Don’t be the mark (plus analysis on Nvidia, Intel, ICOs, Disney and more)

Here’s the transcript to this week’s TradingWithCody Live Q&A Chat.

Hello everybody. Welcome to another episode of Cody Underground live Q&A chat. I am Cody Willard.

I was at CES, the Consumer Electronics Show, last week. Which leads me to the first topic that we need to talk about as we’re talking about the markets today — Bitcoin and the cryptocurrency crash. Someone might call it Bitcoin and the Great Cryptocurrency Crash. Why, I think I published a book just recently called that very thing, The Bitcoin Revolution and the Great Cryptocurrency Crash.

At any rate, Bitcoin is currently at $9,900. It’s down from $20,000 a month ago when that book came out. Look, I believe in blockchain. I bought Bitcoin at $100 each and I took it as a payment for tradingwithcody.com five or six years ago at $100 each and it’s now a bubble. It’s a mania and it reminds me a lot of the dotcom era of the late 1990’s. It doesn’t mean the dotcom, the internet revolution, wasn’t meaningful and wasn’t going to actually happen, but those stocks crashed and the market crashed.

First, it was a mania in ‘98 and ’99 and the first couple months of the year 2000. Every dotcom company and anybody who had the words dotcom in their business model, their stocks would go crazy. Sort of like today with blockchain. There were some Amazons and Googles out there that you could invest in. Although they still crashed, they came back much bigger and stronger than ever. I think some of these cryptocurrencies will do the same. You’ve got to find the Amazon’s and discard the Pets.com’s. All of them will probably crash much further before this reckoning is over.

I was at CES last week and cryptocurrencies weren’t going on crazy everywhere. Driverless and voice revolution stuff was going on crazy everywhere at the Consumer Electronics Show last week, much more than cryptocurrencies. However, everybody was talking about cryptocurrencies and there were scam artists running around with great ICO (Initial Coin Offerings) ideas on these crypto or blockchain currencies and blockchain ideas. They were running around trying to raise money and get people interested in their ICO’s where as most of CES is mostly technology companies trying to find partnerships and do business.

At any rate, everywhere I went people were talking about cryptocurrencies. I was at dinner with Kevin O’Leary from Shark Tank and the maitre’d or the waiter heard us talking about cryptocurrencies and stopped to tell us about all of the money he was making trading cryptocurrencies. If you read my book that was published a month ago you know that I was telling you guys that there’s no such thing as an easy dollar, including in cryptocurrencies. You might make some money trading them for a little while, but in a bubble most everybody eventually ends up getting hurt because they don’t get out early enough. It crashed faster than anybody thought possible. With a 25% crash yesterday and a 15% crash today in Bitcoin, you see that in action.

At some point, in the next year or two, there’s going to be some great opportunities to buy some of the Amazon.com’s of the cryptocurrency and blockchain world at a huge discount to where they probably will eventually go. Much like when Amazon fell from $100 down to $3 from its high, somewhere around February of 2000, to its low in October 2002. It dropped more than 90% and now it’s up 1,000% from even the highest levels it was at then. It’s at $1,200 today!

So, there will probably be some great opportunities. If you don’t own any cryptocurrencies and you want to get in, now is a better time than last week. Trying to trade the stuff is probably for the fools, but owning it is probably going to be revolutionary. You probably do want to own some as I’ve told people to do for five years. With that being said, I started selling Bitcoin at $3,000 and I’ve been selling all the way up. I wouldn’t be buying in just yet other than a tiny amount, maybe to get started or something like that.

Q. Facebook and Google, wondering who’s going to outperform in 2018 if you had to pick two?

A. Why do I have to pick one of the two? Why do people tell me, “Between this stock and that stock, which one’s a better bet?” I would tell you to own a little bit of both. If I liked both stocks, and I do and I’ve owned them for years, why would I only want to have to guess on one? And, for 2018? It’s very hard to gain one years worth of action in an individual stock much less relative to another individual stock. Look, it’s TradingWithCody and I’ll put my feet to fire and throw an answer out for you. If I had to pick between Facebook and Google in 2018, probably Google. I’m going to surprise myself.

Again, I like both. The driverless revolution, for one thing, at CES drove home the point that it’s coming and coming faster at least to major cities around the world and quicker than most people realize. Google is going to be a big player in that. I think there’s going to be a lot of upside from Google in the driverless revolution along with continuous growth. The stock’s not outrageously valued. It continues to grow revenue 30-40% every year in their core businesses.

You’ve got artificial intelligence and the cloud and other businesses in there that are going to be growing also. And frankly with the voice revolution, which I wrote a book on last year called Fifty Stocks for the Voice Revolution that talks about its impact, we’re at peak swipe right now. We aren’t going to be doing as much tapping and swiping in five years from now, as we do today. There’ll be less swiping on our smartphones and we’re going to be talking to them a lot more.

Google probably spent $100 million at CES promoting the Google Assistant and their voice services. I think Google’s going to be able to maybe catch and bypass the Amazon Echo and Alexa platform as a de facto standard in the voice revolution. So, I think there’s some upside to Google.

Q. I cannot buy puts. Can you suggest other options to hedge? Perhaps cash?

A. I’m guessing you don’t have a margin account, maybe you don’t want one. As I tell TradingWithCody subscribers all of the time, on those rare occasions when I do buy a call option or a put option or something, you don’t have to do those tricks. Don’t feel pressured like you have to be buying call options or put options ever. You don’t have to sell them, you don’t have to trade them. Just stick with stocks. Those are volatile and risky enough.

You have to know you’re own risk reward, your risk tolerance and what your goals are. So, no problems, don’t do put options. Weather up some other options to hedge. Without a doubt, cash is the best thing. You’re either in stocks or you’re in cash or you’re short. I’ve been reducing the number of positions I’m in. I’ve reduced the size of my positions over the last couple of years, and that is partly to hedge. I’ve raised cash to help hedge my portfolio.

There are other ETFs and things that you can trade that are short the stock market or inverse the IWM, the Russell 2000, or the S&P 500. Just Google the inverse one of those and you can buy one of those, but why? Look, if you’re not interested in doing puts, I wouldn’t do the ETFs that are short the markets either. Use cash, be conservative. If that’s comfortable for you, if that’s your approach, then stick with it and don’t change that.

Q. Thoughts on Lending Club- Low expectations, improving profitability and high growth potential?

A. I’ve looked at Lending Club a few times over the years and have never warmed up to it. In some part, mainly because of the management and I just haven’t grown comfortable with the stock. And I’m still not, so no. Lending Club is probably not for me.

Q. What do you think of Disney? Professor Scott Galloway was predicting it could become the first horseman of tech by providing a Netflix like package.

A. Disney is clearly rolling up all kinds of content assets. They’ve been doing that for many years from Marvel to Star Wars to Winnie the Pooh. Putting all of those under one house and using that machine of creating products and licensing and then branding and movies around those brands Exploiting yours and my children, quite frankly, to get them to buy those brands pillows and dolls and licensed ‘nacho cheese’ products.
Disney has done it and they’ve done it well. They created billions in profits doing that and I expect that juggernaut to continue. They’re going to finally start putting together that package, ten years after Netflix started doing all of this. They’re going to truly become an app and join the app revolution and become an over-the-top channel and over-the-top app. They’ll be broadcasting and getting you that content whether it’s ESPN, Disney, Marvel, or any of their other content. They want to get it to you on an internet driven platform. And because they have so much content, it’s probably a bullish thing.
I like Disney. I was on Kudlow touting Disney twelve years ago on CNBC. The stock was at $18. It’s at $110 today. I still like it, but I don’t own it. I don’t think it’s revolutionary. But it’s a good point, this move they’re doing by trying to become a Netflix like service is revolutionary-ish.

Q. Cody, I have two biotech small caps that you were supposed to look at, but still haven’t?

A. I have been traveling. So no, I have not looked at those two you’re asking about. I will do so. I don’t even want to mention them let alone contribute to someone buying them if they’re a scam, and a lot of small cap biotechs are scams. So with that in mind, I will take a look at those as a skeptic and see what I think of them.

Q. Cody, Under Armour is nearing your buy range that I had mentioned a few weeks ago. Are you going to initiate a second tranche or wait for some more time?

A. I’m probably going to nibble a little more here. I have no idea what the last ninety days or the next ninety days of Under Armour’s businesses look like, but I do think there’s value in that asset that the stock market does not recognize. I’m probably going to put a little bit more in there and nibble some more. I think we bought it at $11 on the first tranche and it ran right away to $15, and now it’s pulled back a little bit so I might take a look at that.

Q. Cody, you said you thought Facebook could top $220 per share this year in 2018. I personally would like to buy some more of the stock if it got back into the $150’s. Well, the stock isn’t in the $150 area. Do you still think it could reach $220 this year in light of Mark Zuckerberg restructuring the news feed and its potential impact on profits? It feels like I’m investing in the dark at this point.

A. Look, we’ve owned Facebook since $20. The stock’s at $170 and down from $188 or something last week off of the news that they are proactively trying to make the newsfeed and your homepage on Facebook better, more relevant to you and more enjoyable. I’m all for that. I don’t need them squeezing every last dime out of news organizations trying to get their content on my newsfeed in 2018.

Step back and look at the next five years. Do you think we’re going to remember this newsfeed change that Facebook did and the stock impact it had for one day? Probably not. You will probably still be using Facebook or Instagram or Whatsapp and/or all of the above and/or whatever assets they’ve been rolling up and monetizing, or profiteering as some other people might call it, in the future over the next five years.

Q. Why did you remove Qualcomm from your portfolio a few months ago?

A. The biggest reason was because Apple was paying billions of dollars every year accounting for profits and Qualcomm’s books and Apple was mad and didn’t want to keep paying that rate. When you and you’re biggest customers are fighting about royalties it’s usually not a good sign for the stock. I don’t want to be in a battlefield stock like that. Also, Qualcomm hasn’t done anything in the last year or so since I sold it, and I’m not looking to buy it right now yet either. There’s no rush. We don’t have to own them all.

There’s questions from a week ago, speaking of things that people don’t remember a week later, in the chat room. A week ago there are lots of questions while I was at CES last wednesday. People asking for several days in a row about the Intel bug that had been found in the patch, the security breach, and what they were going to be doing and the impact on performance and yada yada yada.

Intel took a hit off of that and it’s up 3% today starting to bounce right back to where it was before any of this news hit, and over five years from now it’s irrelevant what happened there. I don’t think it’s going to have any impact. We own Intel for a whole slew of reasons.

As a matter of fact, I had a great tour of their booth at CES when the blackout hit. Bobby Farrelly (director of Something About Mary and Dumb and Dumber), along with my partners and myself, were having a tour from Intel on all of their latest technologies. While they were literally showing us their 5G technologies, and how resilient their network from end to end and from internet of things to the cloud itself and how it’s so resilient and that they have redundancies built in throughout, when all of a sudden everything starts turning black. CES had a complete blackout. Turns out, you need electricity to run anything.

What was also really fascinating, as soon as that happened, we were up on a stage and I had a moment of nervousness and was worried that a massive crowd or rush might be running by. We were up on a platform looking down on the crowd at that moment. It was totally cool and nothing happened. There wasn’t any panic. We walked down the platform a few minutes later with some of the Intel people and a woman started pulling out and playing a violin. You might have seen it on the news. We were standing there and Bobby turns to me and says, “Sort of like the Titanic.” We all laughed.

Intel also had a couple prototypes of their new quantum chip and a prototype of their latest artificial intelligence chip. When the electricity went out there were security guards immediately with lights and tasers around those chips. With the security guards standing there, the guy told us all about it. He showed us the chips and told us what they’re doing and where they’re headed. A lot of incredible stuff happening at Intel.

But to the point, internet of things going to be generating a lot of revenue growth over the next few years. The cloud itself, probably stable or slightly down. The driverless car, driverless initiatives probably going to be generating some significant revenue for Intel over the next three to five years. Intel’s not going anywhere. It’s got a great dividend. So yes, I still own it and I probably should have bought some more yesterday or at some point when it was down because of that Intel performance thing from last week.

Q. Cody, we know there has been a lot of nonsense going on in the area of blockchain. We also know there is a revolution going on in this technology. Is this something you’re researching?

A. Cody’s words, i.e. scams. Dude! I just published a book. You’re a TradingWithCody subscriber, you get access to all of my books. You must be a new subscriber because you don’t know that a month ago we published and you have free access to it. It’s available on Amazon and tradingwithcody.com and it’s free to TradingWithCody subscribers. It’s called The Bitcoin Revolution and the Great Cryptocurrency Crash. Heck yeah, I’ve been looking at this stuff closely and it’s all in that book.

Q. Cody, my question is about Blackberry securing the driverless car platform.

A. The news last week, Blackberry is creating a secure platform for the driverless car system and that is why I have owned Blackberry since about $10 a share. I’ve been saying that in the driverless platform there’s a possibility and an opportunity for them there. Without a doubt, security in a driverless car is paramount. You can’t have people hacking your driverless car and Blackberry is focused on secure connected platforms. They are already in cars, so this is a no-brainer. It’s why we own the stock, it’s a good thing.

Q. Nvidia, up at the end of 2018 or flat?

A. Could it not be down? That’s awfully presumptuous of you. The username is Tenacious Trader. Tenacious, you’re being awfully presumptuous, not just tenacious in assuming that Nvidia could only be up or flat. Always be worried that there’s fraud. Always know that there could be scandal. Always know that something could happen to someone important inside of the company. Always know that some new product can completely disrupt any technology company you’re invested in. It doesn’t matter how secure they are at this moment. It is a revolutionary time in the technology world that we are living in and things can go badly for even the best and most well-positioned company.

So, Nvidia could be down at the end of next year. We’re back to your question feet to fire, Nvidia could be down. I’ll go with down. It could be down 10% at the end of this year. I’m not sure 2018 is the year that Nvidia rocks. I’ve owned it since $30 and I’m not going to sell it just because I think it could be flat or down this year. But over the next five to ten years, I think it will be up. It could be a half a trillion dollar market cap at some point in the next five to ten years.

Wrap up

My computer battery is down to 20%. The battery revolution is coming. What we’re doing with driverless cars, electric cars, smartphones, tablets, internet of things and devices- batteries are a bottleneck. No, I don’t have a great edge for you and there’s a lot of different things I’ve researched over the years on revolutionary battery technologies, and most of them are scams. Be careful out there, but let’s keep our ear to the ground on trying to find some battery revolutions.

Here’s something interesting, coming back to the cryptocurrencies. One of the celebrities I was hanging out with at CES has a money manager friend who wants to invest in ICO’s and will create a fund that will invest in ICO’s (Initial Coin Offerings). I talked to the guy who wants to run that fund and it was fascinating. Once again, most of these ICO’s are scams. Run from them, okay. Be very careful out there, even the good ones can get crushed. It’s not easy. There’s a lot of people out there just trying to take money out of your pocket.

However, I’m not talking about the guy that I was speaking about. He educated me on the fact that when you do an ICO you can do this presale thing first for founders and insiders who put the money in that will help them do the actual initial coin offering for the public, then you start the ICO and the public can start buying the stuff. None of it trades on an exchange yet though, right? So, there are exchanges out there. Free market exchanges that you can go buy or sell these things on, but there’s no demand and no buyers existing when you first do the ICO.

What you can do is take a half a million bucks and go pay one of the more established exchanges. Not necessarily Coinbase because I’m not sure if they do this or not, but it would be an interesting thing to find out. Can you pay Coinbase to get on their exchange? If not, then that’s good. If so, then what’s the filter here? Can anybody pay to get on your exchange? And if so, those nefarious actors will gladly write a half a million dollar check to get on some exchange so there are buyers that can sell those insider issued and/or founder issued coins to the unsuspecting ICO retail buyer.

If that doesn’t make any sense to you then stay the hell out of Bitcoins and cryptocurrencies, because what I explained is a scam and it’s happening. Like the old saying goes, “If you’re playing poker and you don’t know who the mark is at the table is, it’s probably you.” I totally messed that phrase up, but you know what I’m talking about. You know the cliche. You’re the mark. Don’t be the mark, man.

That will be the name of today’s TradingWithCody posts, when I put this all up in a transcript. Maybe I’ll do an ad campaign about my book touting the fact that we published it calling for a crash in the cryptocurrency market after having bought Bitcoin at $100 and calling for a crash when it hit $20,000. Let’s market it and call it Don’t Be the Mark. I don’t know, I’m not a marketing guy.

Don’t be the mark guys. Peace, Love and Happiness. Support your local business, hug your children, adopt a pet, get your pets spayed and neutered, donate some money to some charities and give big tips. I’ve got all of the advice for you, lots of answers.

Thanks and goodbye until next time.