Economist Preachers, Bonds Be Bad, US Vs Canada Fiat, Ranch Golf, Bitcoin, Stocks, Etc

Here’s the transcript from this week’s Live Q&A Chat. You’ll notice that I’m moving on from DVAX as it was a play on the vaccine and it’s failed to accomplish any traction in the Covid vaccines.

Q. An “economist” just said we lost 1.4 million state and federal jobs since COVID and we need to find a way to get them back. I have for all of my adult life said how overstaffed government has been. Huge deficits. Maybe we don’t need to replace these people. I haven’t noticed any change in government services.

A. “Economists” are often just paid shills who can reference big economic-sounding words as they preach their masters’ talking points. That said, there’s certainly going to be a demand-related impact and real human suffering for the 1.4 million state and federal people who lost their jobs, even if their jobs were not directly beneficial to the broader economy longer-term. People who depend on government services for what little health care they might get (if any) are going to feel real pain from less government service access too, and they are already, I’m sure. But yes, in the long-term, government jobs are not nearly as productive and they don’t create as much prosperity as private industry jobs (assuming the private industry is truly not government-protected and subsidized anyway).

Q. Cody, What odds would you give that US would be in a deep recession in 2021?

A. “Deep” recession? I mean, what’s the definition of that? Here are some comments from me about “recessions” from a few months ago in March: “Before the Kurzweil Rate of Change sped things up, here are the generally accepted definitions an economic recession vs. an economic depression: A recession is the contraction phase of the business cycle. The National Bureau of Economic Research (NBER) describes it this way: ‘A recession is a period of decline in total output, income, employment and trade, usually lasting six months to a year and marked by widespread contractions in many sectors of the economy.’ On the other hand, a depression is a prolonged period of economic recession marked by a significant decline in income and employment, usually measured in years, not months. By these definitions, the US has been through 33 recessions since 1854. And one depression, the Great Depression of the 1930s. With money moving instantly around the world to the most efficient places for it to grow, with the ability for all people in the developed world to always be online, with artificial intelligence gaining traction in society and starting to change the world even more — I’m not sure these definitions are accurate anymore. The world goes through booms and busts faster than it used to and the markets try to price those booms and busts in faster than it used to.”

Q. I understand that the moratorium on evictions and foreclosures has been extended to Jan 31. The forbearance for borrowers will probably end sometime next year. And the foreclosure on homes will probably begin again at the end of next year. Do you think that these coming foreclosures will have any impact on the broader market?

A. Probably not on their own accord, but as part of a broader economic downturn next year, they sure would hurt.

Q. Cody, question about fixed income assets..for those of us who are of retirement age but want to reduce our volatility risk from stocks, are there any classes of fixed income assets that you would suggest? Government bonds, corporate bonds, mortgage backed securities, REITs, or any other asset classes? Any insight in trying to maximize moderate yields (better than CDs) vs capital preservation in this current environment? Thanks.

A. The problem with most any fixed asset class including all those you mention is that the risk-compensated return is not attractive at all. I mean, even the absolute return on most bonds and Treasuries isn’t enough for people to live on and I just don’t think that trying to find an extra absolute return of 2% or something extra over a CD is worth the added capital risk. Sorry, I just can’t make up a better answer to help you. I suggest most people steer clear of most bonds these days as the downside risk isn’t worth the small returns.

Q. Just joined your service – should have done so years ago! Thoughts now on JMIA at about $34.00??

A. This is one volatile stock, albeit one that has gone up a bunch since I sent out the Trade Alert at $16 or whatever it when I sent it out a couple weeks ago. You can see the wild volatility in the fact that in the few hours of trading since you posted this question in the chat room yesterday, the stock is now at $31 as I’m typing this answer. I think it’s a good idea to try to nibble on weakness and be patient when the chart goes parabolic. I almost answer any question about whether someone should buy a stock I like by telling them to start slowly and nibble maybe 1/5 to 1/3 as much as they actually want to own in the stock and then slowly add more in coming days or weeks, especially if the stock pulls back over that time frame.

Q. Thanks for the comments. The other stock I mentioned is TMO (I own some). They make freezer units that are in stock. All of the other companies are 2-3 months behind. They recently had a large drop after a really good quarterly report.( This is obviously not a Revolutionary stock). But it can keep vaccines as cold as necessary reliably. -97 F? No problem. AND THEN: Thank you for that I’ll look into TMO. I probably should have gotten in more. Currently up 111% with GMHI/LAZR. Hope you guys bought tons. I’m loading up on SRAC as well. Got some a month ago at 10.20 at a friend’s advice.

A. Guys, let’s slow it down on sharing stock picks and trading ideas that are outside of the Trading With Cody stocks in this Trading With Cody Chat Room, ok? I love the community feel and sharing of ideas in here, but not OPSPs (other people’s stock picks). Why? Because, as I always remind you all, it’s incredibly hard to make and KEEP the money you make in the stock market — especially if you’re trading random trends and stock picks from people you haven’t vetted or ever met, including those who subscribe to Trading With Cody. Please be careful, ok? I mean, even in this case, I would mention that I’d rather short and/or buy some puts on LAZR than to invest in it. Just sayin’.

Q. I am a Canadian and have been hurt in my portfolio by the weakness in the US dollar/strength in the Canadian dollar. Not thinking this is something you track too much but do you see any end to this USD weakness?

A. Yes, I think the US Fiat Currency will recover vs the Canadian Fiat Currency when the US gets The Coronavirus Crisis back under more control.

Q. Any thoughts on QS?

A. Most of these EV-stocks that have come public in the last few months look like much better short opportunities than buying opportunities. I think there will be a lot of these EV stocks that are flying right now that will end up worthless in two years. I don’t know about QS specifically, but I’m not keen on investing in this idea at this valuation today: “QuantumScape Corporation engages in the development and commercialization of solid-state lithium-metal batteries for use in electric vehicles. The company was founded in 2010 and is headquartered in San Jose, California.”

Q. A lot of discussion regarding the push for electrification and other companies ramping up EV production. Given this, along with government support of rare earth element mining, provides us with a nice long term setup for MP. What are some of the potential risks with this company?

A. In the original Trade Alert on MP, I outlined these risks: “Things that worry me about the company and add risks:

1) The current management team, from the CEO/Chairman to the COO and CFO are all former Wall Street finance investor banker guys. I’d rather the company have some supershot brilliant miner scientist CEO with engineering degrees and stuff.

2) This will be a rare time that I invest in company that depends on the prices and markets of commodities. And keep in mind that in regards to the Chinese competition, it’s clearly going to be an unlevel playing field competing in California with real environmental regulations vs in China where they don’t care too much about pollution from mining and processing this stuff. On that note though, then again, the fact that this company could become part of a decade-long duopoly along with the Chinese competitors which already collude and act like the single government-controlled entity that they are of course plus the growth trends in front of these commodities are also key to the upside potential story here enough that I am willing to take a shot here with a small-ish amount of capital to get started.”

Q. JMIA — love to hear a bit more of your thinking and analysis.

A. Well, there’s a lot of people in Africa and the vast majority do not have Internet access or any spare money, but in coming years hundreds of millions of those people in Africa will have Internet access and spare money and Jumia helps them create an economy of retail sales and wholesale supply chains and e-commerce transactions. It’s a risky stock that isn’t profitable yet, but there’s a lot of potential upside as long as this company executes and has access to more capital.

Q. Do you have any other African oriented company we could invest in other than Jumia?

A. No, not yet.

Q. Is there anything revolutionary about NNDM.

A. The stock is down 80% since it came public four years ago in one of the biggest bull markets in history…something must not be right there.

Q. Any thoughts on SE? I bought in around 50 and have been nibbling all the way until this morning. Just got banking license. Can they be the AMZN, PYPL, Gaming, Banking of Southeast Asia?

A. Seems like a great company, but a lot of the greatness is already priced in as the valuation has skyrocketed courtesy of the stock going up 8-fold this year.

Q. Any problem with the fact that CEO of Momentus is a Russian? Otherwise seems like a revolutionary stock.

A. Yes, there’s an issue and added risk that the CEO of Momentus isn’t a US citizen. I think that will work itself out though and we’re just putting a little bit of venture-capital-like money into this name partly because of that risk.

Q. Happy Holidays @Cody & TWC Family! Feet to fire…VRM Buy or Sell?

A. F2F, I’ I’d rather short it. VRM is like CVNA — a used car dealer with an app. Not much long-term value there, IMHO.

Q. I would like to learn more how one decides what percentage of a portfolio any particular stock should be. Would it be possible you write an article or suggest some good read on this topic?

A. Yes, I’ve written about this topic in detail before, maybe it’s in my Everything To Know About Investing book. I’ll either find it or I’ll re-write it in coming weeks for you.

Q. Cody: What are you plans for DVAX and SPLK?

A. I’m ready to bail on DVAX. Let’s consider this the Trade Alert to let you all know. I’m moving on from DVAX as it was a play on the vaccine and it’s failed to accomplish any traction in the Covid vaccines. I’m holding onto SPLK for now.

Q. Cody. YALA is a social media stock in Middle East and Africa.

A. Thanks, I’ll take a look.

Q. Any thoughts on NNOX? Probably too early now but better than being too late. I would say they are truly revolutionary…..if they can pull it off. Can a 100 year technology finally be taken out to pasture??

A. That’s the second Israel-based tech company I’ve been asked about today. Interesting anecdote. Anyway, advancing X-ray to chips is a good idea at a glance, I suppose: “engages in developing and producing X-ray source technology for the medical imaging industry in the United States. It develops novel digital X-ray source, a microelectromechanical system-based semiconductor cathode that achieves electron emission by a non-thermionic low-voltage trigger to nano-scale molybdenum cones.” Then again, the company’s not hardly got any revenues yet and will hardly have a few million in revenues next year and the stock is worth….wait for it….$2.6 billion?! No thanks for me at this valuation.

Q. I know TWTR is a significant holding for you and the hedge fund – but does it concern you that Jack Dorsey has a complete disregard for increasing shareholder value in favor of using it as a tool to bludgeon anyone who disagrees with his world view? He is actively driving users away by turning it into a useless echo chamber.

A. I wrote this answer to this same question last January when TWTR was much lower than its current quote and nothing’s really changed: “Twitter seems to be suffering a Jack-Dorsey-discount these days. The company needs to report a strong quarter with topline exceeding expectations in order to get Wall Street back on board, at least a little bit. Then again, all the Dorsey-angst and focus on the last 90 days of business might be a wall-of-worry for TWTR to climb in coming months. Twitter also needs to keep growing its daily user base, it needs to monetize better, it needs to get more traction globally. The potential for this company to become a hundred-billion dollar market cap is there, and it could happen in the next three to five years if everything can come together according to their (Jack Dorsey’s) plans.”

Q. TWTR – I get that the stock price will go up and go down in the short term and it’s exciting to think about what TWTR “can be” but can it be truly revolutionary if the CEO doesn’t care about what it can be and literally doesn’t care about shareholder value? The product hasn’t had any meaningful improvements in user experience since……ever? The only thing they spend money on are the censoring machinery. Just venting my internal alarms that caused me to exit my TWTR positions.

A. Venting can be beneficial to one’s state of mind. But it can also make your negative feelings more concrete.

Q. Cody any opinion on GBTC as another way to play bitcoin.

A. It’s okay, but there’s an added risk because you don’t actually own your own bitcoin when you use GBTC. Should we trust the people at GBTC and the exchanges it trades on? Yea, probably. At least until the next 2008-like financial crisis and then who knows.

Q. Is BCHG a decent way to invest in bitcoin?

A. Same as GBTC, I think: “It’s okay, but there’s an added risk because you don’t actually own your own bitcoin when you use GBTC. Should we trust the people at GBTC and the exchanges it trades on? Yea, probably. At least until the next 2008-like financial crisis and then who knows.”

Have a great weekend and thanks for being a part of the Trading With Cody community. I leave you with a picture of how I was golfing on my property last week while the golf courses were shut down with Amaris and Lyncoln cheering me on: