Everything You Need To Know About NYC Right Now

First off, let’s do this week’s chat on Tuesday 8/1, at 1:00pm EDT in the TradingWithCody.com Chat Room or you can just email us at support@tradingwithcody.com.

Bryce here. We are back in full swing here after an incredibly busy and insightful trip to NYC last week. Since it has been a while since I have been to New York, Cody wanted me to write this article from my perspective. Our week was packed full of meetings, meals, and experiences with some really interesting and smart people. Among other things, we use trips like this to help us gauge investor sentiment and get a feel for how other people are thinking/feeling about the markets, economy, sectors/trends, and specific stocks.

Aside from the heat and humidity, this trip did not disappoint and I really feel like I have a greater understanding of the feelings, thoughts, and emotions driving this market and the economy. But perhaps the most important thing I learned from going to New York was the importance of perspective. New York City really does feel like the center of the universe in so many ways and just being there for the first time as an adult was eye-opening for me. I’m sure that living in New York could distort your worldview and outlook on markets in its own way, but certainly living and working in rural New Mexico has the propensity to make someone less optimistic in general. New Mexico has never been a boom-and-bust kind of place outside of the oil patch. The economy in our part of the state is fairly stable and we see consistent, but slow growth. There is a line from an Alabama song that goes “somebody told us Wall Street fell, but we were so poor that we couldn’t tell,” and that’s how I’ve always felt about New Mexico. Thus, I realized that being somewhat isolated in the desert probably makes me overly skeptical of bull markets, whereas if I lived in a booming metropolis like New York, Dallas, Houston, or Phoenix, I might be misled into thinking the growth could never stop.

The word I keep coming back to is “divergent.” Two things can be true at once. Just because one state or company is thriving does not mean that the entire country or industry is the same. This is a market of winners and losers. Even with this massive rally of late, many stocks are still down 90% plus from their highs, while many others are putting in fresh all-time highs. This kind of market is one that we should be excited about because it means good stock picking is that much more valuable. Most of my investing career took place in a ferocious bull market where you could nearly buy anything and it went up. I think what changed most with 5+% interest rates is that it destroyed the value of bad companies, but almost placed a premium on the good companies with healthy balance sheets that can still generate profits with those kinds of rates. Companies with lots of net cash are literally seeing their earnings pop because of rising rates (e.g. Robinhood).

Going back to our trip, there is widespread optimism in NYC about the markets and stocks in general. It seemed like everybody was excited about stocks and where they could go from here–and not just in tech stocks either. Contrary to that popular consensus, we think there is likely a bumpy road ahead and the markets could go sideways or down over the next six months or so. Now let’s get into an overview of the trip.

We caught the red eye from Albuquerque to JFK last Saturday and landed in NYC at about 5:30 am ET. We went right to work and met up for coffee with a long-time subscriber and friend of Cody’s who recently left his job developing Meta’s TikTok competitor, Reels, and is now at Google working in the core machine-learning division. As you might expect, Google is hard at work developing its own generative AI large language model to combat the threat from OpenAI’s ChatGPT. Our friend expressed that Google AI is basically “all hands on deck” and is seeing rapid development of the company’s AI offerings. Even Google founder Sergey Brin has reportedly been spending much more time at the company of late. Historically, Google (compared to Meta for example) has been very slow to roll out new products and is extra careful to ensure that its products are perfect before releasing them. But with Google’s search business faced with the potentially existential threat of ChatGPT, Google is moving extremely quickly to protect its moat. While our friend shared some of our recent skepticism around ChatGPT’s ability to provide accurate and factual information, he did think that with time, generative AI and more broadly, machine learning, will be truly Revolutionary and life-changing. We were very excited to hear the perspective of a true tech / AI rock star and we feel more confident than ever in GOOG.

We finished up our Sunday at the New York Historical Society where we saw some incredible exhibits and artwork including an entire room dedicated to the famous Tiffany Lamps seen below:

We also hit some golf balls at Chelsea Pier, which was a great warm-up for our tournament on Monday (excuse Cody’s poor form):

Also, got to catch up with one of Cody’s best friends on Sunday night, shoutout Moses:

We spent Monday in Redding, Connecticut at a golf tournament hosted by our prime broker. It was great meeting some of our service providers and also had the chance to chat with other fund managers and allocators. Even though I did not play very well, the course was beautiful and lush.

Tuesday was spent with more meetings with brokers and other fund managers. Cody was on Fox Business with Charles Payne and he really enjoyed catching up with a lot of his friends at the network.

We also discussed Bitcoin and other cryptos with Anthony Scaramucci and his partners at Skybridge, who obviously remain pretty bullish on the greater Crypto Revolution. They were encouraged by the Blackrock Bitcoin ETF filling as Blackrock has an exceptional track record of getting ETFs approved by the SEC (575 approved, 1 rejected). We discussed the Bitcoin halving event scheduled to happen next year and that it would probably be a sell-the-news type of event.

We had the chance to grab sushi dinner (Cody’s favorite) with a hedge fund short seller who it turns out is actually moderately bullish at the moment. We discussed the markets, a wide range of stocks, short-selling tactics, etc. My favorite quote of the night was when I asked him how he decides to pull the trigger on a given investment, and he said “A prepared mind is the key.” He spends a lifetime doing homework on a given investment theme or strategy so that when the moment is finally ripe and the right name crosses his sheets, he is prepared to make his move. Again, it’s amazing what you can learn from someone who has such a markedly different strategy and perspective on investing in stocks.

After walking out of the amazing sushi restaurant, Coy, I asked Cody what he wanted to do next and he recommended a jazz or comedy club. I picked comedy because I love standup and basically my entire Instagram Reels algorithm is New York comics so I couldn’t wait to check it out in person. We ran down to New York Comedy Club and it lived up to my expectations. The first comedian (shown below) was absolutely hilarious and even riffed on the Republican-Democrat Regime a little. Cody tried to heckle one of the comics after his punchline didn’t land and I was so scared that Cody was painting a target on our backs, but it turns out he really didn’t give us too hard of a time. For my first time at a NYC comedy club, it was a blast.

We woke up Wednesday to news that a crane had collapsed on 10th Avenue, only a few blocks from the location of our first meeting of the day at Blade HQ. Thankfully, nobody was killed and only a handful of others were injured. As we mentioned a few weeks back, we started buying a small position in Blade Air Mobility, which in the shortest of terms is trying to become the Uber of helicopters. We very much enjoyed meeting with the management team at Blade and will have much more to say about the company in our upcoming deep-dive report. We also had the chance to use the Blade service on Friday on our way back to JFK and it was exceptional. More on that below.

We stopped by the Lucid, Tesla, and Rivian “showrooms,” not dealerships (car manufacturers cannot sell directly to consumers under NY law) in the Meatpacking district. I even got to test drive a Rivian and Cody and I both agreed that they are making an exceptional product. We also got up close and personal with Tesla’s Optimus Robot, which sports a belt buckle that says “Don’t Mess With Tesla.”

Thursday was jam-packed with meetings in both downtown and midtown and we were running back and forth all day trying to stay on top of everything. We had breakfast with our attorneys and had the chance to hang out with several of our investors in the hedge fund who live in and around NYC. Lunch on Thursday was at “The Grill” with one of Cody’s friends who grew up in India but now lives in London. The atmosphere was amazing and the restaurant was quite elegant, even down to the shades which somehow moved in waves and which covered the floor-to-ceiling windows. The Briton told us how he planned to travel to Mount Chester in California and that it was a very spiritual location, akin to Stonehenge and other similar places around the world. Cody recommended a Super Tuscan wine, and although I am not a wine drinker, it was amazing and went great with the Cajun Snapper I ordered.

After that amazing lunch, we ran back to the office to meet up with Cody’s friend Joseph Waldman who was general manager of a giant car dealership, and then we rushed back downtown to meet one of our investors who is a real estate developer. We got the chance to tour one of their amazing ongoing projects downtown, where they are converting a massive 25-story building from office space to high-end apartments. My family also does construction and I was a full-time project manager for two years before I went to law school, so witnessing such a massive construction project in downtown Manhattan was absolutely fascinating to me. Our friend/investor and his family are masters at what they do and have a keen feel for the real estate market in Manhattan. As you might expect, demand for downtown office space has dropped significantly post-COVID as many workers continue to work from home. Our friend/investor pointed out multiple skyscrapers in the area that were completely vacant following lease expirations and explained that some of these building owners will likely end up handing the keys back to the lenders at some point. While commercial real estate came into focus during the banking crisis earlier this year, the stock market is now seeming to say that everything will work itself out with little pain. But with higher interest rates here to stay and perhaps a fundamental shift in the demand for office space, we think there could be another shoe to drop in commercial real estate, lending, REITs, etc. before it’s all said and done. All in all, the tour was amazing and was one of my favorite parts of the trip, and I have no doubt that the project will be a success!

Friday we caught up with a few more of our friends and investors in NYC and spent some time at the office catching up on earnings reports and making trades for the week to follow. We concluded our trip by “Blading” to JFK from an east-side heliport. From start to finish, the experience was first class. The Blade lounge was extremely nice, check-in was easy and simple, and we even were able to switch to an earlier flight on the spot after another customer in the lobby mentioned that they wanted to move to our later flight time which was sold out. Blade’s personnel were able to quickly contact operations and make the switch without a glitch. Once our helicopter arrived, we were loaded and in the air within a few minutes and got some incredible views of the Manhattan skyline on our way out of town. Back on the ground, we were escorted to Blade’s branded car service which quickly ushered us to our JetBlue terminal. Compared to an Uber or cab, Blade probably saved us anywhere from 45 minutes to 2 hours of traffic on a busy Friday afternoon. At $195 per seat, the Blade experience is providing extraordinary value for its customers and we are excited to do an expanded write-up on this one.

While I am omitting tons of details from our dozens of conversations and interactions last week, this at least gives you an idea of what we were up to. Overall, our perspective on the markets and the economy did not shift dramatically, although we can affirmatively say that almost everyone on Wall Street, and in New York for that matter, seems bullish right now. One night while eating dinner one of our waiters saw Cody checking on Meta’s stock price after hours and he was so cocky when he said something like “Meta is really rocking after hours.” Cody asked him if he owned it, to which he said yes but clarified that he bought it “when you should have,” a few months ago and not like everybody else who was only just now buying the stock. It was clear that the waiter wanted us to know that he had nailed the trade and how much money he had been making buying stocks like Meta.

With respect to AI and tech in general, our conclusion was that it is probably near-term bubbled up and over-hyped at the moment. But I think it is clear that we are still in the early innings of AI and it will be a transformative and Revolutionary technology over time. AI and machine learning, in and of themselves, will be extremely deflationary forces once they take root. It is easy for me to imagine a world where these technologies can dramatically improve worker efficiency by simply automating, reducing, or eliminating mundane and repetitive tasks currently performed by humans. This will result in significant cost savings and increased profits for ordinary businesses over time.

Because of the outsized economic impact that AI will have on our world in the next 10-20 years, we need to continue spending time researching AI and finding the best companies to invest in for the next 10,00 Days. For the near term, we are sticking with TSLA and GOOG as we think they are the best AI plays and they are trading at reasonable valuations. I’d also throw INTC in there as a decent AI play because if they can get any traction at all in their Xeon processors or other AI products, that stock could rocket from here. MSFT is probably overvalued and is definitely not the most innovative company on the planet. And while NVDA is basically the only game in town for advanced GPUs right now, we see risk to the downside for NVDA’s margins. Right now, Nvidia’s A100 GPU is selling for $10-$30k and the company is reportedly making around 90% gross margins on these chips. Those kinds of numbers are amazing and will continue to attract fierce competition from other chip makers and alternative solutions from customers. Capitalism has a great way of bringing out innovation when the margins get too juicy.

In general, from the waiter to the short seller to the real estate developer, the bullishness in New York City was tangible. As most stocks have performed remarkably well in the face of a historic rise in interest rates over the last 12 months, this bull market has everyone convinced that stocks are safe and that there is more room to run. Plus the economy seems to be chugging along and other than a few dark spots (commercial real estate, banking, tech layoffs, etc.), most of the fundamentals would seem to support the continued dominance of this bull market. Everyone seems to think that making money in this market will be easy.

While we are not saying that bullish sentiment alone is enough to make the markets crash, we don’t think that making money over the next 6-8 months is going to be quite so easy. We often say that the market is notorious for hurting the most people the most amount of time it can. It was a mere 7-8 months ago when the markets were uniformly pricing in a recession in the first half of this year and nobody wanted to own stocks. While we did not go into a recession, Q2 corporate earnings are down about 7% year over year thus far and yet the indexes are up 20-30%. With this kind of multiple expansion and extreme bullish sentiment, it wouldn’t surprise us to see a 10-15% pullback at some point in the next 6-8 months, but trying to game that with a steady/perhaps strong underlying economy is obviously very tough. So we stick with our individual Revolution investing names and slowly but surely build up our favorites while keeping an eye on valuation and a concerned conclusion about near-term overly bullish sentiment.

We will have more thoughts, anecdotes, and analyses to discuss in the coming days. Also, don’t forget that we will do chat this week on Tuesday 8/1 at 1:00pm ET in the TradingWithCody.com Chat Room or you can just email us at support@tradingwithcody.com.