Government Shutdown?, S&P 500 Predictions, NET, MP, And Much More
Here’s the transcript from this week’s live Q&A chat:
Q. Following up on last week’s question. The Fed spouts gibberish, yes. But, their gibberish has caused a solid pullback/pain in stocks and a rise in yields. While it may be gibberish, shouldn’t we be paying more attention to the noise from the Fed? As many say “don’t fight the Fed”.
A. This question was posted two days ago just as the market was putting in what’s at least a short-term bottom and subsequently bounced big. I’ve written an entire mini-book about why the old saying “Don’t fight the Fed” seems to be wrong most of the time. That said, I do think there are structural concerns for the economy if rates don’t stabilize here around 5% or so. The Republican Democrat Regime has spent so many trillions of dollars and the Fed has printed so many trillions of dollars in the last ten to fifteen years that they have ended up painting themselves into a bit of a corner here. Easy does it.
Q. What do you think are the odds of a shutdown? Will it just be a bluff like before? I read that there are enough Republicans joining Dems to pass the budget.
A. I’d say it’s likely that the government temporarily shuts down and then the Republicans and Democrats can pretend that they were playing hardball with each other and they’ll end up getting an agreement done before next week is over.
Q. Any updates from the who’s more scared poll last week?
A. The consensus last week/early this week was that the BULLS were more scared but now it’s probably shifted as the market has rallied off the lows it put in Wednesday (at least a short-term low anyway).
Q. Feet to fire does S&P see 3000 or 5000 first? And along those lines, a playful reprise of your oil bet with Donald Trump Jr. back in the day… does oil see $75 or $150 first?
A. Wow, the S&P at 3000 would be about a 30% decline from here and while I certainly wouldn’t say that’s impossible, I don’t think that’s likely. So I’d say the S&P at 5000 is more likely to happen first, even though I would think it will take another 3-5 years to get to that level. And yes, Donald Trump Jr. still OWES ME HIS ENTIRE INHERITANCE because he lost the bet we made on national TV on my show back in 2008 or so when oil was trading at $125 and I said oil would hit the $30s before it’d hit the $150s and just a few weeks later oil was trading in the $30s. Feet-to-fire I’d guess that oil will trade between $70 and $110 for the next two years. Here’s a picture of DJT Jr. shaking my hand for that bet:
Q. What are your top 5 positions now? What would be your top 5 buys today?
A. Top 5 largest positions in the hedge fund right now in alphabetical order: DallasNews (DALN), Intel (INTC), RobinHood (HOOD), Rockwell (ROK), Rivian (RIVN), Uber (UBER), Tesla (TSLA) (that’s 7 LOL). Tesla is the largest. Favorite buys right now: Amazon (AMZN) (we put some back in the hedge fund recently, and also got the Meta (META) back in the hedge fund recently). I’m not buying much of anything today after this huge pop we just had the last two days though.
Q. MP Materials (MP has gone down considerably and become a pretty significant percentage loss, whats the thought process to keep owning or perhaps buying more?
A. We originally bought the MP at $14 if you recall, but it has been a painful position of late as we had added to our position at some point at higher levels as the hedge fund grew. MP has been painful but it trades in tandem with the price of the underlying commodity it produces, NdPr. NdPr prices have been crushed this year because of supply/demand imbalances and the market is almost totally controlled by China, so tough to say what the true demand for rare earth minerals is right now. I’m not adding to MP at all right now and it’s not a big position for us and I’m just sitting tight on it for now. We are always re-evaluating our positions and will notify any/all of you if anything changes.
Q. One wonders why you have not mentioned that China has recently restricted exports of rare earth minerals (particularly from Mongolia). While the Chinese continue to ramp up mining, it seems they are hoarding critical minerals for domestic use.
A. Oh, we’ve written a lot about China and its rare earth minerals strategies over the last two years. Tesla and others are moving away from rare earths because of that. Innovation always wins.
Q. For Cloudflare (NET) – was reading about their rapidly rising OpEx, is that just them reinvesting for the future or cause for concern?
A. As long as the topline growth is faster than the OpEx growth, the company will get ever more profitable. It’s not not a concern though — so many tech companies have too much OpEx and it’s something to keep an eye on.
Q. Many thanks for the Snowflake (SNOW) write up. Please correct me on this if I am wrong or out of date, but according to its latest 13 F filed on 8/14/23, I understand that Berkshire Hathaway owns 6,125,376 shares of SNOW that were acquired at the time of its IPO in 2020 at a price of $120 per share. I am a value guy and get altitude sickness when I see high TEV/Revenues such as this one (~20x) made even more uneasy by -$916 in operating losses, which means that SNOW has only two years before having to go to market to raise cash, but It’s reassuring to see that you and Warren Buffett are in agreement on this one. Keep up the great work.
A. Thanks for the kind words and yes, I do think Berkshire Hathaway is still an investor in SNOW.
Q. We invest in SMR. Is there a play on investing in uranium stocks like the Sprott Uranium Miners ETF (URNM)?
A. We’re actively working on other nuclear-related names including URNM. Stay tuned.
Q. Could you please provide your thoughts on Atlassian (TEAM)? Would it make sense for me to switch out of TEAM and invest in NET and SNOW?
A. Atlassian is a good company, but I’ve never dug into it very much. Trading at 15x sales, it’s not cheap either but if they can keep growing at 20%+ on the top line, it will eventually become cheap. Good luck whatever you decide to do.
Q. Any thoughts on Digital Realty Trust (DLR) (data center REIT)?
A. It’s a hated stock and widely shorted by many great short sellers, including Jim Chanos reportedly. I’m not sure how the company will grow as Google (GOOG), Facebook (META), Microsoft (MSFT), etcx tend to invest in their own data centers. Also, the executive turnover has been pretty aggressive, as Bryce put it to me, “They keep firing their executives.” I’d love to be contrarian on this name and tell you that I think it could be a good trade/investment but I do not think it is so. I’m avoiding it as both a long or a short.
Q. You’ve said a few times recently all roads lead to Bitcoin. I’m curious how you see the adoption of Bitcoin potentially playing out. Is it something that happens gradually, or does it need to be triggered by some sort of crisis? And are there specific things beyond the price you’re looking for? Maybe asked another way, if we use the baseball analogy what inning do you think we’re in currently? And what would tell you we’ve moved ahead an inning or two?
A. Slow at first and then all at once, as the old saying goes. I’d say we’re in the third inning or maybe the fourth inning of The Bitcoin Revolution.
That’s a wrap, thanks all!
