Housing Market, Tesla’s Near-Term Problems, Gold Hedge and More

Here’s the transcript from this week’s Trading With Cody Live Q&A chat.

Q. Where and when do you think housing bottoms? Is it 1-2 years out – 10-20% lower from here, what are your thoughts feet to fire?

A. That’s a good question. There’s still a shortage of a million or so homes in this country and we need more all the time so that’s a good secular force but the higher rates and the bubble prices that many real estate markets are coming out of are vicious cyclical forces. I think real estate prices need to come down 20-30% but that’s already happening/happened in some places and maybe real estate will go back to being “local” in which markets boom or bust.

Q. Can we get the normal list of predictions for 2023? What is your gut feeling on when inflation abates? Does the space market hit overdrive in 2023 or is it 2024?

A. Yes, great idea. I’ve been thinking I should do that again and will look back at years’ past predictions too. Space market is probably going to get hot if/when Starlink comes public at some point in the next year year or two. The Space Revolution is a secularly growing sector but it’s nascent. Five years out, I think EVERYBODY will be investing heavily in space stocks and publicly-traded space stocks will collectively be worth more than a trillion dollars in market cap in 2027.

Q. How do you decide which stocks to buy shares of and which ones to buy calls on? You’re expecting both to go up, right?

A. It’s a combination of risk/reward on the options and how much the premiums on those particular options are along with the size of common stock position I already have in most of the names that I buy calls on and a matter of timing. Not science, but art.

Q. Hey Cody – tried emailing but looks like it bounced back. Two quick questions: Thanks for the 4-part email. I didn’t see ratings / buy levels for $VZ, $ROK. Any insight on those(sorry if I missed them somehow)? Where/when do you think housing bottoms? 1-2 years out – 10-20% lower from here or what are your thoughts feet to fire?

A. I’ll take a look and see if the bounce back was caused from a problem on our end. Thanks for the heads up. Verizon VZ (7+) – I like the 8% dividend yield here and this has been a pretty good defensive place for us to hide as most of the market keeps getting demolished. I’d buy more near $35. Rockwell Automation ROK (7+) – This company is set up to benefit more than just about any other company from the Reshoring and need for automation in the factories that are being built around the world to fix supply chain risks. It’s not as cheap as many of our other stocks near-term, but it’s very cheap looking out 3-5 years. I’m a buyer of more near the $210-220 levels.

Q. First, happy holidays! Lot of fear in the market right now and our holdings are getting to the point where they seem attractive. I know you bought some Tesla yesterday. Is there anything fundamental or under the hood that’s concerning to you about Tesla? Or, is this just a lot of Elon hate/exhaustion? The stock has been pounded this year and feels like a good buying opportunity but want to make sure the overall thesis is in place (Yes, I saw the write up on the last day positions report.)

A. The biggest concern is that Elon’s alienated millions of people who used to be idea Tesla owners. How many of the Hollywood people who have left Twitter because they said it had changed under Elon for the worse were going to buy a Tesla but now would buy anything but, for example? Also, I got an email from Tesla yesterday saying they’d give a $7500 off if I’d take delivery of a Model 3 or Y before year end. That basically says Tesla’s going to miss their quarter on deliveries and now on margins too. Whether that’s already priced into the stock is another debate, but there is more potential downside near-term obviously and this threat of missing the quarter looms large now. I think that email I got yesterday morning was received by millions of other people on Tesla’s mailing list and traders probably realized what that meant and that’s why TSLA got hit hard and sold off intraday yesterday. Longer-term, you have to believe that the superiority of their product, the critical mass of Charging stations that work very well and the potential of robots and Dojo computing to drive more upside in years to come. But this has been painful this year and I’m not sure when the pain will end near-term.

Q. Cody, Tesla has been waffled partially because of Musk’s selling stock and somewhat strange behavior. Has SpaceX also suffered a similar loss in value? Thanks.

A. No, believe it or not, SpaceX valuation has remained at all-time highs this year: https://apple.news/AiQf3EKE7QEyKH9VoBD_wYQ

Q. Cody, in my opinion your take on $TSLA is spot on. I talked to a few people who said they believe in the EV revolution but would never buy a Tesla. My question is what do you think are the odds of $TSLA going bankrupt in 3 to 5 years.

A. 10%.

Q. Is there any data available which would provide evidence of a large amount of $TSLA margin calls in recent days?

A. I saw a note somewhere that said there were several billion dollars worth of TSLA margin calls yesterday, but I don’t remember where. Pretty sure there are definitely margin call selling pressures on TSLA every day as its relentlessly drives to new lows.

Q. Hi Cody, at what point do you think Musk’s point about interest on savings (at 4% for some accounts) does divert money from a struggling/volatile market?

A. I personally know people who have moved money from the stock market to bonds, so it’s already happened.

Q. Cody, would you still rate TSLA an 8 now that valuation is down 25% since you’re last update?

A. Yes.

Q. You seem to be very bullish on Amazon. Is this just reflective of the significant pullback, or is something else at play? What are your thoughts on Google?

A. I like Amazon’s long-term as a dominant force in retail and in cloud computing and frankly, they are planning their own Internet satellite network so they are also a Space Revolution play. And yes, a lot of my recent bullishness on AMZN is attributable to how far back the stock has pulled here. I like GOOG just fine, but the ChatGPT threat, at least the threat of near-term perception believing that ChatGPT will hurt Google’s main business of search, has kept from adding more.

Q. Hi Cody. Is it easy to invest in OpenAI stock? ChatGPT is having its moment.

A. Not easy. I’d mentioned in the original article I wrote about ChatGPT that the only way to invest in it right now would be to invest MSFT which invested a billion in ChatGPT and is its exclusive cloud provider.

Q. Cody, happy holidays. What could derail QCOM? It seems like their chips will be in demand for well into the future whether for smartphones, cars, AR/VR. Seems like a buy it and forget about it for a while stock, that also pays a dividend. I am looking for stocks that have growth upside that pays a dividend, QCOM seems to fit the bill nicely.

A. Things that could derail Qualcomm include: *Inventory build ups causing cyclical cash flow crisis. *Competitors or even their customers building alternative chipsets that work well/better. *Regulatory crack downs. *Global cyclical recession. But yeah, I like QCOM here for the dividend and the potential for more growth as it dominates the sectors it sells into.

Q. Good morning, Gold seems to be getting a lot of chatter, should we look at gold as an investment with a full position or more of a hedge against uncertain times.

A. Yes, I sent out a Trade Alert a few weeks ago that I was buying GLD for the hedge fund and I continue to think that gold is a good hedge here.

Q. Cody, can you provide some updated thoughts on U?

A. Unity U (7+) – If Unity will slow it’s growth of operating expenses while continuing to grow its topline 20% per year for the next 3-5 years, the stock will be very cheap, at 10-13x my 5 years out profits number. I’m a likely buyer of more Unity near $20.

Q. Cody, would you buy more MP here?

A. If you don’t own what you consider enough of it, then I could see adding another tranche here. I plan to buy more near $20.

Q. Cody do you still hold SWAV?

A. Yes, but it’s still a small position and I haven’t added much to it although in the hedge fund I have traded around some of the wild volatility in this name.

Q. Cody, any feedback on MTTR?

A. I looked at it a few weeks ago and stayed away. Sorry.

That’s a wrap folks. Happy holidays!

I leave you with a couple shots of the sunset on my drive home one night earlier this week: