Inverse ETFs, Best hedges, Censored independents and more

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

Q. For those of us who do not do (yet) puts would you recommend to go with inverse ETFs? Say if you sell QQQ puts would SQQQ be similar trade? Should I do it? What is cons? Since markets tops I am looking at opportunities to trade shorts with you. Your thoughts are very much appreciated! Thank you!

A. First, let me remind you that I’m pointedly NOT calling a for a top in the markets and I am not getting outright short. I’m just saying it might be a good time to be a little defensive and not aggressive on the long side. As for using the short ETFs — I don’t use them. They don’t usually go up as much as the markets go down when the markets go down and they tend to go down more than the markets go up when the markets go up. I’d suggest sticking with cash rather than trying to game a market downturn with inverse ETFs like the SQQQ.

Q. Cody, which is your favorite hedge now, SMH put, QQQ put, SPY put or others?

A. Hmm, as far as my favorite short among the ETFs, maybe the SMH or the IBB. I want to find a new individual name or two to short as individual names are usually better shorts than indexes.

Q. What impact does this apparent social media censorship have on your longer-term investment thesis. I know you think more regulation means less competition but if large groups feel marginalized, that might be enough to spur a competitive innovation. Plus there is the possibility that people will trust less what they hear and therefore advertisements might be less valuable therefore less profitable. Do you feel Google, FB and TWTR influencing elections is a problem or no because they are private?

A. I think there’s more hype than fact around the partisan censorship issue at FB, Twitter and Google/Youtube. Republicans and Democrats have plenty of voice and power and control on all the major platforms. Independents, not so much. But independents aren’t censored on the social networks as much as they are on, say, national TV news programs. I do think there’s plenty of dirty tricks and undue influence out there, no matter where you look. But it’s more “meta” than just the supposed partisan censorship issue on Twitter, Facebook and Google.

Q. When will you update trade alerts & latest positions? Any option positions on horizon?…Richard

A. The way it works with the Trade Alerts is that I send them out when I do a trade. I do a Latest Positions write up about once every six weeks or so. The next Latest Positions update will be in another four weeks or so unless something goes crazy in the markets. (See the most recent Latest Positions update here: http://tradingwithcody.com/2019/06/24/trade-alert-latest-positions-with-flashbacks-and-quite-a-few-trims/.) As for an options trade, again, I don’t have any on the horizon per se, I just have to see what pitches the markets throw us and what prices the options are trading at as the pitches come.

Q. Cody, I am new to the site I have been reading your articles for years. Finally decided to pony up the dough for your trades I know it will be worth it. Any more thoughts on the companies from Republic I have been reviewing the site all weekend? Very interesting and exciting.

A. Thanks for joining and welcome to the site. Yes, I’ll likely be investing a tiny bit of money into one or two companies on Republic soon. Stay tuned for a Trade Alert. Did you find any companies particularly interesting on http://Republic.co?

Q. I invested small amounts into Innamed, R3 printing, win-win. Small 3 figures. Think win-win might be onto something. I like the fact that there are known athletes onboard. Hoping for some really BIG names as time goes on.

A. Thank you for the names! I like that you threw just a few hundred bucks at them, so that it won’t kill you if it doesn’t work out.

Q. What do you think the chances of these startups getting traction are? How do you measure potential markets for these kind of tiny companies?

A. I don’t know how to put a number on the chances that the starts on Republic get traction. I’m sure some of them will work out and some of those that do work out will work out big. But many will fail of course. You have to measure the market potential for each one individually and on a case by case, sector by sector basis.

Q. Can we have a progress report on Republic? Including responses, if any, from our (subs’) assessment of the companies in their stable (incubator?). What are your thoughts? Anything in there worth our involvement yet? And any further impressions of how the company is operating? And I’m wondering, does your board/financial involvement in the firm restrict comments of this sort on your part? Thanks!

A. I’ll put together all the emails I got about the companies on Republic from Trading With Cody subscribers and will publish it. More to come on Republic, all in good time.

Q. Cody. How do you think FB’s Libra would effect Paypal, SQ, Visa, Mastercard and Amex?

A. Oh, it’s way too early to tell. It’s possible it could be good for them, and I expect it actually will be. But we’ll have to see more details and adoption rates before making any meaningful judgements about how Libra will affect other finbiz companies.

Q. Cody, do you like Zillow here?

A. Zillow’s cheap on a price to sales ratio, but it’s not profitable on a GAAP basis. 90% gross margins was a great business to be in. But now that the company is in the house flipping business (https://www.bloomberg.com/news/features/2019-02-14/zillow-wants-to-flip-your-house) I’d be worried that it’s too much of a direct play on real estate and that there’s unforeseen risk to the new model. The stock has been on fire lately, perhaps partly because mortgage rates have crashed and that will likely help the real estate market and that will likely help Zillow. Longer-term, at some point, real estate will turn down at some point and that could really put Zillow in a tight spot.

Q. More of a consumer-related telco question… if TMUS merger gets approved, as a consumer do you think they will have better 5G service/coverage/etc than Verizon (or will it not really matter in the grand scheme of things)?

A. Again, too early to tell. It will depend on not just technology and spectrum but how much and how quickly each company spends on rolling out that technology.

Q. Cody: Are you planning on adding MO?

A. Not yet.

Q. For a short (hedge) what about WDC?… crappy company that just rebounded 60%.

A. Except for the fact that it’s in a secularly growing industry that’s consolidated down to an oligopolistic status.

Q. Cody – is TSLA primed to squeeze higher? Nice bounce off 180 level.

A. I don’t think it’s wise to try to game a short squeeze. And truly, TSLA will be fine if Tesla delivers strong fundamentals in years ahead, not because there’s a huge short position.

Q. Understanding that you may be rolling over the BRR futures from month to month, in terms of direct BTC purchase, what is the level you see BTC dropping to before perhaps rebounding and making another trance, and what time frame (which all seem to be accelerated in the world of crypto)? Seems like it’s trying to find a bottom but perhaps can spike down to $8500.. or even $5000 before the recovery….

A. Good question. I might increase the Bitcoin exposure in the hedge fund if Bitcoin were to get to $8500 again. It might depend on how fast it gets there and other factors though, so I’ll just have to watch and see what pitches come.

Q. What’s your latest take on Ripple? Personally, I feel a little dirty for owning some as I’m not fond of it being more centralized than other cryptos, however it does seem with their plethora of partnerships that they will be around for the long term. Thoughts?

A. I haven’t done much work on Ripple late, I’m sorry to say. Please send along any reports on the topic you might be reading.

Finally, here are three of the most recent pictures from my phone, featuring wild horses playing golf, a Pyrenees puppy trying to jump on a trampoline and the only kind of bubbles that I thoroughly enjoy:

Ok folks, that’s a wrap!