Market Pain, Powell Propaganda, VACQ To The Moon, Stocks I Bought Today And More
Here’s the transcript from this week’s live Q&A chat.
Q. Do you expect another leg down in markets near-term or we pretty much done with the correction? Thank you!
A. Feet to fire, I expect the market is on the opposite side of the Blow-Off Top Phase of the Bubble-Blowing Bull Market we’ve long been riding but that the broader stock markets won’t go straight down or outright crash near-term. In fact, I think the markets are probably set up for a major counter-trend rally that might spike tech stocks 5-10% in the near-term. But that after that, we might slowly trend lower in the markets for several months or longer.
Q. Same question: Do you expect another leg down in markets near-term or we pretty much done with the correction. Our portfolio feels as though it is down more than the market averages might indicate. What do you think? AND Q. I have previously raised cash. However, to echo Buka, do you feel that there is a lot of room left to drop, or are we getting near some sort of support?
A. I can hear the pain the fact that three of you are asking me to tell you what you’re wanting to hear: That the market is done going down. I can’t possibly tell you that. I think there could be a near-term short-lived but very big rally but that there could be more downside after that. And I could certainly be DEAD wrong about my guess that there could be a near-term really. If you’re in pain, you might need to just trim a little bit and not just sit around hoping you’ll get back to the all-time highs you were at again by next week or something. This is a long-term wealth-building process and you’ll almost NEVER see me try to game the near-term moves in the stock market.
Q. Morning last few days have been painful to say the least. I want to buy a few items but the upside may be limited for while?
A. Yes perhaps. I bought some stuff yesterday as noted in the Trade Alert I sent out and later in the Chat Room when I’d mentioned I’d started nibbling quite a few of our names in the hedge fund (and I nibbled a little more today in the hedge fund too). I don’t have a crystal timing ball.
Q. I got slaughtered this month. It continues to bleed each day. Do I sell, hold on?
A. I spend all week, every week for the last twenty years helping people navigate the markets. I can’t answer a question like this with any meaning in this context. Sorry. Be careful and move slowly with your money is my main advice for you.
Q. This market looks like a year ago. Does history repeat? What does your crystal ball look like?
A. See prior answers. I have no crystal ball though, for sure!
Q. Good morning… Has anything that’s happened (Powell statements) in the last 48 hours changed your opinion on the TLT trade?
A. Powell’s statements, as always, are just propaganda that he hopes will somehow help him and the Fed and his bankster bosses control the markets as best as they can even though they can’t control the markets for long anyway.
Q. Cody, please confirm your understanding of the market cap of VACQ post merger. Wide differences between WSJ and barrons articles, and general confusion amongst other commentators. All in, including pipe warrants. What do you think the post merger market cap will be?
A. With VACQ at $11 per share, the post-merger valution with Rocket Lab will be about $5 billion or so. Here’s more about how to try to value the company post-merger given what we know so far: https://docs.google.com/document/d/1VtuQ6QyqqTFd_BjaQBx6pOz1pK-UImhjkO_STLRDvHs/edit?ts=604125e1
Q. SPCE down about 60% from highs just 3 weeks ago. Why do you think such a steep plunge? Also do you see the valuation too high here yet to get interested in adding at today’s price (currently under $26/share)?
A. How many times for how many weeks in a row did I comment about how I thought SPCE had no business being over $50 a share, much less at $60 a share. $26 is still probably overvalued for a venture capital-like investment like this, but it’s a VC-like investment like this so it will always be overvalued until they have real revenues and earnings in like 5 years from now.
Q. What are you buying today?
A. In the hedge fund I bought some CRSP, DOCU, JD, JMIA, MP, PINS, QCOM, ROKU, SEDG, SNAP, SNE, SPOT, SQ, U, VACQ, as I had more cash come in earlier this month along with the cash and hedges I’d already had on the sheets that I wanted to start to put to work into the panicky action. Small nibbles though!
Q. What stocks do you recommend the most at the moment? Top 5?
A. I like FB TSM at these levels at this time in addition with the stocks I’d mentioned that I was buying earlier today in the hedge fund.
Q. Could you explain ARPU (Avg Rev per User) and how FB measures up?
A. I’m probably the single best authority on FB’s ARPU, at least I was back when the stock came public and then crashed and we loaded up on it. Read this that I wrote about Facebook’s ARPU in 2013 when it was literally just a penny or two of average revenue per subscriber vs today’s Facebook doing about $3 per user in average revenue: “Facebook’s valuation right now is just under $70 billion. Last years’s revenues were about $3 billion so that’s 22x sales, let’s say 20 for good measure. Facebook says they have 900M monthly-active-users (MAUs), a 33% jump from the years before. So let’s say the prices/sale multiple holds over the next 5 years, that would mean Facebook would need $10 billion in revenue to get to a $200 billion market cap. But let’s halve the multiple to 10x sales, so we’re looking for $20 billion in sales. And let’s say that explosive MAU growth slows by a third to 11% for the next 5 years, that would give Facebook 1.5 billion engaged users. Divide that $20 B in revenue by the 1.5 and you get that at that depressed multiple of 10x sales, will anemic future user growth, if Facebook generates $13 in revenue per user per year, it’s at a $200 B market cap 0 B market cap — more than $100 per share. . Let’s make that even simpler, that’s about four cents per day, per user. Everything I just stated is the bear case, and about half what I expect to materialize, but generating 4 cents per user per day, by connecting engaged users with advertisers, is not Q. that hard. And if Facebook needs some time to evolve their strategy or shift the thinking of advertisers and agencies to the mobile reality, good thing they have billions in the bank from the IPO. No changes to my Facebook strategy, as I’ve already built into one of my top 3 largest positions with lots of upside leverage via a wide range of longer-dated calls. But I wanted to be the first to point out how astonishingly little revenue per user per day this company needs to generate to get that kind of a valuation.”
Q. How do you see the effect of rising yields on the market longer term? In the last 40 years every substantial rise in yields resulted into a equity market consolidation. 1983/84, 1986/87, 1993/94 and 1998/99 with a rise of 2.5-3% in the 10yr Treasury over a period of 9 months. The Dow and S&P 500 lost afterwards roughly 20% in a range of 10-25% over several months. Since September of last year we had already a move of roughly 100bps. Are you not worried about the deeper impacts of the stimulus bill when it is passed which ads another 1.9 trillion of fresh debt and the potential yield move? Are we at an infliction point were all this debt will blow into our face?
A. Yes, I’m worried about it and that’s why we bought puts on the TLT a month ago BEFORE higher interest rates became the headlines.
Q. Long Time subscriber to your service. I have questions concerning inflation and deflation. As I see, inflation and deflation in a basic sense is a result of an imbalance of supply and demand to one side or the other. Demand can increase due to need, or as with the current money printing, it can increase because the method of exchange we use becomes more plentiful. But, deflation(as least for the US) can only only come from a drop in demand. If a price of a product gets cheaper because we find a way to make it cheaper, that isn’t deflation. That is an increase in buying power, because at the heart our wages most likely didn’t decrease in this scenario. I hear very smart people on both sides claiming worry about deflation, or worry about inflation. But, as a long time holder of Apple stock (which every hated on from 2007 – 2012) they are trading well over the historical P/E ratio. It seems that all of our extra printed money went into assets. So my question are 1) Am I missing something in the the inflation/deflation argument and 2) where do you see money flowing when assets like stocks and housing are out of favor? Cheers and thanks for your insight throughout the years.
A. Inflation and deflation are monetary phenomena, not a function of supply and demand. Prices go up when supply drops or demand rises, but that’s not inflationary per se. Also, money can get destroyed when asset prices like stocks and housing fall. Anybody who pretends that they understand all of economics, including inflationary pressure causes and effects, is a fake preacher.
Q. Cody, any thoughts on CRSP at this level. I feel technology is to be shunned for for another week?
A. Bought some CRSP for the hedge fund today, small nibble.
Q. Good morning Cody. Is TSLA a buy at this level or do you see more downside to come?
A. I don’t know that I’d use your phrasing. I think TSLA might be a buy and that there could be more downside to come. Slowly nibbling, using tranches is probably a great idea.
Q. Hi Cody, should we buy another tranche of U at this level? AND Q. Thoughts on U now that it’s down 25% since you recommended and nearly 50% from the highs?
A. Yes, I nibbled some U in the hedge fund today already and I plan on nibbling a little bit of it in my personal account today too.
Q. Cody, thoughts on Roblox & their valuation?
A. I’ll take a look and will write about it if it’s compelling.
Q. What are your thoughts on AAPL long term. Are they revolutionary enough to continue the high growth 5-10 years from now?
A. Tim Cook doesn’t look like he’s got much Revolution in him. But the iPhone’s place in this world isn’t going anywhere. AAPL, which I’ve owned since March 2003 at a split-adjusted 20 cents per share, is a hold not a buy in my opinion these days right now.
Q. Have you looked at NNDM? 5.93 a share cash.. selling for 6.85 now. Has a revolutionary chip production method.
A. I just glanced at NNDM’s balance sheet and it looks like they have less than 20 cents per share in cash, no? $37 million in cash?
Q. what do you think about SQ buying Tidal? Seems odd but read that it was a social capital move to grow the main business. What do you rate SQ now? I own <$100 a 1/3 position, would you average up?
A. Seems like a strange acquisition. I’d rate SQ a 7 after its 30% pullback this last week. You know my answers about whether to buy a stock you want to own more of — do it in tranches, but get started.
Q. Is Square a buy here? This is one of those high flyer stocks. It seems like high flyer stocks get slaughtered in this interest rate increase environment. Thanks.
A. Bought some SQ back, small amount, in the hedge fund today.
Q. What are your thoughts on our Dell Calls? We holding? Trimming? Selling? Thanks!
A. I’m trimming some of the DELL calls, maybe 1/4 or 1/3 or so, locking in some nice profits. Consider this a Trade Alert.
Q. What is the price limit to nibble Roku ? I still don’t own it.
A. I always tell people that if you want to buy a stock that you don’t own to start by doing a small tranche purchase and then scaling into more over time.
Q. Ticker GHVI, SPAC bringing public Matterport (a spatial data company). Matterport has technology that builds digital 3D models from any physical space; homes, offices, stores, etc. The company has digitized about 10 billion sq. feet of space and has the biggest spatial data library in the world. Currently has over 250,000 customers in 150 countries. The customer base includes over 13% of the Fortune 1000. Seems to be a VR / 3D theme that should only grow. Thoughts?
A. I haven’t heard of it and that makes me upset that my analysts didn’t bring this one to me since we are always looking for more Space Revolution plays.
Q. Whats up Cody! Any Stocks in the Pet Care industry you find compelling??!!
A. No, pet care isn’t Revolutionary.
Q. I asked this before but it looks like it got lost so sorry if you saw this more than once. Cathy woods elf’s are getting particularly slaughtered, we own a number of stocks in her etfs. tsla, roku, crsp, U, docu, zm to name a few but there are more.. of these are their some favourites in here?
A. I don’t understand your question. I don’t care what Cathy’s doing with the money she’s running to be completely honest though I do respect the hell out of her analysis.
Q. I have recently started watching the showtime show Billions. Through your time in NY, within the industry, your knowledge of wall street personalities and the hedge fund/government interplay dynamic, how accurate is the show, its storylines and its characters?
A. Never seen it! Too much on my plate, too many great shows to watch and I don’t really like to watch stuff that’s about Wall Street for entertainment. This ain’t entertainment for me!
Thanks all! Rock on!
