Mea Culpa, NFLX Trade Alert, Buying Strategies And Lots Of Stocks Q&A

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

Q. In your macro US/world view, do you see inflation or deflation being the more significant medium to long term challenge?

A. Inflation by far. In fact, I’m one of the rare economists who thinks that deflation is actually good for 90% of the people who buy and sell things in the economy. You know all those examples of hyperdeflationary periods that caused economic depressions in various countries at various times throughout history? Oh, no? Oh that’s right…because there are NO examples of hyperdeflation causing economic turmoil for the masses. It might suck for giant corporations and their biggest investors, but for the mass of people out there, deflation would great. But deflation ain’t happening when the government controls the currency. Maybe someday if bitcoin or another crypto is truly a de facto standard for exchanging/storing value, there could be a major deflationary period. But until then…nope, because the money machines really do go brrrrrrr.

Q. Anything you’re paying attention to from the fed today?

A. Nah, who cares. They are bunch of Republican Democrat Banking Socialists who always pump money as fast as they can for their cronies as long as they can and they’ll say some propaganda today to try to pretend otherwise. They’ll do what they do and the markets will react as they do but gaming such near-term movements is usually a waste of time.

Q. Cody, you were right in calling more of a correction in the large caps/indices a couple of weeks ago, do you still see more to come?

A. Eh, I don’t feel like I’ve been right about very much lately. I am upset at myself for not navigating the recent market crash (it’s truly been a crash in speculative names and ARKK etc. so far this year, especially when you look back at the February and/or November highs that those assets made) better. I started us nibbling on the Beatens Basket too early. I did pound the table in both Feb and Nov about raising cash and getting more defensive, but I strive for doing the best anybody’s ever done…and I have failed to do that lately. But thank you for the kind words, haha. Feet-to-fire, I’d expect the markets to chop around here with a slight path of least resistance being downward but not as aggressively as it has been lately. I don’t think the pain will stop in the Crappy SPACs and/or the Crappy Speculative names, unfortunately until all the people who wanted to explain to you that the world and/or economics and/or human nature and/or investing had changed forever back throughout last year finally give up.

Q. Don’t you think it will be awhile before growth stocks get frisky again?

A. See, I don’t know what we mean by “growth” stocks anymore. So many crappy SPACs and penny stock promoters convinced people that they were “growth stocks” and in the Blow-Off Top Bubble-Blowing Bull Market that just ended last year they all went up 500-1000% even though most of them weren’t and aren’t ever going to grow their businesses. I can’t imagine that we’ll see another Bubble-Blowing Bull Market like we just got out of for another five or twenty years, but who knows.

Q. Do you have a specific hedge to recommend today?

A. In the hedge fund, I’m nibbling some puts on SMH and QQQ again and I shorted a little ARKK. I still have a bunch of smaller shorts in the hedge fund in names like BLNK, CLSK, ASTR, PL, etc but those are very small and I don’t think most people should be doing that in their personal accounts. This market has been so wild lately, that I think it might be really hard to catch the next big move up or down.

Q. Cody, what are the points you dollar cost average down? Let’s say you purchased a stock at $50, at what point do you buy another tranche as the price declines? Is there a general rule of thumb? Is it s % decline, etc.? I am looking for ways to improve my scale in buys.

A. There can’t be a set rule to doing anything in the markets. Sometimes you’ll have to pay up for the next tranche instead of averaging your cost down. Sometimes, like lately with W and our basket of Beatens, the stocks just drop so fast after you start nibbling them that you don’t get those additional tranches until they’re down a bunch more. It’s a long-term artistic endeavor, not a rules-based system.

Q. Cody any thoughts on the merits of Cathie Wood’s recent commentary that inflation will unwind quickly, especially when the ports clear? Does she just have to say these things to avoid a run on her fund?

A. I don’t think she has to say those things to try to avoid a run on her fund because there’s probably been a slow but steady walk out of her fund as its crashed over the last year. She’s been stuck in a vicious cycle of redemptions forcing her to sell more which takes down her stocks and creates more redemptions, etc. I respect Cathy Wood.

Q. Cody what are your current top 5 positions? Thanks.

A. FB, TSLA, AMZN, NFLX, UBER.

Q. You missed a couple from your latest position article. Could you give us a rating on the following- UBER, DOCU, and U?

A. I’d rate UBER an 8/10 right now. U is a 7/10. DOCU, I have no position in right now, but it’s getting pretty cheap on a valuation basis.

Q. Hope you and your family are doing well and safe. I have a question about TSLA. I joined recently and started nibbling TSLA slowly but it’s still a small position in my portfolio. I want to make it a big position but its price is sky high right now. Should I wait for the price to come down or should I keep nibbling at these high prices?

A. TSLA’s getting more interesting now as a long-term investment than it has in a long time, but it’s still far from cheap. I always suggest starting slow like you have and then over time adding to it.

Q. Cody you mentioned at one time you’d like Rivian at $80. Well below that level now. Any interest?

A. Yes, I’m growing more interested in RIVN here. The problem is that the market probably is sorta’ over EV stocks right now and RIVN is going to have grow into its multiple, which could take another 3-5 years before the current $56 billion valuation would look “reasonable”.

Q. Can you comment on RKLB’s recent acquisitions? Do they have enough cash? Will they need to raise money?

A. Rocket Lab is following their well-laid out playbook of becoming as vertically integrated in the space industry as they can. These acquisitions are small even for this small company and I trust the management there as very good business people.

Q. Is RKLB still a large position for you?

A. Yes, it’s in the top 10 and I even nibbled a little more recently.

Q. Cody, you mentioned before that you would make RKLB a huge position if it got near $8. Since it’s not a top 5 position yet, was there a change in strategy or did other stocks become too tempting?

A. A little bit of both — I see some opportunities in W and INTC and other names that I wanted to get some exposure too, NFLX got crushed and started looking very attractive and the markets hate unprofitable companies right now and I’m not sure that will change until we finally start seeing some SPACs and former-penny-stocks-that-are-now-former-highflyers-because-they-are-down-90%+ start declaring bankruptcy and/or being busted for fraud by the SEC.

Q. Can you give us an update on Blacksky? I understand the company disappointed out of the box and the field is maybe more crowded than we first thought, but it seems to be trading around two times cash and has some connection to Palantir, if I have that right.

A. Yup all that’s correct. I’ve seen many stocks trade BELOW cash in my career though and that’s a possibility in a bear market like this.

Q. Out-of-control SpaceX rocket on collision course with moon Falcon 9 booster, launched from Florida in 2015 to deploy Deep Space Climate Observatory, has followed ‘chaotic’ orbit since.

A. That’s why SKTLs, the space-debris-cleaning cryptocurrency that helps fund clean up that kind of stuff is so important!

Q. Cody, Most of my play money is in an IRA. I can’t buy BTC out right. What do you think of buying bits?.

A. “BITS pursues its objective by investing in a mix of equity securities of blockchain companies and long positions on US-listed bitcoin futures. Blockchain companies include those involved in crypto mining, blockchain and digital asset, transactions, applications, hardware and integration, and may include those with direct ownership of digital assets. Such exposure could be obtained directly or indirectly through ETFs, especially those of Global X, while exposure to bitcoin futures is obtained through its wholly-owned Cayman Islands subsidiary which made up roughly 25% of the portfolio. Allocation to these two assets is determined by a variety of criteria. For example, greater exposure could be placed on bitcoin futures during periods of low anticipated cost of carry. Conversely, greater exposure to equities during periods where valuation measures present attractive relative value based on forward price-to-earnings or price-to-sales ratios.” I don’t know the people running it or their track record or if they’ll be plowing into crappy bitcoin stocks or something. You might want to check out AltoIRA as I think they can help you directly invest in bitcoin and other cryptos in your IRA.

Q. Hi Cody. Thank you for your guidance here during volatile times. Can you please give your thoughts on the NFLX earnings report and if it’s worth a nibble here? I see it’s one of your top 5 positions.

A. Yes, consider this a Trade Alert that I’ve been buying a big tranche of NFLX here and will buy another big tranche if it drops another 10% from there.

Q. Hey Cody. I know you sold out of Roku but don’t you think Netflix’s struggles are actually a positive for Roku? The more competition to Netflix (Peacock, Paramount+, Hulu, etc.) actually brings more eyeballs to Roku and even the Roku Channel. I can’t stand ads and can afford all the streaming services but most Americans prefer free content to paying for multiple services. Plus I think the ARPU is $40. Not too shabby.

A. It’s a great company, but it’s a tough market for valuations that are stretched as ROKU remains. Long-term will probably be fine from these levels. But I found W and INTC more attractive as investments right now.

Q. Can you please speak about SKLZ? Seems like you’re bullish on this name with the recent purchases.

A. 95% gross margins, growing 40-50% per year and trading at 5x sales. It’s not profitable though, so that’s the problem with the stock in this bear market. But if it delivers on this growth for the next couple years, it will be cheap at these levels.

Q. Can you speak about INTC? Thanks.

A. Nobody owns INTC anymore. The company’s got new chips out that look pretty darn competitive finally. The company’s going to get tens of billions in welfare in the next few years to help it build the fabs they are going to build to (maybe, eventually get competitive with TSM). I think the downside in INTC is maybe 10% or 20% in a crash while a lot of other tech stocks could get hit for another 20-30% pretty easily, I think.

Q. I bought PRVB & INFI a while back, and it has been painful. Should I add to them?

A. I’d mentioned in the Latest Positions updates a couple weeks ago that I’d nibbled a little bit more of each. It has been painful though and mea culpa so far.

Q. Did you take another look at DVAX?

A. Yes, and I like what I found with its potential to benefit from some of the next generation Covid vaccines. Would like to nibble again at some point.

Q. Any thoughts on Moderna? Also, could you take a look at FLGT?

A. Not a fan of Moderna’s management or their stock. I’ll take a look at FLGT (magic, Piper, please).

Q. Hi Cody, I have some precious metal fund in my 401 and I’m thinking about rotating out of metals and into S&P. Where do you think gold prices will go in the next 6 months?

A. I have no idea about the metals market for the next six months. It’s a confusing cross roads of economy with inflation, rates, asset bubbles popping etc. Sorry. For gold specifically, I think the path of least resistance remains higher but I don’t know for how long near-term.

Thanks for the questions. Have a great week!