Musk v. Zuck, How To Buy SpaceX, Plus Thoughts On MP, WOLF, And Much More
Before we get started, we have a quick question for all of you: Do you use the Robin Hood app for trading? If so, do you like it? Feel free to respond in the TWC Chat Room or email us at support@tradingwithcody.com.
Now, here’s the transcript from today’s live Q&A chat. As always, don’t forget to follow us on Twitter @TradingWithCody.
Q. Something I was kicking around over the weekend, what is the probability that the economy is able to recover, we can live with higher rates and equity markets continue their gains? I know we’ve collectively been cautious but is there a chance we can continue this march upward?
A. Here’s what I wrote when I turned bullish back in December last year and covered most of our shorts and got longer in the hedge fund (in late March, early April, I turned cautious): “The Fed won’t cut rates but they will keep them near 5-6% for most of the year. They won’t have to if the US economy will stabilize and start surprising to the upside by year-end even with rates at a new normal-ish level of 5-6%. It’s okay and frankly quite healthy for people to be rewarded for saving money in a bank or lending to a government. A healthy economy could and would grow in such an environment. As someone who has lived through endless Fed-driven bubbles and crashes during my nearly 30-year professional career, I’d find it quite beautiful if we could have a normal growing economy with near-natural interest rate levels for a few years.”
Q. I know it’s very hard to predict the top of the market but here it goes: When do you think the stock market will pop? End of August?
A. Remember when the stock market basically bottomed exactly at the end of last year while EVERYBODY was saying that the first half of this year would be terrible for stocks but that the second half of this year would be great for stocks? Would it shock anybody if the markets topped exactly at the end of that first half of this year when everybody was so sure it’d be bad and that the second half, instead of being great for stocks, was actually a bear market? All that said, I wonder if the markets might just muddle along for a few months or even a year or two and not do anything dramatic up or down overall for the indices while some stocks do great and some do terrible but most just hang around?
Q. This is my own theory: When every government in the world started printing more money when the pandemic hit, the value of all currencies were diluted. Inflation spikes. Value of land and real estate spikes not only because of the dynamic of the result of the pandemic, but also because of the dilution of currencies. Shouldn’t companies and corporations which do not depend on cheap credits rises too? After the jolt of higher interest, prices of services and goods would rise (currencies dilutions) and the real value of corps should rise too in relation to the new diluted currencies.
A. Yes, I think that’s been proven out relatively well in the last four years. Good theory, thanks for sharing.
Q. How do we feel about laddering in some UST’s that are yielding north of 5%?
A. Probably not a terrible idea. I wouldn’t want to buy 30-year Treasuries yielding half as much as the six-month treasuries though.
Q. I’m still sitting on a bunch of cash earning nothing in a savings account. Buy short-term T-bills? Or equities? Or wait? Thanks.
A. You might ask your bank about money market accounts which are paying around 5% right now. T-bills can be a safe way to get 5% too if you don’t mind locking your money up for a few months or a couple years. I love a lot of our longs here too but be gentle scaling into equities as always.
Q. Your picks from the revolutions have been performing nicely. Seems like extremely fast too. Can you please give your top 10 holdings in your personal account?
A. I’ll give you a handful of my largest positions in alphabetical order for my PA: 1) AAPL, AMZN, GOOG, INTC, NVDA, TSLA. In my PA, I’ve owned AAPL, Amazon for 10 years, GOOG for 19 years, INTC for 2 years, NVDA for 7 years and TSLA for 4 years.
Q. At what levels would you consider buying more of the following: $SEDG, $ROK, $RIVN?
A. I’d consider buying more SEDG at $200, ROK at $300, RIVN at $15.
Q. I am a new subscriber and appreciate your approach to stock investing, essentially identifying companies early that are in a position to meaningfully impact, if not completely change the world. I’m hoping you can comment on, or point me to resources you’ve written that address asset allocation for the average investor. I’ve recently read Nassim Taleb’s book “The Black Swan.” His barbel strategy of investing (85 – 90% of a person’s portfolio should be in ultra-safe investments such as Treasuries and the other 15% should be in highly speculative investments such as venture capital or options which give you positive exposure to a future black swan) has caused me to re-evaluate the amount of risk my stock portfolio is exposed to. What is your asset allocation recommendation for average investors? Seems like 90% in cash would take a long time to build wealth.
A. So much of this answer depends on you as an individual and how much risk tolerance, upside goals, demands from your family, the potential for inheritance, upside potential at work, etc you have. I do think most people under the age of 30 should be mostly invested and people over the age of 80 shouldn’t be nearly as invested as someone who’s 40. No easy generic answers to this question though. A great resource to start would be my book Everything You Need To Know About Investing which comes free with your subscription to TWC.
Q. Where can I purchase SpaceX stock from employees that are selling? Do you anticipate SpaceX IPO having a positive impact on RKLB by significantly boosting interest in the space industry?
A. You can buy some SpaceX at EquityZen or Forge Capital or Stonks.com for example. Read the terms that each is offering the SpaceX stock at though and do your due diligence to make sure you’re getting a fair deal. I don’t think SpaceX will ever go public but I do think Starlink and other SpaceX subsidiaries will go public in coming years. I wrote this last week on that topic: “If/when SpaceX’s Starship successfully gets to orbit and/or if/when SpaceX’s Starlink subsidiary goes public with a $50-100 billion valuation and doubles the first week or two, I think Space Revolution Stocks could go parabolic. That’s probably a few months away though. The space stocks could start running higher in anticipation of those events as they get closer to happening.”
Q. Big fan of RocketLab, just finished The Case for Space and now reading When The Heavens Go On Sale and as I was making my way through it the author had a line about SpaceX being so far and ahead away with their ability to land their rockets and made a comment about how “other competitors are still doing things like dropping theirs into the ocean” – is RKLB eventually doomed if they can’t figure out how to self-land their rockets like SpaceX?
A. It’s not just the self-landing that RocketLab needs to learn to do to truly compete with SpaceX on launch. That said, there are only two companies in the world that are currently doing regular launches to orbit — SpaceX and RocketLab. While the economics of Rocket Lab’s current Electron rocket aren’t on a level playing field with SpaceX, there’s more demand for launches than there are supplies. Rocket Lab’s upcoming Neutron rocket will be much bigger and have more reusability features and will be closer to SpaceX’s Falcon economics. Of course, SpaceX will be trying to use their Starship for launches in another two years or so and that will propel them back far ahead of Rocket Lab’s rockets by then too. But launch “only” accounts for 1/3 of Rocket Lab’s sales and I think that Rocket Lab’s Neutron rocket will be gross margin positive in three years and that there will still be much more demand for launch services than supply by then too. Rocket Lab is not without risk for sure!
Q. Good morning! Hope you had a great holiday weekend. I loved the article on Monday about EV’s. If someone was looking to establish a position in Rivian, would you suggest buying a small tranche now and look to build the position over time? I have a feeling I know the answer to this one given your responses to similar questions. If the company can execute, looking at a lot of upside here.
A. Thanks for the kind words. I always suggest starting a small position in a name you want to own and giving yourself some space and time to build it up to a full position. We have trimmed a little bit of RIVN here but are mostly sitting tight with these shares that we were buying pretty aggressively a few months ago.
Q: I see all the big boys now advertising EV’s. BMW, Mercedes, Audi, Accura, Lexus, and lots of SUV’s which Americans seem to love. Unless I am missing something, I see no Tesla SUV’s. And seems to me young people with two incomes have no problem dropping $60 grand plus on SUV’s. In my lifetime I have owned probably 25 cars and 7 or 8 were BMW’s which were the “ultimate driving experience” or whatever they spin. I loved them. Obviously, these guys are not going away! Enjoyed your writeup on Tesla. I would guess we are in the first inning of the EV? Am I out in right field to be concerned? In my youth we always placed the not so good players out in right field!! LOL. Thanks.
A. Tesla makes two SUVs (or “crossover SUVs”), the Model X and the Model Y. Every ad you see for an EV from the BMWs, Mercedes, Audi, etc. car makers is an ad for Tesla because Tesla is the only EV that you can actually easily buy right now. The biggest problem for the traditional car makers in trying to become EV makers is that they are all YEARS away from making any profits on any EVs they sell. Ford’s gross margin (not net margin!) on the Lightning Truck is negative! Tesla has got competition coming for sure, but it ain’t really here in the US yet.
Q. It looks like you don’t use stop losses, rather it seems like you keep in mind the fundamentals and if the story hasn’t changed, you hold on, otherwise you look to fade sentiment when buying and selling (like trimming RIVN today). I have found that selling is the most difficult part of stock investing for me and so a trailing stop loss helps me stay in a trend that is in my favor and get out when I’m wrong. What is your perspective on trailing stops and do you have guidance on a consistent method to selling?
A. Again, no easy generic answer to this question as each stock and each trader is different. I tend to trust my analysis and will hold onto a stock like Tesla that dropped 30% in the first few weeks after I bought it before it went up 2000% in the next two years after it dropped 30%. And the problem with stop losses is that you can get blown out of a stock you want to own forever at the exact wrong time. All things in moderation, including moderation.
Q. Great post/article today on EVs! Thanks and have a happy 4th!
A. Thank you and thanks to Bryce who wrote most of that analysis.
Q. ROK has been a home run. What’s the current rating on this one?
A. 7+/10. Entering this year, this company was supposed to grow about 10% topline in 2023 and now it’s supposed to grow closer to 20% topline in 2023.
Q. Morning, MP and WOLF both in the news. Should I add? Your thoughts?
A. We trimmed a little bit of WOLF on the pop this morning on the announcement of a $2 billion order from a Japanese semiconductor company as WOLF’s stock has rallied from below $40 to $68 in the last few weeks. Still holding a core position in it though. MP is in the news because China says it’s going to restrict exports of rare earth minerals making MP the last many standing in the free world for rare earths. We’re mostly sitting tight there for now.
Q. Thoughts on BABA here? They are a big player in China and will talk up their AI capabilities, etc. Stock has been much higher and is now close to their lows. Any real chance US delists BABA? If they do, what happens if you own it?
A. The communists who run China have increasingly shown themselves to be despots who are motivated as much as by power/politics as they are by money and that being a profit-seeking company in China is not completely compatible with the despots’ goals. In the US, the corruption of the Republican-Democrat Regime is driven much more by money and not just power/politics. I’m staying away from investing in China.
Q. What do you think about Copenhagen Atomic’s Thorium Reactor and investment proposition? Presentation available here.
A. It’s an impressive presentation for a Thorium salt energy plant. It’s a private company based in Copenhagen so I’m not sure there’s much investment opportunity for US-based investors in it right now. We definitely will be keeping an eye on them.
Q Have you looked into old holdings IONQ and OPRA? They seem to be breaking out recently. Thanks.
A. I’ve seen them both pop and wish I’d loaded up each of them before they did, but I’m not chasing them right now.
Q. Elon or Zuck?
A. Zuck is trained and I wouldn’t want to fight him. But Elon is crazier and I have always tried to avoid fighting the guys who are crazy. Trying to pick which one to fight sort of reminds me of two kids I grew up with. One was an all-state football player and was 6’2″, 200 lbs of solid muscle and he would beat up anybody who messed with him but I don’t think anybody ever went to the hospital in one of his fights. The other one was 5’11”, 160 lbs of mostly muscle and he would beat up and sometimes genuinely hurt people he fought. If they do fight, I hope it raises $10 billion for charity (and that whatever charities get the money that they actually spend it on helping people and not paying executives six or seven figure salaries and saving the money in a bank account).
I leave you all with Amaris making my mother-in-law and brother-in-law laugh on July 4th:
