North Korea tensions and the market, a two-tiered economy, Shopify, Micron & more
Cody: “Mack-Daddy Willard. It’s Cody. Hello everyone. Hello hello. Alexa, play Kris Kross on Spotify.” Alexa plays something else. Cody: “No, that’s not it.. Alexa stop. That’s the problem with Alexa, she’s good but she misses a lot of stuff like that.” Alexa makes some more miscellaneous sounds.
Cody: “Alexa stop. I wanted Kris Kross, the band. You remember?” Cody Singing, “Daddy mack will make ya jump. Kris Kros will make ya jump, jump. Well, it’s playing some song called “Criss Cross” that I don’t want to hear.
So, let’s give everyone another minute to call in here. Any music requests in the next minute? Let’s go to classic rewind on Sirius and see if we can name that song. Alexa, play classic rewind on Sirius.” Alexa plays “The Boys are Back In Town” on classic rewind.
Cody: “The Boys are Back In Town. I don’t like that song or this band. Alexa next. Oh, it doesn’t tell you what the song or who the band is when you’re listening to Sirius on this Alexa Show either. Sigh. Alexa stop. Alright. Alright. Let’s give it another thirty seconds. Cody breakin’ it down here. Kris Kros will make ya jump, jump. Ahh, let’s get goin. I was here at the office till midnight last night so I was hoping for a pick-me-up song before we got started.
We’ve got a new show/podcast for The IAm App company called The IAm Show. And, it’s our first episode. We have a legendary Hollywood icon who has an app with us as our first guest. We interviewed him for twenty-five minutes. Anyways, we’ve been working on the production of it for the first time and that’s always a time suck. So, I was here late last night and early this morning.”
(NOTE: Now published and you can find the show on iTunes: https://itunes.apple.com/us/podcast/the-iam-show/id1269752430?mt=2# and YouTube: https://youtu.be/q7TxbxRQOHs)
Cody: “I am, however, leaving tomorrow at noon. Just fyi. My wife and I are taking Amaris and Lyncoln and Amaris, our two daughters, in a medically equipped RV over to a campground a few hours away in Silver City, New Mexico. We are going take two or three nights to just not be at home. And, I won’t look at the computer as much as possible. I won’t look at the computer at all. And I won’t look at the smart phone except for a few calls and stuff that I’ve already got scheduled that I will unfortunately have to make from the back of the RV. Or, maybe I’ll run into town when I have those times scheduled. If I’m rambling it’s because I was giving people another minute or two to call in here…
Let’s jump in and talk, about the markets. You know, DJIA at twenty-two thousand. S&P, Nasdaq, DOW, Global stock markets all at or near all-time highs. There has been been a little bit of pullback the last few days of course. I think you guys know that I think we could see the DJIA 21k or so before we see DJIA 23k.
That being said, as you also know, I’m not out there buying quips or trying to game the next short term move. The thing that keeps sticking out to me is how many traders, hedge fund managers, pundits out there, who have been bearish for the last five years, constantly ignore reality today. Which is, whether they for three or four years or ten years, twenty years in some of their cases, some of these guys constantly explain to you why the stock market has to crash; why the consumer is going to collapse; why the economy is cratering; why we better be careful and out of stocks and/or betting against the market.
And, every time to this day when I talk to those guys, they still, when they talk, have this underlying assumption that they think I agree with that the economy sucks. Now, as you guys also should know, certainly long time readers and viewers of mine know I’ve long talked about how we sort of live in a bifurcated economy. A two-tiered economy. There’s the corporate / oligarch / billionaire side of the economy. And there’s the working class / poor person / person on food stamps side of the economy. And over the last twenty years, clearly we’ve seen, as a result of policies, tax policies and even regulation policies, and bailouts, etc.; we’ve see the incredible wealth disparity growing in this country. And that’s, in large part, because the middle class / poor sector — let’s call it the lower ninety percent, the lower ninety-five percent — the ninety-five percent. I’m not even gonna use the word “lower”. The ninety-five percent out there that is losing wealth relative to their peers on the wealthy side of the equation, on the wealthy tier.
And the point of all that is, look if you step back, that’s been reality. In over the last five years, ten years; no, I’d say since the 2008 crash; since 2009 and you guys saw me throw bullish off of the crash. I had been bearish and sold my hedge funds before the market crashed. In 2007 I closed it and became a TV anchor. I got back into the market in 2010 and was very bullish. In large part because the market had already crashed; the economy and unemployment were terrible and meanwhile corporate earnings were policed to rise.
The thrust of every policy; of Obamacare itself; of the Dodd-Frank bill; of solar subsidies; of electric car subsidies; all of that is for giant corporations and the very wealthy. And part of this discussion is just the recognition that the giant corporations are going to benefit from all of this.
Again, zero percent interest rates aren a huge welfare subsidy for giant corporations (many of which we own). Apple specifically and any others who are borrowing money are borrowing money at a lower percent and even negative interest rates, as in Apples case a couple of years ago. People were lending Apple a dollar trying to get ninety-nine cents back; and Apple goes and buys stocks back and issues dividends and gives a hundred million dollars to their CEO as a bonus with that money; with that cash that they borrowed at the low market interest rates because of policies that were enabling that. Meanwhile, the middle class or the poor person has to go borrow money at twenty-five percent on a credit card, or five percent on their mortgage.
And you know, there’s one other point that I want to make that sort of ties all of that together. I guess it’s the idea that these guys can’t ever acknowledge the reality that there could be good times; at least even for a sector of the economy, and you want to position yourself to benefit from that. And, here we are today. We’ve had this huge run. We’ve benefitted from it. We have been positioned perfectly for it the last, what is now seven years since I’ve got back into the market. And, I wanna be cautious as you guys know. And I’m a lot more cautious today than I was five years ago, but it’s almost like you won’t see the top until those guys panic and finally say, “the markets are going up; yes the economy is great”. And no, the economy is not great. It’s not perfect. But, it never will be. We’ll do everything we can to get out before the crash. I don’t plan on getting out entirely, but to hedge a little bit more and be more defensive at some point.
There’s a quote from Martin Zweig in the book I’ve been reading. I quoted it a couple of weeks ago. I’ll paraphrase him here now. He talks about how most investors and traders should just want to avoid being demolished when the markets crash. You don’t necessarily want to try to profit off of it, because that’s really hard. We’ve done it in the past. I don’t know that we’ll see the exact top when we might get out.
We’re gonna keep revolution investing. We’re gonna keep finding these incredible growth trends, and we will use these cycles in the stock market and this misanalysis by so many people with lots of money who are running lots of money in the market; who are advantaged; who are continued advantage.
We’re already eight minutes into this. Let’s jump into some questions please. Feel free to ask me a question now.”
Q: “Will Korea trigger a stock market slide or will this just be another buying opportunity?”
Cody: “You know what’s interesting about that is? Even with yesterday, Jake Fistes, who helped me write The Voice Revolution book, asked me yesterday when the markets reversed; is Korea, is this the start of something? Ugly reversal thing? It wasn’t just him who actually sent that, some of those aforementioned hedge fund managers and pundits texted me yesterday, or emailed me, and talked about it.
It was the same guys that two months ago talked about how since FANG reversed when you saw the FANG stocks brutally take a five or ten percent nose dive? And all of the same guys were like: ‘This is it. This is different now. This is the first time those big tech stocks have lied on the down side; time to sell everything and get short for real this time, Cody!’ That’s my knowledgable hedge fund manager voice.
Anyway, I’m like, ‘No, I don’t know; you know.’ Look, if Korea; if the markets crash because of S. Korea and N. Korea doing something crazy, or Trump just talking or some sort of diplomatic crisis. Quote un-quote, crisis between us and N. Korea. It’ll be a buying opportunity I would expect. I’m always flexible, always worried, and I’m not going to pretend I can know beforehand about the next actual geopolitical crisis until it’s here.
We’re due for some geo political panic, right? I mean, you guys remember five-seven years ago it was like every three to six months we got a terrific buying opportunity because there was a new crisis du jour; Greece. Japan. Remember the Fukishima nuclear disaster? That was a buying opportunity as tragic as it was, and as tragic as all of these crisis are. It’s not like I’m cheering for stress between N. Korea and our country. I certainly don’t want people in Cyprus and Greece and Spain to suffer because they’re having to bailout the banking system and unemployment is skyrocketing and you know there’s real tangible suffering that happens because of these crisis.
But, if you step back and just look at their impact on our stock market and our economy and societies and the revolutionary trends that we’re in front of and have been investing in, it’s minimal. How many times in 2011and 2012 would I cite one of those crisis and go I don’t care what happens to the E.U.; to any of the banks in the E.U. in regards to Apple and Google or the smartphone revolution? Because I rightly predicted that Brexit or whatever, won’t matter on the demand for smartphones and apps and software, and cloud, and support it all. So, if North Korea escalates into another geo political crisis; crisis escalates and causes some panic in the stock market I will evaluate it as clear headedly as I might be able to at that moment with all of this background analysis that we’ve got behind ourselves to support ourselves on; feel confident in what we’re looking at and how we’re analyzing it and take it for what its worth when it’s there. For now, I’d expect it be a swing ding pitch opportunity; a pitch swing opportunity.”
Subscriber: “Yeah, I have one question.” Cody: “Please.” Subscriber: (Q)“What’s the outlook on Shopify?”
Cody: Did you get the new book The Voice Revolution?”
Subscriber: “Yeah, I did. Shopify is one of the stocks in there and it is rated at 8 out of 10 on your Revolution Investing Rating.”
Cody: “Oh, so you know. There you go. I mean, that is the outlook for it. It’s incredible growth opportunity. Clearly the valuation after it’s had a five time run up, or a four fold run up, whatever it is in the last year, it is stretched but if the company can continue to grow with topline at sixty percent which is the growth estimate for this year and like fifty percent for next year. I mean, you know, those types of numbers become billions quickly and that can quickly go into its valuation. I haven’t bought it partly because I would like to see some major pull back in the market. I’d love to see some panic. There’s still a lot of momentum in that stock; in the market themselves and the momentum stocks. I hate to keep saying, as you guys know, I’ve been patient recently and waiting for better hedges. I’d love to get a swing at Shopify down twenty percent from its current levels. But, if I already owned it I’d certainly be holding it and I’m looking for the opportunity to slowly buy in. Can’t swing at every pitch.”
Subscriber: “On your report, you are pretty high on Micron. They’re gonna see huge revenue growth?”
Cody: “Well, it’s all dependent upon pricing. One thing you would see with those Micron, D-RAM, the storage, flash drive business is it’s very cyclical. It’s also in a revolutionary secular growth phase because all of these new devices that we’re talking to; all of the storage in the cloud; all of that stuff needs flash and DVR and D-RAM and all of the stuff that these guys make. And right now, there’s been a shortage in the last few months, year; in the cycle itself. In addition to it being in secular growth, there just wasn’t enough capacity. There weren’t enough pieces out there. And so, prices were very firm and the analysts had no idea; just a year ago they almost didn’t expect serious growth from Micron because prices were soft. So, I’m not going to buy Micron. It’s not my kind of investment. I might buy it at three bucks. I’ve seen it there two or three times over the last twenty-five years. I don’t think it’s going back though frankly.
The consolidation in the industry has taken out a lot of extreme cycles in the Micron world. But it’s Samsung that’s by far the biggest dealer and competitor to Micron. And they’re the gorrilla. They’re adding a lot of capacity right now and Intel has new technologies that they think will be more efficient and will be able to leap ahead of today’s versions of flash and D-RAM and a lot of moving parts. But if I had to guess feet to fire, I think over the next five to ten years the consolidation in the industry is probably going to protect some of the down side swings in the cycles and that the secular growth and demand for flash and D-RAM is going to drive the market higher over time. Any other questions from you sir?”
Subscriber: “Yeah, one. I read your report. I shouldn’t say I have; I have glanced through it my first pass. How do I pare it down from fifty to five or ten? That’s the challenge I’m having.”
Cody: “You know what? I’m going to; Cathy will you please ask Speck and Jake to go in and grab the ten highest rated stocks? Whatever is eight or higher rated in the report, and let’s just send out a special report for Trading With Cody subscribers that just says here are the highest rated names from this book. And that way you can just get straight to the favorites instead of having to go through and try to find what the highest rated’s are. We probably should have done some groupings at the bottom of the book; here are the eights; here are the nines, etc., but we’ll do that now.
Subscriber: “Ok, that will be great. Ok.”
Cody: “Great question. I appreciate it; even though you didn’t read the whole thing.”
Subscriber: “I read it on the plane.”
Cody: “You read the whole plane ride and you didn’t read the entire report, every word? Unbelievable. I’m just kidding. Thank you so much. I’m gonna let some people hop in here. Check back in in two weeks after the next week on the chat room itself. These chats love to hear your questions. Thank you so much. Next please. Anybody out there, or should I go to the chat room?”
Q: “Is Priceline a buy, down hundred and sixty bucks?”
Cody: “Said another way, it’s down about eight percent. That underscores a point I want to make. A hundred and sixty dollars on the stock is only eight percent. It was a two thousand dollar stock yesterday. And, what will really blow your mind with priceline is its market cap. It’s market cap is a hundred billion dollars. Even right now. Down ten percent today. It was worth a hundred and ten billion dollars yesterday. Disney is worth a hundred and seventy billion. So, Priceline is worth sixty percent of Disney? Did you know that Priceline is worth one point three times more than the always mentioned and obsessed about by everyone; biggest momentum stock on the planet, Netflix; seventy-eight billion dollar market cap at this moment. Priceline is worth a hundred billion dollars.
The reason I never bought Priceline, if you go back I actually mentioned it as a terrific app revolution play in 2011 and 2012. But, I don’t know if I had mentioned this part, but the thing that kept me out of it, cause its market cap was already like fifteen billion dollars, and I was just was like I know it’s a huge growth company but it’s just a travel agent; a digital travel agent. There’s so much competition. How much margins can they possibly have? How much earnings can they possibly generate in the app revolution even if everyone starts using it; and all of the other app travel agent plays?
Well, a lesson that gets repeated many times even for the bulls and people like me who’ve had successful, huge home runs on the long side and have blown people’s minds by being able to say I know Apple’s already worth two hundred billion but it could be a trillion dollar company in five years. Like I did five years ago. Even for me, I never could have fathomed that Priceline could be a hundred billion dollar company. Still can’t. But, I’m not gonna short it because they are killing it. Why short a company that’s winning? Maybe it will crash someday, but let’s go short the crappy competitors to Priceline. They will probably go bankrupt in the next crash. Where as Priceline is here to stay.”
Q: “Cody, good write up. I assume it’s the usual one third tranche on Intel; a one third tranche of what would be a full position for Intel?”
Cody: “That is correct. I am starting with a one third position in INTC common stock and I will add to it in a couple of weeks.
Alright guys. Thank you so much for being subscribers. As you know, I’m giving it everything I’ve got and I will continue to. Thanks.”
