Politics, partisanship, the markets and you (PLUS Apple into year-end)

Here’s Part 3 of 3 to this week’s transcript of our Trading With Cody Live Conference Call.

Subscriber: Cody, you were great last year at handicapping Apple going into the 4th quarter. I’m just curious. It’s had such an amazing run. Where do you see it trading in the next few months going into the end of the year?

Cody: Thanks Jason for the question and for being on the call. I spoke to Gene Munster again this morning. Gene spent eighteen years covering AAPL as a head analyst at Piper Jaffrey for that sector and very few people have seen the cycles and know the company more in depth that haven’t actually worked there than Gene Munster. I know AAPL really well and have owned it and followed it and written about it for fifteen years, but I’ve had other jobs. I haven’t been exclusively focused on it like he was for seventeen years. So, what I’m getting at, I had the opportunity this morning to talk to Gene about AAPL and I asked him that very thing, and he made a lot of sense. Let me tell you what he told me.

The hype around the iPhone 8, at this particular moment before it comes out, is probably peaking. There can’t get to be much more hype about it. At this point, is there any way that the iPhone 8 is gonna live up to the hype on the new way it looks or the new features it has, much less the unexpected bump in sales for the first quarter? Probably not. Unless it really takes Siri to the next level and I’m able to talk to my phone and tell it to open up Facebook to the Neil Patrick Harris page or to open The IAm Neil Patrick Harris App to the Neil Patrick Harris Facebook Page. And by the way, AAPL did recently release a Siri kit for developers so we can get to that point, but they released that 40 days ago. Amazon Alexa’s kit has been out for many more days — two years now. 20,000 skills have already been built using the Alexa skill set versus the Siri kit which is now 30 days in.

So here we are at new all time highs and I get notifications from Market Watch telling me that Apple is nearing a trillion dollar market cap and da da da. And meanwhile you’ve got the fourth quarter sales which will probably include the iPhone 8 launch to market, which could be monstrous. But then the markets gonna look ahead to the first quarter of 2018. And, whatever the fourth quarter was, the markets are going worry that after the Christmas season and the Chinese new year that there’s gonna be a lull and Apple’s next quarter could be down 10%.

As Gene said to me, we’ve seen these cycles with AAPL and even the technology markets over and over. We’ve lived and breathed them. Lived through them over the last 20 years and we’ve seen that with AAPL. So, that’s my long answer to your question, Jason.

My short answer is this — we have four months from here until the end of the year. I think that AAPL will hit $175 at some point but will be trading closer to $150 at the end of the year. I don’t know that there’s enough of a range in what Apple’s going to be trading in that I would try to game it. Unless the only trade I would think of is selling puts or something. You know, sell puts that are with a strike of $140 because I don’t think that Apple will get down to $140. Of course, I don’t short options — I don’t sell puts and I don’t sell calls. I’m just saying that shorting puts would be the only logical trade off for what I’m telling you for my price target and my action target for AAPL over the next four months. I would bet that AAPL gets to $175 at one point but it’s probably closer at $150 by the end of the year.

Subscriber: Got it. Thank you. I really appreciate it.

Subscriber: Cody, you don’t think wireless iPhone charging will be enough to surprise public?

Cody: Hmmm, probably not. Wireless iPhone charging might be something cool, but I don’t know if it’s a game changer. What would be game changer is the original Tesla, Nikola Tesla’s vision of wireless electricity. Free. Surging around the world all of the time. But I don’t think Apple’s got that in the hopper for their September 12 iPhone 8 announcement.

Cody: I’m looking at other questions. There was a discussion today in the chat room — a sort of a back and forth after someone was getting political and the bend of his argument was either conservative or liberal, Democrat or Republican. Someone quickly stepped in and noted that we avoid partisanship and group-think when we talk politics at Trading With Cody. Thanks to David, who noted that when I discuss politics, I am doing so without being a Republican or Democrat.

I am trying to be as effective as I can and I am enabled to be more objective because I do not drink Kool-Aid from either party under any circumstance. I do not believe that either party ever has my best interests individually or collectively at heart.

I’ve never believed that any of my values could ever be reflected in a political party. Even the concept seems absurd to me that I would feel beholden or have my viewpoints affected by an affiliation to either party, or any political party. I want to be a free thinking individual at all times both in my politics and in my investments.

As always, we can’t remove ourselves from politics but we can remove ourselves from partisan biases; from being biased with our partisanship; with partisanship at all at least. At least I can. You don’t have to. You can be partisan. I can be that voice for you that goes, “Well, this is how a guy who doesn’t see the world as either a Democrat or Republican, and never will; this is how he is viewing the economy and the political set up.”

And I always remind you guys that in this day and age, the system itself has become beholden to the corporatocracy that it is. It’s a self fulfilling cycle. The Republicans and Democrats bailed out the banks; bailed out the car companies; bailed out the shareholders of the banks; continue to have the Federal Reserve using emergency measures to subsidize banks and enable Apple to borrow money at 0%.

When I was in San Francisco, one of the meeting that I had was with someone that I, on paper, respected as a politician out there. I met with several politicians but this one I’m picturing is one that I thought I might respect. And when we’re discussing the world and my app business and San Francisco’s economy, he talked about how he should be given credit for the Hollywood Movie Corporation tax credit program in San Francisco. One of the guys I’m sitting with, my partner, produced all of the Farrelly Brothers movies. $2 billion of movies this guy has produced. He is a Hollywood executive and the politician is bragging to us about how he is the one who put out the Hollywood movie tax credit. Or what I will rightly call a “Billionaire Hollywood company welfare program” that pays companies to come make movies in San Francisco and also enable these companies to avoid paying what every other business in San Francisco is paying in taxes.

Meanwhile, someone has got to pay for the roads. Someone has got to pay for the military; for the judges. Someone’s got to pay for all of this, and that’s my thought as he’s sitting there telling us about this corporate welfare program.

I don’t see the world the way that the politican or even my partner is sitting there seeing it. When we left the politician, my partner asked me, is that the typical tax credit welfare Democrat Republican Regime thing that you talk about Cody? And I was like, yeah. He was like,”Don’t you think that when I come to town and I create 400 jobs and we have a $100 million movie budget, that it’s good for San Francisco?”
Certainly, there are some ramifications out of that that are positive but I’m here to tell you, no it’s not a good thing overall for San Francisco or our country.

It’s policies and the relentless, endless focus on tax-credit and corporate welfare programs that is how we end up with this giant wealth disparity in this country. The guys who are working and/or running startups in San Francisco are paying their tax, but the billionaire corporation and the guys who are coming there to make $100 million movies don’t pay tax.

Over time, over decades, you end up in a system where there’s a distribution of wealth that’s not fair. And guys, I’m a little bit off topic but not really. This is all about how people’s Republican Democrat biases allows people to go, “Well I’m conservative so I’m gonna vote for Republican,” or, “Well I’m liberal, I’m gonna vote for a Democrat.”

Meanwhile, what does Hollywood movie credits have to do with being Republican or Democrat or being conservative or liberal? Nothing. It’s just that someone lobbied for it.

I’m not here to tell you it’s an easy fix. I do think the easiest way to fix it, by the way, is to have write in’s for our elections — no lever pulling. 99% of us know how to write and spell a little bit these days. Everybody’s on Snapchat. You can read a headline. The literacy rate in this country, especially among the voting population, is near 100% now. So I don’t think it should be so easy as to pull a lever. I think you should have to do your homework and know how to spell your Representative’s and your Senator’s and your President’s name.

And all of this ties into the bubbling bull market that we’re living through too. It’s not like we can separate any of that. But we can at least recognize some of the realities of partisanship and its impact on our economy and our investments.

Boy, I feel like a preacher. Call me Joel Olstein. Wait, no. Don’t.

Another one of the politicians I met with talked with to about how he’s been meeting with the cannabis industry and that he is putting forth legislation that blah, blah, blah. My eyes glazed over at that point. I’m thinking ot myself, “So you’re getting paid by the cannabis industry and you’re doing their bidding.” Check. Got it.

I’m sorry. I don’t know how to see the world and the parties and politics and economies differently than I see them. But I do think this current RepublicanMcDonalds DemocratBurgerKing two party system is something that I think we have to change and not accept. We should have other restaurants besides crappy fast food, see?

I’ll leave you with this thought. 30% or 35%, whatever it is, the tax rate that the corporations are supposedly paying, let’s just say 30%. Apple’s actual tax rate is a small fraction of that of course. So maybe the government or the company itself should make it a policy that:
30% is what is supposedly being paid and it’s what small businesses are paying, so 30% is what we should pay. And if Apple doesn’t pay the 30% in taxes then they have to donate the difference to charities.

See, I’m all for small government as I think government ends up being corrupt. And I’m happy that Apple can avoid sending the government 30% of their income, but I’m not happy that Apple’s got an unfair advantage over small businesses. So, go ahead Apple, avoid paying your taxes, but go ahead and send an equal amount to charity. Because, someone is paying at least 30% in taxes and if it’s not you then you should at least level the playing field for the small business guy that is competing against you. Flip it guys.

Thank you. I didn’t mean to get all political but I guess it always is. All of us live in this world and we all have to deal with these political realities. Let’s do the best to maximize our returns and minimize our risks as we do so. I’ll see you guys on the next call. Thanks for subscribing.