Real Estate Outlook, Forest Fire Causes, The Gov in Alt-Energy, Tesla Earnings, Etc

Here’s the transcript from this week’s rather long Trading With Cody Chat.

Q. Cody, what’s your thoughts on real estate in general? I know different places are different, but in general, are we in a bubble similar to 2008, or at least getting there?

A. It won’t repeat, but the next real estate crash will rhyme with 2008’s crash at some point. I don’t think it’ll implode this time, but that real estate values, especially in suburban areas near big cities are peaking this year or next year and will slowly come down for several years to come from these current levels. ZG might be a good short candidate at some point if/when that slow fade in real estate starts.

Q. Are all the fires in California due to climate change or forest mismanagement?

A. Both! The forests have been badly mismanaged and allowed to overgrow for decades. I once wrote an article about how the way the government kept natural forces from maintaining healthy forests such that we have to suffer through horrendous giant forest fires when they do hit was the same way the Fed and the Republican Democrat Regime keep natural market forces from maintaining healthy economies such that we have to suffer through horrendous bubbles and crashes. But climate change is exacerbating the problem too. Like usual, I don’t see things through the partisan lens presented to us by mainstream media and like usual I think the problem is complicated.

Q. Should the government be doing more research into alternative energy?

A. The government always corrupts any markets it gets into, it redistributes capital based on connections and nepotism and eventually demolishes any sense of value or fairness or even logic in said market (see farming, banking, etc). Isn’t there plenty of private capital out there for good alt-energy ideas???

Q. Do we need some fundamental breakthroughs to make alternative energy practical?

A. Solar wins already, and solar’s gonna get cheaper all the time too.

Q. Hello Cody, Question(s) for Q&A please address ALL: You have long recommended to your subscribers the holding of some amount of physical gold. (1) The basic question is why hold physical gold for the long term? (2) What circumstance do you think might prevail that would lead to the disposition of physical gold holdings? (3) Do you have any thoughts or recommendations regarding the best (mix of) denomination(s) to hold? Smaller denominations are more expensive but might be easier to dispose of. Larger units could be significantly more cumbersome. (4) What would we be getting in return? Thank you.

A. (1) You hold gold long-term because there is a concerted global effort to devalue all fiat currencies against each other and gold + bitcoin are the best long term ways to hedge against that. (2) Maybe if there’s a solar flare and the whole system shuts down for a while such that I’d need to use some of the gold to buy stuff and/or services. Or if the price of gold were to suddenly triple or something, I’d probably think about selling some or at least not owning any GLD any more. (3) A little bit of both, depending on how much you want to own. Otherwise, just some one ounce coins I suppose. (4) I don’t understand that question, sorry.

Q. Regarding my questions about gold holdings: Question 4 is kind of two thoughts: First might be a follow up to your answers to question 2 and 3. “Maybe if there’s a solar flare and the whole system shuts down for a while such that I’d need to use some of the gold to buy stuff and/or services.” If you have a small amount of gold and it is (mostly) in 1oz bars or coins, doesn’t it become impractical to “buy stuff”? Or Did you mean to suggest that the gold would be exchanged for larger amounts of then devalued currency?

A. It’s possible you could scrape some gold off the small bars to exchange for emergency needs in the case of a total global system shut down. Or you could exchange some gold bars for cash that actually might be worth a LOT of gold because maybe in the case of a global system shut down, paper cash will go through the roof vs all other asset classes. I’m not sure we need to worry that much about a complete system shut down though, I’m just thinking it out loud for you.

Q. What are your (and Mr. Market’s) expectations for TSLA earnings later in October?

A. Markets seem to be expecting something special from TSLA when they report earnings. But even before that, probably tonight or this weekend, we’ll find out how many cars Tesla delivered in the latest quarter which could drive the next stock move. During the second quarter, Tesla delivered 90,650 vehicles, including 10,600 Model S/X vehicles and 80,500 Model 3/Y vehicles. Wall Street was looking for about 71,000 units. This quarter there are some expectations are for 130-140,000 deliveries. Which is not a low bar. In the earnings report, it’s a question as to how much pure earnings from selling ridiculous green energy tax credits the company recognizes, which frankly might not be as much as the last two or three quarters if I had to guess. Longer-term, it doesn’t matter what Tesla’s 3Q earnings or deliveries are.

Q. Cody. Of all the EV companies, which one do you like the most (if any), besides TSLA? There must be dozens of them now.

A. I think NIO looks like it might have survived. Most of the other EV companies look way too speculative for me to invest in. Some look like frauds, ala NKLA.

Q. Are you making any trades today?

A. Not anything in the personal account, but in the hedge fund I bought a tiny bit of TSLA puts since some of the ones I had recently bought are getting to be near-worthless.

Q. Cody. When are you going to launch your S.P.A.C?

A. Haha, with everybody SPAC-ing getting billions, it’s not a bad idea but the hedge fund + Trading With Cody + kids (including one with a trach and g-tube etc) + wife + golf (for exercise and to take advantage of being in a rural area where there’s six or seven golf courses including one three minutes from my office) + occasional music/guitar + reading + etc etc etc probably precludes from even trying to do so.

Q. What are your thoughts on SBE? Thanks.

A. Speaking of anybody being able to raise to billions with a SPAC: “Switchback Energy Acquisition Corporation does not have significant operations. It intends to identify and acquire companies through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combinations. The company focuses on investing in businesses and/or assets in the upstream and midstream energy sectors primarily in North America. Switchback Energy Acquisition Corporation was founded in 2019 and is based in Dallas, Texas.” Surely you know I’m not much of an investor in oil businesses and it’s a sector in secular decline. If the management of this SPAC have great timing when they pull the trigger, they’ll make their investors some money probably. But I don’t know these guys and have no interest in investing in oil companies.

Q. In SPAC world there seems to be some fairly interesting companies – especially those associated with Chamath (SPCE), examples TRNE (Desktop Metal – 3D printing), FVAC (MP Minerals – rare earth), IPOB (Open Door – Home buy/sell friction). Wondering if you have reviewed any.

A. I keep working on FVAC, the others don’t look compelling to me.

Q. Do you think TikTok has any impact on SNAP, TWTR, PINS? I don’t understand why an AAPL or GOOGL or AMZN wouldn’t swoop in and buy one of these social media companies. AAPL sitting on $250 billion of cash and just doing nothing. Sheesh.

A. A Tik Tok shut down would change growth trajectories for SNAP and maybe TWTR. I sure hope Apple, Amazon and Google stay away from Tik Tok. I think Tik Tok might be peaking with or without Trump’s unconstitutional intervening in the marketplace.

Q. Ay cannabis names you would consider buying? they have really fallen out of favor and have gotten decimated.

A. Maybe CGC or GWPH, as usual. There’s one I can’t remember that’s done really well over the last year or three with a nice chart. Worth billions. Anybody know the name I’m trying to recall?

Q. I’m concerned about the long-term prospects for Roku. Why is this a compelling long-term add when it seems like it’s core value-add (facilitating streaming channels on TVs) is something that can easily be built in smart televisions now and in the future? Why would I want to buy a new Roku stick (or box) when I can simply download and add a streaming channel on my Samsung TV directly?

A. Two primary reasons to own ROKU: (1) The company has a negative customer acquisition cost, meaning that they get paid by other streaming services to acquire customers. (2) Roku is sort of Switzerland in the streaming wars and they are the best way to know you can watch just about any streaming service on one platform.

Q. Cody, I’m curious to know what your top 5 largest positions are currently, if you don’t mind me asking?

A. Not necessarily in this order, but in the hedge fund, it’s TSLA the largest and then these names according to my latest glance at weightings here along with many of the other names that are up there too: TSM, GLD, TWTR, AMD, BRR, QCOM, SPLK, etc.

Q. Hey CW, nice call on that “if the markets drop another 2-3% consider calls” post, After that I am no longer 80% cash, now 25%(still cautious) as we continue up after that 2-3% pullback. Anyway what do you think of NEE? Hydrogen energy? Can it(hydrogen) be the future after the future of electric cars and other energy applications? Look at that chart, been on a tear like forever, offers dividend and getting ready to do a split. Any insight into and from your crystal ball would be much appreciated.

A. Without glancing at the stock, which I don’t know off hand, I’m going to guess that this is a former penny stock/small cap stock that’s gone parabolic and after a 500% move, it’s worth nearly a billion dollars. I think the idea of building and maintaining and distributing a hydrogen network for cars or other energy applications sounds like a long shot so I’m probably going to hate this stock and want to buy puts on it. Looking now…BTW, swinging from 80% cash to 25% cash trying to catch a small move off the bottom when I’ve turned slightly less cautious because the markets had pulled back 10-15% from all-time parabolic highs — I think you might be trading too aggressively to build wealth for the long-term.

A. cont’d. Wait, are you talking about NextEra, the $130 billion market cap company that used to be FPL? If so, why are you thinking it’s a hydrogen play? “NextEra Energy, Inc., through its subsidiaries, generates, transmits, and distributes electric power in North America. The company generates electricity through wind, solar, nuclear, coal, oil, and natural gas facilities. It also develops, constructs, and operates long-term contracted assets with a focus on renewable generation facilities, natural gas pipelines, and battery storage projects; and owns, develops, constructs, manages, and operates electric generation facilities in wholesale energy markets. In addition, the company engages in the energy-related commodity marketing and trading activities. The company was formerly known as FPL Group, Inc. and changed its name to NextEra Energy, Inc. in May 2010. NextEra Energy, Inc. was founded in 1925 and is headquartered in Juno Beach, Florida.”

Q. NextEra Energy to Build Its First Green Hydrogen Plant in Florida.

A. One hydrogen plant, or even twenty hydrogen plants, probably won’t move the needle for NEE.

Q. DumbMoney recommended NEE as a Biden win play.

A. I don’t know what DumbMoney is, but I assume it’s some sort of trading service and suggesting anything as a “Biden win play” sounds, well, DUMB to me.

Q. Cody, PLTR 17 years old. Not profitable. $20 billion valuation. Seems crazy.

A. I wonder if Peter Theil weren’t involved with Palantir if the company would even exist any more.

Q. Here is a link to a document about measuring the value in Bitcoin. It contains many definitions, comparisons, scenarios to try and grasp what value is and the simple basis of value being our ‘perception’.

A. Thank you for sharing. I’ll print it out (I still print stuff out sometimes to read).

Q. Can you clarify what BRR is?

A. BRR is the symbol for bitcoin futures. Everything you want to know about BRR is here.

Q. Hi Cody, I recently invested in Republic Note per your recommendation. Also, I see that one can invest in each of the startups on that site as well. There are a lot of startups. It would be a cool feature on Trading with Cody if you could rank or suggest which startups you think are revolutionary companies in the Republic portfolio. Maybe you can’t because of your affiliation there, but thought I would ask. Thanks!

A. I like the Republic Note because it gets you a piece of every company that has or ever will raise money on Republic. There are some interesting individual plays on there too, but while I can suggest some, I don’t have any conviction on those names yet.

Q. Are you at all concerned with what Apple is doing w/ its bundle services? It sure sounds like SPOT is concerned now that they are speaking out and forming a coalition against the move.

A. I think SPOT’s churn rate is low enough that I’m not too worried about Apple’s bundle as a competition for Spotify just now, but the churn rate is what we need to keep an eye on.

Q. Cody, Any thoughts on BIGC now that it has come down a lot.

A. Trading at 30x next year’s revenues, which are only supposed to be up 18% from this year’s revenues, this unprofitable company looks like a better short still than a long.

Q. Cody,, What are your thoughts on COMM. You had mentioned you were doing some research on it. Thanks Cody.

A. I want to see the company actually show some 5G growth before committing to it. The stock is way cheap and we should have plenty of time if these guys do indeed benefit from the 5G growth coming for the next five years.

Q. Cody, did you ever pull the trigger on SNOW?

A. No, can’t get comfy with the valuation yet and the markets are not exactly out of the speculative fervor that’s been driving them yet.

Thanks for being a part of the Trading With Cody community.

PS. Chicken raising update: Still no eggs (they’re young, but due any day now to start hatching eggs). But more to the point, who knew chickens had so much personality?