Stop loss pitfalls, 5G, Blackberry, Fiat currencies vs Bitcoin
Here’s part 2 of 3 of the transcript to this week’s Live Trading With Cody Q&A Chat.
Q: Cody, do you ever believe in putting stops on your stocks to prevent losses in case of a big market drop?
A: Never say never. You use the word ever in there so let’s say “never say ever.” But in general, the answer is no, I don’t like to use stops or trailing stops, but I can think of a handful of times that I’ve had and this has happened (and I’ve known many people who have had this happen many times over the years):
Let’s say you put a trailing stop on Qualcomm. You bought it at $55. You put in a trailing stop at $53 and one day the news comes out that Apple isn’t going to do such and such and they’re fighting back on the royalty payments and next thing you know, BAM!, the stock is back down to $52 dollars that morning. But as the day wears on people say, “Look, this is an ongoing battle. It’s not that big of a deal. It’s not new news.” Meanwhile, $AVGO is trying to buy Qualcomm so the stock goes back to $56 and you got stomped out.
More to the point, I’ve told this story recently at a conference where Advanced Fiber Communications was a stock I owned fifteen years ago and I had a trailing stop in it at like $42. One morning the markets were down big and the stock opened at $41.50 and I got sold out of my whole position and over the next two years the stock went up 300% and I barely got back in at all, much less how much I had owned at the top. So, don’t do trailing stops with your whole position. If you want to do a small part– if you own a thousand shares or something and you want a stop loss on two hundred shares just to stop some of the pain if it goes down– then maybe. But there’s no easy solution to avoiding losses and there’s no easy way to maximize rewards and minimize risks over the long term. Stop losses, trailing stop losses, they are not a solution; they’re not an easy solution. There’s a time and place for everything, but in general, no, I do not use stop losses.
Q: Cody, Verizon’s deployment of 5G seems like a disruptive threat to cable and an additional $100 billion dollars of revenue for them. Please expound on this a little bit?
A: Is there much difference between expound and expand? 5G is disruptive and it’s not just disruptive for Verizon. The reason why I think $VZ is a great 5G pay is simply because they are investing more than anyone else on this. They are not trying to buy and spend a hundred billion dollars on content. Sure, they spent a few billion dollars buying Yahoo and AOL, but they are spending tens of billions of dollars making sure that their 5G deployment is faster and more reliable, and is out there first, and that’s a great opportunity for them. But beyond that, 5G presents a disruption to so many things we’re doing: streaming videos, interactive videos, Amazon Alexa, all of this stuff. All of these things are going to be built with new services and features and exciting ways of engaging with people, devices, the internet, augmented reality, virtual reality, and who knows what else. That’s big for everyone; hundreds of billions of dollars for lots of companies. I don’t know if I would model another hundred billion dollars of revenue from $VZ from 5G, but certainly tens of billions of dollars in the next five to ten years.
Q: Blackberry, please explain how its technology is positioned to be such a compelling buy?
A: I don’t think Blackberry is that compelling to buy. I do own a little bit. We’ve got some gains on it. It’s up again today. It’s a small position and frankly sometimes I’m thinking about taking a little off, or letting it go. I think I own too many positions anyway and it might be one that I might painfully have to let go.
The reason I own $BB, and the bullish case for it is really two fold. First, that they could become a network security Android de facto standard; that corporations that want high security Androids would use a Blackberry. Second, that they own the brains beneath most smart cars– smart dashboards if that’s what you want to call it. I mean, most smart dashboards these days are idiots compared to Android and iOS. Blackberry is the brains behind much of that and that’s a platform from which I hope they can grow.
$BB is something I think I’m going to have to let go. I don’t think that thesis is playing out very well. I think moving beyond the Blackberry platform is easier than building into it and I think most car companies know they need Android or iOS systems in their cars. Maybe in three or five years you’ll have the option- I’ll take an iPhone compatible dashboard; my sister will take an Android compatible dashboard.
Q: Great write up here today. Cody, have you been to eastern Europe lately? Incredible economic progress. First time in my life I got to experience a twenty-five to one hundred times currency difference. Somewhere at home I have two forint coins from the early nineties. Now the coinage is 50, 100 to 200 and they are likely to retire the 50’s soon which are only worth twenty cents.
A: (Cody speaking in Lithuanian) That’s my Lithuanian. I have not been to Eastern Europe recently, but I did live in Lithuania once and I love Eastern Europe. Interesting, you know. Currencies are such an important economic factor. Relatively good currencies like the US and some of the other developed countries in this world are rare in history. Most people in their lifetimes and in history have experienced what Venezuela and Zimbabwe have experienced in our lifetimes, which is crazy currency devaluations and suffering because of that.
Which brings us of course to Bitcoin, cryptocurrencies, and the promise there of, and why there is such demand and interest in the concept that you can somehow avoid fiat currencies based on political governments. And there’s a place for that. Ten years ago on Fox, I used to talk about competing currencies and thought Warren Buffett could have his own currency, Cody Willard could have his own currency, and Apple could have their own currency; and you do sort of see that. True cross-border, open currencies based on blockchain technology have a place in our world. They have a place in our future for the very reason this guy is talking about. It sucks to be on the wrong side of a twenty-five to one hundred times collapse of your currency. I guess it would be a ninety-nine percent collapse of your currency.
