The next great tech bubble is already here but it ain’t over yet
At 2pm ET today on The IAm Cody Willard App, I’ll be Live Streaming today’s Trading With Cody conference call, answering questions about individual stocks, the markets, the economy, politics and anything else that comes up. Download The IAm Cody Willard App. Android app: https://goo.gl/1EG3E1 iPhone app: https://goo.gl/95QJXu
I’ll also take questions over the phone on our conference call line. (Dial-in: 641-715-0700 Access Code: 709981), in the Trading With Cody chat room or just email us your question to support@tradingwithcody.com.
I had one of my assistants go through and give his best shot at typing up a transcript from my speech at the MoneyShow in Dallas last week. You can watch a replay of my talk on the “Broadcasts” screen on The IAm Cody Willard App or you can watch a replay of it on YouTube here.
I warn you that I haven’t gone through and edited this transcript, but I figure you guys would want to read it.
Cody: Alright, let’s go ahead and get started. The topic is, the next great tech bubble is already here, but it is not over yet. As I‘ve been writing for ten years, ever since the bailouts, when we went to zero percent interest rates and emergency measures and everything else along the way. The non-stop march by the republican democrat regime; both being completely owned by their corporatist, their lobbyists and the people that run and give them money, it’s been an overriding theme that we have never had a bigger focus on corporate profits and the stock market. Propping those things up in the name of making a great economy for the middle class or something like that, but it’s a continual thing and I’ve been calling it the Echo Techo Bubble and we’re here. This is the Echo Techo Bubble. Starting in about 2010-2011 is when I left Fox and started trading again. I didn’t trade stocks, own any stocks, and I sold everything before I went to TV because I didn’t want to sit there and have to try to be honest and bash Apple and Google and everybody else while I owned their stocks. I’ve found, since then, I am happy to bash Apple and Google while I own their stock simultaneously. But at any rate, since 2010, I’ve been saying that we are about to enter another great tech bubble. Slowly but surely it’s been growing and climbing. And in 2017, seven or eight years after the bottom of the stock market, we are here. We are in a bubble. Let’s just keep it real. Bitcoin has gone from $100 to $4,000. I looked at the cover of the economist this week and it says, the great inflating assets; everything going up; the bull market and everything. I think that’s what it actually said. I would have decided that was a very bearish column by the way in a contrarian kind of way had it not then had the question, how long can it keep going; at the bottom of the quote there was negativity; they were skeptical about this bubble. So, as long as there is skepticism, the bubble can keep going.
Cody: Stepping back, where are we in this cycle? Seven or eight years into an inflating market that has now spiked into a tech bubble, Bitcoin bubble. By the way, I’m bullish on technology and I’m bullish on Bitcoin long term, but that has nothing to do with where we are at this very moment and whether or not I think it”s a great buying opportunity. You guys should be buying Nvidia and Bitcoin and Tesla. The nuances and the month to month stuff from the Federal Reserve or the employment numbers and all of that stuff is noise. I don’t read it. I don’t care. We know that the Federal Reserve, since 2011-2012, has been in a tightening phase. People don’t believe that. They thought you had to start bumping up interest rates by a quarter point from zero to be in a tightening phase. But even before that when they reduced quantitative easing, that was a form of tightening. And that being very bullish because everybody who thinks conventional wisdom about the stock market and the Fed is wrong. For the last thirty years, every time the Fed is tightening at least for the vast majority of that tightening cycle, stock markets go through the roof. Every time the Fed is cutting phases, let’s say ‘96-’99 the Fed was tightening; what did the stock market do? Going into the dot com bubble late in 2000, late in 2000 stocks started crashing. March 2000 was the top and by six months later we were in a real bear market. What was the Fed doing? Cutting rates like crazy; they cut rates for the next two years. What did the stock market do? Crash. The Nasdaq was down seventy-five percent from its high in March 2000 to its low in March 2002 when, by the way, I had just launched a technology hedge fund. Better to be lucky than good sometimes. At any rate, they started tightening again in 2004-2005. 2006 they continued tightening; 2007 still tightening; stock market through the roof. 2008 hits. Stocks start crashing. What’s the Fed do? Cut, cut, emergency measures, emergency measures.
Cody: Fast forward to today, the Fed still has every single emergency measure that they put in place from the year 2000. Think about that. Corporate profits and bank profits specifically have been at record highs five years in a row and we still have every single emergency measure for 2008 in place propping up, subsidizing, and keeping those profits up. That’s what makes bull markets. That’s what makes bubble-blowing bull markets as I like to call what we’ve been in. The Federal reserve is continuing to tighten here and there. I don’t care if they tighten next month. They’re reducing their balance sheet. Five trillion dollar balance sheet is going to be at zero at some point, but we’ll probably never see zero but they’re going to reduce a couple of trillion dollars of their balance sheet, which is a form of tightening. They’re not putting cash into the economy like they were. Less cash from the Federal Reserve, that’s less liquidity theoretically. One thing to keep in mind is, after eight years of emergency measures and near zero percent interest rates, a little bit of taking water out of the system isn’t going to really do very much. The fields are still flooded. There’s still more water than there needs to be out there. We can get down to several trillion dollars away from where the Federal Reserve balance sheet is at some point. And, we’re at some point in the next two or three years I would assume, we finally do get a little break.. We do get a black swan event or something that does at least put a top in the market for a little while. And then, if we can just get a ten percent or fifteen or twenty-five percent correction and the Chinese are not buying treasuries any more, there could be something that the Federal Reserve says well we better get back in. Start putting trillions of dollars of taxpayer money back in the banks again and try to turn it around and maybe probably not be really really bearish at that point because the Federal Reserve is now loosening; not tightening.
Cody: As a general rule of thumb, and as a general rule I don’t like to have general rules of thumbs, but as a general rule of thumb I want to be bullish when the Federal Reserve is tightening and bearish when they are loosening. And we’re tightening so I’m bullish. With that being said, let’s just catch our breaths by ourselves for a minute. If you bought Nvidia 18-30 months ago like Trading With Cody subscribers and myself did; if you bought small cap company, Axogen, AXGN it’s up 500 percent and I’m not telling you to go buy it. We bought it at four. It’s now nineteen. You bought Bitcoin at a hundred, or as I did, took payments.
Cody: The service Trading With Cody is ninety-nine dollars a month; I used to charge one Bitcoin per month for my service because Bitcoin was seventy, eighty, ninety, one hundred and ten bucks. So, you could just send me your Bitcoin instead of cash. I held on to those for a while. I started selling them six weeks ago at $2,800. You should sell right now. I haven’t looked at Bitcoin today. I don’t really care about what it is at today. Whatever it is it’s a sell right now for the near term. I mentioned a minute ago, I’m very bullish about Bitcoin. How can we reconcile this? We can hold two thoughts in our heads at the same time, right?
Cody: I was very bullish on AMZN’s long-term prospects in March 2000. The stock was at a hundred. It eventually dropped to six; under ten I’m sure. Now it’s at five hundred. So many great dot com stocks got crushed like that. I bought Apple myself at a dollar?? per share in March 2003. The company was at fifteen dollars per share of cash at the time and it’s trading at fourteen dollars; split somethin for one and two for one ?? time since so my cost basis adjusted a dollar. But, if you bought Apple two years earlier you paid fifteen bucks instead of fourteen. Split adjusted, fifty divided by fourteen like three something??. So, you;re cost basis is three bucks if you bought it even after it tripled. But, before Apple was at fourteen it was at fifty. I mean it crashed. Things can go up after they crash. That’s what I expect from Bitcoin. I don’t know if this is the top. ?? I don’t expect it is. I think it will get to almost $10,000 per Bitcoin before the end of the year. That’s a feet to fire guess for you. I’ll sell everything but my one last Bitcoin at that point.
Cody: But then you get the reverse at some point. Bitcoin technology, NVDA, AAPL, GOOG, FB, they’re going to be hated again. I’ve seen them hated three or different four cycles of my life. Not Bitcoin, it’s new. But technology stocks come in and they come out. ?? the bull markets they come in and they go away. So I’m not going to play it this way. But, if you want my best feet to fire guess on how to trade Bitcoin, you should buy it right now and sell it when it gets to nine thousand at some point in the next few weeks or two or three months, short the heck out of it until it’s under a thousand, and somewhere in the year 2019 we all get to go in and start buying our Bitcoins at three hundred, five hundred, seven hundred dollars. And when I’m on my deathbed, hopefully in fifty years or a hundred years, who knows, Bitcoins going to be worth a hundred grand.
Cody: I can have my cake and eat it too cause I’m up here talking about this stuff; no real money about it; no matter what happens I just told you that’s what’s going to happen I suppose. Honestly though, that’s my best guess. If you want to try to do it then go for it. I don’t think that’s a very good risk reward scenario though. I don’t see a lot that makes me want to put money to work right now. In 2010, 2011, even 2012 and 13, you guys who used to come watch me at the money show give these talks. I was jumping up and down bullish; saying we’re going into a bubble. This is early, let’s buy buy buy. There’s a revolution going on in the app world. Smartphones are changing everything. Shut up and buy AAPL or any app related stock in the world. And I don’t see that now. I’ve trimmed. I was one hundred and fifty percent net long in 2010. I’m more about sixty, seventy percent net long right now; probably ten percent shorts, twenty to thirty percent cash.
Cody: One thing I always tell people when they talk to me and ask how much cash do you have? You know, I make money every year too. I have cash in other places. I have assets in other places. Cash is a relative thing. And so, when i say I have twenty or thirty percent cash it doesn’t mean anything. I hope you know that. It’s more cash than I used to have. Let’s put it that way. As a percentage of my portfolio I am much less exposed to the stock market as I used to be. Should you try to copy my portfolio? You can see every position from largest to smallest including shorts and options, which I don’t own any options right now, at Tradingwithcody.com. And then people say, Cody why don’t you tell us what percent of your portfolio is in Apple? Number one, I’m not you and you’re not me. My own personal risk profile has morphed tremendously in the last five years. Five years ago, seven years ago, I was a rock star TV wall street guy; single; without a care in the world; rocking and rolling and partying. It was great. I’m a single father now. I have a medically fragile two year old with Trisomy 13. It’s a miracle she’s even alive. I have nurses that take care of her six nights a week and five days a week. I don’t have the same risk appetite that I did seven years ago. So what difference does it make how much my own personal portfolio is in AAPL when you put it in that context?
Cody: Should you own some AAPL? Yeah, probably. Even now probably. AAPL will be a trillion dollar company someday; probably a two trillion dollar company. I expect there will be ten to fifteen or twenty United States based trillion dollar companies in the next five or seven years; probably a crash in between the time now and when we get there. AMZN, GOOG, AAPL, MSFT. I hope to own MSFT, and I’ve owned MSFT and the other three for a long time and I still do. And I think they’ll be trillion dollar companies. I think there’ll be several trillion dollar companies in China. I don’t own any of them. I don’t like to invest in China. It’s hard enough to believe and trust the companies here in the United States.
Cody: At any point, you guys jump in with questions. I love to engage with you.
Attendee: I do know you and you’re not very bullish right now and Bitcoins ?? the market. But, how quickly, or how hard is it to ?? the position though. Cause I’m almost thinking that, let’s say you were going buy AAPL ?? something that’s trimming up a little stronger. Cody: Nvidia. Okay, NVDA. What do you feel about setting a particular stock just a track below it and ?? you on the market, when it does crash per say….
Cody: The question is how quickly can you get out of these stocks when they turn and/or should I put in a trailing stop-loss underneath as NVDA goes from thirty to fifty to a hundred to a hundred and fifty to a hundred and eighty ad protect myself on the downside? NVDA is actually a great example of the reason why you should not use stop losses; even in the last eighteen months. I bought it at thirty and it went to fifty and I trimmed I think five percent of it. It went to ninety-nine and I was like this thing has almost triple market market cap. I told you guys I thought eventually it could have a triple market market cap. Triple digits market cap is what I’m trying to say there. A one hundred billion dollar market cap. And so I trimmed a little more. Immediately it went up to a hundred and twenty-five and I felt stupid. Why had I sold even fifteen percent of it? Of course, then it went to eighty, eighty-one.
Cody: Remember Citron’s Andrew Left who this week attacked Shopify, probably rightly so, I’m sure HLF has been attacking that one too, he was long Nvidia for a year at a tripling and when it got to one twenty-five I think he released it. Saying hey, I think this thing is way overvalued; way ahead of itself; it should be back at ninety, which I don’t like. I actually lost a little of respect for Citron’s Andrew Left on that because I thought he was betting against concepts; not trying to navigate a thirty percent swing and valuation, which I don’t think is a reasonable thing to try to do in an over loved, over momentum, giant growing revolution company like NVDA. At any rate, he nailed it. It did go back below ninety. And if you had your stop-loss in there at one fifteen when it hit one twenty-five, you’re out. Would you have had the discipline to buy it back? And that’s why I don’t use stop-losses. I’ve never put a stop-loss order in. Maybe fifteen years ago was the last time I put a stop-loss order in.
Cody: I look at my stocks every day or often enough that even when I’m traveling or when I’m on vacation I’m probably going to look at some point. I’ve made my bets. I’ve done my homework. I’ve studied these stocks and I’m going to take advantage. Like I said, I like to have my cake and eat it too. So, I’ll trim a little and then feel stupid when it goes up, but then reminded myself that I still own eighty-five percent of the shares I bought at thirty and it’s now at a hundred and eighty-five, and I’m going to sell some more. I’m going to sell another five percent and I don’t care if it goes to two hundred and fifty tomorrow after I sell five percent. That is not true at all. I will care; it will make my stomach hurt. But I’ll accept that, because I’m handling my risk rewards and trying to maximize my upside potential while minimizing potential for losses. And I don’t think that trailing stop-losses is the way to do it.
Cody: Another example I’ll give you is AFCI, Advanced Fiber Communications. Wow, a blast from the past. They were bought by someone many years ago. In 2004, I owned it and I had a triple on it. I had a trailing stop-loss on it ten percent below. I think it went from twenty to fifty. So, at the moment my out stop-loss is at forty-five bucks. Free market, Nortel or someone, made an announcement they were fraudulent or something, whatever it was, and AFCI opened at forty-three or fifty that day; closed that day at fifty-two. I was out. It went up to a hundred and twenty and I was out. I don’t like trailing stop-losses.
Cody: Now, with that being said, maybe instead of selling five percent, put a trailing stop-loss on five percent. Don’t do the whole thing. There’s something to be said for that. Again, I like to sell when the stocks up five percent and in the green and I feel like I’m selling it while those idiots are buying it right now. Rather that going, oh I’m going to join the sell-off today when it’s down ten percent and sell five percent of mine. But it’s a psychological thing in that regard. And truly, if you’re betting and believe in your analysis and the company, just don’t sell all of it ever. That’s the main thing.
Cody: Yes? Attendee: Never the crazy upside-down stock market. What about NVDA? Is that one of the greatest companies on the earth? Does it have great potential for getting returns in the stock market?
Cody: I think it’s way too early to call it one of the greatest companies on earth. I think it has the potential to be. The greatest companies on earth are worth a half trillion dollars at this point. Nvidia is at this point, does anybody know, maybe at a one hundred and twenty dollar market cap? Whatever. It’s a triple digit billion dollar market cap, okay. But it’s not one of the greatest yet. I do think over the next ten to five years go up threefold; fivefold from here still. It could be a trillion dollar company at a bubble blowing bull market in the year 2023 or something; 2025 even. Cody: It will come down to how quickly they can grow. How quickly they establish themselves as the de facto standard that everybody has to use for say the next en to fifteen years when it comes to self-driving cars, artificial intelligence, deep learning, all of the stuff that NVDA was betting on five years ago and is now positioned to win. That doesn’t mean they will win. They are still competing against INTC. And if you guys remember the lessons over the last ten years, even in the server world I remember thinking that I can’t believe Zuckerberg would want to design their own servers; their own chips. Why is AAPL making their own chip, the A9 at the time or whatever?
Cody: There’s certainly some potential over the next three, five, or ten years that someone, an established player or another start-up comes up with a better mouse trap on the chip side of things; on the software integrating with the chip side of things. Software and chips and hardware integrated together or separated, layered on top, all of the different ways you can do that stuff, those will come into play. And that’s why we can’t just go and buy NVDA and walk away and know that in fifteen years you’ll make a lot of money. You got to pay attention. You got to do your homework. You got to follow every nuance; everything. Let me back up. Not every nuance. Ignore the nuances. Look, NVDA is set up to become the de facto standard dominant player in three or four of the fastest growing industries, the most revolutionary things that might happen in the next ten years, and NVDA is primed to help that stuff happen. That’s probably a bet you want to have a least a little bit of.
Cody: Now again, I bought this thing at thirty and now it’s at one hundred and eighty-five or wherever it is. I’m not telling you guys, go out and buy it; you’ll make a bunch of money this month or by the end of this year. But, yeah, I do think you should have revolutionary incredible companies that are positioned for these revolutions that can grow fifty or a hundred percent per year. The industry itself could, and you want to have that in your portfolio; ride the wave; keep your bucket out in front of it and know there’s going to be times when you feel really stupid for doing it.
Attendee: Do you recognize any of the smaller cryptocurrencies
Cody: No. I’m going to cut you off before you list all of the ones that I will not recommend. No, no, and no. I’ve never traded them and I would short them and come back and look in five years and I think you’ll be making a lot of money. The question is, besides Bitcoin, Litecoin, and Itherium??, are there any of the more obscure, less mainstream cryptocurrency options out there? I’m not even going to let you say the names because number one, I don’t know if you’re making them up when you say them because I have no interest in any of them.
Cody: The concept of blockchain, which is what most cryptocurrencies are built upon including Aetherium and Bitcoin, I believe in it. If you heard George Gilder speak yesterday, he really illuminated some stuff on remittance and payments and the elimination of fees and transaction and friction costs that go along with that stuff. But, to come back to it, I think that Bitcoin has probably established itself as the de facto standard cryptocurrency already. Ethereum might be a secondary kind. Again, it’s not just a cryptocurrency right? It’s a little more complex than that. I don’t understand what you’re investing in when you buy Ethereum So I am not buying Ethereum I have no interest in it right now anyway. I think it’s bubbled up and we’ll get a chance to figure it out and buy it much cheaper in the next coming years.
Cody: Bitcoin I’m selling right now even though I do think it’s the de facto standard. In order for one of those other crypto currencies, even Litecoin, to actually become something meaningful I think would be a miracle; to overcome Bitcoin. Bitcoin is GOOG; Bitcoin is AMZN; those other ones are Yahoo.
Attendee: On Bitcoin, I heard something this morning. That Bitcoin is nothing but software code and it’s only twenty-one million pieces of code. And I found that very interesting.
Cody: That’s an interesting way of phrasing it and it would be like everything with this stuff. What’s your definition of twenty-one million pieces of software code? The question is he was saying, there’s only twenty-one million pieces of software code underlying the Bitcoin blockchain concept, and that might be true and it might not be true. It depends on how you measure it. But whatever it is, at this point Bitcoin has proven itself. It works.
Attendee: They did say that they thought it was the standard.
Cody: And that being said by the way guys, you know I love George Gilder. He was an inspiration to me, frankly. I copied him tremendously when I ran my telecom connection newsletter back in 2002 to 2005 for thestreet.com. One of the things I used to say back then are relevant today. And that is, the people who listen to George and the concept of telecosm and his incredible stock picks from ‘96, ‘97, ‘98, and ‘99; if you listened to ‘99 or the year 2000 you lost everything. Those stocks were down ninety percent at some point. Where he missed, and I remember writing about this when I launched my telecom connection newsletter and talked about how I thought George Gilder was right about so many things. But where he missed was not paying attention to valuations and cycles of the economy.
Cody: And I think that’s the point I’m making up here today. I didn’t realize when I got up here today to talk about this that this was actually going to come together like that. But that is exactly what I’m talking about. I believe in blockchain and I believe in Bitcoin and I have for five or six years. But where George Gilder and myself have really parted recently is I don’t think it’s a good risk reward to buy Bitcoin even if it’s going to ten thousand right now. I think it will crash.
Cody: I see everybody in here asking me about Bitcoins. It’s mainstream for investors and traders to own and trade Bitcoin in 2017. It was mainstream to own and trade dot com stocks in March 2000. I don’t know if this is the top. I have no idea how we will actually know when the top comes for blockchain Bitcoin technology, but my instinct tells me, my experience tells me, that George is right but wrong about the timing. He was telling you to buy Bitcoin five years ago too. And I’m telling you now, as someone who was buying Bitcoins at a hundred to sell them because I don’t like this time of the cycle. I don’t like this part of the valuation. It reminds me of the dot com bubble; the top.
Attendee: So what are the ones you’re looking at now; the next NVDA?
Cody: I hope you’re getting value out of the fact that, even as someone who loves technology and investing in revolutions, I’m not bullish and I don’t feel good about giving you stock picks today. That’s one of the reasons I’m even hesitating to answer your question is because I don’t want everybody going out and buying a stock that’s up five hundred percent.
Cody: Now that being said, I think INTC. INTC has been left for dead. They’ve been repositioning themselves. They’ve spent twenty-five to thirty percent of their market cap bying self-driving and iOT solutions and platforms that they want to become de facto standards in. In the meantime, you get a two and a half to three percent dividend; valuations cheap.
