The Tech Cold War, Gold or bitcoin?, Flying iPhones, T-Mobile 5G and more

Here’s the transcript from this week’s Live Q&A Chat including discussion on the Tesla, who might dominate 5G and who will be affected by the Huawei ban.

Q. Thanks for your missive on the Tech Cold War. Not sure why the flip in Trump’s decision to ease up on Huawei, but it’s welcome… maybe Xi’s visit to the mines was sobering to Trump. Trump and Xi have met themselves in each other — both are strong-willed, which can be an asset or liability. Hopefully, their cooler heads will prevail while seeking an acceptable trade agreement. If nothing constructive comes out of Trump/Xi’s face-to-face in June, how hard do you think 5G chip plays will get hit?

A. That stuff, including what Trump’s and Xi’s motivations are and what their timelines for “victory” are…is so tough to game. You make your bets as best you can and then navigate ahead as best you can too. That’s what you see me trying to do every day and that’s all I guess I can do to answer this question.

Q. Cody: Good morning! Do you believe that the market is actually driven by the news? Or the news is just an excuse to rationalize the market swings?

A. Yes and yes.

Sub 2: The news media needs content daily. New insight is rare, and unlikely to be high quality and timely if it’s being published for free online. Headlines by definition chase. I usually feel better about what I’m doing if it runs counter to what the headlines read.

A. Amen!

Q. I get it… play the pitches. That’s one of the most invaluable insights I’ve learned from you. I used to play the narrative in my head and most of the time that didn’t turn out too well!

A. Thanks for the kind words.

Q. This link has a chart that shows the top 20 US suppliers to Huawei, along with revenue and percentage of revenue exposure to Huawei. https://finance.yahoo.com/news/trumps-huawei-ban-is-hurting-these-us-companies-stock-195316550.html

A. Thanks for the link. I’ve been putting together a collection of notes, links, graphs and resources all related to the Hauwei/Tech Trade War escalation. I’ll add this to it. Will share with you guys soon.

Q. Could you please tell us what the market’s direction is in next 2-3 months? Thanks. Just guess.

A. Ok, I guess that the path of least resistance is probably higher for the next two to three months as the market climbs a wall of worry.

Q. Hi has your strong conviction on QCOM changed at all because of environment we are in presently??

A. Not really, I bought more QCOM yesterday. The Huawei ban certainly adds risk though.

Q. I’ve trimmed half of my QCOM WINNER 6/21 calls at higher prices than they are at today. How do you recommend we play the remaining calls with a month until expiry? Considering you are buying more common this week, I didn’t know if you have a good strategy on these remaining calls.

A. Whenever I try to “roll up” my call options, it seems like I always trim them first and then the stock goes up before I buy the new ones. Or I buy the ones and the stock goes down before I sell the old ones. In the case of QCOM, because I like the stock long-term so much right now, I’d probably just hold onto most of those calls. That said, if you’re going to end up being filled and owning way too much QCOM when those calls expire, then I’d probably suggest trimming some every time the stock rallies before those expire.

Q. Cody – are you surprised by Gold and silver weakness? or its good time to keep nibbling more? Thanks.

A. I can’t say I’d call gold and silver action terribly weak or that its action terribly surprises me. I suppose if you look at a daily chart, gold/silver seem weak. A weekly chart might make them seem strong. A yearly chart, well, I don’t chart. So who cares. I will tell you, anecdotally, that at lunch yesterday, while I was talking to my wife about the China Tech Trade War missive that I sent out today, some 30 year old dude came up and said, “Excuse me, I heard you talking about ‘finance’ and China Trade. Do you like gold and silver? Do you read Zerohedge.” I told him I like bitcoin better than gold and silver but that I own all 3. And that I do “read Zerohedge” even though I can’t say I do actively. I mean, talk about some permabears who have been wrong for years but have made a success of branding themselves — that’s Zerohedge. Anyway, I don’t like that random people are telling me to buy gold at lunch. But as Michael would say, “Gold is not an investment. It’s an emotional experience.” Haha!

Q. With the strength in the financial sector…. what about $PAGS?

A. I’d rather buy PYPL or especially SQ than PAGS. Brazilian companies don’t have a history of making people in the US rich.

Q. What do you think about REITs. Annaly Capital took a dive recently on earnings and hit a new low at 9.26. The dividend at this price is 12.8% and there has been a bunch of insider buying.

A. I typically stay away from REITs, but I’m always willing to look at good risk/reward scenarios. That said, here’s the description of Annaly and it sounds more like a stock I’d rather short than buy! “Annaly Capital Management is one of the largest mortgage real estate investment trusts. It is organized in Maryland with its principal office in New York City. The company borrows money, primarily via short term repurchase agreements, and reinvests the proceeds in asset-backed securities.”

Q. Cody, love an update on DELL. Stocks been a thoroughbred. VMW near highs, Toshiba cash coming in, still modestly valued on earnings.

A. Did you see the latest Latest Positions update: http://tradingwithcody.com/2019/05/15/trade-alert-and-latest-positions-analysis-ratings-plus-other-ideas/

Q. Cody, is the rebound in BTC and other crypto enough to move the needle on NVDA chips for mining?

A. I’ve always been surprised that there’s enough demand for Bitcoin mining chips from NVDA and AMD to actually move the needle compared to say, $10 billion data centers at Google, Amazon and so on. But it does. And I wasn’t terribly surprised to see that Nvidia’s main chip for bitcoin mining had finally worked its inventories down. And yes, I do think if Bitcoin keeps running towards, say, $10,000, the miners will continue to buy more Nvidia mining chips and help drive the price of Bitcoin up higher and boy doesn’t it sound like 3 years ago all of a sudden? Anyway, I am actually thinking about selling Nvidia because I’m worried all these companies that are designing their own chips and using Taiwan Semi to fabricate them are going to perhaps cut back on purchasing Nvidia’s most expensive high end chips.

Q. Cody: Think Tesla will create an Uber for Semi trucks?

A. If they survive another 5 years, yes.

I do feel like with at least 40% of $TSLA in short interest there is the potential for a *massive* short squeeze where the stock could literally go up 10-15% in one afternoon!

A. Here’s some up to date information about the short position in TSLA: https://twitter.com/ihors3/status/1130521101677862913

Q. Cody – are you having any doubts about TSLA?

A. I always have doubts about all my positions. My conviction level about Tesla remains very high, but if the company fails to sell 300,000 cars this year, the stock will likely be still lower than here. If they sell 400,000 cars this year, the stock will likely be much higher from here.

Q. I’m in southern California and see countless Teslas everywhere. Drove a Tesla last week. Amazing! But the auto biz is not the iPhone biz… low margins … huge capital cost … can’t outsource manufacturing. Cody – what do you say about this article? https://www.evernote.com/l/AJehRNzIcw5IaoyacCcACQVErbGxvUn5XWU

A. Not sure the auto business is harder than the smartphone business — there’s only two dominant smartphone companies in my mind, Apple and Google. Everybody else failed or just rides Google Android’s coattails. Only Apple, Samsung, Huawei and maybe a couple other companies make any profits on smartphones. Meanwhile, dozens of global car companies still make enough money every year to spend more than tens of billions of dollars on advertising and another tens of billions of dollars on dividends every year. Finally, I’d note that my latest go-to way of explaining my Tesla Model 3 is that I see everybody else driving around in Motorola Razr flip phones while the Model 3 is like an iPhone X…that enables you to FLY!

Q. TSLA going to $10? https://www.marketwatch.com/articles/tesla-stock-morgan-stanley-china-tariffs-51558445937?mod=mw_quote_news

A. It’s possible, but I’d rather be a buyer in a stock I believe in when the idiots all over TV and Wall Street are running around screaming “$10 price target on Tesla!!! Run for the hills.” Of course, like I just said, they could very well end up being right if Tesla sells only 300,000 cars this year.

Sub2: tempted to add some more today to TSLA, sentiment is crazy negative… TSLA going to $10? really?

Sub 3: looks like clickbait to me. The news is in a echo chamber at the moment. That’s just my two cents.

Sub 4: Why not miss some upside and wait to see if they ever turn the corner instead of chasing this falling knife.

Sub 5: Their price target range is now 10-230. 230 is their actual target. This feels like CYA. You may as well say $0-230. The reality is ANY stock can go to zero. Many companies have. That being said, I am done with $TSLA for now. I think there are a lot more good stocks out there. To wit, Cody’s two new ones suggested today!

Q. As I understand it, the “analyst” has multiple price targets on the stock. So basically he’s saying, “If it doesn’t go down, it will go up”, lol. Kinda like a lot of the Bitcoin commentary that’s out there lately, actually.

A. Haha, that’s brilliant!

Q. I am holding my TSLA position steady through the latest melt down but thankfully picked up some puts to hedge my position. My puts are up big so am trying to determine when is the best time to sell them. Do you think TSLA’s close to a bottom or has more room to fall? Has Elon bitten off more than he can chew with robotaxis, insurance and other initiatives?

A. I’m clearly very bullish on TSLA and I didn’t think it was going to fall this far this fast or I wouldn’t have been buying it higher. I thought the stock might bottom at $250. Or at $220. And maybe it will finally bottom somewhere soon. There’s no way to call a bottom and as you know there is still risk in TSLA, at any level.

Q. Time to trim VZ or not yet?

A. Yes.

Q. Cody: First of all, major wisdom/thanks for TMUS. Second, when you say “Q. Time to trim VZ or not yet? A. Yes.” is this a yes on trimming or your way of saying yes on either? (You’ve answered questions that way sometimes recently.) Clarify please.

A. Yes, I trimmed some Verizon this week. Consider this the Trade Alert.

Sub 1. Congrats to Cody, this is the pop he was anticipating.

Sub 2: Nice call on T-Mobile, Cody. Based on your prediction, I bought (and now sold) July Verizon calls. I’m now opening a position in TSLA.

A. Rock on.

Q. Cody TSLA down big again today. Time to buy more if we’re not at a full position yet?

A. Maybe, easy does it.

Q. Hi Cody. Seems like you have cooled on VZ over the past year. I recall it being one of your favorite 5G plays now you are saying you might sell a good amount of it after the Sprint/T-Mobile merger. Why trimming here? It hasn’t gone up all that much and 5G has barely started. Thanks.

A. Yea, I have cooled a little bit on VZ. The stock has risen some since I bought it. The dividend is still nice and their 5G positioning is probably still the best in the industry — as long as TMUS doesn’t get to buy S. See, the more I’ve researched T-Mobile lately, I’ve been terribly impressed with the way they could be set up to make move to dominate 5G INSTEAD of Verizon. If TMUS gets Sprint, I might shift my funds from Verizon to TMUS.

Q. Could you still buy TMUS calls now?

A. Maybe stick with common for now.

Q. NICE call on $TMUS….. What to do with SNAP? Watch and wait?

A. Thanks for the kind words. We’ve got a double in SNAP and I’m holding tight for now. I did take some profits along the way, trimming a little bit.

Q. Is VIAV still on your radar screen and your take on its position for growth in 5G? thanks

A. No, I moved on.

Q. Cody – If UBER does as you anticipate “could be doing $100 billion in sales, up 9x from this year’s revenues, in 7 years if their plans work out” – what kind of market valuation it might get ? thanks

A. Depends on what the ultimate sustainable margins turn out to be. Maybe the stock is still here at these levels if there were little cash flow and earnings. Maybe the stock is up 10x from here if the gross margins are 60% or something.

Q. IPOs often seem to drop in the few months after listing. Should we be wary of Uber’s lockup period expiring with regards to the suggested initiation of an Uber position?

A. Yes, we should be wary, we are investing our hard-earned capital, after all. And yes, I don’t always like to buy too early after an IPO. But I take advantage of what I see to be a good asymmetric risk/reward set up in a dominant Revolutionary company that has been trashed and was, when we started buying it below $40, a full 50% off what its major investors thought it was worth just two months ago. Caveat emptor, as always!

Q. ******-red profit taking going on in BYND right now?

A. “This beyond me is such a bunch of BS.” My mentor/buddy Michael, sitting next to me, answering this question. That said, I have no idea. I see consumer health food company startups everywhere and I honestly can’t imagine what would ever compel someone to bet on one of them.

Q. Cody & Michael, LOL — fake meat being “a bunch of BS.”

A. Haha, again. It’s BS — BeyondSh*t”? Just kidding, I have no beef with Beyond Meat and other non-meat ideas. So don’t nobody have a cow. Ok, I’m punned out here.