Top 10 positions, Crypto ETF, PANW vs SPLK, Jim Brown lacrosse and much more

Here’s the transcript from this week’s remarkably wide-ranging Live Q&A Chat, including custodial and regulatory issues for crypto, my top 10 in the hedge fund and a discussion on the USD.

Q. Biggest investing mistake and what you learned from it? I know, very open ended question.

A. Lots of investing mistakes over the years to learn from. Probably the most important/recurring lesson is simply: DON’T BE GREEDY, BE COOL. I’ve written many articles about this topic of my worst investing mistakes and the lessons learned from them, and I’ll try to find some of those and reprint them with new commentary soon.

Q. Cody,if the fed is pumping like you say, feet to fire where is Snap, FB, AMZN, Tesla, and NVDA in 24 months?

A. If I’m right that the Fed has already pumped a trillion dollars into the economy through covert QE, then AMZN and the rest of the stocks/asset classes in the world, have already benefited from that. If the Fed pumps another couple trillion into the economy through covert QE in the next year, each of those stocks will likely be up another 20-50%.

Q. Where do you get your hypothesis that the FED has already pumped a trillion dollars or so into the economy from?

A. I don’t know where the hypothesis came from except that the idea popped into my head a couple weeks ago and I was instantly like: “Whoa, that explains some of these wild moves in the global stocks and other assets classes this year.” The Chinese government and other nations are also pumping big money into their economy. I could be wrong about the Fed doing covert QE already, as I’ve not heard anybody else in the world talk about it. But I like being the only one in the world with a working theory that might turn out to be credible. There’s money to be made off of independent thoughts.

Q. Cody, what is your view on USD (especially EUR/USD) and other correlated assets – oil, gold, yields (inflation)…? You choose your favourite time frame. Regards!!

A. The US dollar will probably always be the strongest fiat currency of the fiat currencies. Oil/gold/yields/inflation are not direct derivatives of the action of the dollar. But over time, I think oil will at best get close to $100. Gold will someday in lifetime likely trade for $5000-10,000 or more per ounce. Rates will go up someday, perhaps hugely, but not this year, probably.

Q. Can you please tell us what positions in the portfolio are larger positions? It seems like you mention a lot of stocks are just smaller positions. Thanks Cody.

A. Top 10 largest positions in the hedge fund, in alphabetical order: Amazon, Apple, Dell, Google, Nvidia, Palo Alto Networks, Snap, Tesla, Twitter, Verizon.

Q. Cody, thanks for letting us into your world.

A. Thanks for being a part of the Trading With Cody community. I love doing this.

Q. There was an article in The New York Times last week regarding increased competition in the electric car marketplace. “Tesla Got an Early Lead, but Luxury Electric Rivals Are Racing to Catch Up”. Does this, in addition to the disappointing electric car shipments in the first quarter of this year change your opinion of Tesla (Elon Musk) as an investment?

A. Remember that Tesla is heading downstream while all the other car manufacturers are trying to catch up to Tesla in the high end. Also remember that the other car manufacturers don’t have gigafactories to build their batteries and engines.

Q. Cody – Coinbase plans on going IPO. It probably is the gold standard among crypto brokers for now it appears. Is that correct assumption?

A. I wouldn’t argue that Coinbase is probably the gold standard among crypto brokers, but that’s like saying that Las Vegas is probably the gold standard of gambling destinations.

Sub #2: I’d personally rank Binance way ahead of Coinbase.

Sub #1: I believe Binance is based out of Honk Kong. Coinbase provides a link to your bank account. Does Binance provide that function as well?

Sub #2: I don’t believe so. If I want crypto from their exchange, I usually send BTC or ETH from Coinbase to Binance and make the buy with that.

Cody: Good discussion, yet again, underscoring how buying crypto is still wild-west-ish.

Q. Cody – with BTC steady in 5k range now, are the fears going to 2k subsided ? Even though we don’t expect a return to new highs now, will it be slow uptrend going forward for cryptos ?

A. I still think that Bitcoin could drop to $2000 or less. Be careful. I also think that Bitcoin could be worth $100,000 or more in my lifetime though.

Q. In last week’s chat you stated that you were not adding crypto tokens to the hedge fund until the account custodial and regulatory issues get solved. With that being said, do you think that currently goes for a lot of other existing funds, meaning that once these issues are solved it could be a nice tailwind for the space?

A. What a great question/theory. Yes, I think you’re probably right that there’s a lot of managed money out there that would move into cryptos immediately if the regulations/custodial issues would get cleaned up. Gonna take years for that to happen though. The Trump/Obama Republican Democrat Regime won’t make it easy for freedom to ring in our financial markets.

Q. I know you’ve recently added to your Bitcoin position in the hedge fund. Was wondering if you’ve added any other cryptocurrencies to your personal portfolio or hedge fund recently? And what is the approximate percentage of Bitcoin vs. other cryptos in your portfolio currently? Thanks!

A. No, just added Bitcoin lately. I also own some Stellar Lumens, Ripple and Ethereum. I’d say that an investor might consider having twice as much bitcoin as the other cryptos.

Q. Interesting that Litecoin – which you have written about in The Bitcoin Revolution and The Great Cryptocurrency Crash (and still available for the low, economical price of $3.49) – has been the crypto that precedes moves in Bitcoin lately. Do you still believe that Litecoin will be one of the many that don’t end up surviving?

A. I haven’t worked on Litecoin in a while. Didn’t notice that it was preceding the moves in bitcoin either. Sorry.

Q. Cody – do you see a crypto ETF coming out this year thats approved by SEC ?

A. Highly unlikely. Again, remember the motivations of the Republican Democrat Regime — they want to keep their fiat currency monopoly on our country, right?

Q. Could you help me understand the difference between the security services that PANW and SPLK provide. My understanding so far is that PANW provides a firewall and that SPLK uses AI techniques to find security problems in a customer’s software and hardware. Are they competitors in any way? Does either company have serious competitors?

A. Good question, and you have the right idea. Both have competition, but both have competitive edges that set them apart. My research partner, Kevin Lincoln, wrote this analysis up to better explain each company:

Does either company have serious competitors? Of course. PANW’s competitors are FTNT, CSCO, CHKP to name a few. SPLK is a different animal and its competitors may not be as easily described. IBM, LogRhythm, Solar Winds, McAfee Internal company solutions may be a competitor. Also, SPLK has to convince customers that their product’s use case makes sense for the company. SPLK competitors.

I will keep the answer to the main question more high level and stay away from getting into the weeds. Why? Software companies can be very complicated to understand. Therefore it is helpful to just focus on what they do at a high level.

SPLK – Splunk is a Big Data analytics company that has a software engine that can analyze huge data sets from various applications and real world occurrences. For example: Union Pacific will generate huge data sets regarding the movement of freight across America on their trains. This data can be analyzed by Splunk’s analytics software solutions to help Union Pacific make their operations more fuel efficient for example. Over time, SPLK has developed different software solutions that utilize their big data analytics software engine. These solutions may have been customer specific in the beginning, but have now been developed to be used by many companies. For example: Other railroad companies could use the data analytics software solution that was developed for Union Pacific for example. As far as Security goes….One of these solutions is called: Splunk User Behavior Analytics that detects cyber-attacks and insider threats. It is important to note that security is just one area of Splunk’s business. The simple definition of what SPLUNK does is as follows: Its products enable users to investigate, monitor, analyze, and act on data regardless of format or source.

PANW is security software company that leads with its firewall appliances and software solutions. The company also offers the software that runs and monitors the appliances in order to detect and protect a company from security threats. Over time PANW has developed other security software applications that can be sold to help with security detection and protection.

The two companies themselves are probably not competitors: The difference between the two is simple and is also stated in the question. PANW is a firewall company and Splunk has solutions that analyze the data a company collects. This data is called Big Data due to the amount that is collected. SPLK can help a company look for security threats by analyzing some of the data that is collected from login attempts and other intrusion type occurrences. So there may be minor overlap between the two here. But are they competitors? No. The Chief Information Officer would view these company’s software products as complementary in the area of data security. SPLK’s products can also solve internal business problems and provide valuable information for a company when making business decisions. PANW’s products can’t be used for these purposes.

Q. Can someone please fill me in, but i do not understand the interest in buying $BA. It’s different from $MO where those who use their products know the risks or can make choices over time if appropriate for them, but Boeing did something very reckless that caused excruciating pain for many people. I cannot understand supporting their corporation knowing the outcome of their failures is almost certain death. I know planes today are insanely complex, but our lives are in THEIR hands. Time to nibble on some BA?

A. There are only two plane makers in the world. The demand for planes is growing over the next 10-20 years. That’s the main reason to own BA. Probably not time to nibble more yet. Closer to $350, I might start nibbling.

Q. Hi Cody, Do you have an update on OPRA “I’ve got a call into the company and am spending some time getting to know this company well before I make it a bigger position though.”

A. I’ve not been warming up to OPRA and am selling it. Consider this the Trade Alert. I like the concept of the company but I’m worried they’re not as “Revolutionary” as we need them to be.

Q. Being TWC subscriber for a few years, I have known you not trading few stocks for ethical reasons even though we had a chance to make money. Recent example being gun stocks after school shooting. I felt good regarding your decisions. Given that, I am surprised to see $MO trade alert. We are rooting for Marijuana and e-cigarettes. I see your reasons but I am staying out of it personally due to lessons I learned from you .

A. Thanks Kannan and amen. The big difference is that I’m now investing other people’s money in a hedge fund and not just my personal money. I’ll still fight against corruption, evil propaganda, corporate welfare industrial complex, and so on. But in the hedge fund, I’ll be trying to find the best asymmetric risk/reward scenarios along the way.

Q. Good morning, Cody. What is your view on AAPL now?

A. Trading at 17x next year’s earnings estimates, Apple’s not terribly cheap right now. The 5G cycle coming in a two years will likely make earnings for 2022 and 2023 much higher than estimated. But for the next year, I’d probably expect AAPL to trade between $180 and $220.

Q. Cody – you don’t have QCOM in your top 10…even though they are going to be one of the winners of 5G?

A. Well, they can’t all be Top 10. That said, recall that I’d mentioned I’d bought long-dated out of the money call options in QCOM when I was building that position when the stock was near $50 a share, much lower than it is right now. Including those call options notional value, QCOM’s right up there near the Top 10. From January 25: “I bought some QCOM common and some QCOM call options with strikes ranging from $55 through $60 and dated out from April through next January. Stock has been crushed, short sellers proclaiming how it could drop in half, lots of negativity around this name. Meanwhile, the dividend is nearly 5% and Qualcomm will be one of the best 5G plays in the world regardless of how their court cases play out.”

Q. Cody – market keeps going up so is gold going up and being resilient to any pullback. If market takes a breather, is gold setup to explode?

A. I expect gold to make some moves higher this year if the stock market gets rocky.

Q. Cody have you had a chance to do any work on AXGN.

A. Yes, did more work on it, chilling with it. Sitting tight with it for now, I mean.

Q. I had a question on AABA. This is essentially a proxy for BABA but I learned recently that they intend shutting down. What is your recommendation on this stock: sell now or hold until the company shuts?

A. I’m not a fan of BABA and have no idea what’s up with the AABA proxy either. Sorry.

Q. Do you ever sell puts as a strategy? Thanks Cody.

A. I almost never short options in my personal account. Occasionally in the hedge fund, I might. But rarely there too.

Q. Ea’s (mine at least) down a little. Buy more or wait and see? Same question for tsla.

A. I bought a little more of each of them recently.

Q. Hi Cody, do you have any recent thoughts on GE?

A. I turned from bear to bull on GE when it hit about $8. I still stand by that.

Q. Hi cody good morning where is FB in your pecking order after the top 10 current holdings in the hedge fund.

A. It’s up there near the Top 10.

Q. On SNAP, it’s had a phenomenal run for us. Trim more?

A. Nothing wrong with trimming some after a stock doubles in two months.

Q. Watch any hockey at all? Any picks for who makes it to the finals & wins the Cup?

A. No, we don’t have hockey in southern NM, and I’ve never even ice skated in my whole life (two shattered ankles from my high school/college hoops days). I did learn from my local friend/mentor, Michael, who’s a 70-something Wall Street-er from back east, that he once played against Jim Brown — in lacrosse! Imagine what Jim Brown did to Ivy League lacrosse competition, given what we know he did to NFL football competition! Here’s a Youtube clip of JB playing for Syracuse lacrosse.