Treasury Yields, The Fed’s Against You, VR, Cryptos and More

Here’s the transcript from this weeks Trading With Cody Live Q&A Chat.

Q. Cody, Feet-to-fire, what’s the next 5% move?

A. We had that rip-the-shorts-face-off contra-rally that I’d talked about early last week and now it’s been a path-of-least-resistance downward since then. I think that’s probably the most likely scenario here for now — more market drip lower, slowly over the next month down 5-10%.

Q. I’ve only been a subscriber for 5-ish years but have read the comments when you flip between past and present, and considering your recent portfolio positioning piece and then last nights warning I get the impression you have seldom been as cautious as you are now. Please comment.

A. It makes me proud to be one of few newsletter writers for whom five years of membership isn’t a very long time compared to most my subscribers (ie, “only five years”). And you are correct that while I’m not entirely bearish, I’m certainly more cautious about valuations and most tech stocks than I have ever been. In fact, I AM bearish on most small cap tech stocks (just not the ones that we selectively own but even on our own stocks you know I’m cautious right now).

Q. Hi Cody, in this interest rate/inflation environment, do you think real estate in hot markets (Austin, etc.) are going to correct? If not, why do you feel differently about stocks?

A. I don’t know if real estate in Austin specifically will correct because of the trillion dollar tech companies that are moving hundreds of thousands of jobs into what was just a couple decades ago a small freaky city. Most rural/suburban areas outside of NYC or other major metro areas that have gone through the roof since The Coronavirus Crisis hit, will likely correct though.

Q. I keep reading that treasury yields have been rising. Why does this not seem to be reflected anywhere in the rates available on bank or money market deposits?

A. Haha, great question. The answer, which won’t surprise any of my readers, is that the whole banking construct in this Republican/Democrat-ruled nation is a scam, a fraud and built to screw individuals at the behest of giant banks. THE WHOLE DAMN BANKING SYSTEM, THE REGULATORS, THE REGULATIONS, THE RULES, ALL OF IT IS A SCAM DESIGNED TO SCREW YOU AND WE ALL KNOW IT!

Q. Cody, I keep reading that treasury yields have been rising. Why does this not seem to be reflected anywhere in the rates available on bank or money market deposits? OK, so it’s a scam…that really doesn’t answer the question. Where is the interest being earned? Is it all just going to the banks?

A. The higher rates mean that the people who buy Treasuries right now get paid at the higher rates. The people who bought Treasuries six months ago are losing money on their Treasuries because the value of their Treasuries went down more than the amount of interest they were hoping to get was going to pay them. That’s why I’ve been saying bonds and Treasuries should be avoided these days — the rates, even now with the government promising to pay you only 1.7% per year to loan them money for ten years, Treasuries and bonds still have a terrible risk/reward. The interest on a Treasury or other bond goes to whoever owns it.

Q. Reflecting your analysis and confidence on FB, and my own, I’ve made it one of my largest positions. But it gives me a little pause when smart folks like Ann Winblad and Gene Munster are bearish, in part because of changes in privacy that could hurt their ad tech more than others like GOOGL. Have you drilled down into FB’s internal measures to develop tech to keep their ad data valuable to advertisers going forward?

A. I don’t know who Ann is but Gene is a friend and occasional sounding board for each other. That said, yes, I have done extensive work on the ad changes that Facebook is facing and as I explained when I mentioned a few weeks ago that I was building up Facebook into one of my biggest positions again, that I think the worry about this from analysts and investors is waaaay over priced into the stock already. I could be wrong of course!

Q. When you are on the oculus what games are you playing the most and who do you have for March madness!

A. I have been a bit too busy to play with Oculus lately (even as much as I love the Oculus and even as mindblowing as it is and even as good of a workout as most of the games end up being for you — I’d still rather be outside golfing for my exercise/playtime, which is quite limited in my life). Football is still my go to game though I like most of the games/movies I’ve bought for the Oculus so far and need to download some more. I have Baylor over BYU in the finals (full disclosure, I haven’t watched but like 1/3 of two NMSU Aggie games as my basketball content consumption this year. I happened to stumble across the NMSU game when I was flipping channels while watching Amaris on a Saturday and NMSU was playing some tiny D3 or NAIA team both times and so I watched for a bit).

Q. Would you recommend purchase of an Cculus headset now? Or wait until a new generation is released?

A. Oh I recommend buying it now. Oh, do I recommend buying an Oculus and blowing your mind and freaking out and going like, “What is happening here? Is this real-life? I can’t believe this is happening? Whaaaat? Whoaaaa! Look at this! Do you guys see this? Hello? Oh my gosh, I didn’t know this could happen to my head!”

Q. Coming back to GHVI (SPAC for Matterport). Matterport is a spatial data company and has the largest library of indoor spatial imaging in the world. I mentioned this in the last chat and you thought it may be interesting. Have you had a chance to have a look. This seems like a nice VR opportunity.

A. Haven’t looked yet.

Q. Can you say if you have BTC/ETH in your hedge fund? And convey your chief positions hedge fund vs personal acct. This is always a help to me.

A. I have both bitcoin and ether in both my personal and hedge fund accounts. They are not huge positions, but they’re not small either.

Q. Cody, are you a fan of this NFT craze? If so, anything investable? My opinion and maybe just because I’m too old, there are just too many people with way too much money. They don’t know what to do with it.

A. I think some NFTs will be terrific investments. Most will be terrible investments. A lot like cryptos. A lot like stocks. A lot like most assets in life. Here’s an article about Non-Fungible-Tokens.

Q. Cody, do you buy physical gold and silver at any online dealers or at local dealers/ coin shops?

A. I used to before the Coronavirus Crisis came along and I stopped going places because I don’t want to risk my little daughter who uses a trach tube and oxygen to breath already. Read this for more on how to buy gold and silver: http://tradingwithcody.com/ebooks/everything-you-need-to-know-about-investing-in-gold-and-silver/

Q. Hi Cody, have you sold more TSLA in the fund? Is BIT a buy at $58K, or should I sell some to equal what I paid for it?

A. I’ve trimmed TSLA in both the personal account and in the hedge fund this year a few times. I always tell people that if you don’t have something you want to own, start with a small tranche and that applies to bitcoin at $58,000 too.

Q. Have you been following Republic lately? Have you seen any potentially revolutionary ideas there that make sense to hold?

A. Yes I have been on Republic.co quite a bit lately and next week we have a report coming out on it and some of the companies on there that I like. I should also mention that if you’re an accredited investor, you should check out their new service for accredited investors: Republic Deal Room is a marketplace that enables individual accredited and institutional investors to access sought-after investment opportunities, traditionally reserved for only the most well-connected Silicon Valley insiders. To get access to the Deal Room, apply at https://republic.co/accredited. (Full disclosure, I’m a partner/advisor/equity holder in Republic.)

Q. What stocks would you consider nibbling here?

A. I’m not in a rush and haven’t nibbled much of anything today except I did add some more HOL in the hedge fund today. Favorite stocks at this moment, though I’m not pounding the table on any of them right now, would probably be: FB, VACQ, HOL, GLD, TSM in that order.

Q. Thank you for your timely insight. Would it be possible to hedge our portfolios by shorting the worst, most overvalued stocks that you consider over bought in this market, such as BLNK, or RIOT, or any of the crazy SPACs? Thank you.

A. Yes, but you have to be very careful if you want to try to short stocks, even as paired hedges. I thought BLNK was way overvalued and had so many problems ahead of it when it was at $7 that I thought it might be a good paired hedge. It’s probably an even better hedge at $40, but what if it goes to $70 before crashing? That’s why I work my butt off so hard at the hedge fund trying to keep the hedges balanced.

Q. I’m having difficulty with one thing: By how much, are some stocks in my portfolio over valued (therefore volatile)? I look at p/s ratios, profit, debt, etc. to get a sense, as I learned from you. One thing I’m having difficulty with is to see what’d be fair ratios for any given stock/sector.

A. This video and its transcript about how to analyze a stock that I did about this about a month ago will help.

Q. Are you buying $SPOT here?

A. Eh, if you don’t own any, yes a nibble. If you don’t own enough, yes, a nibble. If you own plenty of it already at much lower levels where we initially built up the position at Trading With Cody.

Q. Hope you and family are well and smiling. How about Airbnb? Business travel is dead…hotels will therefore be empty, increasingly. Airbnb is a preferable model for pleasure travel. Who would stay in/ Pay a premium for a Sheraton or a Marriott Room anymore? Does this seem like a revolutionary company?

A. Yes it is, but the valuation’s not compelling here.

Q. Happy Friday! Thanks for your advice. I wish I listened to you more in the last 10 years. Looking at SKLZ this morning, any thoughts?

A. Will take a deeper look and if I like what I find, I’ll write about it.

Q. What its your opinion on Tdoc?

A. I have a small short position in TDOC in the hedge fund. I think it’s in trouble.

Q. I’ve read quite a lot about the effects of remote learning on the eyesight of kids. Many are spending up to 7 hours a day on computer screens and ophthalmologists are now seeing more myopic issues in kids. To that end, I researched the biggest company for LASIK surgery and found Vision Group Holdings as a leader in the field (https://www.vgroupholdings.com/). The only problem is that they are a private company as far as I can tell and seem to have been through a BK11 in 2020. Wondering if you have any other ideas or approaches to get ahead of what appears to be a generation of kids that will likely experience eye issues in the next 5-10 years. Between the remote learning from COVID, heavy device use from social media, and gaming (including your VR future), I have to imagine eye issues will be plentiful. While not a revolutionary industry, this could be one poised for big business in the near and long term. Would love your thoughts and strategic acumen. Thanks.

A. I think you’re onto the right idea. No sure that LASIK is the answer in front of this trend though. Will ponder.

Q. Cody, I’m a recent subscriber and am really enjoying your updates and commentary so far. I’ve been fortunate to have held DermTech (DMTK) for a few months and still feel really good about it’s prospects to transform the dermatology/skin cancer space and be a 10x bagger eventually. Any thoughts on DMTK? Any other MedTech companies catch your eye?

A. It’s only doing $20 million in sales with a $1.6 billion market cap. I don’t know enough about the science of cancer to bet on it. Sorry.

Have a great weekend. Rock on and be safe out there.