Will Elon Get 25% of TSLA? Earnings Predictions, UBER M&A, And More!

Here’s the transcript from today’s Live Q&A Chat:

Q. I’m not typically a negative person but I am very concerned with the road ahead with the Fed/political landscape. I know you’ve told us to ignore the Fed/political noise but how are we not on the same track to repeating the 1970’s with rampant inflation? The market is currently pricing in 5 to 6 rate cuts this year…yet inflation is still above 3%. Cutting rates will only allow inflation to flare up. Fed is most likely going to cut rates too soon…and be wrong again. The amount of UST debt out there is excessive. And with China/Japan not being significant buyers of that debt, who is going to buy up all that debt? If the demand is not there and the supply remains the same, rates are going to widen. We can believe in our holdings (I generally do) but I am concerned on the macro environment. I guess my question is what are the reasons to be optimistic/bullish? I’m not looking to sell my entire portfolio or anything but I am looking to be conservative here. We’ve had a nice run the last year and think the market is a little over its skis.

A. What you’re saying is very similar to what my analysis was that I sent out to you heading into this new year. I don’t expect the Fed to cut rates aggressively this year, certainly not six times — unless the stock markets get really ugly. Moreover, sentiment, especially amongst the retail trader/investor, seems wildly bullish and unreasonably euphoric despite so many stocks including crypto stocks absolutely smashing the retail folk right now. That said, I also agree that we shouldn’t be looking to unload our entire portfolio, rather we should be conservative, cautious and/or hedged with some cash on the sidelines ready to put to work. Easy does it.

Q. I saw where ocean freight has gone up 4 fold or higher. I am worried about future inflation. The price increases roll down the hill.

A. Agreed. I’m not sure how much freight costs factor into the prices you and I pay at the store, but it’s certainly not going to help Powell and the Fed and inflation doves. I don’t think the Fed can cut a bunch this year and the Fed should probably avoid cutting rates at all if inflation stays above 3%.

Q. Do you think the US will take the step of delisting Chinese ADRs? I know they could, but will it ever come to that?

A. It’s possible but quite unlikely for the next two or three years. If China actually invades Taiwan and starts killing people over there trying to take it over, the US probably would try to start removing the Chinese ADRs listed over here and take a lot of other steps to try to punish China economically. In 3-5 years, it’s more likely but still not a high probability.

Q. Does it feel like the path of least resistance in the markets is maybe to continue sideways to down over next couple weeks until we get past the prospect of a government shutdown and the next Fed meeting? And then hopefully earnings season can turn the tide, otherwise if we hear many cautious outlooks it feels like the draft down could accelerate? Of course, then I imagine the rate cut chatter increases again but not for ideal reasons. In short, is risk balance tilted to the downside here?

A. In short, I agree with much of your analysis/question. That said, a good earnings season from the mega-cap techs, the semi’s and the cloud stocks would probably get some juices going to the upside. But I can’t say I’m really expecting that.

Q. What are your top 5 positions? And top 5 buys right now?

A. Top 5 positions in alphabetical order: Google (GOOG), Intel (INTC), Netflix (NFLX), Tesla (TSLA), and Uber (UBER). Top 5 buys right now in alphabetical order are probably Disney (DIS), Intuitive Machines (LUNR), Pfizer (PFE), STMicroelectronics (STM), and Chinese stocks like Tencent (TCEHY).

Q. What else is in your China basket?

A. Tencent (TCEHY), BYD (BYDDY) stocks along with call options, slightly out-of-the-money calls on the iShares China Large-Cap ETF (FXI) and Alibaba (BABA).

Q. Can you please provide your thoughts on Tesla (TSLA) here at ~ $220/share? Would you be supportive of a nibble?

A. Coming into this year, I kept writing about how I was concerned that Tesla would have a hard time for the first half of 2024 and so far that has been the case. As always, if you don’t own any/enough of one of our Forever Positions like Tesla, I would consider nibbling a tranche to get started but leaving yourself some room to buy more over time. That said, I did reduce our Tesla hedges in the hedge fund just a bit today with the stock near $213. Last time TSLA got to $200 we nibbled a little bit and I would probably consider doing that again if it gets there.

Q. What are your thoughts/expectations regarding TSLA earnings for next week?

A. The earnings report from the 4th quarter of 2023 should be good and perhaps better than expected. I’m worried that the company will have to guide numbers a bit lower for 2024 as the tax credit (welfare for people rich enough to buy a new EV) gets cut in half on the Model 3 and as prices in China have come down again. If the stock gets hit hard, I’ll probably open up more long exposure after the call regardless of what they say about near-term fundamentals because the Dojo AI and the Optimus Robot are going to be huge in coming years. Last week, I started building a “Best Case Scenario” model for Tesla looking out five to ten years ahead, and Bryce and I are still tweaking it before we share it with you all. More on that later.

Q. Along with Tesla, any thoughts on Elon Musk’s desire for/ability to get to 25% voting power and if not the risk of him developing/innovating outside of TSLA if he doesn’t get there?

A. I think his comments about that are being misconstrued and blown all out of proportion. Basically, he’s saying that if/when the SEC finally settles their persecution, er prosecution, of Elon/Tesla, he’ll look to create a supervoting class of shares mostly for himself and I’m fine with that.

Q. Thoughts on Intel Corporation (INTC) earnings coming up next week?

A. I’m worried that the stock is discounting too much good news after this big run it’s hard over the last year. That said, I do expect that Intel is executing on becoming a fab company and also could be taking market share from Advanced Micro Devices (AMD) in servers and PCs and that AI demand is helping too. We’ve trimmed a little Intel in the hedge fund and will probably buy a few out-of-the-money puts dated out a couple of weeks or three to further hedge the earnings report risk but I’m expecting Intel to become a trillion-dollar company if they execute on their plans over the next five to ten years.

Q. Where do you see Apple (AAPL) stock going in the next 3 months? I need to build cash and wondering if I should trim AAPL here. I know selling AAPL is never a good idea unless it’s a must.

A. There’s gotten to be a lot of Apple angst built up, at least amongst the sellside brokerage analysts who cover it and that’s bullish but on the other hand, demand for Apple iPhones might be waning in China and the dongle-bearing virtual reality visors they are planning on selling probably won’t move the needle for the company for another couple years or so (I can’t believe that Steve Jobs would have let the company roll out a product that goes on your face that has to be connected to a dongle for power). I think we might look back in a year and Apple’s stock is still at about these current levels or slightly lower.

Q. Thoughts on Rocket Lab (RKLB) at below $5/share? Thank you Cody!

A. We nibbled a tiny bit more of Rocket Lab below $5 but are in no rush to build it up too big. SpaceX is supposed to launch nearly every other day but there’s still more demand for orbital launch than SpaceX can meet and Rocket Lab is just about the only other reasonably priced alternative.

Q. When SpaceX goes public, what do you envision happening to RKLB stock? Do you see the high valuation of SpaceX making RKLB more attractive? Or do you see SpaceX listing impacting RKLB negatively? When do you think SpaceX will go public?

A. It’s hard to compare a tiny company like Rocket Lab to a giant company like SpaceX in the same way that it’s hard to compare a tiny chip stock like, say, Smart Global Holdings (SGH) or indie Semiconductor (INDI) to a Nvidia (NVDA) or an AMD. I don’t think SpaceX will go public maybe ever but certainly not anytime in the next decade. That said, I do think Starlink will go public in the next year or two and that would probably be good for all space-related stocks that are already public like Rocket Lab.

Q. What are your thoughts on Uber (UBER) acquiring Instacart (CART)? Do you think it might happen? Thoughts?

A. Unlikely because the government would probably take issue with it. Uber’s becoming a monopoly in ridesharing and can leverage that power to undercut its competitors like Instacart in grocery delivery to take/grow that marketshare.

Q. Cloudflare (NET), STMicroelectronics (STM), and Texas Instruments (TXN) are all not far from where we bought them. Is this an opportunity to add?

A. Hmm, I guess by the standards of some of my long-term biggest winners which are up like 1000% to 10,000%, these (NET, TXN and STM) are somewhat close to where we bought them, but they’re each up nicely since I sent you all the Trade Alert that I was buying them: NET on 9/19/2023 at $60.14/share, TXN on 10/25/2023 at $141.79/share, and STM on 10/30/2023 at $37.69/share. We trimmed a little of each of them when they were higher a couple of weeks ago and we haven’t bought more of any of them recently except for STM which we are still building up.

Q. What’s going on with Solaredge (SEDG)? The price looks attractive and then it keeps going lower. I don’t own any at this time.

A. Same ol’. The company needs lower rates to make its products affordable. Solar’s the future, but it’s not straight-up hockey stock all the time.

Q. Feet to fire, if you HAD to make 3 earnings plays (calls, puts, common, etc), what 3 would you make? Obviously, we don’t play earnings much, but just curious!

A. Hmm, maybe puts on some of the bitcoin miners that I’ve mentioned before. Maybe some puts on some solar stocks and/or cable companies. Maybe some calls on Disney (DIS) or Pfizer (PFE). I’m not recommending any of this though. Just trying to answer your question.

Q. What’s the opinion on Virgin Galactic (SPCE)?

A. Long time Trading With Cody subscribers know that I pounded the table on this stock back before it rallied 1000% to $70 or so a couple years ago and that I then begged the company to do a 10% or so dilutive secondary to lock in upwards of $2 billion to put on their balance sheet which would have been enough money for the company to survive for years and to try to get cash flow positive. As the stock fell and the company never raised more capital, I eventually bailed on it. They didn’t raise money until the stock was back at $7 per share and they only raised a few months’ worth of cash instead of billions. Now I don’t think the company can survive and we stay far away from it.

Q. Has your 2024 forecast on bitcoin (BTC) changed with the ETF approvals? And, at what price would you be nibbling BTC?

A. Bitcoin is down almost 10% since I wrote this in late December: “Bitcoin pulls back 15-20% before its “halving” event happens in April, which allows bitcoin and other cryptos to rally into the event only to drop 20-30% in the two or three months after the halving happens. Bitcoin stabilizes in the high $30,000s (bottoming around $36,000) next summer and into year-end when bitcoin finishes at $42,733 or so. Recent highflying cryptos like Bonk and Near finish 2024 down 50% or more on the year while Dogecoin doubles in 2024 (call it the “Elon effect” — I would have expected him to give up on Doge by now, but he’s still bulling it). Ethereum ends the year down more than 20% from its current levels at $1813. Gary Gensler leaves the SEC next summer and the next SEC Enforcement Chief comes in and actually does his/her job as the government steps up prosecution of the founders of thousands of silly, stupid and/or fraudulent cryptocurrency tokens that have been illegally pawned off on the public in the last five years. Coinbase (COIN) gets its own comeuppance as the company settles with the SEC for $7.2 billion and Brian Armstrong has to give up his job as CEO.” My predictions in there haven’t changed much except for the last sentence because with the SEC approving Coinbase as a custodian for some of the major bitcoin ETFs, it appears that, once again, little Mr. Gensler is too scared to actually prosecute the many crimes/SEC violations that Coinbase and Armstrong have committed repeatedly over the last decade.

Q. What state do you prefer for rental investments and why?

A. Easy to answer: Whatever state you are in. That said, I sold all my rental real estate, which was in New Mexico where I am these days, as noted a couple of years ago now.

I leave you all with a picture of Ringo again this week. This ten-month-old puppy is going to be huge but maybe not as huge as his personality is (when he’s awake, unlike in this picture).