Tolerance for corporate lawbreakers?, Dumb gold miners, Tesla, TheStreet and more
Here’s the transcript from the latest Trading With Cody Livestream Q&A. You can watch a replay of the Livestream on Facebook here or on YouTube here or you can listen to the podcast version of it on iTunes here or on Soundcloud here.
Welcome everybody to another episode of Trading with Cody Live Q&A, also known in podcast form as Cody Underground.
I’ve got to get focused here. We have stocks, economy, politics… cryptocurrencies, not so much. I don’t think we’re going to talk too much about cryptocurrencies for a little while.
Well, I think one of the things we might as well hit on, because it is so much in the news, is the immigration policies and the separating of children from their families. As you guys know, I am not partisan. I’m anti-partisan. When I read news, I’m always trying to objectively think through it all and to objectively try to recognize any trends. Both sides — the so-called right and left — once again, are wrong and right. Essentially, Jeff Sessions said, “Look, we’re going to have a zero tolerance policy. We’re going to enforce the laws on the books.” Which I supposed I think is great. I want us to enforce laws on the books. But I don’t know why there’s a law on the books that separates children from their families.
Such a law is awful, and frankly, the bigger point is if you’re going to pretend that you’re enforcing laws and you’ve got zero tolerance, then your should also enforce the corporate laws in this country with zero tolerance too. We’ve got anti-trust laws that are clearly not enforced, as Fox, and Disney, and Comcast are rolling up the last bastions of media and newspapers and news. We’ve got bank laws that are still suspended from 2008, and the emergency measures, every single one of which that the federal reserve in Congress and the Senate and the president at the time, Bush and then Obama, both were active in bailing out and not enforcing laws, and suspending rules of law for banks in 2008.
So I say, yeah, let’s have zero tolerance. If you want to have zero tolerance at the border, I expect you to have zero tolerance at the bank!
But that’s not the way it works, is it? So look, both sides are right, both sides are wrong. Go change the laws, make it a merit based system, whatever. But also enforce the laws. But be consistent enforcing in enforcing those laws. Enforce the laws against rich bankers. Enforce the laws against poor people in the inner city. Enforce the laws against me. Enforce the laws against Trump. Enforce the laws. We are a country that is supposedly based on rule of law.
I have zero tolerance for corporate and bank lawbreakers. I have a little bit more tolerance for families who have immigrated thousands of miles escaping hardship and oppression and looking for opportunities. I have a little more empathy for that.
Think about it this way, have you seen the laws in our country, in our city, our county, our states, federal, UN, global? From global, to federal, to state, to county, to city, to my neighborhood, we’ve got laws that are not being enforced. Enforce them. Zero tolerance? Think about it.
I don’t know what that has to do with the stock market though. I don’t know what that has to do with stocks or your money, except that it does speak to the broader politics of this county. One of the things that I come back to all the time and people get confused about is how I always say that Republicans and democrats are just corporatists. They basically have the same thrust of policy, whether it’s wars and bombing people, including children in the Middle East, whether it’s immigration laws, enforcing, not enforcing, writing new laws, changing old ones, whether it’s tax policies or healthcare — they are all doing things in an economic sense the exact same.
When I see trillions of dollars from policies being directed towards the military industrial complex to bank bailouts to ongoing bank welfare, to endless corporate targeted tax tricks, whether the new tax bill or the old Obamacare. I know where the bread is buttered. Those policies and laws are all written and designed by giant corporations.
Meanwhile, the Democrats and Republicans that glom onto social issues like immigration and children at the borders, and they’re like, “Okay, well if you want to be liberal, you got to be Democrat. Doesn’t matter that every economic policy, and most any other policy from the Democrats frankly, are written by corporations.” The same is true for Republicans — the social issues are what they use to separate and create power of party. It does matter. Going back to the immigration issue, you see it doesn’t matter to the stock market, per se, but it does underscore right/left and how the vast majority of Americans are subjected to being corralled.
The vast majority of Americans are corralled into one party or the other based on social issues, not economic issues. Meanwhile, economic issues are mostly what matter in the stock market, to your livelihood, and our society’s prosperity.
This has been my overriding theme in my entire investment life, 20 something years. 22 years ago I went to Wall Street. In my entire lifetime, the thrust of every policy, every law passed from Republicans or Democrats has been one of redistributing wealth upwards, creating protections or artificial barriers for giant corporations. I have profited by investing in that trend, and so have my subscribers and my old hedge fund investors, but I find it repulsive socially and politically. And it continues today. It’s not like that has stopped.
Right here in 2018, every policy that is debated, every law that is passed is based upon someone who will benefit monetarily from that. And they’re the ones who created the law. Tis is how crazy politicized this stuff gets. A few weeks ago, I actually put up a post on Facebook that said, “Who are these companies running these private detention centers that are separating and/or holding the children that are being separated from their parents?” I just wanted to follow the money, because the corporations that are running those detention centers I guarantee are lobbying now for more of the same policy and more money to come into it. But Republican-leaning friends/fans of mine freaked out and attacked me or defended the policy, but nobody wanted to talk about where the money was coming from and going to with these zero-tolerance/family separation centers.
Lo and behold, Yahoo! News did a big article last night, an expose, that went and found the companies that are running those centers and actually found the contracts they signed with the federal government, joined them. 90 something million dollars of your tax payer dollars are what are running those facilities.
It’s always follow the money. Who’s got the money? Billionaires and giant corporations. Anyway, it’s why I continue to say there’s a Bubble-Blowing Bull Market (trademark!) dynamic that underscores everything in the economy, because those are what the policies from both Republicans and Democrats are focused on. Simple as that.
Q: Hi, Cody. You often say that you prefer gold coins to minors or to the GLD. What is your preferred way to purchase gold coins?
Cody: The only reason I “often” say that I prefer gold coins to gold miners or the GLD is because I get asked that question by new Trading with Cody subscribers invariably, at least once every couple of months. So sometimes I have to repeat myself. I’m sorry.
Anyway, let’s back up. The reason why I like gold bullion or gold coins more than a gold miner stock or the GLD as a certificate. The GLD is a paper promise a digital promise from these too-big-to-fail banks that needed bailouts and couldn’t meet their obligations — like meeting the gold that would be demanded at an ETF GLD. You have to trust that these banks have not taken the gold that is supposed to be physically banking that ETF and moved it, and to trust that they haven’t issued 18 different certificates to different people for that one bar of gold. I don’t trust any of that.
Look, the whole reason you would want to own gold is for the next time there’s a financial crisis. The next time there’s a financial crisis, I don’t know if the banks are going to meet their obligations on GLD, paper digital promises during the next financial crisis, but I know that gold bullion or gold coins that I would have somewhere stored that I could personally go get, not necessarily in a bank deposit box for the same reason. Next time there’s a solar flare, I want to go use my gold to buy some food, I don’t want to go and hope that the GLD trades. I could get cash.
That’s actually, just real quick, another point.When I do these deep dives for Trading with Cody subscribers and I talk to them and go through their portfolios and their sort of outlook for the next 10,000 days of their lives, when I do that, I tell people, “You should have a month’s worth of cash and a few thousand dollars worth of gold and silver somewhere physically accessible, just in case there is a solar flare, just in case Russian hackers take down the electronic grid, electrical grid, just in case there’s something bad that happens.”
It’s a backup plan. GLD ain’t going to do you no good in that case.
Now let’s talk gold miners. You guys ever watch Gold Rush? I’ve learned a lot watching Gold Rush just about gold mining. The thing that Gold Rush underscores or even Bering Sea Gold (I actually like Bering Sea Gold better than Gold Rush) is that a lot of gold miners are idiots. A lot of people running gold mines are not people I want to bet my money on. Unless you’re going to go personally meet the management at that gold company, why risk it? If you want to bet on gold, bet on gold. If you want to invest in an equity in a company, why a gold miner? There’s better things to do with your money.
The other point that I would make is every gold miner stock that I look up has billions of dollars of debt, which number one, underscores the fact that management at those places have been wildly over-paying themselves, or they wouldn’t have had to been on a borrowing binge. Number two, they’re all dependent upon gold staying above this level or so, say $1,300, say $1,200 or more is what the gold miners out there need just to meet their debt obligations and pay the interest.
What if gold runs down to 1,000 bucks at some point in the next three years or $800 for a year or two? The gold miner’s equity will be gone. My gold coins, well, they were worth $1,300 right now an ounce right now. But it’s not like I’m going to go sell them. If it’s $800 an ounce, I’m not going to go sell them.
Look, in my lifetime, I do expect gold to go up at least five or tenfold from its current levels. Why? Because the republican democrat regime federal reserve. It’s a fiat currency.
We have had an incredible 10 year, 8 or 9 year, 8 or 9 year economic expansion happening right now, yet we’re borrowing more than a trillion dollars a year. The government is taking my children’s and my grandchildren’s money and borrowing a trillion dollars, running it through the economy, through the system, sending it to Obamacare companies, sending it to Trumpcare companies, sending it to the Trump tax bailout, sending it to social welfare programs. Speaking of which, social welfare programs like medicare, medicaid, food stamps are one 10th the annual spent on corporate welfare and stadium welfare and billionaire welfare programs.
We’re borrowing a trillion dollars a year right now in the best economic, the largest GDP itself ever. Real GDP, we’re doing $20 trillion, give or take, of economic activity, and we’re going to borrow still trillions. That will hurt the value of the dollar relative to gold (and surviving cryptocurrencies by the way), in my mind. Gold will go up five or tenfold. Not now, not tomorrow. In the next financial crisis, might double or triple, and then the next financial crisis might double or triple again. In the next 10,000 days, 30 years, maybe 50 years. How long am I going to live? I’m 45. What do you think, Piper? Will I get to 100?
Piper: You got at least 50 left.
Cody: Hard work clean living, man.
Piper: You’re almost halfway there.
Cody: Going back to the gold discussion then, if you want to invest in gold, you can go to eBay and find the five star-rated gold and silver dealers on there and buy it. But even better is to get to know a local coin dealer or three and to develop a relationship with them. It’s valuable to do that anyway. Then when you develop a relationship, a guy might be calling you like, “Hey, I got some gold coins in. I need to unload.” You can pick stuff up off occasionally. That is the best way to buy gold coins.
Q: This market seems to be relatively herky, jerky up and down, depending on people’s quirky response to the news, yet your general attitude, Cody, seems to be prepared for a major softening, perhaps soon. Would you be thinking of adding to the QQQ or buying some SPY puts on any interim market blip up? It was so tempting to do so just a few days ago. I know these puts are a general hedge of our existing portfolio, and I have a portion of those set aside for that purpose. Would it be wrong to take an additional small portion to play the relatively high percentage changes in our markets?
Cody: Long question. I think number one, let’s address this :major softening” term, which is ironic and funny really when you think about it. “Major softening” is not oxymoronic. It’s actually just mutually exclusive.
I think the only way I can answer your long question is to sort of talk about the market outlook a little bit here and say look, as I was speaking to earlier, it’s not like I think the Bubble-Blowing Bull Market is over and that you be panicked an out selling or anything. But the flip side of that was that 10 years ago, we had a burgeoning, world-changing App Revolution that hadn’t kicked in yet.
As I used to write about and invest for at the time and talk about on my TV show from 2008, 2009, 2010 was that you had nobody using smart phones, and you had billions of people that were about to start using smart phones over the next 10 years. That, from on an economic perspective, was incredibly helpful to the productivity of our society. Now again, the Republican Democrat Regime has siphoned most of that productivity out through endless trillion dollar corporate welfare packages and bailouts as those have redistributed that productivity. Trillions of dollars of productivity enhancements that the smart phone and the app revolution provided to you and me that didn’t trickle down to the average Joe.
I guess here’s the point, we’ve been through a huge bubble blowing bull market for 10 years. We’ve had incredible revolutionary things happening. We still have some new burgeoning revolutionary things happening, like artificial intelligence, driverless cars. I have put a number of 2 to $3 trillion of annual economic increased output because of the driverless revolution saving people’s time and money and energy, and enabling you never have to drive, enabling you to work, or talk, or communicate, or play, or consume movies, create economic output, no matter where you are or where you’re traveling.
All this stuff is happening, but it’s also largely priced in. I want to be cautious as I just don’t think the risk reward of Netflix at $400, or wherever that is tat this moment, is nearly as good as it was at $40. I don’t think Nvidia at $260 is as good as it was at $30.
I just think you want to have a little more cash right now than you did three or five years ago. I think you ought to be a little more cautious. I don’t think you want to be bearish. So, to go back to your question about the puts — No, I’m not about to go load up on puts or something. I just am preaching caution.
Times are good. Be scared when times are great. Be aggressive and opportunistic when economy’s bad.
Q: Cody, your thoughts about Tesla, please. If I remember well, some time ago you mentioned Tesla as a potential buy, but no more discussions since then. It is hated and shorted. It reminds me around Amazon around 350 bucks. No profits in sign at the time, but they revolutionized. Can Tesla follow and deliver? It seems like they did already and other business, batter storage in Australia, spaceship, etc.
Cody: Now let’s be sure to separate Tesla from Elon Musk. Tesla doesn’t run spaceship businesses. They did acquire another Elon Musk-controlled company. I can’t remember what the symbol was, but anyway, it’s a solar company, and Tesla and Elon did roll those two companies up, but we should separate Tesla from Elon.
Look, I was bearish on Tesla. If you even go back and search YouTube, I’m sure you can find a clip of me going after Tesla executives back in 2008 on my TV show, because they had taken a $500 million welfare loan from the government. I rightly was like, “If we’re going to spend $500 million on welfare, I don’t know why I’m giving it to rich corporations that should be able to raise that money in the private market instead of if I’m going to take this $500 million and spending tax payer money, spend it on children cancer research.” I was mocked on Business Insider, I think, for that. But I’m proud of it. I stand by that statement.
At any rate, I’ve been bearish on Tesla for a long time because of that, because they were dependent on welfare in building their business and government subsidies, including the, what, $8,000 welfare check that you get if you’re rich enough to buy a Tesla car. What kind of sense does that make? I’ve never owned Tesla and probably never well, but that being said, I wrote a mea culpa a couple years ago for my Trading with Cody subscribers, because frankly, Tesla is a name I should have been in. It’s a revolutionary kind of company. If you overlook the subsidies and welfare, which you have to overlook no matter what company you’re investing in, because they’re all paying less than a small business. That’s what subsidies are. They’re being subsidized by the hard working small business and middle class.
Tesla, I don’t own it, wouldn’t short it, wouldn’t buy it. Sometimes you can just throw up your hands and say, “It’s not for me.” I can’t decide whether I like Elon Musk or whether I can’t stand him. Sort of how I feel about the stock. I tried to separate the two, but I guess I can’t.
Q: Cody, what about TST?
Cody: TheStreet.com, baby. The Street just sold one of their subsidiaries, RateWatch, to S&P for 33 and a half million bucks. The street is going to walk away with $32 million cash out of this too. Now TST, this is small cap stock, guys. Don’t run out and buy the stock right now. Don’t go crazy. You’ll move it. When I sent out a Trade Alert a year ago, year and a half ago to Trading with Cody subscribers telling them I was, for one of the very few times in my career, buying a penny stock looking stock, The Street — the entire market cap of the company was just $30 million. The company had $35 million or so of cash in their checking account. The stock market was saying that The Street would never come back. They would use all that money up, and they would basically destroy the value. That’s why the stock was trading for less than the amount that the company actually had of cash.
Side note, Apple, March 2003, stocks trading at $1. They had $1.30 per share of net cash. Same sort of situation. Market was saying that Steve Jobs would never create value. They were wrong. I thought the same thing about The Street, because Dave Callaway had come in. And I was discovered, frankly, by Jim Cramer. I owe my much of my career to Jim. He published me the first time. He put me on TV the first time. He helped me launch a hedge fund.
At any rate, TST the stock traded for less than cash when we bought them. And they just sold one of their subsidiaries for more cash than the entire company was valued at a year and a half ago. Great job, David Callaway. That’s why the stock has gone from under a dollar to almost $2. It’s not been an Nvidia kind of home run or AxoGen kind of home run for us, but yeah man, nice pop today, and I’m quite impressed with their fundamental execution.
Q: Cody, will the trade war and tariffs affect tech companies that make hardware in China? For example, Apple makes their products in China and have their supply design as if Apple is a China subsidiary. No, as if the Apple China subsidiary is selling to the Apple US subsidiary for a significant amount. If tariffs affect the selling price, this would affect Apple’s margin, correct?
Cody: Yes. That is what I’ve been talking about since the very first moment that Trump started talking about tariffs and trade wars. You can’t be the leader of the so-called free world and start talking about tariffs and start talking about trade wars without starting a trade war. The minute he talked about it, that is the first shot of the war. Since that time, that’s all I’ve talked about when I talked about the trade wars. Friendly fire, fog of war, unintended consequences. Absolutely these are real problems, real and developing problems, yet another reason I want to be just a little more cautious right now, because that is a new economic problem, a new profit problem that has not coalesced yet, but is certainly recognizable as a possibility and looking increasingly likely.
If Tim Cook, which he said, he’s on crack if he thinks he can tell his shareholders like me that he knows that Apple is not going to be affected by this tariff and trade war stuff. Uh-uh, man. Six months from now, Apple could very well be suffering in a multitude of ways. What if China itself starts playing nasty and disrupting Apple’s supply chain itself? There are lots of bullets that China has in this trade war. Their minister of finance, by the way, said that very thing Monday night after the news came out that Trump was putting new tariffs of $500 billion, $500 billion worth of Chinese goods.
Q: Cody, big report this week about how Intel is going to lose share in the laptop and server markets to AMD. Intel is acknowledged as much in servers. Has anyone here read the report?
A: Yes. I didn’t read the actual report, but I read parts of it. I read some media reports on it. I didn’t even need to see the whole thing. None of that is news. Intel has been struggling. That’s why the stock has gone nowhere in 18 years. Intel still has a smaller market cap today, is worth less today than it was in the year 2000 at the top of the dot com bubble. Now granted, it was bubbled up and over-inflated at that top, but Amazon also crashed 90% in the dot com crash and is now up 12,000% from it’s lows at the bottom of the dot com crash. Meanwhile, Intel is 300% from its very lowest bottom of the dot com bubble.
I know that Intel has struggled. I know it’s been losing market share, but more importantly, we’re looking at the future. When your investing in stuff, you’re looking at the future. What’s the future hold for Intel? We’re betting that Intel’s driverless and internet of things initiatives, and frankly, flip it. AMD and Nvidia are dominating artificial intelligence in the server area. Well, Intel’s targeting them in that right now. That’s not this month, but maybe in two years Intel could have better artificial intelligence processors, graphic processors than AMD and Nvidia. I’m not expecting it, but it could happen. I am expecting Intel to make billions of dollars on driverless platform, and I’m expecting Intel to make billions of dollars in internet of things stuff.
So I own the stock. It’s from about 30, 33 I think we bought it at first try. Up 55. Am I worried about Intel? Absolutely. I’m worried about everything. Have you been listening to me for an hour? Piper, I’m winding it down here. I want to get your guitar out for the theme song outro. Pressure’s on, bro. I hope you came up with something while you were sitting there.
Q: Cody, do you have a view on Roku’s long-term prospects?
Cody: It’s an interesting company, because they’ve got several different subscription revenue models. Now just the other day, I was just reading that they’re launching Amazon-like channels. You’ve seen Amazon channels? Roku’s is going to have channels now. That said, I don’t like the valuation of Roku here, so I’m not about to buy it. But I do like Roku’s long-term prospects, to answer your question.
Q: Cody, what’s your take on all the new PayPal acquisitions? Also, how do you feel about Square?
Cody: Frankly, I haven’t been paying attention to PayPal. I don’t own it, don’t want to own it. I do use their service, tradingwithcody.com, and I have been a long time displeased, disgruntled customer of PayPal. The other part of your question was Square. I like Square. It’s like Netflix’s stock, I kick myself for not having owned, because I’ve talked about it as a terrific App Revolution stock for years. I would buy Square. I would probably never buy PayPal.
Q: Cody, and thoughts on Lion’s Gate Films as content space continues to heat up? Good things for Sony ahead based on the outcome of Fox.
Cody: Look, consolidation in a sector always boosts profits. Less competition is great for the corporation and its shareholders, terrible for the customers. And yes, consolidation is good for Sony.
Content is king. As I used to say back on Kudlow and Cramer back in 2002, 2003, 2004, that as distribution, as the cost to distribute content as dropped to zero (via the internet so you don’t have to pay for a subscription cable service, you don’t have to go to a movie to consume content) as the cost of distribution of content dropped to zero, the value of the content has obviously skyrocketed. That is why I’ve owned Sony for five years and why I continue to own it. Lions Gate’s been stumbling management wise, execution wise. They need some more hits. I’d rather own Sony than Lion’s Gate. I do own Sony, not Lion’s Gate.
