Q: Is Apple (AAPL) moving to new highs?
A: The answer is yes, but you're not going to get the same massive returns that you got in 2017 with all of the FANG's.
Q: Will inflation rise in 2018?
A: Yes, but not by much. Technology is still creating giant deflationary headwinds. The only inflationary pressures we'll see is from commodities, energy, and from some wage rises in industries like tech.
Q: Do you see 2, 3, or 4 wage hikes in 2018?
A: I vote for three, but four is an outlier depending on how strong the economy gets.
Q: What do we do about NVIDIA?
A: The answer is to buy it. I was holding on for $160 as an entry point and it's not giving it to us. Long term, I think we have another double here. I spoke to the CEO a few weeks ago and he's wildly bullish about the company. AI is the major driver there and this is a $400 stock someday. They are in the sweet spot for every major trend in technology. Of course, there is some New Year reallocation buying going on now, but you can start dipping your toe in here and add to your position later.
Q: Will Japanese stocks rise fast enough to offset the weakness in the Japanese yen?
A: You could have a situation where they may rise and fall by equal amounts and you end up making no money. The answer is to buy the Wisdom Tree Japan Hedged Equity Fund (DXJ), which buys Japanese stocks and sells short the Japanese yen against it. That way you can play Japan with no yen exposure. It's a way of buying the Japanese stock market in dollar terms. The (DXJ) can add another 20% or 30% this year
Q: The ProShares Ultra Short 20+ Treasury ETF (TBT) is at $34. Do you think it will hit $50?
A: Absolutely yes. We have another 10 points to go at least in the (TBT). And that's the conservative target. The more aggressive one is $60. Ten (TLT) points are worth about 20 (TBT) points because of the 2X leverage in the (TBT). There should be another 50% upside from these levels.
Q: What is the catalyst for long term US bonds to decline?
A: Rising federal deficits and rising US interest rates. It's really that simple, and both of these are sure things.
Q: Will the polar vortex fundamentals helps natural gas prices high?
A: The answer is no. We've had a nice little rally in gas in the last week caused by the polar vortex. I would sell into that. I'm not looking for any sustainable rally in natural gas this year because increased fracking supply generates gas as a byproduct. In fact, it generates more gas than the system can supply. I wouldn't want to mess around with gas when there are so many other better things to do in the stock and bond markets.
Q: AMZN has a forward price earnings multiple of $130 so do you think that's expensive?
A: No, it's not expensive, it's meaningless. Amazon has never had an earnings growth type strategy. They've always been about market share. Amazon profits are about to double with all the things they have going on with Alexa, the cloud, AWS, and so on. Some 25% of all US retail sales went to Amazon in 2017. This is clearly a business that is growing by leaps and bounds. There is another double in Amazon, but I don't necessarily want to buy it today.
Q: I am hearing wildly divergent opinions about TESLA, what is your opinion?
A: That will always be the case. The world is divided into two different types of people; the believer and non-believers in the TESLA vision. Non-believers tend to be Trump type Republicans who see it all as a liberal conspiracy. I can tell you that I have been in the Tesla factory every quarter for the last 8 years, and I can tell you that Tesla is a real company and has real products. As they ramp up to 500,000 units per year, they will take over the world. They will be by far the largest car company in the world in 10 years and many value investors agree with me and have major positions in the stock. So, do not sell short (TSLA) under any circumstance. You will get your head handed to you if you do. Elon Musk loves squeezing shorts and has proved to be one of the most successful short squeezers of all time. Since I have been following the stock since it was $16.50, this has certainly been the case.
Q: Will emerging markets do better than the US markets in 2018?
A: Yes they will. You are really getting a perfect storm for emerging markets. A lower dollar, higher commodity prices, and a global synchronized economic recovery are all positive for emerging markets. Think of them as the small cap stock in the global stock world. They do better in these circumstances so look for them to do better than US stocks in 2018. My favorite is India, and you buy it with the (PIN).
Q: Should markets be worried about North Korea?
A: Forget about it because it's all noise. The two leaders are feeding off of each other using a tweet war to get publicity and public notice. It's all very damaging for the US over the long term and it hurts our long term interests in Asia by lowering us to North Korea's level. But no war will ever happen. North Korea has no ability to wage war, they have no single member in their military who has combat experience, while the US has been at war almost nonstop for the past 40 years. The North Korean missiles which you see on TV almost every day have no targeting system. All they can do is fire them in the air and watch them fall into the ocean. You do not arm those missiles with nuclear warheads, especially when 75% crash on take-off on the people who fired them. It's all a distraction from what is really happening on the geopolitical front and the financial market, which is a global US retreat from its alliances and international relationships. Don't waste any time worrying about North Korea.
Q: What do you think about cannabis stocks?
A: I don't want to touch them because they cannot participate in the banking system. Federal anti drug and money laundering banking laws prevent them from using banks. It's an all cash business or all bitcoin business where money is moved around in suitcases. By the way, these business are now the most heavily taxed businesses in the United States. There were no provisions for cannabis companies in the tax bill. Here in San Francisco, where it just became legal to buy pot for the first time, the sales tax is 35%. This will be a huge earner for the states that sell pot. California is looking to take in $8 billion in cannabis sales tax this year. I would not consider it a valid investment theme. Most people didn't even know that cannabis was illegal in California.
Q: Would you hold the CRISPR stocks like Editas Medicine (EDIT) and Intellia Therapeutics (NTLA) through 2018?
Yes, absolutely. CRISPR will be one of the big stories of 2018. These stocks have basically doubled since i recommended them last summer. You want to hang on to them because CRISPR technology is only just getting started. In the last few weeks, we have seen the first FDA approval of CRISPR generated technologies creating custom cures for rare diseases. Don't get off at the 2nd story of a 100-story elevator ride.
Q: Would an impeachment or resignation be market positive?
A: That could happen because it removes the prospect of impeachment and resignation and makes it a certainty. While it's an unknown, it will act as a greater drag on stocks than a known. I don't think it will happen this year. The Justice Department moves very slowly and we may not start getting investigator Robert Mueller's results until after the November midterm elections where you maybe get a Democratic majority. Then it'll be safe for the FBI to come out of its bunker and make its Russia investigation findings public.
