Here’s the transcript to this week’s Live Q&A chat. Join me next Wednesday at 2pm EST at https://tradingwithcody.com/chat or send me an email with your question at support@tradingwithcody.com.
Q. Why do stocks react so much to news? It’s just that I can’t see why if something happens in Europe, suddenly everyone feels fear and start selling their stocks in the US. For me its a stupid thing to do, but maybe I’m missing something important that I don’t understand.
A. It’s not you that doesn’t understand. You are absolutely correct that endless bailouts and crisis mode in Europe doesn’t matter one iota to Apple’s growth in the next year or two. The mainstream media, the guys on TV, the producers who write the stuff those guys say, are basically feeding the government/corporatist beast of which their parent companies are a part. Every time the Republican/Democrat Regime puts forth a new bill, there’s hidden subsidies and other targeted tax tricks for companies like News Corp and GE, which own Fox News, Fox, Fox Business and NBC, CNBC, respectively along with Time Warner and the other major media conglomerates. Did you know, for example, that the original TARP bailout bill had full on tax credits, meaning outright welfare payments, made to any company that produces movies with a budget of like $10MM to $75MM. I actually read that damn TARP bill in its entirety when I was an anchor at a mainstream media TV company and whenever I pointed out how conflicted everyone on our station was whenever they reported on that TARP bill, I was rebuked publicly and privately. Not only that, but I can also tell you that the financial media world sees a huge spike in consumption whenever they can get the world/markets worked up over some so-called “crisis” so there’s yet another incentive for the mainstream media to hype crisis whenever they can. What’s truly sickening is that there is a crisis of these endless bailouts and corporate welfare systems above-the-law policies for the major banks, the military industrial complex, the media and other global conglomerates, from the Republican/Democrat Regime has taken our national debt from $8TT to $14TT in just the last handful of years and that money went directly to those aforementioned banks and global conglomerates and that has continued to feed that beast. Vicious cycle and one that truly will come back to destroy our society as we once knew it at some point. Could be years or decades before the collapse, and there’s always hope that if we got our butts back in the financial criminal butt-kicking mode and if we stopped the looting and returned to some semblance of rule-of-law capitalism that we might avoid an outright societal collapse/revolution. But with Presidential Kill Lists, the suspension of habeas corpus, the institutionalization of non-prosecution of bank drug money laundering, mortgage fraud, court fraud, foreclosure fraud, robosigning fraud, bailout fraud and so on and so forth, do you think the trend is anywhere near turning back to rule-of-low capitalism? Me neither. Never ever vote for a Republican or a Democrat in a national election again. And fight for the truth. Rock on.
Q. I’ve been shorting BAC the last month expecting the opposite of this run. It appears I’m one of the few that feels like we won’t get “cliff” resolution until the 31st, if that soon. Why all the optimism with the partisanship in DC?
A. The fiscal-cliff doesn’t matter and it never did. Read this and read this for more.
Q. Cody, the news is all about Tax cut on those who make 250k and above. What about the corporate tax talk? I don’t see anybody focusing on corporate taxes and capital gains. How will this impact the stock market?
A. The giant corporations all know that their subsidies and hidden tax bailouts, credits, overseas tax avoidance accounting maneuvers and so on will still be in full-effect no matter what convolutions the Republican/Democrat Regime cooks up in their so-called “Compromise”. That, and the fact that the aforementioned mainstream media of the world sure as hell doesn’t want us to start digging into actual corporate tax rates so they never ever talk about that except to say “corporations pay too much in tax!!”. Sigh.
Q. Hey Cody I’m a new member and I’ve enjoyed what I have seen so far and I’m learning to be more patient as we go along here so a question: Considering where we have been in the last five years in regards to financials and the recent drum beating from people like Whitney do any of the financials look appealing to you now?
A. No, not really. The entire financial system has been overtaken in a quasi-communist oligarch kind of way when the bailouts started. There’s very little reality in any major financial firm’s balance sheet, earnings, and so on. Any bet on a major financial institution is simply a bet that the looting by this increasingly corrupt and outright fraudulent industry, a bet that the Republican/Democrat Regime that it owns can continue to increase the banks already’ record share of GDP earnings.
Q: Cody – When you suggest a short on say JPM would a long term Put function much the same way. 10 yrs ago I did a lot of shorting & felt like I was picking up dimes in front of a steamroller – so swore them off. I know – Options can be painful sometimes but have been doing much better – specifically with your input. Thanks for what you do.
A: I wouldn’t say they work “much the same way”, but a short common stock and a long put position are certainly similar. The good part about a put option is that you know exactly how much you can lose on it if it doesn’t work out — 100%, whereas if you shorted AAPL at $90 in 2008, you’d be showing a 500% loss right now if your broker hadn’t forcefully covered the position for you already. The bad part of using a put is that there’s a time limit to the option and if your timing is off, you might lose on the puts even though you might have made money if you’d shorted the common instead.
Q. Cody, Usual trend in starting January, stocks go up and am expecting the same thing Jan 2013 and am kind of invested 80% of my portfolio. Can you shed some light and your thoughts on how the market will be starting next year and as the earnings season start. Is it fair to be invested 80% at this moment or should we raise more cash selling some profitable stocks? Again we all appreciate your service so much.
A. Thanks for the kind words. I continue to think that the path of least resistance is higher headed into year-end and probably for the next few months, as the bears and shorts are feeling confident and the bulls and longs not so much so. That doesn’t mean there won’t be a 5% or even a 10% market drop as market swings are always part of the market cycles in any market cycle.
Q. Is FB the 4th horsemen and what’s your top pick for 2013—just for fun sake?
A. A few months ago I wrote that the New Four Horsemen of Tech were: Google, Amazon, Apple and (soon-to-be) Facebook. I still think that.
Q. Hi Cody, Which one is a better buy for 2013, AAPL, AMZN or GOOG ?
A. Talk about a Sophie’s Choice? Why not ask me to choose between my city cattle dog Lobo, my great Pyreneese Miel, or my once-incredibly athletic barn cat who’s now a lazy overweight house cat? I like all three a lot.
Q. Cody, I’d like to revisit some of our dogs from last year and see if they may be ripe for the 2013 portfolio. What’s current outlook for GLW, RVBD, FFIV.
A. Ooh good question. Here’s what I’d say about GLW – if they couldn’t show fundamental growth results in the last few quarters as Amazon, HTC, Samsung and Apple were selling all these new gadgets, when will they? Over the years, as long-term subs know, I’ve been short GLW from $18 to $2 and then long it from the low single digits back to $18 and than I blew the streak by trading it for a loss last year. I’m not sure it’s on my radar. Riverbed and FFIV are still good long-term plays on the fact that they can cut networking costs and expand capacity both of which are always in demand.
Q. Hi Cody, About 6 weeks ago you sold out of Juniper. “This week we’re going to sell a names that hasn’t lived up to our expectations: we’re selling Juniper….… Juniper’s disappointing earnings proceeded to knock the share price down another couple of points to a low of under $16/share. It has since recovered to the mid $17 per share price level…. .. But in its most recent conference call management was very cautious about the outlook for the next few quarters….. I still like the long-term story at Juniper, but as noted above, there are probably some names in our list with more compelling near-term catalysts.”After dipping again to around $16 Juniper has been steadily climbing and is now trading above $20. I am still holding some long dated calls (LEAPS) priced at $20-22. Do you or your contacts know of any change(s) – in sales, orders or outlook – that might make you change your opinion?
A. The same telecom infrastructure contacts who were bullish about Cisco and Juniper for the last year still are. They see the same demand for infrastructure capacity that I do. I just got sick of Juniper’s actual results not showing the traction I wanted to see from them. The stock seems to be saying that they’ve finally caught traction, but let’s see how the report itself plays out. I’m still bullish on the telecom infra sector for the next couple years, but I can’t own ’em all.
Q. Re: Juniper Cody, when you say “how the report itself plays out” do you mean the next quarter’s earnings report?
A. Yes, that’s what I mean. I want to see if they can show some real topline and bottomline growth and quit taking down future estimates.
Q. Cody what’s a good level to buy SNDK on a dip? Also, what’s a good level to buy FB on a pullback?
A. Got no good answer for you on either one. Both seem to be in momentum mode and that can last longer than whatever price target sell off I might give ya. Try to have your cake and eat it to by scaling in slowly but surely over the next few days if you want to buy more of those. Hopefully the stock doesn’t run away from you before you get your full position on.
Q. If flash storage is such a thriving who are SNDK competitors? At some point the prices of NAND flash will come down quite abut if devices will start to offer instead of 16G as the entry point and instead 32 or 64 G units?
A. I think prices will come a down a lot for all flash levels. In two years, you’ll get 128GB standard in whatever iteration of iPhone is out then, and so on. Sandisk, Samsung, Micron and a few others all make flash. Sandisk has patents and gets licensing fees from all flash growth though, and their whole business is built around flash, unlike the others.
Q. NVDA: what ‘s your thoughts on them? Could NVDA become a serious challenger to QCOM? If above points have positive answers, is the current price a good entry point for the long term? Many thanks! I really appreciate your strategic point of view.
A. I sure like Nvidia a lot more down here near multi-year lows than I did a couple years ago when it was triple the current price. I do think Nvidia’s got a place in the tablet/smartphone/gadget future as that market continues to explode in coming years. I don’t think Nvidia will ever take over QCOM, but that doesn’t mean it’s a bad investment here.
Q. APOL: Instead of exiting my large and long standing short position when APOL rose from $20 to $22 recently (like I would have done before I started following you a year ago) I loaded up with more shorts yesterday at $22 (already down to $21.08 as I write this). APOL is now my biggest short now. I agree with you that long term the business model is broken; how do you see it playing out in the short to medium term and at what point do you think I should look to trim? Thanks for the awesome service.
A. We darn near caught the top in the APOL short when we first put it on in the $50s. I think APOL is eventually doomed as they will lose the ability to fund their students’ so-called “educations” with taxpayer funds over the next few years. That said, with it already down more than 50% from where I initiated that short and with the stock acting stubborn here in the low $20s, I’m not sure I’m counting on another huge drop in the near-term. It could take a while for it to truly end up in the single digits or lower, but I do think by, say, 2020, it’s doomed.
Q. What’s your opinion on GMCR? GMCR has recently brought in a new CEO and a chairman.
A. I’m not sure what Einhorn’s latest stance on GMCR is, and he was the one who said their numbers were no good and kept me telling my subs over and over last year to stay away from that one. I’d probably just try to find out whether he’s still short it now and if so, I’d still think it’s going to crash again. If he’s out, it’s probably finally got some management in place that could make the company really work. I don’t know it though and haven’t done the work on it, so that’s all I got for you on that one.
Okay folks, that’s it for today.
