Let’s do this.
Q. How do you decide when to take money off the table versus let it ride? I had a bunch of Ford calls last year, they were worth next to nothing for months, so when it started to run last month and I got back to half of my money, I started selling. Had I held on, I’d have quadrupled my initial investment instead of losing half….but who knew? You seem to have very good timing instincts…how do you do it?
A. I once wrote an article for the Financial Times called “Running money is for idiots” and it’s all about how you’ll always remember the times you sold too early and the times you didn’t sell early enough more than the times you nailed the trade. (That’s true for everybody but pundits…they seem to have a remarkable ability to remember ONLY their wins, ha ha). Anyway, such timing is more of an art than a science. I am as aggressive a trader as I think anybody should dare to be, and I rarely use options except as a means to complement my overall performance and/or hedge risk. I’ve owned Apple since it was at $7 and I’ve been long AAPL call options off and on for years now and there’s certainly been times when I’ve lost money on the options trades despite the 7,000% gain I have on the initial common stock buy. I’ve definitely complemented the gains and hedged my AAPL risk adequately over the years using options because the total number of options trades I’ve done in AAPL over the years has been net positive. Your F options trade you’re referencing there didn’t work out. That’s no shocker. If, over the course of the next ten years, most of your options trades are losers, then we can discuss the overall performance of your options trading with some meaningful help.
Q. What’s your overall take for the full year. Should we stay invested at least 50% for the entire year.
A. I can’t tell you what % is appropriate for you without knowing your income, your goals, your age, your family history and wealth or lack thereof, your expenses, etc. But I can tell you that while I’m still bullish for another year and plan on being long most of the year, I’m a lot less bullish now in general than I was this time last year or the year before. Risks have risen along with the stock market.
Q. Hi Cody, I’m a graduate Statistics student and I’ve been working on a decision tree/game theory model of what a global currency devaluation race would mean for the global economy. In its essence, Asian economies find maximum utility by devaluing their currencies at earliest possible instance in almost all game models I have set up. The main impetus is because Asian economies know this will break the Eurozone and severely weaken the US economy, giving them exporting/importing advantages. My question is how would you trade the Yuan/RMB and Yen devaluation? And perhaps any thoughts on this devaluation ‘race’?
A. Whoa, deep thoughts, man! I find it surprising that you assume the Asian economies would want to do damage to the US/EU economies any time in the next decade, or anytime before the US ends up in a rate crisis of its own, on its own. Feet to fire, I’d guess that the Yuan/YMB and Yen are both going to be in a long-term up trend, rather than a devaluation race with the West’s currencies. The Euro is doomed, as I’ve said for years, but I still think most sky-is-falling-tomorrow-in-the-EU is too early. In other words, I’d probably take the other side of your Yuan/RMB and Yen devaluation trade, whatever trade you end up setting up. Good luck. Be very careful with your currency trading.
Q. Hi Cody, considering the government’s attitude in USA to the big banks-very cozy , too big to disturb, let them do what they want with no consequences, are you still negative in the 6-12 month period on the share prices for JPM, etc. it seems that as long as their earnings are going up no one cares how they make money. Like you, I was very negative and I bought puts on JPM for Jan 2014. They are dying. You just can’t underestimate the stupidity of the market sometimes. Back in school in the 80s I was taught that the market is efficient. Maybe not so much!
A. I’ve been wrong about the banks because I’ve been wrong that the banks ability to plunder our economy for the benefit of their earnings with the protection of the Republican/Democrat Regime has continued with barely a dip. Click here. Those charts are unsustainable and I think earnings for the big banks are peaking historically. The next six months though? You make a good point.
Q. Hi Cody, I’ve been eyeing Banco Santander for a while now and waiting for a pullback to get in. Since early November it keeps heading north. With the Euro crisis winding down and SAN having a pretty solid footing…what’s your opinion of getting into SAN now?
A. See the above link with all those charts showing how bank share of GDP is at unsustainable historical highs. I wouldn’t want to be working in any bank anywhere for any price much less would I want to own a bank stock in the early 2010s.
Q. Cody, is this now a good time to scale into some FB calls and if so, what would you recommend? Also, are you going to be connected while on your honeymoon or off the grid? Thanks!
A. With FB now down nearly 10% since we sold most of our FB calls for big profits, I’ll likely look to scale into a few more again soon. I always suggest buying a first tranche and then scaling into more on weakness til you build a full position. And no, I’ll send out a note to you guys tomorrow letting you know that I’m officially going off grid and out of the country to a remote location for R&R after I marry my dream girl this coming Saturday. I’ll be back on January 28, full speed though.
Q. I’m getting married this year too. Totally stoked! Congratulations, life’s a trip!
A. Thanks and congrats to you too! I can’t believe that I spent 20 years away from home, 15 of ’em in NYC, and came home to my hometown in New Mexico where my dad introduced me to a 4th generation Lincoln County lady and now I’m finally getting married. Life is indeed a trip, I agree.
Q. Cody what did you think of the FB search?
A. I think FB’s new graph search is going to be awesome in a year or two. It’ll take some time for everybody to learn to use it and for FB to tweak it just right, but suddenly the “Like” button at FB is worth, maybe 100X more today than it was yesterday, and marketers will really try to get people to “Like” their stuff from their FB accounts.
Q. Cody, are you bullish on Telecom Equipment stocks this year? I know you owned JNPR, CSCO, ADTN, and CIEN at one time. Any thoughts on jumping back into any of these?
A. I like all four of ’em for now. In this order: JNPR, CIEN, CSCO, ADTN.
Q. Through the OPNET acquisition, Riverbed is the only company that provides customers with the solutions needed to manage and optimize all aspects of both application and network performance in a single portfolio of products, ensuring high performance, very fast problem resolution, and an enhanced end-user experience.” Your thoughts on RVBD now?
A. I’ll add it to the above list of telecom infra companies, as I don’t dislike RVBD these days, and the list is now as follows: JNPR, CIEN, CSCO, RVBD, ADTN.
Q. Why are all semi stocks ripping today?
A. The semi stocks the last few days especially have been killed kilt killed along with the Apple “cut in orders!!” reports. So today Apple bounces and thusly, the semi’s that were kilt in sympathy with it.
Q. Hey Cody, Thank-you for all of your hard work. What are your thoughts on ARM Holdings the stock and the company? ARMH stock has had a big run last year. Can the momentum and earnings continue, or is the valuation just too high now?
A. ARMH is extended near-term and appears to be very expensive. Same as always. I like ARMH and in five to ten years, it could have a $50 billion market cap, up from $18 billion today.
Q. Last week you closed out the remainder of your RIMM puts and wrote: “and I’m worried that the stock could rally into the hype of the actual rolling out of that stupid new OS…I’ll look to re-enter these puts on strength, maybe if the stock gets over, say, $15 or so”RIMM has since rallied strongly on some heavy volume and is now in the 15 or so range, but it feels to me like it could go higher still. Have the prospects for RIMM improved in any significant respect? What are your thoughts now about an entry level price for shorting RIMM again? The next earnings report is not until end of March.
A. Yeah, I got lucky on the timing of both entering those RIMM puts and then subsequently selling tranches the next day after it crashed post-earnings report. That stock has been on fire since I sold the last of those puts. I just don’t think it’s wise to try to game what the market is going to pay for RIMM’s potential for the next few weeks at least. And this big number of app developers will likely get the analysts talking about RIMM being a viable eco-system once again. Patience on the RIMM for now.
Q. Cody, what are you feelings on PCLN? I see that it has nearly recovered to the 670 level after gapping down and then gapping up on earnings.
A. I always tell people that PCLN is a stock I’ve had to ban from my monitor. I just haven’t ever traded it right and I don’t want to bog myself down with stocks that I can’t figure out. Stick with what you know, you know?
Q. With the solar industry due to make some ground, what do you feel about First Solar now that it has doubled since it’s bottom?
A. I life FSLR a lot more now than I did years ago when it was bubbled. Read the new 100 Stocks for the Clean Tech Revolution for more of our FSLR analysis.
Q. Hey Cody, is there audio in this call or just online chat?
A. It’s just a chat online for now. We’re going to do a live video chat when we get our new site launched. Oh yea, everybody, stay tuned, we’re upgrading our systems, layout, theme etc in a few weeks.
Okay folks. Thanks for another great chat session!