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 email@example.com.
Q. Hi Cody, with sequestration looming on the horizon it seems likely that there may be a renewed end of the world fear and panic attack. Do you have any thoughts or suggestions on a way to profit other than to have a large cash position and a suitable buy list?
A. As the latest Republican/Democrat Regime fake chess match over the ridiculously fake budget numbers they cite, we are indeed likely to see the mainstream media start to hype up any pullback in the markets as being caused by that faked-ness. So yeah, we should be prepared for that and I think the safest way to approach it is exactly as you said — Have a large cash balance ready to work on the next panic attack. For the more aggressive out there, you can look at buying some puts on the SPY or QQQQ or XLF or something like that, but trying to game short-term fluctuations in the market is a very tough way to try to make a living for anybody over the long-term so, I’d mainly suggest staying flexible, objective, and liquid rather than trying to profit on the next panic.
Q. Cody: you had said last week that at times the portfolio can under perform for weeks if not months. Is that not a clear signs the individual stocks are not working and we need to look elsewhere for some performance especially in light of a market up 7-8% ? If the market corrects the under performers will further under perform. What’s your take?
A. Any portfolio can and will underperform for random short-term stretches over the long-term. As for chasing momentum or the flavor-of-the-day last week — I don’t think that is a good idea for anybody over the long-term. We buy ahead of the curve and sell when there’s euphoria and we buy when there’s panic and we trim on rallies. We wait for the right pitches and always remember that patience and not trading sometimes is one of the keys to continued long-term huge outperformance.
Q. I’ve only been here 9 months or so, so I rarely put opinions out there, but I think there is a ‘Cody Indicator’ –if his stocks aren’t doing well, I consider that a serious buy signal, and if they’re rocketing up and he’s saying to trim them. I do sell some. It has worked well so far, although like I said, I’m a newbie. I’m not trying to kiss up, just sayin’..
A. Yes, other subscribers and I have long noticed that there’s a contrarian indicator in the Cody-Love-O-Meter and in the Cody-Hate-O-Meter. Not sure we got enough of either right now to be a guide for us in the near-term though! Ha.
Q. Cody, what are the factors you consider when you decide between options versus common?
A. Several factors, including: 1) My time horizon for the trade. I need the expiration date of any option play to be after the time horizon plays out. 2) The premium in the option pricing. You can look at some of the traditional ways of measuring what the cost of the option should be at your broker’s website, but I almost always just use my own instinct and experience when pricing an option. If I think it’s cheap enough and gets me a lot of leveraged upside with limited downside, I’ll pull the trigger. If I think the premium in the option is too much, I’ll stay disciplined and stick with the common stock. 3) The overall exposure of option vs. stock in the overall portfolio. If I’ve got a lot of options on the books already then I’ll be less likely to load up on more options in any particular trade because I don’t want my overall portfolio to be overly exposed to options vs. stocks.
Q. Hey, Mr. Newlywed! Instead of buying physical gold for those of us who have a problem storing it, do you think the Sprott PHYS ETF and the Canadian CEF ETF, both of which are supposed to actually store physical gold, would be almost as good? My understanding is that other funds, such as GLD, do not actually hold gold, just “receipts” to pay you back in gold, which has been called into question by some. at least, that’s my understanding of all of the above, feel free to disabuse me if I’ve got any of it wrong, by the way. thank you.
A. You’re not really wrong about anything you wrote, but after seeing the horrible fraud and theft and lack of contract enforcement at the big banks over the last few years, I really don’t think there’s anything to stop them from plundering/overselling/claiming “it was just the system that was broken, we didn’t know that the gold ETFs were actually all worthless”. Even if those ETFs say they are holding gold in your name when you own their ETF today, I don’t think they hold nearly enough to cover all the claims that they’ve sold to that gold if and when they are claimed. I don’t trust the banks or Wall Street as far as I can kick ’em. And I kick both the banks and Wall Street every chance I get.
Q. What are your thoughts on using Sprott Physical Gold (PHYS) as a proxy for owning gold outright?
A. I answered that same question above — You’re not really wrong about anything you wrote, but after seeing the horrible fraud and theft and lack of contract enforcement at the big banks over the last few years, I really don’t think there’s anything to stop them from plundering/overselling/claiming “it was just the system that was broken, we didn’t know that the gold ETFs were actually all worthless”. Even if those ETFs say they are holding gold in your name when you own their ETF today, I don’t think they hold nearly enough to cover all the claims that they’ve sold to that gold if and when they are claimed. I don’t trust the banks or Wall Street as far as I can kick ’em. And I kick both the banks and Wall Street every chance I get.
Q. Never chase- that was not my point- Either way Whats your take on buying gold ETF the GLD down 2.7% today vs physical yellow metal down today 41 an ounce to $1563
A. I think over the next five years that the Gold ETFs are doomed. I don’t know that it’s starting today, but these gold ETFs aren’t real, IMHO.
Q. Hi Cody, while I agree with you that AAPL has better eco-system in the US, it has no significant lead in EURO or emerging markets such as China, which makes it vulnerable to Samsung’s attack outside of US. Also, the slowing of high end market and growth in the emerging markets will force AAPL to go low end, which will grow revenue at the expense of margin. Even for the high end, AAPL needs to have real innovation to maintain its lead, not just refresh. Otherwise, Samsung or Google Nexus will definitely cut into high end. My question is how far the increase of cash distribution to the share holders can push the stock price, without significant innovation?
A. I expect a lot more from Apple’s management of the business than you do, and I don’t think margins will be hurt by a lower-priced, lower-featured iPhone. To answer your question, I would think that Apple could go up temporarily maybe even $100 more or so if the market gets excited about a cash distribution there. But I don’t own it or care to try to game the cash distribution. I think Apple’s got more growth ahead anyway.
Q. Cody, now that BIDU has pulled back, do you still recommend it? Do you see this as a slow grower or something that should regain it’s legs sooner rather than later?
A. Glad we trimmed that BIDU before that report. The stock’s partly reflecting worries about the Chinese economy in general, and it’s a small position for me right now and I am working hard on deciding what do with it next. Stay tuned, but for now I’m just holding some common as a steady-as-she-goes position.
Q. Do you think that INTC has any future? I am trying to decide whether to dump it at a loss or hold it until it figures out how to gain market share.
A. I do thin INTC has a future, but they have to execute and deliver on some mobile technology that doesn’t just compete, but takes smartphones and tablets to a whole new paradigm. With the 4% yield and the cash flow that the ongoing but dying PC business generates, I’d rather be long than short INTC when its near $20 a share. Hope that helps.
Q. Cody, what do you think about adding to FF or LNN at the present levels?
A. I like both FF and LNN at current levels for the long-term. No idea what their next 10% move’s direction will be though.
Q. Cody, what do you think of BITCOIN? (I’m ready for the hisses and catcalls). Have you heard of it? There is a small chance it will one day turn into a viable currency. To that effect I bought $5,000 worth about a year ago. If that happens, that $5,000, now $7,000 will be worth a heck of a lot more. But if it doesn’t it will go to zero. The thesis goes well with your anti- Fed manipulation and currency devaluation ideas. Do you think the currency will grow and continue to appreciate? Thanks. And Congrats on the wedding!
A. I do think that there is a big future in private currencies, and I want to someday be a driver in that business. But I don’t think BITCOIN will be the answer if for no other reason that it’s too early and that it’ll be a big target if and when the government decides to crack down on competing currencies.
All rightie then. Thanks and see y’all around!
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