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.
Let’s rock n roll!
Q. You say, “Let’s worry while the rest of the world is complacent. I expect such contrarianism and Flipping It will work out to be the right tactic here once again.” So what kind of actions are you taking or contemplating?
A. Over the last couple weeks I’ve sold down my longs and my calls and have bought puts and just raised more cash overall. I could very well be wrong about the near-term path of least resistance for the stock market being down.
Q. Cody, what percent cash are you in right now?
A. That’s always impossible to answer. Because I have some cash in the bank and I have cash on the sidelines in the stock portfolios and I make cash flow with all my businesses that I run. I probably have more than twice as much cash now ready to deploy than I did six months ago. If you’re old and conservative and retired, then that cash amount should be even higher. And if you’re 22 and learning to trade with a tiny part of that huge nut that you inherited from your Great Uncle Buster, then you would probably want to be even more aggressive and have less cash than I do most of the time. So many factors come into successful portfolio and money management that I don’t ever like to mislead my readers with “% allocations”. I can refer you to a trusted money manager who can help you if you’d like. That goes for the rest of you too. Let me know if you want me to refer you to someone trusted to help you allocate and manage your finances. Doesn’t mean they’ll make all the right decisions for you and you’ll still have to be the final arbiter of your money, but a trusted resource can help.
Thanks Cody, that answer was better than a simple percentage allocation and helps since you are pretty spot on since I am close to the description of the 22 year old!
I’m thinking about starting Monsieur Cody’s Tarot Reading. You could be my first call in. I can tell you more about your future if you start by telling me what you had for breakfast. Madame Crawfish’s Tarot Reading: Chelsea
Q. If/when you turn outright bearish on the market could you comment on your recommendation in a 401K portfolio where I have far less control (I.e. I cannot buy individual stocks nor short stocks, I can only go long in stock/bond funds or place in a .25% money market fund).
A. That is a tough question. I used to get all kinds of shocking gasps on my TV show when I would tell people that I didn’t have nor want any tax-deferred retirement account. Fast forward to this week and I’ve heard more than one alarmed pundit on TV worry if the government will someday come for their retirement account. Frankly, I don’t think a US confiscation of bank and retirement accounts is coming anytime soon, but over the next twenty years, I sure wouldn’t want much of my money tied up in such accounts. As for how to trade your own 401k “if/when I turn outright bearish”, I just wouldn’t. Sell down most of your positions when you get outright bearish and let it ride in that money market fund, is my only advice for the funds the government is controlling for you in that tax-deferred account inside of a major brokerage firm which has trillions of dollars in derivative exposure and supposedly won’t touch your tax-deferred capital. It’s nothing to panic over anytime soon, but over the next five to ten years, I sure would be careful about how much of your money in trapped in IRAs and 401ks.
Q. Hey C.W., do you think it’s still a good time to add to VIX/VXX? Thanks.
A. I think it still makes a good hedge to the overall portfolio’s net long positioning. If Cyprus blows up the EU or declares bankruptcy of something else we don’t expect happens, the VIX/VXX will likely spike in a hurry as stocks gyrate and/or fall.
Q. I got puts on GS & MS, yet it seems like these big banking money culprits walk on water and will not be called on their ….lying, cheating, stealing..I guess this is part of the “fog of war” unintended consequences….I am worried that it will be like the Bank of NY waiting game. Any comments appreciated now!
A. You totally nailed that analysis. I don’t know how these lying cheating stealing giant banks keep avoiding paying for their LIBOR/foreclosure/balance-sheet/shareholder/SEC/etc frauds. I sure think something like a melt-down in Cyprus could spiral into counterparty losses and capital demands and all kinds of nightmares in the thousand-trillion-dollar derivative markets that these guys are playing in.
Q. Which gold bullion is the best investment on a liquidity/value axis? 1 oz eagles?
A. “bullion” means the gold isn’t coined yet. But to your point, I think gold coins are probably the most liquid way to store your money in gold.
Booo-yan! you got me there. Might have been a Freudian slip since I can’t afford a whole bar! 🙂
That’s funny. Man, I used to hate when I’d get home from anchoring an episode of Happy Hour on Fox Business and then get emails from viewers picking apart little mistakes and mis-spokes from that real-time, live show. Live Chat is sorta the same!
Q. What do you think of Freeport McMoran right now?
A. I think I’d much rather own any kind of actual physical gold coinage, bars, nuggets, dust, shavings, etc than own the actual miners as they have all kinds of exposure to those very same paper-hedges/ETFs that I think are going to blow up some day.
Q. I’ve yet to get down and make a gold purchase. What price is a good entry point and when would it become too high and would you expect a better entry point going forward.
A. As a general hedge for the portfolio against inflation, bank deposit confiscation, and economic destruction, I think anywhere below $2000 (or say under $1800 for the near-term) is a decent first tranche entry point. I don’t know when a better entry point will be coming as I think physical gold is likely long-term bottoming around $1500-1600.
Q. Update on ZAGG? Thanks!
A. My best source on ZAGG wrote me this in an email this week: “Stock is stupid cheap at 3x’s ebitda with 20%+ revenue growth. But I guess sellers bet on fact that most peripheral/accessory businesses ultimately get commoditized by China knockoffs. Since the stock can double from here and still be cheap, I am gonna hold this investment position through 2013 and see if I can make some dough. Company management on road this qtr telling story and Q1 co generated $25 million cash or more from balance sheet. They pay down good chunk of debt and buy $10 million shares. So support should be in here with these fundamentals.”
Q. With all the talk about hedge fund trades of long google and short apple now that apple is starting to recover is it wise to continue with the google calls.
A. Probably not. I’m probably going to sell the last of my GOOG calls for a huge gain and just ride the common out for now.
Q. Do you see Apple making some sort of Div/buyback announcement any day? Think it will cause be a near-term in stock before earnings? I am worried about a repeat of last earnings and a steep drop in price (you planning to hedge your calls/common if we do get a run up before earnings)? Usually when Cook speaks, stock drops.
A. It’s true that Cook’s star has fallen and whenever he speaks the market seems to sell Apple. Then again, the market has sold Apple for just about any reason at all for the last year. I don’t think the market is going to reward AAPL the stock price long term because of anything the company does with their huge cash pile. It will go up if they can keep growing earnings over the next couple years at least.
Q. Comments on FB – is FB getting hated enough to consider another buy at this level?
A. I think FB could flounder til the next earnings report. We need to see them move the bar materially higher and make the analysts scramble to change their models. If just another “good” quarter, the stock could stay between $25 and $30 for a while longer. A quarter that misses and causes analysts to lower estimates in their models would make the stock drop to or below $20 again. In three to five years, as long as the world’s economies don’t implode, I think FB is closer to $100 a share.
Q. Hi Cody. Any thoughts on DDD?
The stock is down HUGE in the last three months but so is SSYS and I even like the new 3-D printing IPO play XONE better than DDD, though it’s just come public and I’m not entirely comfy with it yet.
Q. Hi Cody. Follow up question on 3D Printing company XONE. I have been hoping to hear something on this company from you. Are you doing more due diligence on this one or “back burnering it” for awhile?
A. I am indeed working on it. I want to speak to management and get to know the company better first before buying it though.
Q. Update on DG (earnings in a few days – acting strong)and DLTR please; Would you short more if they move up from here?
A. I still like the DLTR short more than the DG short. I recently went to a bunch of different dollar stores to do some anecdotal research on these shorts and DG is moving up the economic food chain quickly here. DG is Target to DLTR being Wal-Mart in their approach. Both are still overbuilding badly though and I think the cycle for them is topped.
Q. You said your were looking for more info on WAGE earlier today (wish i could help). If what you find leads you to recommend going short WAGE, do you think if I were only short one position, this might be a better play than shorting say MS or JPM?
A. I don’t think it’s wise to short just one stock when you short something. Too much concentrated risk.
All rightie people, that concludes another episode of Cody Kiss & Tell. See y’all back here next week! Kangaroo & Dog Make Out
