All right, let’s rock n roll
Q. Hi Cody, the market is definitely extended in short term. I was curious about your assessment of the current bubble. When it bursts in late 2014 or 2015, how big an impact it will have on the market? On the same scale as crisis we had in the past 5 years?
A. Great question. Some of the outcome from the popping of this bubble, when it does come — and it will –, will be the result of policy and reaction to the crisis. There are some never-before-seen misallocation of resources and redistribution of wealth upwards to banks and giant corporations and ultra-wealthy people being pushed through by the Republican/Democrat Regime right now and when that unwinds, it will be very painful. The widening wealth gap in this country via the upward wealth redistribution policies will be, frankly, the scariest part of the bubble pop. Most people are fine with rich people and successful corporations who earn their wealth in the free markets. Nobody is cool with oligarchs and bankers and powerful corporations plundering the nation’s wealth. And that’s what we are living in today, and you see those hungry kids at Circle K eating a day-old sausage dog and drinking from their mom’s giant soda, and you have to wonder just how pissed they are going to be when they grow up in a United States nation that has a privileged class protected by the government that they’re paying for. Revolutions happen in third world countries with government-sanctioned wealth gaps. That describes our country under the Republican/Democrat Regime rulers. Then again, can we ever get back to freedom and the Constitution and free markets without a revolution when the powers are this entrenched? No easy answers for the bubble pop resolution.
Q. Cody, are you expecting a ten percent pullback in the Nasdaq?
A. I think the markets have to pullback at some point. But it sure seems like the forces that have been working to blow up this ongoing stock market bubble are all aligned for the time being for yet more higher prices. You have to swing with the pitches the markets are throwing, even when they surprise us with their pitches.
Q. Do you think as many opportunities like you had to invest in AAPL at $7 in 2003 will be as readily available and obvious in the future, or are index funds a better bet due to the slowing growth and innovation in the US?
A. Remember that the Nasdaq was down 80% from its 2000 highs in 2003. Long-time subscribers will remember that I created a basket of stocks that were trading at less than the cash they had on their balance sheets, meaning that the market thought they would destroy value, not create value. Apple was part of that basket and was my biggest play on that less-than-cash theme. In 2008, 2009, the markets were down 60% from their 2007 highs and there were again great stocks trading at less than cash. In 2013, with the markets now up 130% from their highs in 2009, you would be hard pressed to find a decent company trading at less than cash. Index funds are no easy way out either of course. I suggest actively monitoring and maintaining your portfolio using helpful, trustworthy resources like TradingWithCody.com and working hard to make it successful over the next 10,000 days.
Q. Why does it seem that the markets tank whenever we have a big treasury auction? I can rationalize that in a variety of ways, but I’m curious as to your opinion Cody. Thanks.
A. I don’t think I’d noticed or heard much about the markets tanking at same time as big Treasury auctions. Do you have some verification that there is some correlation or causation of such a repeating pattern?
Today for example, we were pulling back and did a 180 pretty much when the bond auction was over. I haven’t done a study per se, but I have noticed that pullback days tend to correlate with 10 and 30 year bond auctions. I’ve always thought “they” tank the markets to scare people into buying the bonds we need to keep our government going. There’s probably a simpler explanation.
I’d be curious to see if you can quantify and confirm that stocks sell off intraday during Treasury auctions. If your homework says its got statistical significance, you might have a trading system there to use with a little bit of your capital. Day trading like that isn’t usually my style tho.
Q. Apple’s had quite a run. Time to trim?
A. I still think AAPL can head closer to $500 a share before the weakhanded shareholders start puking it because it’s close to their cost basis. On the other hand, you know I always preach taking a little off the table after a big run. So since you asked, it’s probably an indication that you’re overexposed to AAPL for now and you probably should look at trimming some down.
Q. I had a large position in AAPL in the 600s on margin last fall. Seekingalpha and marketwatch articles all suggested AAPL was ready for a bounce back to the 600s once the end of year selling due to tax concerns ended. What happened, was it more the corrupt institutions and speculators or retail investors who brought the stock to the 500-300s?
A. I don’t think it was corrupt institutions that kept AAPL from getting back to $600 last year. There are thousands of investors and traders, both professional and retail, who loaded up on AAPL after it fell back from $700 into the low $600s and then on into the mid $500s. The stock is only worth what someone else is willing to pay for it on the day you go to sell it, and there just weren’t any buyers willing to step in and load up on AAPL on size when it got caught in that downdraft. So the technical guys, the bears, and the short sellers out there were all either shortselling more or staying out of the way as it fell to the $400s. And all those retail and professional investors/traders who were long AAPL from $600 or $550 couldn’t find any one to sell their shares too at the price they’d paid. So they start puking it too. Until the cycle stops and now we can get back to seeing AAPL likely trading based upon fundamental growth and valuation.
Q. I’m sitting son some FB June 30 calls, and GLD May calls. Time to cut and run on these? FB seems to be scraping support, and GLD has stalled.
A. That’s trying to cut it awfully close with those near-term options. I do think FB can run to $40 if the markets stay strong and I think GLD is headed over $150, but I don’t know your strike prices and if they are still out of the money at that level, it’ll be a risky hold into the summer expirations.
Q. What’s your take on the FB decline since that one day POP after earnings to 29.25 Its back below its earnings hitting 26.65 today. Isn’t it a better buy now after this fast 9% decline?
A. I trimmed some FB after that earnings pop, because I’d bought some before earnings. If the markets stay strong, FB is likely to play catch up and run to $40, and if that’s the case, it’s a good buy now at $26. That said, you know I’m less bullish right now than I have been for the last few years and I’m not looking to add much to my own FB for now.
Q. I have a FSLR question. I luckily sold it all when you recommended we trim, really just to free up some cash, so now down 9% or so, should we pick it back up? I heard the end of 2013 is supposed to be better for them.
A. I like FSLR after its sell off more than I did when I was trimming it at those recent highs. And yes, I think FSLR could go much higher over the course of this year and next. But I do think the company will need to show continued steady strong growth and earnings power to keep the momentum going. I’m worried that the FSLR might be a little bit crowded here right now. So I’ll be patient before buying any of the shares I sold higher back.
Q. Is this starting to look like a good time to pick up a play like HDGE? I heard one of the guys who runs that (John Delvecchio), and despite the DISMAL performance since it’s inception, eventually those fellas are going to be right, and I think the clock is in their favor now… could be a cheap entry in the 15-16 range.
A. Hmm, I’ve never looked at HDGE before. “The investment seeks capital appreciation through short sales of domestically traded equity securities. The Sub-Advisor seeks to achieve the fund’s investment objective by short selling a portfolio of liquid mid- and large-cap U.S. exchange-traded equity securities, ETFs registered pursuant to the 1940 Act, ETNs and other ETPs. The Sub-Advisor implements a bottom-up, fundamental, research driven security selection process that seeks to identify securities with low earnings quality or aggressive accounting that may tend to mask operational deterioration and bolster the reported earnings per share over a short time period.” I’d rather pick my own stocks to short using my own homework, analysis and brain and find some APOL or AONE type shorts that we nailed. HDGE looks like it will be a poor-performing reverse correlated market play. No thanks. I think that HDGE won’t be trading in five years.
Q. The water problems out your way are continuing to get worse every year. Is LNN likely to benefit from this?
A. Yes, I think LNN is a great play on the long-term need for more water access throughout the world. And man, does New Mexico need some rain, rain, rain. My 95-year old grandfather-in-law who has lived in Lincoln County his whole life told me this weekend that he’s never seen it this dry this time of year and he said he said that last year for the first time ever too. And this year is worse.
Q. Sorry, lots of questions today. Next one – I thought regulators were finally going to show JPM a thing or two, and maybe they are, but the stock has gone up since the recent headlines!>? What’s up with that? I’m short JPM, should I cut and run?
A. The whole market is bubblicious right now, and when the stock markets are like that, the big banks usually participate. I remain short a small position in JPM and will someday look to add to it. Depends on your risk tolerance, but I’m sticking with it, because the company’s cockroaches are scrambling in good times like this. Imagine how many bugs you’ll see crawl out of that place when the markets tank next time.
Q. I’m interested in getting back into FF. After a solid report, where do you see it going from here? Would you advise getting in now or wait for the next pullback?
A. FF reported a decent quarter last night, with great topline growth. In a small company that’s growing fast like FF is, I care more about the topline growth than the bottom line reported earnings. That said, there was too much tax-subsidy (ie, welfare) recognition in the earnings and that makes me sick to my stomach that this company needs welfare to sustain its valuation. That said, FF is paying a nice dividend here and I do think their industry of biofuel is going to be big in ten years, so I’m sticking with FF for now. I always suggest starting to scale into a stock you want to buy and then use weakness to add to it over time.
Q. No real problems with AMZN after the tax bill passed the Senate (or the house can’t remember). Any concerns there? I don’t imagine there would be, it’s still easier to pay the same price as retail stores and have it delivered instead of spending gas and time to go get it.
A. I agree with you that the online tax issue is a distraction. AMZN should pay the same damn rate of taxes that TradingWithCody.com pays. AAPL, GE, JPM and every other corporation should have to pay my tax rate too (and the aforementioned welfare-dependent FutureFuel too!). Anyway, I’m sticking with AMZN no matter what happens with the Internet tax bill.
PS – I definitely like this chat version better. The chat room has been a sore spot of the website re-do, but you obviously know that bsaed on your actions to fix it.
Q. Any thoughts on TSLA ? love to hear your perspective.
A. TSLA’s entire business model depends on continued welfare for people rich enough to buy new electric cars. I want to short TSLA so bad I can taste it, as that company will crash when their subsidies run out. Then again, those welfare checks for rich environmentalists in new cars are in no risk of running out any time soon. Tesla’s probably going higher in the mean time.
Thanks Cody, I have been waiting for the TSLA entry point and just don’t where it is either. But, there is a short play at some point in future!
Okay folks, thanks for all the great questions and insights again today. Don’t forget that I give TradingWithCody.com away to all active military people, as I know they are often the ones targeted for money scams. I have no magic sauce, but I work my butt off and my subscribers know they are getting an objective, no-holds-barred analysis and money management approach. If you know a soldier who could use TradingWithCody.com, tell him to email us at email@example.com and we’ll get ’em set up.