Here is 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. Do you think that this drop in the market is anticipating rate hikes, and Employee data views for tomorrow? Would you buy now your preferred names or expect the market reaction tomorrow?
A. I don’t think most traders actually sit around waiting for economic data from the Republican/Democrat Regime or their cronies. I get so mad when I hear reporters on TV explain how a billion shares of stocks changed hands in the last 6.5 hours amongst millions of traders in a 0.2% intraday swing by some obscure quote from a Federal Reserve lackey somewhere in a speech in Oslo. I have no idea what the government’s manipulated economic data will report tomorrow or why anybody cares. I think we should continue to focus on buying strength and selling pops as we continue to invest in great revolutionary companies and to short the welfare companies.
Q. Hey Cody, are there any ideas about wearable computing that look compelling? Assuming that several of the big boys have products in the works and wondering how to best get ahead of the curve before these products start hitting the market later this year.
A. I’m working hard on these wearable computing trades. The problem is that I’m not sure there’s any new players in the wearable computing revolution. Broadcom, Qualcomm, Apple, Google, are the dominant players so far and Ciena and Juniper as trickle down players. I’m definitely trying to find some new names that will be positioned for the wearable computing revolution, but they are far and few between for now. Stay tuned for wearable computing-related companies coming public in the next couple years and we’ll get in front of those before everybody else if we can.
Q. I have a Vanguard S&P ETF. Is it time to get rid of it or do you expect lots of bouncing around in the next few months. I have a lot of my portfolio invested in it – about 50% in fact.
A. I don’t know what to tell you about your own S&P ETF weighting. But I can tell you that I think the time to be that aggressive in the S&P 500 was back in 2010 and 2011 when prices were much lower. I do think we’ve got more upside to come in the broader markets in the next year or so, but that’s not a simple trade to risk 50% of your portfolio on, IMHO. Good luck.
Believe it or not, I was invested in it for stability. Now it is the opposite. You have a very good point-thank you for your observation.
Q. Hi Cody, how much do you think the treasury bubble popping and will affect mortgage rates going forward?
A. I think mortgage rates will roughly follow Treasury rates higher in coming quarters and years. Note that rates on the 30 year mortgage just hit levels that they haven’t seen in two years as Treasuries have been selling off of late. That said, I think focusing on rates is not a good indicator for future real estate prices. Real estate prices can go up even if rates are rising and real estate prices can crash even though rates are dropping (as we saw from 2007-2011).
Q. Cody, could you give a ratio of your physical gold/silver position is relative to your total stock positions?
A. Remember that I make a lot of money from my businesses and that I am not limited to the assets in the stock portfolio or my real estate or physical gold and bullion. My gold/silver position is probably less than 5-10% of the overall value of the stock portfolio right now and I plan on building that up both as a percentage or the portfolio and with continued income from my businesses.
Q. Cody, what types of silver bullions or coins did you buy? And how much overhead is reasonable to pay?
A. I’ve bought some of several different versions of gold and silver coins. I don’t think it matters much which kind of gold bullion/coins you’re buying. They all will mostly reflect the price of the gold inside of them over time anyway. Don’t pay more than 5% or so over “spot” price for gold. Right now you do have to pay nearly 20% over “spot” price for silver but I don’t know ANYWHERE that you can actually buy an ounce of physical silver for the $22 that the SLV ETF and spot price says it should be trading at.
Q. Which specific tech stocks would be good to buy on this dip and hold for long-term, no trimming for a year or more, so I can the lower capital gains tax rate?
A. FB, INTC, JNPR, CIEN, and ZNGA to name a few.
Q. What stock do you prefer to add right now?
A. I hate to pick just ONE stock, but feet to fire, I’d probably pick INTC as the single most attractive/safe/upside stock right here right now.
Q. Hi, Cody: in your review of your short positions the other day, in discussing intel, you mentioned the fact that “now AMD is trying to avoid bankruptcy.” I’m unfamiliar with their short situation . . . but (a) do you truly think they’re close to bankruptcy, and what are their prospects and (b) if you can assess this, should we be watching them for a big bankruptcy/short play? Thanks.
A. Read these: “AMD sells its Austin HQ for $164 million to raise some quick cash … arstechnica.com/…/amd-sells-its-austin-hq-for-164-million-to-rai… by Cyrus Farivar – in 1,017 Google+ circles Mar 12, 2013 – After really rough 2012, chipmaker faces ever-increasing challenges.” AND “AMD throws 15% of its workforce off the sinking ship | ExtremeTech › Computing by Paul Lilly – in 447 Google+ circles AMD throws 15% of its workforce off the sinking ship. By Paul Lilly on October 19, 2012 at 12:46 pm; Comment. AMD headquarters in Sunnyvale, California …” This is a company that’s doing everything it can to stave off bankruptcy. They also have more than twice as much debt as they do cash right now, even after doing all those desperate things to bolster their balance sheet. I don’t often short a <$5 stock, but if I did, I would think AMD was a prime candidate.
Q. How is the 10 bagger ebook coming along? Got any ideas for the best potential 10 bagger in the tech sector?
A. Getting started on the 10-bagger book. It’ll take me another money at least. Stay tuned! I’ll leak out some of the names in the book as I decide on them for you guys here at TWC too.
Q. Like your Freudian slip in your answer to the question above! Also, with what you’ve just told me about AMD, you still haven’t taken the step to short it. Just too speculative? And do you know their level of shorting — is it a possible candidate for “the move” if they DO announce the big “B”?
A. “It’ll take me another money at least.” Ha! That is a freudian slip of some sort. I think AMD at $3 is just too risky as a short, but I will think about that some more. Yes, if AMD goes bankrupt, it will probably make a great short-term long side trade. But not before that!
Thanks.
Q. I added AAPL today. Technicals are bad. What do you think?
A. Man, the technicals in AAPL can’t get any worse, can they? The chart is ugly, the sentiment around the stock continues to crater and the stock seems doomed at trade at single digit P/E levels forever. I still think that if Apple rolls out some new wearable computing and iWatch-type devices this year and next that they will be able to earn $70 a share in 2014 and that would put the stock back up above $700 sometime next year. But in the meantime, the stock is just a punk in a bad Ashton Kushner MTV show.
Q. What percentage of your VIX calls do you still have left after today’s trim?
A. I’ve got about 20% of my original VIX calls left. I paid $1.50 or so for each of them and today’s batch sold for more than double that cost basis. The VIX chart is straight up for the last month and I want to scale out and take these profits while the panic is rising.
Q. What’s your thoughts on Salesforce.com? With their recent exata purchase they seem to be getting into the social aspect of CRM as well.
A. Salesforce.com is a brilliant company and has managed their growth well so far. That said, they are trading at 5x sales and 60x next year’s earnings. I don’t think the company can grow into that valuation for at least another five years and even then what’s to say the stock won’t be trading at a more reasonable 1x sales and 15x earnings. That would mean the company would have to grow revenues 500% and earnings would have to grow nearly 10-fold just to keep CRM at this level. I would rather be short than long CRM simply because of that valuation. Do you realize that CRM is STILL valued at 2x TSLA even after TSLA’s huge run this year?
Q. Cody any opinion on VRNG thanks
A. Back in August of last year, I told everybody here that VRNG was a terrible investment and I still believe that. I think VRNG is headed to less than a buck by the end of 2014. The entire shareholder base is gambling on a favorable court ruling in VRNG’s suit against Google and they will flee if they don’t get some wonderful ruling. And I do not expect they’ll get anything meaningful in the ruling whenever it finally plays out.
Q. FB seems to be despised and earnings or not the near 25% decline in a straight line is ominous. What’s your take?
A. When nobody asks me about FB in the weekly chat, that will probably mark the bottom of this latest downtrend. Then again, if the company doesn’t continue to deliver some nice growth and mobile monetization in the next quarter and next after that, it could end up being a teenager for a while.
Q. Interest in increasing your Juniper position after CIEN earnings?
A.Yes, I want to buy more of both JNPR and CIEN in coming weeks.
Q. Cody, what’s your take on AMZN getting into Grocery business? Didn’t work out so well in the dot.com era, what does AMZN hope to achieve? With AMZN getting into everybody’s business and practically earning nothing on $70B in revenue, why are they a better investment that all the smaller growth stories that actually make money?
A. Amazon’s all about building their critical mass in every industry they can get into. Groceries aren’t a bad idea now that Amazon’s got as much scale as they do. One of these days Amazon’s going to turn on the profit spigot. Look at this “Gross” profit growth at AMZN “Gross Profit 15,122,000 10,789,000 7,643,000.” Won’t take much to make that trickle down to the earning when Bezos finally decides its time.
Q. ZYNGA is downsizing lately. Is this serious, or short-term?
A. ZNGA has nearly $1.50 per share in net cash. At $2.80 a share, the stock is a “never expiring call option” on their long-term business viability. The downsizing is serious, but that’s why we are able to buy the stock at $2.80 a share, down 80% from its IPO price.
Q. Cody, my every-few-weeks-or-so question: has BBRY been “given enough time” yet for us to assess/determine that their new phones will or (I’m thinking) won’t save the company and thus now might be a good time to short it? Need we fear it’ll ever get back to 17 again? I’ve been watching it slowly drip down…but is your thinking that soon if/when the world realizes that they didn’t pull it out, it’ll drop at a quicker pace? Or are you not sure yet that the phones DIDN’T help them?
A. I’ve got no feel for what BBRY will do for the short-term. I do think this time next year that the stock will be back in the single digits.
Q. Cody, Give me a heads-up next time your in the D.C. area. Schedule permitting, I’d be happy to put together a Subscriber Happy Hour at a local restaurant.
A. Darn it, I would have loved another TradingWithCody Summit in DC. You could have met me at the Willard Hotel to crash the Paul Volcker tribute. I’m personally sick of Paul Volcker being praised as some sort of guru or wiseman when he’s just another tool of the big boys who pilfer our currency system.
Q. Cody, didn’t realize you were in town until I saw the post from the Willard. Would be delighted to crash that party wearing my TWC T! What’s the story on LPS and the potential acquisition by Fidelity National Financial?
A. Same folks at Fidelity National who spun LPS out of their company five years ago now say they want to buy it back at about the same price they sold it at? What a joke. We made HUGE money on LPS puts and our LPS short on the way down and smartly locked in those profits while they were good. I plan on rebuilding the LPS short and/or shorting Fidelity National if they do acquire this built-for-fraud (IMHO) company, LPS.
Thanks, and . . . bye. Enjoy the corn. (If there is any in Kansas.)
Okay, folks. That’s another wrap!
