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 email@example.com.
Let’s rock n roll. What’s on your mind?
Q. A little off the tracks here but my biggest financial concern is that I can’t actively manage and/or hedge my 401K investments. Without quitting my job can you point to any info on leveraging in-service distributions in order to better control my fate in this insane world of infinite QE and endless financial corruption?
A. Great question and not off the tracks at all. It’s what we are here to help with. First, I have indeed read most of this page and others on the IRS.gov site over the years. And you’re right that the 401k is lacking in your ability to control your own money. I have long advised against using ANY government-sanctioned, tax-avoidance retirement money scheme, because I don’t think the risk of not having complete control of your own money is worth the temporary tax savings. I do not have a 401k or an IRA and that way I have complete control of my assets rather than some corrupt fiduciary controlling my savings. I fully expect that at some point in the next economic crash that the government/bankers will force all 401k/IRA money into Treasuries or some other asset of their own designation which they will then plunder as usual. That’s not a concern today but over the next decade or so, I’d make sure I’ve taken whatever precautions I can to protect my 401k/IRA and I sure wouldn’t keep contributing to them anymore.
Did I answer your question as best I can?
Made me more nervous.
How long before you can tap the IRA/401k without penalty?
12 years to 62.
Hmm, at least you’re not 22 years away like I would be. I wouldn’t go around freaking out or trying to suddenly pull all my money out of the 401k/IRA but I would certainly work to diversify my assets into non-tax-deferred wealth over the next twelve years. Don’t forget that you’ll actually need to be able to pull that money out and pay taxes on it over the next thirty years or so after 62 anyway. I don’t know if its legal for non-TBTF bankers to own physical gold and silver in their IRA/401ks, but even if it were so right now, the powers-that-be would likely undo that in any major crisis.
Thanks Cody…Looks like I’ll be retiring or resigning early so I can move it to an IRA. That opens up a few more options. I’ll continue to research “in-service distributions” from 401K and report back if I turn up anything useful.
Please do keep us informed. That’s what the TradingWithCody.com community thrives in doing.
Q. Yeah…regarding the 401k that’s a really big condemnation of a vehicle mostly regarded as very positive. Especially when employers are giving away free money matching funds. I suppose you feel the same way about investment grade life insurance that pays tax free annuities later in life…I’m about 20 years out from being able to withdraw without penalty, BTW.
A. Yes, I don’t think giving your freedom up in the name of “tax-deferment” is ever a good idea, especially since I’ve seen these “bail-ins” in Cyprus, at MF Global, and have seen the TBTF banks become too big to prosecute. These crooks have been lying and stealing and getting more brazen about it for the last twenty years — why would we expect any major bank/fiduciary to actually take care of your money, tax-deferred and heavily controlled, when the chips are down next time? Finally, we need to remember that any tax-preferential treatment of any person rich enough to have saved any money at all is countered by higher taxes paid into the system by those poor people. So IRAs/401ks are exactly the type of “wealth redistribution higher” that I proudly and vocally fight against every day.
Q. Cody, you had mentioned the tech echo boom would really get cranking once interest rates start cranking higher themselves and a similar set of actions that took place in min 1998-2000. Is there a link between rising interest rates and rising tech stock prices? Should we key in on if there is one a direct link between interest rates now .25 on avg at MM savings acct and their possible ascent to 4-6% potentially and tech stocks price increasing? do you think rates can get to 4-6% in just 1-2 years? or at this pace based on Bernanke’s words today that it may take longer?
A. History from the last fifty years has shown that the Fed typically starts to act too late when it starts raising rates at the end of an easing cycle and that the bull market/bubble can expand another year or two into the Fed’s change of stance. That said, we are truly in uncharted territory with Endless QE, helicopters dropping cash, currency wars around the globe, sovereignty insolvency, and so on. I can only do my best at playing the odds and setting our portfolios up ahead of time for big moves, and I think we were early on being bullish/long on stocks in 2010-thru-today which means we gently trim/fade this euphoric high but try to have our cake and eat it too by staying net long stocks in this part of the cycle for now.
Q. Cody, are you expecting a correction and how big??
A. Hmm, feet to fire, I’d guess we’ll have a 10% correction in the broader markets maybe after earnings season is over. But the bubble blows bigger as we type.
Q. What’s you take on the reaction to Yahoo today up near 10% on weaker guidance? Bodes well for FB, GOOG, etc? Yesterday the stock was down in A/H 3-5% and today a 13-15% about face.
A. I often look for a pattern in earnings reactions by sector, and the YHOO 15% reversal from last night’s lows to today’s highs, along with a net 10% pop today, is certainly a bullish anecdote for FB and GOOG, especially since the YHOO guidance was, once again, lower than estimates. There’s a lot of negativity in FB but a lot of positivity in GOOG rt now heading into earnings. Both or neither could pop or crash after earnings and playing it right here for the near term isn’t what I’m positioned for. I remain long core holdings in FB and GOOG regardless of what happens in earnings this session.
Agreed yahoo rise does have elements in it for good things to come from FB and GOOG. I know I use FB more and more, gift others shop etc. I do the same with AMZN. Lets see what they report.
Q. Hi Cody, do you have any thoughts on yahoo? I purchased it at 16 when Marissa came on board as I believe they didn’t hire her unless they felt she could attract the right kind of people. My thought is how much further can they really run?
A. Congrats on the YHOO buy at half today’s price. As I’ve pointed out lately, I think YHOO long countered in the $20s with a PCLN short in the $900s, would be a great paired trade and then you cover when their market caps cross (YHOO currently worth $30 billion and PCLN worth $45 billion).
Q. Cody: wonder if you got my questions sent in early (yesterday). Briefly: briefly –(a) AMD earnings are coming up tomorrow. Feet to fire, have a prediction? (I know you’re down on them, and i have October puts, so I’m curious.) (b) JDSU — sent you a “this is the one stock to buy in July positive evaluation from Morley Fool on this, saying it’s been too long neglected and this is the quarter it will jump like its sisters (brothers?) in the category. I trust YOU highly on your evaluation of the category. Might you agree that their time is now, or soon?
A. a) With AMD having doubled in the last 90 days, the company better deliver some upside to earnings, I would guess. I’d rather be short AMD into earnings than long it, but I have no edge on what the market will like or hate in the upcoming report. b) Look at this 3 month stock chart on JDSU vs. FNSR and CIEN. The short story it tells there is exactly what you surmised — if JDSU can deliver any fundamental improvement and show some growth potential here, the stock can pop another 10-20% after the report. That said, these guys have had a horrendous track record of missing estimates and never getting forward estimates low enough to beat, and I’m not sure I’d bet on them to get it right this early in the cycle either. That said, feet to fire, I’d rather be long than short JDSU into the report.
Thanks for both, Cody.
Q. Any thoughts on XLNX or ALTRA for FPGA’s and other wireless technologies that they produce?
A. XLNX is likely taking share from ALTR and margins for both are likely to expand on any increase of sales over the next year or two during this capital spending expansion phase in telecom.
Q. What is your take on Micron and Qualcomm right now? Micron seems to have a lot of upside. QCOM looks like it is a minor funk.
A. Yea, I see the same chart patterns you’re seeing — MU is rocking and QCOM funking. I don’t think I’d chase MU here but I’d rather own INTC than either.
Q. How do u feel about SNDK into earnings tonight?
A. I’d rather be long than short SNDK into the report as every indicator shows that pricing power and demand for flash drive has been stronger than the analysts expected for the last three months.
Q. Hi Cody, what would be your take on NFLX as it gets closer to its 300 level. IMHO, the business model can be easily replicated but the scale and the content is what drives success in this business. With Google and Apple getting in talks with the content provider to strike a deal, will that provides potential downside for NFLX?
A. I like your Revolution Investing analysis and context in your question. The scale of content is key and NFLX has been very early on setting the price for that content on the Internet. Google, Apple, Microsoft, Comcast, AT&T, etc are all looking for a way to play in the Internet Video Revolution by using their balance sheets to crush smaller competitors like Netflix and Hulu. Netflix has done an amazing job of staying ahead of the competition and delivering growth and its become the de facto standard for Hollywood-quality Internet video streaming, as I long ago predicted. To answer your question, I do think there’s headline risk for NFLX getting hit when Apple/Google products roll out, but I do think there’s still a lot of growth in the next decade for NFLX anyway.
Q. Hi Cody, I’m a relative newbie to the TWC team coming over from Revolution. Any value in Glencore as an Interest rate hedge? I can’t decide if Nathanial Rothchild being a major investor is good or bad. Would a decedent of the founding family of banking cabals make it a good play or a reason to avoid it?
A. Thanks for joining our community! Please help guide us to making this the best darn investment and trading service on the Internet. Interesting question about Glencore as a rate hedge. It looks to me that Rothschild’s investment came from convertible debt back in 2000 and I’m not sure how much he owns these days, tho I would guess he’s still a major shareholder. The stock has gone straight down since coming public and is at fresh all-time lows right now, which piques my interest somewhat. But I’ve bought calls on the GDX gold-miners’ ETF, which is all the exposure to gold mining I want right now. I’d rather own a basket of goldminers than a specific one simply to mitigate the management failure/fraud risk of owning one of these miners. Gold will have to rally back closer to $1400-1500 or so in the next few months for GDX and/or GLEN to really take off again.
Q. Cody, back to “precious” metals. I’m aware of your feelings about the value of actual ownership over ETFs, etc., but I’m not prepared yet to buy real stuff. Here’s where I am, and would like your advice on what, if anything, to do right now — with a short-to-mid-term view (as opposed to long, which is what actual ownership would give me): I have GDX January’14 $25 calls (which I’m ahead on) and own some SLV (which I’m behind on). Also, IEF January ’14 $106 puts. Stay, hold, add, trim? (I’m ahead on the IEF puts)
A. I’d hold each for now and I’d recommend following my own personal moves on each in the next few weeks and months.
Ok folks, that was another very insightful edition of our weekly chat.
Thanks for everything and please spread the word about how TradingWithCody.com is helping you become a better investor and trader. We’ll rebate you one month’s fee for every referral you send us. Rock on.