Howdy y’all. Saddle up.
Q. What’s your take on the speed and pace of the rise in the 10 year yields? They are pricing in 3% like GDP vs 1.5-2 at best what’s your gut say?
A. GDP at 3% vs 2% vs -1% vs. -2.1% etc is as much about how the government bureaucrats manipulate their data as it is anything meaningful to investors. No idea what the GDP will be reported as…but I do think the speed and pace of the rise in 10 yrs will continue over the next few months regardless.
Q. So you see any ceiling that yield rise will have on our holdings or think that yield competition will have people looking to hi growth names such as those in the portfolio?
A. I don’t think we can try to game any direct or indirect correlation between the Treasury markets and the stock markets for the next few months or year.
Q. However our discussion of higher rates and higher tech stocks stock prices ala 1998-2000 scenario has not changed in your mind is that correct?
A. Correct, I think the stock market bubble will get worse (bigger) before it pops and I think rates are headed higher too.
Q. Then the street and government will just attribute it to the cyclical nature of capital markets and release themselves of any responsibilities.
A. Of course. And when the markets/economy crash again, they’ll give all corporations a tax repatriation holiday and other gimmicks to kick the can down the road again.
Q. I know you don’t like banks, maybe credit unions are more up your sleeve, but if the bubble gets worse / much bigger if rates get to 5 – 7% Would you buy CD’s or what then? I know you will say no what “SAFE” or safer higher yield vehicle would you buy?
A. Won’t know til we get there. I’ll take the pitches and the interest rates and the markets as they come.
Q. And on my (and your) IEF puts ($106, January ’14), we’re doing well. Does your rate-rising instinct say to keep riding this? Would hate to scale out here if you think (as I do) the rate climb will commence again? Or is much of the future rise baked in at this point?
A. I’ve trimmed a little of my IEF puts and haven’t touched them in a while and we’ve got big gains on them now. I do think rates are in a long-term uptrend now and that’s going to last for years, but as you know, we ebb when the markets flow. So it’s a great idea to trim some of the put options and keep the rest.
Q. I am sending one ten ounce silver bar with a friend to a very close friend I have in Brazil as a present. Is there any problems with going through customs or security. Should I have any concerns at all, besides the usual thieves and scoundrels?
A. Wow, great question, and I have no idea. I know that it was always VERY hard for my Venezuelan and Baltic State friends to get silver/money/cash/gold/jewelry etc back and forth when they immigrated to the US. Let us know, please, how it goes and what you find out.
Q. I am up to a good level on the metals, but if I decide to add more how much would you pay up on physical silver and gold, just some parameters would be helpful. The upside over the long run seems to dwarf the short term volatility.
A. I wouldn’t pay more than $25-27 per ounce for physical silver or more than $1500 per ounce for physical gold for the next few months. As you guys know, I loaded up on the physical back a few weeks ago at the lows and my own cost basis is about $20-21 per ounce for the silver and about $1350 per ounce for the gold.
Q. What’s the chance of GLD reaching 135 by next month? Is it time to take the losses, or wait? I have calls for 135 sept.
A. I’d say a 30% chance that the GLD could rally 5% over the next month, which would put it up near $1400.
Q. How’re you feeling about betting with the miners themselves? I recently scaled a bit back on my $29 calls (January ’14), still up by close to 50%. Hold on? Seems like the time frame is long enough to do so.
A. Yeah, I think there’s some great leverage on the upside in the GDX calls that we bought when it was near $22 and which are now hugely profitable. Take a trim, but sticking with ’em.
Q. Here’s a contrarian-contrarian /idea/question — with your optimism on the upside leverage possibilities for GDX puts and its recent slight drop in cost…would this be a time to ADD any? If not that put, anything @ a different strike or further out? Or is that overloading too much on one idea/hope?
A. The answer to that one is that yes, I think GDX is still got some game into year end. Depends on your risk tolerance.
OK — but if I did decide to add to GDX because I agree it’s still got some game — what strike and date feels good to you? (Remember, I currently have $29 January ’14 calls.)
I’d go out a little higher…say the $32 Jan calls.
Q. Hi Cody, I have a question regarding your choice of the Sept 45 put in WAGE. Since this is the first expiration (Oct was not trading when you bot this) and they are in the money there is a greater risk of loss if WAGE doesn’t drop almost immediately. Why not choose the Nov 40s?
A. Great question! I probably should have chose the Nov 40s and I might still add them since I’ve just barely got a toehold in the WAGE puts so far. Of course the Nov’s are always more expensive than their corresponding Septembers since they’ve got an extra 60 days to work out. I do think WAGE will likely be a good short both near-term and longer-term. As the Obamacare bubble pops in 2014 or so.
Q. Exactly my question on WAGE. Underlying price/price of put hasn’t moved in the right direction yet, and timeline is close. Apparently no shares available to short. Still recommend Sept puts, or moving out a bit? Is the October price/potential ratio worth it to move out?
A. I’d probably move out to November or as late as they’re offering. But I could see WAGE get hit sooner too.
Q. Addendum to the WAGE move-the-date-out question: there seems to be zeros across the board, no open interest. Comment?
A. Yeah, I’m a bit shocked myself at the lack of interest/trading/volume/excitement around this WAGE given its outsized market cap and straight up stock chart from the last couple years.
Q. As for moving to the Novembers for WAGE- do it at $45 in the money or (how pessimistic are you?) $40 at a major lower cost?
A. Do a little of both, perhaps to spread your risk a tiny bit.
Q. I am not an options person, lack of understanding or never learned enough to trade them . But what about shorting or going long VXX?
A. Yes, nothing wrong with just trading the VXX for a short-term move when I do the VIX options.
Q. What’s your take on the Ichan tweet of AAPL investment ( a separate question in and of itself)? Is it as simple as someone like him saying hey Guys apple growing 15-20% a year and a PE ex cash of single digits is beyond silly for people to then pay up to get its PE less in line with kleenex tissues and more in line with a growth tech stock?
A. Well, valuations are always relative — one man’s cheap is another man’s outrageously expensive. So while AAPL’s down big, having someone like Icahn come in can sure change the underlying and overriding sentiment around the stock.
Q. follow up on the AAPL question. Do you think valuations are hi at this point? and PE ex cash of 8-10 is more in line with what should be vs a tech 10-20% grower should be have a PE near 1.5 – 2x growth ?
A. I think valuations in general are “high” for sure right now. The market is not cheap like it was back in 2009 and 2010. AAPL isn’t expensive though at those metrics you cite.
Q. Can you comment on your thoughts on CIEN earnings on Monday? The stock has been declining steadily for some time and I would like to reload but before I do would love your thoughts on the forces that might affect this quarter’s earnings one way or another. Is this just a high beta stock that is dropping with the overall market or something else? I remember a few weeks ago you posted that you didn’t recommend loading up on CIEN at that point…
A. I expect strong numbers and guidance from CIEN along the same lines as most of its brethren like FNSR et al from the last round of reports. The market’s got high expectations heading into the call too though, so I won’t change my positioning on it until after the report since I’m already established in a decent common position in CIEN. Here’s another report with strong signs for CIEN just this morning: “ADI reports earnings – mgmt. calls out communications as an area of strength (a theme we have seen from a bunch of other tech companies over the last few months); industrials revs very slightly below expectations – ‘Order rates improved across all of our end markets during the third quarter, and we saw the strongest sequential revenue growth from products used in communications infrastructure applications… ‘”
Q. If FSLR hold here 37-38 handle will you add more after its fall from 56?
A. Yes probably. I am liking the way FSLR is setting up here.
Q. Cody, are you concerned about AMZN losing its competitive advantage after having to collect sales tax in several states now? I’m asking this because of the study in the WSJ that showed that some brick/mortar stores were just as competitive with AMZN on certain items. THANX
A. Amazon’s got the cloud business, the video business, the Kindle business and that whole retail outlet business. I think it’ll be fine over the next ten years. Pretty expensive right now tho.
Q. Cody, what are general thoughts on Google from today’s levels to the end of the year?
A. Ooh, tough. Google glass and Android and revenues all need to show growth for GOOG to get to $1000 by year end. Could flounder for while to consolidate its huge gains this year.
Q. Do you think that NVDA is a sell now? The reason that I ask is that Intel seems to be going mobile, or at least the press is saying that it is going mobile in a big way.
A. I think NVDA’s new businesses of creating platforms for other game/device makers could be a potential great big winner for the company regardless of INTC getting some traction in wireless.
Q. Cody – Are you thinking of buying some CREE 2014 calls in the near future?
A. Yes, I’m considering some CREE calls. Will let you guys know if and when I do buy some.
Q. Barnes & Noble. Happily, even with some trimming a few weeks ago, I still have $18 January puts that have performed wonderfully with their recent disastrous ER. I know the best moves are the hardest to make sometimes, but am I right in thinking I should stay just as short as I am because there’s more bad news to come — and thus I don’t want to trim?
A. I’d suggest making the hard trade. You’ve nailed this one. Maybe keep half or so of them, but a trade is a trade is a trade…don’t let it mess with your head just cuz you nailed it so nicely. 🙂
Curses on you, Cody Willard! Alright, damnit.
Ouch, man. That’s what I get for trying to help? 🙂
No — I redeemed you in the second sentence.
Q. Wait for a better entry on JNPR or go for it. Been in and out a couple times?
A. I always suggest doing a little bit of scaling and tranche buying.
Q. Do you like Micron?
A. Yes, I liked it lower, but I’d rather be a buyer in the single digits again some day.
Q. Thanks for the options warning. I plan to get my feet wet slowly. I asked about intc because the call prices look good to me if the market likes what it hears from intc in September.
A. Yes, the extremely cheap premium for time and volatility in the prices for the INTC options is very attractive.
Q. I’m currently using Merill Edge, any recommendation on other online trading platforms?
A. I’ve used most online trading platforms over the years and there’s not enough difference between most of them to make it worth your time to change.
Q. Hi Cody, Last week you promised a complete article explaining VIX trading, I think you said for the next day. Did I miss it? Are you still planning to do that? It would be appreciated. Thanks as always.
A. I did promise and you didn’t miss it. I just ran out of time. Will get one put together for you asap.
Q. Hi Cody. How’s the rest of the Ten Potential 10-Baggers book going? On your June 25th post with a teaser of the three 3D Printing companies, you said it was coming out “next week”. Looking forward to it.
A. I was hoping to publish the book on a market crash and the markets have been going straight up since June…til recently. I’m 90% done with 10-bagger book, so I think you can expect it in the next few days. I can’t wait on it any longer.
Okie dokie rollie pollies. Thanks for another great session. Bill has his work cut out for him cleaning this transcript up, huh? Ha.
Peace — and proceed curse-free. For now.