Howdy folks, let’s ride.
Q. We will be GREATLY overbought if we close at these levels as we head into a Show down in DC starting tomorrow on the budget as rhetoric heats up. I think BULLS need to be more cautious to protect in the short term. What’s your take Cody?
A. Let’s wait and see what the poll results of fear among bulls or bears shows. It’s still showing pretty even so far, and the free money for gambling in the markets for TBTF banks is trumping everything else in the world’s economies.
Q. Just for the heck of it, let me ask you a comment I sent in with my poll vote (saying the bulls are more scared, BTW) — looks like it’s been successful in a way as a predictor, so if it ain’t broke don’t fix it — but do you think it reflects what the responders themselves feel or what they feel bulls and bears generally feel? Also, do you feel it might reflect YOUR assessment on market direction because people trust you? Anyway, always interesting to see it.
A. I’ve wondered that myself many times. I am sure that my commentary before the link to the poll affects people’s votes, so I try to be pretty objective in my commentary in these poll posts. That said, I am also sure that the readers of mine both on Marketwatch and especially those here at TradingWithCody.com often share my contrarian approach and analysis thereby affecting their votes too. Now, all that said, I totally agree that since the poll seems to work when it gets extreme readings that who cares if I’m affecting it or not. It’s working as is, so I’m going to continue to use it til it stops working (which I’m sure it will someday).
Q. Today Boehner and Obama exchanged volleys again regarding the debt ceiling. The last time these guys did this, my portfolio lost a bunch because the market just hated the whole argument. Why are we not hearing more fear about this and why do you suppose the VIX isn’t higher in anticipation of another mess?
A. You are asking wise question BEFORE the mainstream media starts trying to get everybody in the country all in a partisan frenzy over the coming debt ceiling crisis. Good idea. I would be surprised if the markets don’t freak out at some point about something and that the mainstream media might very well pin the freak out on the debt ceiling negotiations…but as I reminded everybody yesterday, even a $100 billion debate give and take on the debt ceiling fake negotiations between the Republican and Democrats and Boehner and Obama is less than 0.03% of the “hidden economy”. So it won’t matter but for the short-term anyway.
And we’ll want to buy if the markets crash over “debt ceiling crisis” headlines in the next few weeks. Until then, I do think the SPY puts and VIX calls are a good hedge.
Q. I know you said (last week) that rates would be going up regardless by year’s end . . . but with what is/isn’t going on with tapering (and with rates today in response to the Fed announcement), is now the time to get out with a modest gain (used to be more) in my $106 January IEF puts and a growing loss (used to be gain) in my $95 IEF puts? Please re-advise!
A. I still think the FED is powerless against the longer-term and shorter-term trends of higher rates steadily hitting the markets. I think the idea that if the FED prints worthless dollars and buys worthless mortgage securities from bankrupt insolvent TBTF banks that we would then maintain lower rates is folly. Rates are going higher whether we devalue the currency with endless free money for banksters or whether the FED finally gets a clue and stops stealing from my grandfather in law.
Q. Does your answer apply in my time frame?
A. Yes, I think rates are headed to 3.5% or higher by year’s end no matter what the FED does now.
Q. If the upside of PM’s is 10x is it really that important if you pay 1,300 or 14 or 15 for that matter for gold and say $25 or $30 for silver at this point in time? I go back to your FIO call (which I made a nice profit on, thank you for that) where you said something like it doesn’t matter that much if you pay say $23 dollars or 30 for a stock such as FIO. It just seems that history is repeating and our new Modern central bank thinks they can pull it off this time with some new chicanery. The more history on banking I read the more upsetting it is that we are being set up all over AGAIN & 90+ % of the people have no clue. It’s really the value of the dollar that’s going down(eventually) so wouldn’t you want to hold as few as possible?
A. I think you make a great point about there not being much difference in buying silver at $25 vs. $30 per ounce…that said, I do think you want to take advantage of the recent near-term weakness in both physical gold and silver prices and buy some now while they’re down again. Silver is still up nearly 20% from where I got big-time aggressive in my buying a couple months ago, but what difference does that make if your holding time is 50 years and you think gold and silver will go up 10-fold vs the dollar over that time frame. Good call, fled.
Remember how many times I said the FED wouldn’t actually “taper”? That’s what the Fed says now. Rinse and repeat three months from now too, btw. Gold and silver exploding higher. GDX up 4% now. Dang it, I wanted to buy some more GDX before the Fed report. Sigh.
Q. I feel like I’m rooting for the packers vs. the bears on this trade for profiting on the GDX calls while the fed destroys the value of our money…do you think we should trim those SPY puts and shorts temporarily on this news?
A. I have a Walter Payton poster laminated hanging up in my workshop that I got from eBay a few months ago. I have never cheered a “team” in my life. I cheer for players I like. Not being affiliated to any team is key to being objective when I place small bets on the weekend’s games occasionally. There’s wisdom in there for stock traders too…I hate that the Fed’s destroying our dollars and savings and stealing from the working man and savers. But it is what it is and it’s going to make gold and silver spike again and I think GDX is headed much higher over the next year or so. By year’s end too. I am holding my SPY puts and shorts as they are simply hedges against a crash. I’ll be up huge in the rest of the portfolio is these SPY puts and shorts lose money, see?
Q. So when I bought GDX with you last week at was a GREAT ACT vs flipping it as you had mentioned! I even bought more GLD yesterday as well!
A. That’s right, Elad. I had teased you that maybe you buying GDX and GLD finally along with me might be a contrarian indicator…does not seem so anymore, though, as both GDX and GLD and physical gold and silver spike again.
Q. Cody, do you think it was a mistake by Apple to price the iPhone 5c at $549 – which will translate to $733 in Asia – if they are trying to capture more of the smart phone market share there? Why would consumers in Asia pay $733 for an iPhone when they can get an Android for half that price?
A. I don’t think it was a “mistake”, I think Apple wants to maintain its huge share of profits within the smartphone industry and that only happens if they charge enough to make profit margins reasonable. I think Apple’s cheap enough and hated enough right now that I’ve made it my 2nd biggest position again recently and am thinking it’s more likely to end the year at $550 than $400. I’ve been wrong before of course. Even about Apple. 🙂
Q. Cody: what’s your take on the pretty positive reviews on both of apple’s new phones vs. Wall Street estimates cut left and right?
A. Apple’s hated by Wall Street these days. They will have to show some serious new products in the next few quarters to win Wall Street back over. In the meantime, we have an edge because we don’t “hate” (or “love” for that matter) Apple or any other stock. Objective analysis will always win out over emotional reaction.
Good answers! Lets see if investors agree as reviews start to come out which are quite good.
A. Yes, the early testers sure seem to be favorable about the new iPhone and IOS7. We shall see.
Q. What about getting back into Corning (GLW)? They should benefit from the Gorilla glass boom and the options are pretty cheap. What’s your take on GLW?
A. There’s been no leverage in that business for so long that I gave up on GLW. That said, I think I answered your FNSR question similarly when it was half its current quote. GLW needs to show some growth topline and strong margins for the bottom line in a couple quarters in a row and that stock would go to $20.
Q. WAGE~ should I add to that short?
A. I’m waiting to build up that WAGE short still. It’s just such a bubblicious market and that stock has bubble blowers buying it big time. (Alliteration anyone?)
Q. Regarding ECTY, how long will you hold? Reason I ask is because our last bankruptcy trade, XIDEQ, has doubled since I sold it. Are there any downside if I exercised patience and held on to these types of trades longer?
A. Great question and yes there is potential downside to holding these bankruptcy trades for too long — they often eventually stop trading entirely and/or finish up at absolute $0.00. When you step back and think about how outrageous the idea is that you are actually buying the common stock in a company that just declared that it can’t even pay all its debts, much less show any value to shareholders…well, you see that it’s a high risk trade and that’s why I also get out of it, win or lose, after a short period of time.
Okie dokie folkie. That’s another wrap. Thanks! See ya on the flip.