Here is the transcript to this week’s Thursday Special 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.
Q. Cody, Good afternoon, – is there a Macro economic playbook you are following? For instance, if the fed is going to continue to taper, stocks are going lower so why not step aside for the slide? It certainly seems like we are in a falling knife situation. I have been looking for a chart or prediction that shows if the fed tapers that should cause the s&p to drop .33% for every ten billion in taper kind of thing. Your thoughts and help will be useful.
A. If the Fed taper could be directly correlated to a fraction of a percentage point in an index of 500 stocks that trade millions of shares each every day in the manner you propose…that logic would carry out to the idea that the market would be at zero if not for Fed QE, liquidity, welfare, etc. My point in this morning’s column was that the Fed’s already gone so far into uncharted territory and that 0% interest rates and all the other programs to bailout banks are so much more meaningful than the $10 billion a month the Fed just said it was supposedly stopping spending on crappy instruments from those same banks.
Q. Cody, I understand the correlation response you gave however is that it was simply an example. There just seems to be the possibility of there being a modeled scenario out there that can be referenced for a view point and strategy purposes. If I find one, I will share it for your thoughts.
A. Great, please do let us know what you find. I don’t think a taper-to-stock-prices concept can be gamed.
Q. Cody, to piggyback off of the comment regarding the present slide: would the time be appropriate now to trim high-flyers, neutral and even current losses to generate liquid cash for your expected difficult to buy pullback? What percentage would you recommend to convert to cash?
A. I’m not making any fresh moves into this current sell-off, as I’ve trimmed along the way near highs and also at lower levels too. I’d want to have about twice as much cash right now as I did this time last year and about four times as much cash right now as I had this time back in 2010/2011, when I was aggressively long.
Q. BTW, congratulations on becoming a Daddy! It is the scariest, and most satisfying life moment, when you realize that you are now responsible for a little person. Awesome!
A. The good news is my wife is also fully responsible for the new human being in our house and she’s much better at being responsible at such things than I am!
Q. Cody how big of a correction are you expecting?
A. I think we’re already through with at least part of the market correction, and I’d be interested in starting to buy some stocks back when the markets are down another 3-5% from here, maybe at 15500 on the DJIA.
Q. You wanted to add to stocks when you saw the DOW at 15,500 it hit 15,700 today any more interested here after this 8-15% correction in some of our names?
A. Not yet ready to buy back much for me.
Q. Have you read Kevin Freeman’s book “Secret Weapon” which presents evidence that the 2008 financial crash was a planned event by sovereign wealth funds in collusion with the oil producing nations to collapse our economy? Some interesting stuff on dark markets and ghost access to high volume trading. Long question short – he has a new book out would you recommend it – is he credible in your opinion?
A. Never heard of Kevin Freeman, but will look it up.
Q. Welcome back, Dad! Hope all’s well with all three of you on the home front. Question for you (as always) on the impending rate rise. Still think we’ll see it (meaningfully) in the next 5-6 months? Last time we addressed this, you said you’d think about additional ways to take advantage other than as-far-out-as-possible puts on IEF. Any additional ideas in that regard? Also, “they” have since added September puts, yet I’m not seeing much out-of-the-money activity there (if I’m reading all the zeroes correctly). I’m holding $96 June puts, thinking of adding September at same strike price. Make sense? Better strike price? Is there ANY logic in buying in-the-money puts at the prices shown? Thanks for the fatherly advice.
A. Nice and funny comments in your question there. So, to answer your question though, I’d look at the TLT and TBT at this point too, but I’d probably try to go out to next year for the expirations on those. If you’re trying to buy the IEF Sept puts and you think there’s not enough liquidity and/or the spread is too big, just bid low on a GTC order and at some point there’ll likely be some intraday volatility in the underlying IEF that will get you filled.
Q. Cody any thoughts on INVN?
A. I’ve grown more interested in INVN and other gyro companies lately after having seen this the other day, for example. One Wheel hands-on at CES 2014 Published on Jan 13, 2014. If the idea of combining a Segway, a skateboard and a unicycle sounds like your idea of fun, you might want to check out the Onewheel. It uses gyros, accelerometers, proprietary algorithms and a single rubber tire to give its passengers a smooth, self-balancing ride that supposedly mimics surfing or snowboarding on dry land. Its direct-drive motor pairs with the aforementioned components to determine the board’s speed based on a how you lean your body.
Q. Cody, is Under Armour (UA) going to be a winner in wearable technology?
A. Will look into the UA as a wearable tech play.
Q. Cody, could we get a basket of stocks from you–on buys to benefit from wearable technology? Wired had a great article saying that it could be as big as the smartphone??
A. I’ve been working on that basket….not much playable out there. INVN for sure would be part of it though.
Thanks Cody–I know I asked too many questions–but you are the best!
Q. What are your thoughts on the FB into the earnings tonight?
A. Remember that I own FB for the next few years, not for this quarter. Feet to fire, I’d guess the company beats top and bottom line and that usage and revenue per user is up above estimates too. Not sure what will be the catalyst for tomorrow’s FB action though — remember that time it was sold off after a good quarterly report because of teen usage concerns? Anyway, I’m holding my FB steady.
Q. Piggybacking on the FB question…Feet to the fire do you see a short term pop or a drop? I fear any tinge of flat or heaven forbid declining users and this thing can plop.
A. In this bubble blowing bull market, if indeed it hasn’t stopped yet, then I would expect that I’ll be trying to buy any sharp declines in FB, maybe even adding some longer-term calls in it. That said, $FB surely can drop 10-20% if the report is awful, though I don’t expect that.
Q. If you were holding near, mid and long term FB options would you also be holding steady?
A. I’d probably look to lock in some profits on the shortest-term, lowest-strike-price call options as those will have littlest time value if the stock does get hit. But depending on how much you’re got yourself exposed to those FB call options vs the rest of your portfolio plus your risk tolerance and your income potential, etc…I wouldn’t just go blowing out of the FB options here yet. Good luck though.
Q. Cody, any thoughts for Google earnings tomorrow. I know you are long Google. Considering the recent run in the Google, do you think any results tomorrow will be enough to push it further higher?
A. I’ve been surprised many times over the years when I’ve thought a stock had already run up too much into an earnings report only to see it continue to pop after that, especially in this bubble-blowing bull market that we’re in, I’d expect a good report would certainly take GOOG to new all-time highs. That said, expectations are high for GOOG into this report and I wouldn’t want to just gamble on how it trades later this week, you know?
Q. Cody, one last question. Google: thoughts on their earnings this evening and the impact of their acquisitions of recent weeks – do these represent material accretive earnings this fiscal year.
A. I think GOOG will have to write off most of the recent acquisitions in a goodwill write down at some point. They’ll never get their money back on the Nest acquisition, for example. Won’t matter for the near-term though, as the markets still believe.
Q. Cody, What time frame do you think AAPL will start moving up again? It seems to be sliding slowly down since the big drop after their earnings announcement.
A. Good question on the timing of the next potential $AAPL climb. As I mentioned yesterday, I’d look to buy a tranche, maybe 1/4 or so of a full $AAPL here near $500. If it drops back closer to $450, I’m likely to start buying some longer-dated AAPL call options, but not yet.
Q. Wow — could it be an APPL-free Q&A? (Just noticing that.)
A. Nope, there’s AAPL Q&A already, your eyes must have just glazed over it. 🙂
Right you are!
Q. Don’t you feel Apple’s PR sucks and Tim Cook needs to hire a speech coach? If he spoke the right words, he could still keep things secret but at least create excitement and fire and buzz. If you were to put another loved CEO in his position (saying the same thing in a different way), I think Apple’s stock would have a much higher price. It seems a lot of their problem is just PR and his words holding the company and shareholders down. He speaks, and stock takes hit after hit. I think they can afford a coach to help him.
A. I don’t think the price of $AAPL this time next year will depend on how well Tim Cook holds conference calls.
Apple question just for you
Q. But you have to admit the way he speaks and words he uses doesn’t do his company justice.
A. Totally agree that Tim Cook has blown a lot of his credibility.
Q. OK, on APPL: everyone talks about their announcement of a new product/category as being the watched-for catalyst to growth (or at least recovery0 like the good old days. But it seems like ANYTHING they announce (Tim’s presentation notwithstanding) is seen by the “makers”as too late or just me-too. (TV, watch, etc.) Can they ever beat the cynicism again?
A. If they earn $75 in 2018, the stock will be at $1000.
Q. Gold seems to have found a bottom – aside from physical metal are you looking at any GLD or GDX flips
A. GDX looks like a good risk/reward here, but I’d use longer-dated out of the money call options and know that it’s a potential 100% loss vs a potential 5-10x gain.
Q. I’m all too familiar with 100% losses but also familiar with 5X gains albeit not quite as familiar as I’d like to be. 🙂
A. All successful traders and investors feel that way!
Q. On the subject of gold, and psychology, do you think that the former and longstanding view of it (and silver) as a “safe haven” for screwy things going on elsewhere in monetary policy, the market, etc. is forever gone, or will it kick in again for any reason — say, when the bubble pops? And any fresh/new insights into bitcoin or ripple, or does your thinking remain the same — maybe buy a tiny amount, watch and tranche? ANY thoughts on ripple?
A. Gold will also be a safe haven.
Okay folks, I’m running on fumes here and have to drive to ABQ on my sprained ankle for a UNM Alumni board meeting early tomorrow morning. Peace til later, peeps.