Welcome back to the circus. What’s your preferred ride?
Q. Elad wrote a post last night taking the position that the events and facts of market direction have changed substantially in just a few days. I definitely trimmed pretty well, taking your advice to have patience combined with your 3-5% nearterm market pullback prediction. Have recent events softened your pullback conviction at all?
A. We had a 5% plus pullback in the DJIA and the other major indices from the start of the year to their recent lows last week, no? I now think rangebound with a slight trend lower is the path of least resistance for the near-term for the markets, but again, I’m not really trying to game that and profit from such a thesis.
Q. General question on rates: have the latest Reserve meeting and Yellin’s “inaugural” comments on still tapering but keeping eye on inflation/ rate rises until the economy recovery gets stronger changed your timetable on rates going up appreciably? A couple of months ago, you sad we’d see a REAL upmove in 6-12 months. Still? Are you getting more conservative in that regard?
A. Nothing’s changed from Bernanke to Yellen as both will simply do the bidding of the banking and corporate masters. No change to my expectation that we’ve seen generational lows in yields and that the near- and long-term trend is ever higher rates.
Q. 2 questions: 1) Are you still anticipating a near-term 3-5% pullback? 2) With recent legalization of marijuana in some states and potentially many more, what are your thoughts on investing in some of the marijuana related stocks? Thanks.
A. 1) I think we could see the DJIA rangebound here around 15500 to 16000 or so for a little while, and then a sell off resumption of 3-5% or more wouldn’t shock me. I’m not trying to game that idea though. 2) I think that most of the marijuana stuff is hype and that the only way to separate the potential good buys in the space from the bad buys is to do a bunch of on the ground research and meet the companies and tour their facilities and what not. I have no interest in doing any of that. We have our edge in other areas.
Q. Did you really just say you thought it was necessary to do some on the ground research on marijuana stocks? Don’t believe I’ve heard you use quite that term before. Just saying.
A. Marijuana distribution and growing is way too new and full of scams out there and criminals that are still being rooted out that you’d literally have to be very into that industry to get any idea of what’s trustworthy and what’s not in the stocks that are “in the weed industry”. I mean meeting management and seeing if they actually have the assets and products they say they have and going through their financials and all kinds of extra stuff we don’t have to do for example on our Apple or Sandisk positions per se. All industries and all stocks are potential frauds and its hard enough doing what I do and getting the edges I’ve got. Pot’s gonna be a growth industry in this country and there will be lots of profits to be made as it becomes more legal in more places. But I’m not going to risk my capital on it at this stage.
Q. Cody, today RKUS, Zillow, CSCO are reporting. what do you think of earnings play in each of them? Do you expect any of them having blow out quarter?
A. I haven’t followed RKUS enough to be able to give u any help on that one. For CSCO, expectations into tonight’s earnings are low and that’s a bullish thing, but the stock itself has been trending higher since bottoming after a nasty sell-off post-last earnings report. Feet to fire, I’d rather be long than short into the call, but really I don’t feel like there’s a good enough edge on knowing if the company will be able to beat and/or deliver on guidance to pop the stock. Zillow is a great app and good product and I use it when I travel to check out what property values in the locale are going for. But I think it’s a bubble-ish stock and way overvalued but the market doesn’t care about that right now. Hope all this helps.
Q. Cody I forgot NTAP also reporting today. What your take on it into earnings?
A. NTAP’s in a similar set up as CSCO here. Remember that trading earnings report results is always a extremely high-risk kind of endeavor, even when the markets are mostly rewarding strong reports and punishing bad ones.
Q. Any opinion on Ericcson – ERIC?
A. Did you realize that Ericsson $ERIC at $40BB is worth nearly 2x what Netflix $NFLX at $25BB is worth and that Netflix $NFLX is worth more than Sony $SNE at $17BB, which is worth more than 3x Blackberry at $5BB. Ericsson is indeed a good wireless infrastructure play during this same cycle we’re using Cienna and Juniper to ride. I’d rather own US-based stocks though.
Q. Did you own a blackberry when you went short the stock and will googles android system end up like RIMM’s one day?
A. Interesting question. I do think I owned a Blackberry at the time when I was short it a decade ago, though I’m not sure. I don’t think Android faces the lack of innovation and falling critical mass that Blackberry’s platform always has.
Q. TSLA..How you seeing the short emerging? Thanks Cody!
A. At this point it sure looks like the $TSLA is running into technical trouble at the rather arbitrary $200 price level. Depending on my appetite for building up shorts/puts I will consider starting to scale into some TSLA puts in the next few days even. But not yet.
Q. Hey, Cody: With the latest ER on TQNT . . . and some kind of a recommendation (or action taken, I forget which) to close certain divisions (sorry for not being more definite) . . . is your (high) opinion still the same? I’m holding May calls at $10 and $15 (thinking about getting out of the $15) and January ’15 $10 calls. Thanks.
A. Nothing’s changed in our $TQNT thesis that the management could juice profitability and growth with some execution and hard work and that the pressure is on them to do so. As for the trades you’re asking about, you sure are talking about being very aggressive in rolling the call options prices and times up again. Hope that helps.
Q. Sorry- in regard to TQNT, not sure what “you sure are talking about being very aggressive in rolling the call options prices and times up again” means. Explain?
A. Buying higher priced strikes and longer-dated call options after you’ve already got big near-term gains in the current batch of options can be risky is what I meant. Take some off the table perhaps as you do it.
Q. What’s your take on the LNKD qtr / outlook / future? The stock is now at 192, are you interested to buy some here?
A. $LNKD is still up from my cost-basis and simply a part of the social basket and I’m not interested in scaling into more yet. I’d rather own $FB than $LNKD at even the current levels.
Q. Hi Cody. Interesting entry point into FEYE?
A. FEYE is back to where it was about this time last week, which makes it still very expensive and bubblicious but it’s still a very good company in a great growth industry that I’ve considered buying myself several times when it comes up on my radar.
Q. How did you like Tim Cook getting aggressive with buybacks? If Apple simply continues to amass cash over the next decade, plus…and buyback shares, at some point couldn’t they simply have no shares left if they continue to get no love (while making lots of money). It would seem at some point, even with little growth, the cash generation alone (with aggressive buybacks) would force Wall Street to drive the price up. And on top of that, we have potential for new sources of cash to come forward with new product categories. Hopefully the tide continues to turn and Apple is truly putting their money on what they know is coming soon.
A. I would much rather see $AAPL and Timmie Cookie either investing that money in new products and software and platforms or sending it to me as a shareholder or paying higher salaries to every employee in the company and making their suppliers do the same — all of the above at the same time would be a better use than buying their own stock and inflating their earnings per share while risking billions in cash on their own equity valuations.
Q. I think AAPL makes great products and I own some, but it seems to me that the company and products are losing some mojo so to speak. Two headlines on Marketwatch today alone I can recall referred to AAPL losing smartphone marketshare to cheaper smartphones, and also that Android had 79% of smarphone market in 2013. I realize AAPL is much more than smartphones but it seems even the same loss of mojo is happening with ipads, ipods, etc. to other less expensive brands. Other companies are innovating well too. Your take?
A. See my comments above about Timmie Cookie’s money management skills as the head of $AAPL.
Q. Cody, thinkest thou that AAPL is about to go sideways/down, or is this mini-resistance insignificant?
A. I thinkest that AAPL is in uptrend until thy forces of thy market showest thou otherwise.
Q. Hope I get lucky cause I havest 10 more days on my Feb 540’s and 550’s….
A. Good luck, god bless, break a leg. 🙂
Q. Hi, are there any calls that you would buy on INVN?
A. You know I’m sticking with the INVN common for now as I get to know it a little better, but I’d probably look at some say, $25 strikes call options expiring out next year or something.
Q. Feet to the fire…what price per share do you see FB a year from now? If has a rather high market cap now.
A. Let’s answer your $FB price this time next year question like this: Current estimates for 2015 earnings for FB are $1.70 or so and just above $2 or so for 2016. I think it’ll come in closer to $2 in 2015 and who knows for 2016. If the analyst estimates at this time next year are for $3 per share in 2016 and, say, $4 per share in 2017 and the stock is trading at about a 25 forward P/E it would be at $100 per share. That’s assuming a lot of growth and putting a very high bar on the fundamentals and I’m not sure its realistic to think we’d see $4 per share estimates in 2017, I’m simply trying to show you the big picture and teach you how I see it.
Q. Good afternoon Cody I read your email on JDSU and I have to say it really reached out to me. It was like a six sense I get sometimes. Sounds creepy to some. Ha ha. After reading the article I looked up JDSU charts. I was very very surprised to see that this stock jumped to $1000 in 2000 and dropped the following year. Would you be able to shed some light on why it jumped and dropped so quickly? I hope on not bothering you with this email but I had to ask you that question. I was waiting for one more pullback on XONE and I was going to jump in. After reading the last email about JDSU I have put on the brakes and I’m contemplating on which stock to invest in. JDSU or XONE. Thanks again Cody
A. I don’t think it’s an “either/or” kind of choice with the JDSU and the INVN. I like buying a bit of both to spread my risk out of one company not delivering on their roadmap. Look at a long-term chart on any surviving telecom company such LVLT or ALA that was publicly traded back in the year 2000 and you’ll see its probably down 99%. It was a huge telecom/dot com bubble back then it popped and took the markets down with it.
Q. I finally started scaling into physical gold last month and accumulated about half of the position I’m currently targeting. Would you continue to add here as a means of completing the position or would you hold fast at your $1200 trigger point?
A. Tough call, for the near-term on where gold’s headed next. Feet to fire, I don’t think we’ll see $1200/ounce again, and I would suggest continuing to scale into small tranche buys while its below $1300 if you don’t have a full PHYSICAL gold coin and bullion position yet.
Q. Thanks and any thoughts of a short term flip on SLV? The gold:silver ratio just under 65 while historically below 20.
A. Lots of retail and small investors have been asking me and/or hyping up silver to me of late. SLV might be okay for trying to catch a near-term swing trade but as I’ve long said, I do not want to own paper promises of precious metal when the music stops playing again next time. And there will be another time the music stops playing.
All rightie, I’m about spent mentally here. One more q or so.
Q. OK — do you really think Jeter will quit after next season? (Just announced.)
A. Yes, he won’t want to be a part of the A-Rod circus that will come back the next year when A-Rod tries to save some semblance of his legacy (way too late for that).
Peace, love and happiness and hugs til next time, folks.