Here’s the transcript from this week’s Live Q&A Chat. You can always find Cody in the Chat Room on the newly updated Trading With Cody iPhone App, the Trading With Cody Android App or at http://twc.scutify.com. If you have any questions about how to log in, just email us at firstname.lastname@example.org
Q. Your thoughts on the Fed decision and how it effects stocks? Thanks
A. I think this headline from Marketwatch is just about exactly the set-up I’ve been predicting: “FOMC leaves interest rates unchanged Fed turns more dovish as economic expansion cools.” And as I’d said yesterday: “Net/net, I expect more near-term weakness and perhaps another test and even a breaking lower from last Wednesday’s panicky lows. The Fed will start to rumble about cutting rates and at the next meeting it will go back to 0% and say they’re worried about deflationary cycles. The stock markets and gold prices will rally 5%-10% off that move and those comments and oil will pop 10%-20%. And then what, we’ll be off to the races again? Hmm, I’m not so sure. Then I’d be worried that the markets will fall as the Fed’s going into another easing cycle here, as I’ve pointed out before that the markets often do the opposite of the old saw of ‘Never fight the Fed’ and that we should ‘Always Fight the Fed.'”
Q. Regarding your thought that the Fed might start cutting rates again this year, and with your expectation that oil could take many years to rebound, would you expect interest rates to stay low for several more years as well?
A. I think the Fed is likely to lose control of rates anyway and that rates are likely headed higher in the next three to five years, tho I have no idea how to play that for the next couple quarters.
Q. Fed reaction what you thought?
A. I think it’s almost exactly what I predicted for the Fed. The markets rallied into the report and then they sold off hard after the Fed announced it was leaning dovish again, no? Here’s what I wrote this morning: “I think it would have been bullish for the Fed to continue to raise rates. A Fed that’s in an easing cycle is bearish! I do expect more near-term weakness and perhaps another test and even a breaking lower from last week’s Wednesday panicky lows.” We didn’t get a big quick pop, but we did get the sell-off I was looking for after the markets rallied into the Fed announcement this afternoon, no?
Q. I know your saying the market should see the fed being dovish as negative but we didnt really get a sustained rally into the and after the hike. It seemed like managers were in a rush to leave the party before the “punch bowl” dried up. Maybe while todays reaction is negative the less hawkish more calculating fed will bring the bulls back after digestion of the message? Or maybe we keep seeing red and getting indigestion?
A. The market never believed that the FED was actually going to get into a tighter cycle, even when they’d raised rates 0.25%.
Q. Cody, has nazz bubble popped? Nasdaq seems to underperform.
A. I wrote this the other day: “Is the Bubble Blowing Bull Market that we rode from 2010 when I left TV and came back to investing and trading in the markets to the end of last year finally over? Well, in some sense, the answer is simply yes. The energy and commodity crash have become a Black Swan worthy event much much quicker than anybody expected. Not only that, but aside from a handful of stocks, there are so many once highflying companies that were worth billions or tens of billions of dollars that are down 50-90%, including GPRO, KMI, CHK, FCX, X, TWTR, YELP, Zillow Z, Pandora P, Micron MU, Ambarella AMBA, Stratasys SSYS, Valeant VRX, and so on from every sector of the market — it’s clear that many stocks have already gone through a crash.”
Q. FWIW- ran into somebody at lunch today who works at IBM. Started talking and he said for the quarter they are doing fine, but January has been “frighteningly bad”.. Something tells me this isnt just IBM
A. Agreed, Tim Cook said Apple saw serious deterioration since January 1.
A. Let’s put it this way — I think we should have at least twice as much of your portfolio percentage in cash today as we did in 2014, which was a little bit more cash % than we had in 2013.
Q. Would you take a look at $BX? It has 11% dividend. Thanks.
A. My Spidey Senses go off when I look at $BX, as that 11% dividend yield and their balance sheet numbers…something just doesn’t seem to be right there. I’m going to have to go through their 10-Qs and other filings to drill down on their actual balance sheet and earnings potential are. I’ll get back to you guys on this one.
Q. Have you looked at NVIDIA in a while? With its latest innovations in the autopilot functions in vehicles, the superiority of its GPU/Tegra platform, it being off ~16% from recent highs, and reasonable debt levels, could be an attractive price here? Thanks!
A. I have looked at $NVDA and I like the way they are positioning themselves to be a big player, along with Qualcomm, in the smart car market. The stock’s not cheap at $27, but they’ve got a great balance sheet and could grow from here.
Q. Will you take a look at $MELI?
A. $MELI wants to be the Amazon of Latin America. The company’s got a couple hundred million dollars in debt and a little more than that in cash, so net cash is just okay. Analysts expect MercardoLibre to grow revenues 10% this year and earn about $3 per share. So the stock is trading at about 30x this year’s earnings estimates, which is about the same valuation at Facebook $FB. I think it’s hard to invest in great companies in the greatest country of all time, the US, and the fact that $MELI is based in Argentina, which isn’t exactly a stable, tech-driven, consumer-led economy would keep me from gambling on this stock unless it got a LOT cheaper, like at less than 10x earnings.
Q. I know you are generally bearish with the biotech but I have been in and out of $BIIB, Biogen, the past year since it dropped 100 points or so and feel it is one of the safer biotech to continue to play for trades as it had very good earnings this morning and raised guidance for the year. I took my profits on the 25 point jump today and would look to start getting back in around 265 again. What are your thoughts on this one biotech?
A. I looked at $BIIB this morning after their report and I still don’t like it. The company is still running at about 90% gross margins and I just don’t think that’s sustainable here in the US or in foreign markets are the governments/taxpayers are the ones footing the bill for these treatments.
- Follow up comment: I appreciate the input and I will listen to what you have said. I don’t ask questions of you and then go out and do what I want anyway. I need to be careful here obviously. Thank you
Q. If you had to handicap how $FB trades post earnings what would you predict?
A. Feet to fire, I think $FB could pop 5% after it reports earnings. Not trying to game that though.
Q. What are your thoughts on $NFLX ? At what price point would you consider buying? How about selling puts? Or is it too risky now given the actual environment?
A. $NFLX is a truly great company, a de facto standard new way of watching TV in the App Revolution, but it’s not cheap and it could fall another 30% in a bear market even if its fundamentals continue to be awesome. I plan on buying back the $NFLX I sold near $130 late in 2015, some where below $95 but I’m not in a hurry to do so.
Q. Any further thoughts on AMBA, as it has fallen significantly from the roughly $54 figure at time of publication of your recent book and you mentioned adding to it?
A. Nothing new on AMBA and am in no rush to add to it.
Q. Do you have any new thoughts on GWPH? Finviz says they have $15/sh in cash.
A. Yes, $GWPH has about $15/share in cash. Not that it’s going to help the stock until it gets closer to $15, methinks.
Q. Do you plan to add any index shorts at any time?
A. Maybe. I think our defensive, high cash stance is good for now though.
Q. After this $AAPL earnings report, what do you think? Have iphone sales peaked?
A. I think $AAPL will sell more iPhones in 2017 than in 2015. Not sure about 2016.