As I mention below, I’ve raised cash, reduced the size of our longs, cut our number of longs in half and put on some more shorts in the last year. I certainly wish I’d gone almost all to cash and loaded up on shorts back when I wrote “The Great Corporate Debt Bubble“, but I am quite proud of how well we’ve managed our portfolios from the depths of 2010 to the highs of 2015 relative to most every money manager and investor I know.
One trade to mention. When I bought the KNDI puts, I sent out a Trade Alert that said, “I’m going to short a few shares of the common stock, starting with a 1/3-size full position and I’m also going to slowly bid on some long-dated KNDI puts, which aren’t cheap and carry a large premium. I’m going to put in a bids slightly above the current bids on the puts that expire out in June of 2016 and January 2017 with the $8 and $10 strike prices and will continue to do so each day for the next few days and as long as the stock stays near $10 or higher. This will allow me to hopefully get filled on some of those bids on the puts at prices that are low enough to really kick in if the stock falls 50% or more in the next year, as I think it could.” I think the stock is still headed below $5 and lower, so I’m holding onto the rest of them for now. If you actually got some of this stock short and didn’t get the puts, I’d consider covering 1/3 or 1/2 or so, since most brokers charge you a rate to hold it short.
The stock is down 30% since I wrote bought those puts and I am going to go ahead and lock in some of the gains in the puts by selling 1/5th of them today.
Here are some questions and answers that I thought were helpful from the Trading With Cody Chat Room today.
I don’t own as many shares of any of my longs as I did back in 2012 or 2013, but continue to hold core investment positions in long-term positions like these and a few others as noted in the full Trading With Cody’s Latest Positions.
Q. I am looking at some shorts. Can I have your take on ALXN, ABMD, EGRX, INCY, ILMN, TYL, ANAC, ULTI, ATHN, TSLA and WDAY.
A. I think there’s a lot of great shorts in biotech and health care and still in energy. But I’m not looking to get aggressively short into the teeth of this decline. We’ve raised cash, reduced the size of our longs, cut our number of longs in half and put on some more shorts in the last year. I certainly wish I’d gone almost all to cash and loaded up on shorts back when I wrote “The Great Corporate Debt Bubble” https://twc.scutify.com/articl… , but I am quite proud of how well we’ve managed our portfolios from the depths of 2010 to the highs of 2015 relative to most every money manager and investor I know.
Q. Isn’t AMZN a buy now?/stock??
A. I bought some $AMZN call options this morning. https://twc.scutify.com/trade-…
Q. Your comments on gold, please? I realize you counsel the best investment is in actual coins, but for those of us with various miner or ETF holdings (which have been shining brightly, if you’ll pardon the expression, the last few days), can we be hopeful that this recent rise has some permanency around it?
A. $GOLD is sure acting like it’s trying to break out. The more it runs, the better odds that the gold miners can start making money again. With so many other commodities crushed, this strength in gold could become a self-fulfilling prophesy as money managers look for a place to get some commodity exposure, making gold miner stock multiples expand ever faster. I’m working on my economic/fundamental analysis for gold right now, but suffice it to say if I had to own a commodity, I’d want to own gold. And I do.”
Q. Any thoughts on gold at this time is very much appreciated. What should we buy besides bullion?
A. $GOLD is sure acting like it’s trying to break out. The more it runs, the better odds that the gold miners can start making money again. With so many other commodities crushed, this strength in gold could become a self-fulfilling prophesy as money managers look for a place to get some commodity exposure, making gold miner stock multiples expand ever faster. I’m working on my economic/fundamental analysis for gold right now, but suffice it to say if I had to own a commodity, I’d want to own gold. And I do.”
Q. A question based on your positions report this morning: for KNDI, you say:”Kandi Tech (*no rating, too hard to short, puts too expensive) –*Tiny Position This stock continues to fade lower, but it’s so hard to find shares to short and to buy the puts at reasonable prices that I’m just about to move on from this name.
A. For those of us who were fortunate (so far) enough to grab some shorts and puts right after you recommended it, what and how will you guide us if and when you “move on”? Shorts are currently +22%, June $10 puts +40%. I’ll send out a Trade Alert for $KNDI when I move on it. Congrats on the trade! PS. Editor’s Note: See KNDI Trade Alert Above.
Q. Look at where stocks were in January 2013. At that time, the future was very bright. Low rates, oil was $100 and china was doing ok. The market was up 30% in 2013. Now, the future looks dark. Oil is $30 and China is spending $100b per month just to keep their currency pegged. Why cant stocks trade down to pre 2013 levels. They could and maybe they will before this is over. SPX was 1400 back then. Only 400 more points to fall. What are your thoughts on this? Thank you.
A. My thought is, first, that from a contrarian standpoint, all those negatives you list right now makes me want to get longer from a contrarian standpoint. My second thought is that I’m not sure the 1400 level that the S&P was trading at back in January 2013 is very relevant. The market can overshoot to the downside and/or the market can get back into a rally mode at some point from any level.
Q. If oil prices stay where they are now, or at least don’t rise above $50 by the end of 2016, we will see quite a few small and probably some mid-size energy companies go bankrupt.
A. Small and medium companies going bankrupt are the tip of the iceberg. If Oil doesn’t get back close to $50 soon, there will be dozens of formerly large cap energy stocks that go bankrupt too.
Q. I’ve been a member since 2012! When can we get another TWC shirt?
A. Good idea. I’ll see about ordering some 5th Anniversary Trading With Cody shirts for current subscribers!
Q. To those who purchased call options on @CodyWillard‘s trade alert, may you make lots of green! I didn’t take the trade, so I’ll be cheering from the sidelines. A quote from Cody worth putting in the quiver, “Keep cool and don’t let emotions drive your trading/investing decisions.” The only reason I didn’t take the call options trade is because I’ve a pretty large $FB trade that I never got off and don’t want to deploy more trading capital until the market finds its footing, because right now I don’t trust it after another horrible open, even though I know that can be one of the best times to buy calls.
A. Amen: “Keep cool and don’t let emotions drive your trading/investing decisions.”
Subscriber’s THOUGHT OF THE DAY: “After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: it never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! Those who can both be right and sit tight are uncommon. I found it one of the hardest things to learn.” Jesse Livermore