Be cool, Update on the shorts and put hedges, No gold miners, Cannabis, WORK earnings, and more
Here’s the transcript from this week’s Live Q&A Chat. Be cool out there.
Q. What’s your mindset on a down day like this? How do you manage the fear, do you get queasy? Are you staring at numbers? Getting your arms around the news? Deciding on buy/sell points?
A. Two most important words for traders/investors: “Be cool.” I certainly have felt more fear deep down inside since I launched this hedge fund again at the beginning of the year, but I’ve also trained my brain to try to use my internal fear as a buy signal rather than a sell signal. You might also consider jotting down a note when you feel fear and then walk away from the computer/smartphone. Basing your investments or trades on emotions is one of the worst things investors and traders do. And usually the day’s news is not nearly as meaningful as the markets and pundits are declaring it to be that day. And having set points where you want to buy or trim helps too, yes.
Q. Time to start trimming puts or so you see more downsides in near future?
A. The puts are just barely kicking in and they provide some juice if the markets keep falling. I’d probably rather cover a little bit of the index shorts than sell many puts here. Their all hedges here so I’m going to mainly try to let them do their job of hedging downside. If the markets rally from here, I’ll lose money on these puts, but as a wise mentor of mine used to say, “Wise man says, ‘may you always lose money on your hedges'” because theoretically, that should mean you’re making money on your primary portfolio that the hedges are protecting.
Q. Good timing on putting on the short / hedges. Cover anything here?
A. Maybe a little covering of shorts, but not trimming too many puts just yet.
Q. I bought protection with VIX ETF a couple of days ago and the VIX up nearly 30%. Should I cash it in, or let it ride?
A. You might considering trimming a little of it, just to be disciplined.
Q. Close out the Apple puts?
A. Personally, I’m going to let the AAPL puts, which have doubled or so for us so far, ride for now.
Q. Hi Cody, any screaming buys now with this pullback? Or wait for a much bigger pullback?
A. FB looks good to me near $195ish. BA, which we just trimmed a few days ago at much higher levels, is now looking interesting again. QCOM looks pretty attractive here near $80ish.
Q. Gold stocks are showing strength…. are you looking at any?
A. No, I don’t like to take the added risk of betting on gold miners instead of just buying a little gold. Here’s an article I wrote in 2006 that includes a detailed explanation of why I don’t invest in gold miners despite liking gold. The shocking future of gold
Q. Any thought on cannabis category/industry? Canada seems to be moving in the right direction and approving additional uses. I recently bought some Canopy Growth at $17.90 and doing some more HW before I add to the position. Thoughts? AND: At all interested in cannabis here? if so, is CGC the one?
A. I recently turned from long-time Cannabis bear to bull. CGC is probably the safest/best single individual name to bet on in cannabis, but it’s not out of the woods itself yet either. Still risky, but I’d rather be long CGC than short CGC here, that’s for sure.
Q. Thoughts on the possibility of Jack Dorsey moving to Africa for 3-6 months, as reported by CNBC? The guy’s running 2 companies and wants to go to Africa for 3-6 months, seems a bit insane to me, but what do I know about running companies?
A. Since Africa has 1.1 billion people and growing, with the hopes that bitcoin could help those billion people bank and save and invest and start their own companies despite living under heretofore despotic dictatorships, the idea that Square’s CEO might want to spend some time in Africa isn’t the worst idea I’ve ever heard. As important as Twitter was the Egypt’s Arab Spring and as important as Twitter is to the global conversation, I can also see the importance of spending some time not in the US’s bubble. That said, yea, it’s a wild idea. But that’s part of what makes Jack Jack, I suppose too.
Q. WORK earnings this week on 12/4 – I’m nervous. Is this going to be a TSLA sort of rip higher situation or has MSFT Teams (or whomever) caused issues and WORK is going down further? I have zero idea, though it’s one of my larger positions. Complete reliance on Cody’s analysis here. AND: WORK earnings this week on 12/4 – I’m nervous. Is this going to be a TSLA sort of rip higher situation or has MSFT Teams (or whomever) caused issues and WORK is going down further? I have zero idea, though it’s one of my larger positions. Complete reliance on Cody’s analysis here. AND: I hear you! WORK either reports upbeat news or it’s down 20% in a ten minute window. AND: Great point…would also like to know Cody’s thoughts.
A. Clearly there’s some pain and a lot of worry about WORK here as the stock is down from where we started buying it and has been a volatile name around these low $20s for weeks now. The good news is that all this fretting about WORK’s earnings report likely reflects how low expectations are heading into the report. The bad news is that doesn’t mean the stock will go up if the company fails to deliver a strong quarterly earnings report and guidance. More the point though, I’m not in this stock because I thought the last 2160 hours (90 days x 24 hours) of business were good, but because I expect that Slack becomes an integral part of how thousands or hundreds of thousands of corporations communicate over the next 2160 days.
Q. Regarding Position Updates… 1) Why are some positions BOLD and some not? 2) Where’s $SPLK? 3) I miss the in/out targets. I’ve gotten in at the bottom on a few stocks from the last update. Very useful…
A. 1) I was thinking about bolding the names that I expect to own forever, but the problem is that I pretty much always hope to own a stock we buy forever, so I’m not sure the bolding idea is helpful. Will stop bolding. 2) Sorry, SPLK is a 7/10. Great earnings report, strong guidance, lots of sellsiders starting to support the stock, but probably a bit overvalued at $150ish right now. 3) I put those “Where I’d buy more” and “Where I’d trim some” in the Latest Positions about 1 out of every 3 times I do them. I don’t like to be more specific more often because then subscribers take those “Where I’d” prices too seriously.
Q. Brick and mortar retail has been beaten lately…any you like for a trade, real estate holdings, etc. Kohls (a possible Amazon target given their existing relationship), Macy’s, Dillards?
A. I’d probably look at BBY over either other those. I still have a few of the M puts that I bought at the beginning of the year when the stock was near $30. The RTH retail stock index calls dated out six months might not be a terrible idea.
Q. Cody, there is a lot of angst where I live around global warming, and how the future looks. I always am interested to here your big picture thoughts. I know that some of the same issues have you out of oil and fairly involved in alternative energy, like SEDG, FSLR, and TSLA. how big of a problem do you believe this is? Can we and will we solve this?
A. Big question, I’ll write up a full article about this before year end.
