Cody Kiss & Tell: Investing Local, Handling Stress, Real Estate Thoughts and more…

Here’s the transcript to this week’s Live Q&A chat. Join me next Wednesday at 2pm EST at http://tradingwithcody.com/chat or send me an email with your question at support@tradingwithcody.com.

Howdy folks. Let’s ride. Ask me anything.

Q. The market and pundits pull you in so many conflicting directions. How do you prepare your mind for trading so you can think clearly? Do you meditate? Do you surround yourself with calming influences such as your home’s decor and where you live?
A. I used to run a hedge fund from a tiny cramped office in a high rise on the 40th floor in midtown Manhattan and I even spent more than a few nights in that space having never left the office after a horrible day or before a big event. I was focused probably 90-100 hours a week on trying gain an edge in performance for my hedge fund and I was starting some Internet companies plus teaching at Seton Hall once a week and all the while trying to raise more money for the hedge fund. At the same period, I lived in several different apartments and was in several tumultuous, and some might say destructive, relationships. For five years each and every single day that the market was open, I was in front of my computer. I puked five or six mornings first thing when I’d wake up. My parents were rightly worried about me and my health. I now live on my dream ranch in a barn that I converted into a Soho-style loft apartment with a 360 degree view of nature and trees (although some of that is burned and recuperating after the recent forest fire that tore through here). Deer and elk wander through my backyard at any given time of any given day or the year. I garden now and eat three square meals a day and rarely am stressed enough to puke, although since I’ve started therapy a few weeks ago to deal with my 9/11 PTSD, I’ve been sick and sleepless a little bit. I guess my point is that even though I definitely still stress out and deal with the same emotions of greed and fear that you and everybody else in the markets do on a daily basis, the bar of what’s “stressful” for me is set very high given my past hectic careers, and working/writing/living here in New Mexico and managing my own money and not managing other people’s money or having to be made up and bubbly for a TV show every single day of the week. Each person has their own levers that cause their own levels of stress to rise and I certainly still have mine. And I definitely worry about performing for my subscribers and making sure my own portfolio is kicking butt for the long-term, and that will never go away. I suggest doing yoga, basketball, tennis, gardening, hiking, music or anything else to get your mind off your money and the world at least a little bit every day.
Thanks for the perspective and suggestions! Glad to see you’re living a much better life now.

Q. Cody, the markets seemed to have stalled here or making abase or top at this S&P 1390-1410 level. What’s your gut say here: breakout or down?
A. You saw what I wrote earlier about how this range, around 1400 in the S&P 500 as you note, will be resistance unless/until it becomes support. That is, the market’s next 5% move will likely be self-fulfilling. A breakout with volume and gusto of just 1-2% from these current levels would likely pop us 5% and a reversal down another 1-2% from here would likely drop us 5% in a hurry. Feet to fire, I’d guess the next 5% move from here is higher, but I’ve been a net seller/hedger of my longs of late, because I’m not overly confident about that feet to fire guess.

Q. Cody, I’m nervous right now. September is a bad month, Europe is a big mess.
A. The time to sell is generally when you’re confident and the time to buy is usually when you’re worried.

Q. What do you think of a GS rec to buy spy 137 puts expiring after the Sept 12 German date?
A. I think any suggestion from GS that gets passed around the markets that blatantly wasn’t what it seems. In other words, Goldman’s got that message out there for the public and that means there’s a reason for them to do so and that reason isn’t because they want the general public to profit on the market’s next major move.
Thanks Cody!

Q. Do you participate in any Angel Fund investing? As part of portfolio diversification, I’m joining one that invests in local enterprises, and wondered your opinion of such funds…
A. I like the idea of Angel Investing and I do some myself, but very judiciously and mostly I trade my expertise and time rather than outright money for a stake. As with all funds, most of it will depend on the competence/ethics of the manager.
—
I love the idea of doing a local-based Angel Fund and I might work off that idea in a few years to create something for my hometown here in Lincoln County, NM. I used to finished every single Happy Hour show on Fox with my saying, “Support your local business.”

Q. Cybersecurity seems like an area that gets lots of focus lately, do you have your eye focused on any players there?
A. I did a bunch of work and bought CYBS a few years ago before it got taken over. The other cybersecurity plays haven’t panned out as well for their investors that I know of, but I’ll get my guys to do some work on the sector and see what’s what.
Thanks cody.

Q. Any intel on some good shorts? I wish I had shorted Nokia about right now… For your sentiment check, I think the Bulls are scared…
A. For shorting ideas, I suggest sticking to companies whose businesses are deteriorating rather than just trying to time a top on momentum. Click here for some more short ideas for the intermediate-term.

Q. Hi, Cody. Last week I asked you a bit about options pricing, and you gave me a nice explanation that I am still digesting. Thanks for that. That having been said, can you give me some info on your thinking on last week’s MS and LPS puts, and whether the same LPS ($2.55 per K) at a $28 strike price is still a good deal? Thanks!
A. Sometimes you’ll see me make trades to hedge the portfolio. I think JPM and MS are both good shorts because I don’t believe their balance sheets and I don’t think their businesses can maintain the kind of valuations they have for the long-term. I bought puts on them last week to get me some downside insurance in case the markets pull back 5% or something like that in large part because we’d had such a big run of late and I wanted to decrease my risk exposure. Yes, I think either trade is viable for a hedge still.

Q. Sorry if this is a question you have answered before, but if you are buying those puts as a hedge, I am guessing that they are not necessarily options you would purchase as an outright investment, correct?
A. Correct. I do think that JPM and MS are both good fundamental shorts and I do think that if the markets were to get hit hard, they and the other financials probably lead on the way down, but I’m bullish overall so if I didn’t need some short exposure to hedge my overall portfolio’s net long exposure, I probably wouldn’t buy puts right here right now. A wise man says, “May you lose money on all your hedges.”

Q. Is the Apple reuse and recycling program new? I just signed up to trade in my Iphone 4S and from the walk through its worth roughly $285 of which I could use in apple credit. Can this program further drive sales or will the $$ per phone credit on iphone/ ipad etc. hurt their bottom line?
A. I don’t think it’s new, but it’s like that hot dog commercial that goes “I’m 99.9% sure.”…”So you don’t know.” Or it’s like my first boss on Wall Street, Andrew Lanyi, used to say, “Cody, the answers to every question I will ever ask you are only: Yes, no, or I don’t know, I’ll find out.” So, I’ll have to find out if it’s new. I wouldn’t worry about it hurting Apple’s bottom line, as I am confident that they’ve done their modeling of how it will play out.

Q. A few months ago you posted a video and said that you expect apple to go to $1,500 a share by 2015. More recently you’ve been saying that you expect apple to go to 1,000 a share by next year. Do you still stand by your $1,500 price target by 2015?
A. Yes, I think Apple will hit $1000 sometime sooner rather than later and I also think Apple will hit $1500 by 2015. Both of which used to sound almost crazy, but these days is just another set of four-digit price targets for this stock.

Q Cody, regarding Facebook, just a couple or so months ago I recall you buying at $26/share and claiming it was a good price at the time. I am wondering if you feel anything has changed of recent for the overall long-term fundamentals for Facebook? If not, it seems Facebook is a bargain right now. I am concerned, though, as I read many reports/articles from analysts about Facebook’s inability to monetize their customer user base, among other things, and many are proposing Facebook stock price at $5-$7 by the end of this year. Your thoughs? Thanks!
A. FB’s got more than $10bb in cash in their checking account, which is more than $5 per share. Apple once traded down to $7 per share back in 2003 when the company had $8 per share in the checking account, which means that it’s not impossible for FB to get down there. But I doubt it. Yes, I like FB here at $18 a lot for the long-term, but as I’ve noted, I’m going to be patient in adding to this one, since I bought a good chunk already at higher levels and I’ve been burned so far on that. I am likely to add a little bit to my FB here soon.

Q. Hey Cody, I just wanted to get your personal opinion on which stock you think has the nearer term (6-12 months) catalysts FFIV or JNPR?
A. Ooh, a Sophie’s Choice, eh? I go with JNPR simply because their new routers are hitting the markets and that could be a good pure fundamental catalyst.

Thanks folks. I’ll do some emails answers here now and we’ll send out the transcript in a bit.

Q: Hi Cody, I was hoping you could answer this question for tomorrow’s Q&A… What’s your opinion on the housing market now? I know you’ve been saying that local real estate is a good investment again, but with real estate rebounding this year (quite substantially in some areas), I was wondering if I could get your take on the overall housing market currently. Do you think there’s more room to run or you wouldn’t chase right now? Thanks!
A: If the real estate is trading at a discount of 50% or more from where it was “reasonably” valued at the peak in 2005-2007, then yes, I’d still generally think it’s worth looking into as a long-term investment. But, in areas where prices are back within 10-20% of their highs, I’d steer clear for now as I do think there will be another downturn in many areas that haven’t truly popped the real estate bubble from the last thirty years yet. Be very careful about clearing your titles too, as the banks and their fraud upon the courts via robosigning and other past illegal title transfers could definitely come back to haunt you some day.
—
Also, anybody interested in going in with me on this one?