Today’s chat: LOGM, FIO, NUAN, Europe, and more

Here’s the transcript of today’s chat. We broke the questions and answers down into two sections as usual — Economy/markets/trading/strategy and Stocks. See you next week at 2pm EST at http://tradingwithcody.com/chat for more Q&A where you can ask me anything.

Economy/markets/trading/strategy

Q: Dear Cody, do you still see a possible year-end rally in tech? Thank you, Cody! Your service is still great!
A: Yes, I certainly wouldn’t rule out a year-end/Santa Claus rally led by tech, but as you know, I’ve been growing increasingly cautious of late. I’d rather wait for the next down turn in the markets–or put another way, I’m just not comfortable betting on such a year end rally with much gusto other than letting our many longs and/or calls work to the upside in such an event.

Q: Do you believe a year end rally is taking shape?
A: See my response above. But I would note that your question coming right on top of his anecdote-ally makes me even more cautious. I’ve seen a LOT of long-only money managers hoping/praying for a year end rally to save their butts and that’s never a bullish anecdote either.

Q: If you are expecting the Euro to crash how do you go about investing that large cash position you now have? Will you buy dips or wait for yet another severe correction?
A: We really won’t know exactly how to navigate the markets until they take us on whatever path does lie ahead, so other than setting up my playbook and recognizing what are some very likely outcomes, I can’t get down to much more precision. In sum, I’d probably be on the patient side of buying dips, though I’m sure I’ll use scales and tranche-approach to any purchases I’d do anyway.

Q: Are there any signs you are looking for in the markets foreshadowing this Euro collapse?
A: Absolutely, and I mentioned a couple in that article yesterday. Notice how the IMF/ECB can’t find place $25MM at a clip where they used to $100MM on bond sales? Notice that Italy’s debt and now France’s debt rates are spiking to double where they were this time last year despite all the “fixes” the technocrats over there keep coming up with? Notice the speed with which every new “This will finally save the EU/Euro” plan keeps changing/failing/collapsing/causing governmental coups? I mean, this is not what we were looking at three months ago.

Q: How can we invest for next 1-2 years vs. the next 10 years, as you like to say, with so much possible destruction in the markets again and again?
A: Time frames and risk tolerance are dependent upon each of you respectively and I can only tell you how and what I’m doing and why. Which is what I do every day here for you guys.

Think about your own question this way: How can we invest for next 1-2 DAYS vs. the next 10 years as you like to say with so much possible destruction in the markets again and again? Or think about your question this way: How can we invest for next 1-2 MONTHS vs. the next 10 years as you like to say with so much possible destruction in the markets again and again? No easy answer to any of those questions at this time and there never has been an easy answer to any of those questions at any time in history either for that matter.

Q: Cody, if you anticipate the market to topple, will you and when would you go heavily short?
A: I don’t know when and I won’t know if I truly will until I see how things actually play out. I think our analysis is probably got us prepared for several different outcomes here in the near-terms and I’m not going to go net short just for the sake of trying to make a big gain on a crash. You see my post the other day about how hard it is to “Skin a Griz”? I’ve seen a lot of brilliant traders and analysts lose their careers over trying to short a crash. Easy does it. I think most investors should be looking to survive a crash, more than profit from it.

Q: Would the US turn into Japan with another “loss” decade?
A: If the Republican/Democrat Regime in power doesn’t get booted out they will continue to suck every dollar out of the working/middle class they can to prop up their bankster/corporate backers with endless “Stimulus” and “Quantitative Easing” and “Universal Health Care administered by private corporations” and all the other scams they use to redistribute trillions and thereby destroy our economy. Yes, we are in trouble but I do believe that’s all about to change and that people will finally vote out the socialist/corporatist/fascist Republican/Democrat Regime. The magnitude of these wealth transfers in this country have destroyed the free markets and I’m worried we could certainly lose years until people/politicians finally wake up and stop the cycle.

Q: My understanding of what you are saying is that you sold 50% plus of your holdings and are sitting on cash and letting your current long hedged by short positions play out while you wait patiently to see a clear direction which could be a market sell-off, S&P falling to 1100 or so and buying then? So wait and watch?
A: YES!!! Want a job as a copy writer for me? Thanks for helping rephrase for all of us. Well put.

Q: Cody, Europe’s problem is the same 3 months ago and 2 years ago, and we are now closer to a resolution than 3 months and 2 years ago–the only difference is that we have risen from lows more than 12%.
A: No, EU/Euro’s problems went from being “Down the road” to “holy crap it’s hitting faster than anybody will admit.” And that’s what’s happening right now. Holy crap, the EU/Euro bailout plans have FAILED. Time to prepare for the market’s acceptance of that failure. Of course all the “fixes”/bailouts were always doomed to fail, as I’ve always said, but they are more likely to fail much sooner now than ever before. Things have changed for the worse for the elites/corporations/banksters running the EU in the last two weeks even as the markets have tried to pretend otherwise.

Stocks

Q: Could you provide your analysis on FIO again? Must have missed that when you went long initially…
A: FIO’s positioning itself to be a key player in the future of cloud computing/centralized content control and probably a few other areas that are only now becoming defined. Indeed, one of the reasons so many people have a hard time getting their arms around what FIO does is because FIO’s driving serious change and revolution in its own right. The model could have absolutely huge margins and upside if the topline growth comes in anything at all like what the trend has been the last couple quarters there. In other words, nobody — neither the execs, nor the longs nor the shorts — have any idea just how much this company might earn per share in three years from now. Could be $5.00. Could be $15.00 And of course things could change in a heartbeart for this newbie and new industry and earnings in five years could be 50 cents. Yeah, it’s going to be volatile, but this one looks like it gives us lots of upside potential if also lots of potential risk.

Q: Any views on LOGM?
A: No, sorry, haven’t looked at LOGM lately.

Q: New subscriber. Great site. Quick question about NUAN. Does it still make sense to purchase it at this level or should I wait for a set back? Thanks!
A: Nuance now has a forward P/E of about 16 where it was single digits just a couple months ago. I still think this thing’s got a lot of upside longer-term and maybe even in the near-term if the new Apple Siri and other initiatives show traction. We’ve got some huge gains in our calls and the common we’ve owned on this one and while I’ve trimmed some of this one as it’s been up here at these new high levels, I’m planning on owning NUAN for a long time to come.

Q: Do you think the run up LPS has been on recently is about to meet some resistance? Going short around $20–seems like a great play to me. Thanks!
A: Ah “resistance.” The rebels ran into resistance on the Forest Moon of Endor, but that didn’t stop them from blowing up the Death Star. See what I mean? I bought puts recently near these levels and I’d add to that position if the stock runs higher. Even if it meets little resistance in the near-term.

Q: To that end Cody are you looking to increase your ‘dark side’ exposure?
A: Yes, I’m probably going to buy back some of the WFC puts we’d sold when the stock crashed a while ago. And I’ll probably look to buy some puts in some high-flying momo names like CRM or what not. No rush though. Let the pitches come as they will.

Q: Cody, I am long on the AMAT earnings report due out after hours. How do you read? Do you think LPS will slide before their next earnings report and why?
A: Ooh, AMAT’s a tough one into the quarter here. I’ve seen so many of their customers blow up and/or guide lower for the next quarter, that I’d be a bit leery of what kind of guidance you’ll get from this major semiconductor equipment vendor. That said, this is a great company and it will continue to grow at a slightly higher clip than the broader global economies will over the next decade or so.

Q: Hi Cody, I missed the FIO run. Is it OK to buy at the $40 level or I should wait?
A: Buying FIO at $40 depends on your time frame, I would say. As a trader, maybe it’s breaking out and you should chase it. As a trader, maybe it’s spiked too much too fast and is ready to pull back. As an investor, I think the stock has lots of potential upside over the long-term but that we might be able to buy a bunch of it lower on a broader market panic or something. Good luck, man, it’s a crazy stock, I’ll tell you that much already.

Q: Cody are you worried about the P/E ratio of FIO? It’s forward P/E is 109 times earning. That’s more than a lot of companies that I’ve seen. I ask because the only reason I didn’t buy a week or two ago was because I was worried about sky high P/E.
A: See what I wrote about FIO’s supposed “Forward earnings ESTIMATES?” In other words, nobody — neither the execs, nor the longs nor the shorts — have any idea just how much this company might earn per share in three years from now. Could be $5.00. Could be $15.00. And of course things could change in a heartbeart for this newbie and new industry and earnings in five years could be 50 cents.

Q: Hi Cody, what are your opinions on gold in context with your thoughts about Europe in the short term?
A: Come on, my friends, Let’s make for the hills. They say there’s gold but I’m looking for thrills. You can get your hands on whatever we find, Because I’m only coming along for the ride. Well, you go your way, I’ll go mine. I don’t care if we get there on time. Everybody’s searching for something, they say. I’ll get my kicks on the way.

That was Pink Floyd: The Gold it’s in the Hills. But to answer your question, I’m more a bear than a bull on gold both near and long-term.

Q: What are your thoughts on the run up of oil? Do you think it will continue or is it time for a correction?
A: I sorta think the oil run up “looks” or “feels” or whatever you want to call it — it looks like it has legs. I’d love to try to catch a top in oil again but I’m leery it’s gonna be trickier than most oil traders and experts think. That is, oil’s about to make a lot of people look foolish all of the time — like Mr. Market is famous for, really, making the most amount of people look stupid the most amount of the time it can. Love to hate that guy, Mr. Market, don’t we?

Q: Any view on JDSU?
A: I’m sick of JDSU’s continued “well, we need to take numbers lower” thing again. Life’s too short to trade JDSU. That might be a new motto of mine. Ha.

Q: Cody – have you considered that EMC (EMC) and NetApp (NTAP) are preparing their own roll outs of flash-storage devices? Doesn’t this make FIO a sitting duck for a fast ride back down to teens? One misstep and this stock could be toast. Feels like buyer beware…
A: New industry. Yes there will be competitors to FIO, including the best of the best like EMC and NTAP and who knows who else. New industry, did I mention?

Q: Can NUAN be an ER play then, Cody?
A: NUAN, maybe. It’s brand new what impact the Siri will have on Nuance and I’m a bit worried that the market’s over anticipating the upside. Not that worried, but a bit. Enough to keep me from trying to game the earnings report this go around though.

Q: Hi Cody, what do you think about LNKD, its price has been dropping a lot. Is it a good time to get in now for a short term rally?
A: I think LNKD is probably still a terrible stock to own and probably a good short. Think about all Internet-related investments this way — there’s almost always only ONE winner. Amazon for shopping, Google for search, Facebook for social…LinkedIn is tomorrow’s Go.com. Remember Disney’s big Go? No? Go look at ESPN.com and what happens to the URL when you type it in. Go.com still exists and so does Alta Vista and does Yahoo for that matter. But the only search engine you’ll ever want to invest in is Google and the only social network you’ll ever want to invest in would be Facebook (if you happened to be one of the 1% who are allowed to skirt SEC laws with Goldman’s help so that you and only other 1%ers can privately invest in a quasi-public company that SHOULD HAVE BY LAW BEEN FORCED TO COME PUBLIC SO YOU AND I CAN ALSO INVEST IN IT. The law is that clear that if you’re public, you’re public, and if you’re private, you’re private, but leave it to Harvard and Goldman idiots to figure out how to screw up the rule of law in the IPO world too). Anyway, LNKD is a better short than a long IMHO.

Okay guys, that’s it for today. Thanks for all the great questions, stimulating conversation and challenging me on my analysis. See you next week on the same Bat Channel at the same Bat time.