Chat Transcript for May 16, 2012: Facebook, FIO, Greece, Bob Weir and much more
Q. Any idea or explanation why some important AAPL suppliers have completely different behavior? QCOM,BRCM more or less are following AAPL (about -10% since their earnings report) and others ( SWKS and mostly CRUS ) growing or stable since their earnings report. Are you aware of involvement in new products? What do you think of gossip on mini ipad this time?A. Interestingly, the two that I am most confident about being in future iPhones and iPads is BRCM and QCOM, each of which have much more proprietary technology in their chips than either SWKS or CRUS (proprietary technology increases margins). Mini-iPad or bigger iPhone? I expect over the next couple years that the iPad/iPhone concept converges anyway. Both bigger iPhones and smaller and maybe also larger iPads might all be here in 2015.
Q. What do you think is more likely before fall: mini ipad or a larger iphone screen?A. I’m not sure people want a larger screen. Maybe smaller/sleaker? Maybe both?Q. Hi Cody, what are your thoughts about oil going forward? Thanks.A. Near-term, I’ve no idea what oil will do or what will drive it. Mid-term, I expect oil to be as cyclical as it always has been and that we will see it trade back down near $50 or so at some point in the next few years. Longer-term, I think we’ll come up with some incredible new energy-enhancing technologies that will make all forms of energy production 10-100x more efficient and that the costs of all energy will drop dramatically. That’s probably not until the 2020s or 2030s though, if I had to put a timeline on such innovation.Q. This market is really nerve racking! I’m afraid its going to be like last year?A. I’ll likely always tell you that when the markets feel “really nerve-racking” that it’s probably a time to be buying and not selling. And when the markets feel like they won’t ever fall again, you’ll probably want to be selling and not buying. Flip It, per my column from earlier today. http://tradingwithcody.com/2012/05/16/flip-it-heres-why-the-greekeu-set-up-is-so-bullish-for-investors/Q. Cody I know that you believe Greece will stay in the EU as do I, but hypothetically what if they don’t? What if they default and just leave? Where does this market go?A. Read this column that I wrote nearly two years ago (which outlined/predicted just about everything you’ve seen happen with Greece in the two years since, frankly): http://blogs.marketwatch.com/cody/2011/09/26/what-if-the-worst-case-scenario-is-actually-the-best-case-scenario/ In it, I write things that still apply today, such as: “Heck, did you know that the DJIA was up 20% per year for the five years heading into the initiation of the Euro? The markets gave more than 10% annualized returns for the decade before the Euro started. And in the decade since, the markets have been roiled and range-bound. In the first five years after the euro started, the markets went straight DOWN. Not up.” And “In other words, the stock market’s returns since the founding of the euro hasn’t even matched inflation. But, but, but everybody says Greece leaving the E.U. and the euro’s demise would be awful! Say what? Heck, you know that the DJIA was up 20% per year for the five years heading into the initiation of the Euro? The markets gave more than 10% annualized returns for the decade before the Euro started. And in the decade since, the markets have been roiled and range-bound. In the first five years after the euro started, the markets went straight DOWN. Not up.” And “Will Apple AAPL sell fewer iPads in 2013 if Poland, Slovenia, Greece and Spain all leave the Euro and go back to using their own currencies? And: Will earnings in the huge move from cell phones to Google’s GOOG Android smartphones and the huge economic boom for companies like Marvell MRVL and Skyworks SWKS selling into that move suddenly reverse itself if Germany, France and Austria are left using the euro and to bail out their own banks instead of depending on Greek taxpayers’ to take all the hit for the fraudulent accounting that the government there had used for years with Goldman’s help leading into the crisis? I think I prefer the so-called “Worst-case scenario for Europe and the E.U.”. But I don’t think either case will really matter much to my portfolio as long as I continue to focus on buying the best, fastest growing companies at good prices and shorting worthless companies.”That said, as I noted this morning and always point out — the markets will likely tank hard if Greece/EU were to finally just recapitalize as they eventually will have to/essentially are already everytime they actually write the value of their debt down to something that reflects the reality of getting paid back…but that will be the greatest buying opportunity of our lifetimes when the markets crash just as rule of law and prosperity and growth are about to return to the economy!Q. What do you think the Fed’s next move is?A. Two points to make to answer your question. First, did you know that Jamie Dimon is on the board of the New York Fed that’s supposed to be regulating him and his bank? Did you know that the entire Federal Reserve is made up of bank executives from TBTF and other banks and that the only “representative of the public” on the Federal Reserve board is a former/current bank lobbyist? The Fed will always do anything it can to help the banks profiteer/vampire/avoid prosecution/fake their numbers/and anything else the banks can come up with to put money in their pockets in the name of “helping the economy”. The Fed’s mandate is for low inflation and low unemployment. And somehow that now includes endless 0% loans, negative interest rates on reserves (meaning the banks are now paid by the taxpayer to hold their cash and not lend it out to citizens and businesses), buying trillions in worthless mortgage securities using taxpayer money at any price the banks say they are worth, and the other $10-14 trillion dollars in welfare given to the banks in the last five years, which has exploded both the Fed’s off balance sheet debt as well as spiking the Federal Deficit from $8 trillion to $14 trillion in the last five years too. So my answer again is the Fed will help the banks no matter what. On another note, as I’ve often pointed out, you need to even “Flip It” when it comes to the old saying of “Don’t Fight the Fed”. The markets historically rise when the Fed is raising rates and the markets historically have fallen when the Fed is cutting rates.Q. Thanks, Cody! Sometimes I just need reassurance and you are the bestA. Just because it “feels nerve-racking” doesn’t mean that we’re at a bottom, by the way. Just saying that historically, the time to buy is when the markets are indeed nerve-racking.Q. Cody, do you have any plans yourself to buy some FB common when it goes public or wait till the options kick in and then play it?A. I’ll probably take some FB on the IPO, but it won’t be enough shares to make much impact on the portfolio, so I’ll have to decide what to do when it actually starts trading. If it’s spiked more than 50% when it trades, I’d probably sell the IPO on the first day or so. But if I get the chance to buy any meaningful amount of FB in the low $30s after it comes public, I’ll probably do so. I will let you guys know if and when I trade FB.Q. Any renewed interest in Netflix at these levels?A. I had to type a NFLX quote into my screen to see what “these levels” are right now. In other words, not really — NFLX has become a battleground stock and I’ve got some other places like the new water names and some of the other highly-rated stocks in our portfolios right now. That said, I’d rather be a buyer than a seller of NFLX for the near-term too.Q. Does the trading pattern in Apple change your opinion on Apple for the next 1 to 2 years?A. I remember about seven or eight years ago when Apple was of course one of my largest positions and I got a detailed email from Jeff Macke of Fast Money and Yahoo Finance fame about why I needed to panic out of Apple because the stock chart was crappy and the consumer was supposedly about to stop spending money on tech stuff. I think Apple was at $25 at the time. I don’t read much into the trading of AAPL as an indicator of the next two years.Q. Do you ever think how your targets can ever be achieved if we basically give SO MUCH back in stocks rise / gains from higher levels to these panic EUROPE or other inspired sell offs?A. Targets like $1000 for AAPL in 2013? And $2000 for GOOG in 2020? They will get there if they deliver on the bottom line and there will certainly be a variance in what the multiple for those earnings are that the market is willing to pay at any particular time, but that’s always true of any stock market. I’m not sure I get your question.Q. Do you type all these answers Cody? Or, are you going to break out and use some voice recognition software/app to do it for you?A. One of the proudest moments of my adult life in a silly, boyish pride kind of way, was when Bob Weir from the Grateful Dead and I had struck up a friendship and we were working with a bunch of people to try to start an alternative cable news channel (it didn’t happen for several reasons, I’ll tell you guys about it some other time). Anyway, we were sitting down with a bunch of people for a meeting and I was typing some notes while they were talking and he turns to me and says, “Wow, I don’t know how you can move your fingers that fast and maintain any semblance of order in what comes out of them.” Mind you this is one of the greatest guitarists in the history of guitar playing, which partly depends on having quick fingers. Made my day. I can type 150 words per minute and I can’t find a software program, not even Nuance’s Dragonspeak, that can match my fingers for productivity.Q. Hi! Would you buy calls on JCP here? Their chairman has really great ideas on changing the company. I went to his meeting back in April and it was very, very impressiveA. I have no edge on JCP and if you think you do and you think you have a good grasp on their financials and the demands on their balance sheet and the real estate assets that they own and the products that they sell and the margins that they’ll generate in the future — then yes, I’d look at getting long JCP for the long-term. But I’m not personally interested in JCP and don’t think I have an advantage there.Q. FIO stepped in it again at JPM yesterday. Do they have a communication problem, execution problem or both? “Unusually back end loaded quarter” is cryptic/scary language to feed analysts. (at least that’s the language I heard was used). It would seem if you have the big boys (FB, AAPL, now P), that they should be able to announce smaller wins all quarter long. I know they have a new product – do you feel we are in the midst of a quarter similar to Apple’s slowdown before the huge bump from 4s?A. The thing about FIO is that it’s going to be a wild ride, both up and down, until they either fail or succeed in truly revolutionizing the server space. You have to consider it a venture capital investment and a venture capitalist who’s invested for the long-term in a company’s management and technology isn’t going to freak out if there’s some lumpiness in the business as it grows. That said, if FIO really does miss this quarter, the stock will likely trade lower. I’m not freaking out or changing my position in FIO though.Q. I know they are a bunch of crooks for sure, but I also keep in mind Keynes’ dictum that “the markets can stay irrational longer than the individual can stay solvent.” I try to stay out of the way of tsunamis whoever initiates them. Thanks.A. Yes, think about that “irrational markets” phrase from Keynes and how it applies to the endless Greece/EU/US bank bailouts. Supposedly, the markets will crash when the banks’ shareholders and executives lose everything even though a washout and a return to rule of law would finally put in a real bottom for this market and the economy. That’s irrational, but it will last until it doesn’t. So we have to realize that even though it’s bad for the economy and the markets in the long run, that the markets will likely spike if Greece re-elects an EU/Bank-bailout/social-austerity government in the next election, as I expect they will.Q. Hi Cody, any comment on AAPL’s recent price behavior? Do you plan to pull the trigger? ThanksA. Yes, I plan on buying more AAPL. I bought more when it was $560 before its earnings report and didn’t take profits higher and therefore discipline in my tranche-trading system dictates waiting for a further pullback before adding yet more. That’s just for me and my portfolio right now though. If you don’t have a near-full-sized position, then I’d be building it right now.Q. I will simplify- Stocks give back so much of their GAINS that we end up not to getting anywhere. FIO, SNDK, FFIV, GOOG etc No small give back but rather huge.A. Did you expect every single stock you own to just go straight up? Did you not expect that they’d pull back sometimes, and that sometimes those pullbacks would be big? I’ve been trading AAPL and GOOG since they were at $7 and $90 respectively and I’ve seen them both pullback big time from their highs as they’ve climbed over the years. I still don’t understand your question.Q. Do you like intc here?A. Yes I like INTC here for the long-term a lot. It has been running nicely and I frankly should have been long it because I’ve answered that question with a Yes I like INTC since it was at $20.Q. Hi Cody, the EUR/USD is currently at 1.2727. Do you see a turning point? Buy? Sell?A. If Greece is to swing back to a more so-called “centrist” government in the next election, I’d expect the EUR to rally. But I’d rather just be long AAPL because I think it’s a better mid-term and long-term investment and I’d expect it to rally even more than the EUR in that same scenario.One housekeeping note. I made a mistake in Monday’s Latest Positions post when I forgot to put ZNGA under the longs section. I am indeed long ZNGA as noted and bought more as noted. The post is corrected now. I’d rate ZNGA an 8 for now, by the way. Okay guys, that’s it. Thank you for the great questions and insightful comments. I’m headed fishing when the markets close today and there is no cell phone or Internet service where I’m going. I’ll be back Sunday. So I’ll see you guys Monday.
