Cody Kiss & Tell: Mom’s 401K, Profiting on Microcap Manipulation and more
Here is 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 y’all. Let’s ride.
Q. Cody, I reduced my exposure to stocks as the markets reached their highs. What should I watch for as signals of getting back in?
A. Well, stick with TradingWithCody.com because you know I’ll let you know what I start getting back into what I’ve trimmed down. I don’t know and won’t know til we get there what will 1) drive prices down again 2) what my analysis and outlook will be for the markets and economy when prices are driven down again. I just know for now that we don’t want to be aggressive at this point right here right now.
Q. I know you don’t like 401k’s etc…but a lot of us have money in them. I have all stock funds some small, some large, some mid cap. If the market is heading into a correction, if you were in our shoes, would you consider moving the 401k monies in a “cash” position to ride it out with these gains?
A. I always have my mom trim about 10-20% of her 401k at times like this. Trim more if it goes higher. Be patient putting it back to work.
Q. Is it better to sell any Muni bonds I have and take a big loss or hold on to maturity? With the market maybe at a top, even parking it in a CD is bad idea.
A. I’m afraid I don’t think I can give you a knowledgeable and helpful answer to what to do with your own Muni bonds. It all depends on your other positions, your income, your age, your goals, your risk tolerance, etc. I do know that I think Muni bonds, Treasuries and corporate bonds and junk bonds have all been incredibly manipulated away from reasonable market-based price finding and that some day the market price will come back and reign again. I don’t own any bonds of any sort because I don’t think the risk/reward is very good. I’d rather have my money in gold, silver and cash and stocks and land and my businesses than lent out to a city paying me a pennies on the dollar with risk to my principal.
Thank you, Cody.
Q. What’s the best way to play growth of cloud?
A. For now, probably ORCL. Better plays are coming though.
Q. When you resurrect RevolutionNetwork will TWC members get first crack at wetting our beaks with some venture capital?
A. Hmm, running and building and getting investments for a Revolutionary-Privacy-Internet-Service-Provider was one of the hardest things I’ve ever done. I don’t have it in me right now to get it going again, although writing about it and the incredible profits that will someday be made on privacy-centric Internet service providers has me thinking about it. Yes, I will let TradingWithCody.com readers know if and when I look to raise capital for a venture like that. Thanks for asking, I’m flattered.
Q. Hi Cody, Good call on SPEX but it feels like an empty victory. If you were unable to find any SPEX shares to short, who owns them? Where’s the beef?
A. Lol.
See, SPEX is a tiny, microcap company that was valued at $3 million in total 90 days ago, and even after the 500% pop it was worth a whopping $17 million. Over $20 where I stumbled onto it as a great short and especially over $25 it was worth less than 10 shares of Berkshire Hathaway. Anyway, I called my brokers and asked if they could find any SPEX shares to borrow so I could short it, but with only a total of 820,000 SPEX shares out there in existence, there was none to be found in their accounts that wasn’t already lent out to some other short.
Q. Now I’m really confused. There are 820,000 SPEX shares in existence and today’s volume is almost 500,000. If they were in the hands of manipulators looking to dump them then who’s buying/selling these shares? Are they all in the hands of stock manipulators selling to each other?
A. The reason the stock ran up from $3 to $5 was the first batch of speculators/manipulators getting in, and the move from $10 to $25 was retail investors greedily chasing a stock they know nothing about. And now at $18 all those people are puking it at a big loss to other retail investors just now thinking they can get in on it before its next pop. It’s a biotech company that’s failed in everything its ever done so it merged with some crappy patent-squatter company and started suing big companies and issuing press releases about it and getting pundits to hype it so insiders and the early manipulators can unload on the retail trader at home in his basement.
Q. I understand the pump and dump scenario in theory; what I can’t seem to follow is where the shares are today, i.e., now. If greedy retail investors have been chasing the stock someone must own them; there must be some shares somewhere…unless they’re all in cash accounts and thus technically unavailable to borrow.
A. You could probably find a couple thousand shares or something like that. But to short SPEX in “size” just isn’t feasible with that few of shares and low of a market cap. The shares are moving from one retail sucker to another and from insiders to yet other retail suckers.
Q. I’m really not in your league; a couple hundred would have been as much as I would have done. Maybe if I had been more aggressive and actually called the broker I could have found some.
A. I am glad you said this part, “Maybe if I had been more aggressive and actually called the broker I could have found some.” Because yes, that is true. If you call your broker sometimes he can with some elbow grease and leg work find you a few shares in a stock that can’t be located with a simple Internet trade.
Q. Hi Cody. Can you give us your take on the disappointing FSLR earnings and guidance and whether you will be selling, adding or holding? For me was a shift from 7% up to 8+% down on 6.5% of my portfolio, so keen to get your thoughts on where best to go from here. Thank you.
A. The earnings report and guidance therein were all “worse than expected by the analysts” and that’s why the stock is getting hit so hard today. Remember that we were short other alternative energy names as they crashed into bankruptcy and that we are now long FSLR as the best pureplay rollup consolidator in solar after that crash. The company also reported last night that they’ve bought a bunch of great assets on the cheap which is exactly the long-term reason I’m in it. I think it could be weak for a while until the next report maybe or even longer if that report isn’t good either, but nothing’s changed about the upside potential for FSLR over the next decade.
Q. Hey Cody, thanks for recommending me to stay away from Nuance their earnings report was pretty bad. Do you think Tesla’s stock will move a good bit tomorrow being that it is heavily shorted? Reason is I’m thinking of doing a strangle on it.
A. Heck yeah I think TSLA will be wild after the report. I don’t know what catalyst people are truly looking for into the report though– will it be number of units sold? number manufactured? earnings? revenues? how many welfare checks they got? how many welfare loans they paid off? how many carbon credit trading scams they were on the right side of? Feet to fire, I’d be heavier on the puts than the calls but who the hell knows how she’ll trade in this bubble market.
Thanks Cody!
Q. Can Facebook hit 50 by year end?
A. It’s possible if their next report is as strong and makes the analysts ratchet up their numbers yet again. Without another huge blowout report though, there’s a lot priced in on this recent spike.
Q. Are you holding FIO?
A. I sold it higher, but I would consider buying a few call option before tonights’ report because if it’s anything good, the stock could pop. Then again with a new CEO and the company seemingly losing its place I’m not overly optimistic about this quarter either. Feet to fire, would rather be long into tonight’s report than short FIO.
Q. Cody, when you shorted IBM, did it cross your mind that you would be on the other side of the trade from Warren Buffett? Do you think he miscalculated? Or do you think both of your trades can play out well with different timeframes?
A. I don’t trust IBM’s accounting, I don’t like their debt, I don’t like their reliance on services and consulting. Buffett’s position doesn’t factor into my analysis, but it did make me double down on my homework before initiating the short IBM position.
Thanks Cody. Make your own decisions. Something I have to remind myself very often.
Q. FNSR’s upped guidance is another indication that telecom equipment spending is on the rise. At what point would you re-load up on Ciena? Also, how long do you think this cycle of spending will last?
A. Congrats on your FNSR call! You nailed that trade here in our weekly Q&A for our TWC subs back when you put it on. I wouldn’t reload on CIEN, I’m just holding mine steady.
Q. Any thoughts on why JNPR seems to lag relative to CIEN?
A. Not really. I think this time next year both will be above $30 if our thesis plays out.
Q. Cody Wyoming, my man, just stopped in to say hi.
A. Heyo Richie. You all outta go check out Richard Gobel, my old friend, sometime at his chat room – http://wallstreetallstars.com/strategic-stock-trades/.
Thanks for the plug, my friend!
Okay folks, that’s a round up. Good riding. Thanks!
