Deep Thoughts with Cody Handy: Burning out, WDC is a “pair”, and how to buy happiness

(Cue cheesy instrumental music and waterfall backgound)

You ever stop? I mean, just step back and catch your breath? Or is every day at the market a battle? When I ran a hedge fund for five years, I never missed a market open or a market close (except one day when I had no power in my midtown office during the NYC Blackout of 2003). I couldn’t take a true vacation because I worked every day from the beach or the slopes, no matter. It was certainly a thrill and rush, but it also wore me out. Burned me out at some stages, though I worked through those stages too.

Anyway, the point is that, unless you’re one of the subscribers of mine who do run an active hedge fund, you don’t want to be married to your portfolio’s day to day action. Take a breath. Did you see AAPL rocket back above $600? I know most of you navigated the recent selling AAPL at highs and buying after it crashed per my advice. That’s a time to catch your breath. That crazy 50% YTD rally in AAPL that turned into a 12% sell off in AAPL which turned into a 10% pop in AAPL is…crazy. Pat yourself on the back. Go outside for a while this morning. Walk around the park. Better yet, go sip some coffee outside and just listen to the noises. Even if those noises are traffic, just go listen to them and look at something green besides a stock quote that’s up. Green as in nature. Don’t let yourself burn out.

Next topic of note. Got this email again this morning: Cody, Are you still short WDC? The short answer is yes, but I want to remind you guys once again and tell you new subscribers freshly, that WDC is a part of a paired trade. Let me quote myself from past commentary:

I wrote this a couple weeks ago, but let me repeat it for new subscribers or those who missed it. It’s a very important point: “Let me be clear that the main reason behind our WDC short is to hedge against our STX long. I do think that WDC is very cheap much like STX is, but I think WDC has company-specific problems that will keep the WDC the stock from being able to rally nearly as much as STX does over the next few months…and if both stocks fall, I expect that WDC will fall more than STX would over the next few months. That’s not the same as saying that I think WDC is going to fall over the next few months. WDC is part of a pair trade with STX and not an outright short bet, you see?”

From an article on WSJ today: “Shares of Seagate Technology Inc. STX +3.65%  and Western Digital Corp. WDC +1.15% also posted gains. Seagate was up 3.5%, while Western Digital rose 1.6%.”

That’s what you want to see in a paired trade. And WDC is not an outright short for me, but part of a paired trade.


I’m down 18% on my WDC common short but I have a double in the current batch of STX calls I hold and I sold another batch of STX calls for even bigger gains a while ago, as you guys know. I don’t expect WDC will report good numbers as the pricing power of the disk drive vendors like STX and WDC is strong right now. But as I’ve explained many times, WDC is part of a paired trade, not an outright short bet, and as I’ve quoted one of my mentors before, “May you lose money on all your hedges.” Because that usually means you’re making money on the actual investments if you’re losing on your hedges, such as I am with STX vs WDC, see?

And finally, speaking of taking a breath and getting some perspective, watch this video from TED. You can buy happiness! Who knew? Seriously though, watch the video, it inspires me and it will inspire you too.

How to Buy Happiness