Transcript from this week’s chat: Interest rates, AT&T merger, oil and much more…

Here’s the transcript of this week’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 for more Q&A where you can ask me anything.


Q: Considering the FED is not going to increase the rates till mid 2013, and considering the market thinks 6-12 months in advance, is it a good time to take some short positions in TLT with expirations around mid 2012?

A: I’d think that the FED stance of never moving rates up is mostly priced in at these levels. But yeah, I can’t argue your logic about timing it a few months out from here. No easy answer when trying to game the Federal Government and the markets reactions to it, which is what any short TLT bet would be.

Q: Cody, do you think AT&T and T-Mobile merger will make it now that DOJ is coming out against it, and do you see any play in there?
A: I can’t believe that our DOJ will ever stop any major corporate merger any more. They are bought and paid for by AT&T, so I figure the merger will eventually go through and there will be less competition and fewer companies buying hardware for the telecom networks and so on…but the overall trend of wireless demand growth will trump any merger effects on the industry. Short answer is — no, I don’t see a trader on the AT&T/TMobile merger.

Q: What is your position based on oil and its price at the moment as well as from the oil companies and oil service companies?
A: I’m neutral on oil at these levels. I’m bearish when it spikes crazy, especially when it gets close or above say $120, and I’m bullish on it near $50. But I figure it’ll probably be near these levels for the next five to ten years at least.

Q: What is the maximum amount of time ahead of the strike date do you hold the calls you buy?
A: I’ve got some Google and Apple and other calls on the sheets right now that expire anywhere from six to eighteen months out. 18 months to two years is usually the maximum time out there I will look at…which happen to be about as far out as most options expirations ever go anyway.

Q: From the levels that we are now, what do you think is the upside potential for the DOW and S&P500? We have had a major pullback this month. Do you think we are heading toward new lows after this rally fades out, or is this start of a new uptrend?
A: Feet to fire, my best guess about the near-term market action is that we get steady .5% to 2% moves in the broader indices for the next couple or three weeks or so and then we’ll have to re-evaluate.

Q: If the ISM number tomorrow is under 50 and foretells recession does that concern you?
A: Do you have any proof of any time the ISM number being below 50 on a specific report actually foretelling a recession? You sure the ISM is predictive of anything ever? I would say it’s a worthless, meaningless distraction of a data point.

Q: How about a 10k jobs number?
A: The jobs number isn’t predictive either. Very little data is predictive — most data are backward-looking. You can infer trends from those macroeconomic data, but I don’t think inference of trends is the same thing as being predictive.


Q: Considering our recent buying in RVBD, MRVL, SNDK and GOOG. All of them except MRVL have bounced back nicely from the lows. Does that signify weakness on part of MRVL?
A: I’ve had the same concern about Marvell — that there’s something out there I don’t know. But the company did just report a strong earnings and gave good guidance a couple weeks ago, and I don’t think much has really changed since then. The stock’s just not cooperating for now.

Q: Do you think now is a good time to look at Copper (like FCX)?
A: I’ve not done much work on Copper specifically lately, but from a medium- and long-term outlook, I’m rather bearish on both silver and gold…and copper would fit in there too. I’d rather be short than long Copper on 8/31/2011.

Q: What is your opinion of iShares Barclays 20+ Year Treasury Bond (TLT) fund?
A: I think there’s gotta be a big short coming in the TLT, meaning that I think Treasuries are another bubblicious sector. Look at a one year chart of the TLT: I’d say there’s probably 10% upside risk and 30% downside potential in the TLT at 112.

Q: Do you have any strong opinions on VMW?
A: VMW is a great company and I have been a buyer of it in the past. My contacts in the industry who sell that type of technology the corporate IT guys says that VMW is unstoppable as a de facto standard already. It’s expensive though.

Q: What are your thoughts about the Ciena, going into the earnings tomorrow morning. How do you expect it to report based on the other earnings recently? Please let us know and depending on your thesis we all can decide what to do. I haven’t scaled much into Ciena yet…
A: I think expectations are very low for Ciena heading into that report tomorrow morning. The problem is that if the company does disappoint there’s probably a 10% underside. That said, I’d expect Ciena comes in okay and that the stock pops tomorrow. I might take a flyer on some calls before the report…but it’s a risky proposition, as any earnings report trade is. Let you guys know if I do.

Q: Cody, great calls lately (i.e., RVBD, GOOG, etc.) on the lows. In regard to LPS, is there a ballpark price point you are looking at to short it some more? Like $20, $18, etc? I just don’t see it getting back to $20 and don’t want to miss the next big drop-off. Thanks.
A: Thanks for the kind words on the trades. LPS is probably a short anytime. I’ve got these puts and short common positions on the sheets in LPS already and tho I wish it were a bigger position, I’m just letting it play out for now. I probably would short more near $20 or even closer to $19 but I just want to see it move up off the lows first.

Q: Cody, What is your opinion on Juniper Networks ?
A: I like Juniper a lot near $20. The stock’s trading at less than 20x next year’s earnings and this company’s in one of the fastest growing and best recurring revenue sectors in the industry.

Q: Cody, spreads on LPS puts are insane. At this moment OCT 18 puts are 2.15/2.60. Would you place an order in the middle or buy where you have to and hope the spread is made up?
A: I’d put an order in the middle or just move up to higher strike prices. Those spreads are insane and there’s no reason to let the market makers skirt off with your money from slippage and spreadage and sloppage.

Q: It appears that Riverbed is breaking down and looking to pull back after its nice leg up. Do you have a specific price point you’re looking for before pulling the trigger on more call options?
A: I’d probably be a buyer of Riverbed on any significant weakness from here. Below $25 a share and I’m a buyer of Riverbed.

Q: What’s your view on apple with Steve Jobs’ health? I think people are right that Tim Cook would be a great CEO, but Jobs’ health is pretty bad and he may have to leave the company. Are you adjusting your call position based on this? I was thinking about waiting for the next earnings report and maybe selling some calls into that news. I would assume you would agree that jobs completely leaving would hammer the stock.
A: I wrote about Jobs’ departure and its impact on my analysis (or lack thereof): And no, I don’t think Jobs leaving entirely would hammer the stock…maybe a 5-10% hit or so that day, but I’d be a buyer of any hit like that.

Q: What are your thoughts on Cypress sitting at $15.79? Are you going to start scaling it pretty soon?
A: Unfortunately, I was scaling into CY higher and I’ve got a decent-sized position in there already. I do plan on buying more, but I need to be careful about getting too much more overly aggressive on the long side from an overall portfolio perspective. CY near $15 seems like a great buy to me though.

Q: Any new thoughts on Corning? I noticed some insider buying and the stock has climbed a little bit lately.
A: I’m sick and pissed at myself over this GLW trade. It’s pretty much gone straight down for three months now. I’ve got mostly calls that are much higher strike price than the current quote and I’ve just been licking this GLW wound lately. I’ll let you guys know when I start to buy it again, but like CY — my short answer is I sure like GLW near $15.

Q: Thoughts on EMC here? They own a ton of VMW so it could be a great way to own that at a much cheaper valuation. But EMC is pretty good by itself.
A: That’s an interesting idea about EMC as a VMW play. I like EMC a lot for the long-term too.

Q: With no calls in SNDK has the train gone for this time?
A: I’ve got some SNDK and RVBD calls that I was buying and highlighting for readers during the crash. Holding steady for now. “Train kept a’rolling all night long!”

All right guys, thanks for joining us here again today. See you back here next week, same time, same place! Stay focused, and please continue to spread the word about