Archive for the 'Flip Its' Category
July 2, 2008 11:08AM
By Cody Willard
One of the themes of this blog and of Happy Hour that we covered extensively with Mort Zuckerman on our Wall Street block party last week is that investors should often just focus on the individual stocks and not the broader market. And indeed, I still maintain that caution is king as we now clearly are seeing the down part of the economic cycle. But I still see a stock or three, especially in the technology sector, that I think look ripe to pop.
First off is Apple. To review, I maintain that Apple has been and remains a great long term investment, as I wrote here in 2003, and recently I’d recommended buying some puts ahead of the WWDC conference when the stock was in the 185 range and then I recommended taking the profits on that trade after the stock had fallen about 5% that day to open back up the long term investment exposure of the “core” Apple long position.
I’d get long some Apple calls, say $50 deep in the money and dated three months out right now. The 3G iPhone is going to sell off the shelves in Europe and around the world. It’s going to be even bigger than the hype currently surrounding it. Flip the “flip it” this time, eh?
I just spent the last five days running around Milan and the coast of Italy with a local. And everywhere I went, people had their iPod on. And I asked everyone, granted in a very non-scientific manner, what they thought of their soon-to-have-ability to buy the 3G iPhone…and everyone under the age of 30 was excited. Many have put off upgrading their phone for the last few months as they anticipated the new iPhone was soon to be rolled out in their country.
And Apple is indeed rolling this thing out all over the world. And the price point is so much cheaper than the comparable Nokia offering, which by the way, is awesome too — it’s just too expensive and not exactly “Apple”.
And that was another interesting point during these discussions about Apple. I asked everybody if most kids in Italy buy Windows or Apple…and most said “used to be Windows, but now only Apple.”
For years I was ridiculed when I used to write about the “halo effect” (here in 2005, for example) from the iPod when the iPod first rolled out by guys who said: Jobs was an idiot and could never turn Apple around or that MP3 players were too specialized to hit critical mass when phones have that ability anyway or that the iPod wasn’t a good product cuz it scratched too easily and so on. Guess what — the halo effect is still building. In Italy even.
The stock market and economy still likely have more downside to them as we unwind the credit bubble. But who cares? Find me some great stocks instead! I’ll mention another name or two on here in the next week or two (and you can also get some exclusive picks with more detailed fundamental analysis by signing up for The Cody Report newsletter).
June 8, 2008 6:50PM
By Cody Willard
I’m sitting here doing research and looking over some Wall Street analyst notes…lots of flow about Apple this past week. I mean, I’ve got dozens of notes from analysts and brokers and newsletter writers full of breakdowns, extrapolations and supply chain analysis for the 3G iPhone. And they’re all PUMPED about it!
And then I remember that on Friday a very bright, but young trader told me that he’s thinking he’s gotta be long Apple Inc. (AAPL) into Monday since he’s seen pictures of trademark filings for the new 3G iPhone…and he’s heard from people at Apple that they really are gonna have a new release on Monday. For sure! Ah hem. Like I told him at the time, I owned Apple straight through since the dawn of the first iPod and every few months I’d get a flurry of emails from bight young traders with links to “trademark filings” for the new iPod…or the new iTablet…or the new iToilet. iWhatever.
And didn’t my landlady, a sweet artist’s widow ask me about the new 3G iPhone and even about Apple the stock the other day too? So then I Google (GOOG) “3G iPhone” without the parenthesis and when I see 2,980,000 hits come up, my trading spider senses start to tingle…ooh, man, this might be a good trading short set up. 4,304 news hits on Google. 247,947 blog hits for 3G iPhone on Google. Think there’s might be just a wee bit of hype into tomorrow’s Apple’s WorldWide Developer’s Conference? You guys do realize that Apple holds or attends some sort of a conference, product release and media blitz like just about every month too, right?
I’m never a big fan of shorting or betting against good companies, and given my very long time and very public ownership and defense of AAPL, I think it’s rather clear that I think this is a great company. But I’d sure be hedged on my long positions in this name heading into the hype of tomorrow’s call. I might even get a little extra juice on some near term puts just in case this headline (from my friend and long-time colleague Aaron Task, no less) really is as great a contrarian indicator as I think it just might be:
- Aaron Task
Finally, let’s say Apple does roll out the new 3G iPhone tomorrow…you got an edge on that? You and the other 247,947 bloggers and 4,304 media and dozens of analysts trying to get you to believe the hype got a real edge on this trade this week? Think about it.
AAPL remains a great long term stock and will someday hit $500 and as I wrote for the first time many years ago, will someday be worth more than even Microsoft. But be cautious with the AAPL at $185 into the dog days of summer.
May 9, 2008 12:09PM
By Cody Willard
Well, well, well, here we’ve just pre-emptively spent darn near every bullet the government thinks its got in its arsenal to prop up this supposedly disastrous economy, yet AIG still has to admit to ridiculous losses and raise more than ten thousands bunches of a million dollars each.
Yeah, $12 billion is 12,000 million, you realize! Picture for a minute how stupid you’d feel if you lost $12,000 on stupid bets How about losing $1 million on a really obviously stupid bet like CDOs and Subprime crap? Now picture losing that $1 million 12,000 times! And you realize these same idiots are very same guys who your Democrats and Republicans are now bailing out. Sigh.
All this hurting the renter and the saver and giving money to speculators and landowners and Wall Streeters and bankers, all because idiot pawn Ben’s been convinced that the creative disruption that market forces always enact to keep the virtuous cycles of economics going would be a bad thing.
I still say, WHO THE HELL CARES if Wachovia, Lehman or most any other irresponsible, gambling financial entity goes under. Let ‘em burn! They got to keep their profits in the good times. Let ‘em eat their losses in the bad times. If Lehman goes away tomorrow, some other company that deserves its chance will step up in the vacuum to prosper.
Did you notice how devastating the Bear Stearns collapse was to you? It wasn’t in the slightest, was it? Yet, everybody tells you that if the stock had gone out down 99.9% to zero instead of just 97% to $10 a share that would have spelled doomsday for all of us! What a crock.
And all the while, RIMM, AAPL, JPM, URBN, QCOM, MCD, and so many other stocks are indeed near their all-time and/or 52 week highs. Ignore the macro picture and fight the Republican and Democrat powers that keep sneaking money out of your pockets and into their rich cronies and landowners.
The saddest part of all this endless central money moving is that it does nothing to stop the obvious economic forces that always play out on their own anyway. Did the Fed and government stop the 75% decline in the Nasdaq from 2000 to 2002? No, of course not. And they’re not stopping the housing depression either.
Yet you still vote for these guys who steal from you.
May 2, 2008 11:12AM
By Cody Willard
Sentiment is a hard thing to measure. How do you quantify “bullishness”? Sentiment, as defined by Webster, is an attitude, thought, or judgment prompted by feeling. And as anybody who’s ever been in a stupid argument with a lover over who’s done more for whom or who’s done less to whom, then you know trying to count up and measure feelings is a fool’s mission.
Alas, sentiment matters when it comes to trading. When I ran money and was writing for TheStreet.com and FT for last few years, I would get hundreds of emails a week from readers, traders, and pundits. I got sick of dealing with all the filters and bureaucracy of writing many times and one time I told one of my biggest investors I thought I should quit writing.
He told me he’d pull his money out immediately. Why, I asked, confused, figuring that he’d actually have wanted me laser-focused on researching stocks and trading his money. “Sentiment, Cody,” he told me. “You’ve got such a great resource of sentiment flow. When sentiment has swung to an extreme in your email flow, you’ve got insight into how big a bet you should be making.”
Trading against reigning sentiment when it gets extreme is probably the scariest, hardest, but most rewarding trade you can make. So again, think back to that panic that hit as the news of the Bear Stearns Bailout came through on a Sunday night after the markets were already down 15, 20% from their recent highs.
As I wrote on these pages at the time, I was getting panicky emails from traders on a Sunday night saying that the markets might be down 1000 points the next day. That’s sentiment to trade against.
Today, with the markets 15% above their recent lows, sentiment is starting to shift the other way again. It’s certainly not extreme yet, as so many traders and investors are still shaking off huge losses and wondering if they’ll make ANY money at all this year…but the pessimism and worries that the market climbed atop of during this 15% rally are mostly gone.
Flip It, as usual. Time to turn cautious again. And if the sentiment around stocks turns as bullish as it was back late last year or if it turns as bullish as the sentiment was on oil when it was at $120 earlier this week, then we’ll need to get outright bearish once again.
The upshot is that I guess I’m seeing the markets here as shorter-term trading cycles off of sentiment within an intermediate-term investment cycle off of fundamentals.
May 1, 2008 11:40AM
By Cody Willard
As I asked repeatedly on Happy Hour last night — if the politicians really want to provide some relief for the little guy at the gas pump, then why not permanently eliminate the tax at the gas pump. See how that works? 2 + 2 = 4.
But nooo, the Republicans and Democrats in power have all these tricks they play to screw over you at home and make sure they line the pockets of the big guys. Yeah, both frat houses are guilty of it.
Even these politicians from the two main fraternity parties’ who want to limit how much money the oil companies, the so-called private sector, can make off of private property. They’re not actually trying to fight big oil. They’re in big oil’s pockets!
Hilary Clinton last night says that there’s no reason for the oil companies to make all this money because they haven’t invented anything new. I guess you have to create something if you want to generate capital that you can keep off your own assets. Where does this logic stop?
You buy an apartment building at the bottom of the real estate cycle…and once rents skyrocket, the government’s gonna come in and decide that you can’t make that much money on that investment since you didn’t “invent” anything.
Here’s the tax I’d promote were I running for president of this country already and not just setting myself up to do so in 2016 or 2020 as a true non-fraternity-party free-thinking candidate –
Let’s cap the earnings power of anybody who used to be in office at say, $1 million a year. Yeah, I mean, anybody who served his fellow man as a leader and lawmaker of the free world should feel like a “bandit” to use another of Hilary’s terms, if they’re making any more than $1 million a year.
Imagine all the problems this cap on earnings power would solve! We know off the bat that the government would raise more than $100 million off the capper herself, Hilary!
Wanna serve your fellow man by holding a public office? You cap your future earnings potential. Capping those guys’ future earnings would undermine the entire obviously corrupt lobby industry at its core.
Wanna be a private citizen who invests in corporations that own property that creates income — yes, even income off oil? You can earn as much as you want and we’ll flat tax ya’.
Think about that last point, btw — creating a simple flat tax. I mean, these same politicians who want to “cap” earnings for these oil companies then turn around and hand them tens of billions of your tax dollars every year in sneaky tax-incentives, subsidies, and what not for drilling here, not drilling there, growing this much corn, pretending to work on solar power solutions and so on.
It’s much the same scam that the banker syndicate has finally figured out — The Republicans and Democrats in power figure out all kinds convoluted ways to pretend their fighting for the little guy when the only thing they’re actually doing is helping out their lobbyists and cronies.
So in the end, they convolute the whole tax process up as much as they can. Somehow I don’t think the little guy benefits from any of it.
Just cut the damn tax as the gas pump for starters, guys.
April 29, 2008 11:15PM
By Cody Willard
I wear my sunglasses at night
so I can
so I can
Watch you weave then breath your story lines.
And I wear my sunglasses at night — Corey Heart
Did I really just quote Corey Heart to start off a blog post? A stretch to connect the lyrics at that…
With the 5% hit to the stock today, Altria’s now yielding almost 6%. The stock, that is. I mean, I gotta ask you something — all these idiots who levered 3 and 4% bonds up multiple times to get up to almost 6% yield and now are writing off almost a trillion dollars as a result….well, why didn’t they just buy Verizon when it was at 20-something and yielding nearly 6%. Or buy Altria with that 6% yield right now? With no leverage, that’s GOTTA be a safer trade than 3 to 1 leverage on 3 to 1 leverage on 2 to leverage on a 3% money market…
At any rate, the reason any of this is on my mind tonight is because as I walked through the neighborhood on my way home, I had to weave around and between a quite a few smokers out on the sidewalk in front of bars and restaurants. These same streets are devoid of any smokers during the day. So I wondered to myself — I wonder what percentage of cigarettes in this country are smoked after the workday is over, say, 5pm. I bet it’s about 2 to 1 that more cigarettes are smoked at night than during the day.
And to Flip It, of course — I wonder what percentage of sunglasses are worn during the day. I’d bet it’s about 10 to 1.
PS. This is also my roundabout way of saying I like Altria for a trade/investment here.
April 28, 2008 11:55AM
By Cody Willard
With all the pessimism and fear in the midst of all this artificial stimulation, this market has been a pretty good set up for the long side and being bullish. After leaving the business entirely myself and having my Mom take 30% of her savings out of the stock market back on air late last year, I got bullish in March after the markets had dropped 20% and had my mom put 1/3 of that money back into the markets. But as I hinted on my Big 3 during Happy Hour Friday, we’re getting closer to needing to be sellers rather than buyers of stocks again.
It’s not exactly been straight up, but the markets have indeed put on some meaningful gains since the Bear Stearns Bailout Bottom created enough panic to get real capitulation in the markets. And that capitulation did indeed put in what we now know is a meaningful bottom, as I’d thought it might at the time.
Yeah, since the Republicans and Democrats in power teamed up with the Fed to print $30 billion of dollars and give them for free to the richest people on the planet, including $1 billion exclusively for Bear Stearns’ shareholders (what their equity has to do with making sure our financial markets are functioning, which is the reasoning the Repubs, Dems and bankers have used to rationalize the theft…which in my mind undermines any of their credibility in claiming all these hundreds of billions that the government’s giving to Wall Street has anything at all to do with maintaining functional financial markets — but I digress a bit), the markets are now up double digits. The Nasdaq’s up 12% since then!
I’d been saying and writing that we’d want to be long until about May 15 when those checks from our grandchildren’s savings start arriving from the Republicans and Democrats in power who want to buy your vote with your kids’ money.
Well, as President Bush and his cronies all sing in unison about how these checks start arriving today to help poor people deal with the very inflation that the checks themselves actually cause, we have to start to “taking the trade”. The playbook’s been fast-forwarded and we’ve got a 12% move to call victory on.
You can’t go broke taking profits. And I’m gonna have my mom take that 10% back out of the market until the next panic. She’s not in any rush and we’ll be leaving about 70% of her funds exposed to the world’s more volatile markets via a well-diversified approach in mutual funds, real estate and treasuries and more.
As usual, the money trade was simply a matter of “flipping it’. If you bought the panic, you’ll now want to sell the relief. Flip it, indeed.
April 24, 2008 12:17PM
By Cody Willard
Even though it’s not a game and the repercussions of it aren’t fun, let’s start a new game on Happy Hour and here on The Cody Word called “The Food Shortage Blame Game”. (Is Chuck Woolery avail?)
I’ve been doing a lot of thinking about all this “Going green” by buying “Green guitars”, or “Green luxury bags” and we’ve all been hearing/seeing all the hype and outsized consensus about how channeling all this time, energy and money into these types of things is supposed to do good for the world’s citizens and the planet at large.
What if conventional wisdom is just dead wrong about all of it?! Flip it, man. What if all these resources that we’re channeling into these concepts that we think make the planet and its people healthier and cleaner are doing exactly opposite of their intent? Come on, that wouldn’t really shock you would it? I mean, how often is conventional wisdom and the mainstream actually RIGHT? Not often, which is exactly why we should think about Flipping It.
It’s just been in the last handful of years that these concepts that people have determined are “green” have become mainstream. And what’s happened to prices of food and all other commodities during these last handful of years as we buy further and further into these “green” concepts. It certainly seems that the result of all these policies and social movements around the developed world’s consumption habits hasn’t been very helpful to the poor in Africa that we’re supposedly trying to help with much of this “green” movement.
Are bamboo guitars actually GOOD for the environment? No, we’re still depleting the world’s resources with our consumer culture, including consuming guitars. Further, while the bamboo might grow back more quickly than oak, it’s not as if bamboo doesn’t have some downside to it. It’s an aggressive plant, man, for one thing! And $800 designer “green” bags? Gimme a break - you’re not doing anything good for the planet buying something like that. Get a potato sack bag if you want a “green” purse.
You realize it’s sorta the same logic that these “green” marketing scammers use that the “carbon-trading” marketing scammers use. “Buy this and even though you’re destroying the world, you’re paying someone to do a little bit less world-destruction to get you this product.” That’s not exactly what I call “green”.
I’m already convinced that recycling — yes, all this paper, aluminum, glass RECYCLING — is more damaging to our environment than any other hairbrained mafia scam the government and its cronies have come up with the last couple decades. You can’t tell me all the manpower and logistics that go into “recycling” garbage wouldn’t be better served re-using and re-training us to consume less packaging and waste. And you can’t tell me that the 20-plus garbage/recycling trucks that rumble along my brick street in Soho EVERY NIGHT aren’t putting more bad gases into the atmosphere and wasting more resources than if we just conserved better and buried the junk we waste. Who directly benefits from all this “recycling”? They who run the garbage business in this country. Ever watched the Sopranos…Tony and his boys in the garbage business used to chuckle at the outsized margins in their recycling scams. Yes, recycling is totally a scam and its bad for the environment. And, no, I’m not just trying to be coy in Flipping It.
And then there’s the organic movement.
It’s widely cited that the market share of organic foods in this world is about 2 or 3%. I just Googled “organic food market share” without the quotes and randomly clicked on several of the links/research reports from the results. One report talked about 25% market share for organic fruits and vegetables, while another talked about organic food market share ranges from 0% (especially for pork,it says) in some places in Europe to about 15% in Austria (one of my favorite cities in Europe is Salzburg, btw).
Regardless of whether it’s 3% or 5% of the food that we eat on this planet is organic or not, we all know that organic is a secularly growing industry within the slightly-cyclical food industry. And the yields from organic crops vs. non-organic crops? They’re not as high, that’s why the stuff is more expensive. So we’re constricting the supply per square unit on this planet just as we’re running into a possible food shortage.
Okay, so here’s where this line of Flipping It logic leaves us then, if I’m not mistaken. To help the environment, the poor and even Africa, we all should cut consumption of expensive new goods, wear potato sack shirts, fight carbon-trading, NEVER EVER recycle, and eat foods full of chemicals and pesticides.
Makes about as much sense to me as most any social/governmental movements, doesn’t it? I mean, they’ve convinced us already of the idea that stealing from the working man to “save” the investment banker is somehow good for the working man.
Here’s hoping there are winners in this game, because feeding the world isn’t really a game at all.
More on this with Environmental Capital Partner (and former NHL star) Michael Richter tonight on Happy Hour, btw.
April 23, 2008 11:56AM
By Cody Willard
On Happy Hour for weeks, we’ve been all over the rice hoarding and food riots. News that Sam’s Wholesale is limiting sales of rice is either a perfect top indicator in a mis-perceived “shortage” of food that’s actually just a figment of all you momentum traders and commodity bulls (most of whom are just mindless speculators chasing the latest trend on Wall Street).
Or this really is the start of something that we all should be VERY worried about, as hoarding of grains is about to hit the developed world for the first time in decades.
All of this, as I wrote earlier is the fault of the government, including the Fed. I have a new theory about Ben Bernanke’s Fed being so willing to screw over the savers, renters and grandmothers of the world supposedly to try to “pre-empt” any possible downturn in the economy. All this printing of billions of dollars for the richest people on the planet down on Wall Street through rate cuts, socialization of capital risk by giving banks guaranteed Treasuries in return for who-knows-how-worthless mortgages, intraday liquidity injections, and so on, by the Fed is because Ben’s just a pawn.
For all his faults, Greenspan was at least a free-thinking guy who didn’t cowtow to Wall Street in the same way. Sure, Greenie fell for the Y2K scam and created all kinds of bubbles and transfered lots of wealth from savers and renters and grandmothers too…but at least it seems like he did it on his terms.
Ben seems to simply take whatever Wall Street’s consensus has convinced him MUST BE DONE TO SAVE THE ECONOMY and put the pedal to the metal in implementing it. Now think about the conflicts of interest here:
The investment banks and Wall Street investors (the richest people in the world, actually, if you think about it how 90% of stocks are owned by 10% of the world or whatever the latest stat like that is) go to the Central Bank and explain to him that if he doesn’t help them by printing all this free money and giving it directly to them that they’re gonna be in big trouble. Oh, and therefore the common man is gonna be in big trouble.
Well, as the government always does when it redistributes wealth and tinkers with natural market forces, it turns out the most obvious unintended consequence of giving free money to rich people is BIG TROUBLE FOR THE COMMON MAN. Flip It, of course. This chart of the skyrocketing price of rice ain’t good for grandma or the guy struggling with two jobs to keep his kids in a running car and a heated home with food on the table:
Blame Ben and the two fraternity parties that you guys keep voting into power for all this food trouble.
April 23, 2008 12:50AM
By Cody Willard
And then there’s the pro sports subsidy scams. Yeah, let’s not overlook another direct redistribution of wealth from the poor to the rich in the form of tax-games, subsidizations and what not. We take billions of tax-dollars to subsidize the building of stadiums and other professional sports welfare programs. What a crock.
You realize today that the Seattle Seahawks, that bedrock of the community it is, let go a player they signed to a $62,000,000 contract just 26 months ago? Yeah, we tax the guy making $62,000 a year so that the guy who created a website or strip mall hardware chain or something and has $62,000,000,000 (that’s 62 thousands of millions, btw) of dollars in his checking account so that he can pay a buddy of his $620,000 a year as team president so that he can pay a great player just past his prime $62,000,000 doing what he’d do for practically for free, of course.
Some of the Giants and other professional football players we’ve had on Happy Hour have told me they work about 8 hour days during the season and less than that otherwise. So let’s assume Shaun’s a hardworking pro, putting in 30-40 hour work weeks just trying to be the best running back he can be, including working out and training in the offseason. That’d add up him working about 1500 hours a year for that $15,000,000 he made the first year of that contract.
Joe Sixpack, the guy making $62,000 a year, probably works a 45 hour work week, not including commute, blackberries on the weekend, and reading trade rags during Matlock reruns. That’d add up to about 2250 hours a year for the $62,000 he took him before taxes. Joe’s making $27 per hour before taxes. Oh yeah, those taxes.
The very tax dollars that then go to Shaun’s boss who then had enough frickin excess capital to pay Shawn $10,000 PER HOUR! That’s $166 PER MINUTE. $2.77 per second, including EVERY SINGLE SECOND HE SPENT ANY ENERGY WHATSOEVER ON WORKING FOR THE SEAHAWKS. I mean, I could have broke the $15,000,000 down to the $800,000 he got per game. Which would be $13,333 per minute played on the field. But I was being generous and didn’t want to be outrageous. Impossible when dealing with this outrageous theft of your money and the outrageous sums they then pay these guys, huh?
To summarize then:
We tax the guy making $27 per hour in a stable career as part of the community so that a sports star can make $10,000 per hour for a couple years before moving to another city?
Want to stop this stuff? Quit voting for the Republicans and Democrats in office who keep catering to these billionaire cronies then! I can’t wait to see how this anti-make-the-rich-richer-off-the-poor’s-taxes approach that Seattle does for their economy. The NBA put it best even though they didn’t realize we taxpayers fed up with this stuff would FLIP what they meant:
“Due to a variety of circumstances, including the inadequacy of KeyArena, the inability of political leaders in Seattle and the state of Washington to support the construction of a satisfactory modern playing facility, and the dwindling support for the Sonics in Seattle from fans and sponsors, Seattle’s potential is not being realized.”
Note to NBA: Seattle’s potential will be realized all the better when Joe gets to keep more of his $27 per hour to spend as he pleases instead of buying another billionaire another running back for $10,000 per hour.
PS. You know I’m all about “Flipping It”, which means taking conventional wisdom and doing exactly opposite of it. Well, sometimes, conventional wisdom is right, and you can’t be outrageous for no good reason. And, man, you had to wonder what the heck the Seahawks were thinking back when they signed Shaun Alexander to that whopping $62 million contract back just a couple years ago. I mean, I am never much of a fan of any particular team, but I do become a fan of individual players, and I’m a fan of Shaun’s play on the field and how he seems to be a good family, community and business man off the field. But I remember having the discussion over Guinness about how it seemed like a bad idea to sign a running back who’s not named Barry or Walter to a mindblowing contact as the dude’ll be turning 30 before the third year of the deal even kicks in. Remember Terrell Davis? That guy who started his career as a nobody at Long Beach State, which actually canceled their football program while they had a future NFL and Superbowl MVP on the roster, and was a sixth round choice? That 28, 29, 30 year barrier is tough for a running back, no? Certainly intimidating enough to warrant not throwing $62,000,000 at it…
3G iPhone: Will It Be Better Than Sex?
