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Greek finance minister resigns – futures rally


A Greek finance minister Yanis Varoufakis announced that he resigns due to “certain preferences” among some Eurogroup participants. In other words, those participants couldn’t stand him anymore.

Greece

And $SPX futures responded to the news with a rally (which of course will be a short lived, most likely):

SPX futures

I only have a few words for this: What a joke!
 



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Posted by Martin July 05, 2015
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Greeks vote NO and send futures to abyss


Here we go again. Now I can say I thought Greeks would reject the Euro-offer, but before that I didn’t dare to say it. What if they chose the opposite, right?

I must say that this vote contains so much stupidity in it that it stunned me a lot. If we take off all the gravy around all we see is the following:

 

 

 

  • European creditors lent tons of money to Greeks in exchange for Greeks to change the way they spend it (such as reducing pensions, salaries, and other expenses; and change the overall budget structure)
  • Greeks are unwilling to do that and consider the creditors’ request a blackmailing.
  • Greeks reject the creditors and their conditions for further financing.
  • Greeks are stupid then.

 

If European and international creditors stop funding whatsoever, Greece would bankrupt and follow Argentina’s path. With “Yes” vote they could follow the Cyprus path and it would hurt less. Now Greece is going into a big financial turmoil and, now mark my words, it will make Greeks even more furious about their government once they find out what’s ahead of them.

 

You may be interested in:
Euro slips, bonds rally on Greek upset By Wayne Cole at Reuters via Yahoo Finance
 
What Greece means to the US By Sam Ro at Business Insider via Yahoo Finance

 

And what about the rest of us? The taxpayers who are indirectly pouring money into the Greek economy and being blackmailed by the Greek socialist government? Should we be worried?

The Greek economy contributes into entire Eurozone by 2%. It is miniscule and it will have no or little impact to the European and even smaller impact to the global economy.

Yet Wall Street is freaking out again:

SPX futures

Next week will be interesting again. Will the market recover this or are we going to have more surprises?
 
 



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June 2015 trading, investing, and dividends results


Another month is over and I am back to make a reflection of my trading and investing.

Many times when I think everything is great and bright I get a snap from Mr. Market. He always reminds me that trading or investing is not easy way up. And it is not always a way up.

When trading there are times when your account will be swinging to both sides. At the beginning of the month I had a great time and now at the end of the month my accounts are down due to recent sell offs.

 

You may be interested in:
Ben Bernanke thinks stocks might be cheap By Myles Udland with Business Insider
 
The Case for Wider Option Spreads By Andrew Falde with MoneyShow
 
15 Problems With Real World Portfolios By Ben Carlson with A Wealth of Common Sense

 

No matter how frustrating it is, these sell offs and drawdowns must be viewed positively. This is a temporary drop of value of my accounts. The quality of stocks or trading positions haven’t changed a bit. Sell offs like the last few days we saw are a great opportunity and money maker.

If you know what you are doing, if you understand how you are making money, where your risk is, and how to manage that risk, you shouldn’t worry.

If you have no clue and you are trembling with any stock or market move, you shouldn’t be investing or trading.
 
 

June 2015 trading results

Before the market crashed thanks to the Greece mess a few days ago my trading account was nicely up. My Net-Liq was booming. Then Greece came out and my Net-liq tanked.

Should I be worried and freaking?
 

SPX
The chart shows premarket sell off at the end of the last month when Greece announced a referendum and no deal with creditors. This large drop had a significant impact on all accounts. Investors shed 300 billion of dollars that day. A typical overreaction from which we are still recovering.
 

Of course not!

Although my net-liq sank to abyss, all my trades (except a few old ones) are safe and still positioned to make money. Thanks to increased volatility they are temporarily losing money, but all options are safely OTM.

 

You may be interested in:
Sold GE, NVDA, MO, PAYX, DFS, KKR, Covered Calls By Bill with Stocks & Options
 
End of the Month Summary – June 2015 By Alex Fotopoulos with My Trader’s Journal

 

It is because I changed my strategy four weeks ago. And that strategy now works like a charm. All trades I opened under that strategy are in great shape even after such sell off. And I am happy for it.

To provide you with a perspective, look at the chart below. It shows all my trades against SPX I opened under my new strategy. The circle shows the recent drop of the market because of Greece. As you can see, no trade is jeopardized at all by the recent market behavior.

 
SPX
The large red candle in the white circle shows the drop of prices due to Greece deal-no-deal events. the yellow price lines indicate my open call spreads and put spreads. No matter how dramatic the sell-off was, none of those trades are in danger. My Net-Liq however dropped because of volatility which spiked up during those days.
 
 

Below are my trading results. Although they look scary, they actually are not that bad. This month I made money, my account’s cash rose a bit, only net-liq dropped. Unless I decide to close all positions on Monday, I do not have to worry about Net-Liq at all:

 

June 2015 options trading income: $206.24 (1.76%)
2015 portfolio Net-Liq: $9,243.73 (-15.79%)
2015 portfolio Cash Value: $12,944.83 (N/A)
2015 overall trading account result: -21.04%

 

The results above do not reflect the effect of the new strategy. The results of the new strategy will be visible later in August – September 2015.

I expect my new strategy to make around $400 a month (since my account is still small) and grow that income every month. The new strategy would require at least $5,000 to start with. I recommend $10,000 for great results. You can follow my trades by subscribing to my newsletter, which is free. I post all trades at the same time I place them.

If you do not have an account you can open one with Tradestation and get up to $500 – trade commission free for 90 days. Then you can follow all my trades to generate income. in your account.

You can also paper trade those trade ideas before you commit your own money. And if you like the results paper trading, why not to tray with real cash, right?
 
 

June 2015 dividend investing results

The value of my dividend account also dropped significantly this months thanks to a sell off. But again, as with the account above, the income is what matters here and not value. As Dennis McCain wrote on his blog, when values of stocks drop, DGI investor is smiling. When stocks are falling, we can buy more shares and get better yield on cost.

This month I didn’t purchase any new stocks. I had a few stock spinoffs though.

My Lorillard (LO) stock was replaced by shares in Reynolds American (RAI) and at the beginning of the month my PPL stocks were spun off and I received shares in Talen Energy (TLN).

Lorillard was a good stock and it paid me great dividends over time. Reynolds however followed the suit and I already received great dividends too. Talen Energy is not a dividend growth stock and it probably never be one. Yet I decided to keep the stock as a growth stock in my portfolio as I like an idea keeping all spinoffs or splits (it wasn’t always like that).

I also decided to apply my option strategy in my ROTH IRA account to build it faster. I can see more and more that with options my income is larger per dollar invested than what I receive with dividends. However, dividends are passive and do not require a daily attention. So I dedicated some free dollars in my ROTH account to employ in options trading and I will invest all proceeds into dividend stocks.

 

You may be interested in:
My Dividend Portfolio: Q2 2015 By Integrator with Get Financially Integrated!
 
June Dividend Update By Captain Dividend
 
June 2015 Net Worth Update By FI Fighter
 
Freedom Fund Update – July 2015 By Jason Fieber with Dividend Mantra

 

I have to do it this way, since our family budget doesn’t allow me to contribute to my retirement account regularly and reinvesting dividends and income from options is the only chance for me how to boost savings.

The only thing I need to figure out is how to trade options so the trade is secure, safe, and money making machine and not a losing machine. I think, my new strategy is the right one which will make money consistently.

 

June 2015 dividend stock buys: none
June 2015 dividend stock sells: none
June 2015 spinoffs: Lorillard > Reynolds American
PPL > Talen Energy

 

For the reasons above I decided to abandon my commission free savings strategy into non-transaction cost ETF RWX. I sold all shares of RWX and use the freed cash for options trading.

I reviewed the results of RWX and it paid a few dollars in dividends. To my surprise I received a bit over $4 in 2015 from RWX and it is not worth it. My options strategy and structure I am building in my ROTH IRA account has a potential to make me $50 weekly in average. Why saving money in RWX?

 

June 2015 dividend income: $118.72
June 2015 options income: $0.00
2015 portfolio value: $17,235.13 (-7.14%)
2015 overall dividend account result: -1.23%

 

ROTH Dividend Income
My ROTH IRA dividend income breakdown per month and per company.
 
 

All accounts

Besides trading and dividend accounts I also have 401k account, emergency savings account, etc., which I do not report in detail. You can review those accounts in my “All Accounts Value” table at the bottom of My Trades & Income page.

My accounts dropped from previous month, but are still up 4.14% for the year. Considering how bad the market was this month I think, this is not a bad result.

What do you think?

How about your investing or trading result?
 
 

What is my market expectation for July 2015?

I do not have any detailed expectations for this market. Greece will play a role in this mess. It is definitely interesting seeing that Greece defaulted to pay back $1.7 billion but our stock market lost $300 billion that day. This says a lot about the market and what freaks are running it these days.

Unlike those freaks who are panicking, you should not. I constantly train my brain to focus on income and safety of my investments and not value of those investments and temporary fluctuations. It is difficult to do. I have seen my co-worker sitting by the monitor every day watching every move of the market and freaking out any time it went down or against his positions. Immediately he considered those trades “a misery, tragedy, or disaster”. At the end he closed all his positions at a loss because he couldn’t stomach the fluctuations, he wasn’t willing to give his investments time needed. But most importantly, he was negative about those investments (trading) and had unrealistic expectations.

It is hard to learn the opposite. It cost time and money.

What is my expectation for July? I think the market will go down in the first half of this month but later on we will see a rally and we may see new all-time highs by the end of the month. I do not expect any significant new highs, just slightly above what we saw last month.

What do you think? What is your expectation for July?

Do you think Greece will leave Eurozone and that would spark more sell offs?

Is the Grexit good or bad for global economy?

Are you afraid of any potential sell off or are you awaiting it with excitement and why?

Share your idea with us and let us know what you think about this market, your investments or trades or just comment or post your questions!
 
 



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Posted by Martin June 28, 2015
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Should you short SPX on Monday upon a GREXIT?


I wouldn’t be so fast jumping the gun and short this market. Futures reacted very negatively on the Greek referendum announced by an irresponsible socialist government. Not only Greeks cannot afford the referendum, the whole EU cannot afford losses from Greeks.

Although Greece is posting a nice drama (or tragic comedy actually) I believe all selling actually already happened. All action has been already done. Jumping in now is too late.

Here is how futures responded right after opening:

SPX

Jumping in now and shorting this market maybe too late. Maybe not, we may see more irrationality coming in and more investors selling like crazy when markets open tomorrow morning.

But I do not expect it.

 

 

If the markets open at the current level which is 2075, then it will be a huge gap down and it will open right at the 1 standard deviation level. Statistically we will be too oversold, too low, and bound for recovery.

See the chart below:

SPX

If you put the chart into a perspective, it would open where the red dot is shown. If so, that lays directly at the 1 standard deviation line (the magenta colored line). Can we go any further down? Although everything is possible, I don’t think there is much room for further downside.

Yes we can go lower to 2 SD, but that would be very unlikely. I do not think Greece poses such a threat to global markets. Although in today’s market driven by algos and freaks everything is possible.

I would incline to a price recovery rather than to more selling. The market will try to close the gap and run away from the 1 SD level.

That doesn’t mean that if the market rallies from the low open price we will be saved, respectively the trend will be saved! We may just see a new lower high forming and then more decline. Or we may see a huge V shape recovery and new highs. Everything is possible with this crazy market.

Stay cool and do not panic. It’s not worth it.
 
 



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How to defend Call Credit Spreads explained by the best trader


 
 

How to defend a credit call spread? Tom Sosnoff and his daughter Case explains how to defend a call spread which goes against you.

Interesting explanation of what should a trader do if a credit spread goes against you. With Tom’s view, everything I have ever done to defend my spreads was wrong.

Here is an example of what a trader can do (excerpt from the video above):
 

We have a stock XYZ is trading for $50.

We sell 55/57.5 call spread (55 strike being the short) with 45 days to expiration (DTE) and collected 0.80 (or $80) premium. Here are a few scenarios what you should do:
 

XYZ is now trading for $52.5 with 29 DTEleave it

XYZ is now trading for $55.0 with 29 DTEleave it

XYZ is now trading for $56.0 with 29 DTEleave it

XYZ is now trading for $57.5 with 29 DTEleave it

XYZ is now trading for $59.5 with 29 DTEleave it
 

And now, here is a different situation:
 

XYZ is now trading for $55.0 with 7 DTEroll it into the next month

XYZ is now trading for $56.0 with 7 DTEroll it into the next month

XYZ is now trading for $57.5 with 7 DTEroll it into the next month

XYZ is now trading for $60.0 with 7 DTEleave it and hope for a miracle that the trade may return back before expiration, and if not, take the full loss.
 
 



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Yellen Almost Admits Fed Not Ready to Raise Rates


 

Peter Schiff’s report on Yellen’s talk about interest rates. Interesting video basically explaining why FED will not increase the rates and that all the talk is just a pretend of rates hike to make it look like FED wants to do it. If the recovery was really so good to justify the rates hike, they would already do it. Keeping rates this low basically says that even FED doesn’t believe to this phony recovery.
 



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Posted by Martin June 16, 2015
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Are the markets turning?


A few years ago, when I was training trading options, the trader from whom I was learning pointed out that the markets were turning down. Slowly reversing. And I remember I made quite nice money under his leadership.

The chart looked like this:

SPX turning

It was 2011 and the market corrected 16% those days (from July to August).
 



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Posted by Martin June 15, 2015
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4 Best-Positioned Upstream MLPs: MEMP, VNR, LRE, and LGCY.


Wunderlich Securities analyst Jay Dobson has a pretty glum assessment of upstream master limited partnerships (MLPS). These are exploration and production companies that have been hammered by energy price declines.

Dobson writes in a June 15 industry report:

The sector has too much debt on average and has suffered from the dramatic decline in oil, natural gas, and natural gas liquids prices since late 2014. Further, a lack of hedging discipline has left the industry more exposed to the declining prices and, in some cases, with very limited financial flexibility.

That said, there are a few he recommends as he takes over coverage of the sector. He believes these are the MLPs that are in the best positions for the current energy environment:
 

  • Memorial Production Partners (MEMP),
  • Vanguard Natural Resources (VNR)
  • LRR Energy (LRE). Its merger with VNR is still pending and its trading at a 6% discount, so it’s is another way to play Buy-rated VNR, says Dobson.
  • Legacy Reserves (LGCY). He notes this one is more risky.

Continue reading >>>
 



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Stocks to buy in June 2015


May stocks I selected finished down -2.98% loss. The market is still driven by interest rate fear and oil pushed down by a price war. All will end one day however and the stock will go back up. For June 2015 I have a new selection but the change from the previous month is small, so I decided not to rebalance my Motif Investing Fund.

I created a screener which browses my dividend stocks watch list consisting of about 200 dividend stocks (there are a few growth stocks too, however). Every month the screener selects stocks which are undervalued based on their P/E, PEG, current earnings and future earnings, and forward P/E among others and assigns a rank to each stock. The first 30 stocks are then selected for my portfolio.

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I buy those stocks in my Motif Investing account and rebalance every month (except June) by removing stocks which are no longer on the selected stocks list and add new stocks. You can see the April selection here.

I also use the screener to buy stocks in my ROTH IRA account. Unlike at Motif investing where I can buy fractional stocks and thus the entire portfolio of 30 stocks at once, in my ROTH IRA account I typically select a stock with the highest rank to add and invest the entire amount into that one stock.

For example, in April I could add a new stock into my ROTH IRA account as I saved $1,000 amount (a minimum amount to minimize negative effect of commissions). To decide which stock to buy I looked at my screener result and found out that ConocoPhillips (COP) had the highest rank as the most undervalued stock. So, I bought the stock.

And here is a new selection for June 2015:

 

You can buy this motif if you want if you open an account with Motif Investing. Then you can buy the entire portfolio the same way as a mutual fund – you buy all positions at once with minimum $250 investment. You will be buying fractional shares if you do not have large amount of money.

 

 

 

I purchased this motif myself to show confidence in my stock selection. You can open your account too and if you start investing, you will receive a $150 bonus from Motif Investing.

I am rebalancing this motif every month. Let’s see, how well this portfolio will do at the end of the year.

Good luck to all of you!
 

Previous selection :

Stocks to buy in January 2015
Stocks to buy in February 2015
Stocks to buy in March 2015
Stocks to buy in April 2015
Stocks to buy in May 2015

 



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PPL spun off to a new Talen Energy. Shall I keep it or sell it?


PPL changesIf you own shares of PPL Corporation, you are most likely a new owner of a brand new company Talen Energy. I bought 66 shares of PPL a few years ago, I think it was in 2013, and since then my holdings grew up 12% plus I enjoyed a nice dividend at around 4% annually.

PPL has been increasing the dividend for 15 consecutive years. Its 3 year average dividend growth is at 2.1%. The last year dividend growth was at 9.85%, which is impressive. And PPL’s current yield of 4.70% is also attractive.

In the past, the dividend yield and growth fluctuated significantly. In 2013, the dividend growth was negative (-7.69%), in 2012 it was positive (5.93%), etc. I think in the near future, PPL will enjoy a positive dividend growth and it will be a great and shiny dividend growth company. Why?

I believe, it is because of a recent spin off.

You may be interested in:
Talen Energy Corp. established as PPL Corp. energy generation spinoff by Kurt Bresswein
Talen Energy
What Should PPL Corp. Shareholders Do With A 65% Stake In Talen Energy? by Chronic Bull at Seeking Alpha

In 2013 PPL announced it will spin off a portion of its business into a new company. And the new company is Talen Energy (TLN). So why PPL did it and why it seems that it will help PPL to have more consistent revenues and thus dividend growth?

PPL made money, originally, in two major segments – power (energy) generation (unregulated segment), and energy delivery (regulated segment). PPL owned several power plants (coal/gas/ oil fired plants as well as nuclear plants) around the country such as in Kentucky, Pennsylvania, Montana, as well as in the United Kingdom. In many of the States, and in the UK, it was also involved in energy (electricity, and in some locations natural gas) delivery to the end users.

And here was the problem. The unregulated segment of energy generation was very volatile and dependent on natural gas, oil, and coal prices. The volatility was responsible for unstable revenues and as I believe, dividend growth. The company was able to overcome bad years and keep the dividends growing, but the history of the dividend growth shows the picture of the struggle quite clearly.

PPL still increased the dividend, but due to a huge slump in 2014, the growth was very small. And thanks to low oil prices in 2014 – 2015, it will most likely be small in 2015 as well.

From this perspective it looks like the spin off was a good move. By doing so, PPL got rid of all its unstable energy generation segment and a new company, Talen Energy (TLN), is now completely involved in energy generation while PPL in energy delivery.
 

 

Every holder of a PPL stock received 0.125 shares of TLN. My 66 shares of PPL earned me 8 new shares of TLN at $16.3112 initial purchase cost (I actually didn’t pay for it, but this was the spin off initial price reported to my broker by the new company). At a current price of $19.30 a share I am immediately gaining 18.32% profit.

It is nice, but as a dividend investor, I look at it from the dividend perspective. And that perspective shows that Talen is not paying a dividend and most likely will not pay a dividend. From the CEO speech at the initial conference call it is clear that this will be a growth company focused on M&A (mergers and acquisitions) rather than on dividends.

And here comes my dilemma. Should I sell the new stock and invest all proceeds back to PPL or keep the stock and let it go?

Reason to sell

The reason to sell TLN is simple. No dividend, no holdings. Why holding a stock which may (and also may not) sometimes in the future make me money. The power generation sector is so volatile that it has big up swings as well as huge down periods, just look at oil price chart in the last 20 years and you will see what I am talking about. What if I need the cash and the stock will be down? A never ending problem with 4% withdrawal rule, right?

Reason to hold

The reason to sell TLN is more pragmatic, while the reason to keep it is more from the land of dreams. Once I read a story about an old woman who died a few years ago, but lived long enough to remember both world wars, but most importantly, she died very rich.

When she was born sometimes in 1902, her father bought her 1 share of AT&T company (at that time the company’s name was Bell Telephone Company). The old lady held the stock until her death, but over the years, she not only held the original stock, but many more shares of all the spun off companies (such as AT&T, Lucent Technologies, NCR, and others). She also ended up holding many shares of AT&T company (as the company split stocks several times over the years).

And of course, she was receiving and reinvesting fat and growing dividends from many of those companies she held.

Grace GronerI do not remember details and all names of those companies, or how much she ended up having in her portfolio. I couldn’t find her story on the Internet anymore. But there was a similar story about another woman named Grace Groner who purchased 3 stocks of Abbott Laboratories in 1935. In 2010, at the time of her death, all her holdings grew into $7 million dollars thru dividend reinvestment, stock splits, and spin offs.

A great example of compounding. Yes, she was compounding for 75 years, and even though it looks like she never used the money, it clearly shows that over time and with the right dividend growth stock your investment can grow substantially.

Both women kept all the spun off stocks and let them grow over the years. That’s was impresses me and makes me think to keep TLN. Although TLN can be a volatile company due to the nature of its business, it may grow, split, and spin more, and more, over time.

Getting the shares didn’t cost me a penny. I didn’t have to sell PPL or any other stock to buy TLN. I didn’t have to add more cash to my account to buy TLN. It was given to me. I still hold 66 shares of PPL, enjoy nice dividend and the price of the stock is still 12% up amid a small turbulence after the spinoff and current tornado in the stock market.

You may be interested in:
The Problem With Grace Groner (And Stories Like Her’s) by Nelson Smith at Financial Uproar

I can easily pretend that I haven’t received any new stock. But there is still that little doubt back in my head that now I have additional $154 which I can add to my savings and later (once I save more money using my commission free ETF strategy) buy a dividend growth stock. It could either be PPL or COP.

Keeping the stock is very appealing to me, but the pragmatic voice is strong too.

This is why I am asking you, my readers, what would you do in this situation? Hold TLN or sell it?

Let me know, what you think!

Image credit: WNEP
 
 



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