Posted by Martin February 14, 2018
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Mind Over the Market – Trading Psychology


 

 






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Weekly Results – Feb 10, 2018


Weekly Results
 

The last week was brutal to say it nicely. The market lost over 5% in that week and our portfolios followed.

The selloff however, provided a great opportunity to buy new shares of now once again cheap stocks. Last week we purchased the following shares:
 

Realty Income (NYSE: O) 11 shares at $47.84 a share
Coca Cola (NYSE: KO) 12 shares at $43.31 a share
Valero Energy Corporation (NYSE: VLO) 6 shares at $87.5 a share
Berkshire Hathaway (NYSE: BRK-B) 3 shares at $194.66 a share
 

I always wanted to buy Coca Cola and this was a great opportunity in my opinion. And if the stock drops more in coming weeks I will buy more shares.

 
This is an excellent opportunity! Look at our current watch list! Almost all stocks are in a correction mode and it is now difficult which stock to buy first!

 
Watch list
 

 

 · What happened last week with our accounts?

 

As you can see above our accounts got a large hit by the selloff last week. However, we had a nice income also. The losses are all related to increased volatility of our options positions and not by closing the positions at a loss.
 

TD account – we continued liquidating bad trades, thus our income was down and our net-liq dropped slightly. The larger drop was also caused by increased volatility and if the market stabilizes this drop should remain temporary

IRA account – we made nice income this week and for the month. However, the account is also down due to many trades being rolled down and away in time and increased volatility. If we see the market doing well again and volatility drops, the value should return back up to the original value.

ROTH IRA account – Very little change in income this week. Also, the account is down due to many trades being rolled down and away in time and increased volatility but not as much as other accounts due to less trading activity . If we see the market doing well again and volatility drops, the value should return back up to the original value.

TW60 account – Unfortunately, I was forced (maybe prematurely) to roll the position in this account for debit which cause a loss of income. Still positive for the year though. Also the net-liq loss is caused by a volatility rather than closing positions at a loss.

As Warren Buffett says” “the market selloff is good news
 

As of now I am not opening any new trading positions in any of the accounts, I will keep buying stocks however and managing the existing open trading positions (rolling or adjusting). Once the market gives a clear signal whether we want to go higher again or down, I will start opening new trades.

 

 · What’s the outlook?

 

This bull market is not dead by any means. I believe, we will see new all time highs again soon. The 200 DMA was touched, held as a support and stocks sparked up by the touch. The rally from 200 DMA on Friday was really crazy.

Historically, when the market rallied and made 4% gains in the past 2 months, made 1 new all time high in those two months, it then corrected and wiped out all those gains in 7 days. And that is exactly what happened this time too. History repeats itself.
 

We saw this in:
 

December 1950
October 1955
October 1979
September 1986
February 1993
January 2010
and the last week!
 

In fact, this is a very bullish setup for the markets!
 

We still see a large momentum in this bull market and economy (great earnings, increasing sales, consumer confidence, raising salary, etc.) and bulls do not die at rising momentum! Bulls die when the economy loses steam, inflation gets high, interest rates are high, etc. We see none of it. Interest rates are still way below normal, rising salary is also way below the average, inflation is also historically low and not increasing although many are scared of it.

Look at it this way, we had a decade of sluggish recovery, cheap money, low inflation, all stunningly below normal. Many were afraid of it and were predicting another disaster and economic collapse. And now, when the economy is finally improving and the rates, inflation, GPD, and salary is returning back to normal those same people are scared again! Scared of economy doing well! Scared that if we make too much money, too good earnings, too good sales, then we will collapse again!

What a bullshit!

Do not listen to those people. Keep following your plan, invest and stay in your comfort zone. All will be good in 1 to 2 weeks!
 






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Posted by Mark Pokorny February 10, 2018
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4 Mortgage Myths to Forget Now

4 Mortgage Myths to Forget Now

When you are getting ready to buy a home, you need to start looking at mortgages. Almost everyone needs a mortgage, and unless you have a lot of experience, it can be difficult to understand everything about your mortgage. There are a lot of myths out there, so here are a few you should ignore.

 

 · You Need Perfect Credit

 

One of the most common falsehoods about getting a home loan is that you need a perfect or near-perfect credit score. Mortgage lenders take into account more than just credit. You may have no debt or high income that could make up for the lower than average credit. There are many loan products available geared specifically for people in credit repair or who are working on boosting their score. However, if you have a low credit score, you are going to have a higher interest rate. Anything below 500 may disqualify you from some types of loans and even being below 580 makes it difficult, so don’t neglect your credit.

 

 · You Need a Large Down-Payment

 

Many potential homeowners put off buying a house because they believe they need at least 20% down payment just to get into the home. This is simply not true. The US government has backed a mortgage program through the Federal Housing Administration (FHA) that will allow a down payment of just 3.5%. The FHA encourages homeownership by working with buyers who may have lower credit scores and allowing for smaller down payments.

However, just because you don’t have to put much down on a house, doesn’t mean you should put the least amount possible. The lower your down payment, the higher your monthly payment will be. If you can afford a 20% down payment, the benefits are definitely worth it.

 

 · Every Mortgage is the Same

 

There are different types of mortgages, depending on how much you are borrowing and what kind of mortgages your lender offers. If you already have a mortgage on your home and you aren’t looking to move, you can even refinance your mortgage, to allow for a different interest rate or lower monthly payments. It’s important to look at the different kinds of loans that may be offered and use that research to make a decision about what kind of loan you are applying for, so you end up in the best situation possible.

 

 · Pre-Qualified Guarantees a Mortgage

 

Being pre-qualified for a mortgage only indicates that the mortgage lender has looked at your income and credit report and can give a reasonable estimate of the amount you would qualify for. Once you have been pre-qualified, you may be pre-approved. Pre-approval means the lender has vetted and verified your income, assets, debt, and financial history. While both of these are good indicators of what your mortgage will end up looking like, nothing is final until you have signed the papers.

If you are uncertain about what you have been offered by your lender, don’t be afraid to talk to your real estate agent or get a second opinion. It’s important that you don’t fall prey the myths surrounding your mortgage.






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Posted by Martin February 09, 2018
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When Stocks Go Down, It’s Good News!


 

 

 






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Posted by Martin February 09, 2018
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Markets recovered almost all day losses in one swift swing


As soon as S&P 500 touched 200 DMA investors jumped in in a fast and swift buying and propelled the market up pairing almost all intraday losses.

 
S&P500
 

The 200 day MA seems to be holding as a support for now as we bounced. If the support holds we may see more buying coming in and we may be on a path of a recovery. But I still expect a lot of volatility and choppiness before we find a proper direction.

As a trader, I am staying out meaning no new trades but managing the old ones. I am preserving a capital. I might be opening a new trade only if safe.

As a long term investor, I am adding cheap stocks to my portfolio.

Stay the course and stick to your plan. Let other panic.






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Posted by Martin February 09, 2018
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Stocks plunge another 37 points, now -11.13% correction from ATH


The market opened relatively strong luring investors getting in just to toast them later afternoon. But volatility and weakness returned and the market lost another 37 points adding to yesterday’s 100 point losses.

S&P 500 is now down to 2,546 losing 37 points (-1.43%), DOW is down 23,512.49 losing another 347.97 points (-1.46%), and Nasdaq is down by 127.08(-1.88%). This is a second day of a correction deepening it to -11.13% from all time high.
 

We are now approaching 200 DMA which may work as a support:
 

S&P 500 support
 

A typical correction is 13% and it will take 4 weeks to recover from the correction (so the seasonal patterns say). Expect more pain in the next few weeks.






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Posted by Martin February 08, 2018
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Why the freakout? History shows rising rates have been good for stocks


  • Using Kensho, a hedge fund analytics tool, CNBC looked at what happens during major periods of rising interest rates.
  • The findings show the market rose big during five of six instances and only fell slightly during the one lagging period.
     

Bonds
Getty Images
 

The stock market is plunging on rising interest rates worries, but perhaps investors shouldn’t be so concerned.

A stronger-than-expected jobs report and wage number on Friday sent interest rates higher, sparking a sharp 6 percent sell-off by the S&P 500 over two trading sessions. The market is dropping again Thursday.

Traders are concerned the Federal Reserve may reduce its monetary stimulus and increase interest rates more aggressively as the economy continues to strengthen.

 
Major periods of rising interest rates
 

Bonds
Source: FactSet
 

Using Kensho, a hedge fund analytics tool, CNBC looked at what happens during periods of major increases in interest rates using the 10-year Treasury yield over the last 30 years.

 
Bonds
 

The findings show there were six periods with major rises in interest rates in the last three decades. The market rose big during five of those instances and only fell slightly during the one lagging period.

 
Bonds
 

The S&P 500 rallied 23 percent on average in the time periods.

CNBC also looked at the sectors which climbed the most during the rising interest rate time frames.

 
Bonds
 

The screen showed technology stocks did well, followed by consumer and financial stocks.

Investors are freaking out this month, but higher rates have been good for stocks in the past. Or at the very least, stocks were able to rise alongside higher rates.

Likely because accelerating economic growth was pushing earnings higher at the same time.

Past performance does not always equal future returns and of course it could be different this time.

But in the past, higher rates didn’t equal lower stock returns.
 

S&P after big single-day drops from CNBC.

 

Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.
 

Source: CNBC
 






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Posted by Martin February 08, 2018
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-10.13% from ATH


The market just entered a healthy correction when it felt for second time more than 100 points in a day (-3.75%). Unless you got caught in a wrong trade this sell off is a great opportunity to buy more shares of cheap stocks.

Unfortunately, people blow up their accounts or are fully invested and they cannot take advantage of this event. To many, the correction look more like a crash (to me too in fact). And many got scared. Many now think, this is the end of the world, bear market from which we will not recover.

 
S&P500
 

But this is not an end!

I met an investor who asked me to trade his account, so I did. Everything went well until this correction hit the markets and everything went south. He said, he could no longer bear the pain and he closed all his positions. Realizing huge loss. Panicking.

But there is no need to panic. This sell off is not the end of this bull market and we will see more growth. We just went so up lately that this correction was needed.

If you are participating in the markets, you must have a plan! You must know what you are doing! Many people out there have no plan! A few do, but do not stick to it.

 
There is a saying: “Everybody is a long term investor until the next bear market.”
 

Don’t be one of them!

If you are an investor, have your goal in front of you during the days like this. Remind yourself about your time horizon for which you are investing! If you are an investor, you are not in the markets for the next 20 days! You are invested for the next 20 years! Have that always in your mind!

And if you are in the market for the next 20 years, then sell offs like this is nothing, it means nothing but it creates a great opportunity to be buying cheaper. Or at least reinvesting your dividends cheaper!

Let me repeat it:

Long term investor – stay invested, do nothing, do not sell, buy more!

But make sure you are buying a good quality stocks, dividend stocks! Do not listen to anyone who says dividend stocks are worthless and that they won’t make you enough money. Those who say this do not understand how dividend stocks work.
 

Here is my dividend stocks watch list. I do not even know which stocks to choose from. All are in a correction mode and great candidates to buy:

 
Watch List
 

I wish the list would stay like this longer so I can keep buying high quality stocks.
 

And what if you are a trader?
 

You too have to have a plan! And strictly follow it. In my last post I wrote about selling options with delta 16 or less and people kept telling me that I am wasting my money, risking too much to make too little.

A few years ago I would agree with them.

Not anymore. I came to realization that I want to make money but I want to make money safely, preserving capital. Capital I used originally to trade and capital I made.

After a week and a half of large losses the S&P 500 entered officially correction.
The market dropped -10.13% today.

And thanks to my delta 16 options I am still alive.

Of course, it is not just the delta which helped me to sustain this carnage but also my money management and strictly investing no more than 50% of my available capital (although today many trade repairs ate much of the capital, I am still near 50% limit). And I am still floating!

Although my “ship” looks like this after a week in the markets:

 
battleship
 

But, if you are still floating, you can repair your ship and continue the journey. How do you keep floating? Stick to your rules to overcome the bad days in the market. Use margin sparingly mainly when the market makes new highs, do not over trade, and do not be greedy! I sometimes struggle with this and later I regret it.

If you follow my blog or Facebook group you know that I was guilty of over trading my accounts. And I paid dearly for that!

As of today, most of my accounts are now back on track and protected. Even with this huge selling, I should start making a progress towards my trading to independence goal.
 

The good thing on all this is that VIX didn’t spike too much (very little gain compared to Monday’s “crash”, higher than yesterday but only by a small margin and definitely not matching Monday or Friday levels) so this leg down looks more like a standard re-test of the previous lows. Usually, VIX will start making lower highs although the market may continue making lower lows but this is a bullish sign for the market.

 
VIX
 

We have officially fulfilled a 10% correction today and although we may see some downward drift smart money will be buying here (and I dare them not to).

There is an analogy to 1987 market when Reagan cut taxes (in 1986) and it propelled the market to all time high after that well into 1987 so we may expect Trump’s tax cut to have a similar effect. If so, we will see this market going higher to ATH one more time before it finally loses steam and possibly reverses into a bear market.

So, now, it is about surviving this turmoil without a big damage (bigger than your account can handle) and later we will see some nice relief and those who remain standing will see nice profits. But, be aware, we are most likely in a final stage of this bull market.

 
As of now, my IRA account lost over $14,000 dollars of paper losses. I didn’t close any of my positions for a loss. I rolled my trades down as much as possible. And i am closing my trades for a profit or they expire worthless. And I fight to keep those trades up and floating. And once this selling is over, and it will be over, the account will once again return up to its original value (provided I will not have to close the trades for a loss).

Stay safe, stay calm no matter how difficult it may be or seem to you. This selling is temporary and it will not last forever.






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Weekly Results – Feb 03, 2018


Weekly Results
 

With one of the largest selloff in recent few years our Net liquidation values (Net-Liq) got obviously a hit. Great gains (on paper) turned down in a day. But it happened only due to a spike in volatility. As of now many of our trades are still in good shape thanks to trading our 16 delta options. Yes the stocks dropped but many are still above the strike and if the market settles down next week, those trades will be great and many probably close for a profit. There are only about two or three trades which will need attention.
 

However, on the “slump day” we could trade frequently to the downside and we were selling many credit call spreads on SPX bringing in nice profits as the market continued lower. You can review those trades on our Facebook Page.
 

What to do next?
 

I recommend staying cautious and don’t be aggressively bearish nor bullish. We need to see what this market wants to do next. I will be most likely staying aside unless I see a great opportunity and just keep managing the existing trades. I may enter a few short term trades on SPX but I cannot say as of now. I do not think this selling was a beginning of a bear market as there is a lack of catalyst to it, so this may be just a correction or a bit deeper dip.
 






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Posted by Mark Pokorny February 02, 2018
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Five “Bad” Home Investments That Are Actually Good

Five "Bad" Home Investments That Are Actually Good

As a homeowner, have you ever made an investment or upgrade to your property that others seem to question? Your home is your castle to do with what you want, but in making the right upgrades and investment choices for your home, you won’t just enjoy short-term benefits. You’ll be adding to the resale value of your home as well. Some of these upgrade choices that can increase home worth aren’t immediately obvious. Some may even seem counterintuitive. Read on to learn how to pick investments that everyone considers a winner.

 

 · Have Your Home’s Interior Professionally Painted

 

Yes, it’s a good deal cheaper to buy the supplies and paint those rooms yourself, but despite those hardware store commercials that make DIY painting look fun and effortless, most efforts look fairly amateur. And even if rooms are painted in neutral colors, potential buyers can be turned off by the appearance of a home in general by badly painted rooms. Other advantages of working with professional painters include speed, avoiding damage, and getting guidance on paint choices that are easy to maintain and durable.

 

 · Professional Landscaping Services

 

No, you’re not lazy in seeking the services of a professional landscaping company. Regular attention from the pros means a healthy yard that discourages invasions from undesirable plants and prevents erosion. The assistance of landscapers means that planted trees and newly established gardens are more likely to survive and flourish, providing an attractive outdoor eyeful to prospective buyers. It’s a good start to help your home for years to come.

 

 · Installing A Home Security System

 

If you live in a quiet and crime-free neighborhood, there may not seem to be a practical need to install a home security system. But unfortunately, these neighborhoods are very popular with thieves. And in addition to deterring or catching burglars, home security systems have features that detect and report fires as well as summon emergency services for impaired members of the household in an emergency. Some even have added head sensing smoke detectors that can alert you before a fire starts.

 

 · Simple Upgrades

 

If you’re planning to invest in remodeling in order to sell your home, you might as well go big, right? Actually, a 2015 study conducted by Remodeling Magazine revealed that prospective buyers found smaller upgrades more attractive than large ones. So before installing that granite kitchen island, perhaps consider simply repainting those kitchen cabinets instead.

 

 · Professionally Refinished Floors

 

Wall to wall carpeting is so 1980s. And if refinishing floors wasn’t easy, why do those stores rent sanders? But it should be noted that work done with this equipment by DIYers has resulted in everything from badly uneven surfaces to house fires. Not only do professionally done floors look fabulous, they guarantee floor preservation for decades, not to mention protecting the rest of the house.

 

“Bad” home investments are ones that threaten lives or property. They are ones that drain bank accounts without offering returns or pleasure. Otherwise, well-educated homeowners should be willing to boldly explore a variety of investment options for their property.






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