How to Eliminate Debt for Good

How to Eliminate Debt for Good

This is a guest post by Richard of Simple Living Australia, a personal finance blog out of Sydney Australia. They provide a range of information covering everything finance with an emphasis on getting out of debt and savings.

Extraneous spending and poor money management can result in personal loan and credit card debt. Unsecure debt can be a huge burden on families. The good news is that there are lots of changes you can make to get out of debt and stay out. Here are some tactics to accelerate the reduction of debt and take back financial control. These personal finance tips will help create positive financial habits.


  1. Create a Budget. This is the most important one right here. List all your monthly bills and necessities and make sure they are covered by your income. The remaining money can be spent as long as you stay within budget. Make sure to put part of your extra money into savings each month. A good rule of thumb is to save 10% of your income every month.
  2. Pay Off Your High Interest Card First. High interest credit cards cost you so much money. Pay off these accounts then close them. As long as you still have four accounts open you can establish a positive credit history.
  3. Switch to Cash. Use cash for your everyday spending and have the credit card for true emergencies. Cash will help you keep track of your spending. Don’t keep the card in your wallet, because it will be too tempting to use it.
  4. Cut Your Spending. Spend less money on dining out and entertainment while you are paying off your debt. Skip the vacation this year to save even more money. Treat yourself to something nice as a reward when your debt is paid off.
  5. Reduce Your Bills. You might be able to find a way to lower your monthly bills if you refinance a loan, shop for a better interest rate, and try to save money on your utilities. You can also downgrade your cable TV service or get rid of any monthly services you don’t use very often.
  6. Become a Bargain Hunter. Use coupons and deal websites to save money on your purchases. With a little extra effort, you would be surprised at how much you can save.
  7. Increase Your Income. Ask for a raise, get a part time job, or do some side projects to earn extra money.
  8. Pay More Than The Minimum Payment. If you want to pay off your debt, you’ll have to pay more than the minimum payment. Set a realistic goal so that you still have enough money left over for your regular expenses.
  9. Get Educated. Go to the library and check out some books about personal finance and getting out of debt. There are also many great resources on the Internet.
  10. Sell Items You Don’t Need. Everyone has items they don’t need just sitting around. Sell that treadmill you don’t use on Craigslist for some extra cash and put the money towards your debt.

If you follow some of these tips, you will be headed in the right direction and on your way to debt free living and be able to enjoy a simple living. Be patient and stick with it. You didn’t get into debt in one day, so it’s going to take more than one day to get out. Once you’re out of debt, invest, invest and invest!


Editorial note: There is nothing much I would add to this list. I like the idea saving money even during paying off the debt, because in my opinion this would start creating a cushion for your emergency so if something happens, you do not have to borrow money again. If you wait for you debt to be paid off and then start saving, you may be waiting for several years. The only thing I would say is try to save first before you touch the rest of the cash and make it a rule.

Reducing bills is another great option by evaluating what services you really need, such as a magazine subscription, extended cable subscription and so on. If you review your current situation you will be able to find some reductions. I did it a few years ago and found tremendous savings.

I still have problems switching into cash, because at the end of the month or two weeks I do not have much left, since a lot of my money goes currently towards the debt. A good strategy can be trying to create a one month salary reserve on your account and then start using cash, but you will always be spending last month (or bi-week) paycheck, not the current one.

And the last note is about investing. I have my own experience with that. My current interest I pay to creditors could easily completely fund my ROTH IRA account, so why paying it to the creditors when I can save it for my future? Isn’t that a great reason for eliminating the debt as quickly as possible?

How are you managing your cash to reduce your debt?



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My thoughts on chasing the dividends and dividend investing strategy

My thoughts on chasing the dividends and dividend investing strategy

I once held in my portfolio a stock which paid nice dividend and had a promising outcome as monthly dividend payer. Right before it collapsed. I was fortunate enough to get rid of the stock before it actually happened. I am talking about mREIT stock Armour Residential (ARR). This stock can be a great example of what to avoid and what not to do.

Although I do not own this stock anymore and here I wrote my reasons why I sold it I still like to watch this stock. I still have it in my watch list, charts, and I still visit a message board on Yahoo to read what others have to say about this stock.

I know that reading Yahoo message boards about any stock is a waste of time and there may be a lot of unreliable information, I still could get some great ideas out of there to think of.

One idea was that people do not understand mREITs and they shouldn’t invest in stocks such as ARR.

True. I do not understand mREITs. All I know that they make money by an interest rate spread between short term and long term mortgages they trade. I am not sure how exactly they do it, but they seem to be borrowing money on short term contracts and finance long term mortgages. If the 15 year mortgage rate is currently around 2.75% and the long term is at 4% (the numbers I am using here are not accurate and I used them just to illustrate the point), they make whatever the difference between these two numbers is.

How the information about mREITs business model can help you to determine whether it makes sense to invest in ARR?

Investing If you have time to spare and browse thru the message board about this stock, you get the impression that this stock has a lot of value and you know absolutely nothing about investing into mREITs. The stock trades at $4.85 a share and its estimated book value is at $5.50 a share. So many will argue with you that if you have bought below $5 a share you were buying at a great discount and you cannot lose. On top of that you would receive a hefty dividend every month. What can go wrong, right?

I really do know nothing about mREITs, actually this particular mREIT stock. I am just a simple dumb dividend investor, who at some point decided to stop trading stocks, because he was losing money doing that and started investing into dividend paying stocks using buy & hold strategy (and in my earlier posts on this block you will be able to find that I was against this strategy during 2008-2009). So ignoring the fact, that I do not trade and I do not buy preferred stocks of ARR, what’s left? The only what’s left is to buy ARR, hold, and collect hefty dividends.

Those who now say ARR has value in this stock, because it trades at discount to its BV I would like to know, what is the difference between today’s book value and price and a book value and price a few months ago?

A few months ago, the book value was at circa $7.8 a share (I do not have the very exact number) and the stock traded around this price. Then the company issued SPO (secondary public offering) and it came out that the new BV was $6.8 a share. The stock tanked to $6.5 a share. then a dividend cut from monthly rate of 0.08 to 0.07 and the stock tanked further down to $6.0 a share.

Per the logic above this was a great value! The BV was at 6.8, the stock traded at 6! and the yield was 14% even after the cut!

Later the whole sector got hit by an irrational fear of FED ending the stimulus (which actually may be positive to mREITs rather than negative) and the stock tanked even more.

Let’s take a look at price action history:

ARR disaster

This is the whole stock history. I try to keep my decision making simple and one of the metrics I look at is how the stock performed in the past. Although the past performance is not a guarantee of the future as every disclosure is telling you, I believe there is a clue in the past performance from the long term perspective. You can see from the chart whether the stock is steadily rising, going sideways, bumpy, or declining and in what time frame this is happening.

A human mind has a tendency to prorate such behavior into the future. You may be wrong on that, but from a 20 – 30 year time perspective you can easily see, what the stock was doing and what most likely will be doing in the next period. Although it is not a 100% guarantee that it will really happen, it is a solid clue how the stock may perform.

When taking look at ARR chart and compare it with any other dividend paying stock such as JNJ, KO, or even AGNC (the closest competitor of ARR), you will see a totally different picture:

ARR more disaster

(Click to enlarge)

From the price action I can see that no matter when I would ever buy into ARR, I would be sitting in a losing position. Unfortunately, monthly dividends wouldn’t be able to make up for the capital loss.

Let’s take a look at another chart:

Dividend comparison

(Click to enlarge)

The chart shows dividend growth for each stock for the same period (ARR adjusted to quarterly dividend).

Summary of reasons why not to invest in ARR

  • The company provided several SPOs over the time of its existence diluting shareholders.
  • The company was cutting its dividend since the beginning and never increased it.
  • The company’s book value was declining since the beginning.
  • The dividend cuts along with declining BV ended up in a constant price loss (currently the stock has lost 47%).
  • The dividends were never able to keep up with the capital loss. the best outcome you could get is to get break even.

I really do not understand mREITs, because I do not see, how a dividend investor could ever make money investing in this stock. Asking some of those in the Yahoo message board makes no sence, because they will immediately tell you, that you have no clue how to invest in ARR. With AGNC, which I own in my ROTH account and although they cut their dividends I have at least capital gains, so it make sense for me to stay invested. But ARR?

Well, do you know and understand how these investors invest in stocks such as ARR?


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1 Comment

We need vacation to rest from our vacation (and trades I made during my vacation)

We need vacation to rest from our vacation (and trades I made during my vacation)

Do you also feel tired when you return from your vacation and the first day at work you wish you had more vacation to rest from your vacation you just spent? Well, this is exactly my case.

We had fun in Disneyland. It was tiresome, we spent a horrendous money (although I saved for this we exceeded our budget), but we had fun and it was worth it.

One thing, which made me mad (and wasn’t worth it) was waiting time for rides. We planned to visit Disneyland early before majority of people arrive. But we were unlucky. The very first day, the park was somewhat empty and our waiting times were short (sometimes around 15 – 20 minutes). But then the next day we hit elementary schools and colleges graduation times and schools were pushing buses of noisy teenagers into the parks.

The park was literally full of kids. One day we counted some 50 school busses on the parking lot. The waiting periods rapidly raised to one to two hours and some rides we waited for three hours! (The tower of the terror).

But overall we were excited and happy. I have never been to Disneyland myself so I enjoyed it myself (and I wasn’t alone as we saw many adults riding rides dedicated for little kids and apparently they were enjoying it too, since they rode some rides more than once).

Although at Disneyland, I watched my investments. Every night I reviewed my accounts. Some were on autopilot so I just reviewed what happened and if a planned event happened, some accounts needed a slightly active approach, but it took me only a few minutes every night.

Here is the report what happened during my time off:

Trade adjustment – Kinder Morgan Partnership (KMP) addition

I planned this trade and I had a contingency order in place to buy a few more shares of KMP if the stock continues lower and then reverses. It happened on June 10th and I bought 11 more shares of KMP.

As of today I hold 22 shares and I increased my dividend income to $114.40 annually (from $57.20 previous payout).

Trade details

06/10/2013 10:04:39 Bought 11 KMP @ 84.2001

Stock details

Total shares held as of today: 22
Estimated annual dividend: $114.4
Consecutive Dividend Increase: 16 years
Dividend yield today: 6.23%
Dividend 5yr Growth: 7.43%
Dividend paid since: 1992

My next trade was an option adjustment

Trade adjustment – Corning (GLW) put roll over

In my portfolio I held a short August 17, 2013 put position for GLW at 12 strike. This put already became worthless as the stock progressed higher over time.

I decided to no longer wait for expiration day to release my cash tied to this position (although a little cash) and bought back this put contract. Originally I sold this contract for $78 premium and bought it back for $7. Nice profit. For that I sold a new November 16 put contract and collected 115 dollars premium.

Trade details

06/13/2013 14:17:23 Bought 1 GLW Aug 17 2013 12.0 Put @ 0.07
06/13/2013 14:17:48 Sold 1 GLW Nov 16 2013 15.0 Put @ 1.15

If I get assigned to GLW, this trade lowers my potential cost basis of this stock to $13.14 a share.

That’s basically all what happened last week. i am back in the rat race and in a blogosphere.


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Posted by Martin June 08, 2013


Time for vacation

Not that I am taking a vacation because of reaching my Yakezie goal, but it was time to recharge the batteries. We are spending a week in Disneyland. We planned for this vacation for some time and the day has arrived. I will be posting and be active with my blog rarely for this week.

So have a great time, stay on top of your investments and savings (I will be although at vacation) and I’ll be back next week.


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Posted by Martin June 04, 2013


Yakezie challenge completed!

Proud Member of Yakezie A few days ago I completed my Yakezie challenge! I broke thru 200k Alexa rank as it currently reads:


I would like to thank you all for helping me reaching this goal. This accomplishment however won’t stop me from striving to provide a better content about investing.


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Trade Adjustment – Armour Residential (ARR) option trade – put roll over

Trade Adjustment - Armour Residential (ARR) option trade - put roll over

As time was running short in regards to this trade I decided to take action to avoid assignment of Armour Residential (ARR) stock. It is a risky move and I completely know it. I was thinking about it and although I am incresing my risk by doing this I decided to take it.

Armour Residential was recently beaten down by two events. One was a fear of FED ending the stimulus (which I however think isn’t a bad thing for this type of REITs) and the second fear is the fear of rising interest rates, which would make bonds more attractive over dividends.

I consider both reasons as bullsh*t, and I think that dividend paying stocks will beat bonds over long haul no matter what interest rates we will have in the future, as was proven in the past anyway.

The rates hasn’t changed yet and the stimulus hasn’t changed yet either. So all the selling now is like throwing out your life buoys out of your ship because the Captain announced that the ship entered into an iceberg field.

However, as this panicking selling of dividend stocks is generally good for us, dividend growth investors, it wasn’t good for my ARR short put trade.

I no longer believe in this stock and I no longer want to hold it.

I held a July short put contract and as we were approaching to the expiration day next month, I decided to move this trade farther away in time to avoid early assignment.

I bought back my original contract and sold 2 new contracts far in January 2014. By doing so, I bought more time and collected more premium. I also took more risk. If it ever happens and I get early assigned, I doubled my risk and now I am risking twice as much as I risked originally.

If the stock gets back up, the contracts will lose value and I will either buy them back or let them expire.


06/04/2013 09:30:57 Bought 1 ARR Jul 20 2013 7.5 Put @ 2.79
06/04/2013 09:30:57 Sold 2 ARR Jan 18 2014 7.5 Put @ 2.9


Time will show and I will have to wait until January 2014 to see the results.

Happy Trading!


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Posted by Martin June 02, 2013


My inspiration in the last week #24

My inspiration in the last week #24

This week I would like to present the following interesting web sites and links.

I often browse the internet to find ideas about investing, trading stocks, options, investing opportunities and strategies. I like to read about investors and what their investing/trading approach to create income you can live on is.




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Dividend paying stocks worth adding to portfolio

Dividend paying stocks worth adding to portfolio

Although the markets are undecided in the trend, which seems to be slowing down, some stocks continued with sell off today. I am not watching all stocks, but some, mainly dividend paying stocks. And these are under pressure. My almost entire watch list is in red.

Some stocks are retreating slowly in small amounts, some have substantial declines. And those are now worth to consider adding them.

American Capital Agency (AGNC)

A real estate investment trust (REIT). The Company earns income primarily from investing on a leveraged basis in agency mortgage-backed securities. These investments consist of residential mortgage pass-through securities and collateralized mortgage obligations (CMOs) for which the principal and interest payments are guaranteed by government-sponsored entities, such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), or by a United States Government agency, such as the Government National Mortgage Association (Ginnie Mae) (collectively, GSEs). It may also invest in agency debenture securities issued by Freddie Mac, Fannie Mae or the Federal Home Loan Bank (FHLB). The Company is managed by American Capital AGNC Management, LLC, which is an affiliate of American Capital, Ltd. (Source: Thomson Reuters)


Dividend Yield: 18.80%
5 yr. Dividend Avg. Growth: 0.00%
Consecutive Div. Increases: 0 years
Gross Margin:
Cash Flow: 852M
Cash per share:
Dividend Rate: 5.00

The Coca-Cola (KO)

The Coca-Cola Company, incorporated on September 5, 1919, is a beverage company. The Company owns or licenses and markets more than 500 nonalcoholic beverage brands, primarily sparkling beverages but also a variety of still beverages, such as waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks. It owns and markets a range of nonalcoholic sparkling beverage brands, which includes Coca-Cola, Diet Coke, Fanta and Sprite. The Company’s segments include Eurasia and Africa, Europe, Latin America, North America, Pacific, Bottling Investments and Corporate. In September 2012, it acquired approximately 50% equity in Aujan Industries’ beverage business. In January 2013, Sacramento Coca-Cola Bottling Company announced that it had been acquired by the Company. Effective February 22, 2013, Coca-Cola Co acquired interest in Fresh Trading Ltd. Effective February 22, 2013, Coca-Cola Co acquired interest in Fresh Trading Ltd. (Source: Thomson Reuters)


Dividend Yield: 2.60%
5 yr. Dividend Avg. Growth: 8.35%
Consecutive Div. Increases: 50 years
Gross Margin: 64.5%
Cash Flow: 1,243M
Cash per share: 2.06
Dividend Rate: 1.12

Realty Income (O)

Realty Income Corporation (Realty Income) is an equity real estate investment trust (REIT). The Company is engaged in acquiring and owning freestanding retail and other properties that generate rental revenue under long-term lease agreements (primarily 10 to 20 years). The Company has in-house acquisition, leasing, legal, credit research, real estate research, portfolio management and capital markets. At December 31, 2011, it owned a diversified portfolio of 2,634 properties with an occupancy rate of 96.7%, or 2,547 properties leased and only 87 properties available for lease. It leased properties to 136 different retail and other commercial enterprises doing business in 38 separate industries. It properties are located in 49 states, with over 27.3 million square feet of leasable space, and with an average leasable space per property of approximately 10,400 square feet. In January 2013, it acquired American Realty Capital Trust. (Source: Thomson Reuters)


Dividend Yield: 4.20%
5 yr. Dividend Avg. Growth: 3.89%
Consecutive Div. Increases: 15 years
Gross Margin:
Cash Flow: 149M
Cash per share:
Dividend Rate: 2.17


PPL Corporation (PPL) is an energy and utility holding company. The Company operates in four segments: Kentucky Regulated, U.K. Regulated, Pennsylvania Regulated and Supply. Through its subsidiaries, PPL generates electricity from power plants in the northeastern, northwestern and southeastern United States; markets wholesale or retail energy primarily in the northeastern and northwestern portions of the United States; delivers electricity to customers in Pennsylvania, Kentucky, Virginia, Tennessee and the United Kingdom, and natural gas to customers in Kentucky. As of December 31, 2012, the Company’s subsidiaries were PPL Energy Supply, LLC (PPL Energy Supply), PPL Electric Utilities Corporation (PPL Electric), LG&E and KU Energy LLC (LKE), PPL Global, LLC (PPL Global), PPL EnergyPlus LLC (PPL EnergyPlus), PPL Generation LLC (PPL Generation), Louisville Gas and Electric Company (LG&E) and Kentucky Utilities Company (KU). (Source: Thomson Reuters)


Dividend Yield: 4.80%
5 yr. Dividend Avg. Growth: 3.01%
Consecutive Div. Increases: 13 years
Gross Margin: 41.7%
Cash Flow: 2,713M
Cash per share: 1.44
Dividend Rate: 1.47

AT&T (T)

AT&T Inc. (AT&T) is a holding company. AT&T is a provider of telecommunications services in the United States and worldwide. Services offered include wireless communications, local exchange services and long-distance services. AT&T operates in four segments: Wireless, Wireline, Advertising Solutions and Other. Its Wireless subsidiaries provide both wireless voice and data communications services across the United States, and through roaming agreements, in a substantial number of foreign countries. Wireline subsidiaries provide primarily landline voice and data communication services, AT&T U-verse TV, high-speed broadband and voice services (U-verse) and managed networking to business customers. AT&T’s Other segment includes customer information services (operator services) and corporate and other operations. On May 8, 2012, AT&T sold its Advertising Solutions segment. (Source: Thomson Reuters)


Dividend Yield: 5.00%
5 yr. Dividend Avg. Growth: 3.36%
Consecutive Div. Increases: 8 years
Gross Margin: 56.8%
Cash Flow: 29,429M
Cash per share: 0.72
Dividend Rate: 1.80

There are definitely other companies available which are recently declining, but the above companies I have in my portfolio (except Coca-Cola) and my rules are now to accumulate instead of buying new companies into my portfolio. I described my rules in this post how many companies I want to hold in my portfolio based on the size of the portfolio. I am not strictly following that rule, however, I want to be accumulating more rather than adding new companies.

Happy Trading!


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Posted by Martin May 30, 2013


Next dividend paying stock worth adding to my portfolio – Kinder Morgan Partnership (KMP)

Next dividend paying stock worth adding to my portfolio - Kinder Morgan Partnership (KMP)

Stock sell off on every battle front continues. Well not every battle front but this shout sounded appealing to me so I used it. Yesterday and a few days ago I was interested in Realty Income, which fell from its parabolic run to sky heights. So it was obvious that it would fall. Many stocks had similar run up pattern, for example PPL or JNJ to name a few.

I am still very interested in adding more Realty Income shares to my portfolio, but my exposure to REITs industry is already too large and I need to look at other opportunities the market is now providing.

I have a few stocks in my portfolio which are now getting lower such as AT&T (T), KMP, MCD, and NGLS. Right at this moment, the most appealing stock to me is Kinder Morgan Partnership. As of this writing it is down -2.18% and it broke thru 200 day MA (see the chart below).

Kinder Morgan

When taking look at the 5 year chart, you can see similar dips along the way:

Kinder Morgan charts

(Click to enlarge)

Look at the bumpy road on the right lower corner in the smaller window showing 5 yr chart. KMP was growing and every time it touched 200 day MA, it bounced and continued higher. If you pull a chart on Yahoo.com and select maximum time frame, this trend is even more apparent.

Of course, this isn’t a guarantee, that KMP will behave this way in the future, but we can expect, that it will most likely do so.

Here are some numbers, why I like Kinder Morgan Energy Partnership

Dividend Yield: 5.90%
5 yr. Dividend Avg. Growth: 7.14%
Consecutive Div. Increases: 16 years
Gross Margin: 47.3%
Cash Flow: 3,134M
Cash per share: 2.85
Dividend Rate: 1.30

KMP’s operations span the entire midstream energy space, with a network of pipeline and storage assets that crosses the continent and is capable of transporting and storing natural gas, natural gas liquids, crude oil, refined product, and ethanol. Kinder even does a fair amount of business handling coal and steel for export in its terminals segment. With its presence in many segments and dominance in some, Kinder routinely earns well in excess of its capital costs, supporting its wide moat rating. In this business, the bigger the asset footprint, the greater the opportunity set for new investment, allowing firms like Kinder with competitive advantages to maintain their competitive position. (Source: Morningstar)

Although there is risk with this company (mainly regulatory and legislative risk), I think this is a good company and I am taking advantage of the recent price drop to add more shares to my current holdings.

If the last of KMP is greater or equal to 87.01
Buy 11 KMP at limit $87.01


There are other great companies which suffered loses and broke thru 50 day MA which I would consider adding. Among those I mentioned above the hottest candidates would be addition of MCD and opening a new position in Coca Cola company.


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Mr. Market’s bad mood seisure

Mr. Market

The stock market is in a selling mood. But the selling isn’t that bad yet. It can get worse, although today the DOW was losing a triple digit loss.

When I woke up this morning – and I heck didn’t want to – I saw my account completely in red. The biggest losers were REITs and since my account is quite exposed to REITs I was losing a lot.

One idea struck me when looking at my account

I saw Realty Income losing a lot this morning… Well, still not that bad as AGNC or ARR or other REITs. And I was thinking why investors would be dumping Realty Income along with AGNC, AVB, EQR, ARR, and others.

Realty Income is a totally different business compared to AGNC, for example. I even cannot grasp why people are afraid of stocks like AGNC or ARR if the FED stops the stimulus. And I would appreciate my readers if you can educate me a bit thru the comments.

But here is how I see it

Many times I read and heard that FED stimulus caused REITs to shrink their margins and thus their ability to make money due to very low interest environment. I heard that their space for profit was very narrow. So my understanding was, that it would be better if the spread between interest rates on mortgages increases. So I felt FED actions to be bad for REITs.

And yet REITs ran up like a crazy horse

But that is (or should be) true when talking about REITs investing into MBS (mortgage-backed securities) such as AGNC, ARR and others named above.

But why the heck people would be dumping Realty Income, which owns properties and make money on renting it. This company has nothing to do with mortgages and any sort of MBS trading. Their risk is in a totally different zone. Their problem could be in tenants not paying on time or at all, inability to rent and have their properties vacant, etc.

The market was overbought and Realty Income was overbought as well, you can clearly see in any long term chart. But this sell off based on FED tapering the stimulus is just a pure excuse to profit taking and some short selling.

The only thing which makes me mad is that I bought too early yesterday. But sometimes that happens in the markets.


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