Gerald Celente – publisher of the Trends Journal – talking about the US economy. Gerald explains what kind of effect Fed hikes will have on currencies, markets and the global economy at large. And he gives us his take on what’s happening with oil plus much, much more as outlined in his latest Trends Journal.
Mark my words, the USA will slip into recession by the end of 2016, at 2017 at most.
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I just finished a trade which gave me a hard time a bit. I was expecting the market to be silent with a bias towards down, so I opened a bear call spread. However, although volume in the market was low, S&P 500 managed to push higher this week and endangered my trade.
Fortunately, it still closed below my short strike and even though I was completely wrong on this trade, I ended up with a profit. You can follow my trades for free at my Facebook Group I created in lieu of the newsletter (because the group is easier to maintain and manage). You can join. It is free and you will be able to track all my options trades and if you like them, you can even mirror those trades.
Santa rally officially starts next week. Usually five days after Christmas and two days into the New Year are considered a Santa rally. But will Santa arrive this year? This week we saw markets recovering from last week’s losses and it pushed higher than I expected. This may be a good push and indication that we may see a Santa rally for the rest of the year.
We will see next week. If the market continues pushing higher, I will be adding some bull put spreads to my options trading account and ride the rally. If weakness persists, I will be adding more bear call spreads. Next week will be important to my next trading.
This will be also important to the overall trend. As I posted a chart of the current trend last time I pointed out that my outlook is bearish. Let me re-post that picture:
And now, let me show you the same picture cleaned a bit without all the noise around. I removed everything which could be distractive and just left the regression channel I use to determine how the market would probably act.
I added big magenta arrows pointing to the upper channel trend lines and lower channel trend lines. Also, in between, you will see a median line. As of today, the market bounced from the median line heading upwards towards the upper channel trend line.
And here comes the fruity part. Before August 2015 the channel was trending up. What changed it? Well the sudden drop in August made the damage. The premise of this charting study is, that the price tends to stay inside the channel as long as it breaks out. If it breaks out, however, it still means nothing to the trend. It must break the channel and stay there for some time. The longer it stays out of the channel, be it below, or above, the more likely the trend is going to change.
And that’s what happened in August 2015 and since then, we have a down sloping trend.
I also added dashed lines on top of each regression channel trends. They project the channel into the future as you can see for yourself, it also shows me how the channel is changing over time.
The channel lines are changing based on the price (I track 9 months time frame) but the dashed lines don’t. They stay static, they do not move. If the channel starts sloping down steeper than it is today, I will see it. If it starts turning upwards, I will also see it as a difference between the new channel trend lines and static dashed lines.
As you can see, as of now, there is no change in trend what so ever. The new channel trend lines are following my dashed lines in a perfect alignment (I put the lines on top of the channel at the end of September). This means, we are heading further down and if nothing changes the prices will be dropping in the near future.
So why is Santa rally important?
Santa can break this downtrend. If in the next 7 or so days the Santa pushes the price towards the upper trend line (somewhere between 2100 – 2110 level) and the price manage to stay there for longer time or will be bouncing at the top of the trend then we may see a reversal in trend and I will become bullish again. If Santa fails, we will again head down.
What’s also positive here is that we are bouncing from the mean level to the upper level and not opposite. This can also move the market higher. But as of now, do not expect much. Rather, expect the market trading inside that sloping channel.
As many of the bloggers who blog about their investing we put some, or all of our yearend bonus towards our investments. I do the same. Part of my bonus goes to my 401k account automatically (it is deducted and saved in my 401 k by my employer before I even see it. The next part will go towards my debt and the last part will go towards my ROTH IRA account where I will invest it into a dividend growth stock.
As every year, I have a dilemma which stock will be that happy one and become my adopted baby. And this year, with prices falling, it is even worse to make a decision.
I will probably invest into oil involved companies as I see an opportunity in this sector. Although I will be overweight in this sector, I think it is OK since I am still building up my portfolio and thus allocation isn’t as much important to me. As oil starts improving, I will focus to other sectors which will depressed at that future time.
Here are stocks I am eyeing to purchase, but didn’t make my mind which one. Can you help me to choose?
[poll id=”27″]
If you choose “other”, please let me know which stock you prefer to buy in comments and why.
The year 2015 is almost over and we are heading to celebrate end year holidays. Let me take this opportunity to wish you Merry Christmas, success, health, and happiness to you and your families! I hope the next year will be better to all of you and that all your dreams will come through!
Merry Christmas!
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If you watch markets regularly you may feel its pulse time to time and feel whether it has steam to push prices higher or whether it is weak and prone to further selling.
We have seen nice recovery recently from 2000 support back up to 2040 level. But if you look under the hood, the recovery isn’t that impressive. The whole day looked like lazy day and volume was slightly drying up hour after hour.
Only the end of the day saw some activity and we dropped hard and recovered it sharply almost at the same time.
Will this be enough? are we seeing Santa finally coming? Or was that it? As holidays are coming my guts are telling me that we are about to stall and we will not see much this week. We only have one and a half day left to the end of trading this week and the market may not move anywhere. Everybody will be gone for Christmas.
However, this low volume/activity environment can actually be violent both sides and we may see sharp moves tomorrow or on Thursday. And the moves can go both ways. Yet I am bearish.
Below is a chart indicating why. I am bearish both time frames – long and short time. The market is below 21 day MA, 50 day MA and 200 day MA which is bearish and also a strong resistance. Will the market have enough strength to overcome that resistance? We will see tomorrow or on Thursday if so. As of now, I do not think the market will have that strength.
What worries me more however is the entire market direction. I use linear regression channel for the overall market trend (magenta lines in the chart below). In August 2015 when we saw the dramatic decline in prices the damage has been done to the trend and since then we are sloping down. What’s even worse is the dashed white projection lines. I draw them manually above the entire channel and extend them further to the right. On the chart, they are on top of the magenta lines although it may not be visible at the first glance. These lines help me to see how is the market changing. Is the channel sloping down more or slowly turning back up? The dashed projection lines help me to see the change.
And that’s the issue. As you can see, there is no change! The dashed lines are still on top of the magenta lines and every day the new portions of the channel are added and they follow exactly those dashed lines! What does that mean? That we are heading down and there is no indication of changing this trend.
That’s why I am bearish overall and unless anything happens, this bull market is over for now. It may change, and I will notice that change when the magenta lines start rising off of the dashed lines.
But now? Now we are heading down.
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I have been a longtime proponent of an idea that FED will not raise rates at all although they have been talking about it for the entire year. They simply cannot afford doing it.
I always said that interest rates is a tool to cool the economy and prevent it from overheating. It is a tool to manage inflation. We do not have economy overheating. It is doing well, but not so spectacular so we need to slow it done. We do not have inflation (at least not the official one).
And I think, FED is well aware of it. If they raise rates tomorrow, they will derail the market, bond market will crash, and dollar will skyrocket.
A strong dollar will hurt our export even more and slow it down.
Higher rates will slow (if not stop) already tight lending, so the housing will slow down and all ARM mortgages will reset to higher rates which will have a negative impact to the lenders.
Higher rates will hurt housing market.
Car loans will stop too if the rates go higher. Today, consumers are buying new cars using low interest environment (rates) and yet many cannot afford it so they take out 6, 7 or I even saw 8 years long loans! When did this become a new normal?
Higher rates will slow car lending and car sales will go down too.
In my opinion, raising rates into slowing economy is foolish. Yet, Yellen may be foolish enough to do it.
People say, they have to raise rates otherwise they lose credibility. In my opinion, they lost the credibility several months ago. Raising rates now would be as damaging to the FED as not raising them at all.
Yellen always claimed that she was data dependent. If they raise rates now, she will prove that she never was data dependent as data coming in are tepid at most. ISM index has been slowing since 2012 and now is in recession level, consumer spending is non-existent, New York FED recently lowered their 4Q GDP expectations to 1.2% from 2.4% (what a surprise!) and employment data is nothing to celebrate about. We are seeing a seasonal increase in employment due to Christmas season (just review at the Department of Labor website what jobs made the data – all temporary jobs in service sector and retails). After the New Year we may see a slow down again.
Raising rates now would do the same damage (and bigger) than letting them at the same level. In short, FED is trapped.
Recently I received an email from one trader telling me what he thinks about FED and their rate hike rhetoric:
“At the end of the day, the Fed can talk all they want about how it is time to raise rates and start moving things back to normal.
But the truth is, the last thing they want to do is upset the apple cart.
Raising rates is for cooling down a hot economy and for fighting inflation. We have neither. Commodity prices are in a deflationary spiral, and a strong dollar would only add downside pressure to that group.
How can they suddenly appear hawkish without scaring the markets to death? Simple. They can’t. Whatever it is they do tomorrow, they will do it with an eye towards keeping the dollar in its current range, being friendly to stocks, and making sure the bond market doesn’t collapse.
I think everyone is looking for both bonds and stocks to collapse tomorrow. Which is why I think ultimately both of those markets will destroy shorts.”
We are also heading into election year. This is a big deal for Democrats. It is historically proven that every party tries to manipulate economy at the election year.
During 1962 – 1973 Federal spending increased by 29% during election year. Social security increased 100% higher compared to non-election years. Nixon pumped $1 billion a month into economy and pockets of unhappy voters, President Bush awarded federal grants to projects in strategically important states; tax cuts, drug benefits to seniors, military spending increasing the federal budget deficit by $477 billion in 2004 (Stock Trader’s Almanac 2016, p.28).
If you think, Obama administration will be doing otherwise, you are mistaken. Yellen is a Democrat. She will protect her party and she cannot afford markets collapsing and economy crumbling even more during election year. She needs a Democratic presidential hopeful wins the election if she wanted to be re-appointed to continue as a chair if the FED.
Whenever Yellen (or any other of the FED’s members) tests waters and releases a blah about a “strong possibility of raising rates” at the next FOMC meeting, markets tank heavily. This has been happening for the entire half of 2015 year. I believe, that this is what scares FED members and at the end they back off.
I think, FED will continue their talks but they will keep rates at the same level tomorrow. If they, however, raise it, it will be a small raise and they will be forced to lower the rates again next year.
What do you think? Will Yellen move forward and raise rates because everybody expects it or stay the course because economy is not ready for the hike?
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So the news is out. KMI cut the dividend by 75% after the market today. After hours, the stock dropped 6.5% and we may expect more investors abandoning the ship. If you feel like your investment fleet took a beating, don’t worry, you are not alone.
The dividend cut is a blow to all investors who were diligently building their portfolios and such behavior from the management who knowingly brought the company into this situation deserve a punishment. And there will be many who invest in their taxable accounts and they will tax harvest and sell.
But if you are like me, I need a different strategy.
KMI is a pipeline company owning large infrastructure, it will not go under. I expect this stock to recover when the energy stocks recover too. If the management improves and gets better in managing balance between their debt and other obligations such as dividends and investments the price will go up and the dividends may also go up. If so, I may keep the stock, if not, and my cost basis will be low enough to sell, I will sell.
But for now, it is all about a damage management. Lower the cost and wait for recovery. I believe, in the next 20 years it will happen.
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If you are a dividend investor you may be invested in Kinder Morgan (KMI) as I am and you are desperately searching the internet for news about this company to find out why it was falling recently while scared that you may lose your hard earned money.
Kinder Morgan lost almost 40% from its peak and quite lot of people have gloomy prediction about this company. Analysts started downgrading the company and even Moody’s rating agency joined the group and lowered rating of Kinder Morgan.
When I pick a company to invest in I try to select one in which I can believe for the next 20 years without too much worrying about the stock and studying it anytime it goes down in price. However, the recent drop made me to check what’s going on with this stock.
So I searched internet and found so many people scared and predicting end of the titan. I have seen even experienced dividend growth stock investors bailing on this stock or being ready to jump the boat.
Although these investors have the right to do what they want and see fit to their portfolio, I disagree with those who pushed the sell button and run away from KMI. Here are my reasons for staying invested and even accumulate this stock.
First, let’s see why people were so negative about this stock. What I could find was two main areas of discontent.
Kinder Morgan acquired a stake in Natural Gas Pipeline Company some time ago and recently they increased their investment in the company (NGPL). Many consider this a bad acquisition and investment because NGPL was a bankrupting company. Some say, KMI overpaid for the company.
I disagree with this view. Although, I am not an expert but considering that KMI is primarily a transporting company involved in natural gas, this was a natural result of capitalist behavior – taking over a weaker company and their infrastructure which under a new stewardship will prosper.
Don’t we see that over and over happening? Even A New England wire and Cable company was taken over because it was weak and making no money! It was more worth dead than alive. NGLP is more worth when navigated by Kinder than on its own.
Moreover, by acquiring NGLP Morgan gained access to locations and areas which would allow the company to better arbitrage and deliver natural gas to places where they can better profit from it.
I think this is a big misconception and misunderstanding of how Kinder Morgan makes money. This company is not involved in production of oil whatsoever. The company is involved in its transportation. It is an oil UPS version. So, no matter what the price of oil is the company would be making money. While other oil involved companies were losing money (almost the entire 2015) KMI remained profitable showing $186 million profit during the third quarter on $3.7 billion in revenue.
So KMI is exposed to oil indirectly and its price doesn’t influence the company. As long as people will need and use oil, KMI will make money on it. However, majority of the business is in natural gas.
Recently KMI followers and analysts expressed their belief that the management should consider a dividend cut although the financial reports indicate that they can easily cover the dividend. I have seen investors claiming dividend unsustainability of companies for many years. A good examples are Realty Income (O) or AT&T (T) when investors claimed that those companies would cut the dividend soon. I have heard them saying this for many years, yet both companies managed to pay dividends for 40 or more years and increasing it for a similar amount of consecutive years.
Yet the analysts caused a big panic among investors and they sold the stock pushing its price to $16 a share. Is this justified?
The 2016 dividend obligations are expected to be at approx. $4.55 billion, with current cash flow KMI should have $450 million in excess cash flow and $705 million in cash reserves. The dividend is secured at least for 2016.
Even if they cut the dividend and the price drops lower, I will continue investing in KMI as I will show later.
You may do whatever you want, but I stay the course, keep the company, reinvest dividends into the company, and even put more capital in it. Why? As I mentioned above I do not think that this crisis is anything KMI wouldn’t sustain.
In the past, I have seen companies being bashed, downgraded, predicted to bankrupt and yet they survived. One example is Johnson & Johnson (JNJ) which a couple of years ago had a significant products recall hurting company’s revenue, cash flow, and profits. Analysts and investors were predicting an end of JNJ, being spun off into several smaller companies and the losing one either sold or dissolved. The dividend was predicted to be cut or even suspended.
Any of it happened and JNJ which fell hard in price now doubled and its dividend continued growing.
KMI is now compared to another Enron and bankruptcy is predicted. Such comparison is obviously ridiculous and shows that the investor making such comparison has no understanding of KMI business.
There is however, one big issue why I stay the course (and which goes to the JNJ example a few years ago): consider your investment time frame. Are you invested in this company for the next two to five years? Are you already retired? Or are you at the beginning having the next 20 to 25 years ahead of you?
If you are a retiree, a portfolio adjustment can make sense. To me, it doesn’t make sense at all. I started investing in this company three years ago, accumulating slowly, and reinvesting dividends into it. I believe in this company and its management and I am in it for the next 20 or 25 years. I believe, that five years from now, this crisis will be forgotten.
So, even if KMI cuts its dividend, I will continue investing in it and reinvesting dividends because once this panic and “crisis” is over, the stock price will be going up again and all I miss on dividends now I will make in capital appreciation later. Even if it takes two or more years to wait. I have a plenty of time. And in the meantime, I believe, KMI will start raising the dividend again.
What do you think about KMI? Are you bailing out or going to weather this panic? From my trading experience, trading SPX I can see what the market can do when it is in a panic. It can recover as quickly as it fell down. Since the price action of KMI is a panic reaction, five years from now, nobody will remember this the same way as no one remembers JNJ crisis anymore.
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November passed by even faster than October. I feel like it was just yesterday when October finished and cannot believe that it was already November which ended a few days ago.
It is time to review my November result and see how my investing and trading performed.
Those of you, new to my blog, here is a quick review of my investing and trading strategy. I invest into dividend growth stocks in my ROTH IRA account, reinvest all dividends using DRIP program and plan on investing for the next 20 – 25 years. I believe that it would be better for me to have a portfolio made of fewer stocks as such portfolio is better to manage.
Thus I hold about 10 – 15 stocks only, reinvest dividends, and accumulate stocks.
I also like to trade as I believe that one day I will be able to generate enough income to retire early and trade for a living. I plan to contribute my trading proceeds to my dividend portfolio and invest into dividend growth stocks so once I build a large enough portfolio I can stop trading and live off of my dividends.
This is a report how I did fulfilling this plan in November 2015. I must admit that 2015 year will be a bad year for me, however, I may state that I have learned enough to start trading successfully and be consistent.
You may be interested in:
How to Create a Dividend Tracker Spreadsheet By Dividend Meter with Dividend Meter
SPY Vs Dividend Growth Portfolio By Mike with The Dividend Guy
Paying Off Your Partner’s Debt By Dan with Our Big Fat Wallet
Financial Disaster- From Baby Boomers To Elder Doomers, So What’s A Millennial To Do? By Rich Rabbit with Cure Rabbit Ears
November Aims By Nicola with The Frugal Cottage
November was finally a month when I was able to stop my losing strike, calm myself down and get back to be in sync with the market. I have two trades in my accounts which are a bit risky and it will take some effort to manage those trades so they do not end as a disaster, but other trades are finally in shape and I hope I will be able to manage them well and make money.
I slowed down on my trading frequency as well as number of opened trades at one time as it showed to be a bad trading strategy. It was nice to have several trades at a time when they were all making money, expiring one by one, but when they turned ugly on my I wasn’t able to react, panicked, and lost money.
To avoid this bad trading I decided to trade only two to three trades at a time and open a new trade only when the old trade will be over. For example, I will open a bull put spread, then I can open a bear call spread against it to make the trade an Iron Condor. To that I can open a second trade and that’s it. No more trades.
I will be opening one trade (combo) with longer time frame (expiration 45> DTE) and weekly short term trades (expiration <5 DTE). I will be opening one trade for each strategy only and max. 10 dollar wide spreads.
You may be interested in:
Moved to Manhattan to Make More, Save More, and Speed Up FI By Fervent Finance with Fervent Finance
How Much is a Commute Worth? By Red to Riches with Red to Riches
Sorry for the delay – we totally restructured our finances, so we can retire in 2-5 years By KV with King Viking
Wealth inequality and averages: Where do you land? By Revanche with a gai shan life
How much do you need to become financially independent in the Netherlands? By CF with Cheesy Finance
The Ten Questions to Answer Before You Retire Early By Our Next Life with Our Next Life
5 Things To Do Instead of Standing In Line on Black Friday By Thias with It Pays Dividends
If you are interested in seeing and following those trades, I created a Facebook closed group in lieu of my newsletters where you can join and see the trades in real time when I post them at the time of opening. It is easier to manage and follow all the trades than via a newsletter and I hope that it will be beneficial for all members of the group who might be interested in trading options and generate an additional income.
To me, at first, I may generate an income of $120 to $360 per month, but as my account will be growing bigger, this amount will grow too.
All trades are spreads against SPX with minimum money to trade as low as $500. If that is something you may be interested in, I recommend you joining the group.
However, if you decided to trade options against SPX, be ready for some hard work, frustration, and tears. Be prepared for your account net-liq fluctuating up and down almost to a break point. Trading is not easy, get rich quick scheme. We will have to work it up slowly, step by step before we become confident, consistent traders.
Here is my trading result for the month:
| November 2015 options trading income: | $184.00 (1.57%) |
| 2015 portfolio Net-Liq: | $4,061.51 (-13.53%) |
| 2015 portfolio Cash Value: | $6,431.51 (-6.01%) |
| 2015 overall trading account result: | -65.31% |
Here are the results of my options trading:
Here are the results of my new options strategy:
Here is the entire account value from the beginning of tracking it up to today:
You may be interested in:
Trade – Buy (GILD) By FF with Financial Freedom
The S&P 500 Hot Hand Fallacy By Ben Carlson with A Wealth of Common Sense
4 Companies Moving Higher By Dennis McCain with Dennis McCain Investing
It’s F$*$ing Tiring Losing Money By Under The Money Tree with Under The Money Tree
Dividend Income Update November 2015 By Keith with Dividend Hut
Investment Income Update – November 2015 By RBD with Retire Before Dad
End of the Month Summary – November 2015 By Alex with My Trader’s Journal
November 2015 YTD Progress Toward Goals By Bill with Retirement Income – Stocks and Options
Top 10 Things You Must Know Before You Trade Options By OP with Option Pundit
How to Trade Successfully with a Small Trading Account By Nial Fuller with Learn To Trade The Market
Real-Time Option Alpha Performance Stats & Options Trading Metrics Now Live By Kirk Du Plessis with Option Alpha
My dividend investing continues growing slowly but steadily, although the portfolio value dropped this month thanks to a turbulence in the market when traders are too fixed to FED policy instead of on the economy and companies.
In October the FED was supposed to raise the interest rates. It didn’t happen and everybody is now expecting the FED to hike the rates in December. I personally believe that FED will not raise rates. If they do it, then they will prove that they never were “data dependent” as Janet Yellen was always claiming. As a Democrat, I believe she will be protecting Obama administration until the election. Or she will be that stupid that she will really raise rates into coming recession.
High interest rates are considered to be and work as a break to speeding economy, to slow it down if it moves too fast not to overheat. I am not convinced that our economy is in such shape that we can afford slowing it down.
Yet, if Yellen really raises the rates in December, it will have an impact on your and my stocks. They will temporarily drop in price and if you have been accumulating in recent years, be ready for losses in your portfolio. The question would be, how long the drop will last and how long it will take to recover. Nevertheless, it will be the second time when FED’s policies hurt the regular folks like you and me damaging their savings.
But if you are in this game for a long haul, like next 25 years, don’t be afraid. Your portfolio will survive it. Just do not panic, do not react to the short term storms. Have your plan ready and execute it every day. My plan is continue saving into dividend growth stocks even if they are beaten down hard. I do not care about the value of the portfolio, but about the income it generates.
Dividend stocks added or removed from portfolio:
| November 2015 dividend stock buys: | none |
| November 2015 dividend stock sells: | none |
This month I didn’t purchase any stock. I am out of cash and fully invested but saving hard for my next purchase. I plan on adding KMI stock and I will write about it why in my next post although the stock is heavily beaten down by recent oil turmoil. I do not consider it a tragedy for this stock but a great opportunity.
Dividend stocks DRIP:
| November 2015 DRIP: | American Capital Agency Corp. (AGNC) MasterCard Incorporated (MA) Legacy Reserves LP (LGCY) Vanguard Natural Resources, LLC (VNR) Kinder Morgan, Inc. (KMI) Realty Income Corporation (O) Prospect Capital Corporation (PSEC) |
I continued reinvesting my dividends and accumulating into the stocks listed above. It is nice to see the stocks falling down and seeing that I could buy more shares than originally planned and now those stocks will bear more dividends into my account. I consider those stocks good stocks although you may argue that some are risky and you may even find opinions on the internet that some of the stocks will bankrupt. I do not think it will be the case.
However, I admit that it is a gut-wrenching to invest into stocks heavily falling in price and the company battling its survival like LGCY. But I think LGCY will survive the oil glut and in the near future we will see the stock performing well again. And if not, well, I will take the loss and move on.
Last month I also used a FRIP program in my Scottrade account (I am not listing it in here) accumulating my LGCY holding and I can see the snowball rolling faster and faster down the hill. In my last report I expressed my hope that I would soon see the same result in my ROTH IRA account. I must say that my DRIP in my ROTH is already rolling faster and faster, so I must admit I regret that I didn’t use DRIP earlier. I fell in love with this program.
Before I used to keep the dividends in the account and invested them once I accumulated enough to invest. You can do this as long as you accumulate enough to invest right away and without waiting. If your account is small (like mine) and you collect little dividends every month, do not do this, use DRIP. Believe me. I have my experience now that your account will grow faster. Once you receive at least $1,000 dollars in dividends every month then you can switch from DRIP to individual reinvesting.
I also used non-transaction fee ETFs to park my money in there but it also didn’t grow as well as I would expect.
Here are my ROTH IRA trading/investing results:
| November 2015 dividend income: | $86.92 |
| November 2015 options income: | $0.00 |
| 2015 portfolio value: | $14,905.70 (-7.16%) |
| 2015 overall dividend account result: | -14.58% |
As I mentioned above, my portfolio value dropped this month due to some oil exposed companies. See for yourself:
| Gainers by Position ($) | |
| JNJ | $6.96 |
| PPL | $6.01 |
| RWX | $5.80 |
| Losers by Position ($) | |
| KMI | -$316.90 |
| LGCY | -$103.81 |
| EPD | -$76.20 |
| Gainers by Percentage (%) | |
| RWX | 0.6% |
| JNJ | 0.6% |
| PPL | 0.3% |
| Losers by Percentage (%) | |
| KMI | -29.5% |
| LGCY | -20.6% |
| VNR | -20.4% |
Here my dividend income:
Here is the entire account value from the beginning of tracking it up to today:
You may be interested in:
What Should I Teach College Students About Money? By Neil & Kalie with Pretend to Be Poor
4 THINGS TO REMEMBER ON YOUR JOURNEY TO FREEDOM By Laura with How To Get Rich Slowly
How To Manage Personal Finances? Money Management Ideas You Should Follow By Raj with Mint Investor
Financial Independence 101: What are Stock Dividends and Stock Splits? By Steve with We Retired Early
Below is my dividend income review for the entire year:
My ROTH IRA dividend income breakdown per month and per company.
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 and are losing -3.00% (down from previous month) for the year. This year will be a losing year for my investments.
Remember, if you like trading options and want to have trade ideas for free, join my Facebook closed group and follow my SPX trades in real time, comment, ask questions, and interact with other members.
What do you think?
How about your investing or trading result?
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I cannot believe October is gone already. I was so busy lately that I even haven’t noticed that we are approaching mid-November already and I haven’t posted my monthly review of my trading and investing effort.
Although October was spectacular as far as the market moves I wasn’t able to adjust my positions successfully. Let’s take a review of my October though.
You may be interested in:
A quick visit to the country of the middle class at the Aldeburgh Food and Drink Festival By Ermine with Simple Living in Suffolk
What Happened To Make Our Grocery Bill So High?! By Thousand Days with Thousand Days to Retirement
A Richer Understanding: Living and Eating Well By SavvyJames with Retirement Savvy
Understanding the Power of Compound Interest By Mr. Utopia with Personal Finance Utopia
How Safe Are Your Dividends? By AAI with All About Interest
Are You Contrarian? By FI FIGHTER with FI FIGHTER
Trading can be frustrated and I must admit that the whole 2015 year was a disaster for me. Whatever trade I made, it went wrong. No matter how I adjusted my positions to be on the right side of the market, it went wrong. I was losing money the whole year and I am not able to stop it.
In October 2015 we saw a spectacular recovery of the market coming up from the lows of 1900 to 2100. At some point we saw the market reaching 2115 level. All call spreads I had open and which were safe and making me money suddenly turned up to be a loser. I tried to close them or convert them intoi a bullish trade to protect myself and as soon as I finished, the market stalled and now is turning back down. Now I have bullish spreads which are working against me. Should I leave them and wait them out or convert them back into call spreads? As of now I will wait and see how the price moves. I have a plenty of time in those put spreads, they are all expiring in December.
However, this is being frustrating that I am really so close to give up on trading. It was my dream to be a trader. I wanted to be like some of the traders you read on the internet who turned their tiny accounts into millions. Like Karen the Supertrader who turned her $10k account into $300M in about 5 to 10 years. Apparently, I am not gifted to be like them.
I will give it a bit more time and if this trading continues to be a roller coaster losing game I will stop it for good and continue investing in dividend stocks only.
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At least, I learned a lesson which may be helpful to improve and that is that I was overtrading again. That is a behavior I must stop. For this reason, I am adjusting my trading strategy to trade only one trade at a time and opening a new trade only when the old one is closed. I will be opening only 1 trade per each $5000 of account value. Let’s see if this helps to reverse my record and if not, I will be forced to say good bye to my trading as I am not willing to put more money into my trading account.
Here is my trading result for the month:
| October 2015 options trading income: | -$395.00 (-3.37%) |
| 2015 portfolio Net-Liq: | $4,697.03 (-20.44%) |
| 2015 portfolio Cash Value: | $6,843.03 (-14.07%) |
| 2015 overall trading account result: | -60.29% |
Here are the results of my options trading:
Here are the results of my new options strategy:
Here is the entire account value from the beginning of tracking it up to today:
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This month, I added new shares of KMI to my holdings and continue reinvesting dividends via DRIP reinvestment program. In my ROTH I also downsized my trading effort and focus only on dividend investing. As of now, dividend investing still wins over my trading results. Although, my stocks suffered during the recent correction dividend reinvesting is upholding the entire account value. It is down, but still above the 2015 year’s starting value.
Dividend stocks added or removed from portfolio:
| October 2015 dividend stock buys: | 20 shares Kinder Morgan (KMI) @ 29.24 |
| October 2015 dividend stock sells: | none |
I decided to add KMI although it is now a hated stock due to the Keystone pipe line refusal from Obama. But Obama will not be in the office forever and one day the company will be able to build the infrastructure. I am not following this much, but I think in the next 20 years this will not be an issue and since the stock lost almost 40% of its original value (my average cost was at $41 a share, now the stock trades at $25 a share) I see it as a good deal. So although analysts are downgrading the stock (they did the same with JNJ a few years ago too), I considered this a buy.
Dividend stocks DRIP:
| October 2015 DRIP: | PPL RAI AGNC O VNR PSEC |
This is my first month applying DRIP and I am happy for it. I can feel that this is adding the desired speed to my dividend investing. I should have done that a lot earlier and not today. But I thought I was smarter than others who already did it and recommended it in the past.
I was actually using DRIP in my Scottrade account (I am not listing it in here) and I can see the snowball rolling faster and faster down the hill. Hope I will soon see the same result in my ROTH IRA account.
Here are my ROTH IRA trading/investing results:
| October 2015 dividend income: | $83.01 |
| October 2015 options income: | $0.00 |
| 2015 portfolio value: | $16,054.84 (-2.35%) |
| 2015 overall dividend account result: | -8.00% |
Here my dividend income:
Here is the entire account value from the beginning of tracking it up to today:
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Below is my dividend income review for the entire year:
My ROTH IRA dividend income breakdown per month and per company.
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 and are losing -1.61% (up from previous month) for the year. Considering how bad my trading was this month I think, this is not a bad result.
What do you think?
How about your investing or trading result?
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This is a guest post from Ben Reynolds of Sure Dividend. Sure Dividend is dedicated to helping individual investors find high quality dividend growth stocks suitable for long-term holding.
If you read the Strategy page on Hello Suckers Investments, you will Martin’s thoughts on dividend investing (emphasis added):
Dividend investing is a great strategy, but now I look at it slightly differently. I no longer consider the dividend growth strategy my main investing or trading goal. I however look at it as my wealth preservation.
I have seen some traders investing their proceeds to other instruments or investments. Some invest the proceeds to gold or silver, some buy land, others real estate. I want to do the same. Or similar to be exact. I want to be buying dividend stocks.
I understand that at some point in my life I will no longer be able to actively trade options. Dividend stocks will be here to subsidize trading. My options trading is here to create an income now. Not 20 years from now. Now I want to trade, grow my account and enjoy income from trading. Once I will not be able to trade (maybe 20 or 25 years from now), I will have my dividend stocks to take over.”
When most people think about investing, they think about wealth creation, not wealth preservation. After all, it’s more fun to think about getting rich rather than protecting your wealth.
Warren Buffett is one of the richest men alive; today he is worth around $63 billion. Clearly, Buffett knows a thing or two about generating wealth. Interestingly, his focus is on not losing money. Warren Buffett has just two investing rules:
“Rule number one: never lose money.
Rule number two: never forget rule number one.”
– Warren Buffett
Warren Buffett invests primarily in high quality dividend growth stocks. Take a look at his top 6 holdings, which make up about two-thirds of his portfolio:
• Wells Fargo (WFC) – dividend yield of 2.8%
• Coca-Cola (KO) – dividend yield of 3.1%
• IBM (IBM) – dividend yield of 3.7%
• American Express (AXP) – dividend yield of 1.5%
• Wal-Mart (WMT) – dividend yield of 3.3%
• Procter & Gamble (PG) – dividend yield of 3.6%
Prior to the Great Recession of 2007 to 2009, Wells Fargo had paid steady or increasing dividends every year since 1972. After the recession, the company began paying rising dividends again.
Coca-Cola has paid increasing dividends every year for 52 years. It one of only 17 Dividend Kings; stocks with 50+ years of consecutive dividend increases.
IBM has paid rising dividends every year since 1999.
American Express has paid steady or rising dividends since 1999 as well.
Wal-Mart has paid increasing dividends for 42 consecutive years.
Procter & Gamble is also a Dividend King (like Coca-Cola). The company has paid rising dividends for 58 consecutive yeas.
Clearly, Warren Buffett practices dividend investing for wealth preservation. Investing in high quality dividend stocks is an excellent way to protect and grow your wealth over time.
By owning shares of businesses with strong and durable competitive advantages, you can reap the rewards of their steady, predictable growth.
Businesses that have long histories of paying rising dividends have proven that they can reliably and consistently growth their business under a wide variety of economic conditions. This makes them ideal candidates for wealth preservations.
If you do not invest your money, and leave it to sit in a bank account, it will lose its purchasing power through the effects of inflation. Inflation in the United States has averaged around 2.3% a year over the long run.
If your money isn’t growing by 2.3% a year, then you are actively losing purchasing power – that’s not a good thing. This forces people to invest or suffer the consequences.
High quality dividend growth stocks preserve wealth by counteracting the effects of inflation. If prices rise by 5% tomorrow, what do you think Coca-Cola will do? It will raise its prices by 5%, and people will still drink just as much Simply orange juice, Honest Tea, Vitamin Water, and Coca-Cola as they used to. Excellent businesses can pass off the cost of inflation onto their customers.
You can make money investing through active strategies like trading. Martin does a great job of tracking and explaining his options strategies on this site.
Investing in dividend growth stocks is a passive strategy after you’ve identified the business to invest in. All you have to do is hold a high quality dividend growth stock, and you will be rewarded with rising dividend income. This makes dividend growth investing much easier to practice than more advanced trading strategies.
Of course, the stock prices of dividend stocks are volatile – they go up and down just like any other type of stock. By focusing on the quality and growth of the underlying business (and its dividend payments), investors can learn to not worry about stock price advances or declines. Dividend investing is not a short-term strategy. It works best when one invests for the long-run and holds stocks for years or decades, not days or months. This means you have to fight the urge to sell when a stock sees temporary price declines.
Wealth preservation is an integral part of investing. Dividend investing in general, and investing in high quality dividend growth stocks in particular is an excellent way to practice wealth preservation while simultaneously building a passive income stream.
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Since I started investing into dividend growth stocks in my IRA account some time ago I thought people know how dividend stocks work. To my surprise many people are unbelievably lost in understanding how dividends work.
Recently, I read a post at Yahoo! The 401(k) crisis is getting worse about a man who started working at 14 and now at his 56 he has nothing saved.
Besides a liberal propaganda in the article trying to convince us to be sorry for the guy and how the system is wrong, which actually it is not, it is people who are wrong, because who prevented him from opening an individual IRA account and saving even $50 dollars a month since he started working when he was 14? I bet no one forbid him to open an individual retirement account but his poor choices.
If Tim (as his was name) started investing $50 dollars a month into his IRA and bought 1 share of (JNJ), Realty Income (O), or Coca Cola (KO), and reinvested all dividends, then after 20 years, his account would be worth little over $100,000 dollars and his dividend income would be $3,000 per quarter. If you add benefits from social security to this number, you would be receiving approx. $2,200 monthly which is enough to retire in some cheaper states of the US (commissions and taxes are not included, so for sake of this example you may want to wait 5 more years and retire 25 years later and not 20).
The shocking part of this article was the discussion below it. When I mentioned my numbers in the discussion (and of course, these are very rough numbers of calculating how DRIP would look like after 20 years) a few people asked me where anyone could pay me 12% in dividends per year and thus my numbers are totally unrealistic and off because there is no company out there who would pay you such yield and if so, it is too good to be true.
When I was reading those responses I was surprised realizing that the author of the comment had no idea how dividend growth stock investing works. If so, you would know right away that good dividend growth stocks would actually pay you a lot more than 12%. Of course, not today nor tomorrow.
And that is the greatest misconception about dividend investing. People take a look at the dividend yield today and think that 3.05% yield is nothing (although in zero interest rate environment, it is a great unbeatable yield), or yield of 1.45% is nothing to cheer about.
People make the mistake at looking at the yield today and not what the yield will be 20 years later.
If you look at the yield future, you will see a lot different story. Here are some examples what your dividend would look like if you bought 1 share of a stock 20 years ago and reinvested dividends:
| Stock | Total annual dividend | Yield on Cost (YOC) |
| (JNJ) 20 yrs ago | $1.81 | 3.12% |
| (JNJ) today | $22.30 | 38.46% |
| (O) 20 yrs ago | $1.86 | 4.89% |
| (O) today | $28.24 | 74.31% |
| (KO) 20 yrs ago | $1.37 | 3.24% |
| (KO) today | $28.48 | 67.35% |
In the table above I used today’s prices and yields as if it was 20 years ago, eliminate adding new shares, and no capital appreciation was included. The results are only to show how powerful dividend growth investing is over time and not to provide exact numbers.
Yet the example shows that after 20 years of diligent and patient investing your dividend yield will be a lot higher than it is today. Over time those great numbers will be smoothed a bit due to investing new money, but as you can clearly see, your yield can easily exceed 12% and be somewhere in the 20 – 30% range.
Yet people look at today’s yield and consider it not worth the effort.
I read claims that they can get better yield investing into bonds and be better off and safer.
It is no longer true that bonds are safer than stocks. They are exactly same volatile these days as stocks, you can lose money, but the biggest difference between a bond and dividend growth stock is the growth.
From the example above you can see, that your 1 share of Coca Cola would yield 67.35% 20 years from now, while the bond will still yield the original 4% (for example) yield. There is no growth in it. And you bought your bond at par, you actually lose money.
Investing into dividend stocks is not about yield today, but yield in the future.
As soon as I explained this concept, I got slammed with an argument, that it is impossible to get a safe stock and predict the future knowing what the stock will do 20 years from now.
While the argument of predicting future is valid, it is not so when reviewing dividend growth stocks.
Of course, in the market, everything can happen, yet history can be a good guidance to us when evaluating stocks. Therefore jumping directly at yield may be a suicide. Looking at the dividend history can tell you, what the future may look like.
Let’s compare two companies again:
Johnson & Johnson (JNJ)
The company pays dividends since 1944 (71 years)
The company increased the dividend for 52 consecutive years!
What is the probability that this company will continue perform so well? Although it is not 100% the stake is quite high.
Atlas Resource Partners, L.P. (ARP)
The company pays dividends since 2012 (3 years)
The company increased the dividend for 2 consecutive years!
What is the probability that this company would continue paying its dividend in the future and keep increasing it?
See the difference?
Although I am not saying that ARP is a bad investment, if I was to choose which stock to buy, it would be a JNJ. There is a higher chance that they will pay dividends in the next 20 years and continue increasing it.
To add more stress on the power of dividend investing here are one more powerful and interesting numbers. If you start investing and reinvesting dividends via DRIP, you will literally double your dividend income every 5 years for the first 20 years. If you wait longer, it then spikes into unbelievable levels.
To illustrate my point I used data from my ROTH IRA account, normalized them and here are the dividend results at different years:
| Year | dividend income | YOC | holdings value |
| Year 1 | $699.68 | 4.66% | $15,699.68 |
| Year 5 | $1,042.98 | 6.95% | $19,303.34 |
| Year 10 | $1,828.86 | 12.19% | $26,657.49 |
| Year 15 | $3,500.04 | 23.33% | $40,284.33 |
| Year 20 | $7,489.10 | 49.93% | $68,290.71 |
| Year 25 | $18,472.96 | 123.15% | $134,014.93 |
| Year 30 | $54,599.50 | 364.00% | $316,782.35 |
As you can see, once you go over 20 years, your dividend income more than doubles every 5 years from $7,489.10 annual dividend at the end of the year 20 to $18,472.96 at the end of the year 25 and to $54,599.50 at the end of the year 30.
Also your account value almost doubles every 5 year once you get over 20 years!
And this doesn’t take into account capital appreciation of your stocks and the fact that over the course of that 20 years (if not more) you will be saving and adding more money to your account growing your dividends faster.
The numbers speak for themselves. Give your investment time to grow, reinvest all dividends, invest into good dividend companies even if you can afford only very little every month, and start very early. Start as soon as you learn counting numbers. I teach my kids investing, I started an account for them and every time they get an allowance, they invest it and reinvest dividends. They are 10 and 13 and I hope one day, when they see their little accounts growing, they will appreciate this strategy even more.
And everybody has this same opportunity even Tim from the article at Yahoo! the only thing you have to do is to be willing to do something for yourself, learn and avoid the liberal propaganda of dependency. That will always keep you in the poor house.
Do you have any questions about dividend investing? I am always open and free to help or provide my experience. Do not hesitate to ask. Even $50 dollars monthly savings can make a huge difference in your life. I can see it myself and the only thing I regret is that I haven’t started early.
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