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Posted by Martin March 06, 2020
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What are the investment strategies you are having?


Strategy: I decided to invest into high quality dividend growth stocks.
 

Reason: To get paid regularly regardless of what the stock market is doing and regardless of what the stock price is. If you buy a growth stock and plan selling a portion of it to generate income and the stock drops, you will be selling at a loss or not able to sell. If a high quality dividend growth stock price drops, it doesn’t matter to me, because every three months I receive my dividend which is same every three months no matter what the stock price is and on top of that, every year, the company increases the dividend, so my dividend income growths annually.
 

Strategy: I created a watch list of 60 optionable high quality dividend growth stocks.
 

Reason: First, I go to a David Fish CCC high quality dividend growth list, pick 60 dividend champions, challengers, and contenders. Study these stocks to learn as much about the companies as possible. I also pick stocks which trade options (they are optionable).
 

Strategy: I then trade a strategy, some call a “Wheel”. The strategy consists of :
 

  1. Selling cash secured puts against those stocks, collect premiums, and do is as long as I get assigned to the stock and buy 100 shares of underlying at the strike price. For example, I like a stock ABC currently trading at $30 a share. I sell 26 strike put and collect 0.36 premium (or $36 dollars). If the stock stays above strike price, the put option expires worthless and I keep the premium. If the stock drops to or below strike price, let’s say to $24 a share, the option will be executed, I will be forced to buy 100 shares of ABC at $26 a share, and still keep the premium collected.
  2. When I buy 100 shares, I hold the stock and collect dividends.
  3. While holding the stock I start also selling covered calls. I keep selling covered calls and collect premiums as long as I get assigned and forced to sell the stock. For example, I was forced to buy 100 shares of ABC stock at $26 a share. It currently trades at $24 a share. I sell a call with strike price at 27 a share and collect 0.24 (or $24) premium. If the stock stays below 27 strike, the call expires worthless (and I can sell a new one in the next cycle) and keep the premium. Let’s say the stock moves higher to 26 a share, so I sell a new call (or roll the old one) to 28 strike and collect another premium. Once the stock moves above the 28 strike, the call will be executed and I will be forced to sell 100 shares of the stock at the strike price (in this example for 28 a share).
  4. Once the stock is gone, I go back to step one, completing the “Wheel” strategy.

 

Reason: My ultimate goal was to create a strategy which would generate income no matter what the market does. If you buy a growth stock which doesn’t pay a dividend you are at mercy of the stock market. The stock may go up over time (and it will) but you lock your money into a stock for a long time while waiting for the price appreciation and I didn’t like it. I wanted to be paid while waiting for the price appreciation. On top of it, I wanted to monetize my stock holdings. Like having a rental property renting it to tenants, I wanted to use options to “rent” my stocks and collect rent (premium) to boost my immediate income. I can then take that income and either re-invest it to buy more shares, or pay the bills, or spend it in any other way without a need of selling my “rental property” to generate cash. You won’t achieve this with growth stocks. In order to generate cash, you have to either sell a portion of your holdings (which has tax implication) or go to work elsewhere to get more money to invest (yes you still can trade options, but you will miss the third source of income – dividends).




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Posted by Martin February 28, 2020
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What is the secret of stock trading to make money all the time?


You need to distinguish between “stock trading” and “stock investing”.

Stock investing is easy and you can make a lot of money over time. People tend to over estimate their ability to make money in the stock market in short time (everyone thinks they can get rich quick) but under estimate their ability to get rich in the long run.

So the secret is to set a plan of what you will be buying and why. What do you want your investments to do for you. Do you want growth? Or income? What is your time horizon? And how much money can you invest?

For example, I myself wanted stock to buy and hold them for a long run – 20, 30, or 40 years. And while sitting on them and waiting, I wanted to be paid all the time, 4 times a year. And which stocks will reward you with quarterly paycheck while you hold them? Dividend growth stocks.

Buy and hold strategy works 100% of the time if you hold the stocks 100% of the time. Let me repeat it – if you hold them 100% of the time! People lose money because they are a buy and hold investors only until the next correction. Then they panic and sell. And usually, they sell at the low. Then they are afraid to buy back in because “what if the stock goes lower” fear. And when they are finally convinced that this correction was finally over, they buy back in – and usually at the high.

So the secret is, buy and hold. Never sell. Consider your stocks to be your rental property. You do not buy and sell your house whenever the price goes up or down, do you? So, do the same with your stocks. And if you buy high quality dividend stocks, which grow the dividend every year you will be rewarded while waiting. For example, Johnson & Johnson (JNJ) paid dividends for last 100 years and increased dividends every year for the last 50 consecutive years. They even increased the dividend in 2008 when everyone was predicting the end of the world. What are the odds that this company suddenly stops paying or reduce the dividend? Well, there is a chance, but so slim that we can call it “impossible”. These are the types of companies you want in your portfolio.

Later on, you can start monetizing your “property” (stocks) by selling options around them (like renting your house). You can sell cash secured puts to buy stocks, and covered calls to sell the stocks – and generate additional income. An excellent book on this strategy is “Generate Thousands in Cash on your Stocks Before Buying or Selling Them by Samir Elias. I practice this strategy myself and it is very rewarding. You may expect 30% – 45% annual return on your portfolio.

And trading stocks? Well, that is a different topic and in my opinion you would have to be a prodigy or a miracle child to succeed. 95% of all stock traders fail in 6 months. I admit, I tried myself and failed. I tried three times, and three times I wiped out my portfolio. I made money – tons of them, but I also lost them all. And I do not have the secret formula to tell you how to trade stocks and be rich quickly (and if I had one, I would use it myself and wouldn’t share it).




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Posted by Martin February 26, 2020
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When the market goes up, everybody complains. When it falls, everybody complains.


So, I was wrong. Yesterday, I posted my expectation of a measured move. And it failed. Twice the futures tried to set up a pullback, twice that attempt failed and markets finished red. After exceptional, and never seen before, 3% drop in a row, a 1% selloff now seems like a lukewarm tea for babies. Almost nothing to talk about. Just a few days ago, 1% drop would spark heated debates on social media about crashing markets. Today, nobody cares.

And the markets are setting for another exceptional rare behavior. We had the market falling for five consecutive days. And today’s overnight futures are already down by 1.4%. So, if cash market (SPX) stays down tomorrow, we will have a 6th consecutive down day with no bounce.

The market have seen five consecutive declines without a bounce only twice in its history – in December 2014 and January 2019.

However, the absolute record was 10 consecutive down days which occurred in February 1966. If tomorrow stays red, we will break the 5 day record heading towards 10 days rank.

However, we have approached a 200 day MA and if we stay red tomorrow, we may actually touch it on daily time frame. We may go a bit below it. But, it will be crucial moment. Will the buyers step in and start buying? And if so, will it be a sustainable buying or just a dead cat bounce? We will have to wait and see. So far, in the recent past (at least 2 past years) corrections were always supported by 200 day MA and markets recovered. Let’s see, if this will be the case these days or not.

There are two observations I noticed and find actually funny, if you think about it.

First, the coronavirus issue. Everybody talks about it. Everybody project worse case scenarios, deaths, gloom and doom, cases here and there. But, it seems to me, the coronavirus is not that of an issue (and I do not want to downplay its impact on people). It seems, it is the media, and so called experts on TV shows painting the apocalyptic after-virus world with few human survivals, what makes the matter worse, that it actually is.

At least, we have the memes to laugh at. For example, Trump and Pence going to address the coronavirus and coordinate its handling. Now, we are in big trouble.

The second observation I find funny, is in the same psychological category as the one above. When the markets are running up, everybody is freaking out about it, selling their positions, screaming about high valuation, predicting the end of the world, rigged markets, FED pumping the stocks, fake economy, and who knows what else.

And the markets start finally falling and correcting, these same people are freaking out about it, selling their positions, screaming about crash of the markets (8.3% pullback is not a crash), predicting the end of the world, rigged markets, FED screwing up the markets, fake economy, and who knows what else.

I find it truly funny. All people who claim that they are long time buy and hold investors are buy and hold until the next pullback.

Stay safe out there, save cash for more buying. When this rout ends, it will be a great opportunity to be buying at a huge discount.
 

S&P 500 correction

 




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Posted by Martin February 25, 2020
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What’s next in the stock market after this big rout?


The selloff we just experienced exceeded all my expectations. I do not remember when I saw the market drop more than 3% in two consecutive days. It was amazing! Well, of course, if you forget, that it was your money on the table in this rout. It is also a never seen move action when the market saw two consecutive days losing over 3%. Never ever in history, this ever happened. What a move!

At the end of the day, the correction settled at 8.1% and VIX as max 29.7 level:

 
S&P corrections
 

This also makes it the shortest correction deeper than 6% in terms of the losses. If we stop here and start recovering, it would really be the shortest one. If we keep falling, we may see more days of selling.

What can we expect from here?

I expected a bounce from yesterday’s 3.45% selloff. The market bounced up for about 1% (futures) but at the cash open, it lost the steam quickly and sold off. The selling speed gained steam soon and before we knew it the market was down over 3% again. It went as low as 3.4% again and bounced of the lows to finish 3.05% down. Unimaginable!

Will the bounce happen then and where is the bottom of this first wave of selling?

For that, we may use a measured move practice again.

To find a potential bottom where we may expect the market to bounce, we take the market peak and measure the distance to 50 day MA. On the chart (see below) we identified the peak to be 3388 (remember, this is not an exact science, so an approximate number works well too). The 50 day MA level was at 3260. If we subtract the numbers, we get 128 points distance.

Take that number and project it down from the 50 day moving average: 3260 – 128 = 3132. So we may expect the market to drop to approx. 3132 level and see a bounce. Today, the market finished at that exact level (plus / minus).

Thus, I expect a bounce from here, possibly back to 3240 level which was the previous correction low support and also a long term support line. Then we will probably see another wave of selling. I expect it to drop a bit further and touch 200 day MA which, hopefully, will end this correction. From there, we may see a long way to recovery.

Of course, I may be wrong and selling may continue tomorrow and for the rest of the week. If so, it however, will be extremely rare. But again, no matter what happens, this is a great opportunity to be buying great companies at a nice discount.

For my measured move speculation, see the chart below:

 
S&P corrections
 




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Posted by Martin February 25, 2020
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A needed correction on the way – don’t panic


Selling never feels good and people have hard time to handle it. It’s their money and they fear them getting lost. They start rushing to protect the value of their portfolio and start selling. Pouring oil into fire.

However, this is not the time for panic and time to start selling. If you knew this was coming, you should have sold three days ago. Today, it is probable too late to be selling. We may be already bottoming this small correction (as on now 6.4% decline). Sure, it may go lower in the next few days. We can correct additional 4%, or 14%. But do you know it? Do you know for sure? I don’t. And I do not ant to speculate. This correction may be in the range of the previous corrections, or it may exceed and go down 20%, or 30%. But given the US economy is relatively strong, a larger than 20% correction would not be justified. And even if it happened, it would be a GREAT opportunity.
 

S&P corrections
 

And recoveries or bounces can be as sharp and fast as the drops. You know that bear markets rallies can be as dangerous as the selling itself. Shorting now may catch you on the wrong side of the market.

And so, when everyone is panicking and selling due to some bogus reason, I decided to add to my portfolio. Lately, I started adding an index to my portfolio in addition to my dividend stocks.

So I added 1 SPY ETF. And if this market keeps sliding lower, I will be adding more shares. I will be adding individual stocks too and selling puts. But, I need to wait a bit for the dust to settle.

 

S&P corrections
 

Remember, this will pass too.

S&P corrections
 




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Posted by Martin February 21, 2020
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The stock market is now at all times highs. What are you buying? Are you worried about a recession?


I keep buying what I have been buying since 2006 and that is high quality dividend growth stocks. If you look at the chart from 1982 to 2000 (that is 18 years long bull market) the market was making new all time highs until 2000 for 18 years. 18 years of all time high market. And that is excluding the previous 10 years from 1972 – 1974 bear market when the market rallied from 1975 to 1982 recovering from the lows and then added additional 18 years of rally and some 900%+ gains.

So, if we look at the history and we see that the exact same pattern happened before (twice) what makes you think that this market cannot rally additional 18 years from the recent breakout in 2013?

See the chart:
 

All time highs
 

And here are the cycles I was referring to, indicating easy markets and difficult markets. We just broke out from a difficult market and we will see additional cycle of an easy market. It could be additional 18 years and additional 800%+ gains:

 
All time highs
 

Of course, the rally up was not a straight shot. there were corrections and secondary bear markets (drops by 5% to 20% at times), but overall, the markets went up.

So, knowing this, why would you be panicking about all time high when 90% or so the markets in fact spend time making all time highs?




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Posted by Martin February 17, 2020
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Coronavirus fear overblown. Load up anytime Wall Street freaks out.


Apple (AAPL) said that they will not meet the revenue guidance due to Coronavirus and market participants pooped their pants again.

Futures down 0.45% (now recovered a bit to -0.34%). This virus is an old news. Come up with something else.

I do not want to belittle the death of people, but just in the US itself, more people die from a common flu (influenza) than this Coronavirus and no one is freaking out about it, pooping their pants, claiming that companies will not meet their outlooks, and overall global economic slowdown?

This is totally overblown. But, I will gladly take any dip and buy it. Once these idiots realize they are freaking about nothing and chasing themselves back into the market, I will be loaded up.
 

Corona deaths vs Flue
 




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Posted by Martin February 14, 2020
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Are all the trading mentors scam?


I must admit, majority of all sorts of gurus, mentors, sellers of all sorts of magical formulas which would make you rich overnight are scam. It is sad but this trading industry is full of charlatans and pure thieves who just go unscrupulously after your money. They are not there to help you. There are there to help themselves.

There may be a few who are honest and really want to help and teach but it is difficult to find them. Maybe because they are not aggressive in advertising their trading magic.

I myself was looking for mentors in the past, as well as for ways how to raise capital by either borrow or trade for a prop firm. The results were saddening. So, my ruling?
 

YOU ARE ON YOUR OWN out there.
 

Unfortunately, it is difficult to find anyone willing to help. Lately, you may be lucky to find people on Facebook who might be willing to teach.

Thus, you need to rely on books, free Youtube videos, and other social media to get help by asking questions and put together all the pieces of the trading puzzle you can collect out there by yourself.

Overtime, I found a good website, which writes reviews of these trading mentors and signal sellers. When browsing through the list of all the charlatans out there I could recognize many of them which are still filling out my junk box of my email although I unsubscribed. So, if you are thinking to subscribe to a service selling miracles and predictions of the future, check the Tradinchschools.org website first to see if you find your future sorcerer listed on that website and if so, what rating was “assigned” to that magician. Mostly, if you find him or her on the website, run away as fast as you can.

I found some of the charlatans I was once considering to subscribe such as Jason Bond Pick. He even has two funny reviews on the website. It was amusing to read how this guru made $26,000,000 dollars trading penny stocks and yet he needs to peddle his scam and fake Harvard University speech invitation. I found the Harvard fake invitation story especially entertaining.

Or another joker, magician, and trading savior listed on the website Teeka Tiwari. I remember, I once watched his promotional video (I no longer remember what actually it was about). Fortunately, he made is so boring and long, that I stopped watching it soon after it started wondering who actually has guts and time wasting it with this loser.

The website was created by a former scammer himself, Emmett Moore, who engaged in a similar fraud as Jordan Belfort (Wolf of Wall Street) and was convicted and went to prison. After he was released, he started his blog doing his reviews (and if you want you can submit your own request to have him review your potential magical road to riches provider too).

Funny part, which makes me feel Moore is legit is that some of the reviewed scammers (Day Trade Academy) started a website with Emmett Moore’s name in the domain name saying:
 

“Emmett Moore saw the success Day Trade Academy was having and knew he’d be able to extort them out of money. In turn, Moore wrote a fake and defamatory blog post about the trading program, where he lies non stop about individual people’s personal history.”
 

This is so laughable and in fact proving that Moore was right exposing Day Trading Academy as scam because if someone’s bad review forces you to use the accuser’s name in the domain and whine about it all on the website, and how damaging the report was, instead of providing enough evidence and proof to the accuser proving him or her wrong and explaining the matter on your own website makes me (using common sense) to think that the exposed scammer shouts out laud now, something like a thief crying: “Thief, catch the thief!”

It is similar that if this poor blog, Hello Suckers, writes something about Wall Street Journal and Wall Street Journal gets offended and starts a new website named hellosuckersscammabout usthewallstreetjournal.com and asks everyone to join them with a class action. My guts still hurt laughing.
 

And now, since you know that all the scammers out there, you can contact me for my magical formula to get rich in 5 days trading options. I will send you my bank account immediately.




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Posted by Martin February 07, 2020
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What are good resources to start learning about investing and personal finance if you know nothing about it?


Even if you know absolutely nothing, you need to know what you want from investing (and or trading). Investing is such a broad industry, so to speak, that you will not be able to read everything and learn. You will start jumping from one topic to another and soon get confused and lost.

So, first, you need to narrow this topic to the part of investing you want to learn and then focus on that only and ignore everything else. And by ignore, I really mean deliberately ignoring it no matter who tells you what and what CNBC is currently broadcasting about it.

You need to start with yourself and ask and do the following:
 

  1. Set your goal – that means, think about what you want your investments to do for you. Do you want income? Or do you want growth? Do you want speculation or save investing which will grow but also reward you for waiting for appreciation?
  2. Next, you need to look at how much money you have available. Do you have a large sum or just started? If you just started how much can you invest? Is it $100 a month or $2000 a month? Or you inherited $350,000 or sold your old house and rent?
  3. Next, look at the time horizon you are willing to give your money machine to churn some money for you. Will it be 1 year, or you can let it run for the next 30 years?
  4. Be as specific as possible. Write it down. Think about it, think about what you want your money machine to do for you, with how much money you are available to pour in it to multiply and how long it can run before you turn off the switch.

 

All that is really important to know before you jump in because all that will determine the strategy you want to adopt and based on that strategy you will narrow your learning path (unless you want to start an investing University and learn everything – and for that you may need the rest of your life).

Once you have your narrative and answers to what you want, use the Internet to look for investment types which can provide you with that result. Once you have it, here is your topic to study. Then go to Youtube and find people who post about that topic, watch their videos, evaluate, and eventually subscribe to their vlogs. Buy or rent books (I rent with Kindle Unlimited and if I like the book and want to have it, I buy it). Find blogs, there are many investors who blog about their investments and portfolios, find them and follow their posts. You can also ask them questions. Many will gladly answer and help you to direct you toward more resources. Join Facebook groups with the same topic you want to learn about, find people you like their views and follow them (this may be tricky, if you join a group of investors which is 10,000 members large, you won’t be able to follow them all, so pick one or two members and follow just them).

Here is an example of what I did myself many years ago. I wanted an investment, which would help me to generate income. I didn’t care how the income was generated, I just wanted a monthly income which I could take and invest to grow my portfolio.

But I also wanted an income, which would pour into my account no matter what the stock do. I was aware that during crisis and bear markets stocks may lose 50% or more of their value. If you are a growth investor relaying on selling some of your shares to generate income and you happen to need to sell during panic (like the one in 2008) in order to pay your bills, well you have a problem (that’s why I didn’t like the 4% rule investing).

So, what kind of investment will provide you with decent return, good “interest rate” and safe, continuously growing income even if you do absolutely nothing about it, or every night when you sleep?

I won’t answer the question this time. I leave it up to you to find the answer. It is however easy. Once you have the answer, then go and rent or buy a few books about this type of investment. As you read them, they will point you to more resources and you will be reading, and reading, and reading…




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Posted by Martin January 31, 2020
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Is investing in 20-25 stocks really the best form of diversification?


Yes. You can be well diversified even with less stocks. Owning hundreds of stocks will not protect you against systemic risk. If there is a recession and panic, everybody sells everything, then it really doesn’t matter how many stocks you own. And if you want to be protected against a failure of one stocks vs. the others, just make sure you pay attention to the proper stock correlation so your positions can hedge each other. That means, you need to look for companies which act in opposite way, for example, if oil companies go down, which companies are correlated in the opposite manner and go up? And then of course, you want to pick good businesses and know them and monitor them. If you do this right (and bad news is that very few know what to do in lieu of blatantly buying everything and thinking that they are diversified) then you can be literally diversified with only 2 stocks. But, that would mean to learn a lot about hedging.

I myself own in one portfolio only about 10 companies. One went bankrupt (it was a speculative oil company and I stupidly let it go instead of ditching it as soon as I saw troubles), yet my portfolio is significantly up.

William O’Neil wrote about diversification I think back in 2006-ish (I really no longer remember) and concluded that owning many companies not only will not protect you but it will also be difficult to monitor them and watch them that they still meet your criteria. In my IRA account I have a lot more companies and it is really hard to follow them all. So do not bury yourself in a huge portfolio and get lost in it. Pick only a few and familiarize yourself with them and know them in and out as if they were your businesses.




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