Lately, I wasn’t posting much as I quit my job and I was on the hunt for a new one.
Then, all my trading and dividend investing was on an autopilot and I wasn’t posting much either.
Now, that I have a new job, I hope will be able to get back to trading and publishing on this blog more often.
I also skipped reporting my last two months (July and August).
I kept my records up to date though, as I am still working on automating them – all I have to do is upload my *.csv file to my spreadsheet and all calculations are done automatically for me, so you still should be able to see my key metrics about trading and investing in Trades & Income.
I just want to publish a quick review of those missing months without any details:
| July 2017 account value: | $22,903.91 | (up by $169.34; +0.74%) |
| July 2017 dividend income: | $127.34 | (up from previous $87.90) |
| July 2017 options income: | $19.19 | (down from previous $243.37) |
| August 2017 account value: | $22,741.00 | (down by -$161.10; -0.70%) |
| August 2017 dividend income: | $91.23 | (down from previous $127.34) |
| August 2017 options income: | $59.44 | (up from previous $19.19) |
| XIRR: | 9.23% |
Monthly dividend Income:
My dividend holdings:
| July 2017 account value: | $21,818.60 | (down by $1,346.66; -5.81%) |
| July 2017 options income: | $100.55 | (down from previous $1,293.42) |
| August 2017 account value: | $21,417.21 | (down by $401.39; -1.84%) |
| August 2017 options income: | -$1,308.67 | (down from previous $100.55) |
| XIRR: | -31.45% |
Month-to-moth trading results
(The red dots on the chart indicate income estimate, blue bars actual earnings.)
We are presenting you our month-to-month business performance review:
| July 2017 account value: | $211.97 | (unchanged) |
| July 2017 interest income: | $0.00 | (unchanged) |
| August 2017 account value: | $313.17 | (up by $101.20; +47.74%) |
| August 2017 interest income: | $1.20 | (up from previous $0.00) |
| XIRR: | 3.85% |
Due to my life (job) changing events last two months our trading and income building effort was on an autopilot and I was mostly monitoring my open positions. Since now I have a new job I hope to have more time again and start posting about our trading again.
As far as the market and my outlook, I am still bullish and I think we are heading higher.
Many investors and bears out there will disagree with me but they are overlooking one important thing I have been saying in my posts for some time now:
The US economy is still growing and accelerating. We had the second best earnings since 2011, sales grew by 5% year over year, luxury index grew by 24% year over year, ISM manufacturing index went up and came as the 76th month high and inflation is still way below FED target.
So how does the inflation affect the stock market?
This is a metric bears miss to see. They are largely comparing today’s market with 2000 or 2007 market saying that with S&P 500 P/E at over 20 we are at pre-crash levels.
They however forget to see that with a low inflation we can actually afford higher valuation. What is the difference? In 2000 or 2007 the inflation was at 14%, today at 1.7%. If you adjust S&P 500 for inflation, our today’s S&P 500 P/E is only at 7 level!!! Thus we can go even higher and still absorb the stock market valuation.
Our economy is growing and accelerating. Expect this market to go higher until this changes. And I will be the first one who would trumpet this out. Believe me. I have my own skin in this game.
What do you expect from the stock market in September? Will it grow more or are we going to see a correction? And how does it affect your investing and trading strategy?
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UPDATE: August 24, 2017
After I rolled this trade in July, it all looked well until Amazon started selling. And it still struggles to hold the ground.
As of today, the stock dropped to $941.43 and I decided to adjust my trade to keep the stock price a bit more centered in my Iron Condor. So I decided to roll the entire structure down a bit.
Again this had to be done in a few steps:
Step 1
First, I rolled my puts down and one month away:
STC 1 AMZN Nov17 970 put
BTC 1 AMZN Nov17 990 put
STO 1 AMZN Dec15 980 put
BTO 1 AMZN Dec15 960 put
@ 0.95 debit
Step 2
Then, I opened a new call spread:
STO 1 AMZN Dec15 1090 call
BTO 1 AMZN Dec15 1110 call
@ 2.33 credit
Step 3
Then, I closed the old call spread:
STC 1 AMZN Nov17 1240 call
BTC 1 AMZN Nov17 1220 call
@ 0.34 debit
Total balance of this roll was 1.04 or $104 credit.
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This question has dogged novice traders for quite some time: Should you trade options or CFDs? The point of departure is to understand the difference between options trading and CFD trading. Both have inherent advantages and disadvantages, depending on your trading preferences. All of these are derivative financial instruments. A derivative trading instrument is one whose price is determined by other factors.
Contracts for difference (CFDs), futures derivatives, and options prices are derived from the commodity, index, currency or stock that is being tracked. For example, a gold CFD tracks the price of the precious metal. Since there are so many unique derivative products available, it’s important to be able to quickly differentiate between them and evaluate them on their merits. Be advised that certain trading strategies and practices that may work effectively on futures contracts and options will not necessarily perform well with Contracts for Difference. Traders will do well to read the markets.com review to gauge how leveraged CFD trading can benefit you. Unlike options, you can assume a portfolio with significant asset management with CFD trading.
When trading options, always remember that the option gives you the right to trade a set number of shares (typically 100 shares) by a certain date. It is possible to exercise that option before the due date. With options, the trader is not obliged to buy/sell the asset before the due date. With CFD trading, the buyer and the seller are obligated to settle the difference between the buy price and the sell price on the set date. When it comes to CFD trading, it is possible to select the size of your position from just 1 contract.
This is remarkable given the requirements in typical trading activity on bourses, and brokerages around the world. CFD trading is inherently easy to understand. With options, a premium is paid upfront, and this allows the trader to track the movement of the share/equity for a set period of time. If the trader is wrong, he/she forgoes the premium, and if the trader is right, he/she receives cash back. CFD trading is characterized by put options and call options. A put option indicates that the CFD trader believes the price will decline, while a call option indicates that the trader believes the price will rise.
Depending on which way the trade goes, the premium may be lost. The simplicity of CFD trading is it saving grace. It should be remembered though that CFD trading is inherently risky, and traders should be fully apprised of the benefits and pitfalls of this derivatives trading instrument. Fortunately, the pricing models with CFDs are easy to understand. They simply mirror the performance of the underlying asset. It should be remembered that the risk in options trading is limited, while with CFD trading it is substantially higher.
Luckily, you can trade a single CFD contract at a time, as opposed to a contract which has hundreds, perhaps thousands of shares in it. Options are far more complex to understand and master than CFD trades. Options routinely expire, while CFDs do not. But perhaps the best aspect of CFD trading is the wide variety of financial instruments available – upwards of 10,000 across all asset classes.
CFD trading is inherently easier to understand than options trading. For starters, the pricing methods are simple to comprehend. There are no time decays and no expiration dates on CFD trading. Various traders have pooled different strategies and options together to make them more attractive. This is not possible with contracts for difference. However, CFDs are unique in the number of trading instruments that are available. Thousands of stocks, commodities, indices and currency pairs can be traded in a CFD format.
These are available from markets all over the world, including the US, Canada, Britain, Europe, Asia, Australia, New Zealand and beyond. In fact, the sheer variety of CFD trading options is unparalleled – no other markets offer as much to traders. Since these are derivative instruments, you’re not purchasing the actual asset – you’re simply speculating on the price movement. Compared to options, where large positions must be purchased upfront, CFDs allow for relatively minimal investments.
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It is no longer news that credit cards now have a bad name in the personal finance industry. Many personal finance coaches teach people to close out their credit cards because credit cards are synonymous with the vicious cycle of debt. Of a truth, some credit card companies could charge stifling interest rates topped off with an unhealthy dose of fees akin to loan sharking.
However, getting rid of all your credit cards won’t necessarily make your debt problem disappear overnight. In fact, you are likely to create more financial problems for yourself down the road if you make a rash decision to cut up your credit cards. Before you go ahead to throw away your credit cards, here are four things you need to do.
(image credit: public domain)
Budgeting is a smart tool for staying on top of your finances; yet, it’s a shame that many people don’t know how to budget properly, many of the folks who make the effort to create a budget also have trouble sticking with the budget. A budget ensures that you have enough money to pay off your bills and pay down your debt at a faster pace as well.
Without a budget, you won’t know if the available money will be enough to carry you through until the end of the month – if you run out of money before the month ends, you’ll be left cashless and broke. Since you are planning to stop using credit cards, you’ll also need to start setting money aside for emergency expenses because you’ll no longer have the safety net of a credit card.
Before you cancel your credit cards, you need to ensure that you have created pathways to access a diversified portfolio of credit solutions. Canceling your credit card would lower your credit utilization ratio and reduce your available credit. A reduction in your available credit can in turn reduce your credit score making it hard for you to access other essential type of credits such as mortgages and auto loans.
However, if you have access to other type of credit such as personal loans, student loans, and auto loans, you’ll have a FICO score based on how you manage those credit. In essence, even though canceling your credit card will reduce the temptation to spend money you don’t have, you’ll still need some other types of credit to keep your finances healthy.
If you don’t have any open credit accounts of for the last two years, you’ll practically be without a credit score because your good credit history will age out of your credit report. Cancelling your credit cards can outright destroy your credit score. However, paying attention to your credit score can help you know when you should begin the process of rebuilding your credit.
Your credit score will most likely nosedive after you cancel your credit cards. However, you can protect your credit score from taking a hit by using a secured credit card – a secured credit card can also help you get started in repairing your credit if it takes a hit after you cancel your credit score. A secured credit card typically has a lower limit and the secured nature of the card ensures that you can’t get behind a payment. Hence, a secured credit card can technically help you bump up your credit score without actually taking on credit.
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More and more bears are now coming out of the woods worried about the stock market valuation claiming that “it is expensive”.
Also dividend growth investors who are accumulating stocks in their portfolios for the next 20 or 30 years are joining the ranks of the perma-bears and selling. The latest Wall Street concerns are that the tech stocks which are up +19% year-to-date and thus ready to crash. I have seen bears saying lately: “I’ve seen all this before, I am not buying this expensive market because it is similar to dot.com bubble, 1932 crash, 1987 crash…” or you name it.
Although at 22 time trailing twelve month earnings the market may seem expensive, selling your stocks on some magic valuation level and fear will actually make you wrong. And you will be wrong until the acceleration of the economy and recent growth slows down.
And it may take for some time. We still may see more growth (and we will) coming pushing this market higher. Remember, there is still more than 70 billion dollars sitting on side and those investors anticipating the crash will capitulate soon and push this market higher in panic buying.
And we can see this trend already happening.
Luxury spending is back! Rich people are spending again for some time already (since April in fact). With the US economy heating up and the stock market reaching new highs consumer spending on discretionary goods is picking up again. This can drive the economy and market even higher than you may expect.
A Personal Expenditure Index (measuring everything from spending on pleasure goods such as luxury boats, aircraft, jewelry or watches is up +8.2% year-over-year. Luxury homes sales are up 29% for the same period of time.
As a mechanical engineer by profession I worked for this type of consumers and they are one of the significant economy drivers. Ignoring their behavior and selling your stocks based on fear will cause you missing the boat and losing a lot of great opportunities.
What happened during the dot.com bubble and why is it wrong comparing today’s tech sector with dot com is wrong?
In 1996 many investors too called for a large correction. They also considered the market expensive at 20 times earnings (similar to what we are seeing today), but the market continued going higher. For the next 3 years we saw the market climbing higher until the trailing PE reached 30. But it was not the valuation which caused the bubble to finally burst. It was a slowdown in the US economy in 2000 which exposed the phony stocks and they crashed along with the entire market.
In 2000 it was economic slowdown, but today, we actually see the US economy accelerating! If you want to be worried of valuation of the stock market, you must be also worried and see the US economy slowing down too. And there is a great chance that this acceleration trend will continue through 2018 and beyond. With this outlook, the stocks may become even more expensive than today.
You may have missed it and think that companies reported bad earnings overall. I had this feeling myself when watching just a handful of my stocks. A few such as STX missed and dropped so much that it obstructed a clear view that yes, there were exceptions but overall this earnings season was one of the best so far.
Out of 425 of S&P 500 companies have reported earnings growth of 10.1% and sales growth of 5.5%.
If this earnings growth result stays at this level, it will be the second highest earnings season since 2011 as in that year we saw 11.6% earnings growth.
But there is another quite positive view. It will be the first time since 2011 S&P 500 will see two consecutive quarters of double digit earnings growth (in 2011 third and fourth quarter brought in 16.7% and 11.6% growth).
I am bullish on this market and I have been for the last year. There is no change in the economic outlook and there fore no need to panic and sell my stocks because of valuation. I keep investing in dividend growth stocks using DRIP and keep investing. You should do the same. You are in the market for the long haul and not just through tomorrow.
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Retirement planning, unfortunately, is something that most don’t think about until the time is almost near. While some might have a retirement account through their employers, the effort to increase their savings for the future often takes a back seat. For obvious reasons, of course. Trying to sustain enough income to cover your day to day expenses is tough, often making it difficult to find areas to save more.
Though money may be tight, there are ways to cut back now which can help you to find more money to invest in your financial future. Here are a few suggestions:
1. Bundle your home entertainment services – If you’re paying separate bills for your phone, the Internet, and television services, you could be watching money go down the drain. To save on these services, look for packages or services you can bundle with DIRECTV which would allow you to have your phone, Internet, and television services for one monthly rate.
2. Ditch the data plan on your cell phone – If you have Internet at home, you really don’t need an unlimited data plan. There are also a lot of businesses that allow their customers to use free Wi-Fi. To save money you can either lower your data plan or cut it all together and use your free options.
3. Make sure your home is efficient – Utility costs can be several hundred dollars per month. This number is higher when the home is less efficient. Consider having an energy audit to find out if you’re letting money blow out the window. Some affordable ways to make your home more efficient would be to add weather stripping to doors, plastic to windows, and insulation in the attic.
4. Use coupons when shopping for groceries – The cost of food is another household expense that can be reduced. Start looking at coupons as money. Clip coupons and compare them to sales in your local grocery stores to get the best savings. Some stores offer double and triple coupon promotions allowing you to save even more on your grocery bill each month.
5. Cook at home instead of going out – The average person spends about $2,000 a year on dining out. Imagine how that would look in your retirement account in 10 years? While you don’t have to stop eating out altogether, try to minimize the number of times you do by cooking at home. Use online recipes and cooking shows to get creative with your meals.
6. Refinance your mortgage or renegotiate your rent – Homeowners have the opportunity to refinance their mortgage which can lower the interest rate for increased monthly savings. Though renters don’t have this opportunity, they can talk with their landlord about lowering the rent. Perhaps you’ll be responsible for all repairs less than $200 in exchange for $50 off the monthly rent. This would give you an annual savings of $600.
7. Shop second-hand clothes – You need clothes on your back but they don’t have to be expensive. Instead of heading to the mall, perhaps start shopping a thrift stores. You can find some clothing in really good condition for half of what it would cost you at a retail store.
8. Bundle your insurance – Bundling, as described above can provide customers with additional savings. There are insurance companies that sell car, life, and homeowners insurance. Shop around to see which company will offer you the best bundle rate for all of your policies.
Each of these methods of saving on household expenses may seem small individually, but they add up in the end. When you multiply that by however many years you have until retirement, you will be saving thousands of dollars towards something that benefits your future. By placing these funds into an interest-bearing account or investing in stock each year, you can multiply your savings even further.
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This next fact might shock you: In 2016, Amazon accounted for more than 40% of U.S. online retail sales. To be sure, Amazon (AMZN) is changing the game for retailers around the world, but isn’t taking over all of retail.
Just ask Costco (COST).
In the video excerpt above, from a recent institutional call on Best Idea Long Costco, Hedgeye Consumer Staples analyst Shayne Laidlaw explains why the $65 billion discount retailer is actually beating Amazon on price.
In a Hedgeye survey of 2,269 individuals, about 25% of respondents (523 for this particular question) had both an Amazon Prime subscription and a Costco membership. Of that 25%, about 63% said their “primary reason for shopping at Costco” was the “price to value,” selected over options such as “the experience,” “convenience” and “product selection.”
BOTTOM LINE: Amazon is absolutely disrupting the world of retail. But Costco is still thriving in spite of all the hype.
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