The economy shows some improvements, but not that much for the market to rise more than 20% in such a short time. Europe and China have their own problems, so the global recovery is not smooth to say the least.
It could be our money printing machine is at its max. When you print that much money, everything including commodities, oil, food (hopefully temporarily due to the current drought and flood), precious metals, stocks in our case would rise not in real value but relative to a depreciating currency.
US dollar is the only reserve currency. When China buys oil, they have to convert the Yuan to USD. US has a free hand to print money and becomes the world's chief currency manipulator.
It cannot last for ever. Most likely the followings will happen.
China and other nations will use a different reserve currency other than USD. No suckers will buy US government debts as they will not be paid back. USD will depreciate for real this time. Getting out of the debt by depreciating will not fool the lender the second, and the third time.
It could be the perfect storm: depreciated currency, no takers for the debts, HIGH inflation... It could take us back to another recession. I hope I'm all wrong and/or the government has better tricks under the sleeve than printing money. Hopefully we'll NOT have a QE3 or QEn to keep inflation tamed. However, politicians will find ways to spend and override the debt ceiling. The low interest rate should be continued for a while to help businesses and investors.
It could be very damaging to hold cash now if the above is correct and super inflation is coming.
The rise of the market could be due to banks playing the market with the stimulus money which is supposed to lend to businesses. The flow from bonds esp. muni to the stock market could be a factor too.
(c) TonyP4 1/17/2011
#####
Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
Friday, May 27, 2011
Thursday, May 26, 2011
Hi
* Promotion works! The one day traffic is about the same as the entire last year. For promotion, I just include the link of a selected article to other blogs.
* Primarily it is used to keep my current thoughts esp. in investing for my own use. I just rewrote some for better read.
* Will update some posts like the status on handling this anticipated correction.
* Will create new posts from Instablog in seekingalpha which serves as a draft.
* Primarily it is used to keep my current thoughts esp. in investing for my own use. I just rewrote some for better read.
* Will update some posts like the status on handling this anticipated correction.
* Will create new posts from Instablog in seekingalpha which serves as a draft.
Wednesday, May 25, 2011
Are dividend stocks a better deal?
The advantages of dividend stocks (dividend growing stocks in particular):
* Dividend stocks are good in a market going side way as you can collect dividends.
* It requires less time, effort and knowledge to trade.
* Simplify trading stocks: buy dividend growing stocks and sell stocks when their dividends are decreased.
* For last 10 years, S&P 500 has about a total return of 3% (1% appreciation + 2% dividend), so dividend is 2/3 of the total return. However, the decade before last decade is quite different. I expect our decade would follow last decade with dividend as an important part of the total return.
* It could be self fulfilling prophecy as more folks retire and follow dividend stocks.
The disadvantages:
* A swing trader like myself pays little attention to dividends but quick potential appreciation. However, I have a portion of dividend stocks for the reasons above.
* Market timing could steer us to stay in cash to escape from market correction and recession when all stocks fall with the tide.
* Ensure the dividend is sustainable in the future. A high payout ratio could indicate problems.
* Harder to diversify as most dividend growing stocks belong to the following sectors: utility, bank...
* Miss some good stocks that do not pay dividends.
* We should adjust our portfolios to the stocks favorable in the current market: dividend stocks in side way market, momentum stocks in market up, and value stocks in market bottom...
* Dividends in the retirement accounts except Roth will be taxed as ordinary income when it is withdrawn. Usually ordinary income tax rate is higher than dividend rate as it happens currently.
* You can receive income by selling some stocks. Eventually the tax rate of long-term capital gain will be less than dividend.
* Double taxation: first the profits are taxed in the corporate level and then at your individual level. It is better for the company to appreciate the stock by buying own stocks, reducing debts... as usually (not currently) tax on long term capital gains is less than dividends.
For some reason, it seems foreign stocks have higher dividend rates.
* Most likely, after 2013 the dividend tax rate is higher than the long-term capital gain rate.
Your dividends will be taxed fully but your capital gain only taxed on the gain when you sell the stock. Most likely the stock price after dividend is the same minus dividend the next day.
To conclude, if you're a retiree and/or with little time and knowledge in picking stocks, dividend stocks are for you.
The premium on dividend stocks is the highest in the last 40 years. It indicates it is popular now due to 1. more income seekers, 2. prolonged bear market, and 3. easy to maintain. The premium is the extra cost you pay for the stock price when two stocks have same valuation metrics (P/E, P/Cash Flow...).
Even so, try to pick stocks with good fundamentals and learn market timing for best time to buy and sell.
For the last 10 years, the average return of stocks is about 2.5% with 1.5% dividend, so dividend is more important. It is expected to so so rather than the historical 8%.
When income tax is more important to you, you may want to take advantage of the low rate of long-term capital gain in 2011 and 2012 and keep the losers for 2013. Dividend has the same rate, but the impact is far less.
-----
Random thoughts on the same topic.
*
Total Profit = appreciation + dividend - taxes - inflation + covered call
The bank stocks before the big plunge were in one of the sectors giving most dividends (utility is #1). See what happened to them. Some like Lehman Brothers lost all of their values.
Appreciation is a prediction and not a sure thing. I count on 5% average for the last 20 years. In 2009 the return of S&P is about 24% and dividend about 2%. Inflation is about 3% average. Covered calls are used to increase return when you have a stock that you do not expect to appreciate a lot in the near future.
Stocks with increasing dividends have better potential in appreciation than companies doing the reverse. We buy stocks looking for total return - not only the dividend yield.
*
Skip stocks with high payout ratio (i.e. dividend/profit). It indicates something wrong, and/or the company will reduce dividends in the future.
*
No (almost except for social security payment) Federal tax in 2010 to 2012 if your tax bracket is 15% or less. It is same for long term capital gain and dividend. However, you can control capital gains by selling the gainers only.
*
Some stocks like partnerships may return part of the capital, so do not count them as dividends. DRIPs and some partnerships give good dividends, but they may give you nightmare in preparing tax returns. The potential appreciation for commercial REITs could be limited by on-line retailers.
*
If you insist a dividend-giving company is superior and necessary for your expenses, why save some cash for your expenses (which is not taxable but dividends are) and select the best company you can with or without dividend?
*
Do not be fooled by the CEOs/majority owners to attract you by boosting up the dividends. Watch out for high pay ratio (dividend/profit) and poor fundamentals.
*
Most stocks with good dividends indicate a matured company or the company feels the stock owner can use the money better than the company. A fast growing company should not give dividend as it is like braking the growth of a company.
*
Most likely you will not find ten baggers in DG stocks. They are smaller and newer companies needing cash to plow back to research and product development.
*
Market timing for dg investors.
Trying to be right most of the time and there is no perfect timing (I did have several but they were mostly due to luck), and we should not be too greedy.
For dg stock investors, it is not bad to ignore market timing and buy more when you see bargains. We need to be trained to buy (i.e. emotionally detached) when everyone is selling.
*
Is it a big joke the guy tells me his investment is doing better when the stock loses half of the value so the dividend yield is doubled (=dividend/stock price)? It is like moving to the other side of the house when this side has a leak in a rainy day.
*
Do not sell the stock when the dividend is cut. It is too late and many times the stock lose so much value and it becomes a value stock esp. when the problem is fixed.
Do not fall in love with any stock.
*
There are sectors that all value investors including DG lovers should not touch unless they have expert understanding. They are financial/bank (due to quality of the mortgage), miners, bio. drugs (due to pipeline and expiration)... Also you may want to skip emerging companies esp. the smaller ones unless you trust their financial data.
If you follow the above guideline, you will not buy BAC, C, Leh.Brothers.... It could save you some big bucks, lost sleep and even a marriage.
* Another way to screen DG stocks besides looking for dividend growth: Dogs of Dow.
(c) TonyP4 2011. Written 5/26/2011. Updated 11/10/2011.
#####
Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
* Dividend stocks are good in a market going side way as you can collect dividends.
* It requires less time, effort and knowledge to trade.
* Simplify trading stocks: buy dividend growing stocks and sell stocks when their dividends are decreased.
* For last 10 years, S&P 500 has about a total return of 3% (1% appreciation + 2% dividend), so dividend is 2/3 of the total return. However, the decade before last decade is quite different. I expect our decade would follow last decade with dividend as an important part of the total return.
* It could be self fulfilling prophecy as more folks retire and follow dividend stocks.
The disadvantages:
* A swing trader like myself pays little attention to dividends but quick potential appreciation. However, I have a portion of dividend stocks for the reasons above.
* Market timing could steer us to stay in cash to escape from market correction and recession when all stocks fall with the tide.
* Ensure the dividend is sustainable in the future. A high payout ratio could indicate problems.
* Harder to diversify as most dividend growing stocks belong to the following sectors: utility, bank...
* Miss some good stocks that do not pay dividends.
* We should adjust our portfolios to the stocks favorable in the current market: dividend stocks in side way market, momentum stocks in market up, and value stocks in market bottom...
* Dividends in the retirement accounts except Roth will be taxed as ordinary income when it is withdrawn. Usually ordinary income tax rate is higher than dividend rate as it happens currently.
* You can receive income by selling some stocks. Eventually the tax rate of long-term capital gain will be less than dividend.
* Double taxation: first the profits are taxed in the corporate level and then at your individual level. It is better for the company to appreciate the stock by buying own stocks, reducing debts... as usually (not currently) tax on long term capital gains is less than dividends.
For some reason, it seems foreign stocks have higher dividend rates.
* Most likely, after 2013 the dividend tax rate is higher than the long-term capital gain rate.
Your dividends will be taxed fully but your capital gain only taxed on the gain when you sell the stock. Most likely the stock price after dividend is the same minus dividend the next day.
To conclude, if you're a retiree and/or with little time and knowledge in picking stocks, dividend stocks are for you.
The premium on dividend stocks is the highest in the last 40 years. It indicates it is popular now due to 1. more income seekers, 2. prolonged bear market, and 3. easy to maintain. The premium is the extra cost you pay for the stock price when two stocks have same valuation metrics (P/E, P/Cash Flow...).
Even so, try to pick stocks with good fundamentals and learn market timing for best time to buy and sell.
For the last 10 years, the average return of stocks is about 2.5% with 1.5% dividend, so dividend is more important. It is expected to so so rather than the historical 8%.
When income tax is more important to you, you may want to take advantage of the low rate of long-term capital gain in 2011 and 2012 and keep the losers for 2013. Dividend has the same rate, but the impact is far less.
-----
Random thoughts on the same topic.
*
Total Profit = appreciation + dividend - taxes - inflation + covered call
The bank stocks before the big plunge were in one of the sectors giving most dividends (utility is #1). See what happened to them. Some like Lehman Brothers lost all of their values.
Appreciation is a prediction and not a sure thing. I count on 5% average for the last 20 years. In 2009 the return of S&P is about 24% and dividend about 2%. Inflation is about 3% average. Covered calls are used to increase return when you have a stock that you do not expect to appreciate a lot in the near future.
Stocks with increasing dividends have better potential in appreciation than companies doing the reverse. We buy stocks looking for total return - not only the dividend yield.
*
Skip stocks with high payout ratio (i.e. dividend/profit). It indicates something wrong, and/or the company will reduce dividends in the future.
*
No (almost except for social security payment) Federal tax in 2010 to 2012 if your tax bracket is 15% or less. It is same for long term capital gain and dividend. However, you can control capital gains by selling the gainers only.
*
Some stocks like partnerships may return part of the capital, so do not count them as dividends. DRIPs and some partnerships give good dividends, but they may give you nightmare in preparing tax returns. The potential appreciation for commercial REITs could be limited by on-line retailers.
*
If you insist a dividend-giving company is superior and necessary for your expenses, why save some cash for your expenses (which is not taxable but dividends are) and select the best company you can with or without dividend?
*
Do not be fooled by the CEOs/majority owners to attract you by boosting up the dividends. Watch out for high pay ratio (dividend/profit) and poor fundamentals.
*
Most stocks with good dividends indicate a matured company or the company feels the stock owner can use the money better than the company. A fast growing company should not give dividend as it is like braking the growth of a company.
*
Most likely you will not find ten baggers in DG stocks. They are smaller and newer companies needing cash to plow back to research and product development.
*
Market timing for dg investors.
Trying to be right most of the time and there is no perfect timing (I did have several but they were mostly due to luck), and we should not be too greedy.
For dg stock investors, it is not bad to ignore market timing and buy more when you see bargains. We need to be trained to buy (i.e. emotionally detached) when everyone is selling.
*
Is it a big joke the guy tells me his investment is doing better when the stock loses half of the value so the dividend yield is doubled (=dividend/stock price)? It is like moving to the other side of the house when this side has a leak in a rainy day.
*
Do not sell the stock when the dividend is cut. It is too late and many times the stock lose so much value and it becomes a value stock esp. when the problem is fixed.
Do not fall in love with any stock.
*
There are sectors that all value investors including DG lovers should not touch unless they have expert understanding. They are financial/bank (due to quality of the mortgage), miners, bio. drugs (due to pipeline and expiration)... Also you may want to skip emerging companies esp. the smaller ones unless you trust their financial data.
If you follow the above guideline, you will not buy BAC, C, Leh.Brothers.... It could save you some big bucks, lost sleep and even a marriage.
* Another way to screen DG stocks besides looking for dividend growth: Dogs of Dow.
(c) TonyP4 2011. Written 5/26/2011. Updated 11/10/2011.
#####
Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
Tuesday, May 24, 2011
Valuing a stock
We have a discussion on how expensive is Netflix. LinkedIn could be more obvious than Netflix. Here are my thoughts.
* Reward / Risk ratio. If the probability is the same to move up a stock by 30% and move it down 50%, it is overvalued by 20%.
* The current P/E is 60 and the average for last 5 years is 30. Most likely it is overvalued by 50%. P in P/E is usually the expected earning. It is better fit to predict the future performance of a stock in general than the past data which is 100% accurate.
P/E has better meaning and easier for comparison such as to bank CD rate or AAA Treasury Bill if it is reversed E/P (i.e. earning yield EY). In addition, you do not have to consider negative earning in searching stocks.
* The fools who do not learn from the high P/E stocks in 2000 will part their money fast.
* When the market favors momentum (vs value), it is ok to buy stocks with prices higher than the intrinsic values by a small percentage. In long term, the prices will come back close to their intrinsic values.
* Buying such an expensive stock is like buying a hot dog cart in NYC for $100,000. He will sell many hot dogs, but the return of the investment is peanuts.
-------
Shorting is risky.
You cannot short in retirement accounts. Even with the best analysis in shorting Netflix, you can still lose a lot of money. You can lose more than 100% esp. when the herd is your opposite side. You need to pay cost borrowing the stock and the dividends.
(c) TonyP4 12/25/2010
#####
Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
* Reward / Risk ratio. If the probability is the same to move up a stock by 30% and move it down 50%, it is overvalued by 20%.
* The current P/E is 60 and the average for last 5 years is 30. Most likely it is overvalued by 50%. P in P/E is usually the expected earning. It is better fit to predict the future performance of a stock in general than the past data which is 100% accurate.
P/E has better meaning and easier for comparison such as to bank CD rate or AAA Treasury Bill if it is reversed E/P (i.e. earning yield EY). In addition, you do not have to consider negative earning in searching stocks.
* The fools who do not learn from the high P/E stocks in 2000 will part their money fast.
* When the market favors momentum (vs value), it is ok to buy stocks with prices higher than the intrinsic values by a small percentage. In long term, the prices will come back close to their intrinsic values.
* Buying such an expensive stock is like buying a hot dog cart in NYC for $100,000. He will sell many hot dogs, but the return of the investment is peanuts.
-------
Shorting is risky.
You cannot short in retirement accounts. Even with the best analysis in shorting Netflix, you can still lose a lot of money. You can lose more than 100% esp. when the herd is your opposite side. You need to pay cost borrowing the stock and the dividends.
(c) TonyP4 12/25/2010
#####
Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
Monday, May 23, 2011
Munis for investment
Unlike Federal government, states and munis do have to balance the budget and we are getting more cities bankrupt as previously predicted. We have to bite the bullet somehow otherwise we can never service our growing debts. We're running out of suckers like China to lend up more money.
Most likely it will happen as followed.
* States will not bankrupt, but muni bonds will lose a lot of value. QEn will be used to rescue the state. Property and state taxes will be if not already raised.
* State/muni bonds together with Federal bonds will have the junk status, so in the future it is hard to raise money that are needed for any project.
* Cut state employees. It is easy to cut about half of the state workers and you will not notice any loss of service (as most of them work short hours and are not motivated under the union umbrella). I just get sick of the routine 'discoveries' how few hours they work as reported by our newspapers while we've about 18% real unemployment rate and we've folks begging for work.
However, the firemen, policemen, and teachers should be paid fairly.
* Then cut their pension and increase retirement age. Most state workers have just a little less than their regular salaries when they retire at a young age. Most big companies do not have pensions now.
* Cut the entitlements/benefits that encourage folks not to work like benefits to teenage mothers, no more free medical care for illegal’s... All expenditures
have to be a fair percentage of our GNP not how much we can borrow.
We do not need large government, but lean and mean government to provide us efficient services. All those taxes are not good for the economy and businesses (how can you compete with those foreign countries with minimal taxes). Without business expanding (not government expanding), we do not have real jobs.
-------------
Now, we need to set up a law to require the federal government to balance budget and not to be the world policemen which we cannot afford.
Joke of the day. Sell Alaska with Sarah P. as a required clause not a bonus to China. Sell California with the big-mouth governor to Brazil
(c) TonyP4 2/26/2011
#####
Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
Most likely it will happen as followed.
* States will not bankrupt, but muni bonds will lose a lot of value. QEn will be used to rescue the state. Property and state taxes will be if not already raised.
* State/muni bonds together with Federal bonds will have the junk status, so in the future it is hard to raise money that are needed for any project.
* Cut state employees. It is easy to cut about half of the state workers and you will not notice any loss of service (as most of them work short hours and are not motivated under the union umbrella). I just get sick of the routine 'discoveries' how few hours they work as reported by our newspapers while we've about 18% real unemployment rate and we've folks begging for work.
However, the firemen, policemen, and teachers should be paid fairly.
* Then cut their pension and increase retirement age. Most state workers have just a little less than their regular salaries when they retire at a young age. Most big companies do not have pensions now.
* Cut the entitlements/benefits that encourage folks not to work like benefits to teenage mothers, no more free medical care for illegal’s... All expenditures
have to be a fair percentage of our GNP not how much we can borrow.
We do not need large government, but lean and mean government to provide us efficient services. All those taxes are not good for the economy and businesses (how can you compete with those foreign countries with minimal taxes). Without business expanding (not government expanding), we do not have real jobs.
-------------
Now, we need to set up a law to require the federal government to balance budget and not to be the world policemen which we cannot afford.
Joke of the day. Sell Alaska with Sarah P. as a required clause not a bonus to China. Sell California with the big-mouth governor to Brazil
(c) TonyP4 2/26/2011
#####
Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
Sunday, May 22, 2011
Preparing for a correction
First we need to define a correction: it is a temporary dip (about 5 to 20% down) but not a recession or a double-dip recession that will drag on longer and lose more than 20%.
1. Accumulate cash. I just halt buying any stock and have been selling stocks for several weeks as of 5/19/2011.
2. Prepare the buy list. It is based on:
a. the good (from my analysis) stocks that perform reasonably well,
b. the stocks that have performed very well even they're not classified as good stocks,
c. stocks in my previous buy list that have lost a lot of value - very careful here as they could go to 0, and
d. IVE, commission-free from Fidelity, if you cannot find enough stocks to buy.
My logic is that if they performed well and plunged due to correction, they will climb back. One's opinion.
3. Buy contraETFs - place 3% less than the market prices.
4. Sell covered calls for some stocks I already own.
This article will serve as a preparation list for future corrections.
----
I also check the % they lose due to the correction. The more they lose, the better buy they can be. Again, one's opinion.
I've been right many times than times wrong in predicting a correction. I was wrong last time anticipating a correction. The recent best year is 2009 when I got about 80% return in my largest account. Every time there was a correction in 2009, I tapped into my house credit line and paid back after the correction. It is risky and I do not recommend leverage to any one.
The last anticipated correction had not been materialized. I missed some gains, but it is better to be safe. Market timing is not a science and market is not always rational.
There will be about 3 corrections a year. You cannot predict every correction correctly. However, you need to prepare for it and act accordingly. It is better to have a plan than no plan at all. In the long term, it pays off.
----
Status.
5-26-2011. Have over 30% in cash. The market has been down by only 2%, so my prediction is currently beating the folks with 100% in cash. I count ContraETFs as double cash. Sold two covered calls.
6-1-11. About 40% cash. Sold about 5 covered calls. 50% is my target for now to Nov. 1.
6-7-11.
Off my accumulating cash phase by about 2 weeks to achieve 50% cash.
1. I count ContraETF as 2 times for cash, but it should be 3 times.
2. The market has been down about 5% for last 5 weeks. It is now can be classified as a mild correction.
3. Enter a lot of buy orders. They're about 5% to 12% less than the market prices. Hence, I do not believe some to be executed unless there is a big drop.
4. 'Sell in May and go away' works so far.
5. June is usually the worst month. However, this is the third year of presidential election cycle and is usually a good month. Commodities should always be down by this period.
6. Most likely, politicians will find away to increase debt ceiling as no voter wants to bite the bullet.
7. Will take a look at the bank stocks which have fallen a lot. They are still risky but quite good valued.
7-1-11.
The good news:
All expired covered calls net me with cash without selling the stocks.
USAP was bought for a good profit.
The bad news:
The rally started and continues. It is still a risky market as EU has intensified their debt problems with the 'fixes'. Will start maintain 30% cash and continue regular trading.
Glad I did not move to 100% cash as some did. The market never is rational.
(c) TonyP4 2011. Written: 5/19/11. Updated: 6/7/11.
#####
Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
1. Accumulate cash. I just halt buying any stock and have been selling stocks for several weeks as of 5/19/2011.
2. Prepare the buy list. It is based on:
a. the good (from my analysis) stocks that perform reasonably well,
b. the stocks that have performed very well even they're not classified as good stocks,
c. stocks in my previous buy list that have lost a lot of value - very careful here as they could go to 0, and
d. IVE, commission-free from Fidelity, if you cannot find enough stocks to buy.
My logic is that if they performed well and plunged due to correction, they will climb back. One's opinion.
3. Buy contraETFs - place 3% less than the market prices.
4. Sell covered calls for some stocks I already own.
This article will serve as a preparation list for future corrections.
----
I also check the % they lose due to the correction. The more they lose, the better buy they can be. Again, one's opinion.
I've been right many times than times wrong in predicting a correction. I was wrong last time anticipating a correction. The recent best year is 2009 when I got about 80% return in my largest account. Every time there was a correction in 2009, I tapped into my house credit line and paid back after the correction. It is risky and I do not recommend leverage to any one.
The last anticipated correction had not been materialized. I missed some gains, but it is better to be safe. Market timing is not a science and market is not always rational.
There will be about 3 corrections a year. You cannot predict every correction correctly. However, you need to prepare for it and act accordingly. It is better to have a plan than no plan at all. In the long term, it pays off.
----
Status.
5-26-2011. Have over 30% in cash. The market has been down by only 2%, so my prediction is currently beating the folks with 100% in cash. I count ContraETFs as double cash. Sold two covered calls.
6-1-11. About 40% cash. Sold about 5 covered calls. 50% is my target for now to Nov. 1.
6-7-11.
Off my accumulating cash phase by about 2 weeks to achieve 50% cash.
1. I count ContraETF as 2 times for cash, but it should be 3 times.
2. The market has been down about 5% for last 5 weeks. It is now can be classified as a mild correction.
3. Enter a lot of buy orders. They're about 5% to 12% less than the market prices. Hence, I do not believe some to be executed unless there is a big drop.
4. 'Sell in May and go away' works so far.
5. June is usually the worst month. However, this is the third year of presidential election cycle and is usually a good month. Commodities should always be down by this period.
6. Most likely, politicians will find away to increase debt ceiling as no voter wants to bite the bullet.
7. Will take a look at the bank stocks which have fallen a lot. They are still risky but quite good valued.
7-1-11.
The good news:
All expired covered calls net me with cash without selling the stocks.
USAP was bought for a good profit.
The bad news:
The rally started and continues. It is still a risky market as EU has intensified their debt problems with the 'fixes'. Will start maintain 30% cash and continue regular trading.
Glad I did not move to 100% cash as some did. The market never is rational.
(c) TonyP4 2011. Written: 5/19/11. Updated: 6/7/11.
#####
Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
Anticipating a correction
Today is May 19, 2011. The market has been up and SPY is up by about 9% YTD. Both opposite camps on this correction have convincing arguments.
I have been selling stocks several weeks ago and move most Annuity positions to money market fund (Energy and Commodity sector funds to Health Care before the crash). My total cash is 25% and am still selling. I sold most stocks at 5 to 10% higher than the market prices. Hence, even there is no correction I'm making a handy profit for the stocks I sold and it is a good insurance policy when I see risk in the market.
Next week or when I have about 30% cash, I may play the 'buy one and sell two strategy' betting I can spot stocks better than others. I will sell the stocks I buy right away for a small profit.
* Arguments for no correction:
- QE3 will not be materialized (and gold, oil will not rise by a lot) due to the debt ceiling.
- Corporate profit is still rising.
- The economy is improving.
* Arguments for correction
- QE3 will not be materialized and no money to stimulate the economy and the stock market. Contradictory with above argument!
- The market is taking a breather.
- Slim chance for no 'stay away in May' for two consecutive years
- Global problems from China, EU, Japan, N. Africa.
- With tightening margin requirements, commodities, oil..., speculation buys will be reduced (good for the long term).
The above is a summary of what experts said. I do not do any research (as they're already available from the web), but summarize their opinions, select what make sense to me, and act accordingly.
I choose the middle road. Prepare for it as below but move stocks gradually to cash at higher prices. If I'm 90% sure, I will not move 90% of my stocks to cash as I may have 10% wrong.
Click here on how I prepare for this correction.
(c) TonyP4 2011. Written: 5/19/2011. Updated: 6/1/2011.
#####
Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
I have been selling stocks several weeks ago and move most Annuity positions to money market fund (Energy and Commodity sector funds to Health Care before the crash). My total cash is 25% and am still selling. I sold most stocks at 5 to 10% higher than the market prices. Hence, even there is no correction I'm making a handy profit for the stocks I sold and it is a good insurance policy when I see risk in the market.
Next week or when I have about 30% cash, I may play the 'buy one and sell two strategy' betting I can spot stocks better than others. I will sell the stocks I buy right away for a small profit.
* Arguments for no correction:
- QE3 will not be materialized (and gold, oil will not rise by a lot) due to the debt ceiling.
- Corporate profit is still rising.
- The economy is improving.
* Arguments for correction
- QE3 will not be materialized and no money to stimulate the economy and the stock market. Contradictory with above argument!
- The market is taking a breather.
- Slim chance for no 'stay away in May' for two consecutive years
- Global problems from China, EU, Japan, N. Africa.
- With tightening margin requirements, commodities, oil..., speculation buys will be reduced (good for the long term).
The above is a summary of what experts said. I do not do any research (as they're already available from the web), but summarize their opinions, select what make sense to me, and act accordingly.
I choose the middle road. Prepare for it as below but move stocks gradually to cash at higher prices. If I'm 90% sure, I will not move 90% of my stocks to cash as I may have 10% wrong.
Click here on how I prepare for this correction.
(c) TonyP4 2011. Written: 5/19/2011. Updated: 6/1/2011.
#####
Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
Subscribe to:
Posts (Atom)