Saturday, August 13, 2016

What Would George Costanza Do In This Market?

"...if every instinct you have is wrong, then the opposite would have to be right." ~ Jerry Seinfeld to George Costanza in episode 86.

This market is unbelievable. All three major indices closed at new highs on the same day this week. The last time this happened was in 1999, just before the dotcom crash which was followed by the 01/02 bear market.

Every investing instinct I have is telling me the market is too high, that this is too good to be true, and that a market top is near. A correction has to be coming soon.

My instincts are screaming, "TAKE PROFITS NOW!"

However, every sell instinct, except for one, since the 08/09 crash has been wrong. The only one that I acted on correctly was in August 2011, but then I stayed out of the market too long.

So I am going to do the George Costanza opposite. I'm going to stay in the market, for the most part. However, I will use the opportunity to reduce my holdings in company stock, sell some losing stocks, and take some profit in stocks that have advanced significantly.

Otherwise, I'm going to brace myself and hold tight. I may even hold my nose and invest more fund in equities should the market pull back.
For more on Reflections and Musings, check back every Saturday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Sunday, July 31, 2016

Make or Break Tuesday

My company announces earnings on Tuesday before the market open.   I have a vested interest since I hold employee stock options that expire 1-1/2 months.   If the earnings report exceeds expectations, I may get a nice bonus.  If the earnings disappoint, I'll have to settle for less, maybe much less.

I fully expect my company to disappoint.  It would take a small miracle for the company results to beat expectations. Therefore,  I should sell on Monday prior to the earnings announcement.

However, I plan to take the George Costanza approach of doing the opposite.  So I am going keep my stock options until after earnings.

For more on  New Beginnings, check back Sundays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Sunday, July 17, 2016

Dividends Higher Than Interest Again

1959 all over again? Why this could be another historic moment for the market reports that for the first time since 1959 the S&P dividend yield is higher than the 10 year bond yield.  Prior to 1959, the S&P dividend yield was almost always above the 10 year bond yield.    However, since 1959, the 10 year bond yield has always been higher than the S&P dividend yield.

I found this article interesting, since all I have ever experienced is the 10 year bond yield  being above the S&P dividend yield.   So I assumed that was the norm.  I guess I accepted the explanation that dividend stocks had earnings growth, which led to a higher total return than bonds.

So what does the flip mean?  To note, both the S&P dividend yield and the 10 year bond yield are  about half of what they were in 1959. Are bonds now considered ultra safe investments again and yields will fall further?   Are stocks about to rise or fall significantly shortly to revert to the mean?  Is inflation unlikely and deflation more likely in the future?

All great questions to ponder.  My answers and yes, yes, and yes.

For more on New Beginnings, check back every  Sunday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Tuesday, July 12, 2016

Irrational But Not Exuberant

The best thing I can say about this bull market is that there is no exuberance.   In fact, this is the most unloved bull market ever as there is very little investor confidence in the strength of every rally.   On the other hand, just about everyone agrees that this market is irrational, i.e. there are very few fundamental reasons that support the current market value.

Markets can be irrational for quite a long time.   However, market exuberance can only be sustained for short periods, and often end with a bear market or crash.

For now, I'm staying long with this irrational market since no exuberance in sight.   I'll be looking for signs of exuberance, such as relatives and friends telling me about their killings in the stock market.  At that point, I'll protect our gains by reducing our exposure to equities, and hopefully protect some of our gains.

For more on  Ideas You Can Use, check back every Tuesday  for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Monday, July 11, 2016

Building a Cash Cushion

While I have enjoyed the recent stock market rally, I have no confidence in the market's ability to continue advancing.  So as the market advances, I have been taking profits in accounts that have been hitting new highs, and maintaining the original account balance.  That way I stay invested and take profits.  So if the market goes up, our investments will participate. If the market goes down, I have protected some profits.

 At first, I would wait for a 5% gain before taking out funds.  Now I am taking out funds with as little as a 1% gain.   Since the accounts are like a mutual fund with a 1.25% expense fee,  there is no commission charge when I sell a small portion to raise cash.  I have been doing this since 2012 and have taken as much as 40% out, while maintaining the original amount invested.   However,  I do have one account that is losing about 10% net after accounting for the funds taken out.

I plan to do this until I have withdrawn about 50% of the original investment to create a cash cushion.   After that I may let the investments ride until they gain 25-50% before taking additional funds out.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Sunday, July 10, 2016

A George Costanza Stock Market

"...if every instinct you have is wrong, then the opposite would have to be right." ~ Jerry Seinfeld to George Costanza in episode 86.

Based on Jerry's comment, George resolves to do the opposite of what he would normally do and he turns around his life and becomes successful.  It seems the current stock market continues to do the opposite of what many people expect.  Maybe doing the opposite of what is expected will lead to success:-)

This past Wednesday, I decided to take the George Costanza approach to stock market predictions.   I thought there was no way that the S&P 500 would close above its weekly high of 2126,  So I predicted to an investing colleague that the S&P would close above the weekly high this past week.  Although, it didn't look likely after Thursday's decline, the S&P rocketed Friday to 2129, a new weekly high.

It worked so well this past week, I will apply  the George Constanza approach a couple more times.  Here's what my instincts tell me:

First, with the S&P within a few points of an all time high, I think another new high is likely.  However, the S&P earnings and economy do not support further market strength.  So the advance will not be sustainable, and the market will pull back even if a new high is made.

Second, while my company stock is at a new 52 week high, it is still 9% below its all time high. I don't think the fundamentals of the company support the current price.  So I believe it will also likely correct in the next few weeks and not reach a new high.

Normally, I would be preparing myself for the expected decline. However, the stock market seems to consistently do the opposite of what is expected. So this time, I'm going to do the opposite and plan on both the S&P and my company stock breaking through to and sustaning new highs, even though I don't think it is likely to happen.

If this is really a George Constanza market, we may even see 2300 for the S&P, but, of course, I don't expect that could happen this year.

For more on New Beginnings, check back Sundays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Monday, July 04, 2016

Taking Profits While Waiting for a Correction

"Don't look a gift horse in the mouth."  - old adage

I've been pleasantly surprised by the extremely fast recovery (4 trading days) from the Brexit correction.   I was expecting the downturn to take at least 3-4 weeks and maybe 3-4 months.  I was planning to buy some stocks at lower prices.  The downside was the execution of stock options a a lower price.

I missed the one day buying opportunity last week on Monday.

My plan now is to sell some of my trading positions into the rally.   Oil stocks, gold stocks and total market ETFs are showing good gains.   In addition, I will take some losses in biotechs that have fallen significantly since 2014.   I also will execute stock options at a faster rate, since my company stock hit a new 52 week high twice last week and is up over 30% from its 52 week low in September 2015.

However, I still do expect a market correction sooner than later.  So I am still ready to make some purchases if the market should decline.   My focus would be to take positions in large cap biotechs,  and financial stocks and increase my positions in dividend paying stocks and total market ETFs.

For more on Strategies and Plans, check back Mondays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Tuesday, June 28, 2016

Dealing with an IRS Notice

This past weekend, I checked Where's My Refund and learned that the IRS had revised our 2015 tax return and reduced our refund by about 10%.  The IRS would be sending me a notice this week with the details.  Per usual protocol,  the IRS offered two options:  accept the adjustment and do nothing or dispute the adjustment if I didn't agree.  Many people I know just accept the adjustment rather than deal with the IRS.   I, on the other hand, assume I will dispute the change since based on experience as a tax preparer, I have found the IRS is incorrect (at least partially) about 80-90% of the time.

Here is my approach to dealing with an IRS notice.
  1. Understand the exact reason for the adjustment.  Fortunately, Where's My Refund provided the details of why my return was changed.  It specified that an incorrect number had been transferred from Schedule D to Form 1040.
  2. Check a copy of the return.  Since I do our return by hand, I always make a copy to keep for reference.  Upon inspecting my return, I notice that I forgot to put parentheses around a negative total.   So the IRS calculated the total as positive, even though a math check would have shown the value was negative.
  3. Call the IRS early in the day.  On Monday morning, at 7:05 AM, I called the IRS and was connected to a representative in less than 5 minutes.  I tried calling back at 7:45 AM and was disconnected due to "unusually high call volume" and instructed to call back at another time.
  4. Determine what needs to be done to correct the error.   Since the only error was a missing negative sign, the adjustment was categorized as a "math error"  and could be corrected over the phone.  The representative agreed with my explanation of the missing negative sign and recalculated the results, which matched my original return.   So the error was corrected, and my original refund was reinstated.   If needed, I was ready to file an amended return, but that wasn't necessary.
Granted, I have several years of experience working with the IRS, which makes the interaction less daunting.  For example, most people I know would rather stick a pin in their eye than interact with the IRS.  However, I have found that the IRS is usually very good at arriving at the same position I have once all the relevant facts have been presented to them.

For more on Ideas You Can Use, check back every  Tuesday for a new segment.

This is not financial or tax advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Sunday, June 26, 2016

No Fed Rate Increase for a Long Time

My cynical conspiracy theory is that the Fed won't be raising rates for the next five to ten years, but they can't let us know.  Otherwise, asset prices will increase significantly and create numerous financial bubbles.  So the Fed will officially keep talking about raising rates, but use every negative event to delay delivering an actual increase.

The Brexit vote is exactly the public reason the Fed needed to avoid raising rate in the near term, and even, for the next two years.  In the meantime, the Fed will keep jawboning about being data dependent and keeping an imminent rate increase in front of investors.

Ben Bernanke was right that interest rates won't be increasing during his lifetime.

For more on  New Beginnings, check back Sundays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Saturday, June 25, 2016

People vs. Political Elite

Brexit, the vote heard round the world.

To me, this may be the beginning of the end for the political elite who have be ramming their view of the world on the masses in their respective countries, while personally benefiting financially.   Obama, Clinton, and even Sanders are part of that political elite.  So are Ryan, McConnell, Pelosi and Reid.   It seems to me, none of them have worked in a real job to know what it's like for most of us.

I like the idea of a referendum and the government leadership resigning if the voters do not support the leadership's point of view.   Perhaps, the U.S. would benefit from a few referendums; gun control, immigration, etc.  

Unfortunately, I doubt any of the U.S. political elite would resign if a referendum went against their policy positions.  

For more on Reflections and Musings, check back every Saturday for a new segment.

This is not financial or political  advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC