Patience

Since July, whenever I purchase a stock, I could have gotten a cheaper price if I had waited a month, a week or even a couple of days.  It seems that stock prices keep going lower.   Either it's time to start shorting stocks, or I should be more patient.

For now, I will choose patience.  So I've added two rules to my purchase strategy.   First, wait until the dividend yield crosses into the next higher whole number, e.g. transition from 4% to 5% yield.  Second, I will only make one stock purchase each day.  This way I will limit the number of stocks that fall after I make a new purchase.

However, if the market continues to fall, I may choose to also short some stocks.

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

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

Copyright © 2015 Achievement Catalyst, LLC

Preparing for a Bear Market

I've been wresting with whether the stock market is more like 2008, which was the decline before the crash, or 2011, which was the decline before a big rebound.  

With the recent stock price action, the market is starting to feel a lot like 2008...an agonizingly slow decline until a big fall.  Anecdotally, in 2008, I had decided to ride out the volatility, instead of selling out.   At this time, I have also decided to maintain our current investments, which may not be a good omen for me.

Also, several major companies, such as Hewlett Packard and Catepillar,  have resumed cutting jobs.  This doesn't bode will for their expectations for the economy.   I think there is now a risk of a U.S. recession, which virtually no economist is predicting.

However, the major negative is that stocks keep going down.  Many stocks are already down 20% or more.  Some previous high flyers, such as Ambarella and Alibaba, are now down over 50%.

So now, I'm going to assume a bear market is coming... at least a 20% decline of the S&P to 1705.

I will still try to make small purchases of select dividend stocks and a total market ETF as the market falls, but I will be patient.  At a 20-30% decline, I will try to be disciplined and move 10-20% of our cash back into equities.

Disclosure:  At the time of publication, we did not have any positions in Ambarella or Alibaba.

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


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

Copyright © 2015 Achievement Catalyst, LLC

Interest Rates

When I graduated from college, interest rates were high and going higher.  I remember getting a five year CD at 14% during the 80s.   People thought I was crazy since rates were probably going up to 30% in a few years.

Well, rates soon plateaued and declining rates led to the great bond bull market.

Nowadays, interest rates are so low, it doesn't seem worth it to put money in a CD.   After all, 0.05- 0.5% doesn't return much money.   Rumor has it that Ben Bernanke (60) said that the Fed funds rate won't return to its normal benchmark of 4% during his lifetime.

With the latest Fed action of keeping interest rates at 0, I'm starting to think that Mr. Bernanke is right. It seems the Fed only wants to give the impression of raising rates and doesn't really want to raise rates.

Now, I don't expect the Fed to raise rates at the October 29-30 meeting.   That will be too close to Halloween, which is a very scary time.  (Perhaps, Ms. Yellen can dress up as a witch at the press conference to make the point.)   The December 17-18 meeting will be too close to Christmas and the Fed won't want to give markets a lump of coal.  (For this press conference, Ms. Yellen can dress up as Mrs. Claus.)

When I was younger, we didn't think inflation and interest rates would come down.   Now, I don't expect inflation and interest rates to rise to normal again...at least not in my lifetime.

For more on  Crossing Generations, check back Thursdays for a new segment.

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

Copyright © 2015 Achievement Catalyst, LLC

Mostly Waiting

There may be one or two more stocks that I will buy in the near term.  But mostly, I will be waiting for a more clear market direction before making any substantial commitment.   The lack of any potential upward catalyst is becoming more concerning.

I expect the Fed interest rate decision to be a negative, either way.  If the Fed raises interest rates, the market will fall.  If the Fed keeps interest rates the same, the market will fall.   It's a no win situation for the Fed.

China looks worse everyday.   In 2009, I believe that China had a much better response to the financial crisis/great recession than did the U.S.   Maybe not.  Nowadays, I believe China is having significant issues in managing their economy and financial systems.   Perhaps this may create a contagion for other economies.

Although Greece is no longer a highlighted issue, Europe's overall economy still seems weak and possibly going into recession.  Emerging market economies are also weak and some are already in recession.

Finally, many previously high flying stocks have experienced their own bear market, declining 20% or more over the past 6-12 months.   Examples include Fitbit, Ambarella, Alibaba, and GoPro,

The only positive I see is that the U.S. economy is still growing and does not appear to be heading towards recession.

So right now, I see more downside risk than upside potential and I will wait before making any large investment of funds.

Disclosure:  At time of publication, we had no positions in Fitbit, Ambarella, Alibaba, or GoPro.

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 © 2015 Achievement Catalyst, LLC