Sunday, January 19, 2020

Preparing for a Significant Market Decline

"The market doesn't ring a bell at the top."  ~ trader adage
"If it's too good to be true, it probably is." ~ old adage 

Depending on which yield inversion (March 2019 or August 2019) chosen, the market is now 5-10 months past the inversion.  The market can rise as much as 30% and take as long as 24  months before peaking based on history.

While I'm enjoying (and benefiting from) this rally, I don't believe that it is sustainable.  There are too many indicators (eg. total market value/GDP, government deficit, Fed balance sheet, personal debt, corporate debt, etc) that are flashing "too high."   So I am being prudent and taking some profits off the table.

I've sold some of the total market indices (SPTM, VTI all sold, VOO  all sold, SCHB) and have taking profits on most of my peripheral holding (ie. shares of core holding purchased on dips).   Now I am starting to sell some core holdings.   Recently, I sold some Visa (V), Tesla (TSLA), Shopify (SHOP) and Apple (AAPL).    I have some sell orders for Microsoft (MSFT), Nextera (NEE) and Google (GOOG).    Due to all trades being commission free, I am scaling out 1-2 shares at a time, to benefit from the inevitable higher prices in the next few months.

I am waiting for some of my "value" purchases to recover to at least break even, and then start selling some shares.  Examples include Exxon (XOM), Occidental (OXY), Kinder Morgan (KMI) and Helmerich and Payne (HP).

Actually, I'm hoping, and would enjoy, the rally continuing for 6-12 more months.   Despite my skepticism, I have no complaints about the effect on my investments.   However, if the rally does continue for 6-12 more months, I am sure the market will truly be in "the danger zone."

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

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

Copyright © 2020 Achievement Catalyst, LLC

Monday, January 06, 2020

Four Contrarian Investment Strategies

With the market near all time highs, it's hard to find good value stocks to buy.  My personal bias is to sell into this rally.

However, there are four sectors that I am only slowly selling or continuing to hold:

  1. Oil and Gas.  Tremendously beat up sector.  Some stocks in this sector are paying 5-7% dividends: OXY, WMB, KMI, BP, XOM  Others are at or near all time lows: CHK, MCF, NE.   I am not purchasing any more shares, but holding or slowly selling what I own as the mid-east crisis boosts oil prices.
  2. Gold and Gold Miners.   Gold has just reached a 6 year high.  With the geo-political issues, gold and gold miners could keep rising.   
  3. Biotech.   It has been a long winter for most developmental biotechs.  Fear over Medicare for All, Health Care reform, and price controls have kept these stocks down.
  4. Bitcoin related stocks.  I bought at the end of 2018 and have lost over 80%.  Some of these stocks have started to bounce back, as much as 100% of their lows.  I own OTIVF, MGTI, MARA, HBVTF, and NXTD
If any of these sectors should advance significantly, our investment portfolio would experience a nice windfall.
Disclosure:  We own shares of OXY, WMB, KMI, XOM, CHK, MCF, NE, OTIVF, MGTI, MARA, HBVTF, and NXTD,

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

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

Copyright © 2020 Achievement Catalyst, LLC

Friday, January 03, 2020

My Advice to New Retirees

Although I took early retirement 12 years ago, many of my contemporaries have just started retiring in the past year.

Here's my advice, three financial and one social,  to them based on my experience:

  • Take advantage of tax benefits in retirement.   After I retired, I became eligible for several tax deductions and tax credits which were phased out due to income thresholds while I was working.    I became a part time tax preparer and learned about my own tax situation while on the job. I didn't make much money, but I sure learned how to save a lot on my own taxes.   For most people, it is probably worth consulting with a good tax preparer/accountant if they currently don't use one.
  • Have 3-5 years of investment income needs in cash. For those without pensions or SS payments, the number is equal to 3-5 years of expected living expenses.   For those with pensions or SS payments, the nominal number is lower since pension and SS covers part of living expenses.   I retired in 2007 at the peak of the stock market.  I was fully invested.  Then came the 08/09 crash.  Whoops, it was a challenge to get by for the next few years until the market somewhat recovered.
  • Pay off all debt.   Having no debt eliminates a debt payment from living expenses. In 2008, I made the mistake of keeping funds in the stock market market instead of cashing out and paying off our mortgage.  When the market crashed, I had less money to pay of the mortgage.   The irony is I asked to refinance since I had always been timely in my payments.  The bank, which I won't name, refused since I didn't have regular income. So I told them to send me the payoff amount and let me close out the mortgage.
  • Learn to say "no."  It's amazing the number of people that want retirees to do their volunteer projects, since retirees have "lots of time, from not working" in their eyes.   Fortunately, I didn't have to say "no" very much since I gave the impression I wasn't going to say "yes" if they asked.   I did recant my "no" from one request, but it was for a paying job, and they met my salary request.
My final observation, but not advice, is that retirees soon wonder how they had time to work, given how busy they are with activities and interests in retirement.

For more on Reaping the Reward, check back Fridays for a new segment.

Despite the title of the post, this is not financial, investment or retirement advice. Please consult a professional advisor.

Copyright © 2019 Achievement Catalyst, LLC

Wednesday, January 01, 2020

Yield Curve Inversion Economics

"It's tough to make predictions, especially about the future" ~ Yogi Berra

Stock market peaks typically follow a yield curve inversion after 18-24 months.  Depending on which  yield curve, we are now 4-9 months past the inversion.  I expect a market peak to happen in the next 18 months, but I don't know exactly when.   So I am being cautious, taking some profits, and moving to more cash.

2019 was a great year of stock investments.   My plan is to protect some of those gains against a significant pullback in 2020.

For more on The Practice of Personal Finance, check back Wednesdays  for a new segment.

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

Copyright © 2020 Achievement Catalyst, LLC