COVID-19 Related Stock Rotation

Today the Dow was up 911 points, about  3.85%, the biggest gain since April 6.   The reason:  A positive result in Moderna's phase I clinical of a Coronavirus vaccine among eight subjects. 

The result was stocks that have benefited from COVID-19 (e.g. work from home software, health care technology) fell and stocks that have been beaten down by COVID-19 (e.g. airlines, cruise lines, hospitality, energy, financials, and REITs) surged by as much as 19%. 

I was planning buy some airlines and cruise lines today, but many were up 10-20% right from the open.   Instead, I sold some of my beaten down stocks that surged, specifically REITS and banks.   I wasn't able to do any selling for energy, since most of my buys were on the way down to  the bottom and thus, are still below my purchase price.   

Personally, I think the advance based on limited positive vaccine news is premature and an over reaction.   Therefore, I will continue to sell my profitable beaten down stocks if the advance continues.  However, I expect a reversal once the market digests the information, resulting in the beaten down stocks falling again, and those benefiting from COVID -19 to rise again.

My plan to sell the pops and buy the drops during this rotation phase of the market.  If the rotation continues for the rest of this week, I will be buying some of the stocks that benefit from COVID-19 as they decline and building a position to sell in the subsequent rotation.

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

This is not financial nor investment advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

To Invest or Not to Invest

Yesterday, I was itching to buy.  However, for the most part, I am waiting for the next drop.

My tendency is to invest in the beaten down stocks.   I've been doing that with oil stocks, which hasn't worked out that well so far since I started buying too early.  However, I'm thinking there may be opportunities in airlines, cruise lines, and retail.   I'm even thinking about some banks.   The commonality of all these stocks if that they  have been beaten down significantly (50+%) due to COVID-19 shutdowns, although some have bounced back.   If the market does fall, these stocks probably won't fall much beyond their previous lows.  So I may buy a small position in these stocks and wait for the decline.   Stocks I am considering include:  DAL, SAVE, KEY, HBAN, NCLH.  I already have relatively large positions in various energy (e.g. XOM, SLB, OXY) and some small positions in REITs (e.g. WPC, NNN, VTR, STAG, O, and GLPI).  I may also add to some of these when the next significant market decline occurs.

The other option is to invest in stocks that have hit new highs since the market crash in March 2020.  When these stocks fall to or below their March 2020 lows, I will start buying.   If they fall more than 50% from their new high, I will buy more.  Here are some companies I am considering:  DOCU, IRTC, VTRX, TDOC, COUP, TWLO, EVBG, BAND, VEEV and TEAM.

Right now, I am still going to wait for the next big drop in the market before purchasing large positions.  Until then, I may make a small purchase to start a position.  In addition, I will still be selling if the market continues to rally.

Full disclosure:   At the time of posting, we currently own shares of KEY, HBAN, XOM, SLB, OXY, WPC NNN, VTR, STAG, O, GLPI, BAND, VEEV and TEAM.

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

This is not financial nor investment  advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

My Post Retirement Education

As part of my retirement, my company allotted up to $5000 over 2 years to use for post retirement education.  The only restriction, that I recall, is the funds could not be used for golf lessons.

I used my funds to take courses at a local vocational school.  The knowledge I learned from these courses have been very useful in retirement.  Here are the courses I took:

• Electrical wiring.  This was a course that enabled me to qualify as an apprentice electrician. I learned how to correctly wire outlets, switch boxes and lights.   Prior to this course, I would rewire elements as I found them. With the course, I was able to know when elements in our house were not wired correctly (but not dangerously) and rewire them correctly when making changes.
• Plumbing.  A basic plumbing course to qualify as an apprentice.   For me, plumbing was not as complicated and more intuitive than the electrical wiring course. However, I wasn't able to solder copper pipe correctly.  I still learned enough to be more adept at simple repairs.
• Masonry.  Again a basic course to qualify for apprenticeship.   I learned that I could never do masonry work well, e.g build a straight wall.   I did learn enough to do basic minor repairs.
• Landscaping.    Although this course covered design, my best takeaway was how and when to prune trees.
• Cooking.   I learned some cooking skills and got some good recipes to use at home.  I must admit the best part of this course was eating the meals we prepared in class.

I enjoyed all these courses, mainly because they expanded my personal capabilities to do basic repairs on our house and save the cost of hiring someone.

For more on Reaping the Rewards Reflections, check back Friday for a new segment.

This is not financial, home maintenance nor education advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Be Patient

"Patience is a virtue."  ~ old adage

I'm waiting for the other shoe to drop before making any significant equity purchases.   I expect the market indices to test or go to new lows, before rebounding to new highs.  So I have been selling into this rally.  (Full disclosure:  We are still down because I began purchasing peripheral shares long before the bottom.)

Today, I started nibbling at a few stock that were getting close to, but not at their March bottom.  These included:  NNN, T, and COTY.      I expect the stocks will go lower in the coming weeks, but I couldn't resist making a purchase of one share of each, since the commissions are now $0.

I will scale in and buy more of these shares, and others,  if the market continues to drop.

Full disclosure:  We own shares of NNN, T and COTY.

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

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

Copyright © 2020 Achievement Catalyst, LLC

Venturing Out after COVID Lockdown

Our state has started reopening:  elective medical and manufacturing last week and retail stores, outside dining, and personal services this week.  Next week will be indoor dining.    Still to come:  daycare, schools, gyms, and bars.

Our plan is to slowly return to normalcy by restricting daily exposure at this public places.  Specifically, we'll try to limit daily exposure at public places to 2 exposures per day.   That way we reduce the daily probability of being exposed to an infected person.  Also, in most cases, we won't be in contact with any person for an extended time, e.g more than a minute.

The exposure exceptions are personal service and elective medical visits, which may have up to an hour of contact.  I plan to get a haircut this week, on the first day of opening.  Fortunately, my service is fast, only about 15 minutes.    For now, I will pass on routine medical visits and tests since to reduce exposure to people in hospitals.

With declining overall infections, we will increase the number of daily exposures as time passes.  If overall infections increase, we will reduce the number of daily exposures.

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

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

Copyright © 2020 Achievement Catalyst, LLC

Is this time different?

The fast rebound off the lows has investors wondering if the bear market is over.   If that were correct, it would be the shortest bear market ever.   That would be too good to be true.   Bear markets typically have a second major decline, before exceeding previous highs.   Thus, I remain cautious and and skeptical that the bear market is over.

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

This is not financial nor investing  advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Preparing for Further Market Declines

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

As Warren Buffet said, " I don't think anybody knows what the market is going to do."   IMHO, if they did, they wouldn't be telling the world :-)

I admit, I have no clue as to what the market will actually do.  However, I do know that a significant decline of our investments is much more troublesome than mission out on significant gains.  Thus, from a risk perspective, I'm preparing for a further market decline.  Here's what I'm doing:

• Selling into rallies and taking profits.  I was a buyer from January to March, mostly in energy stocks.   So I'm taking profits when I get a 15% gain or greater.  Unfortunately, I'm still underwater for the majority of my energy purchases, but am willing to wait.
• Buying CDs.  Mostly 1 year or less.  Even though the rates are less that 0.5%, it's still better than 0.01% in the bank sweep accounts. 
• Putting in low ball limit orders.  I want to buy after the market falls significantly.  I have submitted some low ball good-til-cancelled orders for stock that I already own and still like.
• Keeping cash to invest.   When market falls, I will be scaling in with small purchases.   Hopefully, I will start buying near the bottom, but, if not, I will be dollar cost averaging down.

I believe the stock market has over estimated the speed of the recovery from the lockdown.  Once the reopening shows some sputtering, the uncertainty will cause the market to pause and  decline.

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

This is not financial nor investment advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Deflation or Inflation?

Despite all the FED monetary actions, I am starting to think deflation due to the Coronavirus shutdown is the most likely short term scenario for the following reasons:

• Demand will fall for discretionary services.    After states reopen, I expect a large number of people will still be reluctant to go to restaurants, theatres, bars, and other venues that have large congrations.  These businesses will need to lower prices to attract more patrons.
• Total wages have fallen.   With shutdowns, employees wages are being reduced for those that continue working.  Others have been furloughed and will be on unemployment.  Both stituations will lead to lower spending.
• People will save more and spend less.  The uncertainty of COVID-19 will cause people to be more cautious and have more funds in case of another shutdown.   In addition to less spending on entertainment (e.g vacations, travel, etc.), people will spend less on major purchases such as automobiles.

If there is defation, cash and bonds will be a great investment.   Real estate, commodities and stocks will likely see declines.   

I plan to start taking actions to hedge against the possiblity of a deflationary economy over the next few years.

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

This is not financial, economic nor investment advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

What are Your Wealth Building Questions?

I've been blogging about 14 year now on various financial topics of my choosing.  I'm going to try something new.  I will offer to write a post or two responding to questions readers may have about wealth building.   

Here are my guidelines questions that I will and will not write about:

• What's worked not worked for us.
• Opinions about the stock market and economy.
• No  questions on specific numbers:  pre-retirement salary, net worth, etc.
• No personally identifiable information:  employers, home location, schools attended, etc.
• No recommendations on specific stocks

If you have a question for consideration, leave it as a comment on this post within three days.  I will review and choose a question or two as the subject of a post.   I reserve the right to not answer any and all questions.

Thanks, in advance, to those that comment.

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

This is not financial, retirement, nor investment advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Stress Tested Strategies

The COVID-19 pandemic and ensuing lockdowns have stress tested a number of personal finance strategies that have benefited from a strong economy and an 11 year bull market.   Some of these strategies are having their fatal flaws exposed during the Coronavirus crisis.  IMHO, here are some that I believe are being stress tested the most:

• FIRE practitioners.   FIRE stands for Financial Independence Retire Early.   I have generally been skeptical of most practitioners.   Some "early retirees" are men that become Stay at Home Dads, while their wife continues working and covering health insurance through her company.   When I was growing up, that was called a single income family, not retiring early. (If I used that definition, my mom retired at 30 when I was born.)   Other retirees are doing freelance employment, e.g. blogging, and earning significant income to cover most of their living expenses.   I think that is great, but to me is not "retired."    Another group of retirees have saved about $1 million and plan to make that last 40+ years, probably supplementing with blogging income.  Most FIRE bloggers are putting up a strong face.  It will be interesting to see how many survive this COVID-19 stress test.
• Retirees with health insurance but without pensions nor Social Security.  These retirees have health insurance coverage from  their previous employees, but no pension, only 401K or profit sharing plans.    In addition, they are not old enough for Social Security.  I put us in this group, although I could start taking Social Security, but have chosen not to.   Many are dependent on the growth of investments in their reitrement plans.   With the decline in the stock market, it will be a stess test of their funds.  For us, COVID-19 stress test is deja vu all over again, since the 08/09 recession happened right after I retired at 49. I learned then being 80% investing in equities was not good in a decline.   After surviving that stress test, I prepared our investments to withstand a similar decline, and the investments have done well so far.   We'll see if we survive this stress test.
• Mortgaged real estate.  With extremely low interest rates, owning rental real estate has become an attractive opportunity, especially for Airbnb hosts.   From the real estate courses I took, the strategy was to have rent cover mortage, property taxes, and routine expense.   Let the tenant pay for the property.  That works until there aren't tenants for long periods, which is happening to a number of Airbnb hosts.  Even landlords with long term tenants are experiencing some significant percentages of non-payment of rent.  I expect a significant amount of Airbnd properties to be at risk for foreclosure duing this stress test.  Personally, we own, as part of a partnership, a commercial rental property, that fortunately is paid off and is fully rented.  We only have taxes and maintenance to cover, and tenants are still paying rent, so far.

Soon the media will be reporting the survivors and failures of the COVID-19 stress test.  I think we are prepared, but there are no guarantees we will be survivors.

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

This is not financial, retirement, nor real estate advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

No RMD in 2020

An element of the CARES act, the Coronavirus relief bill, is that no RMDs (required minimum distribuions) need to be taken in 2020, either for the IRA owner, or a beneficiary.    This is to help retirees by not requiring some to cash out of equities after the significant decline.

We will benefit from this since my mother-in-law passed away this year before taking her RMD.  Therefore, my spouse won't need to take a taxable withdrawal in 2020.    In addition, due to the SECURE act of 2019, my spouse won't required to ever take a RMD.  Instead, she will be required to withdraw the entire IRA account within 10 years of her mother's passing.

Separately, our daughter had inherited an IRA from my mother, which is still subject to the stretch IRA beneficiary rules requiring an RMD be taken base my daughter's life expectancy.  My daughter also does not need to take an RMD in 2020, but I had already withdrawn the RMD in early January, so it has been completed.

I am still under the age of taking an RMD, currently 72, but I expect tax laws will change again before I reach that age.

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

This is not financial, retirement nor IRA advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC