Repeat of Sell in May Pattern?

Since the 2009 bottom, the market has corrected each year around the month of May. With the Dow at all time highs, it may be a good call to assume the pattern will repeat itself in 2013.  If a decline happens around May again, it will be the fourth year in a row.

The case for "sell in May" is that many traders will go on vacation during the summer, returning in September.  Thus, there is little buying pressure during the summer which results in a decline in the market.

However, 2013 may be different this year for a several reason:

Rotation from bonds to stocks. Investors seem more willing to take more risk due to the low interest rates for fixed income.    There has been a net outflow from fixed income and a net inflow into equities.

Sideline money being invested.  Retail investors are putting money back into the market after four years for taking money out.   Either confidence is growing or people don't want to miss the next rally.

Excess funds from 2012 tax gain selling.  Due to the expected expiration of the Bush tax cuts in 2012 and unknown 2013 tax rates, there was significant selling of appreciated assets to have the gains taxed at a known and lower tax rate.  The money from the sales will likely be reinvested.

On the negative side, there are the usual suspects:

Sovereign debt issues in Europe. Someday Greece, Spain, Italy or other EU country will default.  Just a matter of time.

Debt limit brinkmanship.   We're just a couple weeks away from a technical default by the U.S. with the President and Congress no where close to a solution.

Sequester impact.  The sequester did not have an immediate impact on the economy.  However, the rest of 2013, the spending cuts will affect the economy.

At this point, I think "sell in May" is the higher probability scenario.  However, it may be better to go against me since my success rate at these types of predictions is less than 50% :-)

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

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

Copyright © 2013 Achievement Catalyst, LLC

Time to Quit?

I'm considering making 2013 my final year for working at my seasonal part time job.   No one believes me.  My spouse, colleagues and friends have reminded me that for each of the last three years I have said it would be my last year and then returned. I guess I'm not really reliable when it come to quitting a job. So everyone fully expects me to be back next year. 

Here's why the probability of me quitting has increased:

Office turnover.  The office environment has changed.  About 3/4 of last year's office has decided not to return, and I enjoyed working with most of them.  Overall, it was a good group of co-workers.  This year there isn't the same level of camaraderie as there was in past years.  I only enjoy working with about a quarter of the office nowadays.

Increased bureaucracy.   The corporate headquarters is asking us to do more peripheral work that isn't directly related to our core work.  In addition, more requirements are being imposed on our everyday work. 

Learning curve flattening.  A major reason for doing this job was for me to learn about how to do the work.  My expertise is now sufficiently high that I am not learning much more each year.  In addition, the changes to the regulations have significantly decreased with each year.

Higher commitment expected.  Next year will be a major transition for the work processes, requiring a relearning of the work.  In addition, management has asked me a couple times to have a slightly bigger role in the transition.

Perks being reduced.  Each year, the company seems to reduce the perks employees receive.

While this job pays a little over minimum wage, I've been happy since there had initially been high flexibility and low interaction with bureaucratic corporate policy.  Essentially, I felt like I was running my own business without the backroom responsibility.  However, the company is changing based on its revised strategic direction which is creating less flexibility and more bureaucracy for me. 

There is a good chance that I will decide I'm not paid enough or get enough perks for the extra effort and stress being imposed.    I guess we'll see at the end of this season :-)

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

This is not financial, retirement or work advice. Please consult a professional advisor.

Copyright © 2013 Achievement Catalyst, LLC

Our Household Wealth Recovery

U.S. Household Wealth Regains Pre-Recession Peak reports that $16 trillion lost in the Great Recession has been regained.   Most of the rebound has been due to a rise in the stock market with the rest due to an increase in home equity.   The rebound has benefited those who own equities: the top 10% of wealth, who own 80% of stocks; and employees with 401Ks invested in stock.   For most Americans, home equity is the largest element of wealth and, and while higher, home prices are still down 30% from the 2007 peak. However, consumers are still cautious about spending, which economists don't expect to reach 2007 levels.

The article mirrors the financial gain that we've experienced since the Great Recession.   90% of our wealth recovery has come from the gain in my company stock and company stock options, despite being significantly below 2007 highs until recently.   Another 10% came from the other stocks that we own.    Our home is still 30-40% below 2007 highs, but only 20% below our 2003 purchase price.

At this point, I do not have confidence that the stock market gain are sustainable and remain cautious with our retirement savings. Also, I expect that housing prices will continue to rise slowly and that we won't fully recover our purchase price for five more years.

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

This is not financial,investing or retirement advice. Please consult a professional advisor.

Copyright © 2013 Achievement Catalyst, LLC

From Simplicity to Complexity and Back

When I was a child, it was important that ideas and tasks were simple.   That's because I had not developed the knowledge and skills needed for the complex elements.   As my skills and knowledge grew, I was able to handle more complex ideas and tasks.  Throughout my twenties, thirties and forties, I would use complex processes to maximize the benefit for me.  While the processes took extra effort and thinking, the additional benefits made the processes worthwhile to do.

In my fifties, I am thinking that simplicity may be a better choice going forward.  While I'm still able to manage complexity, it is taking more effort and time than before.  So the benefit of having more complexity are not as great as when I was younger.

Investing in our retirement accounts is one area that I will test if simplicity is a better choice.  Over the next few months, I will create an ETF portfolio for part of our retirement savings and compare the results to returns of market indices.  I hope to find out that a simple diversified ETF portfolio will yield comparable result to a complex portfolio of selected stocks.

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

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

Copyright © 2013 Achievement Catalyst, LLC

Waiting for a Pullback

"Buy low and sell high." ~ Wall Street adage

Even with the Dow achieving new highs, I don't feel particularly confident about the uptrend given all the negative events that can potentially happen.   I am resisting buying into this rally, i.e. to buy high and sell higher.   Mostly, I am selling into the rally and taking profits on positions that I purchased over the last year.   Occasionally, I am buying stocks that have pulled back already despite the rally.   Overall, I'm waiting for the inevitable pullback that has taken place in the spring in every year since 2009.

Given the sequestration, China slowdown, and European sovereign debt issues, something is likely to trigger a market decline.  I'll be ready to make some stock purchases when that happens.

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

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

Copyright © 2013 Achievement Catalyst, LLC

The Wealth Builder Carnival #116

Welcome to the one hundred sixteenth edition of The Wealth Builder Carnival. The purpose of this carnival is to collect articles from the blogosphere on building, preserving and keeping enough wealth for a comfortable retirement. For reference, I have tried to keep the carnival content tightly focused on wealth building and did not include submissions that were off topic. For reading convenience, the posts are listed with a brief summary or comment by the submitter and organized into seven categories: Earning, Insuring and Protecting, Investing, Living Frugally, Retiring, Saving and Taxes.

And now on to the Carnival.

Earning

Bryan presents How To Answer 20 of The Most Common Interview Questions posted at Gajizmo, saying, "If you are a student graduating this summer, unemployed, or currently employed but looking to make a career transition or move, researching and being well-prepared for an interview is a sure way of relieving some of the stress associated with the process. Here is a list of the most common interview questions you can expect as well as tips and suggested answers."

Insuring and Protecting

Bryan presents Get Life Insurance Quotes Online posted at MyLifeInsurance101, saying, "Written by a former life insurance agent and broker, this article highlights the pros and cons of whole, universal, and term life insurance as well as discussing the primary differences between permanent and term coverage. If you are looking for a strong overview of life insurance protection, this post can help you determine what types of policies you should be looking at."

Investing

Dividends4Life presents Coca-Cola, Wal-Mart And Other Big Names Increasing Their Dividends posted at Dividend Growth Stocks, saying, "The life-blood of a sound dividend growth strategy is a growing dividend. Often the initial yield of a dividend growth stock is less than other available stocks, but the dividend growth stock comes with an expectation of reasonable increases year after year. This compounding effect will quickly grow the stocks income. It is well worth the investor's time to find companies that can deliver on this expectation..."

John Schmoll presents 5 Investing Mistakes That Are Easy to Make posted at Frugal Rules, saying, "We all make mistakes, we’re human after all. Investing mistakes can not only be costly, but they can also have a major impact on the overall health and performance of your long term portfolio."

Living Frugally

Theresa Torres presents How to Save Money on Groceries posted at CreditDonkey.com Tips, saying, "Here are some tips on how you can save money on groceries at home, while shopping and the purchase patterns to avoid so you can stay within your budget."

Kaitlyn Johnson presents How to Budget for Having Your First Baby posted at Newborn Care, saying, "There’s an old adage that says if you wait to have children until you can afford them, you’ll never have them. While it’s true that raising kids in today’s world costs a pretty penny."

Josh Champagne presents Do Infrared Heaters Save Money? posted at Josh Champagne, saying, "An infrared heater and an oil-filled radiator go head to head in this real life experiment."

Retiring

Super Saver presents Too Old to Rehire and Too Young to Retire posted at My Wealth Builder, saying, "Fifty years old may be the new goal for retirement."

Saving

CashRebel presents What can your money metrics tell you? posted at CashRebel, saying, "I've applied business money metrics to help drive my wealth building strategies."

Taxes

Kurt presents New Capital Gain Tax Rates posted at Money Counselor, saying, "The American Taxpayer Relief Act of 2012, which resolved part of the so-called fiscal cliff, changed capital gain rates for some. Did your rate go up?"

Edward Webber presents Tax Code 944L posted at TaxFix Feed Update, saying, "The tax allowance for 2013 has increased in the UK. This post will let you know how much you can earn before you need to pay any tax."


That concludes this edition. Submit your blog article to the next edition of The Wealth Builder Carnival using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Technorati tags: the wealth builder carnival, blog carnival.  

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

This is not financial, earning, insuring, investing, living, retiring, saving, tax, or wealth building advice. Please consult a professional advisor.

Copyright © 2013 Achievement Catalyst, LLC

Profit Average Selling

One strategy that I learned from an stock trader is to sell partial positions when a stock reaches a near term sell price.  That way if the stock price continues to rise, I will continue to participate in the gains. If the stock price declines, I will have taken some profit at a higher price.  Psychologically, I win (partially) either way.

Previously, one downside of this approach was the trading costs.  The cost of  additional commissions can significantly reduce the amount of gain if the partial positions are small lots.  However, with brokerages offering free trades (by promotion or account criteria or for select ETFs) which enables cost effective partial sales.

Recently, I used this approach for several positions that I owned. As might be expected, some of the stocks continued to rise, allowing me to sell the rest at a higher price.  Some of the stocks were didn't change and I sold the remainder at about the same price.  Some of the stocks declined, allowing me to lock in some profit and  to buy some at a lower price.  Although I have not made a comparison to selling the entire position at one price, I felt that I had made a good selling decision for all three scenarios. 

Since I believe the stock market will continue in a trading channel in the near term, I will continue to use this profit averaging selling strategy in our investment accounts.

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

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

Copyright © 2013 Achievement Catalyst, LLC

Major Lifestyle Change

In  2012, I decided to see a cardiologist to address some concerns I had.  Unfortunately,  I was diagnosed with coronary heart disease, with significant blockage in my coronary arteries.  After surgery, the blockages were eliminated.

Before the blockages were gone, I realized I needed to make major lifestyle changes and do vigilant monitoring to maintain my health in the future.  That's because even though the current blockages were eliminated, I knew that my body would continue to create the buildup that caused my health issues.   So I decided to implement some major lifestyle changes, base on Dr. Ornish's book Program for Reversing Heart Disease.  Here are the four elements of change:

1. Diet.  I'm following a mainly vegetarian diet with no added fats/oils or nuts/seeds.  The only non-vegetarian items I eat are egg whites and non-fat milk/milk products. 
2. Exercise.  I am exercising at least 30 minutes a day for six days a week.   Most days, I get in at least 45 minutes of exercise. 
3. Stress management. I use the DVD Beat Your Fatigue and Stress Fast by Del Pe.  It is a 15 minute breathing and stretching program that I do at the end of the day.  
4. Group support. My family has been very supportive my health situation.  In addition, there are some elements of group support in my cardiac rehab sessions.  I've also learned that about 5% of the people I know have had heart surgery.  

At this point, I have been consistently (6 times or more a week) maintaining the diet for 2.5 months, the exercise for 3 weeks, the stress management for 3 weeks, non-family support for 3 weeks.  Prior to 3 weeks, I had been doing the exercise, stress management and non-family support for 2-3 times a week for a couple weeks.

Right now, I am still very motivated to continue the lifestyle change since I believe in the significant health benefits of reversing buildup in my heart arteries.

Disclosure:  No compensation was received for this post.  If  Program for Reversing Heart Disease is purchased through the above Amazon.com link, I may receive compensation as an Amazon affiliate member.

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

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

Copyright © 2013 Achievement Catalyst, LLC

Smaller Government Maximizing Pain

Sequestration has taken effect and government spending cuts will take place.   I expect the cuts to be extremely painful as government intentionally cuts essential services instead of cutting waste, which is the exact opposite of what a private company would do. To make their point, the government has chosen to release over 200 illegal immigrants scheduled for deportation because of the need to cut costs.   However, there is no discussion of the elimination of extravagant conferences that represent wasteful spending or the fact that the  U.S. spends more on defense than the next 17 countries combined.

Yes, spending cuts are typically painful.  The sequestration spending cuts will even be more painful because of the "cut essential services" approach chosen by the government.  

Even so, I think reducing federal government spending is the right path to take.  If the government chooses to make poor decisions on what to cut, I guess we'll need to experience more pain that we normally would.
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 © 2013 Achievement Catalyst, LLC

Too Old to Rehire and Too Young to Retire

Workers over 50 are the new 'unemployables' according to CNN money.   According to the article, people over 50 are often considered over qualified or too highly paid when apply for jobs.  In addition, their 25 years of work experience is not an advantage versus applicants who have just graduated from college.  Unfortunately, most of the unemployed over 50 do not yet qualify for retirement with pensions and/or retiree health insurance.

After taking early retirement from my company at 49, I experienced  the unemployable issue for older workers. Despite my experience, I didn't receive any responses about positions comparable to those from which I retired. When I was applying for part time jobs, I noticed I was often not considered for positions when my education or experience made me over qualified.  Finally, I learned to down play education and experience. Then after getting a couple part time jobs, I stopped showing the job from which I retired on my resume.

We were luckier than most 50 year olds.  Although I was younger than typical retirement ages, our financial situation allowed us to consider the other choice of not working until a recognized retirement age.  We had sufficient funds for living expenses until I was 59 1/2, at which time we could make penalty free withdrawals from my retirement account.  In addition, I was able to get retiree health insurance from my company.  So we decided to take the retirement path, even though we were still "too young."

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

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

Copyright © 2013 Achievement Catalyst, LLC