A Confusing Market

I did not expect the market to rally Friday after the jobs report, especially since the jobs number indicated the Fed is raising rates in December.   In addition, the ECB said that they would continue monetary easing in the EU.  So I expected the stock market to decline, especially interest rate sensitive stocks, dollar to rise, and gold to fall.

Instead the market rallied, dollar went down, and gold rose.   The market not only rallied, but it went up over 2% and recovering the losses from the previous day.   The main negative sector was energy, due to the OPEC deciding to continue their policy of not reducing oil shipments.

While confused, I am very happy with the outcome.   Our accounts were up and my company stocked (uncharacteristically) gained a little more than the market indices.

However, the market reaction has me questioning the sustainability of this rally. The market can't keep rising if interest rates are going to rise.     If I'm right, the next few weeks/months should be the beginning of a market correction.

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 © 2015 Achievement Catalyst, LLC

Tough to be Positive

With a month left in 2015, I find it hard to be positive about the stock market.  I expect the market to continue to be ambiguous and directionless.  I also believe that the downside risk is higher than the upside potential.

Given my poor track record of anticipating short term stock market direction, I'm maintaining hold on our current investments.  I like my current investments, my level of cash, and can still sleep at night if the market falls.   So I'm bracing myself for a decline, and ready to make some additional purchases should the stock market go lower.

If my psychological preparation is wasted, I will be happy to be wrong.

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 © 2015 Achievement Catalyst, LLC

My Watching Paint Dry Investments

Tracking my investments in 2015 has been lot like watching paint dry.   A lot of time goes by and very little seems to happen.   With 2015 almost over, most of my accounts within a couple percent of the beginning of the year.   One managed account is down about 7% and one is up about 10%.    So overall, everything is about the same.

One reason is that I have chosen to invest in stocks that pay above average dividends to build a more dependable source of retirement income.  These stocks usually don't see significant short term price appreciation, and thus have a smaller impact on the account value.  In fact, several of my purchases have fallen with the expectation of Fed raising rates.   So most of my account growth will come from dividend payments, which will be about  1- 1.5% of the invested value per quarter.

Another reason is that we chose to be conservative in 2014 and put significant amounts in 5-10 year CDs paying 2-3%.   While better that the 0.01% of money market accounts, 2-3% still feels like very little annual growth.   But it's steady.

Finally, I don't get any immediate benefit from income,  since the investments are in IRA accounts and I am still below the age for penalty free withdrawals.    In about 2 years, I will be eligible for penalty free withdrawals and hopefully will benefit from "watching paint dry" during this time.

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

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

Copyright © 2015 Achievement Catalyst, LLC

Seeking Higher Interest Savings Accounts

Yesterday, my bank informed me that I am now eligible for 0.7% on our money market savings accounts.  Historically speaking, that may not be much, but it is significantly higher than the 0.01% we are getting today.

This info caused me to check with our other financial institutions on similar interest rate increases.  Unfortunately, there were no matching hikes by other institutions.   However, most had 5-6  month CDs paying 0.5%, which seemed like a reasonable alternative to me.

So in the next month, I'll be moving our 0.01% money market funds into higher paying money market funds or CDs, especially if the Fed raises interest rate in December.

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

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

Copyright © 2015 Achievement Catalyst, LLC

A Frustrating Investing Year

2015 has been a very frustrating year for my investing.  The markets have been ambiguous and directionless. The indices have been seesawing all year, neither breaking out to new highs or falling o new lows. In addition, my company stock has fallen about 18% after hitting new highs in 2014.

My strategy of buying beaten down dividend paying stocks has lead to the purchase of several energy stocks, which unfortunately have fallen further.   The only highlight is the 4-8% dividend these stocks pay, if the dividend is maintained.   A dividend cut would only add to my frustration.

My last frustrating year was 2012, which was followed by a significant market advance in 2013.   However, my previous frustrating year was 2008, which was followed by a further large drop in early 2009.  It's not clear to me which will follow 2015, but right now I feel a negative outcome is more likely.

If there is a significant year end rally, I may take the opportunity to sell off some positions for a profit.  Otherwise, I will wait for a significant drop in the market to put more funds back into equities.
More than likely, the market will continue to be frustrating and not allow me to do either.

For more on Reflections and Musings, check back Saturdays.

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

Copyright © 2015 Achievement Catalyst, LLC

Cautious and Waiting

I believe that many individual stocks will test the August and September lows again before end of this year.   Until then, I am only making a few small purchases of 3-6% dividend paying stocks and a total market ETF that I plan to hold for 3-5 years.

That way, if I'm wrong and the market rises, I can participate in the gains.  If the market declines as I expect, I wlll be able to buy at lower prices.

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

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

Copyright © 2015 Achievement Catalyst, LLC

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