Markets in turmoil....

[sevoflurane]

Or buying opportunity?

I'm buying. Added strong positions with RIG, XOM, NXPI, Dividend Funds, NASDAQ and Total Stock market. Started yesterday and will continue to do so over the next 5-10 days.

How are you guys playing this last sell-off. In my opinion, the correction was overdue and we are still in a bull market.

Europe/Ebola is holding us back.

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[deleted171991]

I am waiting for Ebola to become an epidemic (the WHO predicts 1.4 million cases in Africa by the end of January), before I buy. I think this epidemic will throw us into recession, if not world war, unless we fix Africa fast.

I'll probably keep buying on the way down, but it will be a loooong way down, once the epidemic will start affecting the economy. I won't start buying significantly until we drop to a Dow of 10-11,000.

 

[dhb]

I am waiting for Ebola to become an epidemic (the WHO predicts 1.4 million cases in Africa by the end of January), before I buy.

Sadly 1 mil dead africans won't do much harm to the stock markets

 

[deleted171991]

One million Africans will mean at least 1,000 non-Africans all around the world, and growing fast.

Getting from less than 10,000 today to 1.4 million, in less than 4 months, means that the number of cases would double about every 2.5 weeks, so we could get to 100 million by June 2015. Only time will tell.

 

[dhb]

Whatever...

 

[Mman]

Or buying opportunity?

I'm buying. Added strong positions with RIG, XOM, NXPI, Dividend Funds, NASDAQ and Total Stock market. Started yesterday and will continue to do so over the next 5-10 days.

How are you guys playing this last sell-off. In my opinion, the correction was overdue and we are still in a bull market.

Europe/Ebola is holding us back.

I personally don't try to time the markets. I continue to invest as I always do. Each month I max out the 401(k) to a low cost stock heavy mutual fund, max out the pension plan, and invest an additional 5K in individual stocks, bonds, cash, or mutual fund depending. It's the last 5K that I tweak where it goes based on market factors and if I find a particular stock that looks cheaply priced I'll buy it. Lately I've had fewer and fewer stocks that look like great buys and have started inching up on more cash and bond funds. So I'm not anti-stock, it's just got to be the right one.

As for XOM, I've held a nice chunk of that for the last 24 months. It's been up about 5-10% but has a great P/E ratio and nice dividend and continues to be a money making machine with no signs of slowing down over the next 10-20 years so I have no plans on selling and may even add to it at some point.

 

[thinkorswim]

Or buying opportunity?

I'm buying. Added strong positions with RIG, XOM, NXPI, Dividend Funds, NASDAQ and Total Stock market. Started yesterday and will continue to do so over the next 5-10 days.

How are you guys playing this last sell-off. In my opinion, the correction was overdue and we are still in a bull market.

Europe/Ebola is holding us back.

I am cautiously buying here, especially after the huge earnings reports from the financial companies this week. The global economic climate may be fragile, but the US economy is stronger now than it has been since the recession. I think fundamentals will finally right the ship. I'm buying total market ETFs and also making long-term volatility plays.

Sevo, it's interesting that you're loading up in the energy sector. There have been multiple reports about the Saudis willing to let oil prices ride to the $80 range for 1-2 years in order to maintain their dominant market share. I would stand on the sideline until this all plays out.

 

[sevoflurane]

My strategy is dollar cost averaging as mentioned by Mman. I do have a stash of liquid assets that I put to use at times like these. Usually put them to use two to three times a year. Goldman Sachs did well, jobs report are looking good, fundamentals look good to me, US has been a haven for investors... there are some real bargains out there.

But you have to know your stocks.

XOM is a solid performer year over year. Probably one of the best in it's sector. It's divided is great and it's a long term play. It's at a bargain price here. If it dips further, I'll buy more.

Same applies for RIG. That stock has been crushed and it's dividend yield is 10.19%.

I would like oil prices to stay down for now (laugh at RUSSIA !). These prices will stimulate global growth... but it will come back at some point. May go even lower... I've heard Saudi's being ok with $77 per barrel... but make no mistake----> they also like it going up! It cost them $10 a barrel to dig up out of the ground. It costs every one else 4-8x more ($40-80 per barrel). So Saudis are good either way.

The market might look dicey, but it's a healthy correction IMHO. The rally on the way up is always harder to time.

May we see a 20% correction??? I don't know.

 

[sevoflurane]

Nothing is 100%, but year end is right around the corner.

 

[sevoflurane]

... and there is the pop in the market at the opening bell. Look at what the above stocks and etfs are doing...

Of course... we'll prolly see some more volatility.

NXPI is up 12% in 5 days.
RIG is up 8% in 5 days.

 

[sevoflurane]

Interesting graph... especially that part on the far right.

This predicts nothing... but I'm glad I started putting funds to work when I did.

 

[dhb]

Same applies for RIG. That stock has been crushed and it's dividend yield is 10.19%.

They didn't pay divdends for almost 10 years / 2002-2012

 

[Mman]

They didn't pay divdends for almost 10 years / 2002-2012

Agreed. With dividends, history matters. Companies that maintained a dividend through 2 stock market crashes in 2000 and 2008 are quite likely to continue to pay out. Companies that have dividends that come and go are less likely to keep it up.

 

[imfrankie]

Agreed. With dividends, history matters. Companies that maintained a dividend through 2 stock market crashes in 2000 and 2008 are quite likely to continue to pay out. Companies that have dividends that come and go are less likely to keep it up.

Dividend Achievers

 

[thinkorswim]

Interesting graph... especially that part on the far right.

This predicts nothing... but I'm glad I started putting funds to work when I did.

Same here. Earnings and fundamentals will continue to take over in the coming weeks. Given the global slowdown, one can also hope that the Fed tapers QE3 to $5 billion a month instead of shutting off all stimulus entirely. I believe that this would propel markets through year end.

The VIX futures are entering back into contango, signaling times of low volatility ahead. The dip was steeper than I had anticipated, but my volatility plays should work out nicely.

 

[sevoflurane]

Same here. Earnings and fundamentals will continue to take over in the coming weeks. Given the global slowdown, one can also hope that the Fed tapers QE3 to $5 billion a month instead of shutting off all stimulus entirely. I believe that this would propel markets through year end.

The VIX futures are entering back into contango, signaling times of low volatility ahead. The dip was steeper than I had anticipated, but my volatility plays should work out nicely.

Looking good buddy!

 

[deleted126335]

Dividend Achievers

http://www.cbsnews.com/news/why-a-high-dividend-stock-strategy-isnt-a-good-approach/

 

[Mman]

http://www.cbsnews.com/news/why-a-high-dividend-stock-strategy-isnt-a-good-approach/

That is an absolutely terrible article and very poorly researched. They basically picked out stocks with the highest dividend yields for their analysis when what they should do is pick out historically profitable large companies that have EPS that increases year over year for 10-20 years or more and have dividends that consistently pay out for 20 years or more through market upturns and downturns.

High dividend yield does not equal a "value" stock.

A big ass company that keeps making more money every year compared to the last and has paid out dividends for a long time and trades for a low P/E ratio. Now that's a value stock.

 

[epidural man]

The market in general will not perform well the next 5 years. Real estate will however. Buy REITs

 

[Mman]

The market in general will not perform well the next 5 years. Real estate will however. Buy REITs

There is probably a 50% chance that you are correct in how the market will perform the next 5 years. After all, it wasn't supposed to be doing anything the last 3 years either but those that sat on the sidelines missed massive profits.

 

[deleted126335]

The market in general will not perform well the next 5 years. Real estate will however. Buy REITs

REITs are one of the most richly valued equity asset classes. REIT dividends grow at about minus 1% in real terms. They are also quite volatile. They still compose 10% of my equity portfolio with a 50-50 domestic international split. International REITs are cheaper than domestic right now.

 

[deleted126335]

That is an absolutely terrible article and very poorly researched. They basically picked out stocks with the highest dividend yields for their analysis when what they should do is pick out historically profitable large companies that have EPS that increases year over year for 10-20 years or more and have dividends that consistently pay out for 20 years or more through market upturns and downturns.

High dividend yield does not equal a "value" stock.

A big ass company that keeps making more money every year compared to the last and has paid out dividends for a long time and trades for a low P/E ratio. Now that's a value stock.

The definition of a value stock is a stock with an above average Book to Market Value.

http://www.cbsnews.com/news/factors-to-consider-for-high-dividend-stock-strategies/

 

[Mman]

The definition of a value stock is a stock with an above average Book to Market Value.

http://www.cbsnews.com/news/factors-to-consider-for-high-dividend-stock-strategies/

Not according to the most successful value investors in history it isn't. Benjamin Graham, the most famous value investor of all time except perhaps his pupil Warren Buffett, laid out 7 rules.

1) Long term debt less than net working captial
2) Current assets >>> current liabilities
3) 10+ straight years of profits
4) Uninterrupted dividend payments for 20+ years
5) Average annual EPS growth of at least 30% over the last decade (taking 3 year averages of EPS for now and 10 years ago)
6) P/E ratio < 15
7) P/B ratio < 1.5

Graham also felt that a company needed to be an industry leader (of sufficient size) so as to derive benefits that big companies get in being able to withstand ups and downs where as smaller companies are at more risk of just folding in a downturn.

If you can find a company that meets all 7 criteria, they are probably a pretty safe investment idea and historically (100+ years) have performed well overall and vs the S&P. The dividend is only a small part of it. It isn't the dividend that makes you the profit, but a company that is always making money hand over fist and can consistently afford to pay out some to the shareholders through good times and bad is a company that will likely continue to make even more money. Warren Buffett and some other giants have made minor tweaks to this philosophy they learned over the years, but the basics are the same for them even today.


Buy profitable companies that are temporarily on sale for cheap prices. It's not easy to do, but when you can you come out ahead.

 

[sevoflurane]

I'm really liking this graph.

Looks like the US market is holding strong in the international arena. I hope it keeps this up through the holiday season.

 

[DreamMachine]

Damn sevo, you timed that recent turn perfectly. I bought a little early in the pullback, even though I added more as it dropped. Finally, back in the green for my recent trades. As of now, in general, I'm long through the winter. Come March, I'll restrategize...

 

[deleted126335]

Not according to the most successful value investors in history it isn't. Benjamin Graham, the most famous value investor of all time except perhaps his pupil Warren Buffett, laid out 7 rules.

1) Long term debt less than net working captial
2) Current assets >>> current liabilities
3) 10+ straight years of profits
4) Uninterrupted dividend payments for 20+ years
5) Average annual EPS growth of at least 30% over the last decade (taking 3 year averages of EPS for now and 10 years ago)
6) P/E ratio < 15
7) P/B ratio < 1.5

.

According to the academic financial literature, it is the most effective way to capture the value premium. The seminal paper is:

http://www.bengrahaminvesting.ca/Re...e_Cross-Section_of_Expected_Stock_Returns.pdf

The authors of this paper founded Dimensional Fund Advisors. They have over $300 billion under management. Passive only strategies with an emphasis on value investing.

http://www.forbes.com/sites/feeonlyplanner/2013/12/03/why-you-should-know-dimensional-fund-advisors/

I have a chunk of money with them.

 

[Mman]

According to the academic financial literature, it is the most effective way to capture the value premium. The seminal paper is:

definitely not the most effective, maybe the easiest though. I can see why they would do it if perhaps they have too much money under management. The bigger a fund gets, the harder it is to do anything except mirror the market.

 

[sevoflurane]

Damn sevo, you timed that recent turn perfectly. I bought a little early in the pullback, even though I added more as it dropped. Finally, back in the green for my recent trades. As of now, in general, I'm long through the winter. Come March, I'll restrategize...

DM!! Where ya been bro? Hope you are doing well man.

Yep. Hoping for a good holiday run up.

Good to see ya on here.

 

[Hockeyguy]

I'll preface this by saying I believe in value indexing for your retirement - ie bogle type investing three fund portfolio etc. That being said i keep a couple hundy K on the side to speculate with with. Some of you may remember most of my posts on this board were in the old wall street thread we had going. I just plowed into USO at 30 and change. It is at/near three year lows (see chart below). No one knows where market is going but I'm confident oil is NOT going to zero. Looking to get out at 38 will buy more at 25$ if it goes that low...

 

[Impromptu]

A prolonged bear market would be great for young, long term investors, like myself.

I have my asset allocations set and invest my full monthly 401(k), $5000 more each month, and a yearly back door roth IRA for me and my wife. Overall current allocations are about 20% bonds, 40% domestic and 40% international. 8% of that is real estate. There are further divisions between small, large, value, and blend/core funds and ETFs. International has emerging market portions. I don't own any individual stocks. Most of my funds are very low cost.

I am not going to time the market. I will rebalance every couple of years, ensuring I buy low and sell high. Boring, steady, currently a little aggressive, and hopefully will give me average returns over the next 25-30 years until retirement.

Once I pay down my student loans and mortgage within 2.5 years I will then have some more discretionary money available. I probably won't use that for speculation in the stock market.

 

[DreamMachine]

Stocks hitting all time highs after Japan increases it's QE. Wow, what a difference two weeks make. I wonder if the ECB will also consider increasing stimulus in the near future. Eventually, this morphine drip is gonna hit a brick wall and there is gonna be a big shake out. Staying in for now.

Check out these stats posted on Marketwatch this morning:
Prior to 1999 Winter Return: 5.1% Summer Return: 2.1%
Since 1999 Winter Return: 6.0% Summer Return: -0.5%

Winter being Nov to April. Summer being May to Oct.

(Been reading the forums, Sevo. Plenty of good info on here. I just haven't been motivated to post. Lol. Life is the same...work hard, play hard. )

 

[sevoflurane]

Stocks hitting all time highs after Japan increases it's QE. Wow, what a difference two weeks make. I wonder if the ECB will also consider increasing stimulus in the near future. Eventually, this morphine drip is gonna hit a brick wall and there is gonna be a big shake out. Staying in for now.

Check out these stats posted on Marketwatch this morning:
Prior to 1999 Winter Return: 5.1% Summer Return: 2.1%
Since 1999 Winter Return: 6.0% Summer Return: -0.5%

Winter being Nov to April. Summer being May to Oct.

(Been reading the forums, Sevo. Plenty of good info on here. I just haven't been motivated to post. Lol. Life is the same...work hard, play hard. )

Playa!

You're prolly still single...

Let's hope for a good run.

 

[dhb]

(Been reading the forums, Sevo. Plenty of good info on here. I just haven't been motivated to post. Lol. Life is the same...work hard, play hard, be hard. )

Ftfy

 

[Mman]

Check out these stats posted on Marketwatch this morning:
Prior to 1999 Winter Return: 5.1% Summer Return: 2.1%
Since 1999 Winter Return: 6.0% Summer Return: -0.5%

Winter being Nov to April. Summer being May to Oct.

People have been referencing those numbers for a long time. Unfortunately they don't always hold. S&P just finished this past summer (May 1 to Oct 31) up 7.12%. That's ever so slightly better than last winter (Nov 1 to Apr 30) of up 7.05%. A year ago, the summer (May 1 to Oct 31) finished up 11.33%. So in the last 18 months, the worst return was during winter 2013/14 and the two summer periods were better.



Then again timing the market never really works any more than luck would suggest since this bear market was supposed to have ended a long time ago. One of my colleagues has mostly been sitting on the sidelines the last 3 years. Sucks for him.

 

[sevoflurane]

US GDP grew 3.5% in the third quarter. Not too shabby.
Couple that with prices at the gas station below $3.00 a gallon and interest rates still at all times lows = strong holiday season.

Nothing is for certain and dollar cost averaging is the way to go. You also need to look around a little and take calculated risks if you want to have bigger returns. Nothing is for certain that's the only thing you can count on.

 

[sevoflurane]

For example... look at UPS and FedEx. Both companies are gas guzzlers and they will be used heavily during the holiday season. Investors have already factored this in and look at what they've done over the last couple of months. If you had your head in the game, you could cash out now.

 

[thinkorswim]

For example... look at UPS and FedEx. Both companies are gas guzzlers and they will be used heavily during the holiday season. Investors have already factored this in and look at what they've done over the last couple of months. If you had your head in the game, you could cash out now.

I'm right there with you man. Airlines and travel stocks are also a strong derivative play on the cheap gas. Going forward, these companies will post great earnings on improved profit margins.

But I'm still puzzled by your play on XOM and RIG, especially with crude oil prices tanking. These companies will struggle while prices stay low, especially since they may very well need to turn to the debt markets to keep paying out their high dividends. I'm not a fan of that move.

 

[Mman]

But I'm still puzzled by your play on XOM and RIG, especially with crude oil prices tanking. These companies will struggle while prices stay low, especially since they may very well need to turn to the debt markets to keep paying out their high dividends. I'm not a fan of that move.

For the year end 2013, XOM earned a diluted $7.37 per share and paid out $2.46 per share in dividends. They also had $4.6B cash on hand and only $6.5B total long term debt. If their profit was cut in half, they'd still be able to afford the current dividend. And their earnings in 2014 are ahead of 2013. Since 2003, XOM's lowest diluted EPS is $3.23 and that includes periods with prices of < $40/barrel. Plus, when oil prices drop the profit margin XOM makes on their refining business goes up.

Exxon won't stop making oodles of money when oil prices drop. They'll keep cranking out cash. In fact, I can only find their dividend info as far back as 1998, but they've increased their dividend every single year since then. Even through drops in oil prices and market crashes, their dividend keeps going up. I highly doubt they will need to turn to debt markets to keep paying out anything.

 

[pie944]

What brokerage service do you guys utilize? I'm using vanguard for funds and stocks. The commissions are difficult to beat once you start putting significant money with them. Starting to expand options trading, been doing paper with TD Ameritrade. The thinkorswim platform is fabulous. Vanguard for options has better pricing, but no platform that can compare to thinkorswim.

 

[thinkorswim]

What brokerage service do you guys utilize? I'm using vanguard for funds and stocks. The commissions are difficult to beat once you start putting significant money with them. Starting to expand options trading, been doing paper with TD Ameritrade. The thinkorswim platform is fabulous. Vanguard for options has better pricing, but no platform that can compare to thinkorswim.

As my username suggests, I am a fan of TD Ameritrade. I use them for both my retirement and taxable accounts.

For retirement, in my opinion, they have the best selection of commission-free ETFs compared to any other brokerage. These include many SPDR sector funds and Vanguard index funds.

For more active trading, as you mentioned, thinkorswim is truly a fabulous and powerful platform. It's best in class, no question. The only downside is that their commissions are a bit on the higher side if you're going to day-trade.

I should also throw out a friendly warning to beware of trading options. Stick to conservative strategies, such as covered calls, collars and cash-secured puts to give yourself a "dividend" and protect your positions in times of volatility. I have been caught up in the hysteria of day-trading naked options in the past and suffered sizable losses. It's no better than throwing money away at a casino.

 

[sevoflurane]

But I'm still puzzled by your play on XOM and RIG, especially with crude oil prices tanking. These companies will struggle while prices stay low, especially since they may very well need to turn to the debt markets to keep paying out their high dividends. I'm not a fan of that move.

They are long term plays. Even so my friend, look at the date I mentioned positions with the oil companies.

I bought XOM at 90 ish. It's almost to 97 in the time frame I started this post.

RIG is a riskier play for sure.

 

[Hockeyguy]

I should also throw out a friendly warning to beware of trading options. Stick to conservative strategies, such as covered calls, collars and cash-secured puts to give yourself a "dividend" and protect your positions in times of volatility.

Sound advice. Trading options is a passion of mine and for the most part I'm profitable - but make no mistake it options take days to learn a lifetime to master. I sell naked puts and trade in and out of them. I use IB (interactive brokers) it doesn't have all the bells and whistles of TD but cheaper. A good book to start with for those that are interested in trading options is "Get Rich with Options" - the title is horrible but it's by far the best book for newbies and experienced traders alike in my opinion. I'd also be willing to discuss option with anyone who is interested.

http://www.amazon.com/Get-Rich-Options-Strategies-Straight/dp/0470445890

 

[Hockeyguy]

Exxon won't stop making oodles of money when oil prices drop. They'll keep cranking out cash. In fact, I can only find their dividend info as far back as 1998, but they've increased their dividend every single year since then. Even through drops in oil prices and market crashes, their dividend keeps going up. I highly doubt they will need to turn to debt markets to keep paying out anything.

I think this oil drop will be the play of the year. I'm playing it with USO bought some ITM LEAPs picked up when stock was at 30 and some change I believe USO will be at 38$ with 18 months.

 

[pgg]

I think this oil drop will be the play of the year. I'm playing it with USO bought some ITM LEAPs picked up when stock was at 30 and some change I believe USO will be at 38$ with 18 months.

What makes you think the rest of the market hasn't also noticed that oil is cheaper and likely to remain cheaper for a while yet, and that this "play" isn't already accounted for in yesterday's market prices?

The price of oil and how much Saudi Arabia is pumping and OPEC's infighting and the fact that FedEx trucks burn hydrocarbons and that the holidays are a month away aren't exactly secrets.

What do you know that everybody else doesn't know too?

 

[Hockeyguy]

What makes you think the rest of the market hasn't also noticed that oil is cheaper and likely to remain cheaper for a while yet, and that this "play" isn't already accounted for in yesterday's market prices?

The price of oil and how much Saudi Arabia is pumping and OPEC's infighting and the fact that FedEx trucks burn hydrocarbons and that the holidays are a month away aren't exactly secrets.

What do you know that everybody else doesn't know too?

You are 100% right I don't know anything anyone else doesn't. That's why I said "I think". Oil, like most things, is cyclical. Right now it is hitting lows - 5 yearish - and I hope it goes lower I'll buy more USO at 25 and 20 if it gets there. I go with the buy low sell high thing...

 

[pie944]

Sound advice. Trading options is a passion of mine and for the most part I'm profitable - but make no mistake it options take days to learn a lifetime to master. I sell naked puts and trade in and out of them. I use IB (interactive brokers) it doesn't have all the bells and whistles of TD but cheaper. A good book to start with for those that are interested in trading options is "Get Rich with Options" - the title is horrible but it's by far the best book for newbies and experienced traders alike in my opinion. I'd also be willing to discuss option with anyone who is interested.

http://www.amazon.com/Get-Rich-Options-Strategies-Straight/dp/0470445890

I have only played with paper money in options.

Been an attending approaching 1.5 years. Paid off wife's loans after 15 months. Max out 403/457/HSA. Monthly deposits in a Vanguard Index fund. Putting away a decent chunk now that loans are gone into a money market for a house down payment. Put money into our brokerage account with Vanguard for eventual investing in stocks. Would like to build up a decent amount in that account before buying so I can start off with 10 to have adequate diversity.

We have a few people in our practice who have worked with options for a long time, great resource. Mainly experimenting with long setups; selling put credit spreads(2SD, 1.5SD, 1SD, ATM), Buying Delta 70 and Delta 20 calls as well.

I started off with The Rookie's Guide To Options by Mark D Wolfinger

http://www.amazon.com/The-Rookies-Guide-Options-Beginners/dp/193435404X