Investing 102

[GregWeld]

Originally Posted by GregWeld

Back to Investing 102 ---- today's action is why it's so hard to be OUT of the market waiting for something to happen. This is why I park cash in an investable spot rather than just sitting on cash.

I consider parking cash in ETF's such as JNK - HYG - NLY... where you get a pretty dang good dividend -- the share prices are "relatively" stable. I currently have quite a bit parked in JNK and NLY... and while NLY has been drifting lower (it's very interest rate sensitive).. overall when I see the dividends I've collected and the increase made on JNK has offset the loss I have in NLY... and overall that's the objective. I look at my account as a whole not as individual performance... and you MUST included the dividends in the calculations.

So just to show what I'm talking about....


I currently show (can't say HAVE because I haven't sold so just have a paper loss) a loss in NLY of $16,500 but consider the dividends -- I don't really have a loss.

I currently show a gain (again just paper gain) on JNK of $39,800

Just the gain in JNK cancels out the loss in NLY -- but lets consider the dividends collected:


10/29/2012 NLY ANNALY CAPITAL MGMT REIT
type: ORD DIV - CASH
$17,500.00
07/26/2012 NLY ANNALY CAPITAL MGMT REIT
type: ORD DIV - CASH
$19,250.00
04/26/2012 NLY ANNALY CAPITAL MGMT REIT
type: ORD DIV - CASH
$13,750.00
01/26/2012 NLY ANNALY CAPITAL MGMT REIT
type: CASH DIV
$14,250.00


and JNK


12/11/2012 JNK SPDR BARCLAYS ETF HIGH YIELD VERY LIQUID
type: ORD DIV - CASH
$13,354.56
09/12/2012 JNK SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF
type: ORD DIV - CASH
$6,682.32
08/09/2012 JNK SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF
type: ORD DIV - CASH
$2,296.25
07/11/2012 JNK SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF
type: ORD DIV - CASH
$2,356.51
06/11/2012 JNK SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF
type: ORD DIV - CASH
$2,368.39
05/09/2012 JNK SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF
type: ORD DIV - CASH
$2,462.88
01/06/2012 JNK SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF
type: LT CAP GAIN
$1,320.39
01/06/2012 JNK SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF
type: CASH DIV
$1,093.49



Notice that as the "fiscal cliff" talks seemed to be falling on deaf ears - I increased my JNK holdings significantly... because I had cash on hand - took some year end LONG TERM capital gains (locking in the 15% rate)... so all in all these are making me money SO FAR. That can change in a heartbeat - but for now the strategy is working. IF -- BIG IF -- these clowns can get their act together -- I'll scale out of these and work towards normal company specific positions.

Since I posted this ----- we can change the numbers


Annaly Capital Management (NLY) is now UP $6033. In the Green


JNK is now positive $56,587


See what a couple of days can do?

[GregWeld]

I just sent an email to my bond broker and instructed to sell my entire muni bond portfolio. I think we are going to start to see interest rates rise. Houses are selling. Employment seems to be improving. And in order to make money you must be AHEAD of the game many months. If I wait to be certain it can make a giant difference. As low as rates are right now, a very small move up would mean a huge drop in bond values. Since I have a nice capital gain now. I'd prefer to lock that in. And if I'm right I want to have even more money in equities.

[bdahlg68]

Originally Posted by GregWeld

I just sent an email to my bond broker and instructed to sell my entire muni bond portfolio. I think we are going to start to see interest rates rise. Houses are selling. Employment seems to be improving. And in order to make money you must be AHEAD of the game many months. If I wait to be certain it can make a giant difference. As low as rates are right now, a very small move up would mean a huge drop in bond values. Since I have a nice capital gain now. I'd prefer to lock that in. And if I'm right I want to have even more money in equities.

Will be interesting to see how NLY and the like mange the spread going forward if rates do in fact continue upward.

[GregWeld]

Originally Posted by bdahlg68

Will be interesting to see how NLY and the like mange the spread going forward if rates do in fact continue upward.

Well.... NLY has already cut it's dividend - and the share price is down a pretty good tick from it's highs a couple months ago.


That's why I've reminded folks that these are not the "buy and forget" kind of stocks ---- these are places to put money to work if you're sharp and keep an eye out for what's coming. You've got to be nimble in names like these. They're really not for Investing 102... or for IRA's and that sort of thing.

I've moved in and out of NLY several times in the last year... ditto JNK and HYG.... I purely use them to park money - pick up a dividend and wait for something else to come along.

[GregWeld]

Since people are asking about Annaly Capital Management (NLY) here's a Motley Fool report on them.

PLEASE NOTE THE FINAL COMMENT ---- This is an INCOME investment --- not a price appreciation investment. The income is currently sky high and as such has been great for people like me... but please understand what your individual situations are and what each stock does or doesn't do for you.




http://beta.fool.com/jordobivona/201...l-cliff/20301/

[glassman]

Greg, what's the difference between an income investment and a price appreciation investment?

Mike

[GregWeld]

Originally Posted by glassman

Greg, what's the difference between an income investment and a price appreciation investment?

Mike

Income investment - let's say NLY - are bought because they spin off super sweet income in the form of dividends or interest... But you're not investing in them because you think the price per share is going very far.


A price appreciation investment would be where you expect (hope) that the share price is going to go higher. So I might buy a stock where I "only" get 3% dividend - but to offset that smallish dividend - I need the share price to appreciate to give me a "TOTAL RETURN". Dividend plus share price growth.

[GregWeld]

I had a funny thought this morning -- partly because of Mikes question about income vs appreciation... and partly because I got my Annaly Capital Management (NLY) dividend this morning.

Most of you guys own houses.... I think a "jumbo" mortgage is $417 grand in most states...

I have about that much invested in NLY ($437 grand) -- but instead of paying someone -- IT pays me... $12,891 per quarter or $51,564 per year.

That is INCOME investing...


Side note --- AT&T is trading "ex" dividend today - so part of the price drop this morning is "market" and part is the "ex" dividend trade.

[GregWeld]

Here's - to me at least - a CLASSIC example of using your own sense for investing.


If you drove down the major retail street in your home town -- which of those businesses would you likely "think" was doing well -- and which of those would be of the least interest to you. We've discussed this before... but todays news/articles just highlighted this for me once again.

This article about SEARS...

http://www.cnbc.com/id/100361253


The news is mostly uninteresting. BUT -- when I drill down on the article -- it shows a PER SHARE LOSS.... and when I couple that with something I would ask myself before investing ----- "WHEN WAS THE LAST TIME I WENT IN TO A SEARS STORE?" WHERE IS A SEARS STORE? vs - When was the last time I was in a Home Depot or Lowe's or name some other retailer...

Put a different way --- how many of you have had to "manage down" in your lifetimes? It's a difficult job to CUT expenses and cut everything to the bone... versus manage your finances etc when things are going GREAT. I just don't choose to invest in any company that is trying to manage DOWN. Why would you do that? What is it that you'd see that would say --- HEY! What a great investment!

Amazon is growing top line and growing it's business..... Sears is trying to manage it's loss of business and scale itself down to the shrinking customer base. Which one going forward is the better bet?

These are hypothetical questions by the way and not meant to be answered --- they're just meant to THINK ABOUT when investing.

[GregWeld]

This brings to mind something that Gwen and I noticed this year....


Seems that 99 out of 100 Christmas cards we got this year were ordered/printed "electronically" -- rather than the store bought folding versions we used to get. Most of them had pictures of families on them and were single sided.

Got me thinking --- when was the last time I saw a "Hallmark" store? Did they make the transition to "on line"? Or are they a Kodak that didn't see the switch to electronic cameras from film.

Again - this is just the way I think when I choose investments. I use my own "sense" of how a business is going and or what it's competitors are doing.... THEN I start my research!