Investing 102

[GregWeld]

This is a big heads up.... and while the MARKET could be wrong --- it seems that the YIELD CURVE is headed UP. Which means that mortgage borrowing is strong because housing sales are strong.... and the FED seems to be signaling that they're going to or are about ready to taper their bond buying (QE - Quantitative Easing).

With the HUGE run up in CAPITAL (Share prices) we've had -- my guess is the big money is going to scoop theirs off the table... and start to buy other stuff --- which you'll start hearing the word "ROTATION".

When you do the math -- the market has run about 17% this year (that's just giant given it's not even a half a year yet!).... So it doesn't surprise me that the fast money would be selling and taking their profits.

If you've made 15% capital appreciation -- and you're trading millions / billions of dollars -- you start to sell the dividend shares (you get 4% - but you've made 15%) and ROTATE into shares that would deliver GROWTH in a better economy.

But then what you have is share prices dropping --- but the YIELD goes up as the share price drops... and then you have all that cash that was "made" now has to go somewhere --- we can't have employees on vacation for very long - and that money lands somewhere.

Think about a tree full of doves -- you shake the tree -- all the doves fly up -- and then they land back on the tree - but on a different branch.

++++++++++++++++++++++


Does this mean you should log in and sell everything and sit waiting for better prices?

No probably not. Your dividend stream will continue -- it will buy shares at lower prices -- building your share count faster -- paying more dividend -- buying more shares. IF the market - thus prices - are high - your dividend doesn't buy as many shares - and you build shares slower. So in actual fact - you want share prices down... Remember that the dividend is paid in DOLLARS not percentages.... so provided the dividend isn't cut -- then the PERCENTAGE you're earning on those new share purchases is higher... the lower the share price goes -- the higher the percentage you're earning on your money.

+++++++++++++++++++++++++++


I've been warning for awhile now -- to remember what it feels like to be in a market like this -- where every day you're up. That isn't normal - not normal at all..... But remember your goals! Your goals are 10 - 20 years away.

[Sieg]

Thanks GW, very interesting. I was reviewing our fund managers actions and it appears they sold off 30-45% of positions on an average last week.

05/28/2013 as of 05/23/2013 Sell
25,000
US TREAS NOTE 1.75%03/14UST NOTE DUE 03/31/14 $101.379 $25,394.30
05/28/2013 as of 05/23/2013 Sell
25,000
WACHOVIA CORP 5.25%14NOTES DUE 08/01/14 $105.258 $26,729.71
05/24/2013 as of 05/23/2013 Sell
25,000
GEN ELEC CAP CP 5.625%18MED TRM NT DUE 05/01/18 $118.104 $29,620.38
05/24/2013 as of 05/23/2013 Sell
25,000
BP CAP MKTS PLC 5.25%13FNOTES DUE 11/07/13 $102.103 $25,590.96
05/23/2013 Sell
50,000
US TREAS NOTE 2.625%14UST NOTE DUE 07/31/14 $102.9102 $51,849.80
05/23/2013 Sell
30,000
US TREAS NT 4.125% 05/15U S T NOTE DUE 05/15/15 $107.5977 $32,294.57
05/23/2013 Sell
25,000
TARGET CORP 5.375%17NOTES DUE 05/01/17 $116.249 $29,151.76
05/23/2013 Sell
25,000
A T & T INC 5.5%18NOTE DUE 02/01/18 $117.828 $29,892.69
05/23/2013 as of 05/21/2013 Buy
25,000
A T & T INC 5.5%18NOTE DUE 02/01/18 $118.337 -$30,030.85
05/23/2013 Sell
60
ZMH ZIMMER HOLDINGS INC $79.801 $4,779.03 $9.03
05/23/2013 Sell
150
XEL XCEL ENERGY INC $29.463 $4,410.42 $9.03
05/23/2013 Sell
80
WAG WALGREEN COMPANY $50.28 $4,013.38 $9.02
05/23/2013 Sell
95
WMT WAL-MART STORES INC $76.541 $7,262.32 $9.08
05/23/2013 Sell
250
TCK TECK RESOURCES LTD CL BF $27.112 $6,768.93 $9.07
05/23/2013 Sell
380
VOD VODAFONE GROUP NEW ADR FSPONSORED ADR $29.213 $11,091.80 $9.14
05/23/2013 Sell
60
TEL TE CONNECTIVITY LTD F $45.53 $2,722.80 $9.00
05/23/2013 Sell
140
STT STATE STREET CORP $64.633 $9,039.51 $9.11
05/23/2013 Sell
700
SPLS STAPLES INC $15.013 $10,499.97 $9.13
05/23/2013 Sell
750
LUV SOUTHWEST AIRLINES CO $14.103 $10,568.12 $9.13
05/23/2013 Sell
85
RDSA ROYAL DUTCH SHELL A ADRFSPONSORED ADR $67.521 $5,730.24 $9.05
05/23/2013 Sell
20
SLB SCHLUMBERGER LTD F $74.76 $1,486.22 $8.98
05/23/2013 Sell
100
PNC PNC FINL SERVICES GP INC $70.636 $7,054.53 $9.07
05/23/2013 Sell
250
RTN RAYTHEON COMPANY NEW $66.72 $16,670.76 $9.24
05/23/2013 Sell
115
PSX PHILLIPS 66 $65.21 $7,490.07 $9.08
05/23/2013 Sell
70
NSRGY NESTLE S A REG B ADR F1 ADR REPS 1 ORD $67.94 $4,746.77 $9.03
05/23/2013 Sell
125
NEE NEXTERA ENERGY INC $77.689 $9,702.01 $9.12
05/23/2013 Sell
475
NCR N C R CORP NEW $31.3738 $14,893.35 $9.21
05/23/2013 Sell
90
MUR MURPHY OIL CORP HLDG $61.78 $5,551.15 $9.05
05/23/2013 Sell
265
MS MORGAN STANLEY $24.323 $6,436.54 $9.06
05/23/2013 Sell
135
TAP MOLSON COORS BREWING CLB $51.316 $6,918.59 $9.07
05/23/2013 Sell
250
MSFT MICROSOFT CORP $34.293 $8,564.15 $9.10
05/23/2013 Sell
325
MRK MERCK & CO INC NEW $46.643 $15,149.77 $9.21
05/23/2013 Sell
90
LLL L-3 COMMUNICATIONS HLDGS $85.606 $7,695.46 $9.08
05/23/2013 Sell
135
MCK MCKESSON CORPORATION $117.093 $15,798.33 $9.23
05/23/2013 Sell
35
KSS KOHLS CORP $51.961 $1,809.66 $8.98
05/23/2013 Sell
230
JPM JPMORGAN CHASE & CO $53.261 $12,240.87 $9.16
05/23/2013 Sell
410
JCI JOHNSON CONTROLS INC $37.083 $15,194.82 $9.21
05/23/2013 Sell
65
HHC HOWARD HUGHES CORP $100.00 $6,490.94 $9.06
05/23/2013 Sell
300
INTC INTEL CORP $23.973 $7,182.82 $9.08
05/23/2013 Sell
40
HSP HOSPIRA $35.15 $1,397.03 $8.97
05/23/2013 Sell
150
HMC HONDA MOTOR CO LTD ADR FSPONSORED ADR $39.514 $5,918.05 $9.05
05/23/2013 Sell
80
HP HELMERICH & PAYNE INC $61.791 $4,934.24 $9.04
05/23/2013 Sell
230
HRS HARRIS CORPORATION $49.789 $11,442.32 $9.15
05/23/2013 Sell
450
GE GENERAL ELECTRIC COMPANY $23.563 $10,594.22 $9.13
05/23/2013 Sell
20
FDX FEDEX CORPORATION $99.171 $1,974.44 $8.98
05/23/2013 Sell
170
DVN DEVON ENERGY CP NEW $57.846 $9,824.70 $9.12
05/23/2013 Sell
70
COV COVIDIEN PLC NEW F $65.201 $4,555.04 $9.03
05/23/2013 Sell
420
GLW CORNING INC $15.582 $6,535.38 $9.06
05/23/2013 Sell
110
COP CONOCOPHILLIPS $62.6101 $6,878.04 $9.07
05/23/2013 Sell
320
COH COACH INC $58.323 $18,654.09 $9.27
05/23/2013 Sell
75
CB CHUBB CORPORATION $87.761 $6,573.02 $9.06
05/23/2013 Sell
25
CVX CHEVRON CORPORATION $125.221 $3,121.53 $9.00
05/23/2013 Sell
70
BG BUNGE LIMITED F $70.881 $4,952.63 $9.04
05/23/2013 Sell
60
BDX BECTON DICKINSON & CO $100.14 $5,999.35 $9.05
05/23/2013 Sell
75
BLK BLACKROCK INC $282.174 $21,153.73 $9.32
05/23/2013 Sell
245
BWC BABCOCK & WILCOX CO $29.6614 $7,257.96 $9.08
05/23/2013 Sell
355
T A T & T INC NEW $36.583 $12,977.79 $9.18
05/23/2013 Sell
200
ADM ARCHER-DANIELS-MIDLND CO $33.953 $6,781.53 $9.07
05/23/2013 Sell
125
AMGN AMGEN INCORPORATED $105.4212 $13,168.47 $9.18
05/23/2013 Sell
200
AET AETNA INC NEW $59.651 $11,921.04 $9.16
05/23/2013 Sell
85
ALL ALLSTATE CORPORATION $48.66 $4,127.08 $9.02
05/23/2013 Sell
125
MMM 3M COMPANY $110.006 $13,741.56 $9.19

[GregWeld]

Old saying in the market ---- "when interest rates rise -- the stock market dies".



Is it a zero sum game -- NO!


Does it happen over night -- NO!


When rates rise -- some money flows out of the stock market and into the new higher rate "whatevers" that compete for the world's money this week. It's been happening since the first market opened a gazillion years ago.

[toy71camaro]

yup.. quite the pull back for my divvy stocks today.. roughly 2%.

but, that also means that possibly my next CVX and ED divvy payments will be buying just a tad more of a share this time around thanks to the pullback since they both pay in a couple weeks.

We'll see. a 2% pullback (just today) isnt going to change a whole lot on my paper gains. lol

[GregWeld]

Originally Posted by toy71camaro

yup.. quite the pull back for my divvy stocks today.. roughly 2%.

but, that also means that possibly my next CVX and ED divvy payments will be buying just a tad more of a share this time around thanks to the pullback since they both pay in a couple weeks.

We'll see. a 2% pullback (just today) isnt going to change a whole lot on my paper gains. lol

I'd be prepared for about a 10% plus pullback --- because the market ALWAYS over corrects --- just as it shoots the moon on the up side... then people who sold start looking around and saying -- Hey! Now I can get 3% on JNJ (made up that example) and start buying again. In order to make money -- your money HAS to be working... it can't be sitting in cash.

[GregWeld]

One of the guys asks me ---- So what do I do if I'm 40 and have 25 years to retire? What do I do if I'm 50 and have 15 years to retire? What do I do if I'm 60 and have 5 years til retirement?


To me -- this is the best question ever....


My response:


What happens when you retire? Do you die?

Oh wait.... maybe you'll live another 25 years! So your REAL TIME HORIZON is 50 years if you're 40.... 40 years if you're 50.... and 30 years if you're 60!


That's the real way to think about it.... 'cause ya just don't up and die because you retired. Ask me how much more money I spend being retired than I ever did working. And ask me (retired some 22 years now) what things cost me 22 years ago versus now! Retirement isn't the end of spending and it isn't the end of you! Just keep doing. Keep doing what got you to retirement.

In the old days -- they advised people to switch from stocks to bonds and blah blah blah... to which I've seen more than my fair share of people "out live" their useful cash flow. Had they stuck with stocks and real estate -- they'd have lived a whole lot better.

That being said --- I don't invest in Faceybook -- or Netflix -- or any of the other "sure fired winners" either anymore. I stick to good old fashioned basics --- just like we've discussed here. You don't start (or continue) to gamble at 60 (which I'll be in August). But you don't up and die either!

[Steve_O]

SO, I made my first purchase in my Schwab account this morning, and...

True to predictions, the stock immediately lost value! Good thing I'm in it
for the long haul.

Next challenge, locate enough Best of Breed companies for my IRA account
funds.

Steve O

[GregWeld]

Originally Posted by Steve_O

SO, I made my first purchase in my Schwab account this morning, and...

True to predictions, the stock immediately lost value! Good thing I'm in it
for the long haul.

Next challenge, locate enough Best of Breed companies for my IRA account
funds.

Steve O

When that happens --- pull up the 5 year chart --- or longer if you can find one... and look at it. How far down is it on the left vs the right side.... and think about that TREND.... Now if you zoom in -- you'll see all the zigs and zags... Don't worry about the zigs and zags --- zoom back out and stare at the trend line.... TIME is your friend. Keep at it!

[GregWeld]

The author of this article must be reading this thread....



He does do one interesting calculation which I've never even thought of - and that is what happens to the % if a company grows the dividend over time...
Interestingly -- I've stated here many times -- that money doubles about every 10 years (based on a 7% interest rate/dividend rate etc). Well guess what? So does the dividend % if a company increases it at about that same rate! DOH!

Read the article and it will make sense.

Also note the small number of shares this "portfolio" is working with.... yet the important part to me is -- that the author has a plan -- is working that plan -- and he understands the market and what his goal is.


http://seekingalpha.com/article/1474...g_income&ifp=0

[Steve_O]

I've spent some time looking for places to put my 'employees',
and find that my list is heavy on consumer staples. Can anyone suggest
a few things that they have, or are considering, so that I can
broaden my search?

The list I have is:

Philip Morris
Coca Cola
Costco
Altria
Kimberly Clark
Nike
McDonalds
Consolidated Edison
Southern Cos
AT & T
Johnson & Johnson
Eli Lilly
Merck
Caterpillar
Chevron
Kinder Morgan
National Retail

Also, I would probably consider these steady-eddy type picks.
I would also like to consider one or two that might be more 'exciting',
so if you like a company that has some growth potential, I may
have some room for a small share in something slightly riskier.

Thanks for all the good info shared on this thread, and for the good
things ahead!

Steve O