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Old 02-14-2018, 12:46 PM   #1581
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I haven't been following closely today (due to w*rk). It seems that this morning the inflation report was interpreted negatively, and since then we've had a bit of divergence between stock and bond market behavior.

Perhaps upon further analysis someone figured out that the latest inflation numbers might be partially because of tight inventory? If so, that would certainly be "good" for stocks as it would mean inventory replenishment and also that the normal January discounting was muted because of good holiday sales (sales in terms of $, not sales in terms of large discounts). Or maybe traders are realizing a 2.9% 10-year isn't the end of the world.

I dunno. For me, I have the vast majority of my fixed at relatively short duration's or inflation adjusted.

I haven't posted any trades on your thread but am trying to decide whether to flip out purchases I made in the mini meltdown we've just gone through.
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Old 02-14-2018, 02:24 PM   #1582
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I've decided to try to sell some things bought last week since I am way way way overweighted to equities. I've put in some limit orders for VSS and MTUM, but they are both trading lower since I submitted the orders. 35 minutes to go. I'll update at the market close.

Bond ETFs are trading at their lows for the day. I have not submitted orders to buy, but may do so.

Update: My sell trades were executed at slightly higher than the closing prices in the last 5 minutes as things rose towards the end. So now I have plenty of cash to buy something.
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Old 02-14-2018, 04:47 PM   #1583
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So here again is the math on how hard it is to beat one's benchmark. I try to have a portfolio with a 60/40 asset allocation. If I "buy on the dip" by moving 8% of my portfolio from bonds into equities to get to 68/32 and that extra 8% in equities goes up 3% (along with all other equities), then that is an excess of 8% x 3% = 0.24% extra return over the benchmark.

Yep, less than a quarter of 1%. It almost seems not worth it. But if equities continue to drop, then the damage is not that great either.
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Old 02-14-2018, 05:20 PM   #1584
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So who says they can predict the stock market? I don't.

Look at what happened today: Futures up 0.5+% before the inflation announcement, then the market opens about 0.5% down after the announcement. The first 30 minutes look dicey.

But now at lunchtime, everything but bonds and REITs are up very nicely. The things I sold yesterday continued to go up and the things I bought went up about the same. I could have made my trades this morning or now at lunchtime and it would've all been the same.

Now I have to decide if it is time to buy back bond funds yet. Anybody want to give me some free advice?
Interest rates are still climbing. Maybe the 10 yr will make it to 3.15%. It is certainly try to get to 3%.
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Old 02-14-2018, 05:43 PM   #1585
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Thanks. Total US Bond Market funds seem to be down around 2.4% to 2.5% YTD. I'm not sure how far off that is from their highs of 2017 though.

I will probably in the near future buy back the short-term corporate bond index that I sold last week just because I hate cash. (I should've sold more Total Bond instead of selling the ST corp though.)

I guess any tax cuts just go to paying higher prices.
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Old 02-15-2018, 08:55 AM   #1586
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Here on Thursday morning, the things I sold yesterday continue to go up nicely. 621. I have more to sell to get all the way back to 60/40, but I'm going to take a break from selling at least for today.
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Old 02-15-2018, 09:45 AM   #1587
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The 3 trades that I made last week during the market rout are now all in the green, including the first one made early on Monday 5 before the bottom.

Have not sold anything. Looked at my put options, and saw that the market rise has pushed the stock prices above the strike prices. And so, I will not have to buy these stocks, and my stock AA will not be as high as I thought.

With more cash on hand, I just bought a semiconductor equipment stock to add to my existing position. Good earning released. Low P/E. Forward earning raised. I am in. Even with additional shares, this stock is only 1% of my stash. I like to stay diversified. Maybe I should get some more. Can one have too much of a nice, good stock?

"Temptation, temptation, temptation
I can't resist"
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Old 02-15-2018, 01:38 PM   #1588
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Sold some CY today that I picked up on 2/9 @ 14.81, sold for 16.14, 9% profit. Still holding QCOM purchased that same day as well as Vanguard Value. I might sell more today just to clear out some of the falling knives I caught.

ETA: Sold some more things. Sold some Small Cap Growth, Target Retirement 2020, and Total Stock Market Index in a tax deferred 409A plan. Sold these there as it is relatively short term money, since it is being distributed to me over 10 years and next year is the last payment. So, what is left of that account is in cash (Interest Income Fund) as of the end of the day and I've effectively locked in next years payment. [All of these will be priced at close as they are mutual funds with EOD pricing.] Also sold some HDNG which is being bought out at $18.50 (and was up over the last few days because of it), as it is essentially dead money and I'd rather have the cash than to play the arb of $18.33 to $18.50.
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Old 02-16-2018, 04:40 PM   #1589
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Today is February option expiry day. Earlier in the day, stocks were riding high, and it looked like my put options were going to expire worthless and I would not have to buy any stock.

I went do something else, and came back to see the market dropped back down. So, a few contracts went back in-the-money, and I will have to buy a low 5-figure amount. It's OK.

What makes me happy is that I have many covered calls and cash-covered puts expiring worthless today. The covered calls, I sold right before the recent market drop of 10%. The covered puts, I sold when the market was down. The market drop made the covered calls expiring worthless. Then, the rebound made the puts go away too. How lucky is that?

So far, the option premium I collected YTD is 0.4%. That's good for 2 months of living expenses.

I also have been buying some stocks during the rout, and my stock AA is now back up to 71%. Most of the rest is in cash.
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Old 02-16-2018, 05:42 PM   #1590
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@NW-Bound, it seems you made it out alive which is a good thing.

I'm ahead of my benchmarks at the end of this week, but not by much. I'll submit a post-mortem of the first 6 weeks of 2018 sometime this weekend while I am still ahead.
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Old 02-16-2018, 06:28 PM   #1591
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I play quite conservatively, so if my moves are wrong, I will still make it out alive. Just scrapes and bruises, but I do not risk life or limb.

PS. I posted about selling puts during the rout. I was wrong. These puts were sold in mid January, before the top of the market. The strike price was below the market price then, and was sufficiently low that it is out-of-the-money even now.

During the rout, I bought stocks on 3 occasions. They are all in the green now. Not selling them yet.

Next week, I will look into selling covered calls again. If they get assigned and drive my AA down from 71% to 65%, it's OK.
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Old 02-17-2018, 12:12 PM   #1592
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I was going to do a complicated post-mortem with an annotated chart, with green/red circles for bond buys/sells and green/red squares for equity buys/sells with the two sizes of the circles and square for <$50,000 and >$50,000 transactions. But I gave up and will just post the unannotated chart.



From review of my posts in this thread since January 11th, I rebalanced out of equities on 1/11 and 1/18 which was a week or so "early" as the top was at the end of January.

My biggest mistakes were buying MTUM on 1/29 (Ouch!) at nearly its high for the year and also doing a Roth conversion from bonds to Total US Market on 1/30.

But then the market tanked on Feb 2 and 5. On Feb 5 I sold more bonds and bought big chunks of VSS and MTUM. I more than doubled my position in MTUM.

Then I hung on through a further dump on 2/8. I was not at my computer that day, but the next morning on 2/9, I sold more bonds and bought more equities. Then waited out the weekend.

Selling bond fund shares was good because they dropped after I sold them at least 1%.

Then after things had gone up on 2/13 I started selling equities that I had bought and also continued that selling on 2/14. MTUM that was my biggest loss on 2/9 fully recovered so I have nice gain overall, but only because I doubled up on 2/5 before the 2/8 bottom and sold about half the shares on 2/14.

So I ended up going to about 68% in equities and now sit at 63% in equities. I could sell another 3% of portfolio to get down to 60%.

I usually have no cash, but I have got quite a lot of cash that I need to redeploy into bond funds. My overall portfolio now only has about 10% in Total US Bond Index which is OK with me. I will try to buy short-term corporate bond index ETFs (VCSH and SPSB) in the coming days.

I will sell some equities to pay for February and March bills, too.

I compared my YTD return against my benchmarks of other 60/40 funds and the portfolio is ahead of all of them. This is only because I cheated and went up to 68% equities at more or less a good time.

Thanks for reading. This post-mortem helps me clarify my thoughts and gives me areas to improve upon, but also shows my limitations.

Bottom line: My timing is not great because I sold equities too soon and bought equities too soon, but it was good enough.
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Old 02-18-2018, 12:21 AM   #1593
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... I compared my YTD return against my benchmarks of other 60/40 funds and the portfolio is ahead of all of them. This is only because I cheated and went up to 68% equities at more or less a good time...
I don't think tactical AA is cheating. One takes advantage of a short-term situation to make more money. It's fair.
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Old 02-18-2018, 11:09 AM   #1594
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Before the correction, we sold WMT and TGT. Post sell off, I got some VDE only to sell a few days later for a 4% gain. Friday I sold my BMY and KR, expecting another buying opportunity and cashing up for it...
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Old 02-18-2018, 03:02 PM   #1595
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4 Alrighty, I was looking at things this weekend which is always dangerous. And in the spirit of this newsletter, I'm going to tell you what I will be doing even before I do it. Markets are closed Monday anyways.

6 I was considering my fixed income assets which are composed of Total US Bond, short-term corporate bond, a 3% stable value fund, and cash. I have decided that I am going to sell most of my Total US Bond later this week in the hopes that it goes down another 0.5% to 1% over the next few months.

2 But that leaves the problem of what to do with all the cash. Ideally, I would put it all in the stable value fund paying 3%, but I can no longer contribute to that fund. I see that:

3-month CDs pay about 1.5%,

Vanguard money market Prime pays about 1.5%
Vanguard Federal MM pays about 1.3%

a short-term 1-3 month Treasury bill ETF (BIL) pays about 1.2%.

I may wish to use the money to trade in/out of equities, so I will not buy CDs nor use Ally. Thus, I have a decided in the Vanguard accounts to exchange into MM Prime and in the non-Vanguard brokerage accounts to buy BIL.

Or are there some possible cash-like investments that you know about that I haven't considered? Thanks!
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Old 02-19-2018, 04:52 PM   #1596
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2 But that leaves the problem of what to do with all the cash. Ideally, I would put it all in the stable value fund paying 3%, but I can no longer contribute to that fund. I see that:

3-month CDs pay about 1.5%,

Vanguard money market Prime pays about 1.5%
Vanguard Federal MM pays about 1.3%

a short-term 1-3 month Treasury bill ETF (BIL) pays about 1.2%.

I may wish to use the money to trade in/out of equities, so I will not buy CDs nor use Ally. Thus, I have a decided in the Vanguard accounts to exchange into MM Prime and in the non-Vanguard brokerage accounts to buy BIL.

Or are there some possible cash-like investments that you know about that I haven't considered? Thanks!
I'm interested in this too. I don't necessarily want to tie my cash up, but want a higher return than a MM such as Vanguard's Prime MM, which is currently yielding 1.47%. I guess that means I'll probably end up with a shorter duration bond fund.

Just out of curiosity LOL!, what are the numbers at the beginning of many of your posts? Also, you said you hate cash, so are you normally 100% invested in stocks and bonds, other than after executing a trade? If so, I'm assuming then you just sell something each month to cover expenses, or are you still employed?
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Old 02-19-2018, 07:50 PM   #1597
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I'm interested in this too. I don't necessarily want to tie my cash up, but want a higher return than a MM such as Vanguard's Prime MM, which is currently yielding 1.47%. I guess that means I'll probably end up with a shorter duration bond fund.

Just out of curiosity LOL!, what are the numbers at the beginning of many of your posts? Also, you said you hate cash, so are you normally 100% invested in stocks and bonds, other than after executing a trade? If so, I'm assuming then you just sell something each month to cover expenses, or are you still employed?
The numbers are secret tracking codes.

I am not employed, but my spouse works. I do not sell something each month to cover expenses, but I do have to sell sometimes to cover expenses that exceed my spouse's take-home and the equity fund dividends that show up every quarter. Yes, I am normally 100% equity funds and bond funds.

I will still have short-term corporate bond index funds when I make my shift. Those funds have lost money, too, but not as much as Total Bond. I suspect they will still lose money in the next few months, but not much.

So that's the unknown: Will total bond index funds lose money in the next 3 months while I am earning one-fourth of the 1.5% annual return of a MM fund? Or better stated: Will Total Bond Index funds make at least 0.4% in the next 3 months since that is what a MM fund will make? Which will be a better investment?

I would prefer to exchange out of Total US Bond Index funds on a day when they go up 0.2% or more like last Friday, but I may not have that luxury.
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Old 02-20-2018, 01:04 PM   #1598
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Since nobody suggested anything better to buy, I bought some BIL this morning. I still have some cash and I still did not sell Total US bond which is down about 0.2% today.
888

And late in the day, I bought a T-bill that matures in 2 months just to see how that works out. The annualized rate is about the same as Vanguard Prime MM fund, but it stays in my 401(k).

With all these "cash-like" investments that are not the cheesy settlement account, the expenses/fees can eat away at the interest paid.

Even a 1 cent bid/ask spread on a $90 BIL could reduce the interest rate effectively by 0.02% to add to BIL's expense ratio. If BIL was not commission-free, then that would make it a poor choice. Also, one had better hold for the 30+ days required to be commission free. Plus one needs to invest in large enough amounts to make it worthwhile.
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Old 02-20-2018, 05:38 PM   #1599
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Nothing good to buy today, although the overall market went down. That is, most every sector other than semiconductor.

Due to put options expiring last Friday, I had to buy a semiconductor stock at just a tad below closing price on Friday. With the premium on the option, I was still ahead, so that was not too bad.

Today, the stock surged above what I paid, and my profit on this trade got better. As I already have too much in semiconductor stocks, I sold these shares today. Including the option premium, I made 8% on this trade (profit over the cash to cover the put), which started with selling a cash-covered put on 1/22, even before the market rout in early February. The profit would be a lot better if I sold the same put after the market tumbled, and if I had the gut.

Also today, Walmart dropped 10.7% due to bad earnings. Good thing I have no WMT at this point, due to a covered call getting exercised on 1/22. That made me sell WMT cheap compared to the then market price, but WMT is now below what I sold. Talk about luck.

These above gains were small compared to what I lose today on other stocks I hold. Still, every thousand that I make from each of these individual trades is still extra money.
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Old 02-20-2018, 06:11 PM   #1600
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So is there a new adage:

As WMT goes, so goes the nation.

or maybe

As AMZN goes, so goes the nation.

?
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