Short-term volatility

 We've had a very hot March...historically hot, but I wouldn't say the market is following suit, and metals really took a break from the crazy times we were having at the last entry.  Silver is down like 40% from it's highs (I've already bought some back - a VERY quick turnaround),  The stock market is looking hesitant, to say the least.  It made a little progress since last entry, but gave it all back and we're about where we were.  The war in Iraq isn't doing anything for the market, mainly because of how it is affecting gas prices.  It seems it is up quite a bit for a couple days in a row, and then it's down about the same for a couple days.  I don't know if this kind of volatility is a warning of the beginnings of a new bear market or what.  There is a lot of grumblings that the market is getting ready to really take a long-term dive, but those have been going on for the better part of the year.

I'm just doing what AIM tells me to do.  Some accounts, it's still telling me to sell stock; in other accounts, it's telling me to sit tight.  I have a feeling I'll be starting to buy stock again if this keeps up.

Another Year

 It's crazy to me that we've made it through a quarter of this century. Strange how time catches up with you.  

I don't see a whole lot different in the market from last entry.  What I do notice is where metals are going.  Gold keeps hitting new highs, and now silver has followed.  It's not to the crazy highs gold has hit, but as silver goes, it's pretty high.  Silver, seemingly, can't really keep up with gold on a percentage basis.  Actually, that makes it a more relaxing vehicle to invest in.  I use an ETF in my son's account that more than doubles the volatility of silver.  It's called AGQ.  I've only got three securities in his account - one a stock that does have a good dividend, percentage-wise, but it doesn't move very much.  The other two are ETF's - one tracking technology stocks, and the other the silver one.  It works well for AIM, because I don't have to worry about the ETFs ever going in the tank completely (unless the shit really hits the fan, and we all know that we would have worse things to think about if that ever happened.)  Both of those ETFs are extremely high right now - I've practically sold all of the silver - just a little left in case it continues to go up.  Recently it's been showing some weakness, though.  I have a feeling it might finally start to come back down.

Meanwhile, a lot of stock has been getting sold in the other accounts.  Just like silver, there's still some shares left to continue should the market keep going, but the cash pile keeps growing as well for when (not if!) we have a correction, or even a sustained bear market...

My account hasn't changed - still the same stocks as last time.  

I did get a little antsy with my older son's accounts and found a company that within the last year had a HUGE spike.  Just a small bet that it may happen again..The company seems fairly healthy, and in an industry that itself can be pretty volatile (the gaming-betting industry).  Both of their accounts were being a little flat for my taste and for what AIM really needs.

Anyway, I hope everyone has a nice New Year - talk to you in the Spring!

Getting nervous

 I feel things are getting fairly strained in this market.  I just read where the PE ratio of the S&P just hit 30.  That can't be a good sign.  Looking at charts for the wider market, it seems that classic top signals keep getting overcome.  I'm waiting for the 'this market is invincible' type quotes to come up.  That will be the last straw.  I am becoming more and more conservative in my naked put trades.  The prices keep getting higher, which takes trading capital out of my account, and I am waiting longer and longer before making those trades, just to reduce risk.

The thing is, thanks to AIM rules, if something does tank, I am ready to take advantage of a bear market, even if is sudden and quick, which is all we've had since 2009.  I've broken my cash into different income-producing vehicles, so half of my account isn't just sitting there doing nothing.  I have periodically gone through my mind about how I would go about refilling my actual trading capital, if it were to be used up.  Not really much need to worry about it at this point, though - the market is still making new highs.  I just don't know how much longer this can last - we've got to be approaching historic numbers here, as far as how much time it's been since the last sustained bear market.  I keep seeing more and more hints that, historically, have been signs that the bull market is about to end.  I just seems very stubborn about giving it up.  That tells me that when it does go, it won't be pretty.

As far as individual stocks in my account go, I did make one change since last entry.  I got rid of the NKE and replaced it with SWK (Stanley-Black & Decker).  Better dividends and I feel SWK has more upside possibility.  Neither one have been actual dogs, but SWK is closer to being one.

Current stocks in my account - INTC, VZ, SWK, DINO, DOW

AIM for Not Necessarily Dogs

 The Dogs of the Dow have, of late, become, on average, very high in price.  In other words, the per-share price of the stocks in this group has become higher, generally, than I am comfortable paying for a stock for my accounts (which are not really huge, by the way).  If someone has a large account, then it wouldn't really matter if the stocks in that account are above $100 a share. But in a smaller account, to maintain it by the AIM rules, it makes it difficult to manage it, because of the rules involved. I like to have all the stocks around the same total value.  Since the average number of stocks in the ideal AIM account should be 5 or so, it makes it easier to manage a smaller account if the per-share price of each stock is a little lower.  Now, I will always check the Dogs of the Dow group for stocks to use in my AIM account, since they meet the criteria that works well, generally.  But lately, since the per-share prices of the Dogs are so high, for my accounts, I have been backing away from using those stocks.

Right now, there are only 3 stocks in the Dogs that are under $100, and the lowest price one is Verizon. The other two are Coke and Merck, neither of which appear, in my opinion, to be bargains right now. When I look for candidates for my accounts, I look at volatility, quality of company, and where they are in their general trading range.  Right now, only VZ fits those descriptions, so except for VZ, all of the stocks in my account are either former Dogs or non-Dogs.  

One of the nice things about using DOTD stocks is that they inherently have nice dividends, so they are always adding to my cash.  So when I have to go outside the Dogs to look for stocks, I still make sure the company pays at least a reasonable dividend.  I stay away from companies that pay too high of dividend, because I understand that those companies may have a higher risk than I am willing to take.

Lichello, in his book, doesn't talk about Dogs of the Dow.  That was my idea.  His description of a good stock candidate, to my recollection (I honestly haven't read the book in a while) says that if you recognize the name just from general day-to-day dealings, it's probably worth looking at. As he puts it, if you are drowning in the ocean, and somebody throws you 2 lifesavers, and you recognize the brand of one and not the other, grab the one you recognize. Now, I'm not sure I would take the time, if I was drowning, to read the brand names of lifesavers, but he was just trying to make a stock-picking point.

I really didn't talk about the way the market is right now, because it hasn't changed too much from last post.  I'm a little surprised that it's coming back the way it is after it's major double-top (I'm a bit of a technically guy - I pay attention to charts) but the S&P just made a new high yesterday.  The Dow has a little work to do to get to it's next high.

Current stocks in my account - INTC, VZ, NKE, DINO, DOW

The Market Took It All Back - Now Another Push?

 Before the last couple trading days, everyone was talking about how Trump's tariffs made the market give up everything it gained between the election and his inauguration.  Of course, he lightened up and the market responds back in a pretty big way.  Though, not all the way.  This market is way overdue for a major correction, at least.  It is feeling very sensitive to negative as well as positive news, which spells volatility, which could be a warning for something to go haywire.  It still seems fairly resistant to any long term down turn...I still don't see the attitude that the market can't go down.  When that kind of thinking happens, then it's time to buckle the seat belts and get ready for a ride.  We aren't there yet, though.

I've been a little more cautious about the cash-producing methods I've been trying in the last couple years.  One part of my thinking is, "Don't just go right back out and sell an option the first thing after the last one expired."  I know I need to give it a little time between those trades.  I may give up some income, but that's better than getting stuck with something careening out of control.  I've been staying with the lower priced options anyway, so there's not as much risk.  Less reward too, should this market decide to have another session of climbing that wall of worry.  Putting time between trades just lowers the risk further without giving up all the profits.

This latest downturn seems like has created a new sense of unsuredness -  now it appears there are as many thinking disastrous thoughts as there are still thinking with a positive outlook.  The bottom line is, though, that it's really just in a funk right now.  No particular direction (especially as far as any major movement goes) either way.  This is evident from my accounts.  Usually, there is at least one that is either have a buy or a sell signal, but they are all in between.  That's actually more of a rarity than the alternative.  It's unusual for there to be more than two of them with activity, but even more unusual for there to be none.

I know this will not stay this way forever, as there is always something new on the horizon.  It's just hard to see if that something is a good something or a bad something.  We'll just wait and see, and in the meantime, we'll just keep playing by the rules...

Push From the Election, or Not

 It's strange how some portfolios go with what the market is doing and others really just don't.  I think that especially happens when you have smaller numbers of stocks in the different portfolios.  When Donald Trump was elected president, the markets loved it.  The general market went way up - especially in the few days after the election, but has been positive overall since.  My 'Dogs' account seems to be bucking this trend, for whatever reason.  I actually had a 'Buy' request from the formula in the last month or so.  That means the account is a ways down, relative to the 'Portfolio Control,' which is a number that basically says where the account standard level should be, and doesn't move much.  Only when stocks are bought at the bottom of the range of the particular portfolio is the PC added to.  It's all in the book. (I put a blurb about what this is all referring to in the last entry - I'm going to try to remember to repeat that once a year in the fall entry.)

When the market is making overall slow advances, as it has been in recent years, I believe this kind of thing can happen with different portfolios.  Recently I have had both Buy and Sell signals with different accounts.  One is going with the general market and the other is going the other way.  It does concern me a little what would happen to the account that is already down should the general market decide to have a sudden down period. These things have a tendency to happen very suddenly to the down side.  I still have a good supply of cash to purchase more stock should this happen.  When following the rules outlined in the book, there should always be plenty of cash to buy when the market goes down.  I keep track of the percentage of cash versus stock portfolio, and if it gets too far away from 50%, I know I need to make adjustments one way or another.

It will be very interesting to see what this next four years brings, but for now I want to wish everyone a happy Holiday Season and hope everything is going well.  See you in the spring! 

A Bit More Flexible

 Lately I've been paying more attention to the times some of the stocks in each account is suffering, and some of the other ones are doing much better.  AIM is designed, mostly, to take advantage of volatility of the market itself - having different stocks in each account just puts more of a safety feature on it. Often, especially when the market is going one direction for an extended amount of time (as it is now), some stocks, for different reasons, do poorly while others can do especially well. I've decided to play with the accounts and, as long as the distressed stock doesn't seem to be in actual trouble...in other words if it still is a fundamentally good company, then I have been taking from the rich stocks and investing in the poor ones.  There really is no rule against this in the AIM book - the author says it's fine to trade out stocks, and I figure that includes trading between them.  I haven't been doing this very much - only in more extreme cases, and I try to err (if I am erring) on the side of safety.  Most of the time, so far, it is working beautifully.  Most of the time when a stock goes way up, it doesn't stay there; and the same can be said for a stock that gets very depressed when the rest of the market is stable. Eventually, they tend to correct themselves.

I also have been bending the rule about doing updates only at the set time in the month.  I usually monitor the accounts and if something happens where the account gets pushed way up or down suddenly, and it is pushed into the buy or sell area, I'll go ahead and do a transaction then.  Now, I am diligent about waiting at least a whole month before doing any more, regardless of what the account does after that.  Especially if the account dips suddenly for one reason or another.  I've had a bad experience doing multiple transactions too close in time together.  The market can go against you and suddenly there is no money to do anything.  The month waiting period gives everything a chance to straighten back out.  Sometimes it's hard to have to wait before doing another transaction, but it works for the better in the long run.  Example:  2008 into 2009 - I think I talked about that experience in some of the earlier entries.

One of the other areas I have become a little more flexible in is when I am trading out a stock in my AIM For Dogs account.  Now, I don't do this very often, but once in awhile I notice a well-known stock that is way below what I would have thought it would have been. If I have a stock in my account that has just raced up and I think it is out of gas, I'll trade it for one of these that seem low.  For example, recently MMM (which I bought when it seemed low) ran up in price.  I noticed it because I was looking at the list of Dogs of the Dow and it came up as a 'Small Dog.'  That surprised me, because I never would have thought MMM would be low enough in price to be a 'Small Dog.'  So I bought it, and a relatively short time later, it wasn't even in the DOTD list, because it had gone back up in price and their dividend yield was no longer that great.  So, I was looking through the stocks on the Dow list and noticed Nike under $100 - like, in the eighties!  That surprised me, so I traded the MMM for the same dollar amount of Nike, even though I hadn't even owned the MMM for a year.  Now, this rarely happens, and though Nike wasn't (and still isn't) a Dog of the Dow, neither was MMM, so I figured it was ok.  I know Nike will eventually get back up to it's normal levels - I figured I'd ride it back up! 

It's a good feeling to do some of these extra curricular stunts with these stocks within the accounts, as long as the main, general rules of AIM are followed.  I don't veer to far outside the rules, and I figure it doesn't matter too much, as long as it makes sense, and even if it went bad, the AIM way will generally protect things from really going south.

The reference to AIM is a book by Robert Lichello, How to Make $1,000,000 in the Stock Market, Automatically.  The basic plan is to start with an amount of money, split it in half, use one for a pool of stocks or an equity mutual fund, and the other keep in cash.  The same amount as each half should be kept track of, called the Portfolio Control, which keeps track of how the stock fund is doing, and is part of the formula.  When the stock fund gets either below or above the Portfolio Control, or PC, by a set amount (the author suggests $100), a buy or sell signal is produced.  Buy if it is down, sell if it is up. Also included is what is referred to as a 'Safe,' which is suggested to be 10% of the fund amount.  This amount must be also overcome on either side to actually make a transaction.  The Safe creates more safety in the strategy so as not to be trading too much.  The PC is never adjusted, except when doing a purchase, which is an increase of 50% of the purchase amount.  Also, the account should be updated no more than once a month.  I have set up a spread sheet with these criteria and updated it every month since 2008.

Main account performance since 2008:  +352.8%