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Rin's relative market high, intermediate trading strategy


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2019 Aug 14, 11:07am   1,454 views  18 comments

by Rin   ➕follow (8)   💰tip   ignore  

Ok, this is a followup to my preaching to the choir about dividend aristocrats and pruning stocks which can't control their debt picture.

The newer idea here is that yes, your blue chip stocks give you dividends but at the same time, do you want to automatically re-invested them (DRIP), when it's clear that if we're nearing the end of the bullish cycle, it's better to buy the blue chips at a discount in the future?



Realize, the yield curve just went negative recently, however, there's always this lag time prior to the actual recession where a bit of that trading euphoria kicks in just like in the "Pets.com" or "That Real Estate (including REITs) Only Goes Up" eras.

So my advisor and I have this intermediate strategy. It's called putting the aristocrat dividend flow into buying non-aristocratic stocks, whose price action has to beaten to a point, not too distinct from let's say a 2009/10 low but at the same time, can give a 8-11% dividend just for holding onto them. And then, these stocks can be DRIPed to get a decent growth for a 2-4 span prior to selling 'em off.

Here's a scenario using a cheap stock price (realize, most aristocrats/blue chips are pricey in today's market), 10% dividend yield, and passively putting extra aristocrat dividend cash into them.

Comments 1 - 18 of 18        Search these comments

1   Rin   2019 Aug 14, 11:11am  

The idea is that the stock, being already beaten, isn't going to go very far down, like $5 to $4.7, instead of let's say $150 to $100 which will happen during a market correction for stocks which have had a major run up till the crash.
2   Rin   2019 Aug 14, 11:29am  

Plus, this is not selling off any of your main portfolio, this is just the cash flow, being generated from your dividend aristocrats. In other words, free money.
3   KgK one   2019 Aug 14, 12:58pm  

How many stocks pay 10%?

I did like MO suggestion, are there others?

Any suggestion on how to invest cash, cd rates are dropping
4   Rin   2019 Aug 14, 7:15pm  

KgK one says
I did like MO suggestion, are there others?


MO is long term, not a short term thing. It's tobacco.

KgK one says
How many stocks pay 10%?


Take a look here, but be careful. Remember, you need to make sure (though nothing's a sure bet) that your company doesn't go belly up within 3-4 years.

https://www.nasdaq.com/dividend-stocks

Right now, I've created a small set of them using the cash from the blue chips. I'm planning on holding onto this set until the next correction wave though I don't expect that until the markets get optimistic again, which is usually the clarion call before a crash.
5   Patrick   2019 Aug 14, 9:54pm  

Wow, that graph is pretty compelling. Thanks @Rin
6   mell   2019 Aug 18, 10:42am  

Just drove by Boston, nyc->ct->me, Rin is likely in Montreal seeing some hoes. Just a quick shout out.
7   Rin   2019 Aug 18, 10:09pm  

mell says
Rin is likely in Montreal seeing some hoes. Just a quick shout out.


Yes, VPN'ed in from MTL, though the VPN picked a New York server instead of local.

There was the gay festival on Samedi so I just porked away at the hotel instead of going out in town.
8   Heraclitusstudent   2019 Aug 20, 4:34pm  

Rin says
Realize, the yield curve just went negative recently, however, there's always this lag time prior to the actual recession where a bit of that trading euphoria kicks in just like in the "Pets.com" or "That Real Estate (including REITs) Only Goes Up" eras.


There is a lag between the inversion and the recession, but this because the bond market anticipates the recession. Stocks also could anticipate and crash around the same time the yield curve inverts for good.
In fact in 2000, the top was about the same time as the graph above dived.
10   Heraclitusstudent   2019 Aug 20, 4:38pm  

So many people are like: "Don't sell. It's different this time.".
https://www.calculatedriskblog.com/2019/08/dont-freak-out-about-yield-curve.html
11   EBGuy   2019 Aug 20, 6:39pm  

Heraclitusstudent says
"Don't sell. It's different this time.".

Last time around they crossed paths just south of 5%; this time they're going toe-to-toe at 1.5%. I'll let the reader decide if that's different enough....
12   Rin   2019 Aug 20, 8:17pm  

Heraclitusstudent says
In fact in 2000, the top was about the same time as the graph above dived.


In 2000, there was no 'Wall of Worry'. It was pure euphoria as pundits were saying that the economy fundamentally changed and that economic downturns were a thing of the past.

Does anyone remember Pets.com?

https://en.wikipedia.org/wiki/Pets.com

Talk about bullish hysteria, almost akin to the Tulip Mania of prior centuries. By the close of 2000, Pets.com was a memory.
13   just_passing_through   2019 Aug 20, 9:10pm  

How much time do you think we've got Rin? Just a wild guess that I won't hold you to. Me? I'm thoroughly confused. Was convinced the sky was falling last week after watching too much RealVision but since then folks like the CEO of Bank of America have made me consider perhaps we could go quite a bit longer.
14   Rin   2019 Aug 20, 9:26pm  

just_dregalicious says
How much time do you think we've got Rin? Just a wild guess that I won't hold you to. Me? I'm thoroughly confused.


I think we're in the 'Wall of Worry' era where there's enough scaredy-cat sentiment, that it's not the start of the bear market.

When it happens, according to the old timers, is when ppl forget about their worries and start to think that either stocks or real estate, can only go up.

The only reason for this post is that since I tend to recommend using DRIPs for dividend aristocrats is that perhaps as we near a market top, even if it's a double shoulder (or whatever) era, that it's probably best to either bank the dividends entirely or play a short term DRIP gain on the 'loser dividend stocks' who can still payout but have already started their browbeaten sideways channel, with their beaten down prices, for some time.

So in this arena, look for signs for high optimism, not pessimism.
15   Misc   2019 Aug 21, 3:34am  

Rin says
Heraclitusstudent says
In fact in 2000, the top was about the same time as the graph above dived.


In 2000, there was no 'Wall of Worry'. It was pure euphoria as pundits were saying that the economy fundamentally changed and that economic downturns were a thing of the past.

Does anyone remember Pets.com?

https://en.wikipedia.org/wiki/Pets.com

Talk about bullish hysteria, almost akin to the Tulip Mania of prior centuries. By the close of 2000, Pets.com was a memory.


I think Pets.com got taken over by Petco after they went bankrupt. Well, Petco owns or owned a huge amount of a new company "Chewy". Well, they are hyping the new company especially its massive increase in sales (even though this will be at the expense of Petco sales). Since on a percentage basis, the increase in sales (because they have a small base) is huge; Wall Street is treating this as a growth company even though overall sales are up just slightly for the two companies if you combine them. Overall profits are down if you combine the two companies because of the massive advertising spending. Petco can sure make bank by selling its shares of "Chewy" at a huge profit. They probably got this idea from someone at the original Pets.com.

So yes, people are getting carried away, buying hype and not looking at fundamentals.
16   Heraclitusstudent   2019 Aug 21, 12:41pm  

Rin says

I think we're in the 'Wall of Worry' era where there's enough scaredy-cat sentiment, that it's not the start of the bear market.

When it happens, according to the old timers, is when ppl forget about their worries and start to think that either stocks or real estate, can only go up.


We just went through 2 successive bubbles. People are mentally scarred. There won't be a large bubble now, and the downturn, when it comes, will not be the result of a bubble popping as was the case in the previous 2 cases.

Recessions do not happen only when a bubble pops. For the expansion to continue, new jobs need to be created, unemployment needs to continue going down. When the market is tight enough, either inflation will flare, or more likely companies will defer investments for lack of cheap workers.
17   Shaman   2019 Aug 21, 12:55pm  

Rin says
When it happens, according to the old timers, is when ppl forget about their worries and start to think that either stocks or real estate, can only go up.


That is exactly right. Irrational exuberance leading to poor investments based on hysteria. That’s what happened in 2006-2007 and it led directly to 2008. I called it, as did several here on Patnet (although I wasn’t a site member until post crash). Additionally, I pulled my money out of stocks and put it into bonds in December of 2007. There it sat for over a year as the market detonated... slowly at first and then later more quickly. If I’d have been richer, I’d have made out big. Oh well, there’s always the next one.

Btw I don’t see the next one coming yet. Sure we have high house prices, but people pay them glumly because they have little recourse, not in hopes of instant real estate riches. Sure the market is high, but that’s because there’s an ocean of money sloshing around out there and it wants to be invested and the market is the easiest way to get it invested. If that changes for some reason, it will be because of lack of faith in some core tenet of the economy like the banking system or Wall Street trading functions. These little 1000 point bobbles are just speculators speculating, and trying to make some money on dips and rises. It’s nothing to be concerned about.

Oh and the media’s push for a Recession is just a ploy to get rid of the Donald, whose Presidency would not likely survive one. It’s wishful (if schadenfreud) thinking, and I don’t believe that investors are fooled enough to start some sort of panic.
18   EBGuy   2019 Aug 21, 5:45pm  

2002: Massively subsidized bags of dog food.
2019: Massively subsidized taxi rides.
What could go wrong?

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