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Craig Lehman  

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  • 2015 Review Of The Dividend Growth Safety Superstars, Part 2 [View article]
    "What does the ability to sell half your portfolio do for your financial plans? How does it help you meet your investing goals?"


    When I've got all the secure annual income I need (with adequate insurance, fallback funds, etc), I've MET my primary investing goal. Planning was to GET THERE. From there on, investment returns are icing on the cake, and I'm basically NOT planning, except that more $$ are obviously better than less, and DG investing is a good way to go (but not the only way.) We have no kids. We want to see more of the world and experience new things. I enjoy playing the piano, but unfortunately being Rachmaninoff is not something you can buy. It's surprisingly hard to find causes that we want to leave our estate to. But hopefully we'll figure something out.

    So you need some ambiguity tolerance for this approach. For more information, see Wikipedia's entry on Epicurus and the concept of ataraxia, or read Tom Wolfe's A Man in Full. In short, keeping your desires modest solves a lot of problems. Beyond that, I don't think I have anything more to say.

    Sep 20, 2015. 06:00 PM | 1 Like Like |Link to Comment
  • 2015 Review Of The Dividend Growth Safety Superstars, Part 2 [View article]
    "To everyone here still reading....What lessons have each of you learned from your holdings suffering capital losses?"


    More or less exactly what you have. I too fell for SDRL, thank God not in a big way. Oh, and BBEP as well.

    So no more chasing yield, and no more positions rated below investment grade (I am down to 2/48 now, and only 7 whose rating does not start with an A, although I feel pretty good about MMP and my BBB+ REITs.)

    Where I think I differ somewhat from you is that I have no aversion to tech, esp. "old tech", and I will go looking for yield in CEFs (which are designed for it.) Personally, I would have a hard time SWANning with heavy cyclicals like CAT, AFL's Japanese exposure, and BDCs, even if those worries are not captured by a rating. (We all have our bete noires.) I also think (following Scott U) that beta is a crummy proxy for riskiness, so that I don't explicitly go searching for betas < 1, even though I have quite a few of them. Finally, I will go lower than you on yield, if there is a very good dividend growth history and a favorable ongoing "story."

    But... we are still pretty much playing in the same ballpark.

    Sep 19, 2015. 06:43 PM | 2 Likes Like |Link to Comment
  • A DGI Shopping List For The Utility Sector [View article]

    Thanks for the excellent links.

    We live in CA and have solar, but to be honest, I can appreciate the argument for some kind of infrastructure connection fee for solar customers. It is kind of unfair to dump the costs of grid maintenance disproportionately on people who don't have solar. However, it would make a big difference whether that fee was $15/mo or $50; I didn't see anything to indicate that true costs have yet been accurately estimated.

    It seems to me that where push will really come to shove for the utility companies is when and if battery storage units become cost-effective, because then cord-cutting will become a real possibility. My impression, however, is that that day has not yet arrived -- and they've been trying to improve battery technology for a couple centuries now.

    Sep 19, 2015. 11:42 AM | 5 Likes Like |Link to Comment
  • 2015 Review Of The Dividend Growth Safety Superstars, Part 2 [View article]
    What's hard to understand is cryptic phraseology, as if I'm supposed to automatically understand what you mean when you allude to an "unacceptable price", etc. Your explanation helps, though it still seems strange to me to call the standard method for calculating net worth -- used when applying for a loan, paying taxes, etc -- a "half measure."
    Sep 18, 2015. 09:24 PM | 1 Like Like |Link to Comment
  • 2015 Review Of The Dividend Growth Safety Superstars, Part 2 [View article]
    Just doing it like an accountant would if asked to calculate my net worth.

    I don't understand about "half measures" and "unacceptable" prices. I can't imagine anything more straightforward and conventional than looking at today's closing prices. I just accept what I see on the screen.
    Sep 18, 2015. 08:03 PM | 2 Likes Like |Link to Comment
  • Dividend Growth Diversification: A Deeper Look At My DGI Portfolio [View article]
    There's an easier way, at least if you're comfortable with spreadsheet functions. I copy ticker symbol, dividend per share, dividend growth rates, Chowder rule, and a few other columns I like from the CCC list, and put them on a separate Google Sheets page. (That takes about 5 minutes a month, once you get the knack.) Then, I use the VLOOKUP function to link the information into columns of my stock pages. Of course, this only works for stocks that are in the CCC list, but since 95% of my stocks are, manually filling in the dividend per share for the few exceptions is not much work.

    Robert, the only place where I regularly see the N/A is when I try to get the first-day-of-the-year price for a stock. (Next year, I will just paste the Dec. 31 prices into a hidden column.) Eric, be sure to use the new version of Sheets which has no limits on the number of functions per sheet, and generally seems to work better (albeit with a few new bugs of its own.)
    Sep 18, 2015. 06:26 PM | 1 Like Like |Link to Comment
  • 2015 Review Of The Dividend Growth Safety Superstars, Part 2 [View article]
    Robert, I'm not sure I understand the phrasing of your question. But to illustrate, I am definitely *not* setting a goal of a $3M portfolio earning $100K/yr in income, a la Chowder. With Social Security and other retirement, I can comfortably and securely live on half that. So I would feel free to sell off half the portfolio (hence sacrificing half the income that came with it), and spend the $1.5M on <whatever.> In other words, my first-level goal would be $50K in dividend income from the usual DG suspects, and my second-level goal would be to maximize net worth beyond the amount necessary to generate that $50K. Of course I wouldn't *have* to sell off half the portfolio and spend the $1.5M, and I might allow the dividends to continue to accumulate and increase my net worth, but once beyond $50K my *goal* ceases to be generating more dividend income. It's just greater net worth, perhaps from capital appreciation, perhaps from dividends, perhaps from some other type of investment.
    Sep 18, 2015. 04:17 PM | 3 Likes Like |Link to Comment
  • 2015 Review Of The Dividend Growth Safety Superstars, Part 2 [View article]
    "what change should take place in my thinking based on the fact that the net worth number is up or down a few percent from one quarter to the next?"


    Excellent question. It made me stop and think. And I think your implicit answer is right -- total portfolio should *not* be an overriding concern. As you acknowledge, assuring oneself that they are prepared in case of a catastrophic emergency is one reason. But once that box is checked, emergency preparedness is not something to obsess over.

    I suppose another reason to track net worth would be if someone, especially a beginner, had not taken the kind of care in constructing a diversified portfolio that we tend to take for granted with the leading authors here on SA. E.g., suppose someone was 50 or 75% in energy. Then, a rapid decline in net worth such as would have occurred in the past few months would be a symptom worth paying attention to, like a fever -- why is my portfolio down so much more than the market? Again, a couple percentage points difference from the return of the S & P is not worth obsessing over, unless it occurs quarter after quarter. But I think it should be a (small) part of a regular portfolio checkup. And checkups need to be done cold-bloodedly, realistically, without any temptation to rationalize that "it's only a paper loss."

    But finally, I confess to a human weakness: I like to sneak a peak at my net worth from time to time. Seems to me that, like drinking in moderation, it's a fairly minor vice. I call myself a dividend growth investor, and SA has certainly educated me on the greater importance of dividend-related metrics. But I can also imagine the day coming in which I have all the dividend income (plus emergency funds, insurance, etc) I need for my lifestyle, so that "excess" net worth could be safely spent on some indulgence or worthy cause that suddenly grabs my fancy. To do that, I have to know what my net worth IS, and how much of it needs to be tied up in dividend generation.

    Since you're an advocate of a portfolio constitution with explicitly-defined goals, let me put it this way: dividend maximization is NOT my only goal. I want enough secure income to sustain my lifestyle, but my lifestyle is relatively modest, and once that goal is achieved, I want the things that a higher net worth can provide. In other words, higher net worth IS a second-level goal for me. So, of course, I need to keep track of it.


    (Robert, I hope that answers your question.)
    Sep 18, 2015. 03:06 PM | 2 Likes Like |Link to Comment
  • Dividend Growth Diversification: A Deeper Look At My DGI Portfolio [View article]
    FWIW, I use Google Sheets to track my portfolio. Google Sheets has a set of built-in functions that return current stock price, change, percentage change, and many other metrics.

    By simply having a column that contains the S & P sector ID # for each stock, I can then easily display the total amount I have allocated to each sector -- down to the penny, in real time, with no additional work. Highly recommended to fellow lotus eaters.
    Sep 18, 2015. 01:59 PM | 2 Likes Like |Link to Comment
  • 2015 Review Of The Dividend Growth Safety Superstars, Part 2 [View article]

    I am not doing anything more than advocating using mark-to-market accounting in one's own thinking. The reason that regulators force banks to use mark-to-market accounting is "merely hypothetical", too: they want to be sure that IF depositors want to withdraw their money, the bank is able to pay them. For that same reason, I'm simply saying that it's imprudent to kid oneself about what one's assets are, at any point in time. because any point in time *could* be the time when you need them. If it makes you feel better to say that your assets are greater than what a CPA would say they are, then party on.

    Chowder, I honestly don't understand what you're saying. I am certainly not claiming that anyone who doesn't sell at the top has lost money, and I don't see how I implied that.

    Sep 18, 2015. 01:29 PM | 1 Like Like |Link to Comment
  • 2015 Review Of The Dividend Growth Safety Superstars, Part 2 [View article]

    [Geez, I wish SA would chain replies directly below the comment they are directed at.]

    Yes, there was *really* a loss. Suppose some truly serious disaster in your life had occurred in, say, Feb 2009, and you had HAD to raise cash by selling stock. It is very comforting, now that the crisis has passed, to think that you didn't have to do that. But *at that time*, there was absolutely a loss, and no creditor or accountant would pretend that the situation was otherwise. And unless you have much greater political influence than I have, Congress would probably not have granted you a TARP bailout.

    I completely agree that a prudent planner would be ready for such situations, avoid panic selling, etc. But as an old philosopher, I try to use the word "real" carefully. I see no advantage to claiming that if disaster *had* struck in Feb. 2009, that your losses were not "real." No realist would have cut you any slack.
    Sep 17, 2015. 07:13 PM | 2 Likes Like |Link to Comment
  • Make A Monthly Ladder Of Dividend Income Payments With Stock Recommendations From My Portfolio [View article]
    Just to take a slightly different angle on this issue of a smooth flow of dividends, there are *so many* factors that contribute to uneven personal cash flow: e.g. income tax payments and refunds (which vary year to year), unpredictable medical expenses (when not covered by insurance), travel (which is generally not done on a steady monthly basis), last-straw decisions to buy a new car (or accidents), home repairs, holiday gift giving, the joys of impulse buying, gambling... I'm sure there are many other variables that don't occur to me at the moment.

    So I am with the cash-cushion folks. Even if you could smooth out your dividend cash flow without affecting optimal stock decisions, you *can't* (in the real world) smooth out all the other stuff. I'm not going to try to work out the numbers, but I'd be willing to bet that the lumpiness in my other expenses greatly exceeds the lumpiness of my dividend cash flow, especially over intervals as short as three months. So smoothing dividend cash flow is just not something I am going to worry about. I have enough worries.
    Sep 17, 2015. 06:56 PM | 6 Likes Like |Link to Comment
  • 2015 Review Of The Dividend Growth Safety Superstars, Part 2 [View article]

    I appreciate your brutal realism. I find the concept of a "paper loss" to be the ultimate in self-deception. "It already happened" is exactly right.

    If "paper losses" were not taken seriously, then Lehman Bros (no relation) could have simply told its creditors "See, we bought these mortgage-backed securities @ $100 and now they're only worth $10, so you'll accept them at face value in payment of our obligations, right?" And exactly the same is true if an individual ever has to sell a stock in an emergency. It is worth exactly what today's quote says it is, and no creditor in their right mind will price it differently. That is the real world talking.

    Might as well man up and accept the news RIGHT NOW. For one thing, the realism can be helpful in selling a turkey that may go even lower in the future.
    Sep 16, 2015. 03:15 PM | 5 Likes Like |Link to Comment
  • David's High Velocity Solution For A Buy And Hold SWAN Portfolio [View article]
    Ideally... you're right. But many years ago, you could have thought Kodak or Penn Central were inside your "knowledge circle" -- film for your camera, and maybe the train you took to get to work. And surely anyone with a good science/business fiction imagination can develop a scenario in which KO or JNJ goes belly up. Likely? No. Conceivable? Yes.

    But the point isn't the likelihood of such events happening. It's just that diversifying to a basket of 20 or 40 or 50 high-quality companies gives you free insurance from being skewered by the arrogance of certainty. *Suppose* it happens -- then instead of losing 20% of your wealth, you lose 2, 3, or 4%.

    And yes, the S & P 500 contains at least 50 quality companies.
    Sep 12, 2015. 11:36 AM | 1 Like Like |Link to Comment
  • A Dividend Growth Investor's Perspectives On Advisor Perspectives' 'Use And Abuse Of Dividend Strategies' [View article]
    User 6830851,

    I don't drip either, but the counterargument is, you don't know the future. The answer to your question about VZ is, suppose it goes to $50 next month? You'd be kicking yourself for not having dripped.

    Also, as to averaging up, I don't like to do it either, but as Wm. O'Niel has argued, the way to do it is to invest progressively smaller amounts as the price advances (e.g. 100 sh, 50 sh, 25 sh.) In this way, your cost basis doesn't get pulled up too much. (Just get your initial buy right!) I note that dripping accomplishes the same thing, because you are always purchasing a progressively smaller percentage of your total investment.
    Sep 11, 2015. 05:20 PM | 4 Likes Like |Link to Comment