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  • Looking Beyond The Obvious: Critical Thinking And Investment Decisions (Part 1) [View article]
    "UBER: I think you owe me an apology.
    Since you have posted several times since I sent you a PM addressing your exact questions and my latest update* to the blog does as well, you've had ample time to set things straight either openly on the board or via PM." - UBER

    Au contraire. I will 'set things straight' here and now.

    At the time I posted the suggestion for including the total account value the only thing on your blog was an image of your statement and a copied set of SA posts between yourself and other commenters, myself not included.

    There was no summary. You added those later. The posted statement image is nearly unreadable and, lacking any definition of the various terms, I could only guess at which one might represent the total value.

    I might also remind you that it was YOUR idea to post your results in competition with Chowder, not mine. I was actually trying to compare the two (and give you a fair consideration) but having difficulties. A post consisting soley of a barely readable image of your statement does very little to enable that fair comparison.

    Posting the second image, with different information added to the confusion. Did the second image total include the first, or not? I'm glad you have since added the textual summary. I'll be interested to see how you fare going forward. Personally I wish you'd add more detail for each position. If you do well, people might be able to learn something more than the fact that you are argumentative.

    Best of luck to you. I won't be responding to any future comments you might direct at me. I feel my time will be better spent interacting with others going forward.
    Jul 5, 2015. 12:12 PM | 13 Likes Like |Link to Comment
  • Are Dividend Growth Investors Livin' Too Large? [View article]
    "I would strongly encourage younger investors to have 100% of their retirement savings in equities. Bonds are great for preserving value, terrible at growing value. You only benefit from "time in the market" if you capture growth. After 10-20 years, you may want to assess your risk tolerance. ... That's different from taking stupid bets." - TF17

    It seems to me that many such academic points can be semantically disingenuous. When examining the difference in 'risk/reward' between TR and DGI (which is what I believed we were doing) I would not expect the stock/bond weightings of a TR portfolio to play a part.

    The common adage of "taking risks while you are young, use TR" to me would imply investing in a no-dividend growth stock like Apple used to be, instead of a stodgy blue chip like SO, on the hopes that you will build your portfolio faster. I wasn't thinking "100% equities" vs. "60/40".

    While it is true that any single stock can be a moon-shot wealth builder, it's also true that they can consume your wealth without end if you're stock picking skills are not top notch.

    In 1999 CSCO was all the rage and you could have gotten in at a split adjusted $40/share, watched it zoom to nearly $80 per share, and then have it plunge to under $12 in the span of three years. Today CSCO trades at $27.33. Still underwater by more than 30% after 25 years (a CAGR of -1.1%).

    'Boring' utility SO returned 11.5% CAGR and is worth 6.5x the CSCO shares today.

    I guess my point is why risk picking a CSCO, where the result is feast or famine when you can pick a steady growing performer that will get the job done over the span of 25+ years?

    Why risk losing your savings and the returns it might generate trying to hit a home run, only to potentially strike out? Each home run might require a proper buy and a proper sell decision. Each strike out requires a bigger home run to make up for lost ground.

    I don't get it. When I want to cross a stream I prefer using a bridge rather than having to run from head to head of the alligators swimming in the water.

    'Boring' Blue chips and DGI stocks are the bridge for folks who start early enough. Seems to me that most shouldn't risk alligator-hopping unless the bridge is out and there's no other choice for crossing the stream.
    Jul 4, 2015. 05:01 PM | 4 Likes Like |Link to Comment
  • Are Dividend Growth Investors Livin' Too Large? [View article]
    "But if you lose $1K in the second year, how much are you down 39 years later?" - PendragonY

    Not sure what point you're trying to make, but then maybe my point wasn't clear enough.

    My point was that starting early means you don't need to achieve 'outsized' performance in order to replace your paycheck. Starting at 25 requires only market level performance combined with healthy savings to do so. Waiting until you are 40 to get started would mean a LOT more savings or expectations of high yield or high DG, which would entail more risk of failure.

    Why the 'common wisdom' is that young folks should take more risk seems counter-intuitive to me. Younger folks have more time and can therefore achieve success by taking less risk. Why gamble when it's not necessary?
    Jul 4, 2015. 02:59 PM | 1 Like Like |Link to Comment
  • Are Dividend Growth Investors Livin' Too Large? [View article]
    "Why endure losses at all, at any age? ... The younger you start, the more you benefit from compounding and dividend reinvestment." - Robert

    Conversly, the younger you start, the lower CAGR required to reach 'paycheck replacement'.

    Over a 40 year span, with annual contributions of 15% of income, a 4% yield, a 6% DGR, and 3% inflation you will generate inflation adjusted dividend income exceeding your initial inflation adjusted wage income (this also assumes that your wages are increasing at half the rate of inflation over those 40 years).

    A 4% yield and 6% DGR aren't that big a stretch. Nor is saving 15% of your paycheck.

    The interesting aside is that your dividend income after 40 years under those circumstances will exceed your final wage income by roughly 80%, so there's a bit of slack in the exercise.

    Looked at another way, your dividend income will surpass your wage income around age 59. That leaves a lot of options open for consideration.
    Jul 4, 2015. 02:00 PM | 2 Likes Like |Link to Comment
  • Are Dividend Growth Investors Livin' Too Large? [View article]
    "I'm heading in this direction, but it is not easy psychologically. Especially this quarter where my portfolio is "down" even though the income it is producing is at an all time high. It is hard to make my mind shift the focus of what is most important after years of bottom line thinking." - Mark335


    Look at it this way. Your primary goal (increasing income) is progressing according to plan. Hopefully that plan ends in a place where your income supports your retired lifestyle and then some. If not, consider revising your plan.

    As for the value of your portfolio being "down", think of it this way. The stocks you felt were worth buying just a little while ago are now ON SALE. Buy some more of them and grow that income even faster.

    The beauty of the DGI mindset is that the screening process should leave you with stocks in businesses that are well run and likely to continue to be run that way. They're probably not going to go under any time soon, so the current market price is only a reflection of market psychology and not the value of the business performance.

    If someone offered to sell you shares in JNJ at $1 each, would you buy them even if you knew that your portfolio value would drop significantly? (That's meant to be somewhat of a rhetorical question. JNJ pays $3/share in annual dividends. If you can 'hang on' for 6 months you'll get all your money back in dividend payments.)

    Sure you would. JNJ isn't going anywhere for quite a while. Remember that you are not buying "price slips", you're buying part of the business. Lower prices are better. Price is temporary, income is enduring. Buying the income when the price is low is a good thing.

    I'm sure someone can dig up a Warren Buffett quote regarding his preference for having his stock prices stay low so he can buy more of the businesses he owns.
    Jul 4, 2015. 12:37 PM | 3 Likes Like |Link to Comment
  • Why I'm Calling The Federal Reserve's Bluff [View article]
    "I also feel you're very safe buying leveraged bonds funds." - Adam Harrington, June 16, 2015

    Ouch. UBT off by 5.25% since that statement was made just over 2 weeks ago. Not so good for a bond fund yielding 1.4%. (July 2, 2015)

    Meanwhile, Southern Company (SO), that boring utility, is up nearly 1% over the same interval and is yielding over 5%.

    Maybe there's something to the whole "risk of default" line of thinking after all. Imaging how bad it might get for funds or etf's holding large amounts of Puerto Rican bonds if conditions there keep deteriorating:
    Jul 4, 2015. 11:04 AM | Likes Like |Link to Comment
  • Looking Beyond The Obvious: Critical Thinking And Investment Decisions (Part 1) [View article]
    Perhaps you can identify the total starting portfolio value, since you're "tracking" it.

    As of COB 6/30/15 I make out two positions (so far) costing roughly $35,228 with a net loss of ~7.1% since inception on 6/15/15. But I don't have any idea how much cash is sitting on the sidelines. Last week there was less than $6,000 in play, now there is more than $35,000. For all we know there might be $1,000,000 still sitting there unused and your current losses are a tiny fraction of the whole. Or not. Who knows?

    It would help if you post a net portfolio value each time you update so we can get an idea how your posted performance relates to the entirety.

    Or is not posting that information part of your "tracking" plan?

    It has been my experience that employing undisclosed 'hidden' information is often the mark of a charlatan.
    Jun 30, 2015. 08:16 PM | 4 Likes Like |Link to Comment
  • How To Be Sure You Won't End Up Eating Cat Food In Your Retirement [View article]
    "Anybody know a website where I can find a calculation how quickly my mortgage will be paid off based on the extra principle I pay each month?" - PTI

    Another spreadsheet for your Mortgage what-if'ing pleasure:

    (In order to save a copy you can edit,
    use menu commands File -> Download As -> .xlsx File)
    Jun 30, 2015. 07:55 PM | Likes Like |Link to Comment
  • How To Be Sure You Won't End Up Eating Cat Food In Your Retirement [View article]
    "Could you share how one would change the headers to conduct "what if" analysis" - stem23

    You should be able to download the spreadsheet to your own computer and then change the values in the tan boxes to anything you like. Any change made to those tan boxes will recalculate all the results. When I tried this at work I had to enable editing (via the pop-up which appeared).

    The spreadsheet includes all the necessary equations, just "what-if" the values in the tan boxes.

    If you don't have Excel on your home machine, you can download, install, and use OpenOffice instead. It's free.
    Jun 30, 2015. 02:20 PM | 1 Like Like |Link to Comment
  • How To Be Sure You Won't End Up Eating Cat Food In Your Retirement [View article]
    I put together a simple spreadsheet that anyone can use to replicate the figuring done by PTI here:

    I've also added columns to show what an inflation adjusted Wage would be worth based on a current Wage and an assumed inflation rate.

    I hope this proves useful for anyone out there who wants to start thinking about their own retirement planning and how to set and achieve a goal.
    Jun 29, 2015. 08:37 PM | 10 Likes Like |Link to Comment
  • How To Be Sure You Won't End Up Eating Cat Food In Your Retirement [View article]
    Good article PTI. Establishing goals is of primary importance if you want to accomplish anything (beyond retirement income). Reviewing progress is also key as it allows you to modify the plan as circumstances change. Without it you might wind up at the end of the time interval without the anticipated income and not having any idea why.

    Young folks out there reading this article would be wise to take heed and pick up a pencil to start figuring for their own retirement needs.

    Bravo also to ScottU for asking the probing question that kicked off your effort.
    Jun 29, 2015. 08:15 PM | 4 Likes Like |Link to Comment
  • Looking Beyond The Obvious: Critical Thinking And Investment Decisions (Part 1) [View article]
    "Yes, I figured that out he was trading option spreads (most likely via ETFs based on the VIX) a long time ago, back when he was here under a different user name." - giorgiolb

    I'm late to his game, but establishing option spreads where the worst case outcome is to lose ~40% of your account balance on one trade seems somewhat riskier than DGI. Given the small account value, he won't have much hope if he gets a surprise move in the underlying. Delta neutral positions would seem like better bets for 'extreme' VIX plays, but that takes more money unless his ETF is priced around $10 or so, which would make the options side a challenge.

    He's either going to win big, or lose big. Time will tell.
    Jun 28, 2015. 11:33 PM | 1 Like Like |Link to Comment
  • Looking Beyond The Obvious: Critical Thinking And Investment Decisions (Part 1) [View article]
    "C'mon giorgio, give the man credit. He has $2.62 in a mutual fund. The rest of his portfolio is in a money market fund, total $5,380.19 before he lost $13.69 and then shut the site down so we can't see how he's doing." - Chowder

    I got a quick look at his website when he first started it. He wasn't using mutual funds, he was trading option spreads. The upper right hand portion of his website shows the gain/loss vs. price chart that is often used to depict option trade results. From the looks of the graph on his website it appeared he had established a spread of some sort using call options.

    In addition his statement showed all the 'greeks' for his position (also indicative of an option position). What wasn't showing were the symbols for the options he used,the duration of the spread, or the prices of each leg.

    Apparently he did some 'prep' work to cover up that kind of information in his statement(s). Why, we can only guess. Maybe he can provide further detail if someone asks.

    One thing he is not doing is 'investing' by establishing long term positions. He's establishing short term option positions to either sell premium or to play short term stock swings.
    Jun 28, 2015. 09:36 PM | 4 Likes Like |Link to Comment
  • Looking Beyond The Obvious: Critical Thinking And Investment Decisions (Part 1) [View article]
    “Five percent of the people think;
    ten percent of the people think they think;
    and the other eighty-five percent would rather die than think.”

    ― Thomas A. Edison

    Edison died in 1931, so the general principle that most folks avoid critical thinking has been around a while.

    The blog example discussed in this article makes me wonder if Edison held KO in his portfolio when he died though. :-)
    Jun 27, 2015. 11:50 AM | 8 Likes Like |Link to Comment
  • Looking Beyond The Obvious: Critical Thinking And Investment Decisions (Part 1) [View article]
    "I retired from Callahan and have moved on the bigger and better things. Like being retired! And a grandpa." - Dave Crosetti

    I can't help but put one last Tommy Boy reference in:

    Critical thinking is sort of like when Tommy Boy saw 'guaranteed' stamped on the box. It makes you feel all warm and fuzzy, but you still have to figure out what's being guaranteed before spending your hard earned money.

    And that's when we blow it.
    Jun 27, 2015. 11:42 AM | 2 Likes Like |Link to Comment