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Having Fun Taking Profits! Try It. You'll Like It.

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David Crosetti's Blog
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  • Since March of 2020, the market has been on a tear.
  • My portfolio since March has been growing exponentially.
  • So, I began taking profits on some of my best performers.
  • I would suggest that you strongly consider doing the same.
  • Especially into rallies, like today.


There is a difference between "sound advice" and "words of wisdom."

Not a lot of difference, mind you, but a difference, nonetheless.

I have been looking at investing with a different approach, lately, and that approach has prompted me to give you some "sound advice" relative to the stock market and how things might play out in the next 12 months or so.

You can do whatever you like with this "sound advice," it really doesn't concern me in the least, what you decide to do, but keep in mind that at least, "I told you so."

The current state of affairs, politically, in this country have become somewhat problematic for some of us.  It seems that there are two types of Americans, these days.  

There are the kind of Americans who love this country the way it is and the kind that do not love this country the way it is, but want to change the way it is.

It would be ok if their changes were rooted in common sense and in light of our Constitution and Bill of Rights, but those two documents appear to be a bit of a sticky wicket for those who look for change. 

Why should we be held to a document that was written so long ago by a bunch of white guys who were all guilty of "white privilege" and filthy rich, to boot?  I mean, let's face it.  Those two documents are nothing but a restriction upon government and how we manage things in this country.

What You Should Know:

If the left has it's way, then there will be a couple of changes to America coming your way. 

First, the Supreme Court is going to have additional members.  Perhaps another 4 justices or maybe 6.  Who knows?  But they will have to pass the litmus test that the left favors and that could become problematical for things that we take for granted as Americans.

Second, we might be adding a few more states.  Puerto Rico and the District of Columbia, for example.  Why would we want that?  Well, those two entities will likely go Democrat with their Senate seats and that will mean the left will have an additional 4 seats in the Senate.  Likely forever.

Third, we might see the elimination of the Electoral College.  That is a goal of the left, so that we might be able to elect the President from a handful of states where the population gives those states control over the popular vote.  So if you live in Kansas or Mississippi or Louisiana, don't bother to vote at all, because it won't count as much as a vote from California, Florida, or New York does, relative to seating a President.

Fourth, a fundamental change in our tax laws.  Income taxes will go up with a leftist government.  They have to, in order to fund social justice programs.  There isn't enough money without increasing those taxes.  So, look for a change there, along with changes to deductions for things like retirement accounts, mortgage interest, charitable contributions, business expenses etc.  Money votes with it's feet.  Back when I lived in the United Kingdom, the rich people were moving from Britain to France where the taxes were more favorable.  The exodus of corporations to foreign status a few years ago was directly tied to the notion of corporate business taxes being confiscatory.

Fifth, defunding of the police.  Let's face it, social workers are a lot less expensive than cops and not only that, but they will not be armed, so the only people who can get shot are the social workers.  No more police shootings.  Yea!  And that money can be channeled to social welfare programs where syringes are provided for junkies in the major cities and best of all, the cities can get port-a-potties to end defecation on the sidewalks.

What I Know:

The stock market is not going to take well to any of this change.  The stock market does not like change.

Over the last 10 years or so, many of us have made a lot of money by being invested in stocks.  I know that I have.

But about 6 months ago, I started trimming my stock holdings with a more aggressive posture and took profits off the table and parked that money in preferred stocks.

Now, those preferred stocks were mostly bought at levels below par value and that means that I don't have to account for any premium price and dividend catch up scenarios.

These preferred shares have appreciated a bit and mine are now all above par level ($25 for most) and that is a double bonus.  Preferred stocks are not normally thought of as capital appreciation plays, but as income plays.

Many of the companies that we owned were "doubles."  We wrote about some of them in 2016 when we added shares to our Perfect Portfolio.

We bought companies like (JPM), (BAC), (QCOM), (ADM), (EMR), and others that have done nicely for us, since then.

All along, we have been buying.  We bought our low yielding Dividend Champions like (PH), (VFC), (MSA), (GWW), (SWK), (LANC), (SCL), (ITW), (MSEX), (LOW), (AWR), and (NDSN).

We bought our Pandemic Portfolio with companies like (PTON), (GNRC), (ETSY), (RBC), (ZM), (WORK), (HQY), (BAH), (ICE), (TMO), (ANTM), (SPOT), (ACN), (ATVI), (LH), (FB), (AMZN), and (NFLX).

The best part is that all of these stocks were in tax exempt (Roth Accounts) and in my IRA Account.

So, there is no tax on capital appreciation, nor is there tax on dividends.  How good is that?

But will that change with the new administration and the new Congress?  

Who Knows, But Sometimes You Have To Take Action:

I have not real idea as to what is going to happen, other than what left wing folks like the Democrat leadership have been telling us for the last 4 years of things they want.  They might be blowing smoke up our asses or they might be deadly serious.

I am going to go with "deadly serious" and that is why I have been taking profits.  Aggressively.  Consistently.  Selling into rallies, with limit orders to set my price target and not market orders to just get out "willy-nilly."

Right now, my stock holdings, for the most part, are at a neutral point relative to profits.  Peloton (PTON) for example.  I purchased 500 shares of stock at $59.16 a share on July 17th, 2020.  That was an investment of $29,580.

In December, shares of Peloton (PTON) were selling at $160 a share.  That meant that my shares were valued at $80,000.  That meant I had a profit of $50,150.

I decided to sell 325 shares at $162 a share and hold 175 shares, of (PTON) today.  

That same scenario has played out with other stocks that I own and now, I will chill and see how things shake out, in the new year.

Today's rally had me trimming shares in other stocks with large gains.  Again, aggressively selling into this rally.

But, Dave, What If The Market Keeps Going Up?

I am reminded of the time that I went to Lake Tahoe with my best friend, Ron.  We would take the trek every month and turn it into a three day weekend.  He played Black Jack and I played Craps.  We would check into Harvey's Wagon Wheel (I knew the GM) and then hit the buffet before hitting the casino floor.

This one time, I was not doing well, but stumbled upon a Craps table where some kid was rolling numbers like a freaking machine.  I decided to ride his streak and got on the back line, something fierce.  All hands on deck.  

This kid has a point of 4 and he kept rolling the dice and throwing out 5, 6, 8, 9 and 10, but no 4 to close the roll.  I kept pressing the bet every time he made a number and then he rolled the 4.  Took the back line down on his roll out.  He throws a 7 and then two more.  Then he rolls 10.  Start the back line all over again, putting everything back "on."

Needless to say, when I left the table, I had $5500 bucks (chips) in my cargo pockets.  In $50 and $100 chips.  But, I had no idea about how much I had, until I went to the cashier to "cash them in."  She kept counting out $100 bills until she got to $5500 bucks.  

I gave $5400 bucks to Ron and said, "Hang on to this money until we get on the bridge back into San Francisco.  Do not give me a dime of this money until we are out of here.

Well, I kept $100 bucks and that was gone in about an hour.  I found him and said, "Ready to go home?"  He was.  When got to the bridge, he handed me a wad of $100 bills.  Keep in mind that $5500 bucks was a lot of money in 1975.

Having it in his pocket made my entire weekend, when he handed it over to me.  As opposed to having potentially lost it.

Words of Wisdom:

We are living in troubling times.  No one ever went broke taking a profit.  My advice to you?  Take a look at your profits and take them off the table.  It's better to let inflation "ravage" your money than it is to loose 20% of your money in a market correction.

There will be time enough to put that cash back to work. 

Just like there was in October of 2011.

Just like there was in June of 2012.

Just like there was in January of 2013

Just like there was in January of 2014 and in November of that same year.

Just like there was in October of 2015.

Just like there was in February of 2016.

Just like in January of 2017.

And just like every time the market has had a pullback like clockwork.

Like in December of 2018.

Like in June of 2019.

Like in March-April of 2020.


Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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