Early Retirement Extreme Forums

I haven't been trading much because this rally just keeps going on and on...
Since January 1, 2013:

S&P 500 is up 17% (about 18.25% including dividends)

My regular portfolio is up 21.4% and holding 6% cash

17% in less than half a year, that is insane, especially when on top of the previous gains... My gut has been saying get out of stocks, but guess I'll stick to PP allocations!

Let go of OHI yesterday, decreasing holdings by about 60%. Not soon enough to collect $38/share... only got $36.
[Edit: 2 weeks later it has hit bottom at $31.20 and hovering around $32.50. Still, I would not consider buying unless yield is over 6%, which happens at about $31.]
Where replacement income is needed, WPZ has been my choice. Otherwise, I need to build a fresh shopping list.

On Tuesday, my chosen municipal bond fund (VKQ) started the day at $13, a 7% discount to net asset value. Snapped up a wad of shares to probably hold through the summer/fall. There was only a short window and the shares are now trading at $13.44, so half the discount is gone.

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Potential Shopping List

common stocks: JCS, T, MAT, SRE, GE

REITs: ***nothing at this time***

MLPs: ARLP, NSH, KMP, WPZ

George, how many different equities do you hold in total?

What're people's thoughts on PHK? It trades at a huge premium and has for a while, but the dividend has never been cut (as far as I can tell), with a 10 year track record.

There are about 50 stocks & bond funds in my tracking universe and I currently hold:
VKQ - muni bond fund
SJR, GE, SYK, TRP, JCS, PG, PEP, INTC, MSFT, MAT, COP, AVA, PPL, MCD, JNJ - common stocks
GOOD, OHI, ADC - REITs
AGNC - mortgage REIT
ARLP, KMP, WPZ, BWP, NRP - MLPs
PNNT, ARCC, TICC - BDCs
PBT, NDRO, MVO - resource trusts (hold in IRA/Roth to reduce paperwork)

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SYK, PBT, & NDRO have disappointed me. SYK is the largest holding of those three at about 2% of portfolio and is most likely to be trimmed.
OHI used to be my largest holding, maybe as much as 20%, and now it's down to 5% or so. Now the largest are WPZ and GOOD at around 10%-12% each.

VKQ is near 7% again this morning.

I know most people are more conservative than this, but Turkey is a good stock market to keep an eye on right now. It's almost down 20% because of the recent protests, but is widely considered one of the better developing economies. I'm going to hold off a little longer to see how these protests play out, but I like the opportunity.

Sold RIO, TNK, CLF when they ran up.
Bought or added to SDRL, BPT, NLY, NTI, VKQ
Watching:

BBEP (y10%)

NTI (y18%)

PAC (y5.5%)

LINE (y9%)
In our 401Ks that are limited to funds, I exchanged out of VWELX, VWIAX, and VGSLX (I had already gotten out of VEIEX and VWILX earlier in the year) into a stable value fund. I'll jump back into them after I'm confident that the correction is about over.

I bought everything listed above except PAC. Also bought WMC. (I own WMC, AGNC, and NLY now--a little risky even for me.)
Currently watching:

PAC

CMLP

ARCC

DMLP (but only with pullback)

Abandon ship!
Sold off all the BDCs and mREITs this morning. Trimmed down the regular REITs a little further.

Wow. I'm holding tight for now, but watching closely. I'm down less than the market today, so that's a good thing. LINE is even up today

George, why selling now? Bond rates? Seems a bit extreme to me--I don't see why BDCs can't keep getting paid on their investments.

Anyone else seeing this as a buying opportunity, or are you expecting further drops? What's on your radar screen?

I personally think tomorrow will be a big drop as well. Asia tonight will edge even lower from what happened to DOW today, like a chain reaction.

I sold off some LINE today for a profit and added more WMC.
I have a pretty long watch list, but I'm holding off for now. I *might* add more AGNC.

How much of your portfolio to you put in stocks like AGNC? Of course, the yield is super attractive, but I suppose that there is a lot of risk involved?

Right now, I'm comfortable owning AGNC, NLY, and WMC because our 401Ks and IRAs are in cash or stable value funds (I rolled them out of VWELX, VWIAX, and VGSLX a few weeks back to capture some of the crazy gains this year). When those funds are fully invested, I'll probably limit the high yield allocation to 10% with only half of that invested in the riskier stocks like AGNC.

1) We've all been saying the market is overpriced since at least March. As of today, we're only down 5% from the S&P 500's peak of last month. That means the S&P 500 can drop another 10% and STILL be higher than we're likely to buy.
2) Mr. Market usually overreacts.
3) Leveraged accounts will accelerate their selling as the broader market continues to sink (or else they get margin calls). The higher the leverage, the more pressure to sell.
4) Highly leveraged companies concentrated in financial products(BDCs, mREITs) will try to protect their net asset values. That leaves them a choice between selling assets or cutting dividends, which both put pressure on the market price. [AGNC cut their dividend once already and price was stabilizing until Bernanke speech, then dropped hard]
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Thus I think the rollercoaster is still going downhill.