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Rin spoke with his financial advisor

By Rin following x   2018 Sep 25, 3:00pm 2,181 views   33 comments   watch   sfw   quote     share    


Disclaimer: This is not financial advise, it's just my opinion piece.

Ok, since I'd cashed out 90% of my hedge fund equity, I've parked my earnings into dividend yielding equities, having them re-invest those earnings into buying more shares on a quarterly basis with minimal active management.

Now, after a long talk with my advisor, I've decided to cash out some of those blue chips, who haven't been able to control their debt to share ratios, during the past two to three years. In other words, the more leverage a firm has, the more likely it'll have to cut future dividends during the next downturn, since that debt overhang would still need to be serviced, and that's not a position one wants to be in.

That extra cash will sit in 2% CDs until the time comes to buy more shares. For now, my equities are only in those dividend yielding stocks where their corporate debt has been under control for some time. Examples of these would be Proctor & Gamble or Hormel Foods.
1   Rin   ignore (3)   2018 Sep 25, 6:45pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

Aphroman says
I’m surprised you utilize a professional financial advisor. I figured you for a DIY type

I’m confident that I’ve performed an order of magnitude better than any pro financial advisor over the last twelve months, although here in the States they’re at a disadvantage by not being able to recommend Cannabis equities


He's not a typical douchebag, I mean financial advisor (or consultant).

He works with my strategy and that is a capital preservation one, using dividends to grow one's equity profile. So in effect, what he does is analyze things like debt per share, cash flow markers, fluctuations against the broad indices, dividend maintenance, etc. The idea is that he runs through this stuff weekly, whereas I only look at my holdings, once per quarter.

So when we do meet up, it's more about things like if General Mills is over leveraged or if GE has hit bottom, or is it a fact that GE is really a former blue chip, now in the toilet long term. And yes. we're both in concurrence about GE, as I haven't invested in them for ages.

Normally, FAs are retarded beings who don't know squat. This guy, on the other hand, does and he treats my portfolio like a project, not a list of things to up sell.
2   Evan F.   ignore (0)   2018 Sep 25, 6:50pm   ↑ like (4)   ↓ dislike (0)   quote   flag        

Rin says
GE is really a former blue chip, now in the toilet

This happened the moment Jeff Immelt took the reins. That guy was an idiot
3   Patrick   ignore (1)   2018 Sep 25, 6:54pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

I own GE and PG. GE has been a disaster, but fortunately I hadn't bought much. PG's dividend is pretty nice, over 3%, and some appreciation as well.

Still looking for something to replace the cash out from SODA. Cannabis stocks are tempting, but are there any that actually make money?
4   Rin   ignore (3)   2018 Sep 25, 7:04pm   ↑ like (2)   ↓ dislike (0)   quote   flag        

Patrick says
PG's dividend is pretty nice, over 3%, and some appreciation as well.


PG has a sustainable business.



As you can tell, throughout the post-2008 correction period, PG has not ballooned its corporate debt to maintain its earnings and dividend payouts.
5   clambo   ignore (4)   2018 Sep 25, 8:43pm   ↑ like (2)   ↓ dislike (0)   quote   flag        

At the risk of trolling Rin, herewith my two cents.

Mutual funds are the essence of investing. One doesn't need and may not really want to be choosing individual stocks (although it's fun and I do it with some of my $).

(Re: individual stock for Patrick: I bought some Deere (DE) recently and am very pleased with that little investment.)

The reason I dislike cash, e.g. CDs, is you are paid almost nothing to lend your capital to a bank. After taxes, a CD has a negative return usually.

The reason I would not get out of stocks, especially ones which pay dividends is you lose out on the compounding effect of those dividends. Over time, the compounding effect is very powerful.

I will own various investments based on my present needs and tax consequences. For example, I have a fund Vanguard Tax Managed Capital Appreciation which is hopefully not going to produce a large 1099 every year.

After Roth IRA, SEP-IRA, I have funds including those which are focused on dividends, others on income, others on capital appreciation.

One of the richest people I knew was a little old lady neighbor who had held blue chip stocks for 65 years or so.
6   Rin   ignore (3)   2018 Sep 25, 8:51pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

You're not trolling at all.

clambo says
The reason I dislike cash, e.g. CDs, is you are paid almost nothing to lend your capital to a bank. After taxes, a CD has a negative return usually.

The reason I would not get out of stocks, especially ones which pay dividends is you lose out on the compounding effect of those dividends. Over time, the compounding effect is very powerful.


I'm only divesting the dividend stocks, where the debt per share was highly increasing over the past 2-3 years, over those, who'd maintained their debt portfolio, over the same time period, while maintaining (or increasing) their dividends.

The reason for this is somewhat clear, companies who can't control their debt, eventually cut their dividend yields, during economic downturns. And thus, that cash on the side, is better spent, investing it once it's clear which companies can't maintain their annual dividends, once the downturn plus market corrections are factored in. So in effect, it's not about investing in CDs but in knowing when to steer clear of a downturn in the markets.
7   CBOEtrader   ignore (5)   2018 Sep 26, 6:35am   ↑ like (4)   ↓ dislike (0)   quote   flag        

Aphroman says
that’s the whole retirement portfolio.


This is a speculation, not a retirement account. It may be a great bet, but dude you need safety and diversification if you want to retire.
8   CBOEtrader   ignore (5)   2018 Sep 26, 6:40am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Rin says
So in effect, it's not about investing in CDs but in knowing when to steer clear of a downturn in the markets.


Knowing when to steer clear of a downturn is the hardest thing to predict in finance, unless you are talking about 1 to 3 days out and are willing to spend 5 to 10% of your portfolio on puts into a crashing market.
9   Rin   ignore (3)   2018 Sep 26, 8:50am   ↑ like (1)   ↓ dislike (0)   quote   flag        

CBOEtrader says
Knowing when to steer clear of a downturn is the hardest thing to predict in finance, unless you are talking about 1 to 3 days out and are willing to spend 5 to 10% of your portfolio on puts into a crashing market.


I think you're thinking of the whole cap gains thing.

When one's not an active trader, keeping an eye on out of control corporate debt, is a way to avoid the downturn, when it occurs because even if the S&P corrects, places like P&G or Hormel will still gives dividends which will allow one to buy even more shares, given the lower ticker prices.

On the other hand, since other firms will still be needing to service their debts, despite a general decline in the markets (& possibly their business as a result), the dividend checks will be on the chopping board to make those interest payments.

One can buy companies, which still need to get their balance sheets in order, after a general market decline but not before it.
10   clambo   ignore (4)   2018 Sep 26, 4:35pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

I will consider a Swiss stock fund for some of my investment. There are several ETFs that come to mind.

I don't think I will ever own much cash again.

When I first visited Switzerland, $1 USD=3 Swiss Francs. Today, $1 USD=1 Swiss Franc
11   CBOEtrader   ignore (5)   2018 Sep 26, 4:45pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

Aphroman says
Here in late 2018, it’s the retirement account.


Well you have balls sir. I legit think your bet is a good risk, but highly cointegrated. One or two new laws would either make or break that account.

Rin says
One can buy companies, which still needs to get their balance sheets in order, after a general market decline but not before it.


You seem to have your affairs (pun intended) in order :)

I love the concept of having cash on hand to buy low into a market crash. Parking that cash over time is the opportunity cost that makes me cringe. Seems like you have a plan though, good on ya buddy
12   KgK one   ignore (0)   2018 Sep 26, 4:46pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Why not get Berkshire b stock 20% or more n let them do dividend investment for me?

Market has 33 PE so in general hard to find anything. I have lot in Cds also
13   CBOEtrader   ignore (5)   2018 Sep 26, 4:50pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Rin says
When one's not an active trader, keeping an eye on out of control corporate debt, is a way to avoid the downturn


I've never done much fundamental analysis. Are you predicting a downturn? We havent even had a real scare in a few years, unless you count that hiccup earlier this year (DOW down 666 has 4chan all conspiracized )
14   HeadSet   ignore (1)   2018 Sep 26, 4:58pm   ↑ like (2)   ↓ dislike (0)   quote   flag        

I’m confident that I’ve performed an order of magnitude better than any pro financial advisor over the last twelve months, although here in the States they’re at a disadvantage by not being able to recommend Cannabis equities

Take care here, sir. From your posts, it seems you have quite the affinity for the pernicious weed. That may "cloud" your thinking, as you see a big take off in profits as pot gets legalized. I am a huge fan of solar, and thinking that many others share my passion, I was certain that investing in solar power companies was the way to go. Got my ass kicked by SunEdison, which seemed a great buy at the time.
15   RecentCost   ignore (0)   2018 Sep 26, 5:04pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

Putting all available funds for retirement in a single emerging industry is extremely reckless. This may result in making a ton of money but unless the investor is very young and has time to build up funds again this can result in a personal financial disaster. Overall my investments are not well diversified as most of my funds are tied up in trust deed investments but at least these types of investments have some downside protection with a max loan to value ratio.

Please always remember to diversify. You don't know what you don't know.
16   Rin   ignore (3)   2018 Sep 26, 5:30pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

CBOEtrader says
Rin says
When one's not an active trader, keeping an eye on out of control corporate debt, is a way to avoid the downturn


I've never done much fundamental analysis. Are you predicting a downturn? We havent even had a real scare in a few years, unless you count that hiccup earlier this year (DOW down 666 has 4chan all conspiracized )


Not a downturn ... though it is possible that the broad indices may see a downward slide after the rate hikes settled in.

The point is more that in general, increasing corporate debt, without exorbitant earnings per share increases, doesn't bode well for a dividend stock, esp when lending parameters grow tighter over time. So when one's an investor, with the "buy, reinvest divs, & hold" forever concept, the idea of a company which can't manage its debt profile, is not one to have in one's portfolio, esp if one's in a rate hike epoch.

But sure, if a downturn does kick in, would you rather be using your now, up ticked 8-10% dividend yield (up from 4% during a bullish peak) to buy more meaningful equities than a company who may be cutting dividends, just to make their creditors happy during the same time period?
17   CBOEtrader   ignore (5)   2018 Sep 26, 5:47pm   ↑ like (2)   ↓ dislike (0)   quote   flag        

RecentCost says

Please always remember to diversify. You don't know what you don't know.


Even more true when predicting legal environments. One or two new laws and these weed stocks could drop by 90%
18   CBOEtrader   ignore (5)   2018 Sep 27, 9:16am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Aphroman says
CBOEtrader says
RecentCost says

Please always remember to diversify. You don't know what you don't know.


Even more true when predicting legal environments. One or two new laws and these weed stocks could drop by 90%


Which companies do you see facing the potential of a 90%?


The entire marijuana industry is beholden to legalization in US and Canada (maybe elsewhere to a lesser extent). If this legalization trend reverses, you lose. If it continues, you win.

Like you said, great risk can equal great reward. You know exactly what fire you are playing with. I wish you luck, and if I had extra money I'd take a speculation w you.

Even w an extreme positive expectation I wouldnt bet the farm. I've had the financial rug pulled out from underneath me before. Trust me, that downside black swan exists, and can ruin your life for many, many years. Is the black swan risk worth retiring w $10 million instead of a more guaranteed $5 or $3 or even $2 million?

For me, it's not.
19   Evan F.   ignore (0)   2018 Sep 27, 10:50am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Aphroman says
Libertarians

Not sure these guys would oppose legalization. Just saying.
20   CBOEtrader   ignore (5)   2018 Sep 27, 10:51am   ↑ like (2)   ↓ dislike (0)   quote   flag        

Aphroman says
Libertarians are Failed Losers. How could they possibly regain any momentum and bring back their War on Drugs?


I cant speak for republicans or anyone but myself.

Seems like a lot of the establishment on both sides of the aisle was scared to be smeared as weak on drug crime. In fact it was R's like Ron Paul, and the libertarians who were anti war on drugs far before any D.

You're welcome.

Dont know why you are so fixated on placing blame exclusively on the fantasy R's in your head. I find it bizarre
21   Rin   ignore (3)   2018 Sep 27, 11:21am   ↑ like (2)   ↓ dislike (0)   quote   flag        

KgK one says
Why not get Berkshire b stock 20% or more n let them do dividend investment for me?


My number one complaint about BRK is that it gives no dividends, despite earning nearly $100B per year with little active management.

So when retirement comes by and one is fully vested in BRK, the only way to make money is to sell shares. If you took a similar profile as Buffet, but periodically pruned the bad debt holders, taking on less risk than him, you can start with $1M, reinvest divs (say ~3%), and when you have your $2M pile, instead of selling, all you do it stop the reinvestments (or curtail them a bit) and pay yourself. In a way, you're then a true business owner and not a trader.
22   Patrick   ignore (1)   2018 Oct 23, 6:59pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

@Aphroman I did actually buy some of those today:

APHQF CNTTF KSHB CWBHF

I tried to buy ACBFF as well, but that failed with "This order cannot be accepted because the security symbol is not valid." That's odd because I could look up the price by that symbol.

I picked those from your list above since they seemed to have the best growing (heh) revenue and in some cases, actually earnings.

It was a gloriously down day in the morning, meaning I got a substantial discount on all of them relative to yesterday. So I'm happy for the moment.

I take it back. I'm kind of annoyed because they split up the trades into many tiny trades. For example, the CNTTF trade was they split it into 11 irregular parts, each with a different number of shares or price. Was I charged 11 commissions? Their site won't tell me the commissions paid, nor did their online chat support guy know the answer. Not good. Not so impressed with Schwab on this.
23   mell   ignore (1)   2018 Oct 23, 8:26pm   ↑ like (2)   ↓ dislike (0)   quote   flag        

Patrick says
@Aphroman I did actually buy some of those today:

APHQF CNTTF KSHB CWBHF

I tried to buy ACBFF as well, but that failed with "This order cannot be accepted because the security symbol is not valid." That's odd because I could look up the price by that symbol.

I picked those from your list above since they seemed to have the best growing (heh) revenue and in some cases, actually earnings.

It was a gloriously down day in the morning, meaning I got a substantial discount on all of them relative to yesterday. So I'm happy for the moment.

I take it back. I'm kind of annoyed because they split up the trades into many tiny trades. For example, the CNTTF trade was they split it into 11 irregular parts, each with a different number of shares or price. Was I charged 11 commissions? Their site won't tell me the commissions paid, nor did their online chat support guy know the answer. Not good. Not so impressed with Schwab on this.


If you put the order is as a whole you will not be charged commissions for partial trades - it's normal that they are reported separately, but of course on the OTC the price for those partial trades can quite vary, it's a bit like the wild west. It's going to be a dog-eat-dog competition and the margins will get pressured, so it's probably wise to spread your investment into multiple tickers, they are extremely volatile, tcnnf and tlry are more than 50% down from their recent high, cvsi is bouncing around. Good luck and viva la weed!
24   mell   ignore (1)   2018 Oct 23, 8:39pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Btw. you have to give it to Rin, that timing was impeccable - just before the volatility arrived.
25   KgK one   ignore (0)   2018 Oct 24, 8:51am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Do u have list of div stocks with cash on hand vs lot of debt? Comp with lot of debt will end up paying high interest.
26   Rin   ignore (3)   2018 Oct 24, 11:15am   ↑ like (0)   ↓ dislike (0)   quote   flag        

I wouldn't go with my advisor's list, as that would basically be me, being a financial advisor.

Just go through the list of symbols offering dividends, you can always start with the aristocrats and move on from there ...

https://en.wikipedia.org/wiki/S%26P_500_Dividend_Aristocrats

Once you identify a company and an industry you're familiar with, for instance, ConEdison (ED), run it through the free graphing tool ...

https://www.gurufocus.com/financials/ED



So you can tell that in the past 5 years, knowing that it's been making acquisitions, esp this year with Sempra, its debt only grew from $43 to $53 per share. That's not bad, esp for an energy vendor which supplies power to the Tri-State area.

Many companies have been ballooning that debts between 200% and 300% for the past few years.
27   Rin   ignore (3)   2018 Oct 28, 8:04am   ↑ like (1)   ↓ dislike (0)   quote   flag        

FYI, if you are an intermediate style trader, DO NOT use a short ETF unless you're certain that you're in a bear market channel, where each bounce back is followed by an even greater sell off. Otherwise, when it wobbles sideways, you get killed by the counter rallies.

Also, short ETFs need a well defined exit strategy where once you see blood on the streets, exit and park your cash because the more time spent near the bottom, the greater the potential losses.

I don't use any short ETFs, even though my trader friend does.
28   mell   ignore (1)   2018 Oct 28, 8:42am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Rin says
FYI, if you are an intermediate style trader, DO NOT use a short ETF unless you're certain that you're in a bear market channel, where each bounce back is followed by an even greater sell off. Otherwise, when it wobbles sideways, you get killed by the counter rallies.

Also, short ETFs need a well defined exit strategy where once you see blood on the streets, exit and park your cash because the more time spent near the bottom, the greater the potential losses.

I don't use any short ETFs, even though my trader friend does.


Also the short etfs have decay and over time trend towards zero unless you have an extraordinary condition such as the 2008 crisis.
29   Rin   ignore (3)   2018 Dec 18, 9:17pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

FYI, my stock portfolio has lost no money this year, as a result of pruning those firms which don't have a good debt management. And thus, I only have dividend equities with manageable debt profiles.

All and all, a dividend aristocrat-like portfolio works, for a long term investor, whereas those who buy the entire market, like an S&P500 or Dow Jones tracker, tend to lose because when a market shakes out, the losers in those brackets, create losses for all the holders, without the dividends to make up for the cap losses.
30   clambo   ignore (4)   2018 Dec 19, 4:56am   ↑ like (2)   ↓ dislike (0)   quote   flag        

I have owned the W5000 index since 1992 among other funds and I haven't lost any money and I won't sell during a down period in the stock market anyway. I never sell anything unless I need extra money; gifts for girlfriends don't qualify.

I also own a dividend growth fund and a dividend stock fund, I think I have funds like Imelda Marcos had shoes.

They're all good for future money needs.
31   Patrick   ignore (1)   2018 Dec 19, 7:54am   ↑ like (1)   ↓ dislike (0)   quote   flag        

I agree with the strategy of owning dividend-paying stocks with limited debt. Almost all my stocks fall into that category. They may not skyrocket, but there is a pretty solid floor under them as long as they don't cut the dividend.
32   Rin   ignore (3)   2018 Dec 19, 8:06pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Patrick says
there is a pretty solid floor under them as long as they don't cut the dividend.


That's a part of the point, dividend aristocrats only cut divs when they can't manage their debts or there's a significant contraction in their industry, ala telecom bust early 2000s.
33   Strategist   ignore (2)   2018 Dec 19, 8:18pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Patrick says
I agree with the strategy of owning dividend-paying stocks with limited debt. Almost all my stocks fall into that category. They may not skyrocket, but there is a pretty solid floor under them as long as they don't cut the dividend.


It's the best strategy for someone who needs a stable income from 401K's when they retire. Low risk, stable dividends.


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