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Rin's last dance for 2022

By Rin follow Rin   2022 May 5, 2:29pm 772 views  25 comments           share      

Ok, the Bitcoin trade is officially over.

https://patrick.net/post/1344089?offset=160#comment-1838336

[ the entire text is the first posting ]

Now, given the fact that the blue chips, like Proctor & Gamble, are mainly overpriced so that dividend reinvestment (DRIP) is basically overpaying for those shares, it's better to simply bank whatever P&G gives you every quarter, henceforth, until the next market correction.

But sure, I have my Rio Tinto, Altria, & British-American Tobacco on DRIP mode, as they're properly priced with high dividends, so any market correction will result in a huge no of reinvested shares.

Ok, so the last dance is Carl Icahn Enterprises, IEP. IEP is basically a high dividend stock, 15+%, but with poor fundamentals. In other words, if anything happens to Carl's health (he's in his 80s) or one or more of his deals go south, the company may cut dividends and see its price go into the toilet. And his heir apparent is his son, which doesn't give me much confidence ... just look at George W Bush or any other organization where nepotism is the way of the land.



So with this stock, the idea is to use those P&G dividends to mastermind the trade. In other words, use guaranteed dividend income to pay for a risky trade. And in this case, given the fact that 1) Icahn could fail with its stock pricing plunging or 2) the market could tank which could easily take IEP down with it, one should pay for a LEAP put option on the downside and then, sell (re-claiming half the value) at the mid-term, & re-purchase that put, for a latter expiration time to maintain a level of insurance while also adapting the pricing for the present stock ticker for IEP. So far, I'm predicting that the ~15% dividend would cost some 5-7% per annum in terms of the downside protection which nets one a 7-10% yield on their investment.
1   Rin   2022 May 5, 2:29pm  

https://patrick.net/post/1344089?offset=160#comment-1838336

Ok, this was the correlation I was looking for, in terms of weekly candlesticks. Realize, the longer the time frame, the better the predictive ability.

1) The Russell finally closes a week outside of the long running price box


2) The EURO is testing a decade long low.



3) The Pound Sterling is just about to enter that same price box of the decade's low.




So the Bitcoin trade is over. I'm selling XBTF at 39 with a take profit of $4 per share, totaling 1200 shares. or $4.8K.

This will be re-visited at a latter time when the market structure is in a better place.
2   theoakman   2022 May 7, 6:17pm  

I'm loving Altria still, the entire market is selling off, and I'm just watching it inch up a dollar every month and pay me my dividends.
3   Rin   2022 May 8, 12:44pm  

theoakman says
I'm loving Altria still, the entire market is selling off, and I'm just watching it inch up a dollar every month and pay me my dividends.


Yes, it's a great defensive stock, along with British-American Tobacco, esp when we're probably at the first leg of the bear market.
4   Eman   2022 May 8, 1:34pm  

@Rin,

I’m an IEP stock owner, put seller and covered call seller. I completely agree with you in regards to the potential risk given Icahn is so old.

If you have to buy IEP puts, what strike price would you consider buying? Would you simply buy puts, or would you consider debit put spreads? The farthest options available are December of this year.
5   Eman   2022 May 8, 1:37pm  

Rin says



Long term, $47 has been a strong support for IEP for over a decade. Hard to see it dropping below $47 unless IEP cuts its dividend, or Icahn passes away.
6   Eman   2022 May 8, 1:47pm  

I’ve also been selling puts on MO, occasionally, to collect the premiums without owning the stock.

Based on my experience, the best time to sell puts on these dividend stocks is about a week, or even a month, after a dividend distribution. Sell puts with an expiration before the next dividend date. The stock tends to run up into the dividend date. What has been your experience?
7   Rin   2022 May 8, 3:03pm  

Eman says
If you have to buy IEP puts, what strike price would you consider buying? Would you simply buy puts, or would you consider debit put spreads?

Long term, $47 has been a strong support for IEP for over a decade.


You said it yourself, the only long term buy put option is the $40 strike, as $45 is too expense (near the line on the chart) for a downside risk, esp when the goal is to pocket the difference between dividend payments & the option. As for the put debit spread, that would be for short term income generation than a hedge against Carl's death, bad M&A deals, or a general market crash where yeah, I'd rather save my basket than worry about a bit of extra money for the season.


Eman says
Sell puts with an expiration before the next dividend date. The stock tends to run up into the dividend date. What has been your experience?


I know people who do that but I'm not into it.
8   Eman   2022 May 8, 3:27pm  

Rin says
the only long term buy put option is the $40 strike, as $45 is too expense (near the line on the chart) for a downside risk, esp when the goal is to pocket the difference between dividend payments & the option.


$40 puts are cheap, but there’s still a huge gap between $54 stock price and $40. It provides some protection, but still a $14 loss. Any way to bridge the loss gap?
9   Hircus   2022 May 8, 3:43pm  

What's the appeal of IEP? When I look at trailing returns, they're pretty similar to the s&p this past decade or so, yet I would imagine it has much more risk.

Here's 30 years of trailing CAGR for IEP assuming you DRIP.
30yr	11.28
25yr 11.83
20yr 15.48
15yr 4.35
10yr 12.99
5yr 14.54
3yr 3.58
2yr 22.61
1yr 9.94


vs SPY
25yr	8.47
20yr 8.99
15yr 9.10
10yr 13.79
5yr 13.36
3yr 14.45
2yr 22.02
1yr -0.57
10   Rin   2022 May 8, 4:08pm  

Eman says
$40 puts are cheap, but there’s still a huge gap between $54 stock price and $40. It provides some protection, but still a $14 loss. Any way to bridge the loss gap?


It's currently in a bearish flag and will re-test 50-51, which is where I got my first batch. I suspect it'll be range bound, between 45 and low 50s for some time which will give $16 per share over the course of the year.

Hircus says
What's the appeal of IEP?


It's a 1-2 year dividend accumulating stock. Unlike Altria, I'd never apply DRIP to it.

If anything, the safest trades are to buy 'n hold & DRIP with Altria, British-American Tobacco, and Rio Tinto.
11   Hircus   2022 May 9, 2:17am  

Rin says
It's a 1-2 year dividend accumulating stock.


Could you elaborate? I dont really understand the significance of what you said. All I really infer is that you prefer a dividend because its probably more reliable than appreciation for a 1-2yr time window?
12   Rin   2022 May 9, 5:18pm  

Hircus says
Could you elaborate? I dont really understand the significance of what you said. All I really infer is that you prefer a dividend because its probably more reliable than appreciation for a 1-2yr time window?


We're at the start of a bear market. Many stocks, esp those which have had years of bullishness, will have downward pricing pressures.

Icahn's already had its price action clobbered for some time and thus, is a pure dividend play for at least the next couple of years.
13   Rin   2022 May 14, 1:18pm  

Ok, one last bear market stock ...

This is a mortgage REIT, Annaly Capital (NLY), which has had its price action completely clobbered. A lot of that is a result of the expectation that they wouldn't be able to re-shuffle their portfolio during a higher interest rate environment. Well, it looks like they're doing it and will stay around for a bit.



So its dividend is 12-13% and as a REIT, they need to distribute it to shareholders than hoarding it for their botched deals, etc which differentiates them from Carl Icahn.

Since my only current DRIPs are with Rio Tinto, Altria, & British-American Tobacco & that we're only at the start of a bear market, I'll add incoming savings to this one and then, when we get a full correction, I'll branch out back to my Troika & wait a bit longer before getting back into the blue chip/P&G world.
14   Eman   2022 May 14, 2:50pm  

Rin,

You believe the stock market has entered a bear market? You own 3 dividend stocks and will continue to hold and DRIP them? You plan on adding NLY to your holding?

Piper Sandler believes this correction could drop to 3,500 on SPX before the market bottomed. What are your thoughts?
15   Booger   2022 May 14, 2:59pm  

What about QYLD?

I want to get a bunch of this at some point. Probably right before retirement.
16   Rin   2022 May 14, 5:03pm  

Eman says
You believe the stock market has entered a bear market? You own 3 dividend stocks and will continue to hold and DRIP them? You plan on adding NLY to your holding?


I still own Proctor & Gamble along with other dividend paying Blue Chips, however, I've sold off some of that portfolio a few years ago, and haven't added to those positions because I believe they've gotten too expensive. I guess that's the 'fixed' side of the portfolio.

So as far as letting the Troika run, yes, they're on DRIP.

In terms of NLY, they're the add-on to Icahn so that I have two high dividend stocks to make some earnings during the bear market. I've actually owned NLY in the distant past but was disappointed in the cap gains so I sold back then. No big deal because it's pretty discounted today.

Eman says
Piper Sandler believes this correction could drop to 3,500 on SPX before the market bottomed. What are your thoughts?


I've been told that it could bottom in a price box between 3200 and 3700.

At that time, I'll look into starting up another 'Dogs of the Dow' sliver on the portfolio, as that's usually a good way to get back in without too much risk. The mistake that 'Dogs' investors did back in 2007-2009 was in putting Citigroup, JPM, & GM into their folder. Basically, if any of those 10 Dog stocks are basically considered garbage without govt bailout, it's better to wait it out.

I hope this time, it's just the bloated tech sector and not the old timers.
17   zzyzzx   2022 Jun 8, 11:47am  

theoakman says

I'm loving Altria still, the entire market is selling off, and I'm just watching it inch up a dollar every month and pay me my dividends.


https://finance.yahoo.com/news/altria-group-shares-stumble-morgan-152523218.html

Altria Group shares stumble after Morgan Stanley says inflation is taking away Americans’ COVID stress relief: cigarettes

Shares of tobacco company Altria Group took a dive Wednesday after Morgan Stanley downgraded the company to underweight and lowered its price target from $54 to $50.

“Smokers skew toward low-income consumers, who are disproportionately impacted by rising gas and food prices,” analyst Pamela Kaufman wrote in a note. “We anticipate greater pressures from rising gas prices and weaker consumer sentiment, which should weigh on cigarette volumes and enhance trade down risk.”

Morgan Stanley believes there is an inverse relationship between gas prices and cigarette sales—and gas prices on Wednesday were averaging $4.95 nationwide, according to AAA.
18   Rin   2022 Jun 8, 3:38pm  

zzyzzx says

Shares of tobacco company Altria Group took a dive Wednesday after Morgan Stanley downgraded the company to underweight and lowered its price target from $54 to $50.


Here's the thing w/ companies like Altria, When its price falls, you make up the difference in the dividend checks which buys more shares than earlier during the dip.

In contrast, companies like Facebook, once the Wall Street "darling shine" wears off, gives nothing once its price falls.
19   theoakman   2022 Jun 9, 5:03am  

That's the thing that "investors" can't grapple with. Does anyone think I care about a $5 drop to $50? I bought at $16, 20, 30, 40 for the past 15 years. I get paid to hold...I don't even look at the price on my dividend portfolio.
20   Booger   2022 Jun 22, 4:38pm  

Altria $41.50/sh -4.20 (-9.19%) At close: 4:03PM EDT
21   1337irr   2022 Jun 22, 4:49pm  

theoakman says

That's the thing that "investors" can't grapple with. Does anyone think I care about a $5 drop to $50? I bought at $16, 20, 30, 40 for the past 15 years. I get paid to hold...I don't even look at the price on my dividend portfolio.

It's all about AZZ!
22   theoakman   2022 Jun 22, 4:52pm  

Yes, the US government has a hard on for JUUL. The same thing happened 2 years ago when they went on their JUUL rampage. Altria fell, and went back up because they make their money. Will they remove JUUL off the market? Seems like shaky ground given that they are leaving all the other E-cigs. My guess, they want their palms greased, and then it's business as usual up to 50 again. What I find funny is that people freaked out about buying Treasury Inflation Protected Securities at 7%. You have a company that has paid that for decades. Altria is a hold for life unless you think people will stop abusing nicotine.
23   Rin   2022 Jun 22, 6:16pm  

theoakman says

You have a company that has paid that for decades. Altria is a hold for life unless you think people will stop abusing nicotine.


Here's the thing, companies like Altria & British-American Tobacco are old school value stocks.

In other words, they don't make cap gains based upon the latest buzz about the "Metaverse" or "Green Future". Instead, they pay their investors actual dividends based upon sales of their products.

If you want to play the cap gains "market timing" strategy, here's my link on that ...

https://patrick.net/post/1345315/2022-05-25-rin-has-recognized-that-the-nasdaq-is#last
24   KgK one   2022 Jun 22, 8:54pm  

Boughy some more mo at lower price and bought nly.

As long as divident comes, it's worth it
25   just_passing_through   2022 Jun 22, 10:02pm  

theoakman says

Yes, the US government has a hard on for JUUL.


The maniac in chief is trying to ban tobacco with addictive levels of nicotine as well - the 2nd part of the news! lol

I read about it before work and am considering perhaps a buying opportunity as well. Thinking the latter part might drive a leg down too even if ultimately unsuccessful not sure.

Then again, CBDC... Dance ya monkeys dance!

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