BennyEast.Com/Blog The official blog of Kenny West

Ups and Downs

So, I'm just going to ramble in this post about investing and such.  Because... Why not?  So here goes some investment ramblings...

I feel like one of the reasons I really dig the stock market is because... It kind of mimics life.  It's full of ups and downs.  Things that are at the top one day can sink to the bottom the next.  And things at the bottom one day can be flying high the next.

My trading strategy basically relies on the idea of seeing the little joys of life.  Life is full of lots of things.  Some good... Some bad.  Some REALLY good and some REALLY bad.  But... Often, there are little tiny good things.  And lots of them too.  So, I just take those little tiny skimmed off the top good things.  And I balance out the BIG bad things with lots of little good things.

So far it's turning out to be a solid strategy.  I skimmed again today by turning a tiny profit of 53 dollars from CBOE holdings.  It's the Chicago Board of Options Exchange.  This brings my realized capital gains pretty far ahead of my dividend income stream.  I'm about a hundred and ten bucks ahead of my dividends.  So I can sit back now and not trade for a little while until my dividends catch up to my gains and then I have to trade some more to keep that number ahead of the pace.  I do have to research and purchase another stock at my leisure to bring me back up to the full 40 since I'm now at 39 again with today's sell.

So what are my tops and bottoms?  Well my top stock currently is Extra Space Storage.  I'd been eyeing this one for a while and decided after a significant pull back to hop in.  So here I am in at 82.91 and the last trade is 88.25.  I'm long this stock because I just feel like junk isn't something that's going to go anywhere any time soon.  People have lots of stuff.  And they just don't want to get rid of their stuff permanently.  They like to keep it.  They just don't always have the space... So, I feel like renting storage units is something that will stick around and continue to be profitable.  Junk is the best tenant.  They don't make noise, they don't complain.  They just sit quietly in a unit day after day, week after week, month after month while someone auto debits their bank card or account or credit card.

And if the person stops paying?  I'm certain they auction the stuff, or just trash it... After a certain amount of time, and then someone new comes in with their belongings that they just don't want around the house or have space around the apartment, or whatever the scenario is... Divorce, moving for a new job and come  back for the stuff later, downsizing into a retirement community... Etc. etc.

Stuff.  It's here to stay.

I may eventually sell these shares and take profit and then get in on another public storage type of REIT.  We'll see.  For now I like Extra Space Storage.  And it pays a dividend 4 times a year too!  Although all my stocks do since that's my requirement for any of the stocks I purchase.  No dividend... No deal.  Netflix is a big one that I'm missing out on.  But until they can start paying a dividend... I'll just sit on the sidelines and watch from a distance.

Now... The bottom stock.  VNR.  It's a REALLY bad "bad".  It's an oil and natural gas company... or an MLP actually.... But it doesn't matter, anything related to oil is down... WAY down.

How far down?  The purchase price I paid for my shares back in July of 2014 was a whopping 31.32 per share.  How much do the shares fetch in value as of close of the markets today?  2.07.

So... As you can imagine that's a BIG ouch.  But here's the thing.  I'm not far away from passing that big "loss" should I choose to sell my shares at a loss in gains.  But I won't sell.  So even though my shares have indeed lost money, this whole time these last few years I've been cashing out the dividend.  I've taken that dividend and used it to buy shares in another company that also produces dividends.  I've then used that dividend to pay forward into another company that produces a dividend... Etc. etc. etc.

Now VNR or Vanguard Natural Resources... Has slashed their dividend as oil prices fell... Then they recently just got rid of it all together.  I'm not happy about that.  No dividend does mean that I no longer really want it in my portfolio, so I'll consider selling it, but not till the end of the year.  I most likely won't unless I really want to use the loss for tax reasons, which I might... We'll see.

I'm fairly convinced that eventually oil prices will start to rebound at least even marginally and eventually VNR will reinstate the dividend.  SO to me it's like... Why sell it?  Just let it sit there.  It's not really doing anything.  It just sits there.  Even if the stock drops 50 percent at this point... I lose maybe a few bucks.  If it goes up though even by 50 percent... I stand to gain.

This is why I invest and grow out sideways instead of upwards.  The most this thing can ever fall is to 0 dollars.   The most it stands to gain is... there isn't really a limit per say.  I mean any stock could theoretically go up forever.  That's very unlikely but, argue what you want... It never hurts to just hold on to shares.  VNR could eventually be bought up by someone else... Acquired by another company, split into two different companies, merged again.... Etc. etc. and I might end up owning shares in a completely different company that starts to grow like a weed and split and pay dividends...

This happens a lot in the business world.  Yes, sometimes shares are bought outright and then you are just given a lump payment of whatever... That happened to me last year... But the idea is just to keep trying to increase the odds that you will be right more likely than being wrong.

Which is my strategy.  You're more likely to get a basket of cookies brought to you than you are to win the lottery.  You're more likely to see a nice sunset than you are to have a whole year's worth of bad luck strike.

So, VNR dropping to a fraction of its initial value was a highly unlikely event... the 5 percent I took today from CBOE was a lot more likely and I'll repeat that again and again. until my 20 separate 5 percent trades equal my 100 percent loss.

Insurance companies do the same thing with actuarial tables.  You're more likely to bring in x dollars a month over and over again than you are to have to pay through the roof to that one time that someone has a claim of a million dollars.

And I also receive dividends.  SO even if VNR goes out of business and I end up losing that investment entirely.... If I make no trades and just sit back... Eventually my dividends will pile up and surpass the loss.

But my thing is... I feel as though VNR will eventually recover at least some and they will restore the dividend.  We'll see.  If I have to take the loss, I have a strategy in place that allows me to cover my loss with all of my little good trades to balance out my massive loss.

Right now I'm still at 40 slots, I want to expand soon to 41 or 42.  I would be at 42 by now if I hadn't used some of the money to pay my credit card without moving money from my checking account since I need the checking account cash to pay property taxes.  SO the investment gains that I made in the last year kind of went to that instead of opening up another spot to trade an additional stock in my portfolio.  I've been trying this thing where I don't move money from my other bank account.  Instead I've been seeing how long I can go with my bill pay and credit card just from my trading account.  I'm trying to not use my paycheck from work at all.  That's one of my goals is to get to the point where I'm transferring less and less of that money over until suddenly my investing activity can actually pay my credit card in full each month and my bill pay as well.

Then I can use my work cashflow for other things... Maybe plane tickets to travel?  Or who knows what.  Maybe lots of music equipment.

Anyways so there's my stocks update.  At the moment I'm beating my dividends in realized capital gains which is my goal.  If I have to take a loss on Vanguard Natural Resources because they go belly up... I'll just have to keep making my small trades to get that number back ahead of the dividends again.  For right now though I'll make one more buy trade and then just sit pretty for a month while my dividends stream back in every few days and that dividend number inches closer to the capital gains number.  Just trying to stay one step ahead with all these little ups to balance out the downs.

Big and little ups with the big and little downs.  And who knows, oil inventories could suddenly bottom out or even drop, the price of a barrel of oil could sky rocket and... VNR might suddenly shoot back up through the roof and it could be my top stock this time next year.

That's the way of the market.

Valeant Pharmaceuticals was at 262 dollars a share on August 6th of 2015... Today's close price? 33.54.

Ouch.

Of course on the other end of the spectrum... Celator Pharmaceuticals Inc was 1.69 when it closed yesterday... Today's close price?  8.94.

That's a more than 400 percent return in 24 hours.

Sometimes you're down... Sometimes you're up.

Neither of those stocks pay dividends so I wouldn't touch them with a 10 foot pole... But there's opportunity in life every day.  Just have to be patient... Or sometimes in the right place at the right time.

Or, you just have to do your research stick with your investment choices and know for instance that people like Coke... And they have liked coke for a long time.  Coca-Cola hit an all time high today and they have been paying a dividend for over 50 years.

And just like storing junk, or burning oil... Coca-Cola will probably continue to be a drink of choice for many individuals for many years to come.

Sometimes you are wrong on an investment... And sometimes you're right.  Just like life, sometimes you make a wrong choice in life and sometimes you make a right choice.  But focus on all the little tiny right choices that you make each day and not the big mistakes that are few and far between.  My only goal is to be right just slightly more than I'm wrong and let all those little sips of Coke... and all those fuel tank fill ups and all those containers filled with extra stuff... Add up to cancel out my much less likely larger mistakes.

Well... Those are my investment ramblings for today.