Tuesday, March 17, 2020

How low can it go - nibble

Remember Mark Haines or Haynes, a former anchor on CNBC called the bottom in March 2009.   Sadly, Mark left us not long after that.  Wish we had his instincts.

I am thinking we could touch 15,000 on the DOW.   I know that sounds terrible but if you look at P/E's and realize earnings will go down during the recirculation of the effect of shut downs and therefore prices will follow.  Without a doubt the market looks forward.  When it does turn up it will be telling us the market expects earnings to improve.

Constipation is the worse thing for the economy.  Velocity of money is so necessary.  Turnover is so important.  Each of us can make money when a trade occurs.

This is terrible news for retirees especially those of us without a pension.  And it is wonderful news for wealth builders with cash to invest.  That would be young people.

For me, I just keep selling calls and nibbling.  I have enough positions that I bought when the DOW was under 15,000 that I can afford to take a chance that the market will shoot up in the next 40 days and my calls will be taken.   I am keeping expirations short so calls either expire and I can sell another call on the position to supplement my income and or raise cash for the next buying opportunity.

I believe the next nine months will be very volatile providing opportunities to put those proceeds to work.

If you have the money, buy whole lots, but don't be embarrassed to buy less than 100 shares.  You can add 10 or 25 shares at a time.  It's like dividend reinvesting but on your schedule.  Put your buys in really low and see what happens.

You have to be brave and stick with your disciplined approach.  When you nibble make sure you are nibbling on stocks that meet Dividend Machine fundamentals:

  • Solid Balance Sheet
  • Dividend Yield for me above 3% - Jim Cramer at CNBC says he wants 4%
  • P/E ratios below the historical level for that stock - please use trailing P/E's not forward.  Who knows what forward earnings will be
  • No dividend reductions during the previous crisis

M* MoneyMadam