Month in Review – June 2018

With the end of June we come to the end of the first half of the year.

It feels like the summer doldrums are settling in and the market could be getting a little complacent. Although the volatility jitters from February haven’t completely dissipated either.

I’m interested to see what happens in the second half, but in the meantime let’s review what happened in June.

Portfolio Summary

Metric

End of June 2018

End of May 2018

Total Invested

$464,308.64

$462,966.55

Market Value of Total Invested

$497,643.43

$494,584.97

Allocation % – Equity

56.31%

61.08%

Allocation % – Bonds

18.63%

18.27%

Allocation % – “Other”

2.89%

2.78%

Allocation % – Cash

22.07%

17.79%

Income Assets – Invested

$267,898.92

$295,244.88

Income Assets – Market Value

$276,027.23

$302,137.56

Projected Annual Income

$11,349.28

$14,327.45

Invested Yield

4.24%

4.85%

Market Yield

4.11%

4.74%

Stock Purchases

1 stock purchased which represents an addition to an existing position; projected annual income is unchanged because the investment is set to automatically reinvest.

06/05/18 – VCF: 115.1020 shares purchased @ $14.44/share. I’m continuing to build a position in this muni-bond closed end fund in our taxable account.

I’ve had the sharebuilder auto-invest feature set up to buy $1,666 worth of shares once per month. Capital One is dumping their investment brokerage business, and I guess we’re getting ported over to E-trade some point soon. I had intended to buy another $5,000 worth of VCF by the end of summer, but I’ll have to see how that works out with the brokerage move.

I plan to continue dollar cost averaging into the position because I expect negative pricing pressure on bonds this year as rates rise and inflation picks up.

Since the dividends are set to be automatically reinvested, I don’t count this investment towards my total projected investment income.

Casino

Last month I officially retired the UVXY trade. It was fun (and lucrative) while it lasted, but it’s time to move on to something else.

While I haven’t exactly found the proper replacement for the UVXY trade, I have found something pretty intriguing.

I started dabbling in a little bit of sports betting this month. An old friend from college who was a professional poker player for many years has been playing around with different sports betting strategies. He seems to have hit on a profitable system for betting baseball, and I have to say it’s very compelling.

Unfortunately, I will not be able to be as open and transparent about this system as I am with all my other investing strategies. My friend is trying to monetize it and wants to keep it confidential, which is reasonable.

I started with a very small amount ($100) in mid June. After 16 days, the account is up 12.4%, which, if that’s sustainable, equates to a 283% annualized yield.

Of course it could just be a lucky streak, but the sample size is pretty big at this point. The returns seem likely to be at least positive over the long run.

I’ll be putting a little more cash to work in July and will start tracking the progress in this portion of the monthly reports.

Stay tuned!

Pay Days

Dividend Income Tracker is published here at the mothership and has been updated.

Total investment income of $757.71 with a taxable total of $26.22. We’ll call it 12 “pay days” with 29 individual payments received.

Options premiums represent $96.38 of that total.

Capital gains made up $0.00.

Which leaves $635.12 of actual bona fide dividends (plus $13.82 of interest from P2P lending and $12.40 of sports betting profit).

Lending Club

Lending club income is aggregated into a single income record for simplicity’s sake. It actually arrives as a lot of small payments over the course of the month.

Two loans got charged off this month. Boo!

Net net the bad loan situation improved month over month. At the end of May there were 9 loans listed as late. If two of them got charged off, then the fact that we are left with only 6 late loans means somebody became current. So that’s nice.

The number of bad (charged off) loans we’ve invested in so far comes in at 16 out of 241 or 6.63%.

Oh well.

Month

In Grace Period

Late (16 -30 days)

Late (31 – 120 days)

Charged Off (aggregate)

End of 2017

0

0

6

8

January 2018

1

0

4

9

February 2018

0

4

1

13

March 2018

0

2

3

13

April 2018

0

1

4

14

May 2018

2

1

6

14

June 2018

1

0

5

16

I’m glad I started tracking this stuff last year. It should be fun to continue to follow it through 2018.

Lending club’s algorithm is suggesting I should write down $79.36 worth of principal for the nine loans that are late, but as the eternal optimist, I’m going to continue to wait until the loans are actually charged off to recognize the loss.

That is down quite a bit from what it suggested last month ($99.67), which reflects the improved situation.

I’ve finally completely lost interest in my distressed debt experiment which involved buying late notes on the secondary market at a discount. While I still feel like I have a good set of rules to follow to pick out decent loans among the garbage on the secondary market, it’s just too tedious to execute.

I’m going to let that portfolio of loans run to maturity and then we’ll recognize whatever the actual loss is at the end. The extra cash I had floating around to potentially buy more distressed notes is going to the sports betting scheme for now.

Anyway, here’s the last update that.

Comparisons

Month over month, investment income was down -32.85% compared to $1,128.41 in May.

I really curtailed my options trading activity in June. That was a conscious decision. I decided to build up a little larger cash position as a precaution against an overly exuberant market. I’m planning to shift to a slightly more “risk off” allocation for the next few months at least.

Thou can’t time the market, so thou shalt not try to.

I don’t worry too much about month over month comparisons because of the way I count “income”. Options activity and capital gains are likely to be erratic. But that’s how I count it, so it is what it is.

I now have over 4 years (!) of data on my income tracking sheet.

So I’ve been including this table in this segment to look at longer term trends:

JUNE – INVESTMENT INCOME HISTORY

Year

Dividends

Options

Capital Gains

P2P (Gambling)

Total

2015

$407.35

$0.00

$0.00

$0.00 ($0.00)

$407.35

2016

$148.58

$1,038.77

$0.00

$0.00 ($0.00)

$1,187.35

2017

$463.20

$48.12

$716.66

$6.93 ($0.00)

$1,234.91

2018

$635.12

$96.38

$0.00

$13.82 ($12.40)

$757.71

Pretty cool huh?

Rather than totally recreate this table, I’m just lumping my new sports betting endeavors in with the Lending Club income. They’re both in taxable accounts. They’re both highly speculative and a little “unconventional”.

It’s interesting to me that June of 2017 was also a “slow” month for options and P2P income, but I had some hefty capital gains offsetting that lack of activity.

So it goes.

Raises

We received two dividends payments last month that represented a raise.

LUV increased their payout by 25%, which is great. Dividend growth investing is a strategy deployed over long time horizons. Right now, it can be a little frustrating holding LUV shares that yield such a small percentage. But that dividend is poised to grow and I think management is committed to raising it.

JNJ also increased their distribution, albeit by a lower percentage of 7.14%. Over the past several years it has been nearly impossible to pick this stock up at anything above a 3% yield. If you reverse engineer a dividend discount model for stock valuation a 3% yield with a 10% discount means the stock is “fairly valued” so long as it maintains a 7% growth rate.

Which is all to say that damn right JNJ raised their dividend by 7%. If they hadn’t I would have been pretty disappointed.

So there you go. June is over. Summer is in full swing and the wizards’ portfolio just kind of keeps plugging away. It felt like things stalled a little bit, and maybe they did, but we’re still mostly moving in the right direction.

What do you think? How was your month? Don’t let the comments section go completely empty!

 

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