Month in Review – July 2018

And that quickly July is gone.

Right when the market indexes had almost made up all the ground they lost in February, some big tech names stumbled. It was interesting to see a little bit of divergence emerge; staples and industrials, etc. were relatively unphased, but the “tech” sector was pretty wild.

Personally I don’t really care about the “FANG” stocks. Our exposure to them is limited mostly to the index funds we keep in our employer sponsored retirement accounts.

Still, watching $120B in market capitalization vaporize overnight is a little unnerving for anyone long, regardless of what stock it was.

I’ve decided to try to build up the cash allocation a little bit more. Things feel frothy and the yield curve is tightening. I didn’t sell any puts in July but I did sell some covered calls.

Just shifting gears a little bit that’s all.

So let’s take a little closer look at July.

Portfolio Summary

Metric

End of July 2018

End of June 2018

Total Invested

$469,679.46

$464,308.64

Market Value of Total Invested

$503,824.71

$497,643.43

Allocation % – Equity

58.40%

56.31%

Allocation % – Bonds

17.41%

18.63%

Allocation % – “Other”

3.14%

2.89%

Allocation % – Cash

21.02%

22.07%

Income Assets – Invested

$264,227.03

$267,898.92

Income Assets – Market Value

$276,032.85

$276,027.23

Projected Annual Income

$13,360.01

$11,349.28

Invested Yield

5.06%

4.24%

Market Yield

4.84%

4.11%

Stock Purchases

2 stock purchased. One of which represents an addition to an existing position and the other is a new position; projected annual income is increased by $480/year based on the current annual dividends.

07/03/18 – VCF: 113.8921 shares purchased @ $14.59/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 at some point soon. I have enough cash set aside for two more purchases, although I think I might only get one more in before the transition. I don’t think E-trade has the auto-invest feature.

Oh well.

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

07/10/18 – CBRL: 100 shares purchased @ $158.03/share. This was part of a buy/write trade which I twittered at the time. Do you follow me on the twitter? You should.

The idea here was to get long CBRL before it went ex-dividend on July 12. That was a very special ex-dividend since shareholders of record were entitled to the special dividend of $3.80/share in addition to the regular $1.20/share. The actual payment will arrive in August, so I’ll have to wait to recognize that, but I got a whole year’s worth of dividends all at once.

No particular reason to do a buy/write here except that I figured the stock price probably wouldn’t take off after such a big distribution. So far that’s been right and the option is way out of the money.

Projected investment income is increased by $480/year based on the current annual dividend of $4.80/share (although they’re due to announce an increase next quarter).

Casino

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

In June I started dabbling in sports betting as an alternative investment. Yeah I know. My wife rolled her eyes too.

I started with a very small amount ($100) in mid June. After 16 days, the account was up 12.4%, which would equate to a 283% annualized yield if sustainable

It’s probably not sustainable.

Although I don’t think it was pure dumb luck either. July brought about a reversion to the mean with the strategy, and of course that reversion happened after I moved a more serious amount of money into it.

The accounts are up a total of 8.9%, but a lot of that is because of a sign up bonus at one of the sportsbooks. I have to bet a minimum amount before I’m eligible to withdraw the bonus money. I’m basically treading water at the moment, but I’m optimistic that over the long haul this will actually become profitable.

This deserves its own explanatory post at some point in the near future. I just need to get around to writing it, and building up some data to talk about.

Pay Days

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

Total investment income of $1,998.33 with a taxable total of $251.54. We’ll call it 11 “pay days” with 36 individual payments received.

Options premiums represent $264.48 of that total.

Capital gains made up $0.00.

Which leaves $1,482.31 of actual bona fide dividends* (less -$3.00 of P2P lending losses plus $254.54 of sports betting “profit”).

*So a while ago HCP spun off their HCR Manor Care properties (which were struggling) into their own new little company: Quality Care Properties (ticker: QCP). HCP shareholders got 1 share of QCP for every 5 shares of HCP that they owned.

Welltower Inc. (another REIT) agreed to buy QCP not long ago for $20.75/share in cash. Several of our accounts owned HCP prior to the spinoff and had been holding QCP shares. Since the Welltower deal finally went through in July, all those QCP shares are gone now and were replaced with $20.75/share in cash. Yay!

How should I classify that transaction? I’ve decided to treat it as an HCP “dividend” because mechanically that’s basically what happened. We received a certain number of QCP shares from the spinoff, and then those were eventually monetized. We still have the same number of HCP shares as we always have.

The IRS doesn’t count it that way, but none of these shares were in taxable accounts, so I’m not going to worry about that. For my tracking purposes I’m treating it like a special dividend, so the whole amount is going into “investment income”.

Across the three accounts that held QCP shares we received $637.13 in proceeds, which is a big percentage of the “dividend income” for the month.

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 again. Boo!

In aggregate the bad loan situation worsened slightly month over month. At the end of June there were 6 loans listed as late. If two of them got charged off, then the fact that we are left with 5 late loans means we added another bad apple along the way. So that’s a bummer.

The number of bad (charged off) loans we’ve invested in so far comes in at 18 out of 247 or 7.28%.

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

July 2018

0

0

5

18

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 $77.04 worth of principal for the five loans that are late, but as the eternal optimist, I’m going to continue to wait until the loans are actually charged off before I recognize the loss.

That is down slightly from what it suggested last month ($79.36), which makes some sense since there are now five vs six late loans.

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 up 168.4% compared to $757.71 in June.

Of course if you take out the QCP special “dividend” it’s only an 80% increase.

As I mentioned last month, I really curtailed my options trading activity in June, which was a conscious decision. I wanted to build up a little larger cash position as a precaution against an overly exuberant market.

I extended that effort in July by not selling any puts, but I did sell some covered calls. I intend to continue to take some risk off the proverbial table. Will I miss out on some melt-up gains? Maybe.

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:

JULY – INVESTMENT INCOME HISTORY

Year

Dividends

Options

Capital Gains

P2P (Gambling)

Total

2015

$383.82

$0.00

$0.00

$0.00 ($0.00)

$383.82

2016

$277.96

$473.04

$1,145.35

$17.25 ($0.00)

$1,913.60

2017

$377.07

$319.28

$0.00

$6.93 ($0.00)

$707.88

2018

$1,482.31

$264.48

$0.00

-$3.00 ($254.54)

$1998.33

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”.

Raises

None of the regular dividends received in July represented an increase over the previous distribution. Bummer.

So there you go. July is over. Here comes August. We’ll be funding our ROTH IRAs this month per usual. Also I had been keeping my 401K from my previous employer around because it was all vanguard funds and was easy. But I transferred that recently to yet another self-directed IRA, and I will not be indexing with that money going forward. So hopefully we’ll have some stock buying activity to talk about over the next couple months.

Thoughts? How was your July? Do you think I’m crazy? It’s okay if you think I’m crazy. Why don’t you leave a comment about it?

Leave a Reply