Archive for March, 2013

Weekend Readings

By: ispeculatornew | Date posted: 03.15.2013 (3:00 am)

lost_kristen_bell_veronica_mars_2I just love this digital era. Have you ever heard of the TV show Veronica Mars? I don’t know much about it but my sister was a big fan. They were unable to get funding for a movie so they went through Kickstarter to get funding and they’ve destroyed their goal.. filming starts this summer.. over $3M already.. amazing right? Check out their project here. Here are a few

General Readings

Life insurance as an investment @ LifeInsuranceDoesMatter
Vanity Fair’s Bill Ackman profile @ TheReformedBroker
Pauk Ryan’s budget simplified @ TheAtlantic

Dividend/Income Readings

How spending cuts will hit your portfolio @ TheDividendGuyBlog
What does early retirement mean to you? @ InvestItWisely

Technology Stock Readings

Netflix (NFLX) launches speed index @ TechCrunch
Spotify vs Pandora (P) @ TheBigPicture

Japan… Trade Opportunity?

By: ispeculatornew | Date posted: 03.14.2013 (3:00 am)

japanEven though I rarely trade on macroeconomic trends, I absolutely love looking into them. If I were trading for a hedge fund, I’d be trading one of 2 things:

-Long and short technology stocks (as I write about on the blog)
-Macroeconomic trading (stocks, currencies, etc)

I’ve worked with a few different macro economy traders and have always found it fascinating. One of the biggest challenges is that things that seem illogical can go on for much longer than anyone would expect which often results in bubbles, market crashes, government collapses, massive inflation, etc. One case that I’ve been reading a lot about in recent years is Japan. It’s truly fascinating how the country went from a miracle economy to one with deflation, no growth, etc. It’s depressing in so many ways. Look at the Nikkei over the past few decades:

nikkei

The country has poor demographics, little growth and its government has an incredible amount of debt:

Japan-Government-Debt

Economists have been predicting some type of collapse of the Japanese government for some time now.Just think about how alarming voices are saying that Greece, Spain and others are in over their head in terms of debt.. yet they’re at far lower levels than Japan. So what’s going on?

japandebt

It looks like things are changing now. The new government has promised to bring back inflation and economic growth, How? By taking the Yen down…! There are 2 trades in the works now. Short Yen and Long Nikkei. There are obviously many ways to play these, including trading the yen directly with forex tools, I also looked at some ETF’s (as you can see below). Both have already moved a fair bit:

YCS

EWJ

They could have a lot further to go. This is starting to become a crowded trade which is always worrying but what if Japan finally moved to where it’s supposed to? Until mainstream media starts reporting on it (CNBC, etc), I have to think there’s an opportunity here. The big question would be when to get out of it!

What are your thoughts?

Ultimate Sustainable Dividend Portfolio – March 2013 Update – Looking Strong!!

By: ispeculatornew | Date posted: 03.13.2013 (3:00 am)

54In September 2011, I did some in-depth research to find long term sustainable dividend stocks and have been doing updates on this Ultimate Sustainable dividend portfolio since then in the attempt to show how well such a portfolio can perform over the long term but also show how I would manage such a portfolio. I have said it before, I do not believe in stocks that you can hold “forever”. Thus, even in a long term portfolio such as this one, I will end up making some trades from time to time.

The USDP is obviously a critical part of my now very public quest to replace my job income with passive income. you can see my most recent update here.

The USDP continues to do very well!! Very exciting stuff and I’m thrilled with how things have gone so far. I have done a couple of trades and continue to work on optimizing it, if ever you would like to receive those types of updates, please join, it’s free:

Keep in mind that this portfolio was built by selecting 20 stocks out of thousands. The goal is not to pick the 20 best dividend stocks but rather to pick a diversified, high quality portfolio that will keep dividends increasing over time.

Here are the holdings as of Monday evening to start off:

[table “500” not found /]

Dividends Received

Things are still looking good on this front as this March will bring in 44% more than the same period last time. I will be adding more money into the fund and thanks to my use of the DRIP.  Take a look at the progress:

usdp-income

Ultimate Sustainable Dividend Portfolio News

A few good dividend increases for the USDP, always good news right?

[table “501” not found /]

Returns

I’m thrilled to see that the USDP is back to overperforming the S&P500 total return index. It’s not a total surprise as the portfolio has generally done well in solid months but it’s still very nice to see.

usdp3

Trades

I didn’t do much exciting this time around, I simply reinvested the dividends into those stocks but not much else was done.

Passive Income Targets – March 2013

By: ispeculatornew | Date posted: 03.12.2013 (3:00 am)

49I’ve gotta say, I never could have imagined how well this would be turning out to be. Since starting to do monthly updates about my passive income project, my revenues have been increasing steadily almost every single month. Part of it is expected as investments continue to compound and I reinvest all income. Another important part though is that since I know that every month I’ll be reporting my numbers here, it makes me think about it a lot more. I’m trying to be smarter about my expenses, creative in finding new income sources, etc.

As time goes by, my objective is to be able to live entirely off of these new income streams but also be able be diversified enough to be ok no matter what happens. In many ways, that is what’s behind my interest in dividend income. For now, I prefer to avoid using actual numbers (might change later on) so what I will do is express all of this data in %. The objective of course is for all of these flows to end up generating 100% of my current income. I also want to gradually make sure that my income producing assets are not all locked away in accounts that will only be available upon retirement. In terms of income, I will be using my gross household income. Counting the bonus would only make things more difficult to track and would not represent how I currently live on my finances.

For example, if my base salary is currently 100K, my objective is to make 100K of passive income on an annual basis. This could be done through a variety of methods which I will be exploring of course. A few people tried to figure out how much capital I have by looking at the USDP size. The main issue is that the USDP is only part of my dividend income. I also get income from my ETF holdings, etc.

My primary objective remains to generate 100K in passive income on an annual basis as soon as possible, ideally from a few different sources

March Updates

-I did take a look into the consequences of becoming a landlord

-I’m rather intrigued by the idea of buying shares of Berkshire (BRK/B) over time, then selling them off once I do need more passive income. It would make it more difficult to track here but would remain a viable way in my opinion to fund my retirement.

-My online company is paying a bit more every month, that will certainly help

-I wrote a bit more about why I think it’d be crazy to count on the government for a pension

How Much Do I Really Need?

I am aiming for an income of 100K or so, before taxes as a first goal. To be clear, I feel like I need significantly less than that. Why? I’ve described how I am living off of significantly less right now (I’m paying taxes, paying my house, saving, etc). I also have the option, as discussed of retiring in a foreign location.

Overall, I feel like aiming for the same level of income as I am currently making is very very reasonable and I could easily live with less but why aim lower if I’m confident I can reach that 100K?:)

passiveincome2

Why Am I Doing This?

I’m a strong believer in working with clear objectives but also holding myself accountable so writing about these objectives will without any doubt help me reach financial independence more quickly.

Current Passive Income Flows:

5.31% – Dividend/Investing Portfolio: I am currently generating a dividend yield of about 3.31%. This portfolio will be increasing over time. I use a bucket system which I will be writing more about but the main retirement components are a long term dividend portfolio (see the Ultimate Sustainable Dividend Portfolio) and an ETF portfolio (see BuildYourETFPortfolio for more details on how I build mine). I saw a slight increase here thanks to markets rising and a similar yield.

7.48% – Private Investment In My Online Company: I have discussed how my web company has been the best investment of my life so far. I’m happy to say that I was able to slightly increase my monthly income from the company even though it wasn’t expected. I certainly hope that will keep happening.

Total: 12.79%

It’s not spectacular by any means yet. That being said, I am 31 years old (soon to be 32!) and do have a decent base (I could live with less easily).. I will continue to work on getting that total as close as I can do 100%:)

passiveincome

Passive Income Ideas

0% – Real Estate: I have started writing about adding real estate to my income flows. One aspect that I love about Real Estate Investing is how much of an inflation hedge it will represent for my portfolio. So I started looking into some aspects such as investing into residential or commercial real estate as well as the question of becoming (or not) a landlord.

0% – P2P Lending – I started exploring the idea and wrote my first post about it here🙂

0% – Annuity – No intention of buying an annuity for the time being

0% – Farming – I know it sounds crazy but I’ve started looking into it as you can see from my post a couple of weeks ago

0% – Other ideas – I could end up starting other businesses or projects will I’ll certainly keep you posted about.

What I Am Not/Will Not Include

Pensions: I do know that the government will be paying me a sum of money once I retire. However, given how poor government finances look like these days, I personally think it’s crazy to count on the government actually fulfilling its promises. It won’t happen. Yes, there will be money, but not anywhere what is currently being promised. Whatever I do end up getting will be a nice surprise.

I feel like I am being extremely conservative here. By not including my government pension and also not including the fact that lower revenues will mean less taxes to be paid, I’m overestimating the amount of passive income that is truly needed. That is more than fine by me. I’d also like to think that my house will be paid by then making my level of spending lower all things being equal.

My Long Term Passive Income Objectives

January 2014: $12,000/year
January 2018: $25,000/year
January 2023: $50,000/year
January 2030: $100,000/year

I love seeing that little blue line above the red one, it’s a very nice thing to see:) So far so good in terms of reaching my next objective of $12,000 per year by January next month. In fact, I’ve already surpassed that amount and will work hard to get closer to my $25,000 goal.

journey

Do you have any questions or comments? I’d love to hear any ideas or how you’ve been managing on your end as well!

 

New Trade: Long Dice Holdings ($DHX) & Short Monster Worldwide ($MWW)

By: ispeculatornew | Date posted: 03.11.2013 (3:00 am)

There was not much movement this week in my weekly trading as my average return remains close to 0%. As always, you can see my live tech long & short trades and performance here:

2013 Long & Short Tech Stock Picks

Today’s trade is one that I’ve made several times over the past few years. This time it wasn’t as obvious. DHX has outperformed MWW quite a bit in recent months leaving me with a less obvious winner. That being said, they still trade at almost identical forward P/E ratios which I don’t think can be justified. You can see the numbers here:

[table “499” not found /]

Just take a look at the revenues growth in recent quarters. They do have comparable lines but DHX has displayed strong growth every single time…!

DHX Revenue Quarterly YoY Growth Chart

DHX Revenue Quarterly YoY Growth data by YCharts

Long Dice Holdings (DHX)

Dice has been able to grow at a faster pace than Monster simply because of its focus on a few niche industries rather than trying to be solution to all for employment searchers and employers. It does have much better margins than Monster and I’m counting on that trend keeping up.

AOL

Next earnings release: April 25th 2013

Short Monster Worldwide (MWW)

Monster has an incredibly strong brand but has been unable to leverage it correctly and in many ways looks like the Yahoo with little to no growth and struggling to compete against smaller niche services (such as Dice Holdings) but also more recent competitors such as LinkedIn. Monster is simply unable to grow enough to justify its P/E ratio.

DMD

Next earnings release: April 26th 2013

If ever any of you are interested in my technology stock thoughts and picks, I invite you to my tech stocks newsletter, it’s free and you’ll get an email bi-weekly with additional thoughts on many of these names:

Disclaimer: I will enter into the trade this morning but have no positions as of this time…

Weekend Readings

By: ispeculatornew | Date posted: 03.08.2013 (3:00 am)

spring-in-Japan-spring-13476523-1600-1200Is it me or does it feel like spring is FINALLY around the corner. I can’t wait…! By the way, I’ve been looking at using Passbook on my iPhone..do any of you use it? If so, what are your thoughts? Seems like a good idea but I have not played with it yet.

Here are some good readings for the weekend! Have a good one:)

General Readings

How I helped my brother take control of his finances through ETF’s @ BuildYourETFPortfolio
How much of your current income to save @ CuriousCat
Risk and investment @ Monevator
Wealth inequality.. not an easy problem to tackle @ TheAtlantic

Dividend and Passive Income Readings

The sector that will beat the market in 2013 @ TheDividendGuyBlog
Canadian dividends and the tax credit @ DividendNinja
Pros and cons of dividend ETF’s @ ThePassiveIncomeEarner

Tech Stock Readings

Facebook (FB) updating newsfeed @ TechCrunch
Google building a same day shipping competitor to Amazon prime? @ TechCrunch

Making The Case For An Ecosystem Play (GOOG, AAPL, AMZN, FB)

By: ispeculatornew | Date posted: 03.07.2013 (3:00 am)

amzn_aaplI’ve discussed this a bit in the past but I have such a strong belief that I thought I’d revisit this. We live in an increasingly digital world and while there are hundreds of companies in the race to provide valuable and profitable services, only a few are able to dominate. Why? Because they’ve been able to build strong ecosystems that make it very difficult for others to compete.

What Do I Mean By Ecosystem?

Think of 4 companies: Google, Apple, Amazon and Facebook. These companies have all used very different ways to get it done but they have each built an ecosystem. They have core products that are so strong that they can attach other offerings very easily either by building it themselves or by getting outside help. Here is a brief summary:

Apple (AAPL): This one is probably the easiest. Apple has an incredibly strong lineup of products dominated by the iPhone, iPad, iPod, etc. They all evolve in a closed ecosystem where developers and content producers can sell their content (generally through iTunes).

googleGoogle (GOOG): Google started off with the best search product but that has evolved over time to a browser (Chrome), an email client (Gmail), the top mobile operating system (Android), an ISP (Google Fiber), the top video platform (Youtube). Google is able to combine all these products together to create unique products such as Google now and an overall experience.

Amazon (AMZN): Some would argue that Amazon doesn’t quite fit. I would argue that point. Amazon has built the top ecommerce ecosystem in the world with an exceptional distribution network, that enables it to sell its physical stuff, but also articles from third parties. Amazon also controls the ebook market and is increasingly taking over other markets such as physical books, cloud storage/computing, etc.

Facebook (FB): I fully expect some of you to argue that Facebook does not belong here. Time will tell I guess. The company is the top social network, has the control over how thousands of companies manage their online marketing campaigns, etc. Being at the center of how people connect with each other and with their favorite products and brands gives Facebook a lot of very valuable knowledge that makes it easy for Facebook to allow developers to build on top of its platform but also to offer its own products.

Competitors Struggle To Compete With Advanced Ecosystems

I could name many high quality products that are facing competition from these 4 names. The problem of course is that these 4 can easily launch products expecting to make little to no money for several years. If it makes their ecosystem better for users and helps them take out competition, that is good enough. Just a few examples:

Online music: I’ve already said that I’m very skeptical of standalone names like Spotify and Pandora (P). The problem is that they’ll end up competing with Apple (iTunes and upcoming radio service), Google (launching a music subscription service through Youtube), Amazon, etc. How will they be able to compete?

Wearable Devices: It’s the new “cool” thing with companies like Fitbit and Jawbone offering products that I personally love and believe in. But Apple is reportedly working on the the iWatch, Google is already in advanced testing of the iWatch, etc. Those devices will be connected to ecosystems that already know a lot about me which seems like a huge advantage.

VOIP: Products such as Skype have had huge success but I’m not sure how they can compete with Facebook’s VOIP offering as well as Google Voice, etc. Most of us already have the Facebook app, have our contacts in there.. so why would I install Skype then go through all of the trouble of adding contacts, etc?

I’d Go Long Some Or All Of Them

This is a long term trade and I’ve already explained why I believe in Amazon (AMZN) and Google (GOOG) over the long term. I’m a believer in Apple and a Facebook shareholder. So yes, I do think these are terrific plays. One of them could turn into the next Microsoft (MSFT) and it’s still early in the game so difficult to call but I’d put money on the fact that holding these 4 names over the long term will be a winning strategy.

FB AAPL GOOG AMZN

Disclaimer: Long Facebook (FB)

What Makes A Dividend Yield Safe?

By: ispeculatornew | Date posted: 03.06.2013 (3:00 am)

Safety_MattersIt’s a very common question for any dividend investor. As much as we look to play offense (try to get a rising yield), it’s critical to also have a good defense, avoiding any stock that might reduce its dividend payout. It’s not always easy to do but it’s the key to being able to rely on a dividend portfolio as an income source. In fact, even having no growth is simply not good enough. Your dividend income should increase by the inflation rate at a minimum in order for you to be able to keep the same lifestyle.

Can All Dividend Drops Be Anticipated?

I’d personally say no. Some things are almost impossible to predict. Just think of events such as the Enron scandal or the recent credit crisis when banks all around the world went from great dividend payers to not paying out anything almost overnight. That is why there is no substitute for having a diversified dividend portfolio, one that can’t be too affected by any one event or regulation change.

There Is Such A Thing As Yield Safety

That being said, the best way to ensure that you have see growing dividend yields year over year is holding names that are paying out what they can afford. Here is what I personally look for in dividend stocks in order to determine if their dividend yield is safe:

Low Payout Ratio: This can be seen as just one number but in reality, I’m looking for companies that pay out at most 70% of their earnings every year. Anything more means the company might run into issues

Dividend History: Companies that have a 20 or 30 year old history of paying and raising dividends are generally proven and reliable enough to depend on

Healthy Underlying Business:  I always look at 5 year growth numbers in terms of both revenues and earnings per share. You could look at a different number but I always feel like looking at 1 year growth rates tells a very incomplete story.

Debt Level: Debt levels are a bit more tricky because it depends a lot on the industry. What I do is compare companies with industry competitors and look for below average levels of debt.

Underlying Risks:  This is a bit more difficult to look at. But think of it this way. What are the odds that competitors will be able to take over major brands that Proctor & Gamble own? How would you compare that to the risk of seeing Apple’s one big product, the iPhone, lose its edge? Those are the type of things I look at.

How many of your dividend holdings are at risk? I’ll do a better analysis of the USDP’s yield safety in the near future.

 

One More Sign That Washington D.C. Is Crazy

By: ispeculatornew | Date posted: 03.05.2013 (3:00 am)

I often write about building my passive income cash flows and how I’m working on being financially independent. One of the criticisms that I get is how not counting on my government pension is foolish. I’ve written about this just a week ago but then this weekend I came across this chart…

sequester-cut-debt
Chart from Coyote blog

So let me get this straight. When politicians say talk about how catastrophic the sequester will be, the impacts on our safety, on borders and airports, the defense budget and everything else… Just look at how much spending has increased in the past decade. This sequester is basically a 1% cut. Everyone agrees that it’s not being done in the smartest of ways but please don’t tell me that the government can’t cut 1% of its expenses.. especially the government is going to take care of these massive deficits.

I’ve said over and over that some revenues should be part of the solution. Some revenues were raised earlier this year and there will likely be more. But don’t think that I don’t get it. Spending is (by very far) the bigger problem and the fact that we can’t even agree to cut down 1% of the budget is not a good sign. If we’re going to see the US and other governments take action to reduce and eventually eliminate their deficits. If they don’t, how in the world will they be able to pay pensions and all other expenses.

If they keep kicking the can down the road, politicians will eventually get us to a dead end. Do you personally want to depend on Republicans and Democrats doing the right thing? I certainly don’t.

New Trade: Long AOL inc ($AOL) & Short Demand Media ($DMD)

By: ispeculatornew | Date posted: 03.04.2013 (3:00 am)

There was not much movement this week in my weekly trading as my average return remains close to 0%. As always, you can see my live tech long & short trades and performance here:

2013 Long & Short Tech Stock Picks

This trade feels odd in so many different ways. It’s a fairly different one than what I usually do, especially looking at the quarterly Y/Y growth chart that you can see below. Of course, AOL’s declining ISP business screws up those numbers but they’re still worth considering. You can see the numbers here:

[table “498” not found /]

Two stocks priced at almost identical P/E ratios for next year. I am starting to be a believer in what Ariana Huffington has been doing though and they clearly have a strong strategy for that part of their online content business.

DHX Revenue Quarterly YoY Growth Chart

DHX Revenue Quarterly YoY Growth data by YCharts

Long Dice Holdings (DHX)

AOL has been by far the most difficult stock to trade for me in the past year or so. I’ve shorted it over and over and after getting a much needed break, traded it again a few weeks ago. Once again, I got killed. Am I finally switching to an AOL bull? Not quite. I still think its valuation is way too high and I’d never buy it outright. That being said, one advantage of long & short trading is that I can buy a stock I don’t love but that I think provides a good trading opportunity compared to another one. I do think that while AOL’s overall growth has been fairly small, it has been doing a lot of positive things and is certainly being much more innovative than Demand Media which is translating into strong numbers.  I don’t love going long AOL after so many times of being wrong shorting it.. can you imagine if suddenly the stock crashes down? I’ll hold that thought to preserve my sanity;)

DHX

Next earnings release: April 25th

Short Monster Worldwide (MWW)

Demand Media has performed fairly well in recent months but I don’t hear much exciting coming out of the company. Just a couple of weeks ago, news came out that the company was considering a split. Is that really what DMD is focusing on these days?

MWW

Next earnings release: April 26th

If ever any of you are interested in my technology stock thoughts and picks, I invite you to my tech stocks newsletter, it’s free and you’ll get an email bi-weekly with additional thoughts on many of these names:

 

Disclaimer: I will enter into the trade this morning but have no positions as of this time…