Saturday, August 8, 2015

Financial Planning Weekend Update - August 8, 2015


Well, that week sucked for the model portfolio. The final blow was Friday's jobs report showing fewer than expected but still decent 215,000 new jobs. That pretty much green-lights a 0.25% interest rate increase in September.

As it stands the model portfolio has done measurably better than the S&P 500. That index closed at 2100 on April 20 when I swapped into the current version of the portfolio. With the S&P dropping to 2077 the index is showing a loss of 1.38%. My portfolio is up 0.07% over the same period.

What's that mean? This portfolio covers a little over three months during which the S&P has traded in a very tight range (2040-2130ish). I happened to start things off in the upper part of that range. What's worse, one position, COP has gotten hammered by continued low oil prices, both GE and PG are plagued by re-organization issues (though GE seems to be handling things better), who the heck knows what's going on with EMR, and everyone has problems with the strong dollar.

So what's held up? KO is actually positive by $1.35 (3.33%) and ED has done even better, up $3.90 or 6.36%, mostly in the last couple days. VTR is up as well, on a good 2nd quarter and the impending spin off of its skilled care properties.

Even given the short time period this is just about the best possible example of using covered calls as part of a conservative income portfolio. The lesson:
  • Covered Calls, properly used, can provide significant downside protection.
This model has, however, only a few weeks to live. As I mentioned last post I've moved a chunk of money from my 401(k) to a rollover IRA. That transfer is complete and this blog will be operating with real money. I'll drop the model portfolio after August expiration.

My immediate plans are:
  • Watch for the S&P to bounce off 2040 or so.
  • Look to buy VTR after the spinoff (August 17)
  • Watch XOM - it goes ex 8/11 so I'd have to buy on 8/10 to capture the dividend
  • Watch F after an S&P bounce.

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