Uncertainty [October 2014]

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Uncertainty [October 2014]

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October I was able to control my spending reasonably well despite a more expensive than average Red River Gorge, KY climbing trip.

Expenses: $1091.90
Dividend Income: $147.81
Percentage of expenses paid by dividend income: 13.5%

Passive Income Versus Expenses JCurtiswebb

This is the fourth month in a row that I’ve earned over $100 in dividends. Looking forward, $147 a month will be on the low end. Next month I’m poised to receive around $250. This is incredible progress for just 10 months of investing, however, there’s a growing uncertainty in me that holding stocks is a good idea right now.

The markets have continued their march to all-time-highs during October, but the average daily volume has been declining during this time. Only during the short period of volatility did volume increase significantly. In a healthy bull market, high trading volume is desired because it corresponds to new money being invested in stocks. The low trading volume in the markets right now means there is not as strong of an influx of dollars into securities. I’m worried that if trading volume trends even lower, the bull-market will dry up. NYSE margin debt also is at an all-time high. This is a measure of how many dollars of securities were purchased on margin. I’m concerned that the two are related; that this bull-market has no new money flowing in because investors are already over-leveraged and can’t continue to feed the machine.

Anyway, I’m not going to sell anything right now. I would have to be damn sure that we are going to have a significant correction in order to liquidate. The only reason I would sell would be to buy all of these stocks back at a significantly lower price. I’ve said numerous times that market corrections are good for me because they allow me to purchase all of the stocks I want at a lower price, and thus at a higher yield. I still stand by that, but part of me wants to liquidate before suffering any capital depreciation.

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