2020-12 Dividend Income Report

Here is the dividend income report for December, 2020.

The monthly dividend income came out to $3490.60. The yearly income total for 2020 through the end of the month was $10541.51.

The income for December, 2019 was $3611.13, and the yearly income for 2019 through the end of December was $10515.13.

The total for 2020 was my highest ever. I still worry that my dividend ETFs will not cover my expenses in retirement. I have about a decade left in the workforce, possibly more.

I had RWR for most of 2019, and I sold all my shares in early 2020. I sold at a price higher than the low in 2020, but lower than the price now. I thought real estate would get hosed more than it has. Perhaps RWR has a lot of wholesale real estate and not much consumer and office space. I plan on going through the RWR annual report to see what is in it. I also plan on going over the conference calls for LAND. I should have some cash to install.

Anyway, I made $1982.49 from RWR in 2019, and 179.94 from RWR in 2020. So that means that I beat my 2019 total without the 1802.55 difference in RWR. I did buy some BND for my Roth IRA. I that seemed to help. I also got income every month in my Roth IRA.

I bought some shares of Global X S&P 500 Covered Call ETF (XYLD). This will give me monthly income. Perhaps I won’t need to get Ron DeLegge’s newsletter for the monthly ETF trade.

In addition to tracking my finances in GnuCash, I also have a spreadsheet for my stocks and ETFs. I have a sheet for the monthly totals for the accounts. I added a few columns with the 3- and 12-month moving averages for my taxable accounts which take out about 33% for taxes. I don’t know if my tax rate will be that high when I retire, but I think this will give me a better idea how well my investments would do if that is all I had to rely on. Right now, my 12-month moving average after removing assumed taxes from income from taxable accounts is $680. That is not enough to cover my rent. But a few years ago it was around $450, so I guess I am doing okay.

I have some money in another account that I will probably “put to work” (as they say in the industry). What I really need is to start making more money.

Here is a table with the year-to-date amounts, the monthly amounts, and the three- and twelve-month moving averages for each December from 2011 through 2020:

Month YTD Amount 3MMA 12MMA
2020-12 $10541.51 $3490.60 $1294.16 $878.46
2019-12 $10515.13 $3611.13 $1343.15 $876.26
2018-12 $6971.76 $2313.99 $1165.08 $580.98
2017-12 $7536.98 $1837.78 $913.40 $628.08
2016-12 $6076.53 $1027.76 $605.28 $506.38
2015-12 $5472.07 $954.52 $575.86 $456.01
2014-12 $4438.02 $909.86 $481.67 $369.80
2013-12 $3406.20 $594.59 $344.05 $283.85
2012-12 $3585.01 $686.10 $386.41 $298.75
2011-12 $3091.99 $514.94 $323.40 $253.92

Here are the securities and the income amounts for December, 2020:

  • Vanguard Total Bond Market ETF: $141.02
  • Vanguard Total Bond Market ETF: $36.12
  • Vanguard Total International Bond ETF: $9.83
  • RLI Corp: $103.60
  • RLI Corp: $24.86
  • Vanguard Utilities ETF: $290.74
  • SPDR S&P Dividend ETF: $1031.43
  • SPDR S&P Global Dividend ETF: $1463.25
  • Vanguard Total Bond Market ETF: $286.78
  • Vanguard Total Bond Market ETF: $73.46
  • Vanguard Total International Bond ETF: $29.51

Note: Some securities have more than one payout in December. I have BND in two accounts. BND, BNDX and RLI have multiple payouts in December.

In spite of all that happened, Big Jim had an okay year. Hopefully 2021 will be better for us all.

Image from somewhere on the web, assumed allowed under Fair Use. Painting of angel by Guariento di Arpo (1310-1370).

2020-11 Dividend Income Report

Here is the dividend income report for November, 2020.

The monthly dividend income came out to $196.63. The yearly income total for 2020 through the end of the month was $7050.91.

The income for November, 2019 was $126.48, and the yearly income for 2019 through the end of November was $6904.00.

There is not a whole lot to report. There was a brief reprieve from the interest rate repression. The dividends for the bond funds was slightly higher than it was for October. However, the December amounts have come in, and they have resumed their downward trajectory. I am considering putting some money back into individual stocks again. Unless there is a dividend cut, income from individual stocks keeps increasing. I don’t know what is going to happen, but I think that if any company can at least maintain their dividend for a few more months, they should be fine going forward.

It is possible my total at the end of this year will be less than last year. This is partially because I sold RWR. Last December it provided about $800 of income. I am still worried whether or not I will have enough cash flow for when I am old. I got an email from the Social Security Administration reminding me to check my statement. I will do that later. Perhaps that will provide a cushion.

Here is a table with the year-to-date amounts, the monthly amounts, and the three- and twelve-month moving averages for each November from 2011 through 2020:

Month YTD Amount 3MMA 12MMA
2020-11 $7050.91 $196.63 $742.84 $885.10
2019-11 $6904.00 $126.48 $843.65 $768.17
2018-11 $4657.77 $50.86 $562.56 $541.30
2017-11 $5699.20 $560.60 $559.31 $560.58
2016-11 $5048.77 $506.98 $502.98 $500.27
2015-11 $4517.55 $460.83 $477.55 $452.28
2014-11 $3528.16 $291.27 $357.30 $343.53
2013-11 $2811.61 $252.75 $277.74 $291.48
2012-11 $2898.91 $247.99 $262.78 $284.49
2011-11 $2577.05 $246.37 $232.84 $240.81

Here are the securities and the income amounts for November, 2020:

Vanguard Total Bond Market ETF: $148.40
Vanguard Total Bond Market ETF: $38.01
Vanguard Total International Bond ETF: $10.22

Big Jim will keep pushin’ to increase the size of his cushion.

Image from Wikimedia, assumed allowed under Fair Use. Painting of angel by Guariento di Arpo (1310-1370).

2020-10 Dividend Income Report

Here is the dividend income report for October, 2020.

The monthly dividend income came out to $195.26. The yearly income total for 2020 through the end of the month was $6854.28.

The income for October, 2019 was $291.83, and the yearly income for 2019 through the end of October was $6777.52.

There is not a whole lot to report. I think that putting more money into BND was a good idea. Since I sold RWR, that is the only thing that is keeping my totals this year ahead of last year.

And RWR is still above where I sold it. Will REITs never get hit? There are a lot of businesses that have gone under, there are a lot of people unemployed, there is a lot of unused office capacity, yet the REIT indexes are still doing fine. Granted, I know a lot of people are having a harder time than me, but it just seems like the laws of cause-and-effect are no longer true. Or perhaps there is a lot of extend-and-pretend. I plan on taking a better look at the annual reports for RWR and VNQ (Vanguard REIT ETF). Perhaps they are skewed towards warehouses and data centers. Yet Realty Income is still increasing its dividend (see their dividend history on the Realty Income page here, or on the Street Insider website).

Here is a table with the year-to-date amounts, the monthly amounts, and the three- and twelve-month moving averages for each October from 2011 through 2020:

Month YTD Amount 3MMA 12MMA
2020-10 $6854.28 $195.26 $745.73 $879.26
2019-10 $6777.52 $291.83 $822.53 $761.86
2018-10 $4606.91 $1130.39 $561.66 $583.77
2017-10 $5138.63 $341.83 $566.34 $556.11
2016-10 $4541.79 $281.09 $508.05 $496.43
2015-10 $4056.72 $312.23 $459.42 $438.15
2014-10 $3236.89 $243.87 $368.19 $340.32
2013-10 $2558.86 $184.81 $295.19 $291.08
2012-10 $2650.92 $225.14 $285.46 $284.35
2011-10 $2330.68 $208.90 $258.17 $238.44

Here are the securities and the income amounts for October, 2020:

  • Vanguard Total Bond Market ETF: $147.48
  • Vanguard Total Bond Market ETF: $37.77
  • Vanguard Total International Bond ETF: $10.01

Big Jim blah blah blah. Big Jim is kind of tired of life and a lot of things right now, including the lack of growth in dividend income. And what is going on with that angel and demon in the painting? The whole Falwell fiasco has shown that a lot of religious people are freaks; it looks like even the heavenly hosts like to play games too. Perhaps Big Jim needs to go to church and find himself a freaky woman (after COVID, of course).

Image from Wikimedia, assumed allowed under Fair Use. Painting of angel by Guariento di Arpo (1310-1370).

2020-09 Dividend Income Report

Here is the dividend income report for September, 2020.

The monthly dividend income came out to $1836.64. The yearly income total for 2020 through the end of the month was $6659.02.

The income for September, 2019 was $2112.65, and the yearly income for 2019 through the end of September was $6485.69.

I am starting to question whether or not indexing, or dividend growth investing (DGI) or any other buy-and-hold philosophy is going to work out over the next few years. Granted, many people say that these are the most important times to stick with buy and hold. But things are not working out too well.

I have been engaged in DGI for about ten years. Maybe that is not enough time for the magic of compounding to happen, but the pace of my income growth is making me wonder if I will have enough money when I am old. Between COVID and interest rate repression, my bond income has decreased a lot. From April until October, the dividend per share for BND has gone from 19 cents a share to just over 15; here are the amounts from April to October: 0.1905, 0.1739, 0.1687, 0.1624, 0.1587, 0.1531, 0.1503. RLI paid a whopping 7 cents more than it did three months ago. This is not the stuff that affluence is made of. I thought interest rates would have gone up five years ago. They keep going lower. One of the effects is people play more games with money. Some people blame the central banks for the way people react to low interest rates. You can blame central banks for the rates, but not peoples’ reaction.

Nevertheless, I am thinking about doing some things that run counter to indexing, DGI, and buy-and-hold in general. Like putting all my money in bonds in the A and B months and the beginning of the C month, and putting it into stock ETFs during the second half of the C month. Or putting a lot of it in covered call funds.

In other news, RWR is still above where I sold it. I am starting to think a market correction is like “the storm”, or the second coming of Christ: Always predicted, but never seems to arrive. (Granted, market corrections are a known historical phenomenon and not something only believed by crazy people who are too stupid to focus their anger on something productive.)

Here is a table with the year-to-date amounts, the monthly amounts, and the three- and twelve-month moving averages for each September from 2011 through 2020:

Month YTD Amount 3MMA 12MMA
2020-09 $6659.02 $1836.64 $750.42 $887.30
2019-09 $6485.69 $2112.65 $744.85 $831.74
2018-09 $3476.52 $506.44 $430.49 $518.06
2017-09 $4796.80 $775.50 $562.76 $551.05
2016-09 $4260.70 $720.86 $505.47 $499.02
2015-09 $3744.49 $659.59 $443.06 $432.46
2014-09 $2993.02 $536.75 $353.04 $335.39
2013-09 $2374.05 $395.65 $293.78 $294.44
2012-09 $2425.78 $315.21 $283.66 $283.00
2011-09 $2121.78 $243.26 $256.81 $233.01

Here are the securities and the income amounts for September, 2020:

  • Vanguard Total Bond Market ETF: $149.94
  • Vanguard Total Bond Market ETF: $38.41
  • Vanguard Total International Bond ETF: $10.14
  • Vanguard Utilities ETF: $192.58
  • RLI Corp: $24.80
  • SPDR S&P Dividend ETF: $711.50
  • SPDR S&P Global Dividend ETF: $709.27

Big Jim is trying to keep up with all the changes.

Image from Wikimedia, assumed allowed under Fair Use. Painting of angel by Guariento di Arpo (1310-1370).

2020-08 Dividend Income Report

Here is the dividend income report for August, 2020.

The monthly dividend income came out to $205.28. The yearly income total for 2020 through the end of the month was $4822.38.

The income for August, 2019 was $63.10, and the yearly income for 2019 through the end of August was $4373.04.

There is not a whole lot to report. I might have more to say on the September report.

Here is a table with the year-to-date amounts, the monthly amounts, and the three- and twelve-month moving averages for each August from 2011 through 2020:

Month YTD Amount 3MMA 12MMA
2020-08 $4822.38 $205.28 $790.58 $910.30
2019-08 $4373.04 $63.10 $788.78 $697.89
2018-08 $2970.08 $48.14 $549.51 $540.48
2017-08 $4021.30 $581.69 $558.23 $546.50
2016-08 $3539.84 $522.20 $493.44 $493.92
2015-08 $3084.90 $406.45 $427.26 $422.22
2014-08 $2456.27 $323.94 $348.41 $323.64
2013-08 $1978.40 $305.11 $279.05 $287.74
2012-08 $2110.57 $316.04 $280.53 $277.00
2011-08 $1878.52 $322.35 $254.56 $225.45

 

Here are the securities and the income amounts for August, 2020:

  • Vanguard Total Bond Market ETF: $155.22
  • Vanguard Total Bond Market ETF Other Account: $39.76
  • Vanguard Total International Bond ETF: $10.30

 

Big Jim thinks that an angel holding a ventriloquist dummy is the weirdest thing he has seen.

Image from Wikimedia, assumed allowed under Fair Use. Painting of angel by Guariento di Arpo (1310-1370).

2020-07 Dividend Income Report

Here is the dividend income report for July, 2020.

The monthly dividend income came out to $209.33. The yearly income total for 2020 through the end of the month was $4617.10.

The income for July, 2019 was $58.79, and the yearly income for 2019 through the end of July was $4309.94.

There is not a whole lot to report. I am still waiting to see if the world will end some more, or if we have come to the end of the endings.

Here is a table with the year-to-date amounts, the monthly amounts, and the three- and twelve-month moving averages for each July from 2011 through 2020:

Month YTD Amount 3MMA 12MMA
2020-07 $4617.10 $209.33 $781.84 $898.46
2019-07 $4309.94 $58.79 $818.06 $696.65
2018-07 $2921.94 $736.90 $548.35 $584.94
2017-07 $3439.61 $331.08 $541.56 $541.54
2016-07 $3017.64 $273.36 $464.99 $484.27
2015-07 $2678.45 $263.13 $412.44 $415.35
2014-07 $2132.33 $198.43 $333.77 $322.07
2013-07 $1673.29 $180.57 $258.23 $288.65
2012-07 $1794.53 $219.72 $261.24 $277.53
2011-07 $1556.17 $204.83 $235.96 $211.69

Here are the securities and the income amounts for July, 2020:

  • Vanguard Total Bond Market ETF: $158.50
  • Vanguard Total Bond Market ETF Other Account: $40.60
  • Vanguard Total International Bond: $10.23

Big Jim tries to be consistent, even when nothing happens.

Image from Wikimedia, assumed allowed under Fair Use. Painting of angel by Guariento di Arpo (1310-1370).

2020-06 Dividend Income Report

Here is the dividend income report for June, 2020.

The monthly dividend income came out to $1957.12. The yearly income total for 2020 through the end of the month was $4407.77.

The income for June, 2019 was $2244.44, and the yearly income for 2019 through the end of June was $4251.15.

All in all it was a good month. I have one less fund than I did last June (I sold RWR in May), but overall I did alright. I did buy some more BND for my Roth IRA at the end of June. So now my Roth will get income every month.

RWR is still doing well. Perhaps I sold too soon. Or perhaps the damage in the economy has not hit the stock market yet. I think I will stick with my plan to just sit tight until next year and then buy something. If I stick with Ron DeLegge’s plan, I should buy RWR. I am also thinking about KBE, the SPDR S&P Bank ETF (ETFDb page here,  State Street page here). Banking is not a major asset class, but let’s face it: Banks make money coming or going.

I am also thinking about getting XYLD, the S&P 500 Covered Call ETF by GlobalX S&P 500 Covered Call ETF (ETFDB page here, GlobalX page here). Ron DeLegge has a premium newsletter with the Monthly ETF Income Trade. It sells covered calls in SPY, GLD and I believe one other ETF as well. It looks like XYLD might do something similar. It pays monthly. Ron DeLegge gives a dollar amount for what you would have made if you put $100,000 in his income portfolio (which would be in your non-core portfolio). If you had $100,000 in XYLD, you would have made about $483 in July. Not quite as good as Ron DeLegge’s portfolio, but not bad considering it’s less effort. I might hold off for a few more months. I don’t know how this strategy will do if the S&P 500 goes down. I think XYLD is more correlated to the level of the S&P 500 than Ron DeLegge’s portfolio.

My Roth IRA might get a lot bigger because I might quit my job and add my Roth 401K to it. There are a lot of things I do not like about where I work. I know this is not a good time to quit, but I frankly hate it there. This is no way to live.

Here is a table with the year-to-date amounts, the monthly amounts, and the three- and twelve-month moving averages for each June from 2011 through 2020:

Month YTD Amount 3MMA 12MMA
2020-06 $4407.77 $1957.12 $778.78 $885.91
2019-06 $4251.15 $2244.44 $959.55 $753.16
2018-06 $2185.04 $863.49 $319.68 $551.12
2017-06 $3108.53 $761.91 $539.42 $536.73
2016-06 $2744.28 $684.76 $464.00 $483.42
2015-06 $2415.32 $612.21 $411.83 $409.95
2014-06 $1933.90 $522.86 $333.10 $320.58
2013-06 $1492.72 $351.48 $257.79 $291.91
2012-06 $1574.81 $305.84 $260.85 $276.29
2011-06 $1351.34 $236.50 $235.38 $203.23

Here are the securities and the income amounts for June, 2020:

  • Vanguard Total Bond Market ETF: $164.38
  • Vanguard Total International Bond ETF: $10.28
  • RLI Corp: $24.73
  • SPDR S&P Dividend ETF: $700.64
  • Vanguard Utilities ETF: $270.44
  • SPDR S&P Global Dividend ETF: $786.65

 

Big Jim is holding tight in his portfolio, but might make big changes in his life.

Image from Wikimedia, assumed allowed under Fair Use. Painting of angel by Guariento di Arpo (1310-1370).

2020-05 Dividend Income Report

Here is the dividend income report for May, 2020.

The monthly dividend income came out to $179.08. The yearly income total for 2020 through the end of the month was $2450.65.

The income for May, 2019 was $150.95, and the yearly income for 2019 through the end of May was $2006.71.

The one big event in May is that I sold all my shares of RWR from my IRA. I bought at $100/share, it got to $67 when it paid the March dividend, then it went up to $80, and I started thinking about selling. When I sold it was at $71, now it is around $77.

The March dividend for RWR was 58 cents, and the June dividend was 70 cents. I thought the June dividend would be lower. I am not caught up listening to Ron DeLegge’s Index Investing Show or The Phil Ferguson Show, so I do not know what they are saying about what is going on. (I am actually a couple of years behind with The Phil Ferguson Show). I guess I need to work on my investment policy statement and written investment plan. I need to figure out my rules for when to buy and when to sell. I think they might be different for ETFs. A lot of DGI investors sell when a company cuts their dividend, but for funds the divident varies (I assume this is due to people going in and out of the funds).

Given that I sold based on price, maybe I am not as dedicated to indexing and dividends as I would like. I like to think I make my own decisions, but maybe I do not. I guess the capital gains conditioning is stronger than I thought. But I do think that real estate and REITs will have a hard time in the future.

Wolf Street points out that a lot of mortgages are in forbearance right now. We might not see the pain in real estate for a while. I think office REITs will get hosed.

I am on the fence about working from home. I don’t miss the commute, but I am getting tired of the dogs, the trucks, and the neighbors smoking pot all the time. It is easier to focus at the office. I hope that working from home does not become mandatory forever. I think it would be a mistake for companies to do that. Granted, some people do like it. It would be a mistake for companies to not explore it, or mix the two. If you used to lease five floors in a building and now you only need three or four, that is a no-brainer.

When the iPad came out, all the Apple fanboys were saying that in five years, nobody would buy a laptop or a desktop ever again, everybody would be all tablet all the time. That did not happen. I think WFH will be the same. I think there will be changes, but I don’t think offices will go away.

I have read a lot of articles and watched videos in which people have said that big cities in the US might lose population. I think this would be a tragedy financially, economically and environmentally. We have put in a lot of time and money into building cities, and it would be stupid to throw it all away and pave over more farmland because some people are too stubborn to wear masks. A lot of big cities in Asia (except maybe Wuhan) and Europe are flattening the curve through masks and distancing.

It looks like Realty Income is still able to increase their dividend. If you look at their top 20 tenants, there are a lot of food stores. They might be okay. This is something to keep an eye on. I might revisit RWR in January and see if I think it is worth getting back into. Their biggest stock is Prologis, which is a REIT for logistics. Somebody has to get the food to the grocery store. Their second biggest holding is Digital Reality which focuses on data centers. Perhaps selling was a mistake.

I have done pretty well investing on my own. Sometimes it is because I am smart, sometimes because I am lucky. It looks like with RWR I was neither.

Here is a table with the year-to-date amounts, the monthly amounts, and the three- and twelve-month moving averages for each May from 2011 through 2020:

Month YTD Amount 3MMA 12MMA
2020-05 $2450.65 $179.08 $747.49 $909.85
2019-05 $2006.71 $150.95 $592.51 $638.08
2018-05 $1321.55 $44.66 $398.51 $542.66
2017-05 $2346.62 $531.68 $553.90 $530.30
2016-05 $2059.52 $436.85 $479.79 $477.37
2015-05 $1803.11 $361.99 $411.92 $402.51
2014-05 $1411.19 $280.01 $304.77 $306.30
2013-05 $1141.24 $242.65 $260.91 $288.11
2012-05 $1268.97 $258.15 $257.13 $270.51
2011-05 $1114.84 $266.55 $233.03 $194.61

 

Here are the securities and the income amounts for May, 2020:

  • Vanguard Total Bond Market ETF: $169.02
  • Vanguard Total International Bond ETF: $10.06

Big Jim admits he does not know how to handle a crisis.

Image from Wikimedia, assumed allowed under Fair Use. Painting of Saint Michael by Guariento di Arpo (1310-1370).

2020-04 Dividend Income Report

Here is the dividend income report for April, 2020.

The monthly dividend income came out to $200.13. The yearly income total for 2020 through the end of the month was $2271.57.

The income for April, 2019 was $483.26, and the yearly income for 2019 through the end of April was $1855.76.

There is not a whole lot to say. I might post more in the May report.

Here is a table with the year-to-date amounts, the monthly amounts, and the three- and twelve-month moving averages for each April from 2012 through 2020:

Month YTD Amount 3MMA 12MMA
2020-04 $2271.57 $200.13 $753.19 $907.51
2019-04 $1855.76 $483.26 $588.35 $629.22
2018-04 $1276.89 $50.88 $405.77 $583.24
2017-04 $1814.94 $324.66 $532.02 $522.40
2016-04 $1622.67 $270.38 $461.86 $471.14
2015-04 $1441.12 $261.30 $409.21 $395.68
2014-04 $1130.58 $196.43 $323.64 $303.18
2013-04 $898.59 $179.23 $262.82 $289.40
2012-04 $1010.82 $218.56 $274.05 $271.21

Here are the securities and the income amounts for April, 2020:

  • Vanguard Total Bond Market ETF: $184.76
  • Vanguard Total International Bond ETF: $10.92
  • Brokerage Money Market: $1.99
  • Brokerage Treasury Account: $2.46

 

Big Jim doesn’t have a lot to say. His life has become pretty monotonous.

Image from Wikimedia, assumed allowed under Fair Use. Painting of calling Peter and Andrew by Duccio di Buoninsegna (c. 1255–1260 – c. 1318–1319), aka “The Duce”.

2020-03 Dividend Income Report

 Here is the dividend income report for March, 2020.

The monthly dividend income came out to $1863.26. The yearly income total for 2020 through the end of the month was $2071.44.

The income for March, 2019 was $1143.33, and the yearly income for 2019 through the end of March was $1372.50.

Up until the coronavirus pandemic, it was looking like switching from individual stocks to ETFs was working out very well. I had sold my shares of RWR that I held in a taxable account, and even without those shares, I had the best March ever. (Granted, I still need my three-month moving average to be about triple what it is in order to live off dividend income.) I still have RWR in an IRA.

I sold my RWR shares in my taxable account and just about broke even. I made some money in dividends, but I had to pay taxes, and sold when the price was at $90. I know I am always saying that people put too much emphasis on price and capital gains, but if something goes to $0, then there are no dividends. Besides, I do not know what is going to happen, and I might need some cash at some point. I think selling after a 10% is not a bad rule to go by.

I am still not sure what all my rules should be for investing. There is a saying on Wall Street: Bears make money, bulls make money, pigs and sheep get slaughtered. I think this is another way of saying plan your work, and work your plan. Should I sell the ETFs in my tax-advantaged accounts? Or should I let them go as they are since I do not need to touch them for 10 or 20 years? (I assume things will be better in 10 or 20 years.) I was planning on making an investment policy statement as Ron DeLegge recommended. Perhaps I will put his podcast back into my MP3 player and see what he has to say. I will also see what Phil Ferguson has to say about what is happening. I knew at some point there would be a recession (there always is at some point). I know that stocks might go down. I did not think there would be 15% of the labor force filing for unemployment in a month.

I may even look into the ideas of “The Black Swan” author Nassim Taleb, although there are some issues with Taleb and his ideas. He may know what to do when the world is ending, but he sounds like an angry crank when talking about every other issue. When I was living in Chicago, I knew someone who worked on the floor of the NYSE on 9/11. He thought it was kind of funny that Guiliani got a reputation as a guy you want during a crisis. He said that if Guiliani did not have a crisis to handle, he was making one of his own.

The basic strategy of Taleb is “tail-risk hedge”. One firm had a 10x return in March using tail-risk hedge. Here is another page from the Felder Report explaining tail-risk hedging. CALPERS recently exited one of two tail-risk hedges that according to Bloomberg could have returned 3,600%, or about $1 BILLION dollars. They kept a second one that still had a positive return (see article here). One issue with CALPERS is that the Chief Investment Officer did not tell the board that he had exited one of the hedges at a March meeting (he exited the hedge in January). Maybe he is an Austin Powers fan: Why make billions when we can make millions?

I am not clear how these tail-risk hedges work. The article from The Felder Report talked about some of the options expiring, some not expiring. It all sounds complicated for someone who already has a job doing something else. I know they can lose money during the good times and make money during bad times. Frankly, that is one reason I am leery of them. I remember back in 2007 or maybe early 2008, when things were starting to look shaky, Bloomberg Markets magazine had an article about David Tice, who at the time managed the Prudent Bear fund. The next month, the magazine published a letter from a reader about the article that said something like: This guy lost money for five or six years; he makes money one year, and now he thinks he is a genius.

I am leery of stock market bears and the hyperinflationistas. They keep predicting disaster all the time, and when it finally happens they want everyone to think they are geniuses. Yet they never acknowledge they are wrong more often than they are right.

Can an individual investor like me even get a tail-risk hedge? Can I do it without getting taken to the cleaners? And who is the counterparty? Are there multiple counterparties? What if the world ends, and the counterparty doesn’t have the money to pay up? If CALPERS did not walk away from a $1 billion dollar payday, where was that money going to come from?

There is one ETF called Cambria Tail Risk ETF (page on ETFDB.com, page on ETF.com, page at Cambria Funds) which according to ETF.com, invests 1% of its holdings in “out of the money put options on the S&P 500 Index”. Ron DeLegge’s ETF Premium monthly income trade uses covered calls. TAIL appears to be the ONLY tail-risk ETF out there.

Here is a table with the year-to-date amounts, the monthly amounts, and the three- and twelve-month moving averages for each March from 2012 through 2020:

Month YTD Amount 3MMA 12MMA
2020-03 $2071.44 $1863.26 $690.48 $931.10
2019-03 $1372.50 $1143.33 $457.50 $593.19
2018-03 $1226.01 $1099.99 $408.67 $606.06
2017-03 $1490.28 $805.35 $496.76 $517.88
2016-03 $1352.29 $732.13 $450.76 $470.38
2015-03 $1179.82 $612.48 $393.27 $390.27
2014-03 $934.15 $437.87 $311.38 $301.75
2013-03 $719.36 $360.85 $239.79 $292.68
2012-03 $792.26 $294.68 $264.09 $269.92

 

Here are the securities and the income amounts for March, 2020:

  • Vanguard Total Bond Market ETF: $167.25
  • Vanguard Total International Bond ETF: $9.50
  • Vanguard Utilities ETF: $186.77
  • RLI Corp: $23.62
  • SPDR S&P Dividend ETF: $682.41
  • SPDR Dow Jones REIT ETF: $179.94
  • SPDR S&P Global Dividend ETF: $596.84
  • Brokerage Money Market: $3.77
  • Brokerage Treasury Account: $13.16

Big Jim knows that he will need a plan that can work in good times and bad.

Ancient woman praying, painting in Catacomb of Callixtus, 2nd-4th century, file found on Wikimediaassumed allowed under Fair Use.