My thoughts this morning. With reference to SI Message and Elroy's reply SI Message on the use of margin debt for market capitalization under management. At times I have wondered if I should just 'sweep them all away' 'close the umbrella' and 'get out of the way' with only a cash account like when I used a broker for my first trade to buy a share of a Canadian mining company as a more interesting way of saving money without spending it.
I obtained my margin account when I asked to get Advanced Dashboard. When I got Advanced Dashboard not only did I learn I now had a margin account but that they had also gotten rid of the cash accounts which prompted me to phone them, after they heard me we agreed to just open new cash accounts. Canadian and US cash accounts were opened with a different account number from the margin number and linked together in both Advanced Dashboard and WebBroker. A few years later an incident prompted me to phone them again when a fellow with a French accent answered, he heard me say 'Of course the cash account is the default account'.
For a good number of years most of my money was in the margin accounts and I tried investing in companies with a reasonable dividend like Ford, Centurylink, and Wells Fargo rather than relying on churn of the portfolio to obtain cash for house, insurance, property and income taxes, utility, and food payments and watched as dividends were reduced or eliminated. On the Canadian side many companies that paid reasonable dividends were available though many of the oil and pipeline companies were convinced to reduce their dividends to less than that of preferred shares. There are still a good number of them available though they do not appear to contribute to increasing market capitalization under management. The Canadian side has split corp's now with nice yields that help with interest charged they earn with option strategies though when interest rates rise quickly they stop paying the dividends for a while. On the US side I still see funds and business development companies with good yields. Real estate trusts are available in the US and Canada though I do not think Canada has the mortgage backed securities as publicly listed exchange traded entities. In recent years I have placed the higher yielding publicly listed securities into the cash accounts and the tax free savings account (TFSA), the TFSA is still part of the original account number that where the cash accounts became margin accounts.
When interest rates started to rise quickly including in my margin account, personal line of credit, and home equity line of credit I reduced the market capitalization under management and stored more assets in the cash accounts. Even though the interest on the lines of credit increased less than triple what they were I did not increase the rent I charge the person who rents the basement suite.
Most of my trading is done in the margin accounts now with the cash accounts and TFSA mostly in assets with (or once had) good dividends or distributions. For a long time when almost everything was in the margin accounts I had a lot of trouble building up assets in the cash accounts (for a period of time it the computer software would not allow me to even though there was adequate available buying power). I have started a practice of moving a small number of shares representing profits after commissions to the cash accounts when selling a position though I do not do it all the time. Sometimes I move assets or cash between the cash and margin accounts to manage available buying power, sometimes I sell to manage available buying power. At the end of every month for some dumb reason the broker's system does not display 'loan' values in the margin accounts and for some reason they do not have as part of the data they make available for users watchlists the required buying power percentage. On Friday I sold shares of an interlisted Canadian company and bought shares of a United States company and I was surprised as I had to buy less than I thought I was going to be able to as the required buying power percentage for the US company had changed from the last time I bought it in the margin account, I was not holding the margin debt on that side of the umbrella so there is some cash sitting there now and the debt in the account did not change.
For now it looks like I do not want a 'sweep them all away' of the margin accounts. The TFSA with a significant portion of dividends and distributions is part of that account number and though those dividends and distributions currently are being used for expense payments, they could flow to the margin accounts like The Prairie Thunderstorm SI Message. |
