Security and Earnings
Two famous professors from the Wharton School of Business
, Drs. Jeremy Siegel and Jeremy Schwartz, don't think so. In an article, "The Great American Bond Bubble," published in Wednesday's Wall Street Journal, page A17, they claim that bond prices are way too high and are fixing to come tumbling down just as internet stocks did in 2000. Mr. David Rosenberg, former Chief Investment Strategist at Merrill Lynch, thinks the "Two Jeremies" are dead wrong, saying that bond prices won't come down anytime soon. (See http://www.businessinsider.com/david-rosenberg-on-the-bond-bubble-2010-8.) Mr. Rosenberg believes deflation is likely to come upon us and low interest yields on totally safe T-Bonds will be looking awfully good compared to negative inflation rates. Position here is that Mr. Rosenberg may be right, but no one interested in investing money on a 1 or 2% return.
The "Two Jeremies" suggest that investors consider buying stocks of solid companies such as AT&T, which have a relatively high yield, currently 6.23% on 08/19/10. Mr. Rosenberg doesn't totally disagree with this, but wonders why an investor can't invest in safe government bonds and "safe" stocks. This sounds OK, but who can be satisfied with a return of less than 10% on their money?
After a lot of research on retirement strategies there's one thing for sure. You're never going to get the 10% return you want by buying low yield bonds and so called "high yield" stocks. That's why two of the four strategies described involved the technique of selling Covered Calls on dividend paying stocks. This technique was featured as our "Strategy of the Week" presentation on September 25, 2009 and it has been featured several times since then.
One of the essay called, "The PayDay Portfolio" reiterated conviction that selling Covered Calls on stocks paying high dividends is a relatively safe, practical way of generating 20-30% return on your money. You need to know how to trade Options, however, to properly implement this technique. Therefore, we have illustrated the basic technique several times as the "Strategy of the Week" presentation. (See the SOTW presentations of 09/25/09, 03/26/10, 05/14/10, 07/23/10 and 07/30/10.) Also made it a bonus presentation in Options Course and have made it available to options savvy subscribers via the purchase of a special PayDay Portfolio Report.
As of yesterday's close, a backtest of a hypothetical $100,000 PayDay Portfolio started on January 8, 2010 shows a Total Value of $130,035.95. I have been trading Covered Calls with real money for several months now in accordance with the rules described in the PayDay Portfolio Report and it's the best way I know of achieving both Safety and Income.
TAMING THE TIGER WITH COVERED CALLS
Ever since the so called "Flash Crash" of May 6, 2010, the stock market has shown manic-depressive behavior, going back and forth from euphoria to depression on the slightest bit of news. It's been hard to make money by going either long or short, but the strategy of selling Covered Calls does both at the same time. So visit the VectorVest University to see Mr. Glenn Tompkins, Manager of Educational Services, illustrate how it is done in this week's rewarding "Strategy of the Week" presentation, "Taming the Tiger with Covered Calls."
THE $1000.00 AWARD CHALLENGE
We believe we have a winner, but we need more time to check the results. If it pans out the way we think it will, we will give you the details next week.
Want to learn about stock investing software or stock chart analysis? Start here: http://stockanalysissoftware.blogspot.com/
Security and Earnings
By: Chris Fox
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