No. 148 – September 16, 2012

WHERE TO START?

In my last newsletter I tried something different, and got a wide range of responses – both on, and off – the record.

A very good friend of mine, who is a professional writer, once told me:

“The goal of a good writer isn’t so much to be understood; the real challenge is not to be misunderstood.”

Apparently, that happened somewhere in my last newsletter.

Comments such as, “Don’t tell me how to talk to other people,” and “Who the hell do you think you are telling me how to interact with Liberals?” Then to the more sublime comment of, “Seems that you did not save enough money when you were younger, so now you have to invest in the Stock Market to make up for lost time.”

It has always been very interesting to me how people can “read into” something that is really not written – nor even intended.  I suppose it is the sign of the times – and also a testament to the anger and frustration that is brewing out there – just below the shallow surface.

With that in mind, I have decided to condense my “investment advice” – and then return to what most people seem to be more interested in, that being the political climate of the day.

COVERED CALLS WITH A TWIST

In my last newsletter I suggested four publications that you should think about getting, in order to make sound, stock decisions.

Today, I am going to give a quick thumbnail sketch as to how I use, what is referred to as, covered call writing on stocks that you already own.

Instead of going into the whole concept of what covered call writing is, I will give you the formula that I use – and if you are still interested, then you can dig deeper on your own as to how to implement this type of investing.

Basically, if you own 100 shares of any stock, that is optionable, you can write a covered call on it.

So, let’s take Bank of America, ticker symbol:  BAC

On Friday, it closed at $9.55 per share.

Let’s work with 1,000 shares.  That is $9550.00

If you buy 1,000 shares your investment is $9550.00 (plus broker fees = $7.00 with Scottrade).  For simplicity, I will not include broker fees, as they are not that relevant to this topic.

For every 100 shares of stock, you can write ONE covered call.

You now have the opportunity to write 10 covered calls on BAC.

Using Yahoo Finance:

http://finance.yahoo.com/q?s=bac&ql=1

Go to the Options bar on the left hand side of the page.  Click it and you see that the September call for the $10 contract of BAC is .05 cents.

You Sell to Open 10 contracts and immediately get $50 into your account.  This is your money to keep, no matter what happens to the stock.

Please bear in mind this is the simplest explanation – there are many variations on this type of investment.

2 Scenarios:

Scenario #1

By the end of the third week in September (all options expire on the third Friday of every month) if the stock is $10 or more – you get “called out of your stock.”

Your profit: $50 premium

$450 the amount from $9.55 to $10.00 call price that you promised to sell your stocks for.

In one week, you stand to make $500.  PLEASE remember, next Friday is the third Friday – thus just one week.

Most covered calls run about 4 weeks (1 month) in duration.

TOTAL:  $50 + $450 = $500 in one week

Scenario #2

By the end of the third week in September the stock price is NOT $10 or more, you keep the stock PLUS the premium (you never lose this money) and you can write another covered call for the following month.

Please bear in mind, if the stock goes OVER you only get the money from $9.55 to $10.00.  Anything OVER that amount goes to the person who BOUGHT your covered call.  This is the BUYER’S gain – and the gamble that he takes when buying your option.

The “Twist” on this approach is to pick DIVIDEND PAYING STOCKS that are due to pay the dividend during the time that you are writing the covered call and sell it at that time.

You collect the premium for writing the covered call, you collect the difference between the stock price and the “strike” price PLUS, you get to collect the dividend for that quarter.

The beauty about this is that, IF you stick to your principle of buying blue chip stocks with a good covered call premium – and a good dividend, you stand to cut your  RISK to the bare minimum.

This is, in essence, the way many very successful money managers make their millions.  Once you get to the point of where you have, say 10,000 shares of a good stock, you can write covered calls far enough out, so that you don’t lose the stock – but always collect the premium.

YES, there are a lot of variations pertaining to options – but if this approach sounds interesting – I suggest that you find a person who knows what I am talking about – or ask your broker to explain it to you.

It took me about six times of pounding into my thick skull by my good friend, Scott Greene, before I got the point. Ever since then, I have been making money writing covered calls.  I have not gotten rich – but so far, we are very comfortable with the proceeds that we have been able to bank.

One note of caution.  You will NOT understand this concept on the first try.  Like I said, it took me six times to finally see the light.  Lucky for me, Scott was willing to put up with my dumbness – and my constant harping that, “If this is so damn good, then why isn’t everybody doing it?”

His simple answer was, “Only those who stick with it make the money.  Most just give up.”

I stuck with it – and I am glad I did.

I hope this concept of investing will help each and every reader to make extra money for the economic crunch I see coming – very soon.

The below article will help you to check out dividend stocks and the benefit of investing in them.

Good luck!

http://seekingalpha.com/article/869251-retirement-strategy-buy-any-dips-in-dividend-winning-stocks?source=email_the_daily_dispatch&ifp=0

LET’S START HERE

As most of you know by now, the Middle East is in near chaos.  I hope it finally settles down, but I have my doubts.

I received some very troubling news from two sources, both regarding Israel, and the impending conflict that appears to be a foregone conclusion.  When, not if.

One piece of information came from a reader who has a family friend stationed in Israel.  The other came from my mentor and confidant from many years back.

What startled me was that both sounded almost exactly the same – yet neither of these men know each other.

In summary, they both said that Israel is ready to strike Iran, that the movement of troops in the Sinai is extremely heavy, and the more telling by both men, was that troops are being bussed to the Wailing Wall – in essence, to say their last prayers before going into battle.

But also, they both mentioned that an Israeli Rabbi was called upon to issue a blessing to the troops – and for the nation of Israel.

This is the situation that I was predicting almost a year ago – except I thought it would come in October. Apparently, it is ready to go – without the explicit consent of the Obama Administration.

Yet, just this morning, came the news that the US Navy has dispatched an unprecedented amount of US Navy ships to the area – and are on stand-by, full alert.

The reason for this is, if Israel actually does launch a first strike, then the US will be there for them to fall back on.

In the likelihood that the Israeli strike is successful, then Obama can, again, take credit for “having Israel’s back” without having to actually do anything at all.

The worry lies in the off-chance that the Israeli Air Force runs into resistance – and the results don’t turn out as planned.

Then Obama will be forced to act – and THAT is where all the fear is concentrating itself as I write.

THE SHAME OF OBAMA’S MIDDLE EAST POLICY

The Obama Administration has led itself into the classic Neville Chamberlain abyss of trying to “reason” with unreasonable people.  Nobody in his right mind now believes that Obama’s Middle East policy was right – let alone survive.

I believe it was Gandhi who once said:

“You cannot shake hands with a clenched fist.”

Let Obama take a page from history – and learn from his naive mistake.  But I doubt that will happen.

However, the REAL SHAME lies in the Main Stream Media’s refusal to actually tell what really happened to one of our best, and most respected Ambassador’s in Libya, Ambassador Christopher Stevens.

Anyone who thinks that these attacks – in 7 different countries – were spontaneous, are simply nuts.  They were planned – but the Main Stream Media will NEVER admit that.

Exactly like they will not admit, nor even comment on the fact that before our United States Ambassador was assassinated, he was sodomized (raped) by his assailants.  Not even animals stoop to this level.

Had American troops caught a terrorist leader – and raped him before they killed him – you can bet your last dime that every newspaper in the WORLD would have reported it – pictures and all.

Thus, my assertion that the Main Stream Media is not only hoping that Obama gets re-elected, but the media also is in full consort with this current Administration to draw down America – to the level of a Third World Country – and, in essence, destroy America as we know it today.

Therefore, I appeal to all Americans – regardless of your political affiliation – to get out the vote for Mitt Romney.

No, I am not a Romney supporter.  I am an AMERICAN supporter.  And, in this election, if you vote for Romney, you are voting for America.

If, on the other hand, you wish to see America become equally POOR with the rest of the nations on this globe – then I urge you to vote for the incumbent.

Thanks to another dedicated reader, these photos – from Middle East Media – show the shocking details of the actual rape, dragging of his dead body and the ensuing dancing in the streets after the assassination of Ambassador Christopher Stevens.

Site:  http://www.powerlineblog.com/archives/2012/09/update-on-the-murder-of-ambassador-stevens.php

May his soul – and those of the other 3 men who were murdered – rest in peace.

NOTE:  Breaking story that four more American military members were murdered by Afghanistan police – the very people these Americans taught and trained.  This just happened today.

SECOND NOTE:  As of this writing, they are now evacuating the U.S. Embassy in Pakistan, due to the threat of more violence said to be coming next week.

What kind of sham American Foreign Policy is Obama foisting upon us?

How long are WE THE PEOPLE going to allow this shameless screwing to continue?

It is time to WAKE UP America!

Until next time.

Keep thinking positive.

Lawrence Klepinger
Editor/Publisher
THE AMERICAN TELEGRAPH