In Search of the Perfect Investment

I made that call recently when it was much lower. I’m proud.

My friend sells covered calls for a living. He makes about 15% on his money each year. About 95% of the calls he sells make him money. He tells me buyers of calls lose their entire investment about 85% of the time.

He regards the revenue he gets from selling of his covered calls like rent on real estate he owns. In addition to the  ”rent”, he also gets “bonuses.” They’re called dividends.

The key is to not to be greedy. If your stock falls, you can sell it and buy back your option at a lower price than what you sold it for. The value of an option typically declines the closer it gets to its expiration.

Covered calls can be annoying if your stock rises – since your customer will call your stock away. This is what happened to him as the car maker Ford rose. But each time it got called away, he made the money on the sale of the call option. And he kept buying Ford and writing calls on Ford.

Many stocks go nowhere. Writing calls against them is like printing money, since the calls never get called. They expire worthless. Exxon is an example of a stock that has gone nowhere for months.

He uses the VectorVest to time his sales and purchases. Right now VectorVest says the stockmarket is close to its present peak. Hence be wary of buying.

He also believes that the best indicator of buying and selling stock is a 28-day moving average. When the price line drops below the 28-day moving average line, sell. When the price line  rises above it, buy.

More on covered calls tomorrow.

VectorVest offers a free ($9.95) trial and a free analysis of one stock. Click here.

Last night I asked for an analysis of Google. Here are key excerpts from VectorVest’s impressive  report:

How hard is it to buy tech stocks? You can’t “Buy and Hold” because things change so quickly. But you can stay up with the technology and buy when the company’s products are hot, and sell when the stock turns down. The two hottest technology stocks today are Google and Apple. Once STEC was hot.

Business Insider did a piece on the 21 Things That Became Obsolete This (past) Decade. They include:

1. The once awesome Palm Pilot.

2. AOL and email accounts you had to pay for. Think Gmail.

3. Dial-up Internet.

4. Getting film developed.

5. Movie rental stores.

6. Paper maps.

7. Newspaper classifieds.

8. The landline.

9. Long distance charges.

10. Public pay phones.

11. VCRs.

12. Fax machines.

13. Phone books, dictionaries (except mine) and encyclopedias.

14. Calling 411.

15. CDs.

16. Backing up your data on floppies or CDs.

17. Getting bills in the mail.

18. Buttons. The iPhone is hurtling us into a touch-screen world.

19. Losing touch. Social networks have practically erased the possibility of ever losing touch with anyone.

20. Boundaries went out the window with the huge popularity of Facebook and Twitter.

21.  Paper. Probably the biggest casualty of the decade. Magazines, newspapers, etc.

Bonus: Record stores. Now replaced by the Internet and iTunes.

You can get the entire list (along with handsome photos) here.

The car rental nightmare. Everyone has a theory about the cheapest way to rent a car. I don’t have a theory. I hate renting a car.  The car companies lie about the car you’ve reserved. They lie about their rates. They lie about their added charges.

My friend recommends AARP. They use Expedia. That place gives confusion a whole new meaning. Hertz and Avis with AARP “discounts” is more pricey than going directly to their web site and not using AARP. I found the Hertz’ “Pay Now” deal to be pretty good — about one-third cheaper than anything else. I suspect that renting away from airports is substantially cheaper.  But what a pain.

Jon Stewart of The Daily Show discuss Wall Street fraud. His guest is Harry Markopolos. Harry was the hedge fund manager who brought the Madoff fraud to the attention of the SEC. But they didn’t listen. Marlopolos says the SEC is overlawyered. “Lawyers know nothing about finance.” The Daily Show is one of growing number of TV shows which can be watched at any time for free on the Internet. To see this episode, click fraud.

Recent David Letterman cracks.

+ “Iranian President Mahmoud Ahmadinejad now says that 9/11, the attacks on the United States on 9/11, were fabricated. Like his re-election.  He says the whole thing was an elaborate hoax. I’m skeptical. I think I’ll wait to see what Kim Jong-il says.”

+ “But the guy seriously is nuts. He also denies that Conan O’Brien ever hosted ‘The Tonight Show.’”

+ “President Obama yesterday had his annual physical. Annual checkup. Apparently everything is all right. Earlier today, former Vice President Dick Cheney went in for his annual autopsy.”

+ “But Obama’s physical turned out great. The doctor said a couple of things. He said: ‘Cut out the cigarettes. Also, try to stay out of Toyotas.’”

Good news. My son Michael has done good on making sure everyone can see my charts and images.

Harry Newton, who has done well with his Google and is intriqued by covered calls and  VectorVest. I’m signing up for the free ($9.95) trial of VectorVest today.