Thursday, August 23, 2012


 It is with relative peace of mind that I go on vacation next week with only 2 of my 25 existing DITM positions "under water", thanks to the upward bias of the overall market (due to Inflation, survivor bias, growth, etc.).Although it is the least desirable direction (except, of course, for the Black Swan, or Bear Market that occurs once or twice a decade - since 1900), the rally does provide a cushion for existing trades, although it makes new entries higher priced, lower in dividend %, and usually lower Implied Volatility. 

Laddering positions month to month is always desirable for diversity of income payment as well as risk. In protracted stock and/or market declines (the opposite of rallies), it is possible to "step down" positions. Such was the case with Waste Management (WM), a long term holding:  

My number one source for DITM candidates has been Seeking Alpha, so I was elated that they accepted my writing for them - in columns and Instablogs. It is possible that this blog may migrate over to them at some point.

Hopefully September will be a positive month for the market, although historically it is the worst one of the year. In Presidential Election years, for the past 28 (since 1900), the market has risen whether the Incumbent wins, loses, and all 28 combined years. According to the Ned Davis chart, the real divergence occurs after October 1, in the case where the Incumbent is to lose - the market tanks dramatically and remains there for the rest of the year! 

Friday, August 10, 2012

23 SKIDOO!! :

Schwab called today to inform me, per usual, that a stock had been "called" away - Seagate Technology (STX) - it was called on Thursday, August 9 since its ex-Dividend date is the 10th. The Call was a Sept. 26, so more than a month compression - the annualized yield (after 4 months holding) is 23.2%. Slightly better ! than MMFs .01% or Treasurys, with less risk. STX is at $33 and climbing. Actually, the yield was more like 16% after finding an error!
Also paying today was QR Energy, which was traded recently with a November call. QRE went ex-D on July 26 with a 11.1% dividend yield, and $.35 extrinsic premium (enough to make the trade worthwhile if immediately called). Hopefully the October 26 dividend will be paid, or the call will be rolled forward to Feb. 2013, depending on future price action. The chart is a typical Wyckoff selloff and Trading Range, enhancing the dividend.
So far this year, despite a lousy 2nd Quarter market, and a rare loser - SVU - the small model IRA is on a 8.6% annualized pace, about even with the S&P 500, without the unhedged risk. BTW - this pure proxy account for DITM is making new all-time highs while the markets are not.
The Ned Davis Research chart, which I wrote about in my column: 
shows that since 1900,  all markets tend to rise into Oct. 1, with the overall trend, and the incumbent-losing trend continuing up until year end - only with the incumbent (Obama) losing, does the market tank precipitously in mid-October, never to rise for the balance of the year.