Friday, December 21, 2012


They say good things come to he who waits! In some cases this is true. Although I don't believe in Buy-&-Hold these days, looking back at the handful of plungers (really bad losers that I recommended at meetings and to clients) they all came back. They include:

Still, the overall return for DITM remains consistent - between 9 - 10% annualized. I wrapped up trades only opened in 2011, closed in 2012 - about the same number will be posted after Jan.1

#months 121.. in trade: 6

2012 DITM

5/24/2011 WM 17 5.66%
6/27/2011 BMY 9 9.09%
8/20/2011 DIA 8 6.06%
8/20/2011 MAT 7 8.56%
7/21/2011 LO 7 16.00%
9/16/2011 PM 5 13.77%
10/12/2011 COP 4 12.33%
10/25/2011 EPD 3 5.56%
10/26/2011 LLY 4 9.65%
11/1/2011 INTC 2 15.75%
11/28/2011 TAL 3 13.36%
12/1/2011 KMB 9 10.13%
12/1/2011 SDRL 9 10.13%
12/5/2011 MRK 3 9.55%
12/16/2011 NUE 4 17.72%
12/27/2011 DOW 3 22.47%
5/10/2011 TOT 8 9.37%loss
5/16/2011 CVX 8 10.77%
5/20/2011 SVU 8.9%loss
5/20/2011 NOC 8 8.00%

Monday, December 10, 2012


Hot off the Bloomberg airwaves: the average Hedge Fund has returned 1.4% year-to-date, the third year of gross underperformance. Legendary John Paulson's funds are mostly down 20%, while Steve Cohen (SAC) is up 9% (and undergoing an SEC insider trading investigation).

For the record, the S&P 500 is up 12.7% so far, with its ETF - the SPY- up 13.6%. The Nasdaq Composite, despite AAPL falling from the tree, is up 14.6% as of today, with hopes of more the rest of December.

Despite the scare of higher dividend taxes in the near future, here are some interesting facts garnered mostly from Barron's this week: per Sam Stovall, taxes to be on dividends ( ordinary income) are the same as on Bonds! So far, since November 7, there have been 160 "Special Dividends" - my advice, buy them AFTER the ex-date, so the stock price will have dropped, increasing dividend %. 50% of dividend stocks are in tax-deferred accounts anyway. 

A very interesting chart by Ned Davis (NDR) shows that, paradoxically, stocks do much better in decades (since 1930) where taxes on dividends are higher! The worst decade for stocks - the only negative number at -1% - was the past decade; the Depression years - 1930s- earned +.3%. The best was the 1950s, up 19% when taxes were 91%!!!!

In the past I've mentioned the investment strategy that I've been almost exclusively testing and using for my entire retirement funds (because of its safety and performance). Called the DITM (deep-in-the-money) covered call plan, as of  the November close, my small IRA account ( a microcosm of DITM with strictly 5-6 stocks and cash)  is up 8.21% YTD, or 9% annualized through December. Considering the safety net of selling calls well below the BUY price, to ride through Volatility, and the consistency of year over year @9-10%, it has proven a winning strategy - especially since that IRA continues to make all-time (adjusted for prior withdrawals) highs. 

What is most surprising is that my portfolio is overweighted in Energy and tech stocks (MCHP, QRE, INTC, WMB,  PWE, PGH, VNR, ERF, et. al., some of whom are currently slightly "under water". Hopefully they will all rise before expiry and be called away for 100% of expected return - or will have normal covered calls (above the then existing price), receiving a higher intrinsic Call value and 3% or more dividends (more since the stock has fallen!).

Caveat - since the year end is seeing possibly very volatile times, and DITM does have as its only flaw the threat of a Bear market (20% or more), it is prudent to spend a few $$ for downside protection - either with puts, put spreads, or Inverse ETFs.  
For more on investing, please visit (and Subscribe to):