LIVING OFF DIVIDENDS & PASSIVE INCOME

If you don’t know who Ron Paul is and what he stands for then you should definitely check out this video. He’s my favorite politician!

If the video doesn’t show up, click here.

The Euro is on the verge of collapse.

Yesterday, the Euro closed below $1.30 – the lowest level all year. And the yield on the 10-year Italian bonds closed above 7%. The last eurozone countries who’s bonds closed at 7% were Greece, Ireland and Portugal.

The market considers these countries to be credit risks. If you have bad credit, you’d pay 30% or more on your credit card. But a sovereign nation has the ability to tax it’s citizens. So the chance for a total loss is remote – which is why it’ll pay a comparatively lower rate.

But even at a low 7%, Italy can’t pay the interest on it’s bonds. At this rate, as more of the debt rolls over at a higher interest rate,  it will eventually have to default on its debts.  Read more... (555 words, 8 images, estimated 2:13 mins reading time)

In April of last year, I made the case of going long Vodafone (VOD).

Since then, I’m up nearly 44% on my purchase price (including dividends). Vodafone currently yields nearly 7.5%.

Recently, Barrons had a good article on why investors should still consider investing in Vodafone.

Its ADRs, which trade on Nasdaq and each represent 10 ordinary U.K.-listed shares, could rise more than 20%, to $35-$38, over the next two years. Including dividends, the total return could top 35%, with significantly less volatility than the average stock, given Vodafone’s relatively stable business. (Vodafone ordinary shares closed in London Friday at 180 pence. The ADRs finished near $29.)

There were also several quotes from fund managers:  Read more... (238 words, 8 images, estimated 57 secs reading time)

In my last post, I mentioned that Berkshire Hathaway was undervalued and a good buy that the current price of $76 per B-share.

It turns out that it’s probably a better buy than anyone expected.

Buffett just announced that he’s spent $10.7 billion buying IBM stock, as well as a few billion dollars on CVS and VISA.

I currently own BRK-B, and I’d like to increase my exposure to it. But I’m strapped for cash.

So how do I make money from being LONG BRK when I’m short on cash?

Time to look at option strategies.

When most investors are bullish on a stock, they buy CALL options on it. They fork over some money (called a premium) and have an option to buy that stock at a specific price (called a strike price) at a future date. If the stock price exceeds your strike price, then you’ve made money.  Read more... (718 words, 8 images, estimated 2:52 mins reading time)

About four months ago I made the case for going long Cisco. At the time, Google shares (GOOG) had popped 20%, and I was looking for a new company to invest in.

In the middle of July Cisco (CSCO) was trading at $15.66.  From a fundamental perspective, Cisco was cheap – selling at less than 10 times free cash flow, and had just started paying a 1.5% dividend. However, the market was discounting the stock price  because they didn’t believe the CEO, John Chambers, could revitalize the aging tech giant.

But regardless of the management, based on just the numbers, the stock was too cheap too pass up.

And numbers don’t lie.

Yesterday, Cisco announced stellar results. It seems that growth is picking up.

Since that last post, shares of Cisco are up almost 20%, at $18.61.

Cisco isn’t the only company doing well this economic environment.  Read more... (396 words, 8 images, estimated 1:35 mins reading time)

Gold broke another record today, closing just over $1,700/oz. The Dow Jones Industrial Average dropped 634 points (5.5%) and not surprisingly, US Treasuries jumped.

This was the expected response to S&P’s cut in US credit rating.

The irony is the jump in US Treasury prices caused a decline in the interest rates.This is because bond prices and interest rates are inversely correlated.

Usually, when your credit rating is cut, the interest rate at which you can borrow goes up.  But, in the case of the US government, it has gone down.

The current yield on a 10-year Treasury is 2.31%.  Last month it was 3.02%. Similarly, the yield on a 30-year Treasury bond is 3.65%, down from 4.28% last month.

Maybe S&P should take down the US’s credit rating another notch, and cause interest expenses to fall even further!

Okay, I’m being facetious.  Read more... (241 words, 8 images, estimated 58 secs reading time)