LIVING OFF DIVIDENDS & PASSIVE INCOME

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)

One of my favorite investors, Nassim Nicholas Taleb, founder of Empirica investment management funds and author of Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, was recently quoted on Bloomberg advising every single human being to short the US Treasury bonds. While this news is about a week old, I thought I’d still comment on it given the fact that it’s a pretty strong statement and that I recently exited a similar paired-trade.

Taleb said investors should bet on a rise in long-term U.S. Treasury yields, which move inversely to prices, as long as Bernanke and White House economic adviser Lawrence Summers are in office, without being more specific. Nouriel Roubini, the New York University professor who predicted the credit crisis, also said at the conference that the U.S. dollar will weaken against Asian and “commodity” currencies such as the Brazilian real over the next two or three years.  Read more... (555 words, 9 images, estimated 2:13 mins reading time)

I just closed down my account with TDAmeritrade. I transferred everything to Izone.com.

Funnily enough, Izone is owned by TDAmeritrade and offers EVERYTHING that my regular TDAmeritrade account offered. Infact, the user-interface is identical. Its so identical, that the new username and password I created at izone.com even works at tdameritrade.com!!!!

 So whats the difference? All the commissions are half-priced as compared to TDA.

But whats the catch? There’s no phone support and you need to have a couple of years online trading experience in order to open an account. Actually, I’m not sure about the ‘no phone support’ policy – I suspect that if you call up the customer support number for TDA and give them your izone username, it just might work. In any case, I usually asked my questions via email at TDA, so there’s no difference for me. And izone also has a live ‘customer support chat’ feature during normal business hours which has less wait time than the phone lines.  Read more... (233 words, 8 images, estimated 56 secs reading time)

Friday’s stock market had a distinct sense of deja vu about it. Even though it was down overal, I was reminded of the crazy dotcom days in late 1999 when any tech stock could rally 25-50% in a single day!

One of my friend’s subscribes to a stock newsletter. Periodically he gets an email alert informing him when a stock is about to make a significant jump. He often sends them to me and I usually look at them and then ignore them. Yesterday he sent me an email about a China Clean Energy Inc (CCGY.OB).

By the time I got the email, it had already jumped 30% that day, but I really liked the chart. It had retreated about 15% from the highs of the day and looked like it was ready to make a move back up to the $2 range.  Read more... (744 words, 14 images, estimated 2:59 mins reading time)

In an earlier post on investing on news, I had sold puts on JRCC.

Well JRCC was up sharply in the past few trading sessions. I closed out my position by buying back my naked puts and netted a 38% profit (sold the puts for 1.95 and bought them back for 1.20).

There’s a chance the stock might go higher. But, I bought puts because it was a speculative trade and the idea was to make a quick (or somewhat short-term) buck. It went up, I made money so its time to get out.

Thats the good thing about options. They prevent you from getting married to your positions. That can be a dangerous thing if the market turns against you (speaking of which, I’m really glad I closed out my Countrywide puts after they started going against me. When I closed my puts, the stock was at $37 – now its almost $42).  Read more... (196 words, 8 images, estimated 47 secs reading time)

I read an email today that mentioned China (who is already the planet’s largest coal consumer) claims it will need an extra 80 million tons by next January. India is also estimated to need an extra 120 million tons, and most other Asian countries are expected to increase demand by 7%.

According to Kevin Kerr, “Coal prices are going much higher than I thought. Keep an eye on those diesel prices too, they are already creeping up. These two markets are going to surge this summer, absolutely.”

Since I like to take advantage of investment opportunities whenever I come across them, I placed an order to sell PUT option contracts on James River Coal Company (JRCC). Its essentially a long position on the companies stock, which has nicely trended up 50% in the past several months.  Read more... (451 words, 9 images, estimated 1:48 mins reading time)