CNBC, Bloomberg, Fox, whatever, the message is always biased to guests agenda. If someone is a perma bear, they will constantly bash specific stocks, equities in general, the economic climate, whatever, because it's in their best interest. Same with someone who has a bullish view.

Your thread proves again that "buy and hold" is dead.

I sure hope the average guy out there is not getting investor advice from a radio station.

St., this is a field that I know zip about. Why would buy and hold be dead?

You use options and that is very smart, but 95% of the investors don't. Just look at the components of the DOW over the past 10 years. Most, not all, are still trading at or below their stock prices 10 years ago. So if getting 3 or 4% yearly return is OK with them for the past 10 years, so be it.

Actually most investors are long term passive investors. Whether through their 401K, IRA, they tend to buy mutual funds, ETFs, which basically have just treaded water over the past decade.

Look at these 2 charts. The first is a Vanguard Total Stock Market Index. It basically tracks the S&P 500. Look at chart from 2001 when it started. Basically the same, except you do get a dividend of about 2% per year.

Now look at the 2nd chart, which is Microsoft. Very large and perceived successful company. Let's say you invested in the stock back in 2000. You have lost money, and only in the past year or two has MSFT been willing to pay a dividend. Still not enough to justify holding this position for 10 years.

I can give you a lot of examples. This market has been way too volatile to be a passive investor. I mean shit, yesterday the EURO debt crisis, specifically Ireland, dropped the market by 200 DOW points. It's one to invest in a company based on their fundamentals, management, strategy, but then you have all these external macro factors, i.e. government.

I think you mentioned you are in your early thirties. If you don't have the time, inclination, desire to learn, then investing in big solid companies, or ETF's is probably smart, considering you have 25 or 30 years before you need the money. Of course that's assuming you don't need the money.

http://finance.yahoo.com/echarts?s=VTI+Interactive#chart1:symbol=vti;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined


http://finance.yahoo.com/echarts?s=MSFT+Interactive#chart2:symbol=msft;range=20000101,20101117;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

-- Modified on 11/17/2010 8:30:03 PM

it keeps giving me today's chart. You can change the parameters and put the dates you want to see toward the bottom of the chart.

dead for the past 10 years but who knows about the next 10?
     
       I'm still committed to indexing for the bulk of my holdings and would bet that the next 10 years will show this strategy is superior to stock picking at least as far as the S and P 500 is concerned.

     By the same token, there really is no other strategy that will provide better returns for the average investor as most non index mutual funds did just as poorly over that same time period whether their strategy was buy and hold or churn and burn. And check out the number hedge funds that died during that same period.

If you don’t trade big money commissions and taxes will eat most of your profits. Further, not all stocks are good candidates for covered calls – you have to screen carefully and know what you are doing. Finally, you have to be in enough positions to diversify your holdings or the risk of loss is just too great.

       There are in fact better option strategies than covered calls but they are complex and require a fair amount of study.


-- Modified on 11/17/2010 9:02:26 PM

1,100.00  1983
2,000.00  1987    
2,900.00  1990
3,600.00  1993  
4,600.00  1995  
8,400.00  1998  
11,300.00 1999
14164.00  2007
10200.00  2009
11,007.00  Nov 18,2010

As I said in a previous post, the majority of investors are passive investors, and 98% of the available investment options are focused on the long side. If the average guy out there doesn't have the time or desire, then probably investing long term in quality large cap stocks paying good dividends as mentioned by JLWest, or investing in Vanguard ETFs probably makes sense.

We are so inter-connected in the global market, that a Greece, Ireland, China, or closer to home government action or inaction, makes this market beyond volatile.

Look at what happened at the end of August. The Fed comes out and mentions QE2. The intent is to eliminate Treasuries from the equation, and push just about everyone into other assets, hence the market goes 15%. Then all of sudden Ireland pops up on the radar screen again and stocks drop 5% in a week. A rig blows up in the Gulf, and BP (a large generally well run company), stock gets whacked by 65% in a matter of a few months, and our government helped in a small way (lol). There is way too much volatility and uncertainty in this market, so having a trigger finger on the enter key of my computer is one of my options.

Nevertheless, buy and hold can work in certain circumstances.

They got hammered as a result of the Gulf spill, but of course not as bad as BP. What really pissed me off is that WFT is a land based driller. They have no exposure to the Gulf. Go figure.

Off topic a little, I'm a bit surprised that liberals are not screaming about the lack of GM IPO shares for the average American worker, whatever that means. I understand that the underwriter (Morgan Stanley) is supposed to get the best IPO price as possible, which in turn benefits the government and taxpayer, but I'm still surprised on how quiet they are on this issue. I'm also surprised on how quiet they are on QE2. The Fed, and with Obama's endorsement, want asset classes like equities to increase, and if the dollar drops, oh well. Well, commodity prices are going up at the retail level. That's going to hit the typical Democrat constituent. I guess these issues are not that important to them. It should be.

-- Modified on 11/17/2010 10:23:34 PM

Today the Dow Jones closed at 11,007.88.

This is a dollar value.

In November of 2000, the DJIA was at 10,629.11

What has been the effect of inflation between 11/29/2000 and today?

Well, the US inflation calculator puts the current DJIA at 8666.95 in Y2K dollars.

Therefore, the value of the DJIA has declined 18.5% over the past decade.

I was listening to someone on the radio proclaiming how crossing the 11k threshold would put us back to where we were at X point in the past. Bunk. In order to even break even with where the DJIA was 10 years ago, it would have to hit 13,500.

And THAT is using bogus BLS inflation numbers that don't take a ton of things into account. According to Walter Williams, true inflation is actually about double what the BLS reports. So that 13,500 number is charitable.

It's amazing the people they will put on the radio.

The price of the DOW 10,000, 11,000 or 14,300 all time high has very little to do with anything unless you are a trader. Lets say you buy Google at a price, you have to hold it untill it goes up and then sell it. Very few people can buy and sell at the right price at the right time.

My point is any stock that doesn't pay a decent dividend is a speculative stock. And if you buy a stock that pays a 4.5 - 6.6% yeild it really doesn't matter that much if it goes up or down. You bought it at a price to yeild.

This in turn make the level of the DOW less of imporantance. To compare the Dow over more that a 3 to 5 years span is not really feasable. The stock in the Dow change to much over long periods of time. You also have the fluctionation of the Dollar to factor, Fed policy and money supply.

The Dow is just a measure for pundants on MSNBC to talk about.

I've often wondered if it's so volatile right now because none of the fundamentals are as solid as they're often made out to be.

I know zilch about this topic, so I'm all ears on this one.

I am a buy and hold investor. I'm still holding some stocks that I bought before graduating high school. And like you, I strongly favor dividend paying stock which makes up about 40% of my equities.

There is a small amount of stock that i guess you could say I play with. By that I mean that I try to buy low and sell high.

But overall I am a buy and hold investor. I buy stock in companies I believe to be solid; and as long as their future continues to look solid, I hold that stock.

And let me tell you, those reinvested dividends add up over the years.

Exxon is a good hold EOM

-- Modified on 11/17/2010 9:34:19 PM

Very few of the DOW stocks are worth looking at unless they have a good short term option at say 1 - 2% just before Exdate with a dividend of 4%. Then you can make a quick buck. Buy the stock, take the spread, didvidend and option money and have the stock assigned. If it dosen't sell do the same thing next month and keep doing it until you loose the stock or lower the basis to where you can't afford to sell based on the yeild.

But your right, most investors are long term passive investors due to 401K and IRA's.  

However, Vanguard is for the passive 401K investors and usually only makes money for Vanguard. I never buy a stock, well almost never, that dosen't pay 4.5%+ dividend and it must have options so I can sell covered calls.

Your using a couple of examples here of stock like MSFT, but what about something like a KMP with a 6.3% dividend and has risen from a $25 stock to 69 dollars and paid a 6% dividend on current price between 1992 and 2010. My best purchase in 1992 by the way and ATF.  My yeild on this is over 20% at the current dividend of $4.40. Where can I make better money without using a gun.

Chevron 1970 todate 56 to 83 with a nice dividend all the way. And there are many stocks like this. You have to do a lot of research but it's not that difficult. A guy with an IQ of 100 could easly make enough over a lifetime investing in these kids of stocks on a buy and hold basis, reinvest the dividends, dollar average on a basket of good companies, sell a few options and do just fine.

Trading stock is too damn difficult and subject to the Goverment, Euro, war and pease and the ups and downs of the market.

Plus the spread. I think I'll keep it. Taxes take a bit, but most were in an IRA account, so fuck the taxes and the commisions $1.25 plus .75 cents a 100. When assigned they take a little bigger bite, I don't know $25 but I usually moving 400 to 800 shares of something and the spread is $1.50 to 2.00 dollars. And if I buy before the exdate I'll sometimes pick up an additional .95 to a buck dividend even if I loose the stock.

Example:

CVX $62,400  (800 shares)               Nov $80 Calls
Spread     2.38  $1.904
Dividend    .72       604
Call          2.45      1,984
Total                   $4,492      
Commisions:  
Stock Purchase       $7.00
Covered calls          14.85
Assigment               25.00
Total                      46.84
Net:                                            $4,445.15
Return                                         7.12%

But wait a min. I had the stock for 36 days. It's 7.12% in 36 days. How do you anualize that?

It is true, that had I bought CVX and held until next Thur I would probably make more on the spread and got the dividend and still had the stock. But hey it ain't over yet. CVX could be under break even of $82.45. If it's over I'll give up some spread but I never cry about a profit.

Smart money says don't sell covered calls, but I do and I did this trade both in my IRA and regual account.

It's the 5th time this year that I have done this with Chevron. Gotta love Scottrade.

Thank God it was only 400 shares and I had a covered call on the position. By the time I got out it was a loss of about $3.50 a share. Was going to buy to close the position but even Buffett makes mistakes. But that Son of Bitch can afford to lose once in a while. It really pisses me off. LMFAO

maybe it's a bad night for me with all this agreement. As far as th GM IPO I think that's a short trade. Probably 1 to 3 dollar rise then below $30 when some bad new comes out. The Democratic base don't really buy stocks in the market. There the 401K passive people.

I would think QE2 and a weak dollar is hurting the Democratic base, retired, fixed income, union workers and poor. Problem is most don't understand the implications. And the Republicans and TV are to stupid to explain it.

The majority of U.S. companies are doing relatively well, specifically on the bottom line (profits), and are now starting to show a bit better improvement on the top line (revenue). I know it's difficult for all of us to stomach 9.7% unemployment, but U.S. companies did a good job of reducing expenses and cleaning up their balance sheet during the recession. But understand that most of the companies in the S&P 500 generate close to 50% of their revenue outside the U.S. All you have to do is look at the strength of China, Brazil, India and the other emerging market countries. So this global diversity helped a number of companies. You are also starting to see M&A activity, increases in dividends and share buybacks which are all positive indicators that the fundamentals are getting better.

Whether we like it or not, we are in a global economy, and macro events here in the States and overseas will have an impact. Look at Ireland. On Tuesday all hell broke lose as a result of their banking issues. Markets tanked, and then today it appears the ECB will come to their rescue and everything is fine. This is one example of macro events that tend to roil the markets.

Fundamentals will only continue to improve if we can only increase demand, and only then will the unemployment rate drop to a more reasonable level.

Do you have a Barnes & Nobel in your neighborhood? When you have some free time, hang out and just start reading some of the business mags, i.e. Money, Forbes, Kiplinger, Smart Money, etc., just to get a sense of what they are saying. Understand the info they provide is a bit dated, usually by a couple of months as to what is actually going on in the market, but it's a great way to start understanding the lingo and issues. Plus, there is always a hot chick or two, or in my case a hot MILF or two hanging out there as well. Just don't smoke any weed before you go, because you won't remember shit.

Utilities, Housing, Banking and Healthcare are currently promoting most of the volitity right now. Now one knows what the Gov is going to do to them regarding regulation. The rest of the industries have good fundamentals and decent profits.

The stock market is trading in a wide band from 10,400 to 11,400 and probably will continue for a couple of years. If the PIIGS (Portugal, Ireland, Italy and Spain) get into serious trouble where the ECM won't give aid all bets are off. A serious danger is the German vote and elections. Merkel is losing her support. The German electorate is feed up with the bailouts (Greece) and soon Ireland.

There is one other big hurdel for the US economy. The US economy is 70% consumer driven. It's not substanable with that percentage due to productive. If it took 95 or 96 percent of the work force to produce to goods and services for the 70% consumption it would be.

We have about 15 to 18% unemployment/under-employment. This may be a long term problem, a very long term problem.

Read Yahoo finance, MSNBC.com, CNBC.com. It's difficult to sort the shills from facts but after a while and common sense will win out.