Tuesday, April 26, 2011

History Bodes Ill for Stock Market

"There have been only four other occasions over the last century when equity valuations were as high as they are now, according to a variant of the price-earnings ratio that has a wide following in academic circles. Stocks on each of those four occasions would soon suffer big declines."

Mark Hulbert

Read more of Mark's article by clicking on the above blog post title.

Investing Lesson

I watch the Shiller PE 10 Ratio very closely and am concerned about its current high reading. That said, it has been above 20 for over one year. Markets can remain over or under valued for long periods of time, before a significant adjustment takes place.

Thursday, April 14, 2011

Covered Call Strategy Explained

Selling call options against stocks you hold is a great way to generate additional income for your portfolio but there are several problems with executing such a strategy in individual accounts:

(1) Call options can only be sold in 100 share increments.
(2) You need to be approved for selling covered calls by your broker.
(3) Commissions often eat up most of the premium you receive when you sell only one call.

Fortunately for investors in the Wade Core Destination Fund, we are able to execute the covered call strategy within the fund which overcomes the above limitations. In fact, we have sold covered calls against 25% of the individual stocks held in the fund.

When selling a call option in the fund, we allow for a cushion to capture additional upside in a stock's price while collecting a premium from selling the call.

This is a clear example of one of the many advantages of investing in the Wade Core Destination Fund.

Monday, April 11, 2011

Still Kicking the Can Down the Road

What is going on in Washington is a joke. A dangerous, bad joke.

Our country needs to "restructure our finances," much like a business going through a bankruptcy or foreclosure process. Unfortunately, our leaders are unwilling to chop the fat, and our citizens only want their neighbors to go on a diet and shun any needed changes that would impact them personally.

"There is only one difference between a bad economist and a good one: The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen... the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil."

Frederic Bastiat

Bernanke will be judged later as a "bad economist."