Making money the ugly way.

This is not pretty, nor is it necessarily morally right, but it IS a way to make a buck.  

Several years ago it became clear to me that there was at least one person in the national hurricane weather forecasting business who knew their stuff and more importantly was not tainted or swayed by politics, government bureaus, trial lawyers, or most importantly global warming foolishness. That person was Joe Bastardi.  Joe as they say has forgot more about hurricane forecasting than just about everyone else actually knows.  Joe has called more hurricanes paths RIGHT that anyone I know.  Joe has called more hurricane paths RIGHT longer out in the time frame that anyone else period.  

Many years ago as the liberal government bureaus began to take over the National Weather Service they began to plant in many people who believed as they did and that is that weather is more and more influenced by the global warming religion. Weather models began to reflect that idea and here is the big point, weather forecasting began to become agenda based on making the climate change idea stick.  You might not like hearing that, but it is plain fact.  The reason many local stations began using their own in house forecasting was to avoid that taint, but even there few forecasts remain that are not agenda based.  Note that since NBC bought The Weather Channel they too have gone off the deep end on climate change silliness. 

Point here for you local Raleigh readers. Greg Fishel is as good as any forecaster out there. However have you heard him say once in last year or two anything negative regarding his now closely held view that global warming is a hoax?  How about this little tidbit.  Raleigh set record after record this summer for heat.  During the same time hardly any of the normal hot spots in NC, such as Fayetteville, Goldsboro, etc. set any records.  The reason is simple, Raleigh over the last couple of decades has become what is known as a heat island like big cities generally are now due to concrete, housing, and such that holds heat longer.  Not one time during the records setting did you hear Mr. Fishel acknowledge that fact. Why?  Barbara Goodman (wife of station GM Jim),  now basically decides the stories going on air and she will not tolerate any deviance from her liberal theology.  High temperature records being broadcast make for good climate change agenda. 

In the last decade many of the really good forecasters went to the paid side and used the models to actually forecast what they believed to be right.  Joe Bastardi is maybe the best ever since he uses a combination of weather smarts, model understanding, and the kicker here history as a guide. Joe knows global warming is a hoax and knows that history is a better guide.  In the future look to his forecasts if you really want to know what a storm is going to do. 

Now how you can make money from listening to Joe?  Here it gets ugly. No one wants to bet on someone else losing or getting hurt in hurricanes, but folks it happens and that is fact.  The current hurricane Issac has been plodding along for sometime now and Joe Bastardi has been saying all along this baby is headed for Louisiana.  Going back the National Weather Service has been talking about a Florida hit with at most a Category 2 scenario.  Wonder why they have been talking a TAMPA Florida hit here?  I will leave that to your consideration.  Anyway it is becoming increasingly clear Old Joe has nailed another one here with the continuing current path of Issac.  If you had done, back almost a week ago as I did, and bought you some bets on the oil price getting spiked up by Issac give yourself a gold star. Because Issac is now on target to do some serious set backs to our Gulf of Mexico oil production, if for no other reason that to shut it down for some time. 

You could have bought oil interests in say Canada who will benefit from this hurricane, or shorted oil interests in Texas or Louisiana which will get hit pretty bad, either way the bounty of cash is headed your way once this hurricane does it's damage.  We doubled up on our Canadian bets and it looks like a winner here and once the hurricane hits we will depose of those assets and accompanying profits shortly thereafter. No need to take chances past the storm.  Of course we will be putting those gains aside to wait on another forecast from Joe for another round of this madness.

            

EXC...new position for us.

We like electric utilities for the safety, dependable dividend, and consider them a great alternative to US Treasuries.  Most investors obviously think the same since over the last year many have piled into them for some of the same reasons.  The most important of those reasons is yield.  The piling in has caused most, if not all, of our favorites utilities to be pushed up in price beyond where we consider the price to be sustainable long term.   SO our absolute favorite has been that way for some time.  DUK, which we dropped last month due to some real legal issues was there as well.  So we have been looking for a replacement for these in our portfolio. 

We believe we have found one in Exelon.   EXC has been under pressure for some time due to it's merger with Constellation, but we believe it has finally found a bottom here in the $37 range.  Add to that the juicy 5.5% dividend, which has now been confirmed as the payout going forward.  The one point that has held us back from earlier investment in EXC has been the business they do in Maryland. No way to decribe it, but to say the power business in this state is awful.  Maryland regulators are the worst in the country and one reason we have avoided EXC in the past. However the decline in stock price has offered up a value price here that offsets many concerns from those regulators. 

EXC has the largest fleet of nuke plants in the country and in a global warming believing Obama administration that is a plus. 

One other plus, if you can call it that about,  is that EXC is on the receiving end of lots of crony capitalism. Obama has many ties to this Chicago based company and has Exelon people in his administration.  So why not take a position in a company that plays on the real possibility Obama will get re-elected. 

We will begin a position in this stock sometime in the next options cycles with an eye on the stock price of around $37.

We also plan is to replace NNN next cycle, which has been a stalwart in our portfolio for many years, but has become so stable it no longer offers premium option value for cash flow. We are not saying NNN does not continue to hold some value, just that it no longer fits our trading criteria.

              

Our WIN trade. Is it a win or lose?

As with all trading sometimes you make mistakes and the option trade we made on WIN just a week ago appears this morning to be a mistake.  We bought in at $10 for 7200 shares of WIN and netted just under $2000 in cash.  The stock is trading down to around $9.41 this morning due to what looks to be a miss on earnings and some concern about cash flow.  Truth is that WIN did not perform as well as it should have this past quarter and this follows a first quarter where there was a similiar report.  All this weakness in the report makes one wonder why so many insiders bought big numbers of shares that are now below water in price the preceding quarter. 

Do we still believe in WIN, the short answer is yes.   The main reason why is this little item in their report this morning that above 68% of their revenue comes from business or broadband. That means the slow decline in residential wireline business is becoming less and less of an driver of profits and revenues for the company. Sooner or later they will get their act together and make the turn in reported profits.  Many of the customers they serve have few options to find service.  Broadband residential customers however in some areas they serve do have options and that is indeed hurting their business. 

Now back to our trade, we are likely to get assigned 7200 shares of WIN at $10, which on the surface does not look good. But note that we will have bought in just prior to the ex-dividend date and will soon be paid $1800 to add to our $2000 already netted. We also can turn around a begin to sell call options on this stock which will net us more cash at the end of next week, currently about $800 per month.  As we have pointed out over and over again our hedging approach is cash flow oriented, not capital gains oriented. 

 In essence we have a stock which will pay us 10% dividend with a cost of 4.75% to borrow to buy. Add in the early on $2000 and the monthly option cash flow and you got a cash flow that adds money to your account regularly until we get called out of the stock at the buy in price of $10.   All this playing with the house's money.   Maybe not a win, but not a loss either. 

                 

 

CTL...safest 7% dividend in the country.

Centurylink, symbol CTL, reported stellar earnings and cash flow after the market closed yesterday.  This company continues to impress with it's integration of purchased assets and making those assets contribute to cash flow.   We have been pushing this stock since it was in the mid $30's and even now with some of the value gone due to the move up in price it is still a decent value with the safest 7% dividend in the country. Few places now one can find payouts like this with a company that has the ability to pay the cash almost indefinitely.  Again this month CTL kept paying off debt with close maturities and lowering the percentage of the cash flow that goes to dividends.  

CTL used to raise their dividend annually, but once they bought two large telecom companies in the last decade they stopped that and have been using the cash to pay down debt from the purchases. Frankly we like that as we see the current dividend as rather nice and if you had been like us the move from $35 or so to the now $42 is a nice replacement. 

We see no reason to drop this stock from our portfolio at this point forever and would suggest you take a look at this company for a nice income stream, safety of principal, and some capital gains too. No it is not the sweet buy we pointed out back when we called it a "screaming buy", but it still a nice safe place to park some cash. 

                 

BCE little known but great company

Most investors in the US pay little attention to stocks and the economy in Canada, we do however and one stock we found several years ago keeps on producing stellar earnings reports and hiking their dividend. 

BCE, which was at one time known as Bell Canada reported earnings up 31% this morning and added another 17 cents per year to it's already nice payout.  We consider BCE nothing more than AT&T in our northern neighbor, but with less regulatory baggage and certainly less worries about spectrum from the Obama administration.  The beauty of BCE is that it is in just about every media that exists in it's Canadian market and keeps on killing the competition.  Be it television service, Internet, wireless, even the old wire line business BCE is making money and making gains. 

The problem is that now the stock price has finally moved up to reflect the quality of this communications powerhouse.  We have owned every month for likely three years 1200 options at $40 share on BCE producing nice cash flow.  The last 4 months we doubled that position to 2400 contracts at $40 per share due to our belief in the prospects of BCE and cash flow has been more than nice since the company has hovered around the $40 strike price.  

Now with today's move up or almost $2 per share the stock has now approached $45 per share and in our opinion the stock is finally valued right.  However that does not mean it is not still a nice buy and will hold the investor's value at the current price and send you the 5% dividend going forward.  

One note BCE is subject to the 15% dividend tax in Canada and will be deducted prior to your receiving the payment. You can deduct the Canadian tax against your tax liability in the US. 

Update on WIN. Seems that this stock is on a roller coaster as we posted yesterday the stock was up nicely, but today down 30 cents per share currently on a downgrade by a major brokerage firm. Go figure here, I have never known a brokerage to make a recommendation one day prior to an earnings report.   We still hold a large position in this company and believe the report will be good.

              

WIN Action

Movement in stock prices always make me wonder when there appears to be no reason for the up or down action. WIN, which if you have been reading my blog, is a perfect example.  Having bought in big on this security for what we believe to be a upside move after the Thursday morning earnings report has yesterday and especially today already moved up in price. 

Today the stock has moved up as of right now 24 cents per share or about 2 percent plus in price. That is a significant move for a company of that size and dividend.  The logical reason would be that yes someone somewhere knows the earnings will be good and are talking. Hence people are getting in before the announcement and this is called "insider trading". 

We many months ago took in the simple truth that insider trading occurs and made the decision any stock purchased within a few days of earnings is fools gold.  The point here is when you believe you have found a stock you like, take some time, do your research and make sure your timing does not get you in at a inflated price. 

Of course if WIN continues to move up we remain pleased due to our large position in this security.

             

Carl Lamm...Rank Amateur versus Broadcast Professional.

Those of us who have had the honor to do a radio show with Carl Lamm will know what I am talking about when I say as Rush Limbaugh does,  those of us sitting across the studio desk from him are "rank amateurs" watching Carl who is the "broadcast professional" at work.   Doing what he does daily is not easy, but Carl having done it so long uses his 65 years of experience to make it look easy. 

For some over 7 months now I have been doing a talking politics show with Carl Lamm when time allows me to get to the studio.  We generally begin with about 5 minutes of quick discussion of what we might talk about, then begin the show with Carl using some jotted down notes about issues of interest.  I usually bring a short list of possible topics that we might discuss as well, but most times we rarely get to those as Carl has a way to direct the conversation by drilling down into issues during the show. 

This drilling down into issues is one of the things that absolutely amazes me each time.  Carl can remember almost anything he hears like to bear trap.  Once heard his memory is locked.  I know this since I do extensive reading myself for my financial work and to keep abreast of political issues.  Trust me on this one there are few topics about politics he does not know and can seemingly bring up from his memory on short notice.  In the many shows we have done only once did I know something he did not know.  There have been several times he has caught me flatfooted with info I did not know. 

The other memory moment that those of us who have seen him at work all must look at him with amusement is his uncanny ability to do a live commercial on the spot from memory.  The program director will mention to Carl that a certain business commercial will need to be done at the next break and Carl just takes it from there.  He starts with his own folksy way to letting you know the people who own and work at the business, the times they are open,  what they have for the customer, and just about anything that needs to be said about the business.  Time and time again he just does most of these from memory, I am over 20 years younger than Carl and there is no way I could ever do a live commercial from memory, much less from written notes. Carl does dozens daily most from memory.  As I said a broadcast professional.  

Carl is now into his 65th year of broadcasting and it is clear to anyone who has participated in a studio broadcast with him is that is loves doing radio broadcasting.  I have told those in his family and at the station that they have no idea what they have in Carl and how much they will miss him one day.   Frankly I consider myself blessed to have done shows with him and look forward to more as the political season moves towards November election day. 

So next time you tune in to 1090 AM WTSB take a moment to savor the 

broadcast professional" on air since few radio people are as good as Carl Lamm.

                

 

Windstream Purchase

As we said in a posting earlier this week we eat our own cooking.  Therefore today we took a 7200 share position on WIN $10 options for August. This is in addition to our already 4400 share long position.  As they said in the movie Casino Royale we are "all in" on this stock which will report earnings next Thursday before the market opens. 

The reasoning is clear we believe that WIN will report good earnings next week like FTR did this week as both are in the same business.  Let's add in that there have been huge buys from insiders the past quarter at prices of $9.50 plus.  We make the connection that high insider buying at a price near the current level means these people who should know are placing bets on the earnings of the company.   One other note WIN will go ex-dividend in late September at 25 cents per share and that will buoy the stock as well in this trade. With the stock trading today just under $10 per share on a market pullback we decided now was the time to move and now only need just a 5 cent or so move above $10 strike price to make serious cash flow.  Of course if the stock reports weak earnings we could see the opposite.  But all signs point to a nice upward surprise. 

So if you are looking for a good risk which is noted with the points above dive in and take a position.  We hope that we have not starting feeling bullet proof after our big win on FTR this week.