Yup, you read it right...Guaranteed Income for Life*. That's what Smart Money's October issue says on its cover. Wow, it sounds great, but what's that asterisk for?

Oh, that's to indicate a footnote which explains that there really are no guarantees. Here's some of what it says: "Guarantee may not apply if you don't pick the right financial products. Guarantee void in all territories except Guam. Guarantee also void in Guam. In case of inflation, rip up all your plans and start over. More terms and conditions may apply. See page 55 for answers."

Well, I must admit this cover got my attention, so I went straight to page 55. The lead article said, "One of the biggest frustrations facing retirees today, reeling in a check that is both reliable and big enough to pay the bills has begun to seem like a pipe dream. Increasingly, alarmed investors are finding that "guaranteed" payouts offer only penny-ante 1 and 2 percent returns-or involve unpalatable risks." The article concludes by saying retirees need a new playbook for today's reality.

Indeed they do, but I saw nothing in Smart Money's articles on Bonds & Dividend Stocks, Social Security & Pensions, and Annuities & All-in-One Funds that offered anything new or imaginative. But all is not lost dear readers. We are here to help. With my essay of September 18, 2009, I began to write a series of essays on retirement strategies. The goal was to generate $50,000 a year from a $500,000 nest egg with little risk and no drawdown of capital. In the two years since that essay was written, the plan I suggested and the strategies we created have proven to be more than up to the task.

We have done our best to communicate these strategies and techniques to you via "Strategy of the Week" presentations, free Retirement Strategy Seminars and low-cost Option Courses. I had the privilege of teaching the "Winning Big with Directional Option Trades" course here at the Futures & Forex Trading Show in Las Vegas. As usual, we finished the course with a detailed presentation of the PayDay Portfolio, which I described in my essay of June 4, 2010. Each time I give this presentation, I am amazed at how well it works. I am also pleased with the results I have achieved with real money.

This experience has led me to believe that selling Covered Calls via the PayDay Portfolio technique is the best way I know of for generating steady income for life. Note that no asterisk is attached to my statement, unlike Smart Money's cover story, Guaranteed Income For Life*.

"If you own shares of stock (minimum 100 shares) and you're not selling call options against them, then you are throwing away free money. How's that? Well, there are other traders out there who will give you money today for the right to take your stock away from you if it reaches a much higher price. Selling "Covered Calls" is such a great strategy for padding your bank account that I still can't believe there are investors who aren't taking advantage of it. It's one of the best ways to take in extra cash flow that you never thought you could have. Covered calls get their name from the fact that the long shares you own will cover you against any adverse movement by the short call that you sell."

The statement shown above was written by Mr. Lee Lowell, author of the book, "How to Get Rich with Options." I firmly believe that selling covered calls is one of the best ways to make money in the stock market and I have been urging everyone I could, especially retirees, to learn how to do it. Our "Strategy of the Week" presentation of May 14, 2010 was called, "A Call to Use Covered Calls." Subsequently, on June 4, 2010, I wrote an essay called, "The PayDay Portfolio," which was based upon the idea of receiving regular, weekly deposits by selling covered calls.

A PayDay Portfolio back-test, started on January 8, 2010 with a hypothetical $100,000, was worth $149,366 as of May 20, 2011. $4,663 was collected from dividends and $49,388 was received from selling covered calls. Over the 17-month test period, an average of $761 was received each week. If you attend one of our Options Courses, we will teach you how to trade options and how sell covered calls to manage the PayDay Portfolio. You will also receive a FREE copy of Mr. Lowell's book, "How to Get Rich With Options."

CLIMBING THE WALL OF WORRY.
Several weeks ago I read that security analysts were beginning to cut their earnings forecasts. This, of course, was bad news for stock prices. But the market was resilient and bad news had no lasting effect on stock prices. They would go down for a few days; then come roaring back. The best recent example of this was the terrible disaster in Japan on March 11th. Stock prices went down for three trading days; then soared to a new recovery high of $30.10 per share on the VectorVest Composite by April 29th.

Since then the flow of bad economic and geopolitical news has increased, and, indeed, the frequency of down days has increased too. But the Bulls haven't given up. The Price of the VectorVest Composite has closed up on eleven of the last 24 trading days. One could easily argue that, given the plethora of bad news, stock prices should have gone down every day. But that didn't happen, and, in fact, the Price of the VectorVest Composite is down only $1.42 per share or 4.7% since April 29th. Why is that?

It's because our Investment Climate indicators are telling us that we are in a Case 4, Bull Market Scenario in which earnings, inflation and interest rates are rising. This is the scenario in which investors are driven by fear. They fear that the economy will be going to hell in a hand basket, earnings will fall, inflation will run out of control and interest rates will soar. Greed, however, drives them to buy stocks on the dips and eventually pushes prices higher and higher. As long as earnings are going up, they will continue Climbing the Wall of Worry.

OFF TO THE RACES.
The second event of the VectorVest Triathlon Competition, the VectorVest RealTime Derby, began on June 1st and the Standings and Performance of the top three contestants may be seen on the Triathlon Leaders Score Board shown in today's Strategy Section of the Views. For your convenience, we have reproduced it here also:

Triathlon Leaders Score Board.
..Current...Portfolio....Backtester....Derby L....Derby S...Grand.Total.
...Rank......Identity......%G/(L).......%G/(L).....%G/(L).....%G/(L).....
....1.........T-1-DS.......324.99.......(6.21).....(0.00).....318.78.....
....2.........T-2-DB.......307.24.......(6.21).....(0.00).....301.03.....
....3.........T-3-DB.......258.37.......(6.21).....(0.00).....252.16.....

Click here to visit the Triathlon Score Board.

Because of a technical issue, only 35 contestants are shown in the RealTime Derby Tool. However, you may see the Standings and Performance of all 50 contestants by clicking the link shown just below the Triathlon Leaders Score Board presented in today's Views.

For a complete explanation of how the Standings and Performance of the Triathlon contestants are compiled, please visit the VectorVest University. Not only will Mr. Jamie Curlee explain the Score Board, but he will also reveal the secrets behind this week's best and worst Derby performers in his excellent "Strategy of the Week" presentation, "Off to the Races."

The S&P 500 closed at 1,257.64 on 12/31/10. Today it closed at 1,283.35.
According to Jeffery and Yale Hirsch's Stock Trader's Almanac, that's a good sign. They claim that there's a 90% chance the stock market will end the year higher if the S&P 500 goes up during the month of January. With the S&P 500 showing 2.04% gain so far this year, the "Incredible January Barometer" is Looking Good.

WHY, WHEN AND HOW I SELL COVERED CALLS.
One of my goals as an investor is to not lose money on any stock I buy. But every stock I buy doesn't go up like I wish it would. In fact, some of them actually go down. So I have spent a lot of time thinking about how to minimize and even eliminate the risk of loss on a stock that misbehaves. The best way I know of doing this is to buy rising stocks in rising markets and sell Covered Calls when they show evidence of moving against you.

Let's take Walter Energy, WLT, for example. WLT is a high VST stock and was doing phenomenally well in virtually all respects. So we bought it for the Chairman's Choice portfolio on January 3rd at $132.40 per share, including commission. The stock moved higher for a few days, pulled back, and closed at a high of $138.58 on January 11th. Then it moved modestly lower, then modestly higher and got crushed on January 14th. I have to admit I was surprised and expected it to rebound soon. Alas, it didn't.

Well, I still like this stock and I think it's going to go higher, but I can't wait for that to happen. So I sold 1 Feb 130 Call @ $4.10 per share yesterday. By selling the one Option Contract, $410 was credited to the portfolio's account, effectively lowering the purchase price of our 75 shares of WLT to $126.93 per share. But, but, but you're probably thinking I needed to own 100 shares of stock to sell the Covered Call. No, I didn't, but I'm now short 25 naked option shares. While this is supposed to be risky as all get-out, I'm not worried about it. When WLT goes back up to 130, I'll buy the 25 shares of stock and let the position get called. Overall, I will have paid an average price of $131.90 per share for the 100 shares of stock less $4.10 per share for selling the Call Option. Since my net price would be $127.80 per share, I'll end up making $2.20 per share.

If WLT continues to go down, I'll sell another out-of-the money Call Option contract, at a lower Strike Price. I'll buy 100 more shares of WLT if its Price rises to the Strike-Price of the second option contract I sold. As I follow this procedure, I'm always lowering the average purchase price of the stock. Sooner or later, WLT's price will go above my average net purchase price. Then I will exit all of my WLT positions a profit.

OK, so how am I going to do this? How am I going to know which way the stock is heading? I'll use a combination of a 20-Day moving average of Price and MACD crossovers. If you look at a 3-month, ProTrader graph in VV 6 or an end-of-day graph in VV 7, you'll see that I should have sold the Covered Call on Tuesday, January 18th, instead of yesterday. But I didn't do it because WLT is in the Chairman's Choice portfolio. But I finally decided to make the trade because I wanted to share with you Why, When and How I Sell Covered Calls.

DOUBLE UPS.
I was checking the one-day Derby leaders last Tuesday and I was surprised to see several bottom-fishing Strategies at the top of the screen. Whoa, what was going on? Can you imagine bottom-fishing Strategies out-running the pack at the top of a 19-week rally? Indeed, it was not one stock that was responsible for the big gains that day, there were several very nice winners.

Their graphs showed that they had all gone from being "S" rated stocks to "B" rated over a period of several days. I liked what I saw, but I wished I had been able to spot these guys sooner. I explained my problem to Mr. Glenn Tompkins and asked him to see if he could find a way of doing it. Sure enough, he's got the answer. So visit the VectorVest University to see Mr. Glenn Tompkins, Manager of Educational Services, show us the neatest, simplest Strategy you ever saw in this week's "Strategy of the Week" presentation: "Double Ups."

In response to an email I had received, I wrote a series of essays on Retirement Strategies last year, beginning on September 18th. The writer wanted to know how to generate a 10% annual gain with some reliability while maintaining his principle of $500,000.

Here's what I said, "The first thing I would do is to open an account with a discount broker and make sure that I could sell Covered Calls. Then I would allocate my money into five parts. Two parts, i.e., $200,000, or 40%, would go into relatively safe bond funds that were paying about 6% interest. I would then create three stock portfolios with the remaining $300,000." I then went on to describe how and why I created a Strategy called, "High VST+YSG Stocks." In the following weeks, I created two more Strategies called, "High Yield 2 x 10s, and Optionable 2 x 4s." Each of these Strategies was put into the Strategies - Retirement Group in the UniSearch Tool. Now that a year has gone by, let's see how these Strategies have performed.

A 10 stock portfolio of the first Strategy, "High VST+YSG Stocks," gained 26.05% with 10 winners and 2 losers from 09/18/09 to 09/30/10. Max drawdown was 7.34% and the average dividend yield was 1.59%. This performance far exceeded the 9.30% gain of the VectorVest Composite and my goal of 15%.

A 10 stock portfolio of the second Strategy, "High Yield 2 x 10s," gained 7.91% with 8 winners and 8 losers from 09/25/09 to 09/30/10. Max drawdown was 13.80% and the average dividend yield was 13.65%. The combined gain of 7.91% plus the average dividend yield of 13.65% easily exceeded the 9.30% gain of the VectorVest Composite. My goal of generating $11,500 in profits was also exceeded.

Backtesting the third Strategy, Optionable 2 x 4s, the way I wanted to use it is somewhat involved, so I simply created a 10 stock portfolio using Portfolio Manager and ran it the same way as I ran the first two, i.e., using a 50% Gain, 20% Loss to manage positions in the Weekly Mode. From 10/02/09 to 09/30/10, this Strategy gained 24.80% with 7 winners and 6 losers. Max drawdown was 10.18% and the average dividend yield was 10.66%. The combined gain of 24.80% plus the average dividend yield of 10.66% is nothing short of remarkable. Here again, it far outperformed the market and my goal of $11,500 in profits.

All told, the $12,000 of interest income from the bonds, and total gains of 84.66% from the other three retirement portfolios nearly doubled our target of making $50,000 in a year.

You may recall that the "Double Juicy" essay of October 2, 2009 laid the ground work for the PayDay Portfolio, first presented on June 4, 2010. This portfolio has been performing exceptionally well and its performance will exceed anything cited above. I have been using it with real money and I couldn't be more satisfied. One of the most pleasant surprises has been the outstanding performance of several of the stocks it has found. Think Mesabi Trust, for example.

Most people think that selling a Covered Call on a stock that takes-off limits your profits. Well, I know how to handle that situation and turn it into a big money maker. I call it "Putting the PayDay Portfolio on Steroids." Come to one of our Options Courses and we'll show you how to do it.

In any event, I'm hopeful that you could come to one of our Free Two-Hour Retirement Workshops. We would be more than pleased to share more with you about Retirement Strategies Performance.

IS THE PRICE OF GOLD TOO HIGH?
If you watch TV, you know there are plenty of folks urging you to buy gold. You may be tempted, but think it might be priced too high. Some analysts are saying gold will go to $3,000 an ounce. Others say it's fixing to go down. How can you get the right answer? Join Mr. Bryan Barnes in this week's "Strategy of the Week" presentation at the VectorVest University to see how he uses the Midas Touch to answer the question: "Is the Price of Gold too High?"