Investors, especially Boomers, want two things: Safety and Income. In the quest to achieve these goals, they took $233 billion out of equity funds and put $559 billion into bond funds from January 2008 to June 2010. Was this a good idea?

Two famous professors from the Wharton School of Business, Drs. Jeremy Siegel and Jeremy Schwartz, don't think so. In an article, "The Great American Bond Bubble," published in Wednesday's Wall Street Journal, page A17, they claim that bond prices are way too high and are fixing to come tumbling down just as internet stocks did in 2000. Mr. David Rosenberg, former Chief Investment Strategist at Merrill Lynch, thinks the "Two Jeremies" are dead wrong, saying that bond prices won't come down anytime soon. (See http://www.businessinsider.com/david-rosenberg-on-the-bond-bubble-2010-8.) Mr. Rosenberg believes deflation is likely to come upon us and low interest yields on totally safe T-Bonds will be looking awfully good compared to negative inflation rates. My position is that Mr. Rosenberg may be right, but I'm not interested in investing my money on a 1 or 2% return.

The "Two Jeremies" suggest that investors consider buying stocks of solid companies such as AT&T, which have a relatively high yield, currently 6.23% on 08/19/10. Mr. Rosenberg doesn't totally disagree with this, but wonders why an investor can't invest in safe government bonds and "safe" stocks. This sounds OK, but who can be satisfied with a return of less than 10% on their money?

I've done a lot of research on retirement strategies since receiving an email last summer from a subscriber requesting assistance in this area, and there's one thing I know for sure. You're never going to get the 10% return you want by buying low yield bonds and so called "high yield" stocks. Actually, I knew this from the moment I wrote my first retirement strategy essay last September. That's why two of the four strategies I described involved the technique of selling Covered Calls on dividend paying stocks. This technique was featured as our "Strategy of the Week" presentation on September 25, 2009 and it has been featured several times since then.

On June 4, 2010, I wrote an essay called, "The PayDay Portfolio." This essay reiterated my conviction that selling Covered Calls on stocks paying high dividends is a relatively safe, practical way of generating 20-30% return on your money. You need to know how to trade Options, however, to properly implement this technique. Therefore, we have illustrated the basic technique several times as the "Strategy of the Week" presentation. (See the SOTW presentations of 09/25/09, 03/26/10, 05/14/10, 07/23/10 and 07/30/10.) We also made it a bonus presentation in our Options Course and have made it available to options savvy subscribers via the purchase of a special PayDay Portfolio Report.

As of yesterday's close, a backtest of a hypothetical $100,000 PayDay Portfolio started on January 8, 2010 shows a Total Value of $130,035.95. I have been trading Covered Calls with real money for several months now in accordance with the rules described in the PayDay Portfolio Report and I'm satisfied that it's the best way I know of achieving both Safety and Income.

TAMING THE TIGER WITH COVERED CALLS.
Ever since the so called "Flash Crash" of May 6, 2010, the stock market has shown manic-depressive behavior, going back and forth from euphoria to depression on the slightest bit of news. It's been hard to make money by going either long or short, but the strategy of selling Covered Calls does both at the same time. So visit the VectorVest University to see Mr. Glenn Tompkins, Manager of Educational Services, illustrate how it is done in this week's rewarding "Strategy of the Week" presentation, "Taming the Tiger with Covered Calls."

THE $1000.00 AWARD CHALLENGE.
We believe we have a winner, but we need more time to check the results. If it pans out the way we think it will, we will give you the details next week.

On October 2, 2009, I wrote an essay called "Double Juicy." It was part of the "Retirement" series of essays in which I described how I would go about generating $50,000 of income per year from $500,000 in financial assets. This essay described a strategy which finds optionable stocks paying dividends of at least $2.00 a year and yield at least 4%. It was called, "Optionable 2x4s." That evening, Mr. Glenn Tompkins, Manager of Educational Services, illustrated how the "Optionable 2x4s" Strategy could be used with the Option Rate of Return Tool to capture both the juicy dividend payments and the juicier option premiums.

Even though Mr. Tompkins made the implementation of this strategy look easy, I was concerned that the requirement of selling Covered Call Options to generate income was adding too much complexity for most of our subscribers. So I wrote another essay the following week called, "Managing Your Retirement Stocks." It also became clear to me that selling Covered Calls must be a vital and necessary part of any retirement strategy. I consider the gains that one makes in Capital Appreciation as cushion, but dividend payments alone cannot provide sufficient income to meet our goal of a 10% annual return. Therefore, I thought long and hard on defining a simple, no guess-work, mechanical technique of consistently generating substantial income from the "Double Juicy" concept. I believe I finally designed a rules-based system that will work.

This system is based upon the idea of receiving a nice cash payment at least once a week. When I was a kid I used to get paid in cash at the end of each week, and I found that no matter how rotten the week was, the cash payment always made me feel better. I have never gotten the same feeling from receiving a check in the mail and having my pay deposited directly into a checking account is for the birds. Nevertheless, we live in an electronic world and I still like money. So I decided to take my electronic payments on Fridays.

From the studies that we have done so far, it appears that a $100,000 portfolio will deliver $20,000 to $30,000 per year in dividend and option premium payments with this system. These numbers do not include gains or losses in stock prices. As you can imagine, however, the money received in payments can mitigate any damage done to your capital position. Another thing I like about this system is that it doesn't require a lot of attention. You only have to look at your portfolio once a week.

We are planning on introducing this system as a Special Bonus to attendees at our One-Day Options Course in Los Angeles on June 12, 2010. So why are we not presenting it as a "Strategy of the Week" presentation? Because this material would normally be part of our Options Course and I want you to learn how to trade Options. If you have already taken our Options Course, we will ship a report to you after June 15, 2010 for only $29.00. Simply, call 1-888-658-7638, and ask for the report on The Payday Portfolio.

A SLICK PROPOSITION.
As a layman, I marvel at the technology used in deep sea oil drilling. As a former Chemical Engineer who designed and built plants, I'm repelled at the sloppy, reckless work that led to the BP Oil release taking place in the Gulf of Mexico. As an investor, betting against BP early on was an easy way to make money. But there were times when it looked like they might actually "plug the damn hole." If successful, it would have given BP's stock price a boost. If not successful, BP's stock price would continue to slide down the slippery slick. There's a trade for every situation and Mr. Dan Misch, another one of our best Instructors, will demonstrate how one could have made money when the outlook was dire and when it was hopeful, but not certain. Please join Dan at the VectorVest University to see this week's intriguing "Strategy of the Week" presentation, "A Slick Proposition."

Let's suppose you own a stock that was trading at $23.80 per share and someone offered you $2.60 a share to buy it at $25.00 within the next month. Would you take the offer?

Off the top of my head, it sounds like a pretty good deal to me. But there are several things I would have to consider before accepting it. First, I'd have to decide whether the stock's price would be more likely to go up or down during the offer period. If I thought it would go above $27.60 per share and stay there, I'd reject the offer and keep the stock. If I thought it was likely to go down and stay below $21.20 for a long time, I'd reject the offer and sell the stock. If, however, I thought that the stock's price would stay between $21.20 and $27.60, I'd take the offer. It would be a nice way to generate some cash while the stock's price didn't do very much. So how would I go about making these assessments?

First, I would look at VectorVest's Market Timing Graph to see what the market was doing. Right now it appears that the rally is stalling, so I would conclude that the chances of my stock soaring higher have lessened a bit. Next, I would check the stock's Relative Timing, RT, indicator. If RT were above 1.00, the stock's price would be in an uptrend. If RT were below 1.00, the stock's price would be in a downtrend. This information would definitely affect my analysis.

Then I would use VectorVest's Option Pricing Model to see if the offer of $2.60 per share were fair. I could also see whether it would even be worth considering the offer. Finally, I could get an idea of the probability of my stock closing above $25.00 a share a month from now. If I wanted to see the probability of this stock's price staying between $21.20 and $27.60 per share, I would use VectorVest's Options Analyzer.

To be honest, nobody has actually offered to pay me $2.60 a share to buy my $23.80 stock at $25.00 within the next month. But I know I can cause this to happen by selling September 25th Calls against it @ $2.60 per share. I would then have a "Covered Call" position and it would yield a juicy 157.71% annualized rate of return if the stock closed at or above $25.00 per share at expiration.

If you're interested in finding trades such as this, you would definitely want to use VectorVest's Options Rate of Return tool. It's a marvelous tool and, unfortunately, we don't talk about it often enough. Frankly, we don't talk often enough about any of the VectorVest Option Tools.

On Friday, October 24, 2008, I wrote an essay called "Blue Chip Bargains." It dealt with buying the safest, most undervalued stocks of the highest growth, largest capitalization companies in the VectorVest U.S. database at bargain prices. It also said, "I would be in no hurry to buy these stocks right now. I'd wait at least until the Price of the VectorVest Composite goes up for two consecutive weeks; then I would begin to nibble at the list and I would buy Leaps instead of stocks unless I wanted the cash from dividends and I'd sell Covered Calls against my positions to reduce cost and risk."

So why would I want to buy Leaps instead of stocks and sell Covered Calls against those positions? The answer is to mitigate the uncertainty and incredible volatility we have been facing over the last 15 months. I want to take advantage of potentially rewarding opportunities like buying Blue Chip Bargains, but I don't want to take a lot of risk in doing it. The technique of using Covered Leaps is just one of several ways of "Taming the Tiger." We have demonstrated such techniques on several occasions.

For example, the first "Taming the Tiger" demonstration dealt with a "Safer Way To Short Stocks," and was presented as our "Strategy of the Week" on December 5, 2008. If you're concerned about the risks of selling short, you may wish to see this presentation at the VectorVest University.

The technique of buying Leaps and selling Covered Calls, mentioned above, was illustrated as our "Strategy of the Week" on December 12, 2008. It was called "Taming the Tiger - Part II, and was featured as a "Safe Way to Lock in Low Prices." If you haven't been using it, you may be missing out on some great buying opportunities.

Since selling a Put is mathematically the same as selling a Covered Call, we presented another "Strategy of the Week" on December 26, 2008 which entailed selling Leap Puts of Blue Chip Bargain stocks. We called it "Taming the Tiger - Part III, Raking in Blue Chip Premiums."

A less obvious way of "Taming the Tiger" was demonstrated in our "Strategy of the Week" presentation "VST Mighty Mites" on December 19, 2008. In this case, the high volatility of these stocks required that one employ a large Trailing-Stop setting of 35%. Therefore, only a fraction of the available funds were used to limit the damage a 35% loss on a single stock would have on the overall portfolio. I have used this technique on several occasions in managing the Model Portfolio. If you're buying and selling leveraged ETFs, you'd better know something about Taming the Tiger.