As I watch the gyrations taking place in Washington, I'm reminded of a book I read some 25 years ago. It was written by the eminent historical writer Barbara Tuchman and is called, "The March of Folly: From Troy to Vietnam."

This book chronicles four decisive periods in history in which governments pursued policies contrary to their own interests despite the availability of feasible alternatives. To qualify as a folly, Ms. Tuchman explains that these policies were acted upon by a number of individuals over a period of time, and, importantly, there were people present who correctly pointed out why the act in question was a folly.

She proves her thesis by relating the history of the Trojan War, the corrupt and venal period of the Renaissance Popes, Britain's loss of the American Colonies, and the controversial war in Vietnam.

Let's see if the current debt debate in Washington qualifies as a folly. First, the lives of every man, woman and child in the country will be affected by the outcome of this debate. Therefore, it most certainly will be recognized as a decisive period in our history. Secondly, whatever policies our government pursues will be greatly affected by the President, but he takes his cue from Congress. Finally, no one can state that the course of action this country takes is a folly because that hasn't been decided yet. Given the past performance of our politicians, however, I worry that they will add a new chapter to The March of Folly.

THE ARMAGEDDON COLLAR.
I received an email from a subscriber saying that his broker would not allow him to sell the Naked Calls required to implement the Collar illustrated in last week's "Strategy of the Week" presentation. He wasn't complaining, but thought this was worth noting since it might happen to you. If you do run into this problem, you can always cover the short Calls by buying an equal amount of higher Strike Price Calls of the same underlying option with the same Expiration Date. This will increase the cost of the Collar, but the trade still helps offset the cost of the Puts.

IS THE PAST PROLOGUE?
One of the least known but possibly most useful tools in the VectorVest arsenal is the VectorVest 7 Automated Portfolio Manager. This tool is designed to bring you as close as possible to the real world of investing and/or trading without risking any of your hard-earned money. It manages portfolios from a real-time data feed, tick-by-tick, just as it happens. It also works in VV7 Intraday with a 15 minute delayed feed.

We will be using the VV7 RealTime Automated Portfolio Manager to test the efficacy of the strategy entries in the last leg of the VectorVest Triathlon Competition. The first leg of the competition, which ran from March 31, 2010 to March 31, 2011, used the VV7 BackTester. Currently, we are just five short days from completing a two-month competition using the VV7 RealTime Derby. The results and standings of the top 50 entries as of today's close are shown below in the Strategy Section of the Views.

But all that represents the past. Will the current leaders hold up under the rigors of the Automated Portfolio Manager competition which starts on August 1st? We shall see. And you can see too. Mr. James Penna, Product Support Consultant and Instructor, has a special treat for you on how on to use the Automated Portfolio Manager to enjoy the Triathlon Competition and become a better investor. So visit the VectorVest University to see this week's great "Strategy of the Week" presentation: "Is the Past Prologue?"

"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."

With the recent addition of the AutoTester tool to VectorVest 7, I thought it would be a good idea to see how some of the Retirement Strategies were performing. I was especially interested in the "High VST+YSG Stocks" and the "Optionable 2x4s" Strategies because I had written an essay on their performance on October 1, 2010. Moreover, I had touted the "High VST+YSG Stocks" Strategy as being capable of delivering good performance with tolerable risk. I had also developed a portfolio management technique called the "PayDay Portfolio" with the "Optionable 2x4s" strategy.

To make a long story short, the "High VST+YSG Stocks" strategy had delivered a gain of 26.05%, not counting dividends which have added about 1.5%, with 10 winners and 2 losers from 09/18/09 to 09/30/10. This was not too shabby, given the miserable summer of 2010. But what has it done for us lately?

Finding out was a breeze with the VectorVest 7 BackTester. Bingo, the gain from 09/18/09 to 03/10/11 was up to 50.08% with 70% winners and only a 9.99% drawdown. Wow, I'll sign up for that anytime, but could I do better?

OK, let's see what the Green Light Buyer timing system could do for us. The Green Light Buyer timing system is one in which you buy stocks only when you see a green light in the Price column of the Color Guard. The beauty of this system is that you don't buy stocks when the market gets nasty. Unfortunately, it's a pain to back-test. Err, well, it was a pain until the AutoTester and Timing Lists were put into the VectorVest 7 BackTester.

So, with a few clicks of my mouse I selected the Green Light Buyer timing list and repeated the BackTest described above. Bingo, the gain from 09/18/09 to 03/10/11 was a somewhat better 64.82% with 71.88% winners and a 9.63% drawdown. The only drawback I saw was that a lot more trades were made when the Green Light Buyer technique was used. Still, I'm pleased with the results.

In regard to the "Optionable 2x4s" strategy, I use it primarily in conjunction with the "Options Rate of Return" tool to run a technique I call "Double Juicy." See my essay of 10/02/09. The basic idea with this technique is to buy stocks paying juicy dividends and sell expensive Covered Calls against them. The technique was illustrated in our "Strategy of the Week" presentation on 10/02/09.

Subsequently I developed a simple, rules based portfolio management system aimed to produce steady income and an ROI of 20 to 30% per year. I called it the PayDay Portfolio. See my essay of June 4, 2010. A backtest of this technique since January 8, 2010 has produced total return of over 45%. A detailed report of this investment technique along with personal instructions is available to option savvy subscribers for only $95.00. Simply ask for The PayDay Portfolio Report.

If you do not understand how to trade options, you definitely should learn how to sell Covered Calls. It's like turning your computer into an ATM machine.

Fortunately, Mr. Dan Misch, Manager of Retirement Strategies, is prepared to demonstrate how the VectorVest 7 BackTester works with and without the AutoTester and its timing lists. He will also demonstrate how the Options Rate of Return tool was used to conduct a trade in the PayDay Portfolio, and he will share the results of the PayDay Portfolio since January 8, 2010.

Visit the VectorVest University to see this week's very important "Strategy of the Week" presentation: "Retirement Strategies Update."

We're going to have a great time in Las Vegas and we would like to have you join us. Here's the line-up:

I. We are pleased to have been invited again to present our One-Day Options Course on the opening day of the Traders Expo. This course has been well received and is becoming more and more popular. Not only does it provide a firm understanding of options trading, but it includes a trade-by-trade description of how to manage the "PayDay Portfolio." We have been using it with real money and we are more than delighted with the results. If you're serious about generating steady income in a systematic, repetitive way, you'll want to attend this course.

II. We will be releasing a sensational new tool for VectorVest 7: Support/Resistance Searches. Yes, you'll be able to search for stocks nearing an S/R line, retracing from an S/R line or breaking through an S/R line. You will also be able to use this new tool with other search criteria. You will love this tool. Imagine the possibilities!

III. As noted in the Event Section, above, we'll be giving three great presentations on VectorVest 7 that you won't want to miss. We will also be giving demonstrations of VectorVest 7 at our booth, (407), throughout each day. Ask questions, enjoy and learn all you can.

IV. Finally, we'll be capping-off a great week with a Customer Appreciation Reception in the Octavius 19 room at Caesars Palace on Friday, November 19th from 7-9 PM. So Come See Us At The Traders Expo in Vegas.

POT STRADDLES.
In mid-August, BHP Billiton (BHP) made an unsolicited $130.00 per share bid for Potash Corp. of Saskatchewan, Inc. POT'S shares immediately shot up from $112+ to $143+ and on to a subsequent high of $150+ as investors deemed the offer price to be too low. POT management agreed and rejected the offer out of hand. A number of other significant obstacles, including a poison pill and approval by the Canadian Government, stand in the way of BHP's completing the takeover. Ottawa authorities are scheduled to decide by this coming Wednesday whether it will allow BHP to proceed. If approval is denied, POT's stock price is most likely to fall from today's close of $145.09 per share. If approval is granted, POT's stock price is most likely to rise. If you think POT's price will rise or fall at least $12.00 a share when Ottawa's decision is announced, it's a perfect setup for Nov 145 POT Straddles.

GOING FOR THE GREEN.
On September 10, 2010, Mr. James Penna gave an elegant presentation of a simple strategy which produced a gain of over 95% in 14 months. That's not too shabby when one considers that the market was up slightly less than 15% over the same time period. Now Mr. David Thornton, creator of the great "Thornton's Thunder" Strategy, will use a similar, but more aggressive, technique to produce a far greater return. So visit the VectorVest University to see David's excellent "Strategy of the Week," presentation, "Going for the Green."