Trading Realities

The book Trading Realities: The Truth, the Lies, and the Hype In-Between by Jeff Augen is a very easy-to-read guide to avoiding fallacies, such as buying for the long term and holding onto stocks that have paper losses, and utilizing new strategies to viewing trends, analyzing and reducing risk, and making money trading.

Several interesting narratives are included, such as the incident where Goldman Sachs (GS) admitted to trading against its clients. The smoking gun email from a Goldman senior executive appears at the end of the chapter. Augen explains in simple terms how volatility works and how stock options can be utilized to increase profits and reduce risk. One of the interesting techniques that he provides is buying the iPath S&P 500 VIX Short Term Futures ETN (VXX) and writing one month at-the-money calls against it. The downside is limited because the volatility will never go away. Plenty of other strategies such as this appear throughout the book.

Option collars are explained very clearly and is what he considers the most conservative of trades. One technique he shows on pages 203 and 204 demonstrates how an investor can own Apple (AAPL) for free in 72 weeks. Synthetic stock is another technique that he covers, in order to reduce the cost of a trade.

For traders who have never or rarely delved into option trading strategies, I recommend that you read Trading Realities.

Lots of Ways to Invest Like Warren Buffett

Billionaire Warren Buffett is the second richest American. As most investors know, he is the head of Berkshire Hathaway (BRK-A), the highest priced stock and one of the most successful companies during the last half-century. The company also has Class B shares (BRK-B), currently trading around 83.75, is another way to invest with Buffett. The Class B common share is equal to one-fifteen-hundredth (1/1,500) of the Class A shares. However, there are other ways to invest in Berkshire Hathaway.

The Boulder Total Return Fund (BTF) has over 27% of its portfolio in Berkshire A shares plus another 12% in Berkshire B shares, so in excess of 39% of the investment assets in Buffett's company. Other stocks the closed end fund owns includes:
Yum (YUM)
Wal-Mart (WMT)
Johnson & Johnson (JNJ)

Another alternative is by owning shares in the Sequoia Fund (SEQUX), a mutual fund with a large position in Berkshire Hathaway. Over 15% of their portfolio is invested in the stock. Some of the other stocks in their portfolio include:
IDEXX Labs (IDXX)
TJX (TJX)
Martin Marietta (MLM)
Fastenal (FAST)
Mohawk Industries (MHK)
The minimum investment in Sequoia is $5,000.

A third way to invest is by investing in the Fairholme Fund (FAIRX) which has a little over 6% of their portfolio invested in Berkshire. Although the concentration is not as significant as Sequoia, it is the number three holding in the portfolio, as measured by percentage of assets. Fairholme's other major holdings include:
Sears (SHLD)
Goldman Sachs (GS)
Citigroup (C)
WellPoint (WLP)
Minimum investment is $10,000.

Markel Corp. (MKL) is an insurance company that many consider to be a mini-Berkshire, especially since it has a substantial amount of Berkshire Hathaway stock.

There are other funds that have around two percent of their portfolio in Berkshire, such as Legg Mason ClearBridge Appreciation A (SHAPX) but the percentage isn't enough to be a close play on Berkshire.

One other option is to create a portfolio that emulates Berkshire's holdings of publicly traded stocks, however, this wouldn't cover Berkshire's holdings of non-public stocks. In addition, it would involve purchasing many different stocks, so you would be better off just buying the Class B shares. But if you think that you can out-perform Buffett using his ideas, then here is a list of a few of their Berkshire's major stockholdings:

American Express Co. (AXP)
The Coca-Cola Company (KO)
ConocoPhillips (COP)
Johnson & Johnson (JNJ)
Procter & Gamble Co. (PG)

For a free downloadable list of all of Warren Buffett's Berkshire Hathaway stockholdings, which can be changed, added to, and sorted by yield and forward PE, go to WallStreetNewsNetwork.com.

Disclosure: Author does not own any of the above.

By Stockerblog.com

Get a 5% Yield from Morgan Stanley

If you are an income investor looking for high dividend stocks and are looking to diversify into investment banking stocks, you have several to choose from, but not with high yields. For example, the yield on Morgan Stanley (MS) is only about 0.8%.

However, there is another safer way to invest in the company and get a much higher yield, with inflation protection. Morgan Stanley happens to have a preferred stock called Morgan Stanley Floating Rate Depositary Shares Non-Cumulative Preferred A (MS-PA). This security currently sells for 20.15, a big discount to its par value amount of $25. The first call date is 7/15/2011.

The annual dividend payout is one dollar per year based on 4% of the par value, payable quarterly, giving the stock a current yield of about 5%. The dollar a year dividend is the minimum payout, as the yield is adjustable upwards if rates increase. The rate is based on the three month LIBOR rate plus 0.7%, subject to the minimum.

If you like these adjustable rate preferred stocks, you should take a look at How to Get a 6% Yield from Chesapeake Energy (CHK), How to Get a 4.9% Yield from Goldman Sachs (GS), and Lucent (ALU) Pays a Yield of 13%.

A list of about 20 adjustable rate preferreds, with yields ranging from 1.83% to 8.59%, is available at WallStreetNewsNetwork.com. The list includes the minimum yield, the floating rate calculation, the par value, annual income and yield.

Disclosure: Author does not own any of the above.

By Stockerblog.com

Who Really Makes Money with Real Estate Short Sales

If you want to know who is raking it in with short sales on real estate, you should check out this video. It mentions Indymac (IDMCQ.PK), OneWest Bank, and Goldman Sachs (GS).