Get Ready to Jump on This Breakout Trade

Hey There Income Hunters,

Here’s a secret … I use triangles to identify sideways consolidation patterns that may be close to completion and ready to breakout.

What does that mean?

Basically, trading chart triangles are an indicator that give me an edge. 

Why? Because they often point to a breakout continuation of a stock’s recent performance.

I never want to waste time and money getting chopped up in a corrective trading range … so I let the pattern develop.

Once a triangle is forming, I monitor it more closely and wait for a set-up I can lean on.

Triangles are great tools because they provide a structure to trade against with clear entry points, profit targets and stop-loss levels.

I’ll run through both ascending and descending triangles and show real examples of each.

Read this graphic first …

Enbridge (ENB) is a current example of an ascending triangle.

They also happen to be an excellent company in a sector that has been undervalued and is starting to trend higher. 

The fact that Morningstar has fair value 26% above the current price at $45 provides additional confidence on a continuation breakout.  

Playing the Enbridge Triangle

A breakout to the upside would occur above $34.28.

Depending on when it happens, your stop would be a breakdown below the bottom, ascending trend line.

Your profit target would be the width from the lowest point of the triangle to $34.28, which is roughly $7.

Now, let’s take a look at a descending triangle, which is much like an ascending triangle, just heading the other way …

A Recent Down Trade I Made in GLD

I caught an excellent down trade in GLD in November.

After a significant rally in GLD fueled by the Fed, I noticed the Fed put stimulus on hold, telling me GLD could correct. 

Sure enough, GLD traded off, broke below the 200-day moving average and formed a descending triangle.

I waited for a clear break and purchased puts on GLD.

I purchased the 173 Puts and two days later closed the position for a 90% return (or 16,000% annualized return).

Bring It Home

You want to have a tool box of technical indicators that help identify opportunities and, more importantly, help you manage your trades.

Classic patterns like triangles are extremely helpful.

I’ll share many more as real trades come along that prove the point. Maybe we’ll even start up #TechnicalTuesday!

Ping me with any questions. Until then …

Live & Trade With Passion My Friends,

Griff


DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.

A Wave of Cash is Coming

Hey There Income Hunters,

On Friday, President-Elect Biden said Congress must act quickly on a new stimulus beyond last month’s $908 billion package. 

It would tap into the $4 trillion in total economic assistance Congress has already devoted to battle the devastating pandemic.

So the gift of giving continues.

And just look what it meant for the year-on-year numbers for December. The updated Power Income Reflation Indicator has hit another trifecta …

Power Income Reflation Indicator Breakdown:

  • M1 Money Supply: This is consumers’ most readily-accessible cash.
  • Fed QE: Quantitative Easing is the Fed’s only tool with rates already at zero. The Fed buys bonds from banks and credits their accounts held at the Fed. Banks can then make loans to the public or use the funds for market activity. The majority goes into the stock market.
  • Fiscal Policy: This is the most powerful form of reflation because money is injected directly into the economy. Stimulus checks are a prime example.

The Fed continues to set record highs in money supply and the size of their balance sheet each month. This is fueling the S&P 500 to record highs. See below:

Watch for more Details on the Next Stimulus Package this Week

Here is what you can expect to see:

  • Another $1,400 in new stimulus checks 
  • $370 billion in student loans wiped out under Biden’s current plan
  • Potential for much greater student debt cancellations under the Schumer-Warren plan; as much as $1 trillion
  • Major transfers of wealth to low-income segments, which would be very positive for economic growth

Look for 4,200 S&P in the First Half of the Year

Here’s why …

US households have already received $1 trillion in aggregate — and nearly $70 billion of that remains as “excess savings.” That number will rise as the second round of fiscal stimulus kicks in. 

Meanwhile, wage compensation levels are already back to pre-Covid levels. 

Notice how long it took to recover in the 2008 financial crisis 

The bottom line is this …

With previous stimulus more than offsetting lost income, the coming Blue Wave stimulus will create excess savings and fuel major growth in GDP in 2021. 

Short-term Market Conditions:

In the short run, there is risk a more severe Covid-19 breakout could cause a minor correction in the S&P 500.

However, a 5% pullback towards the 50-day moving average would be a great buying opportunity. 

On any pullback, I look to add to my core portfolio of high-dividend REITs and Energy infrastructure stocks.

For ideas, review my recent editorials for Power Income stocks I love in both sectors

Live and Trade With Passion My Friends,

Griff


DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk.  DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.

Another Blue Wave Special

Hey There Income Hunters, 

A day after posting Medical Properties Trust (MPW) as a Blue Wave Special …

They were up 3%.

Gnarly.

Today, I have another one that will kill it in 2021 as a Tsunami of cash fuels Crude to $65 by year-end … 

There are multiple forces at work that will drive crude prices higher. As you can see below, Enterprise Products Partners (EPD) has a lot of catching up to do.


You know how much I love companies that build wide moats (otherwise known as advantages over competition).


In the Oil & Gas business, you do that by having quality assets, great location and quality contracts …

EPD stands out in each category.

You can tell by looking at a single ratio called: the Return on Invested Capital (ROIC).

Check this out… 

Steady returns year-after-year and they are still returning double digits as their capital cost has dropped.

EPD is expected to average 11% ROIC for the next 10 years.

This is a great long-term hold … They will continue to increase revenues as oil prices benefit from less supply and greater demand as the year progresses. 

Two MORE nuggets for you:

  • EDP pays a $1.80 dividend that goes ex-div 1/28/21. The yield is 8.45% AND it grows at 3.34% a year for a total annualized return of 11.79%. This looks like a homerun stock in your long-term portfolio. 
  • Morningstar has the stock trading at a 16% discount. With Vol this low, I’m buying the 22 calls to June.

Remember …

If you want to have an awesome quality of life in retirement buying stocks like this, reinvesting dividends and letting compound interest grow your wealth exponentially is a tremendous strategy.

The Power Income Portfolio will deliver financial freedom…

Have a great weekend everyone and until next time, 

Live & Trade with Passion my Friends, 

Griff


DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk.

 DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.

DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.

Ride the Blue Wave with this Hospital REIT

Hey There Income Hunters,

The Democrats actually did it. 

They swept the Georgia Senate runoffs (as I predicted) …

And they’re already talking about the next stimulus package. In fact, it was part of the closing pitch that put them over the top.

So it’s time to scoop up stocks that will ride the Blue Wave to nice profits …

Medical Properties Trust (MPW) has been crushing it right throughout the Covid pandemic.

MPW’s portfolio consists of 385 properties with a combined 42,000 beds. Those are leased to 46 individual operators across 33 states and 9 countries around the world (and counting). 

Now, you know how much I love stocks that have room to rise plus offer a nice dividend.

This may be one you just put away for the long-term …

Check these dividend stats:

To get your total annualized yield you add the dividend and growth rate of the dividend.

So, you can expect a return of 9.32% going forward.

Plus, the payout ratio of 69% means MPW still has 31% of profits after issuing the dividend that it can use to to pay down debt or buy back shares. 

AND HOT OFF THE PRESSES!

MPW has just priced a public offering of 32M common shares at $20.05/share.

Estimated net proceeds of ~$618.1M will be used to fund acquisition of a portfolio of behavioral healthcare real estate assets in the U.K., for general corporate purposes and working capital.

Now is the time to buy as the price is 10% below fair value …

Sometimes you need to think longer-term. 

When valuations are the most expensive in history, eventually you go through long periods of low returns.

So, when you can buy long-term winners and capitalize on great annual returns you should.

Until next time …

Live & Trade With Passion My Friends,

Griff


DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 

DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.

Dropping to March Lows?

Hey There Income Hunters,

I was shocked to see the Fed pull back from their cautious stance on the economy in the minutes of the FOMC December meeting. 

I expected an announcement regarding an increase in bond purchases (QE) or even a move to cap long-term rates through a formal control of the yield curve.

Instead, the minutes revealed that the Fed may actually begin to reduce bond purchasing … beginning as early as the middle of this year.

They may be trying to stimulate spenders by changing to a more positive tone on the economy…

But the last time the Fed started to hint they were looking to pull back on QE the stock market had a major meltdown.

It was Q4 2018 and they had been scaling back on their bond purchases. The reduced stimulus forced investors to sell equity positions.

See below:

This time, the bond market is under pressure.

Supply is soaring and inflation is rising, causing bond returns to go negative. 

Without an expansion of bond purchases, the TLT bond ETF price could drop substantially.

There’s simply not much support against it, aside from March lows, unless the Fed buys.

Now, the bond market has been overvalued for months, so this could be an opportunity to jump on a quick slide down towards the 140 level (the level of support established by the March lows).

The Trade I’m Making

I am going to put on the 153/143 March 20 Put Spread on TLT.

It’s a 3-1 risk reward and I’ll get myself out on the trade if TLT closes above 154.77.

This is a “trade the Fed” play …

If they are not supporting bonds when they are overvalued and the technicals are bearish, it’s a green-light special.

As Income Hunters we want to find the trades that put the odds in our favor, then pull the trigger and have an exit strategy so we can execute efficiently.

That’s what we have here.

Live & Trade With Passion Friends,

Griff


DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.


If Dems Complete Sweep! THIS Sector Is A Must-Buy

Hey Fellow Income Hunters,

President Biden has said businesses should be taxed and regulated more heavily. 

Dems having full control will:

  • Require a minimum 21% tax rate on all foreign earnings.
  • Raise the corporate tax rate from 21 to 28%.
  • Impose tax penalties on companies that ship jobs overseas.
  • Raise the minimum federal wage to $15 per hour.

This isn’t good for Big Tech (Amazon, Google and Facebook) OR Businesses that rely on low-wage jobs and foreign imports (i.e., McDonalds).

However!

The Big Winner is the sector Power Income has been touting regardless who is in the White House …

And the Winner Is …

Real Estate Investment Trust (REITs) 

REITS are corporate-tax exempt and 90% of its income must be distributed to shareholders.

They’re also an ideal real estate investment for many reasons, including …

  • REITs use scale to get leverage, meaning lower mortgage rates than investors could get themselves. 
  • Investors own real estate without being tied to a specific property and they can liquidate their holdings at any time. 
  • REIT total return performance has beaten the S&P 500, other major indices and the rate of inflation over the past 20-years!

4 BIG reasons to move into REITs

1. Reversing the Trump Bump

When Trump put through the corporate tax cut back in 2017, investors allocated funds away from REITS into growth stocks.

It hurt REITS (VNQ), but benefitted the S&P 500 (SPY), up 19%, and tech stocks (QQQ), up 31%.

Check it out …

Now, if corporate taxes are hiked, the REIT tax exemption becomes more valuable…

2. Democrats will Even the Playing Field  Retail

  • Imposing more taxes and regulations on e-commerce firms would allow retail REITS to gain some ground versus online players.
  • This would indirectly benefit shopping center and mall REITs which lease space to retailers. Good examples include Tanger Factory Outlets (SKT) and Kimco Realty (KIM).

3. Increase Domestic Production

  • Biden appears to be in agreement with Trump’s protectionist stance on trade policy. He wants to impose tax penalties on businesses that ship jobs abroad.
  • It benefits industrial REITs that own manufacturing facilities, warehouses, and distribution centers. Great examples include Prologis (PLD) and PS Business Parks (PSB).

4. Fewer Tax Incentives to Move out of High-Tax States

  • Biden has proposed to raise or eliminate the cap in state and local tax deductions, which would lower the incentives to move into lower-tax states.
  • Many office, apartment, and retail REITs are heavily invested in these high-tax states including Federal Realty Trust (FRT) and AvalonBay (AVB). 

Democratic control of the Senate will drive investment flow out of bonds and into high dividend yielding REITs

Check out this spread (note the yellow portion below):

REIT performance over the past 20 years has beaten the S&P 500 Index and other major indices AND beat out inflation, therefore INCREASING your purchasing power!


A GREAT REIT PLAY

Iron Mountain (IRM) – 9.05% base line annual yield plus 35% price gain potential. 

IRM provides solutions that include secure records storage, information management, digital transformation, as well as data centers and cloud services. 

They own a real estate network of more than 90 million square feet across more than 1,480 facilities in 50 countries. 

Let’s look at IRM’s Fundamentals: 

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As IRM proves their new digital business model the stock could easily trade at $38/share.

That would add more than 35% capital appreciation on top of a 9% annual return and over 9%-plus annual growth in that dividend.

Assuming just 5% dividend growth and zero price appreciation, you still get:

  • 2x in just over 6 years
  • 4x in 11 years
  • 10x in 25 years

Now let’s see how Georgia plays out!

Live & Trade With Passion My Friends,

Griff


DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.

A Gold Miner That Will Strike It Rich

Hey There Income Hunters,

All lights are green on the 2021 reflation trade. (As a reminder, that’s when you sell bonds in anticipation of new issues with higher yields.)

Here’s an update…

  • M1 money supply, the pool of most readily available cash, is growing exponentially. 
  • This is a major sign that consumers are moving all savings into bank checking accounts so it is available for immediate spending. 
  • The savings rate has been decreasing every month. This shows unemployed Americans need to tap into savings to pay bills.
  • This data illustrates the need for the Fed to keep the printing press rolling, which will continue to fuel real asset prices.

The BTG Trade Strategy

BTG is a stock I own outright. It’s a long-term hold and it crushes the competition in all critical metrics: Dividend yield, P/E, and ROTC and Debt/Cap

Check it out …

A low P/E and high ROC is a lethal — in a good way — combination. Great value and profitability in a sector where the price of output (GOLD) is in a secular Bull Market (meaning influencing factors could be in place for multiple years) …

Nothing more to say …

Other than back up the truck on this one …

Live & Trade with Passion My Friends,


Griff


DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.

The Gold Rush of 2021!

Welcome to 2021, the year of the Gold Rush and Helicopter Dollar Drop …

In the Federal Reserve’s final meeting of 2020, the Fed was very clear that their only mission is to print as much money as it takes to create inflation.

Of course, Power Income’s No. 1 rule in trading is to “Trade with the Fed.”

You see, Fed money flow is the most powerful force in the markets …

And it’s time to go with the flow.

Going for the GLD (Strategy)

I spent New Year’s Day doing research so that you can get off to a fast start in 2021. 

It was worth it.

Check this out …

Twelve out of the past 15 years GLD killed it in January … and seasonal trends can be powerful!

Now, let’s see how the broader trends impact January performance:

During the only down trend over the entire period, GLD put in its greatest January performance.

That’s a pretty powerful seasonal!

Setting Up for Success

The set-up for GLD looks good heading into this January.

Since we anticipate a quick move to the upside, purchasing GLD calls is a sound strategy.

I will pull the trigger on:

An outright buy of GLD 179 calls to 2/19/21 expiration based on Thursday’s 4.70 close.

Exit Strategy Scenarios:

Based on our analysis for the Jan move, you can make an incredible 1,200% annualized return!

Bringing It Home

Beyond what I think will be a great trade, I also want you to notice the three building blocks for a consistently successful approach to trading that were in practice above.

  1. Do the research and find supporting data 
  2. Locate the optimal risk/reward trade
  3. Pre-plan your entry and exit strategy

Consistently practice those steps and you will be in a better position to build your wealth.

Please reach out with feedback, thoughts or questions and as always …

Live & Trade with Passion,

Griff


DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk.

 DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.

DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.

Stocks are the new Bonds

Hey There Income Hunters,

Happy New Year! 

As I turned the page on 2020, I started thinking … 

Stocks actually may be a major beneficiary of the Federal Reserve’s commitment to purchase $120 billion in bonds every month. 

By buying those bonds, the Fed is effectively fixing interest rates below their fair value…

This eliminates retirees or savers from earning a positive return after inflation.  

Meanwhile, some great investment-grade dividend stocks are undervalued AND offer dividend distributions far higher than US Treasury Bonds. 

That’s why it makes total sense for investors to swap out of bonds and add dividend stocks to their income portfolio.

But you have to know where to look…  

Time to Hunt Income

The four sectors that ended up negative for the year are also the highest yielding and should do well as vaccines are distributed and we move past COVID.

Take a look at the year-to-date returns of the major US market sectors:

Energy, Real Estate, Financials and Utilities are normally all ideal income producers.

The sectors in general have taken a beating due to COVID lockdowns.

However, many stocks were able to continue paying their dividend and are now undervalued.

Looking forward to 2021, I expect the Fed to increase bond purchases making the dividend stocks appear that much more valuable … 

On top of that, if inflation rises as expected then the inflation-adjusted returns of bonds will go further into negative territory and force savers to look elsewhere for returns.  

When inflation goes negative like I show below then money HAS to start looking for a higher return elsewhere, even if its viewed as “risky.”

This is all positive for owning those sectors I mentioned so…

Let’s Make Some Money

I did some research for my Income Hunters and found a few excellent candidates in the energy sector… 

Before we jump in to a specific stock, I want to share a helpful checklist I use when scanning for good dividend stocks:

  • Consistent Dividend Growth. I will be a little flexible here depending on the potential for capital appreciation and also if there is room for earnings growth, which could increase the dividend.
  • Solid Dividend Coverage by Both Net Income and Free Cash Flow. Here I like to see a ratio of dividend payment to net income of 80%, and it could be a little higher against free cash flow. 
  • Strong Balance Sheet (Interest Coverage and Debt/Equity). A debt-to-equity ratio above one is a red flag because during tough times it could force them to cut the dividend. 
  • See That They Generate a High Return on Invested Capital (ROIC). The golden rule is to find dividend stocks that return over 10% as a total when combining the dividend yield with the dividend growth rate. This can be an average total return of the entire portfolio. 

So, here’s a pick that fits the bill…

Enterprise Products Partners L.P. (EPD) is one of the largest and most well-diversified midstream companies in the energy industry. 

The company has suffered this year along with most in the sector, despite the fact that its business model is much safer than many of its peers. 

How about this comparison … 

  • EPD is rated BBB+ and yields 9% versus the Fed index of BBB corporate bonds that only returns 2.05%. 

It is also very important to see a consistently growing dividend and the company’s debt ratio below 1…

EPD’s dividend is currently growing at 3.5% a year and their long term debt-to-equity ratio is 51% so EPD is not over leveraged by any means. 

Bottom line: EPD offers opportunities for growth and income.

I see tremendous opportunity in the first half of next year to build a portfolio of solid dividend stocks in the Energy, REIT and Utility spaces.

EPD is a great pick for a core long-term Power Income portfolio that can grow from $10,000 to $1 million. 

That’s something I talk about in my free e-book Turn $10,000 Into $1 Million Without Breaking A Sweat. Grab a copy by clicking here.

It is very doable and in future letters I will introduce conservative option strategies that can further increase overall returns. 

Until then…

Live & Trade with Passion my Friends,

Griff


DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.

Stimulus Checks Come with HUGE Strings Attached! Here’s What to Do …

Hey There Income Hunters,

As Congressman and noted fiscal watchdog Wright Patman growled way back in 1941, “The Federal Reserve bank buys government bonds without one penny.”

It’s pretty amazing that 80 years ago the Fed was doing the exact same thing it is today.

AND nobody really gets it!

Everyone talks about more stimulus, more printing …

Meanwhile, every nation that has gone down this route after accumulating so much debt …

… just kept printing money until they devalued their citizens’ wealth to save itself.

It’s called debasing the currency.

It’s a nice little trick that transfers wealth from the citizens back to the government so it can pay down its debt.

AND there is certainly plenty of debt to payoff.

 A Massive Increase in US Government Debt in the Last 30 Years:

The figure above is seriously important for all investors to understand. I’m sure many people you know – and maybe even you – are holding so-called “safe haven” US Treasury bonds in retirement accounts thinking they could live off that income.

However, investors will be sadly disappointed unless they take appropriate action to protect their wealth.

You see, printing so much currency at the end of a debt cycle creates inflation …

And the Fed is purposely going down this route.

What they won’t tell you is inflation destroys investors’ returns.

Let’s take a look at what happened during the 1970s inflationary period:

Bond rates will rise just as fast as inflation rates, meaning bond prices will collapse. 

For retirees and others with a large amount of bonds in their portfolio, this is detrimental to their wealth.

In the example above the 5-year bond rate rose 7.5% in the first five years. 

Today, if 5-year Treasuries rise just 5%, an investor would lose 20% of their capital.

Time to Hunt Income
However, there are ways to protect your bond portfolio and capitalize on the tailwind of inflation …

CME Bond Futures provide a deeply liquid market and many products ideal for speculating and hedging interest rates. (CME Group is a global markets company.)

See the figure below:

All About YOU
The next few years will be interesting, to say the least.

My mission through Power Income is to build a community of Income Hunters who not only have the presence of mind to take advantage of the turmoil swirling around them, but the ability to prepare others as well.

The goal is to put you on the fast track to financial freedom.

And we can do it together!

To get there, I’ll teach you a disciplined, systematic approach applied to a defined universe of stocks, options and futures.

You’ll learn to maximize your leverage and minimize risk so you will only need a couple of hours a week to manage your portfolio.

Sound like a plan? Great!

Feel free to email me anytime along the way with thoughts or questions and let’s connect on Facebook and Twitter.

I’d like to wish everyone a very Happy New Year, and I look forward to a happy, healthy and profitable 2021!

Live & Trade With Passion My Friends,

Griff


DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 

DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.

DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.