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John D. Thomason  

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  • Cash-Covered Put Selling: 1 Response To Zero Returns On Cash [View article]

    My approach is not very sophisticated. As detailed on my website, I keep up with around 100 to 150 dividend stocks, on three watch lists, dubbed Tier1 (top quality), Tier2 (good quality), and Tier3 (ultra-high yield, but risky). I try to keep up with ex-dividend dates & yields, earnings reporting, upgrades/downgrades, and other news, reporting daily on changes via my website's daily blog. If one of the stocks that I would like to own, but don't currently, seems down a bit for no good reason, I check the options quotes for expirations 4 to 8 months out, and if I can sell a put for $1.50 to $3.00 or even more, with a strike that I wouldn't mind paying, I submit a bid. I usually only carry 2 to 3 open put trades at a time. More than that is beyond my risk tolerance, as explained in the article. I also do covered calls on stocks I own. I have tried spreads, and other options strategies, but at this point I'm only doing straight-forward sells of puts and calls.

    My approach to investing and options is detailed on my website. Click on "visit Optimum Stock Investing" just below my photo to the left of the article.

    Hope that brief synopsis helps.

    John D. Thomason
    Feb 21, 2012. 01:09 PM | Likes Like |Link to Comment
  • Preferred Stock Primer: Nextera Energy Case Study [View article]
    After further research, it does appear that bank Preferred Trust Shares (TRUPS) will have a higher potential for being called by banks. As the initial comment indicated, per Basel III, TRUPS will no longer be able to be counted towards Tier1 capital requirements. There are some complexities (of course) regarding imlementation of Basel III in the U.S. via Dodd-Frank and the Collins Amendment and concurrance from the regulatory authorities regarding timing, and possible "grandfathering" of exceptions, but the point is, bank Preferred Trust Shares have an increased risk of being called. While I'm not clear on this next factoid, if what I read means what I think it means, this could happen regardless of the call date on the preferreds, since a "significant regulatory event" could be presumed to have happened, giving the banks an option to call the preferreds regardless of the call date.

    John D. Thomason
    Feb 13, 2012. 12:12 PM | Likes Like |Link to Comment
  • Preferred Stock Primer: Nextera Energy Case Study [View article]
    Hi, DivDiver,

    Your link was great, the WSJ is certainly is another place to look to determine if a company has preferreds. I have cooled a bit on buying more preferreds just now, largely on the basis of the comments received. Certainly buying above the call price is probably not advisable unless the call date is far, far away. As you point out, the best time to add to preferred holdings is in times of market stress when they can be bought significantly under the call price.

    As I replied above, the complete package of an article and all of the comments delivers a lot more insight than just the article. The enlightenment I gain from the research in preparing an article, combined with further enlightenment from the comments from SA's knowledgeable readership, makes it very worthwhile for me to keep at it. Positive encouragement helps, too. Thanks for commenting.

    John D. Thomason
    Feb 10, 2012. 02:45 PM | Likes Like |Link to Comment
  • Preferred Stock Primer: Nextera Energy Case Study [View article]
    Hi, GD,

    Thanks for the info, I'll take a look.

    John D. Thomason
    Feb 9, 2012. 08:59 PM | Likes Like |Link to Comment
  • Preferred Stock Primer: Nextera Energy Case Study [View article]
    Hi, Icd51,

    Could you elaborate a bit on the point you brought out? Is the point being that Exchange-Traded Debt Securities are more likely to be called because of this?


    John D. Thomason
    Feb 9, 2012. 07:04 PM | Likes Like |Link to Comment
  • Preferred Stock Primer: Nextera Energy Case Study [View article]
    Hi, All,

    As is my custom when I have a new article published, I review it for errors that I and the SA Editors missed (there's always something that was overlooked, it seems), and I try out the links once again to be sure they are working. Unfortunately, I have found that the second link to fails. I had navigated to it with a valid preferred symbol in the past in preparing the article and setting up the links, and saved the link, but apparently the specific web page cannot be accessed directly, it must be via navigation from other pages in the site. The other two Quantum links provided worked fine, and I was able to enter a preferred symbol from either one of those pages when they came up and get to the page with all the great data on the preferred, which was the direct link that failed. You don't have to register to use the site it appears, I was able to access data without signing in, but I recommend that anyone planning to use it should register and login, just in case something won't work if not signed in. Since there are two other links to Quantum that work fine and the data on the preferreds can be accessed, I don't plan to pursue a correction. Sorry about the error, every day I learn something new, usually the hard way!

    John D. Thomason
    Feb 9, 2012. 06:57 PM | Likes Like |Link to Comment
  • Dividend Stocks: Which Way To Go - Blue Chips Or High Yield? [View article]
    Hi, rcw120,

    Your approach sounds like mine to a certain extent. The years you list certainly tested stocks greatly - if a company navigated those environments successfully, it would seem to me that they should be a good bet going forward. When you get to your final list, why don't you share it with SA readers? Either via a regular article or an Instablog posting. I'm sure your research will provide some useful insights.

    Thanks for commenting.

    John D. Thomason
    Jan 30, 2012. 09:20 AM | Likes Like |Link to Comment
  • Dividend Stocks: Which Way To Go - Blue Chips Or High Yield? [View article]
    Hi, Uain53,

    I have owned LINE in the past, and I currently own BBEP, which suspended distributions for a year during the crisis of 2008-2009, but then resumed and is today paying out tremendously. I also believe, as you do (as I think I gathered from your comment), that oil prices are not likely to decline anytime soon, if ever, so producer MLPs should be fine, commodity price risk is not much of a risk. I should have added a comment to this effect into the article.

    John D. Thomason
    Jan 29, 2012. 08:31 AM | Likes Like |Link to Comment
  • Dividend Stocks: Which Way To Go - Blue Chips Or High Yield? [View article]
    Hi, Monty,

    Thanks for the encouragement. I haven't done a review and summation of my entire portfolio with allocations by group for awhile - and it is overdue. I do watch my allocation % to the "ultra-high yielders" group, which right now is about 12%, spread across about 10 to 12 companies. I would get nervous if this went over 15%. Also on a weekly basis I track my % of cash vs. the entire value of all accounts as marked to market. If I'm operating properly per my approach, cash % should go up as the market goes up (and I'm taking profits), and should go down as the market goes down (and I'm finding stocks to buy). Right now I'm at 31% cash. I want to go shopping, but at this time the market is not (as usual) co-operating. This probably goes under the heading, "be careful what you wish for!" Other than ultra-high yielders at 12% and cash at 31%, I don't have current allocation %'s. I'm fairly heavily weighted with large-caps, spread across various sectors. Other holdings are preferreds, MLPs, utilities, property REITs, and foreign stocks, plus a few of what O'Neil (founder of IBD) calls "cats and dogs", and I call "legacy" holdings, bought when I knew even less than I know now. I believe I'm fairly well-diversified as far as stocks go. Some would say I'm not very diversified as I have no bonds, funds, gold or silver, and no stocks that do not pay a dividend - but that is my choice.

    Thanks for commenting.

    John D. Thomason

    Jan 28, 2012. 11:01 PM | Likes Like |Link to Comment
  • Annaly Capital: A Bond Fund In Disguise [View article]
    Terrific analysis, Shaun. The Mortgage REITs certainly are followed by a lot of investors, especially NLY. There are a lot of strong opinions held. I consider NLY a speculation, but as Cramer has said in his books, it's OK to allow yourself to speculate a little, as long as you are under control with it. Even Ben Graham said there is nothing inherently wrong with speculation, as long as you are aware that speculating is what you are doing, and you are not fooling yourself by thinking you are investing.

    John D. Thomason
    Jan 17, 2012. 09:05 AM | Likes Like |Link to Comment
  • Mortgage REITs And Double-Digit Yields: What's The Catch? [View article]
    Thanks. If you missed it, see the comment above by Alan Brochstein, an SA contributor, and read the article that he provided a link to, also on the subject. I only mentioned very recent SA articles in the section in my article on SA articles. Alan's article is from a few months ago, but certainly recent enough to be very relevant.

    John D. Thomason
    Jan 16, 2012. 11:46 PM | Likes Like |Link to Comment
  • Mortgage REITs And Double-Digit Yields: What's The Catch? [View article]
    I stayed away from MREITs until 2011. I decided to tiptoe in a little, attracted by the high yields, like everyone else. I own these in my trading account (MB Trading), where it is cost-effective to accumulate in small increments, plus sell and buy back, because of the low commissions. I started out with NLY;

    Bought 3/22/2011 @ $17.90, had planned to buy more, but decided to sell instead on 6/30/2011 @ $18.06, realizing a small gain and collecting the first two dividends of 2011. So this was a successful get in, get out dividend-capture trade. As I state further on, it looked like $18 was a high, so I figured that maybe it would be better to sell & get back in at a lower price later.

    Decided I shouldn't have sold, went back in so as to not miss any dividends, acquiring my present position in four small increments:

    Bought 7/18/2011 @ $17.78
    Bought 7/27/2011 @ $17.25
    Bought 8/8/2011 @ $16.50 (this was the August sell-off)
    Bought 12/23/2011 @ $16.95 (just before the ex-dividend date)

    I have collected the 3rd and 4th dividends of 2011 on the first three tranches of shares, and the 4th only on the last buy.

    As to why sell at $18 - NLY has only gotten above $18 twice in the last two years, and only then just for a few days, and also just barely over $18: in 2010 in March, and in 2011 in June. So $18 is about as high as it's going to get, and when it does, it probably won't stay long. So it is a good time to sell, you likely will be able to buy it back at a lower price. With $1.00 commission per trade (actually 1 cent/share, minimum commission $1.00), I have no hesitation to sell and buy back.

    As for MFA, I have acquired my holding in three increments:

    Bought 7/11/2011 @ $8.31 (paid too much)
    Bought 10/7/2011 @ $6.28 (the October market sell-off)
    Bought 12/23/2011 @ 7.15 (just before the ex-dividend date)

    I collected the 2nd dividend of 2011 with the first buy, and only the last dividend with the other two share additions.

    At this point I will follow the plan laid out in the article - add more upon a decline, sell or sell a covered call if the stocks go up.

    These stocks, and this type of trading around, are not my usual approach with, for example, a blue-chip like Johnson and Johnson (JNJ). It just reflects my perception of the risk inherent in these names.

    This was a lot of detail - it just reflects the real world of in and out trading that isn't always neat and straight-forward.

    If this goes South really bad, perhaps I will do a follow-up article on the wisdom of avoiding MREITs, with examples.

    John D. Thomason

    Jan 16, 2012. 11:30 PM | Likes Like |Link to Comment
  • Mortgage REITs And Double-Digit Yields: What's The Catch? [View article]
    The 1/3 of 1% was MFA, which is a low-priced stock, and I did not pick up a lot because I planned (and still plan) to add to the position. Also, I view it as a bit riskier because it is largely non-agency MREIT.

    I tend to start small and thus can have a position that is, percentage-wise, not very much. I will add to a position as general market sell-offs present opportunities.

    Jan 16, 2012. 10:47 PM | Likes Like |Link to Comment
  • Mortgage REITs And Double-Digit Yields: What's The Catch? [View article]
    I think my previous two responses pretty well summed up my thoughts on the risks & so on - and my current exposure is under 1%, so that has to be a message that I am fearful of the risks. If that weren't the case (the perceived risk), why not have 25%, even 50% in MREITs? While I don't like to lose $, even if only 1%, it isn't going to affect my lifestyle, as long as it doesn't happen too often. As for whether it's worth bothering with, I guess for me it is, just to sample that asset class. If I didn't fear the risks, I would own a lot more.

    John D. Thomason
    Jan 16, 2012. 02:57 PM | Likes Like |Link to Comment
  • Mortgage REITs And Double-Digit Yields: What's The Catch? [View article]
    Hi, Alan,

    It seemed to me like the recent articles, at least, tended towards the positive towards MREITs. The thrust of my approach was that someone mesmerized by the high yields should at least consider the downside & the recent history (and how ideal it has been for MREITs) before jumping in. Only someone with considerable expertise (like yourself) would be able to delve into how the portfolio is constructed & come up with a clearer picture of the risks. For less sophisticated types like myself, I am depending upon the MREIT's management team. Owning one of these stocks is, among other things, a wager on the expertise of that team and how well they will navigate the choppy waters to come. These guys aren't blind to the likely future trends. And as for these trends, buying or even holding on to these stocks now is also a wager that things won't change suddenly & dramatically for the worst (for the MREITs) for a while yet. I agree the window is closing, but how quickly is the question. I fully expect the dividends to be reduced as conditions (again, conditions for the MREITs) deteriorate. What I am counting on is the entities will survive to pay again another day. Also, I am expecting to be able to add a little at reduced prices, all the while staying under my % allocations. At least I'm not saying, "yeah, it's great, jump in, the water's fine!"

    Finally, I hope anyone reading this or any other article takes the time to read the comments as well - they likely will gain perspective and learn a lot besides what the author said in the article. Many times, the comments contain information that is as good as or better than the article.

    Thanks for your input.

    John D. Thomason
    Jan 16, 2012. 02:43 PM | Likes Like |Link to Comment