Get Rich Slick

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I’m often surprised that retailers dependent on tourist dollars haven’t come up with some type of “luggage voucher” to help boost sales. I’ve traveled all over the world the past few years and I’m always struck at how retailers haven’t come up with the idea of a luggage voucher to help entice more sales.

I was in the South Pacific a few years ago and absolutely fell in love with some local goods: wine, honey, etc. but had to keep limiting my purchases because the local airline had draconian weight restrictions on the return flight. The fee was about $5 per kilo of additional weight beyond allowance.

Let’s put this in perspective, I failed to buy about $1000 worth of goods because the airline was going to charge me about $100 extra in luggage fees. I know it sounds crazy, but paying an airline extra money to haul my stuff back just irks me so I don’t shop as much. The effect is cumulative so instead of buying 4 T-shirts at a shop, I’ll buy just one. Instead of buying two bottles of wine, I buy one. Instead of buying large works of art (sculptures, vases, paintings, etc), I’ll buy none.

On the other hand, if the market place offered a $100 airline luggage voucher and a free suitcase for say, $1000 worth of purchased goods, I might be inclined to actually spend $1000 at the market.

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Years ago, I worked in an office building that had one unique feature that I’ve never encountered again in any other office building. This building featured a lady that would stop by every Friday and sell tamales by the dozen.

Like clock work, every Friday, many people would head down to the lobby and buy a dozen tamales to have for breakfast or lunch that day.  She became to be affectionately known as “the tamale lady” and she’d make at least $100 during every visit but that incident got me thinking about why there isn’t as much entrepreneurship as their used to be.

I wonder how many miles the lady used to drive to get to that office building and sell her wares. With gas over $4.00 a gallon, it might not be as cost effective as it used to be.All of this lead me to wonder why there isn’t an enterprising young person on airplanes these days.

If airlines are going to charge $5 for cold crappy meals then perhaps someone can stop by the local food court, buy a dozen juicy burgers and sell them on the plane to compete with the crappy meals. Ideally, what each airlines needs is a tamale-like lady selling tamales (good food) on the flight. The airlines could spare a row to install a mini-Subway, or Burger King, or other fast food shop on their plane and people would gladly pay for a hot meal.

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Panic! Desperation!  Premiums on Puts!  It’s always hard to catch a falling knife so I like to wear a glove when catching one so I’ve moved my strategy into selling ETF Naked Puts.

How and why would you want to sell naked puts?

When the market drops like it is doing now, people tend to panic and start selling their equities which drives equity prices down.  Some choose to buy insurance on their stocks to limit their losses so they buy Puts (the right to sell at a certain price) which means that put premiums go up on those puts and they become much more profitable.

So here’s a real example from one of my accounts I did earlier this week.   SSO (leveraged 2x S&P 500) was trading at $66.30 so I bought 200 shares and sold $67 Calls for about $2.00 to make $400.   This was a simple buy/write but I’d like to own more SSO just not at the $66.30 price so I moved to naked puts and…..

I sold 2 contracts on SSOSM (July $65 strikes) for $1.65 to rake in $320 on this trade.  If SSO stays below $65 then I’ll be forced to buy SSO at $65.00 no matter how low SSO goes.   If SSO stays above $65, then I get to keep the premium and preserve my cash.

Let’s look at this trade more closely, if I received $1.65 for SSOSM  AND I’m assigned (SSO < $65 on July 19th) then I’m really getting SSO at $63.35 ($65-$1.65 = $63.35).   So if SSO drops more, I’ll be owning 200 shares at a pre-determined price of $63.35 and I’ll be able to sell Calls at some point in the future (e.g. August,  September, December).

As of this post, SSO closed at $61.11 and if it stays here I’ll be forced to buy at $65 so why would I want to do this?   If SSO stays at $61.11 then I’ll own shares and be able to sell calls for August at $65 strikes which are currently trading at $2.70 and flip the direction.  I’ll be making money on the way down and on the way back up.

So the bottom line here is this:

1. We’re using 2x leveraged ETF for the extra volatility
2. We’re selling naked puts and covered calls to earn additional premiums and leverage dollar cost averaging by 2x.
3. We’re looking for exceptional returns.

What are the risks?   The S&P can crash and SSO can drop to $20 in which case we’re all screwed no matter how or what you’re invested in during this time frame.

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I’ve been experimenting with my mini account exclusively applying my ETF Covered Call strategy with a single ETF, the leveraged Dow 30, DDM, and the returns have been fairly exceptional even in a down market.

Take a look at the graph below.

The graph compares the Dow Jones Industrial Average returns with buy/writes on DDM and there’s really no comparison. When the Dow drops, the premiums offset some of the losses and as the Dow raises, a lockable profit gets produced on the upswing.

I’ll continue to the rest of the year using this strategy on this one ETF to find out how well it does over a 12 month period. If successful, I’ll continue with it on through year two.

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With airlines charging $15 for first bag checked and some charging $25 to $50 for second bag checked, it’s become obvious that a new era of disposable clothes is needed.

I’ve been doing a great deal of international travel and here’s what I figured I need to help myself and the airlines out:

Disposable underwear  - Preferably cotton and pre-washed (to make them comfy).

Disposable socks - Wear once, throw away.

Disposable undershirts - Preferably cotton and pre-washed (to make them comfy).

Disposable pajamas/night clothes - Preferably cotton but easy to clean by soaking in soapy water to use twice then dispose.

If I could have these items become purchasable at the airports when I land there, I’d pick them up, wear them and dispose of them daily then I’d only have to pack slacks and dress shirts.

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With a looming presidential election, more and more people are focusing on the differing strategies between the lead candidates in this years election and other political races but I honestly think that politics is wholly irrelevant to personal finance.

“But candidate X wants to raise taxes and candidate Y wants to cut taxes, it makes a difference!”, you shout.

I’ve lived through both democratic and republican administrations both through economic peaks and troughs to know that policies are mostly irrelevant.

Of course, this philosophy only depends on your personal attitude.  If you’re a capitalist, you will seek and find opportunity no matter who’s in office, no matter what taxation system is in place and no matter what economic conditions exist because of or lack of presidential decisions.

In countries like communist China and former Soviet Union there were many wealthy people (capitalists) that thrived despite the environments they found themselves in.  I’ll go further and say that if the ONLY way to achieve a comfortable/wealthy life in these communist countries were to become a member of the government then those people that sought out those offices were nothing more than ambitious capitalist working within the constraints of the communist political system to achieve their goals.

I can guarantee you that right now, there are wealthy people in places like Venezuela, Vietnam, and Middle East, to name a few, with uncomfortable and unfavorable capitalist environments but many thrive nonetheless.

So over the next few months we’ll see more and more economic and tax plans that favor one group or another; they’ll be endless debate and air time wasted on who’s right and who’s wrong.  We’ll see bloggers debate pros and cons and some will spend hours crafting arguments in favor of one policy or candidate rather than another but at the end of the day, they’ll be irrelevant to a capitalist who’ll earn profits no matter the environment.

I won’t be focusing on the politics, policies or taxation, I’ll be focusing on my profits and when a decision is finally made, I’ll take a look at how I need to adjust my strategies to profit accordingly.Why Politics is Irrelevant to Personal Finance

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I’ve been hooked on Intrade for a while and I’m just fascinated with probability markets.   I only use “play” money but it’s fun nonetheless.

Do you think John McCain will win the presidency on 2008?  Why not buy a contract that pays you cash if he does?

Do you think a 9.0 earthquake will hit somewhere in the world?   You can buy a contract on that too!

If you don’t think a 9.0 earthquake will hit then you can sell that contract short and profit if it doesn’t happen!

I have bought “play” contracts on those events and so much more too.  Do you think the Fed funds rate will be higher than 2 pct by the end of 2008 then you can buy long or sell short on that too!

There seems to be a trend for more and more sites like this as I wrote about WeatherBill not too long ago.

You can check out the play markets here at Intrade.

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