Hi Everyone
Last week was great for most of us. Check your brokers transaction record for dividends and misc in the case of UBS’s oil and silver bonds.
Mulling over the beginning of another investing week, I had a few thoughts maybe worth considering re. our investment portfolios:
- NVDA {the reference stock for our big dividend hedge fund NVDY} is constantly in the (manipulatve) news.
- Last week after another quarter of unexpectedly great earnings in spite of the China reductions, NVDA and NVDY surged.
- After today’s articles on the potential effects of Tech restrictions on China, These stocks dipped and surged again.
- But, unlike most investors, rather than rejoicing and panicking about volatile fluctuations in value, we simply smile all the way to the bank. As the reference stock moves up in value, our fund sells more call options on it. As time passes and as the stock dips, those calls diminish in value, sometimes being bought back cheap and sometimes expiring worthless. In each dividend period, we collect a handsome piece of the fund’s net profit. Strangely enough, our Put funds also made profits. In our investments, somebody else runs the trading within the volatile cycles, and we get paid – WHAT A GREAT WAY TO MAKE MONEY!!!!!
- Bitcoin and our group of related hedge funds responded similarly with news of the governments commitments.
PAYING YOURSELF AN EXTRA DIVIDEND
One member of our group has held stock for years not selling it for fear of a huge tax liability. She bought a lot of shares of AXON (Taser) when it was <$10/share. Today AXON is almost $760/sh. Not only would the payment to the IRS be huge, but the sudden large increase might trigger a 10 year TAX AUDIT and who wants to go through that? Similarly, she has has a large collection of UNH purchased under $30/sh now selling for $300/sh, although it was twice that in April.
AXON pays no dividend and UNH pays only 2.78%. So, how is a tax trapped stockholder supposed to benefit from invested holdings that are just too expensive to sell?
If you look at historical price charts of both you can see that there is some news driven volatility. AXON’s share price dropped from $700 to $475 before recovering to the current price of $760 partly based on news articles about their local political / real estate hassels at their AZ plant site. UNH because of political changes also shows a large drop wherein the stock is now at its low point. Short sellers made money on these dips by mostly renting shares from the broker which they sell high and buy back when the price drops low or the shares are called in by the broker. The broker typically splits the rental fee with folks like us when we sign an agreement to lend our shares. So on $760,000 of AXON, if the rent charged were for example 8%, the 50% split would amount to an extra $30,400 / yr or a nice monthly paycheck of $2,533. As the value moves up and down, so does the rent. Right now would be an ideal time to rent out the AXON shares, but not so much so with UNH (the shorters already played this one out).
Renting still maintains your ownership including voters rights, etc. At Schwab, the link for more info is https://schwab.com/securities-lending, so search security lending on your own broker’s website for more details if you are interested.
This weeks dividends include AIYY, AMZY, MSTY, SMCY, WNTR, CHPY, LFGY AND ULTY. PBR also goes ex-dividend this week but they are only paying 7.7% this quarter.
Until Wednesday’s alerts.
Regards,
Clint