Random Money Post

I think it's been awhile since I've talked about one of my favorite topics on here.

So I'll just random post it style.

Here are my current 3 largest investment holdings (in no particular order):

DPO: Pays 10% dividend and gives you $.09 a month per share. It follows the Dow and (from what I think) sells options against it's holdings and pays you the income that they make. The financials from Google finance look amazing and only a few months ago they cut the dividend by a little less than half - which definitely made me sad but that large of a return on dividends alone is definitely unsustainable. I just hope they continue to do the $.09 a month.

I've been buying this stock since it was $10 before the big crash and bought it all the way down to $6. I continue to scoop it up any time it breaks below $9. Unbeatable in it's dividend and watching that monthly payment grow tax free makes me happy in a way no other financial product can.

My other 2 holdings are opposite plays of the other. There are only (in my opinion) 2 ways out of this financial mess the US government has gotten themselves in to:

1) Tax and raise interest rates to bring all the stimulus back and hopefully pay down some of the debt we owe so we don't get knocked on the credit rating (which I can't believe anyone cares about anymore)

2) Inflate the hell out of the dollar by flooding the market with more of it, therefore driving the economy (kind of) and lessening the actual value of the debt that we owe/cash that everyone is holding.

Knowing these 2 things I am holding TBT which is a bet against the 20 year bond price (yields go UP prices go DOWN) and UNG which is such the smarter choice for the entire world it's ridiculous. There's tons of inventory - the distribution channels are already and natural gas is much less harmful to our environment than a majority of the alternatives.

But here's the thing that makes me money on these holdings:

TBT I would buy around $45 or $46 and then turn around and sell 2-3 weeks later at $49-$50. I did that at least 3 times this past year. Sure, this time when I bought at $45 it's now dropped to $35 (where I then bought) but I'm not to worried about it. There's a big bubble in bonds where everyone ran in fear of the market that's about to burst and when it does...I'll be smiling all the way to the bank. Now that I hold my full position in this stock I'm going to start selling calls against my holding. Sure it's not much - I expect to make $20 a month from my holding - but in comparison to the total amount that's close to 10% return on selling premiums alone.

Which is what I've solidly been doing with UNG over the past year and a half. UNG is pretty volatile so it's actually a lot of fun to play. Every so often it will have an up 6 or 7% day - and of course I check it every other day to see where I'm at. Sometimes when we get a little run going (for example last months $8.80 high) I can sell calls for big premiums and cringe while I watch the buyers lose 100% of their investment by the end of the contract. With UNG I'm able to pick up a much bigger premium of almost $50 a month (as high as $70 one month) and almost 15% return on selling calls alone.

As an individual investor, I admit this is definitely time consuming and takes a little work. But if you've got some extra cash laying around in my opinion there is nothing better to do with it than to get it in to a roth and get those high dividend paying stocks/funds. I always dream about putting a big chunk of money together (which will happen) and suddenly earning 12% a year becomes enough money to live life comfortably.

Which somewhat segues me in to retirement talk. Pensions were always of great interest to me. I hate to rely on one - because I think all companies that have them file for bankruptcy to avoid paying them - but at this point the only way I'll be able to retire at 45 is with the help from one. The problem I face though is that if I retire before 55 the rules say that I can only take 40% of my actual pension benefit.

Which is actually fine - because if you had asked me 2 years ago if I thought I was going to get a pension I would've told you no. And that somehow through the magic of saving and compound interest I was going to make it. But after living through the "Great Recession" I'm not so sure anymore. It could be a disaster and the market could stagnate for the next 20 years of my life, not earning me 1 penny for a dollar invested.

But on the flip side I think about things like this: If we contributed an extra $1500 a month (which will be possible before 2012) to our mortgage principal we'd have this house paid off in another 12 years (we'll be paying for it for 5 years as of February 2011, cutting our 30 year mortgage down to just 17). And what then? All we have is property taxes, standard house bills and whatever else we want to spend our money on. And all of that can be covered by our pension payments alone - not drawing on any other money we've saved. But just in case if we needed to do that - we could pull the $10K a year of principal we've been saving in our Roths out tax free to supplement anything we please.

So we're talking about a house/property (one of them) that we fully own in our early 40s. Saving every dime for a few years to pad the "just in case" accounts and then letting our pensions pay for the rest of our lives.

As long as we stay healthy I can't really see anything stopping us. And this kind of stuff is exciting enough to keep me up all night (seriously).

I'll try my best to turn my brain off now. It's a marathon...not a sprint...