If you took my advice and bought shares of "virtual bank" Annaly, you're up 42% today... And we're only halfway through the trade.
A year ago, I told you we had the opportunity for 85% capital gains, PLUS 39% in dividends – for a total return of more than 120% in two years.
While I told DailyWealth readers about Annaly, I told my paid subscribers in True Wealth my favorite way to play it... through shares of another virtual bank: Hatteras Financial, which has done even better.
The "virtual bank" business is incredibly simple... They borrow money at a low interest rate and invest it at a higher interest rate in an ironclad safe, government-guaranteed investment. They earn the difference – the "spread." As I told you last year, when these guys are in their sweet spot, they make a fortune.
Right now, they're in their sweet spot. And there's still plenty more in profits ahead. But the share prices have fallen lately.
I'm not worried. The trade is still on track. Look, Hatteras should pay $5 in dividends in 2010. With its stock price around $27.50, Hatteras' dividend yield is about 18%. Let me be clear...
That's an 18% dividend, with your money invested in government-guaranteed investments.
Hatteras is now trading for a reasonable price again, at only 1.09 times book value, as opposed to its recent peak around 1.4 times book value.
In short, I'm not worried about Hatteras or Annaly. They're both great income vehicles... They capture the spread between what they earn in interest and their interest cost. That spread is currently around 3% – that's huge.
And the Federal Reserve can't raise rates until at least next summer (2010). So Hatteras and Annaly will be able to borrow money cheaply for at least another six months.
My plan with virtual banks is to sell well before it appears the Fed will raise rates. So for 18% dividends... plus even bigger potential capital gains... own Hatteras or Annaly now. Plan on selling once they rise above a price-to-book value of 1.4 (for a capital gain of 30% or more from current levels, PLUS dividends). Or sell sometime in the first quarter of 2010, well before the Fed considers raising rates.
This should be easy money... If you bought a year ago, when I told you about Annaly in DailyWealth, you'll end up with more than 100% in capital gains and dividends. Even if you didn't buy then, you've got a great chance now: a safe total return (capital gains plus dividends) approaching 40% in less than six months.
Platinum is an odd bird in the commodities complex. It has precious-metal attributes like gold, which means people use it as a store of wealth and for jewelry. It also has industrial-metal attributes like copper. Industry uses it to make catalytic converters for autos. Naturally, industry insiders expect Chinese platinum consumption to soar in the next decade as the country grows wealthier.
Platinum suffered a brutal decline from $2,200 an ounce to $800 late last year. But as you can see from today's chart, it's enjoying textbook bull market action of "higher highs and higher lows" off its bottom.
Keep platinum on your trading list... If we experience an inflationary boom, platinum will benefit from a flight to precious metals... and it will benefit from increased industrial activity. These two factors spell higher prices for platinum.
The Best Simple Gold Indicator Around By Dr. Steve SjuggerudWednesday, November 4, 2009
As you can see, the gold indicator kept up with the price of gold in the 1970s... Then when gold went to sleep for 20 years, this indicator kept making money. And now that gold is going again, you're making big money.
The Best Three Gold Coins to Buy Right Now By Tom DysonTuesday, November 3, 2009
Yesterday morning, I had breakfast with one of the largest private gold bullion dealers in the world. His name is Michael Checkan.
This Is Where I'll Go to Escape America By Tom DysonMonday, November 2, 2009
There just aren't a lot of people out there who still believe in 100% personal responsibility, small government, and minding your own business. I know Doug and his partners believe in these things.
If I were a crime detective, I'd say China has the motive, means, and opportunity to push gold and gold stocks much higher.
Get Your Money Saved for This Right Now By Dr. Steve SjuggerudFriday, October 30, 2009
If inflation hits, and your $672,000 dollars turns into 10 times that – $6.72 million – the government still can't tax you... You've already paid your tax bill on that money. You're a tax-free multimillionaire.
