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Basic to my trading strategies is the division of capital into essentially two major parts-capital gains and income orientations. In the C.G. component all holdings endevour to have an income (dividend, optionablility) attachment. In the income component all holdings endevour to include a capital gains element. While these situations are sought, as we all know, they are not necessarily obtainable for numerous and sometimes conflicting reasons.

In this time of benumbed and muddled garu's, financial advisors thumb sucking, dumbfounded talking heads, wildly volitile markets and panic attacked players, there appears to be a dull and overlooked sector slow turned bullish from some deeply oversold levels which should provided security, tax favoured income, capital gains plus a gaurenteed call price within the next four to seven years in some issues'.

Over a period of time the majority of blue chip, infact the entire preferred share sector of the tsx has taken a nasty hit. As usual there is no paucity of uninformed thought as to why this has happened. We, as chart glazers, if we were watching, saw the saranio unfold and exited: now it is starting to reverse. We should be interested! Some issues have suffered 20% and 30% losses from their ISO price and if one was to start selecting and accumulating now the dividends would range from 6.5% to 9% on invested capital.

Most of these preferreds, some are prepetual, bear a date for redemption and at the original issued price. Since they are trading at a substantual reduction from that price an assured capital gain is built in.

The foregoing fulfills a part of my overall investment strategy. I have been and will be continuing to selectively add preferreds as the technical pictures unfold favorable.Remember, we are in a bear market, as far as I am concerned,: bear market traps take no prisoners, so care and close attention to your tech info on each proposed purchase is of the utmost importance.

Oh yes, don't be fearful of the issues of tis oversold equity they include the Royal Bank, BMO, Thompson, Bombardier, Power Corp, Power Financial, BNS just to name a few the list is rather extensive.




HH

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Replies to This Discussion

Excellent. You mention optionability...do you also employ covered calls options with the common stock concurrently?
Hi Scot,

Yes, I employ covered call on an on going basis with common stocks: writing puts separately and in conjuction with covered calls. I will also write uncovered calls and buy the put . Naturally this all has to be done when the technical factors indicate a favoravle risk/reward ratio. And, in affordable numbers which have to be backed up with cash just in case something blindside you.

I find this a conservative system as long as all the rule are followed to the letter.

HH
Another question comes to mind, HH: Do you think the preferred share index ETFs would be way to invest in your approach? On the TSX there is the Claymore S&P/TSX CDN Preferred Share ETF (TSX:CPD), while U.S ETFs that come to mind are the iShares S&PUS Preferred Stock Index (AMEX:PFF), Powershares Financial Preferred (AMEX:PGF), and the new Powershares Preferred Portfolio (AMEX:PGX).
I have looked at the Claymore offering, it too is showing begining bullish overtones so there is no reason that it should no fill the bill generalistic way. Someone else is picking the securities: you are buying their choices. These choices
should be, we assume they are, based on a recognised index and again maybe not. Some of the ETF's are getting a bit wackie, the next bubble?, in that they represent marketeers creating their own indexes to sell product.

I would believe the same swing would go for the yankee offerings if there was the same sell off as here. The situation may be worst there, all the financial and credit chaos, with no swing starting. Tthere should be capital gains room, however the tax advantage is lost. This factor may be more then made up in time with the appreciation of the US$. It will come the question is when and will the wait be worst the risk? I am not in a position to comment knowledgably further than this on the US because I have not looked into it. I will though.

HH
Thought you might be interested in this, if you have not already seen it:

http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/0...
Thanks for the heads up Skot more fodder for the thinking machine, Regardless of the recommendations failure to past my TA tests puts them to the side. Movement with the Prf''s has slow down, boring, but it may be a good time to add to positions. Certainly beats money market accounts.

I am awful, I never read newspapers, seldom watch the talking heads on TV, generally I stay far from the "gushs of daily and hourly wisdom". I feel they are all just clutter and noise-data, cold and unopinionated produced in graphic reality is comforting.

Keep up the good works

HH

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