WHR is down. So what?

October 31st, 2011
Stuff happens. In the Market as in other areas of life. So this week, Whirlpool corporation suddenly announced that earnings would be down and they would lay off 5,000 people. The stock dropped about 8 points. I paid an average of about $63 a share for it and it’s down to around $52. Some investors would be in pain over that loss, but not me. I have a different philosophy, that of an option writer.

Young people invest in the market to create wealth in their old age. I’m already old so I am looking for income to live well. In fixed income or bank accounts in today’s world I can’t get a good return for my investment dollars. So my goal is to get a return on my invested dollars irrespective if my net worth goes up or down from time to time.

WHR is still a good stock and a good company. Sales are actually up! It has been paying a 3.5% dividend, now over 4% at this price. I’ve been writing out of the money covered calls on it, and doing that I can take in at least $3,000 a year, which is approximately another 4% or more. That means that irrespective of the stock price from time to time, I am getting over 7% on my invested dollars. And when the stock is volatile and premiums go up that can easily be 10%.

My belief is that WHR stock will go back up in time. They are cutting costs right now. The market for consumer products is down, but will come back in 1-3 years. With sales up and when costs are down the company profits will go back up and the stock will come back. Meanwhile my dollars are invested well. Options do that for me.

MLH

Market Update For Week Ending 10/28/2011

October 31st, 2011
Index Close Net Change % Change YTD YTD %
DJIA 12,231.11         +422.32         3.58         +653.60         5.65        
NASDAQ 2,737.15         +99.69         3.78         +84.28         3.18        
S&P500 1,285.09         +46.84         3.78         +27.45         2.18        
Russell 2000 761.00         +48.58         6.82         -22.65         -2.89        
International 1,560.85         +92.05         6.27         -97.45         -5.88        
10-year bond 2.31%        +0.10%          -0.98%          
30-year T-bond 3.35%        +0.10%          -0.98%          

International index is MSCI EAFE index. Bond data reflect net change in yield, not price. Indices are unmanaged and you cannot directly invest in an index.
More market data

Market Wrap
Another solid rally in global markets pushed key U.S. benchmarks to the edge of their best one-month performance since 1987. The Dow industrials gained 3.58% while both the Nasdaq and broad S&P 500 added 3.78%. The economically sensitive Russell 2000 surged 6.82% and foreign shares jumped 6.27% out of relief that the European Union seems near a new arrangement to protect the euro. As stocks erased much of their negative year-to-date performance, bond prices fell, sending Treasury yields upward. For more on recent trading activity, please read:
http://msn.com

Euro Deal Triggers Euphoria In Foreign Markets
News that the European Union and banks had come to an agreement in principle to help Greece manage its debt fueled spectacular performance for equity benchmarks around the world. Although the details remain in question, investors are rightfully happy to see signs of real progress in Europe after years of bickering and decline. For more of the latest efforts to avert a crisis, please read:
http://www.reuters.com

Retailers Brace For The Best Season Since 2004
Industry consultants are telling retailers to expect the biggest holiday shopping season in nearly a decade. While such a prediction flies in the face of a lot of the economic gloom in the media, this particular firm has been very accurate in the past. As their analysts point out, Americans who have jobs have cut their debt dramatically and now have disposable income to spend. Naturally, only time will tell. For more, please read:
http://www.cnbc.com/id/45049488