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In times of high market volatility such as we are experiencing so far in 2008, covered calls are one of the strategies proving very effective and profitable. A covered call is an investment strategy where an investor holds a long position in an asset, and sells a short term (usually) call option against that position. There are two reasons for utilizing the covered call:

• to put limited downside protection in place (you are protected from loss all the way down to the strike at which you sell)
• to increase profits at times of lofty stock valuations

As an example, consider a security with ticker symbol ABC that is trading at $165 per share. An investor purchases 100 shares of ABC for $16,500 on July 14, and then sells 1 contract of the August 160 strike ABC for $1300. An option contract has both intrinsic (in the money) value and extrinsic (time) value. In this case, the intrinsic value would be $500, or the difference between the stock price and strike price for in the money options. The extrinsic value is time value, and it is what the seller of the contract collects beyond the price of the shares, as a premium payment for selling the purchase right to the covered call buyer. If the covered call investor does nothing prior to August expiration, then the maximum profit is equal to the extrinsic value at the time of the option sale, or $800 in this case.

But there is a method to increase the profit of a covered call sale beyond the initial extrinsic value of the contract. The method is not something you can explicitly plan for, but it is an opportunity you can watch out for, and take advantage of when the time is right. The method I’m referring to is to temporarily remove the covers and go naked, hoping to re-apply the cover at a later time or date for a higher price. The time when such an opportunity might present itself is during unusual and “temporary” broad based market sell offs. The opportunity may also come immediately following an earnings report, where a “temporary” fear factor causes a “temporary” panic sell off. Temporary is the key word here, and it is up to the investor utilizing the covered call approach to make the determination of what is temporary or not. The questions to ask yourself are:

1. After a large sell off of my ABC shares, how much has the covered call decreased in value? By what percentage has it decreased – more then 50%? More then 75%? Note that a decrease in value to a covered call that you SELL is actually an increase in value to your account.
2. How much time has elapsed since I sold the covered call?
3. How much time is left before the contract expires?
4. Do you have reason to believe that this is just a short lived temporary sell off? If so, do you think other investors will come to their senses in a reasonably short time to bring about a quick recovery in the shares?

Let’s explore those questions as we expand on our example above. We bought 100 ABC shares for $16,500 and sold an August 160 strike call for $1300 on July 14th. The option will expire on the 3rd Friday of August, or the 17th. There were 34 days left in the contract when we sold it. Suppose that ABC released earnings on July 22 and the ABC stock dropped from $165 down to $150 immediately following the earnings report. The option contract dropped in value from $1300 to $300, giving you a gain of $1000 in just a few days. You as the investor firmly believe there is no logic to the sell off in ABC and that the shares will recover in a matter of days. Since you have already made a 77% return against your caller ($1000 gain divided by initial $1300 sale of the option), you decide to close the contract early. To do so you buy back the August 160 strike call (BUY TO CLOSE) for $300. Doing so removes the maximum profit potential limitation from your shares, but also removes the remaining $300 of extrinsic downside protection you had in place. You are now naked in your 100 shares of ABC.

Now suppose that your intuition was correct and that one day after the earnings release sell off, on July 23, the shares of ABC rally back up from $150 to the $165 level. Because you had no caller in place to limit your gain, you were able to capitalize dollar for dollar on that gain. With earnings out of the way, you now think that the shares are properly valued and they will likely hang out in the 160-165 area all the way through to August expiration. You want to capitalize on that premise by selling as much extrinsic (time) value as you can. Prior to the earnings release, you sold the 160 strike call because you wanted the extra protection (you are protected from a loss all the way down to the strike price you sell). With earnings past, and having witnessed a sharp drop and immediate recovery in the shares, you are more comfortable selling the higher 165 strike call. You sell 1 contract of the August 165 strike and collect $700, which is 100 percent extrinsic value. Fast forward to expiration day on August 17 and assume that ABC closes at $166 per share. Your option contract is exercised, and you are automatically paid $16,500 (165 strike * 100) for your 100 shares of ABC.

Lets recap the list of transactions for the above example:

• $16,500 purchase of 100 shares of ABC on July 14
• $1300 SELL TO OPEN of August 160 strike ABC on July 14
• $300 BUY TO CLOSE of August 160 strike ABC on July 22
• $700 SELL TO OPEN of August 165 strike ABC on July 23
• $16,500 sale of 100 shares of ABC on August 17 (fast forward to option expiration)

The net total profit of the above 5 transactions is $1,700. Buying back the covered call option after the temporary sell off, and then reselling another option after the share recovery, allowed you to increase your maximum profit from the covered call. The maximum profit was originally capped at the $800 extrinsic value at the time of sale, but you were able to nearly double that maximum potential profit by taking advantage of what your intuition told you was only a temporary market sell off in the ABC shares. But remember, only you can determine your own definition of what is temporary or not. If you are not sure, then its probably best to leave the covered call protection in place and ride it out through expiration.

For additional reading on this topic:

New Insights on Covered Call Writing: The Powerful Technique That Enhances Return and Lowers Risk in Stock Investing by Richard Lehman

If you have spent any time on the Internet, you probably have seen plenty of ads for free seminars – Real Estate seminars, stock market investing seminars, Internet marketing seminars, Ebay store seminars, and many more. Most people that are exposed to those ads just ignore them. But I’ve got news for you. The people who click on those ads and go to the free seminars do find plenty of value in the form of learning something new or receiving a little inspiration and motivation. And most attendees even subscribe to additional services at the events.

I’ve been to several free seminars over the last few years, including:

• Robert Kiyosaki real estate
• Robert Kiyosaki stock investing
• Investools seminar
• Donald Trump real estate
• Get rich and stay rich seminar
• Stores online

The seminars, despite their differenes, are very similar in nature. A typical seminar will be 2 hours long and offered at several convenient times and places in a city near you. After being greeted and signing in, you are given a name tag and pointed to your seat. If you have arrived early the conference room projector is already on, and displaying several motivational, and yet slightly subliminal messages designed to secretly motivate you to sign up later: “If you always go where you have always gone, you will always get where you always got.”

When its time to begin, there are the customary reminders to turn off cell phones and hold all questions until the end. Then you are treated to a very entertaining, informative, and interactive session on the topic at hand. The interactive portion usually involves the “How many here…” type questions where the applicable audience members raise their hands. The seminar holders must use the same comedian as their humor consultants, because at the end of a series of questions there is always the “how many here are not going to raise their hands no matter what I ask” question, at which point the audience laughs. Beyond the interaction, there is a healthy mix of effective marketing, more motivational quotes and statistics, and a few humorous jokes. The actual meat of the free seminar – what you signed up for – probably only lasts for 25% percent of the 2 hour period, but the audience stays alert and engaged the whole time, and I have never seen anyone walk out early.

Of course the real intention of the companies to host these free seminars is as you expected, to sell you something related to the topic you came for. What starts out as a free 2 hour seminar gradually turns into a sales pitch for a weekend intensive course. I’ve seen the intensive classes sold for as little as $50 (stores online) to as high as $3000. But $500-$1500 is a good range you can expect for the weekend classes they attempt to sell you. I’ve rarely seen any pushy sales tactics, but nonetheless, their conversion rates are truly amazing. Anyone studying business should attend these free seminars just to see the power of an effective marketing campaign. I’ve personally witnessed up to 80 percent of a free seminar audience sign on to the fee based intensive weekend seminars.

If you do sign on to the weekend courses, you can expect additional up sell attempts beyond that. I’ve only been to one intensive weekend seminar so far with Investools. The Investools “graduate” programs were selling from a few thousand to as high as $25,000. But don’t let any of these costs scare you. There was never any high pressure sales tactics. People made their choices based on the perceived value of the program. And they must have done a good job presenting that value, because plenty of people signed up for more.

On July 15th, the Securities and Exchange Commission (SEC) issued an emergency order to enhance investor protections against naked short selling, and specifically listed 19 securities that they will closely monitor, including heavily shorted financial firms such as Fannie Mae, Freddie Mac, Citibank, Lehman Brothers, Bank of America, Merrill Lynch, and others. Technically speaking, nothing has changed and the “emergency order” really served as an “emergency reminder” of the rules against naked short selling. The recent panic in the financial markets needed this emergency reminder to stem the aggressive short selling in these 19 firms that were specifically mentioned, and also served to provide some short term recovery in these securities due to the panic short covering that resulted. But what is short selling and naked short selling, and what is the difference? Read on to discover.

Short selling refers to the selling of a security that the seller does not own. Most stock trades take place by first buying a security and then later selling it a price which is hopefully higher then when you bought it. Short selling takes the opposite approach, and is used when the “short seller” thinks the price of the security will go down. They first SELL the position they do not own, and to complete the transaction, they buy it back, and hopefully at a lower price then they first sold it for.

But the SEC rules say nothing about short selling by itself, and even went so far as to condone the practice of short selling. It is the naked short selling that they are clamping down on, which incidentally was illegal even before the emergency SEC “reminder”. In a regular short sale, the seller does not own the security they are selling, but their brokerage firm may have plenty of shares available to cover them against the SEC naked short sale rules. In fact, brokerage firms regularly monitor their inventory levels of all shares held by all clients, and the total net long position counts of each must remain positive at all times. If a brokerage has a total share count within their house that is negative, then they are violating the naked short sale rules of the SEC.

Based on my conversations with Scottrade brokers, here is how it works. A customer attempts to sell short 100 shares in Fannie Mae. Before completing the transaction, Scottrade checks their internal database to ensure that the net position of all accounts in their house is positive for Fannie Mae. If it is, then the short sale is allowed to go through. If it is not, then Scottrade will not complete the short sell order. But what happens if to many other other Scottrade customers sell their long Fannie Mae positions after I institute my short sale? In that case, the Scottrade net long position for Fannie Mae may go negative, in which case they randomly select an account with a current short position, and then instruct them that they must close (BUY to cover) their short position by the end of the current trading day.

So if Scottrade and others have mechanisms to prevent naked short sales, then who exactly are the naked short sellers that are violating the SEC rules? The SEC did not specifically name the violators, but more then likely we are talking about huge financial and trading institutions breaking the rules en masse.

How does the naked short sale reminder effect the Ultra BEAR ETF’s and Mutual Funds? The Rydex Inverse 2X Financial ETF (RFN) and the Proshares Ultrashort Financials (SKF) are two that come to mind. They both claim to seek investment results that correspond to twice the performance of the inverse of the financial sector. But they each go about it in different ways.

Proshares does not actually short stock to reach its double inverse performance. They utilize something called return swap contracts, which are direct contracts between proshares and some other institution, whereby they agree to guarantee and swap out their respective performance. Looking at the daily holdings of the proshares ultrashort financials, there are only two holdings – “DJUSFN Swaps”, and cash. The naked short sale rule should not affect proshares inverse funds, but those shares may be affected by something else called counterparty risk. Proshares does not disclose who the counterparties are with their return swap contracts, but the is risk that those counterparties may fail to deliver on their end of the contract, leaving the investor holding the (empty) bag. MAS explained the counterparty risk here.

Rydex takes the direct approach with their inverse funds by directly shorting the market at twice the rate. The size of Rydex, and the scale of their net short position in these inverse funds is certainly reason for concern. And if we suddenly see them limiting new investments in their ultra inverse shares and funds, it will likely be related to the SEC’s naked short sale warning.

If you don’t live in a cave, you have probably hears about the current crisis in banking and housing. Many banks and mortgage companies have already failed (Netbank, Indymac, and others), and many more are expected to follow. But if the banks hedged their risks appropriately, the pain of the housing crisis would be mostly limited to the private mortgage insurance companies, such as MGIC Investment Corp (MTG).

Traditional wisdom states that you need a 20 percent down payment to purchase a house. The 20 percent down payment is the method a borrower can use to prove loan worthiness. The large down payment, and a good credit score were the traditional means a bank used to establish credit worthiness for such a large purchase. If a borrower wanted a home loan with less then a 20 percent down payment, they were structured as a piggyback loan. The piggyback loan consisted of two loans, one for 80 percent of the value of the house, and a second loan at a higher interest rate for the difference between the smaller down payment (sometimes nothing at all), and 20 percent. In addition, banks and mortgage lenders issuing piggyback loans required the owner to purchase additional private mortgage insurance. The mortgage insurance premiums paid by the owner was a protective insurance policy designed to hedge the banks risk against default. Companies such as MGIC, who sold the mortgage insurance, would cover the first 20 percent of loss and the banks would cover the rest.

But just as in the DOT COM era, the bubble got a hold of bank CEO’s, and greed and stupidity took over. The logic seemed simple at a time when competition for home loans was fierce and banks were fighting for their share of the loot. You know how the story goes; everything that could be overlooked was overlooked. $500,000 no money down home loans, often structured as interest only arms with negative amortization, were freely given out to anyone with a heart beat, and sometimes the heartbeat was optional. But the banking CEO’s figured there was no risk because houses were increasing in value by 10 or 15 percent per year – or so they WERE. It was a borrowers market and given the choice of a loan from a bank that required the additional mortgage insurance purchase, and one that didn’t, the decision was obvious. Just as the commercials say, banks had to compete, and when banks compete, banks LOSE. They dropped their demands for private mortgage insurance, effectively killing the hedge and taking on all the risk themselves.

Fast forward to present day and banks are now learning the painful lesson that mortgage insurance policies won’t help them if they never existed. Meanwhile, the impossible has suddenly become the probable. Housing values across the country continue to drop, and borrowers who never had any skin in the game find it easier to walk away and hand the keys back to the bank. And the banks are left wishing they had the private mortgage insurance in place to buffer the pain.

You may have seen the Magicjack advertised on late night television. That’s where I first saw it, and I was a little skeptical of how a company could sell unlimited home phone service for only $20 per year. Just as you are doing now, I jumped on line and searched for a few magicjack reviews. The turning point was when I found a positive review from my favorite CNBC commentator Herb Greenberg. If a fellow skeptic like Herb could like it, then I knew it was worth a shot for me!

You don’t have to wait for a replay of the commercial to buy one. They are available for purchase directly from the magicjack website or Amazon.com.   From the magicjack website it will cost you $40 plus shipping and handling – $20 for the device and $20 for the first full year of service. They even offer a 30 day money back guarantee but once I tried it, I quickly realized it was well worth my $40 total investment. Of course, there was the typical attempts to up sell the product such as prioritized availability, expedited delivery and extra pre paid years of service.  I found the up selling options on the magicjack site very confusing and misleading.  That check out process was really my only complaint from the magicjack experience.  For that reason, and for a quicker shopping experience with much less hassle, I highly recommend purchasing the magicjack directly on Amazon.com at the following link.

The magicjack packaging was slim and simple but the device was well padded and did work right out of the box. I just plugged the magicjack directly into my Dell computer, and the magicjack software automatically installed itself. The magicjack has just 2 ports – one end goes into the USB connector of your computer, and the other end is where you plug in any standard phone with an RJ11 plug. I use my GE 900 Mhz cordless phone with my magicjack. You can make calls either using the magicjack software interface or directly from your standard phone. Here are a few pictures:

Surprisingly, the magicjack is pretty well featured for such an inexpensive device and service. The list of features include:

• Your own dedicated phone number for both inbound and outbound calls
• Free directory assistance calls to 411
• 911 service works but there are reasonable limitations, as explained on the magicjack website.
• Free call waiting
• Free voicemail
• Free caller ID if your phone supports it
• Free international calls to other magicjack users – other international calls at reasonable rates
• You can even set up call forwarding to a cell phone or other number

A few limitations of the magicjack are:

• Number portability is not in place yet. You will receive a brand new phone number for your magicjack line
• Your Internet connection must be available to use your magicjack phone
• Your computer must be turned on to make or receive calls with the magicjack
• 911 service limitations really need to be understood completely, especially if you do not have a backup device for 911

Note: Even with my computer turned off, I was still able to receive magicjack voicemail. When new voicemails are received, the magicjack service automatically emails a wave file recording of the message to your email address on file. This is probably my favorite magicjack feature!

Of all the magicjack limitations, the one that many customers may have a hard time with is the requirement to have the computer on. With other VOIP calling services such as Vonage or Comcast voice, only the VOIP router needs to be on because the phone plugs directly into the router, and not the computer. But those other services are significantly more expensive then the magicjack. Vonage has an unlimited calling plan for $24.95 per month ($300 per year), and the Comcast triple play goes for $33 per month ($396 per year).

The bottom line is that if you can live with the limitations, then the magicjack is an incredibly good deal for unlimited home phone service at only $20 per year.  Remember to purchase it on Amazon for a quicker check out process.

In September 27, 2000, CNN wrote that that:

the federal budget surplus for fiscal year 2000 amounted to at least $230 billion, making it the largest in U.S. history and topping last year’s record surplus of $122.7 billion.

I’m not sure where CNN finds their White House correspondents, but they obviously know nothing about government accounting. CNN is not the only clueless news narrators of course; MSNBC, The New York Times, ABC, CBS, USA Today and virtually every other national news agency got it wrong then, and continue to get it wrong today.

Here is a tip for the mainstream news agencies: when reporting on US government budgetary issues, check the source. The source I’m referring to is the US Government’s Treasury Direct website. For all the pilfering the US government does of the tax coffers, at least they are honest about it. They accurately and honestly report the largest accounting scandal in world history. CNN just doesn’t understand the numbers.

As of July 17, 2008, the current US Government Debt is nearly 9.518 Trillion dollars. From the Budget of the United States historical tables (pg 31), the United States tax revenue for fiscal year 2007 was only 1.86 Trillion dollars when the social insurance and retirement receipts are subtracted out. For those of you who think that your money is 100% safe in United States treasuries, consider the fact that the debt to revenue ratio of the United States treasury is over 5 to 1! (9.518 trillion total debt divided by 1.86 trillion in tax revenue).

Looking back, here are the historical US government debt numbers from 1986 through 2007:

Bill Clinton was president of the United States from 1993 to 2001 and although he made significant progress toward fiscal responsibility, he did not balance the budget. If you don’t believe me, (that means you CNN!), then kindly point out two consecutive years in the table above where the total US debt actually decreased from year to year.

Here is another view of some of the historical debt numbers, and the corresponding annual deficits. As you can see, the United States has not had a balanced budget since 1957, the year that Dwight Eisenhower was in office.

So how do CNN and so many others repeatedly and incorrectly report of budget surpluses? They simply do not comprehend the numbers. The US government debt is broken down and reported in 2 components:

• Debt held by the public
• Intragovernmental holdings

The number that matters is the TOTAL of the two components above!

Before going further, let’s take a step back and consider the analogy of an 4 member household. Jack and Jill are married and have two kids. Together they have a total income of $65,000, but expenses are high and they spend a total of $70,000 per year. The annual budget deficit of this household is $5,000, which they finance on 2 credit cards – Jack’s Visa and Jill’s Mastercard. During the past year year, Jack paid down his Visa balance by $1000 (surplus) but Jill increased the balance of the family mastercard by $6000 (deficit). CNN ignores the Mastercard and reports a $1000 budget surplus for the Jack and Jill family!

Back to the United States. Why do they separate the total US debt into two components – debt held by the public and intragovernmental holdings? It’s because the current demographics of the United States make it convenient for them to hide the truth of their Enron style accounting from the American Public:

In 1960 there were 5.1 workers paying into social security for every 1 worker collecting a benefit. That ratio is gradually declining and is expected to hit 2.1 workers per retiree by the year 2032. The current demographics of the United States are causing social security surpluses, but over time those surpluses will turn into deficits.

The social security surplus for fiscal year 2007 was $283 billion dollars. Rather then investing those surpluses for future retirees, as every other American pension system is required to do, the United States budget office “borrows” the surpluses and records them in an Enron style fashion as “intragovernmental debt”. This trick lowers the reported deficit on the “Debt held by the public” side and increases it on the “Intragovernmental debt” side (see VISA and Mastercard analogy above). The trick is also very effective in fooling CNN (not hard to do!), who only looks at easy to read one page reports such as the Joint Statement of Henry M. Paulson, Jr., Secretary of the Treasury, And Jim Nussle, Director of the Office of Management and Budget, on Budget Results for Fiscal Year 2007. But the trick will only work until the United States demographic time bomb completely explodes, and the social security surpluses turn into social security deficits. I’m very curious to see what new tricks the United States budget office comes up with when that happens!

According to the joint statement report, the fiscal year 2007 budget deficit was only $163 billion dollars. In actuality, when you add in the pilfered social security surplus of $283 billion, plus other United States pension system raids (other federal government worker retirement programs), the 2007 budget deficit was actually $500.7 billion dollars, and not the $163 billion dollars that news agencies report from the joint statement. The total US Government debt did increase by $500.7 billion dollars from September 2006 to September 2007. 1957 was the last time the United States recorded a true surplus, where the total outstanding debt decreases from year to year. Thank you Mr. Eisenhower! As for the CNN reported $230 billion surplus for fiscal year 2000, it was actually an $18 billion deficit. Although still in the red, that too is deserving of my thanks to Mr. Clinton. He may not have achieved balance but he came pretty darn close!

For additional reading, I recommend the following:

The National Debt of the United States 1941 to 2008, 2d ed by Robert E. Kelly

One Nation Under Debt: Hamilton, Jefferson, and the History of What We Owe by Robert E. Wright

Depending on the time span, some stock market statistics point to an average return of around 10 percent per year. That’s not a bad years work for just throwing your money at the market and patiently waiting it out year after year. But what if 10 percent per year is not good enough, and you want more – like 25 percent per month. Well, the good news is that it is easy to make 25% per month if you have an options trading account. And you can make those 25% monthly gains with just 10 minutes of work per month. But the bad news is that if you are not prepared and knowledgeable, you could easily wipe out all your profits and more in a single bad month.

The iron condor is one method that traders use to make 10 percent per month. Iron condors can be traded on any optionable stock or index, but to avoid huge earnings or event related swings in price, many choose to utilize the iron condor only on an index. The iron condor is an option credit spread involving 4 simultaneous option positions, a short call and a long call, and a short put and a long put . The strikes of those 4 positions are based on the trader’s opinion of where the underlying will land on option expiration day. One tool that traders use to make their determination is to look at past support and resistance levels. Take a look at this yearly chart for the Russell 2000 index that shows a few support and resistance levels:

There are many ways to trade iron condors but all the methods can be lumped into 2 categories – active or passive. The active iron condor trader expects to maximize monthly returns through multiple adjustments of the channel legs, either reacting to, or in anticipation of market moves. A passive iron condor trader makes a single iron condor trade each month, and either rides it out through expiration, or closes it early for a partial loss or profit, but has no intention of adjusting.

The passive iron condor trader only chooses the range and does not need to determine the exact value of the index at expiration. (3rd Friday of the expiration month) As an example, lets assume that a trader wants to make a bet that the Russell 2000 will fall between the 650 and 750 range by August expiration. The next step would be to look at the August options chain and find the 4 individual option legs that would combine to form an iron condor for the 650:750 range.

The 4 option legs needed for an August iron condor with the 650-750 range are:

1. Short the 750 call, last value at 2.02
2. Long the 760 call, last value at 1.20
3. Short the 650 put, last value at 8.05
4. Long the 640 put, last value at 6.30

The above combination would result in a total net credit of $2.53. Since option contracts are always in lots of 100, the initial credit on the account would be $253. In the absolute ideal case, the Russell 2000 would stay within the 650-750 channel all the way through expiration, in which case all 4 option legs would expire worthless. But the initial credit of $253 would be the for the iron condor trader to keep.

But there is substantial risk on the above trade that the Russell could extend above 750 or below 650. The maximum loss would be incurred above the 760 level or below the 640 level, and would be equal to the length of the largest spread on either side minus the initial net credit. In the example above, the length of the spread on each side (640 to 650 or 750 to 760) is the same $10, or $1000 per contract. So the risk on the trade is the $1000 maximum spread minus the initial $253 credit, which comes to $747. In percentage terms therefore, the results of the max gain and max loss are:

• 25.3% monthly return ($253) in the example above for options that expire worthless
• 74.7% monthly LOSS ($747) in the example above if the index is above 760 or below 640 at expiration

So as you can see, it is possible to earn substantial returns with advanced options strategies such as the iron condor, but there is also significant risks involved as well. Notice that the sum of the maximum return percentage and the maximum risk percentage will always be 100%. You can always close the iron condor trader early to realize a partial profit or a partial loss, but you should be prepared with an understanding of how option time decay will affect your position at various time to expiration levels. Don’t wait until the trade moves against you to figure that out; be prepared with this knowledge before entering the trade!

For additional reading, I recommend:

The Option Trader Handbook: Strategies and Trade Adjustments (Wiley Trading) by George Jabbour

Disclaimer: There are no accuracy guarantees as to the the information above, or any information on Geldpress. No information above, nor any at Geldpress shall be considered as a recommendation.

Other Geldpress articles you may like:

• Time for cover – the covered call
• The VIX index and covered calls
• Covered calls – removing the covers and going naked
• Modeling theta time decay in a bear call credit spread
• Bring your collar into these volatile markets
• Option spreads skyrocket as US changes rules mid stream

Can somebody please tell Yahoo that cost cutting for the sake of a merger value facade will not work. Don’t you think Microsoft knows you can’t even keep your servers running! If I am getting these Yahoo mail messages several times during the day, then I presume that everyone, including Microsoft executives brainstorming on their next offer are as well. Hint: The Microsoft execs have been instructed to lower their offer by $1 per share for every failed mail attempt they receive at Yahoo. (You think they actually use hotmail?!?!?!)

Come on Jerry, apologize to the system admins and tell them they can have their jobs back. And do it quick. I’d really like to finish reading my email today!

The Seattle area is losing its claim to being unaffected by the housing bubble. Condos are generally the first to experience the sounds of that great big bubble losing air, and sounds of leaking air are certainly present at Verdeaux. It’s not a surprise that the condo bubble is finally bursting in Seattle, but it is a surprise how long the insanity lasted. Now that the banks are collapsing under their own weight of failed loans, it is only a matter of time before the rest of this house of cards comes crumbling down. Take a look at the following Verdeaux listing, and the sample price sheet below. Notice the $60,000 price drops (so far!).

[July 27 update] – Here is a recent email from the Verdeaux marketing team confirming the drops:

For all the bad press you hear and all the bad movies you see about the IRS, those government agents can actually be your friend. They are trained tax professionals, just like the ones at H&R Block and other fee based tax services. The difference, of course, is that the IRS is a tax payer funded service, and you are entitled to FREE help with your taxes. Here is a snapshot of the IRS website:

When friends ask me for tax advice, I generally refer them directly to the IRS for help. Nothing against my other CPA friends, but I hate paying for things twice, just as I hate double taxation. Paying an accountant for tax advice which is given for free from the IRS is akin to double taxation! Here are some helpful tips for contacting the IRS for tax help:

1. Be friendly and courteous to the agents.
2. Don’t call on April 14th. Start your taxes EARLY. If you have trouble, keep a list of everything you have questions on. Call right away with your questions (January or February), even if you don’t intend to fill out the forms until later.
3. Know what to expect when calling the IRS. The first person you talk to just needs to know how to direct your call – self employment tax questions, corporate taxes, capital gains, etc. In my experience you will be connected within a few short minutes to the first IRS resource. Getting a live specialist may take a little longer – 10-15 minutes in my experience.
4. Be legitimate. Don’t waste your time calling the IRS to ask for advice on tax evasion!
5. Have a “Do it yourself” attitude. If you are are the type to outsource your taxes, just hand things over to your accountant and forget the IRS. But if you really want to take things into your own hands, the IRS can and will help you.
6. Call well in advance of tax status changes. If you are considering starting a new business, for example, but want to understand the tax ramifications before doing so, call the IRS to discuss. They can easily give you a high level summary, and then likely will refer you to additional reading material on the IRS web site. Calling outside of tax season for these types of questions will get you a quicker response.
7. Do your homework. When the IRS agent refers you to specific IRS publication numbers, spend the time to read them, marking areas which are applicable and unclear. Call back later for clarification after you have read them.
8. For state or local tax questions, contact your state or local tax office and follow the same helpful tips above.