Balancing inflation in a $25 trillion economy is like trying to navigate an aircraft carrier on the Mississippi River — it can be done, but it’s not easy, asserts Bryan Perry, editor of Cash Machine.
If inflation does rear up unexpectedly for a sustained period of 3-4 months, the Fed will be forced to address tapering quantitative easing that will surely be a moment of truth for how market sentiment manages the idea of the economy running on its own without Fed sugar.
Because of the massive level of government spending already authorized with another $2-$3 trillion in phased-in infrastructure spending, the transition might go well.
On the other hand, the Fed tried sending the message of future tapering in late 2018 and the market tanked 20%. Only time will tell, but it’s looking like the Fed may have to tap the brakes much sooner than anticipated.
With tech reasserting itself, as it should with capital spending on information technology (IT) by corporations expected to break all records, I want to add a new covered-call ETF that is doing a masterful job of generating a double-digit-percentage yield and growing share value at the same time.
To get both of these components right consistently is almost an artform. Global X NASDAQ 100 Covered Call ETF (QYLD) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the CBOE Nasdaq-100 BuyWrite V2 Index (BXN).
The BXN is a passive total return index based on (1) buying a NASDAQ 100 stock index portfolio and (2) “writing” (or selling) the near-term NASDAQ 100 Index (NDX) “covered” call option, generally on the third Friday of each month.
The NDX call that is written will have about one month remaining until expiration, with an exercise price just above the prevailing index level (i.e., slightly out of the money). The NDX call is held until expiration and cash settled, at which time a new one-month, near-the-money call is written.
The fund pays monthly distributions consisting of 100% of call premium and sports a current yield of 12.09%. The top holdings are all the Nasdaq heavyweights and buying into this exchange-traded fund now positions us right in front of what should be a banner earnings season.
Monthly distributions for 2020 and the first three months of 2021 have been consistent — a real tribute to the management team that reflects well on the hefty dividend payout being not some one-off or short-term run of good luck.
During the worst market conditions of February through May 2020 when Covid rocked the market, QYLD kept paying out like a seasoned prize fighter.
With net assets of over $2.3 billion and a 5-star Morningstar Rating, this is a great fit for our Extreme Income Portfolio. Let’s put this high-paying, high-powered option income generator to work for us. Buy Global X NASDAQ 100 Covered Call ETF under $23.