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Saturday, January 9, 2010

HOW TO FARM INCOME THROUGH THE STOCK MARKET


About that "farm income through the stock market" idea...

Humans have the desire to collect farm income seared into their DNA. After all, it's great to have any income stream... you're providing a vital product... and you're invested in something permanent, instead of a "dot.com" stock.

Real Estate Investment Trusts (REITs) are securities that allow investors to collect income on things like apartments, office space, warehouses, and hospitals... but there's no REIT with big exposure to farmland. We have to get creative here...

One industry's fortunes are tied so closely to land values and crop prices, owning shares in it is like owning a chunk of farmland. This industry is fertilizer mining. These days, farmers slather fields with fertilizer to boost crop yields. When crop prices are robust, farmers have more profits to buy more fertilizer to grow more crops. Shares of fertilizer concerns like Potash (POT) and Mosaic (MOS) rise as a result.

For this idea in action, take a look at yesterday's chart of the agriculture fund DBA. As we mentioned, this fund is quietly building a bullish series of "higher highs and higher lows." Today's chart of fertilizer producer Mosaic is the same.

One can earn yield on farmland by owning this stock and performing the income strategy of selling covered calls on it. For the "option-able" folks out there, the June "near the money" calls will throw off an 11% instant payout here. Beats sitting on a tractor all spring!

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