I have been taking a closer look at AT&T (NYSE), thinking about what to do with it. The first reason I'm thinking about it is that juicy 6.8% dividend. Thinking: Why not just pile in some money and sit on it for a while? Obvious answer: risk of capital loss. Now, I realize AT&T is not the most volatile stock. But look at Toyota: Shit happens. What if you wake up some morning and iPhones are exploding, Luke Wilson gets put in jail, and you are forced to sell the stock at $20, logging a 16% loss.Then that 6.8% dividend would not compensate you for the risk. So I thought about how to collect the dividend and hedge the stock. What if you could buy a bunch of AT&T stock, collect the dividend, and sell some covered call options as a hedge? That might be a decent strategy. For those not familiar with covered calls, what you do is you sell the call options (an option to buy the stock at a higher price), selling an equivalent number of options on the shares that you own. That upside of this strategy: You are collecting premium on the options in addition to the dividend, if the stock stays below the excercise price.  The downside: If the stock takes off, you will have to buy those calls at a higher price, or tender your shares (hence, the "covered" calls), thereby capping your upside.

Today's "jobs Friday," when the federal government announces its mystifying and statistically incomprehensible report on jobs, thus assuring the job security of media pundits everywhere. And hey, I'm one of them! What's interesting about this month's jobs report, with a report of 36,000 lob losses (less than expected) is not so much its contents, but the market's reaction. All markets are up. That reaction says to me: Inflation ahead. Keep in mind, when everybody is getting fired, it's very hard to create inflation, because nobody has any money to buy anything. However, once the printing presses start running, and job losses start to diminish, all it takes is the slightest bit of hiring to create inflation. Why is that? Because the feds have pumped trillions of dollars of money into the system, and all the banks and consumers need is a whiff of things improving to get the ball rolling again.  Right now that money is trapped on banks, who are clutching it with their fists, saving it for more potential losses or to lend out, if things get better. With that trillions of dollars of liquidity out there, that means that inflation will accelerate meaningfully if there is only a slight uptick in demand.