Sam Zell is here to help you feel pessimistic...

Sam Zell is here to help you feel pessimistic... So is Bill Gross... We still say buy gold... A short-sale candidate from David Einhorn... A safe 17% income stream...

 Just in case you're feeling too optimistic this week, Sam Zell and Bill Gross are here to help change your mind...

Regular Digest readers know we have a lot of respect for the investment abilities of both Zell and Gross.

Zell is a legendary investor who has made billions of dollars in real estate. His contrarian investment approach of buying troubled assets during depressed times earned him the nickname "Grave Dancer." The approach helped one of his companies, Equity Office Properties, to become the largest office owner in the U.S. In 2007, near the height of the real estate bubble, Zell sold Equity Office Properties (which was also owned by shareholders) for around $39 billion. In other words, Zell knows how numbers work. And he knows value.

In an interview with CNBC this week, Zell told viewers he sees trouble ahead for the U.S. economy. Zell says he believes the Fed's latest round of monetary stimulus (QE3) has done nothing but make everything "massively too expensive." He also says government intervention in the market has prevented a natural, healthy clearing process. Zell believes the underlying fundamentals of the economy are so weak, they support a Dow closer to 9,000 than 14,000.

 Bill Gross' latest letter to investors shares Zell's gloomy outlook... and then some.

Gross is the co-founder of Pacific Investment Management Company (PIMCO). The firm has more than $1.7 trillion under management. Of this amount, Gross manages $270 billion in PIMCO's Total Return Fund. It's the largest bond fund in the world. Gross has an incredible track record running it. Gross is now so rich and powerful, he's free to say whatever he pleases. And right now, Gross says the U.S. fiscal policy will lead to damage that will "likely be beyond repair."

In PIMCO's "Investment Outlook," Gross says the U.S. is like a drug addict hooked on "budgetary crystal meth." Federal expenses overrun revenue to the tune of $1.5 trillion each year. The only way the U.S. sustains itself is through a massive infusion of "debt meth." Gross cites International Monetary Fund estimates that the U.S. will need to cut its debt-to-GDP ratio by 11% over the next five to 10 years. This amounts to $1.6 trillion in spending cuts and/or tax increases each year.

Gross recognizes an accommodating Fed is always ready to give the government its "fix" of freshly printed money to make ends meet. The result will be a massive inflationary "ring of fire" that he says will singe stocks and burn bonds to a crisp. He concludes only gold and real assets will thrive within the "ring of fire."

 As I noted in today's edition of our free daily e-letter Growth Stock Wire, the winner in this fiscal mess is gold. Both the U.S. and Europe have built up debts and unfunded obligations that...

To see this idea in action, you only need to look at a chart of gold priced in euros. Last week, gold hit a new all-time high against the euro... which is the same thing as saying the euro reached an all-time low against gold.

Keep in mind, the euro is not the currency of a crackpot dictatorship in Africa or South America. It's the currency of the world's largest economic bloc. And it just hit a fresh all-time low against gold.

 Another asset due to head lower is Chipotle Mexican Grill (CMG), says elite hedge-fund manager David Einhorn. (We noted his short-sale thesis on Green Mountain Coffee Roasters in yesterday's Digest.)

Chipotle is one of the great business success stories of the past two decades. Its approach of offering high-quality fast food at reasonable prices has made it one of America's most popular restaurant chains. It has also made it one of the world's most popular growth stocks. Shares are up nearly 500% over the past six years.

This week, at the Value Investing Congress, Einhorn presented a bearish case on Chipotle. Einhorn believes rising food costs and increased health care costs for workers will weigh on the company. At the same time, the restaurant has limited ability to raise prices because of increased competition from businesses like Taco Bell. With an extremely rich price-to-earnings multiple of 36, any misstep by Chipotle could make for a huge fall in the share price. Chipotle fell 4.2% after Einhorn's comments.

 One final thought before we sign off today. It's about one of the biggest investment concerns in the world: The lack of good options to earn substantial amounts of income on a portfolio. If you're retired, this is likely one of your biggest problems as an investor. With interest rates so low, you can't earn a safe satisfactory yield on any savings account or government bond.

And since all investments take their cues from rates on bank deposits and government bonds, low rates there mean rates on all investments trend lower. Yields on publicly traded real estate are low. Corporate bond rates are at historic lows. Earning a yield higher than 5% usually involves taking on risks that are unsuitable for most investors.

 Regular Digest readers know we have some suggestions for earning yields. Rental real estate, in particular, is attractive. But most folks don't want to deal with the extra work involved with real estate. "World Dominating Dividend Grower" stocks offer safe yields. But we realize their current yields aren't high. (Right now, many are offering yields of 3%-4%.)

 This is why it is so important that readers learn about the incredible income-producing power of selling options... especially the way it's done in Dr. David "Doc" Eifrig's Retirement Trader service. Following this strategy is a very conservative way to generate annual yields of 10%-20%.

If you missed our collection of pieces on this strategy, make sure to read them (compiled right here). And make sure to consider the example I've used for several years now to demonstrate this idea...

Almost exactly two years ago, I wrote a piece in Growth Stock Wire titled "How to Make 17% Income on the World's Safest Cheap Stocks."

The idea was buying Microsoft shares at beaten-down, bargain prices, and then selling someone the right to buy those shares from you at a higher price. This is the practice called "selling covered calls."

In my original example, I noted how in October 2010, you could buy shares of Microsoft for around $24.42. And you could sell the November $25 calls for about $0.70. In other words, you're buying shares for $24.42, then selling someone the right to buy them from you for $25 per share.

The premium of $0.70 resulted in an immediate 2.8% yield on the original stock position. The options sold had a lifespan of less than two months. Repeated six times per year, this was an annualized gain of about 17%.

To drive the point home, I covered this trade in "real money" terms. You could buy 200 shares of Microsoft for $4,884. You'd collect around $140 in super-low-risk premium for selling covered calls on your stake. And once those calls expired, you could do it all over again. A 17% income stream on the $4,884 stake would be $830. That's an extraordinary income stream coming from a position in a cheap, dominant, blue-chip stock.

 I know what you're thinking... "You're not telling us the full story. You can't repeat that trade all the time."

To this, I reply that I wrote up basically the same trade one year later. Same stock. Same options-selling strategy. I got creative with the piece's title. It was called "You Can Still Make 17%-Plus with the World's Safest Stocks."

Only this time, the trade was offering an annualized income stream of 21%.

 Looking back, this trade has consistently been a winner for two years. All you had to do was learn the basics of this approach and put them to work for you. It involves buying the world's best companies when they're trading for cheap prices. These are the companies that can manage through hard times.

And keep in mind, these stocks don't have to "soar" for you to make money. You make money if the stock climbs, moves sideways, or even declines a little. Look at Microsoft... the stock spent the late 2010/late 2011 period moving sideways... Yet you could have used the stock to build a covered call position that would produce a 15%-plus yield.

Let me repeat that because it's very important: The stock did nothing except stay cheap and pay its reliable dividend. Yet the option seller made a huge income stream... from a stock that did nothing.

 Because this approach involves the world's best, safest stocks – and because it offers the investor so many ways to win – "Doc" has been able to produce one of the greatest track records in the history of our industry. His readers have been able to generate huge, reliable income streams on their retirement accounts.

So it's no wonder this service has one of the greatest "cult followings" I've ever seen in this business. We've received a truly incredible amount of positive feedback from subscribers... many who say learning this approach has completely changed the way they invest. They now make more money with less risk. Doc makes learning this approach extremely easy with his suite of educational videos and study guides.

 If you're looking to generate safe investment income of 10%-20%, we encourage you to at least learn about this skill. With Doc's educational materials, learning about this has never been easier. And with him walking you through trades, putting it into practice has never been easier. Again, this is our most successful product because it puts the odds overwhelmingly in your favor.

  New 52-week highs (as of 10/2/12): Fidelity Select Medical Equipment & Systems Fund (FSMEX), Sysco (SYY), Eli Lilly (LLY), AB InBev (BUD), ProShares Ultra Health Care Fund (RXL), iShares Nasdaq Biotech Fund (IBB), and Chevron (CVX).

  In today's mailbag... one reader asks about selling puts in a retirement account. Send your e-mails to feedback@stansberryresearch.com.

 "I have a question about selling naked puts in my IRA. Since there is no margin allowed in an IRA account the percent return is reduced because you have to put up the full amount of capital in reserve. This reduces the percentage return on paper by a substantial amount because it ties up more money in the account.

"This is an opportunity cost for sure but since the return is substantially higher than leaving the cash in any savings vehicle, including the money market provided by the broker, isn't it still worth doing? All things being equal, even if I were to be put the shares I am getting a company I would want to buy at a discount while collecting 'interest' on the money that is higher than I would otherwise have been able to obtain.

"I know it is riskier as the trade could really go against me but I am willing to take that risk to collect the money... is this foolish or intelligent? I suppose I could buy the shares and sell calls and accomplish nearly the same thing but the returns are higher with the puts right?

"I would appreciate your input on this, maybe I am missing something in my analysis... Thank you." – Paid-up subscriber T.P.

Hunt comment: You got it right. Even though you must put up the full amount of capital in reserve in the IRA, selling puts on cheap blue-chip stocks is still one of the greatest income-generators in the world.

Regards,

Brian Hunt

Delray Beach, Florida

October 3, 2012