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Erroneous Opportunity

To the Editor:

Re the "Calculating the Odds" table with the March 21 "Wheel of Fortune" article: Wouldn't everyone's chances be better with Portfolio 3: 80% Stocks; 20% Bonds; 10% Cash=110%? Any advice on how I can set up a portfolio like that?

William C. Cross
Ayer, Mass.

Use a calculator you bought from a guy who also sells Rolexes for $5.00. Or maybe just type in 10% for cash, as we mistakenly did. The correct figure: 0% -- Editor

Home Equity

To the Editor:

The risks facing homebuilders and their shareholders ("Bubble Trouble," March 21) are equaled or exceeded by the problems facing first-time homebuyers as the product has been priced out of their budgets. With new houses in the more desirable locations selling at $500,000, the old rule of spending no more than 2½ times your income on a residence has gone out the window, being replaced by the new edict, namely if you can obtain a lender for the mortgage, buy the house.

The ultimate result in an era of increased mortgage-interest rates and higher real-estate taxes from increased house assessments will be the loss by many new homeowners of not only the house but accumulated savings, as the bubble bursts for home values.

Nelson Marans
Silver Spring, Md.

Income Enhancement

To the Editor:

The comprehensive review of attractive yields ("Income to Spare," March 21) omitted an important conservative strategy to enhance yields on high dividend-paying stocks. The simple act of selling an out-of- the-money LEAP may double the yield on some of the quality stocks mentioned in the article.

For instance the January 2006 70 LEAP call on Altria can be sold for about $3.10 today. This can be applied to the purchase price of the stock when initiating the trade. Assuming the investor receives three 73-cent dividends between now and the expiration of the LEAP, he'd get an annualized return of over 10%, rather than just 4.4% from simply buying and holding the stock. Should the stock rise to 70 and the stock be called away, the return would be that much better. This simple strategy can be applied to many of the big payers you listed in the table. This isn't a complex strategy and the concept should be understandable, even to investors who have had no experience with options.

Dr. Elliot Liff
Mill Valley, Calif.

Risk, Reward and GM

To the Editor:

Barron's hallmark is a certain carefulness, an emphasis on value and a de-emphasis on the conventional assessment of securities as practiced by the herd. Uncharacteristically, in "Income to Spare," you tout a number of issues with a yield of 3% to 4%. Yet my shiny new General Motors common (market cap $16.7 billion) is yielding me 7% and with plenty of upside for some capital appreciation. Too risky for a retiree? Nonsense.

In "What GM Must Do" in the same issue, you suggest that the answer to GM's health-care problem is equality of sacrifice and point to the retirees and union as needed participants in the sacrifice. You are blessed with a poor imagination.

If GM, its U.S. competitors and suppliers, unilaterally stopped paying health-care benefits tomorrow, one would see how the automobile industry has been subsidizing a huge and disproportionate amount of America's health care, and not just for those two groups.

The responsibility for fixing the resulting mess would fall where it belongs: on the do-nothing Republican Congress and the current administration. Might be a good idea, and GM's profit would be right up there with Toyota's (market cap: $126 billion). By market value, either GM is underpriced or Toyota is overpriced. I stick with GM.

Also, I would urge Barron's to test-drive an "antediluvian" Buick. There's real value there, and you missed that, too.

William Mark Parson
Troy, Mich.

To the Editor:

"What GM Must Do" left out the most important thing: build better cars.

Zoltan Benedek
New York City