01/22/20 factlet; negative interest rates

17 trillion dollars are invested at negative interest rates today. Surely, much of that is smart money. Why would anyone pay a bank to save money instead of receiving interest?

In 1935, Gerald Loeb stated: “Indeed, should some super-solvent agency agree to preserve the buying power of capital for a substantial length of time at a stated fee per annum, informed people would embrace the plan enthusiastically.”

Savers in Venezuela, Ecuador, Argentina, Iran, Turkey — the list is long, are much better off paying a small fee, a negative interest rate, to protect savings from hyperinflation.

It is not an indicator of problems in the rest of the world.

Adam Smith, Lincoln, investing, ethics, morality

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.” Adam Smith

“Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” Abraham Lincoln

The butcher, the brewer and the baker provide goods and services to earn their keep. That is what Abraham Lincoln describes in his statement.

When investors buy shares in a company “from their regard to their own self-interest” they often hold it for two decades or longer.  I did that with Berkshire Hathaway, investing to support the company in providing goods and services. It was the only security that I owned.

The average stock holding period on the NYSE from 1929 to 2016 has declined to an unbelievable 8.3 months! That was 2016.

Today?

Since the rise of high-speed trading, the average holding period for a stock has been reported to be as low as 22 seconds! That is not a misprint; the figure is available from many sources.

The butcher, the brewer and the baker, the providers of the labor which Lincoln refers to are hard to find in a 22 second holding period. The ethics and the morality of this type of investing are suspect. But it is not going to go away.

The fourth habit of the Monday Morning Millionaire Program members (buy and hold) is a habit of true investors. Long holding periods defer tax and let “compounders” like exchange-traded funds work their magic.

“Compounding is the eighth wonder of the world.” Albert Einstein.

The cautious encouragement by the Monday Morning Millionaire Program for members to sell puts and calls is much closer to what is currently happening on Wall Street. However, since this attitude will not go away, why not take advantage of it? (By “cautious” we mean selling puts and calls — only sell, never buy puts and calls, in a “fun” portfolio if you have one.)

A separate issue at this time is that now is an excellent time to look into profit-taking and portfolio rebalancing, that is, the fifth habit of the Monday Morning Millionaire Program.  Over the last few weeks, the S&P 500 has gone up sufficiently to do that. There would be no tax hit in tax-advantaged portfolios, but other portfolios would likely incur taxes.

Check with your accountant, may you often face such problems, enjoy the ride.

Please note that the Monday Morning Millionaire Program contains opinions only. It does not provide any investment advice or endorsements.

 

01/15/20 factlet; mutual fund investors do poorly

During the 30 years beginning in 1983, the average mutual fund investor earned 239%. During that same period, the S&P 500 index after expenses, grew 1102%!*

Investors practicing the Monday Morning habits earned 1102% during that period.

Over the last 30 years, the average investor saw a return of 3.66%, whereas the S&P 500 had an average return of 6.73%.

Investors practicing the Monday Morning habits earned an average return of 6.73% during that period.

 

 

*Bogle, J. C. Don’t Count on it John Wiley and Sons, Inc.

2020 forecast

“There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.” John Kenneth Galbraith

Without question, the record-breaking expansion which we have been experiencing will end one of these days.

When will that day come?

The correct answer is, nobody knows. Doing a search for stock market predictions for 2020 produces 377,000,000 results. That is about 100,000,000 more than a week ago! None are reliable; a few will be correct, entirely by luck.  Those who make them we’ll get major publicity for their “foresight”.

There is nothing that we can add to this subject which will improve on the comments we made about one year ago and two years ago.

Enjoy!

Please note that the Monday Morning Millionaire Program contains opinions only. It does not provide any investment advice or endorsements.

Continue reading “2020 forecast”

Buy and hold, asset allocation, rebalancing

 

One of the Monday Morning Millionaire Program members’ habits is to buy and hold. There is no evidence to show that market timing is useful.

Another one of the members’ habits is to rebalance to a personal asset allocation when the market goes either up or down by a certain percentage.

What is that percentage? Is it the same on the upside as it is on the downside? How do we square buying and holding with rebalancing, a form of market timing?

As much of our investing as possible should be rules-based rather than judgment-based. Sound rules are inviolable. Judgment is often wrong. Nevertheless, investors need to use judgment frequently. Investor judgment needs to be adjustable in order to account for changes in the investing environment. For example, in the 1960s, trading commissions could run up into hundreds of dollars. Today, they are much closer to zero dollars.

In the 1960s, rebalancing effectively needed to have a percentage of portfolio value change sufficiently to offset trading costs.

Today, we can ignore the trading costs.

Rebalancing at smaller percentage pullbacks makes sense since they are more frequent. Rebalancing would take place into a higher trending market over time.

If we wait for a 10% pullback to rebalance, as we used to, we could miss out on several years of strong returns as well as rebalance at levels much higher when the pullback occurs.

We could improve results by rebalancing a smaller amount at a 5% pullback and then a larger amount at 10% and larger yet at 15% and so on.

It is a judgment call; it will work in our favor regardless of the percentages we select.

Please note that the Monday Morning Millionaire Program contains opinions only. It does not provide any investment advice or endorsements.

 

Michael McCloskey joins the Monday Morning Millionaire Program

We are pleased to announce that GreensKeeper President, Founder and Chief Investment OfficerMichael McCloskey recently joined the Monday Morning Millionaire Program.

Michael has decades of experience in the securities industry. He will provide valuable input to our members.

Michael manages investors’ portfolios actively (stock picking). The Monday Morning Millionaire Program encourages self-directed investing passively (no stock picking).

However, our members have many friends and relatives who are not prepared for self-directed investing. We encourage those members to refer their friends to GreensKeeper.

Clinicians Report® and Monday Morning Millionaire Program

Clinicians Report  (CR) placed our books Monday Morning Millionaire and The Six Habits of Monday Morning Millionaires on its best products list for 2019 and 2020 respectively. These two books are the foundation of the Monday Morning Millionaire Program investment philosophy.

CR tests over 750 product brands each year. Most do not measure up to the claims that they make.  At the end of each year, CR publishes the best products which the company evaluated in that year.

Until CR was founded in 1976 by Gordon Christiansen DDS, MSD, Ph.D. and his wife Rella, RDH, Ph.D., dentists only had the promotional material that manufacturers produced, to guide them about the safety and effectiveness of dental products, materials, devices, equipment, textbooks and techniques.  The rush to markets by manufacturers frequently resulted in dentists and their patients becoming guinea pigs.

CR now has 450 clinicians in 19 countries who volunteer their time to evaluate claims, as well as 40 on-site scientists and engineers. CR is free of outside funding and so can keep its research objective. It does not charge companies for the evaluations and derives revenue from clinical courses and subscriptions to the Gord J. Christensen Clinicians Report®.

Our two books are available at the Books tab on our website. The Six Habits of Monday Morning Millionaires is new and free.