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How is our intrepid, fearless investor doing? Novavax (NVAX) update, March 8, 2021

When she first got involved selling covered calls on NVAX in August last year, our intrepid, fearless investor lost $232,407.50 in the very first week in a $500,000 portfolio on NVAX itself. She bought it at the very top and it soon dropped over 50% on the 1,500 shares that she owned.

She continued to sell just out-of-the-money covered calls every Monday, expiry date on Friday of the same week. NVAX frequently rose above the strike price, her shares were called away and she needed to buy them back at a higher price to stay in the game. Frequently, the value of the shares dropped more than she received in premiums and she had an overall loss on that particular week.

The table below shows her overall position as of last Friday, March 5.

Total gains Total losses Result
$458,921.01 $402,107.31 $56,813.70

It took 32 weeks for her to come out ahead! There were some painful losses too frequently. The major correct thing she did was that this adventure was in her “fun” portfolio and involved only about 5% of her overall market investments.

She sees her NVAX shares as a money tree which shrinks and grows and shrinks but constantly throws off cash.

What will she do today, Monday, March 8, when the market opens at 9:30 AM?

Continue reading “How is our intrepid, fearless investor doing? Novavax (NVAX) update, March 8, 2021”

If it is good enough for Buffett should it not be good enough for any of us?

The Berkshire Hathaway (BRK) annual shareholder letter is now available.  As usual, there is a great deal of wisdom in it. You would enjoy it it regardless of whether or not you are a BRK shareholder.

For more than 15 years, I owned nothing but BRK-B. It was a no-brainer, effortless way to get outstanding investment results. About three years ago, I became interested in writing (selling) covered calls and cash-secured puts. (Only sell and never buy options.) BRK-B was not the best choice for that because it only has  monthly expiry dates. SPY, which mirrors the S&P 500, has three weekly expiry dates, so I sold all my BRK-B shares and bought SPY.

I did the right thing for the wrong reasons.

As the chart above shows, SPY has outperformed BRK over the last three years. Buffett and Munger predicted that outcome a long time ago. BRK is so large that it cannot turn on a dime the way it used to be able to, when it was smaller.

Buffett himself invests a large part of his portfolios in an index exchange-traded fund.

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How to generate extra income safely and effectively with a SPAC

 

Set up one. With SPACs (special purpose acquisition companies) the fees, both open and hidden, are enormous. Don’t even think about investing in one.

For details see How SPACS Became Wall Street’s Money Tree in Forbes.

And the subtitle of the piece?

How hedge fund traders known as the SPAC Mafia are driving an $80 billion investment boom with a no-lose trade.

What does that tell us?

We frequently state that over the long term, properly selected US market index exchange-traded funds, held in tax-advantaged accounts, in an appropriate asset allocation, have been the investor’s best way for growing savings and are likely to remain so for many years.

That statement is evidence-based.

People investing in SPACs ignore two of the habits of Monday Morning members. They are not being do-it-yourself investors and they could not explain the concept to a 12-year old.

Once again: Don’t even think about investing in one.


How to generate extra income safely and effectively

Monday Morning members know that investing in securities has given the best returns in over 100 years, with fluctuations. The comparative chart below, which we frequently show, illustrates that.

Our asset allocation allows us to tame the fluctuations.

On 2.21.02, we wrote about the three main reasons why people trade options. The one which interests us is to generate extra income.

Two days ago, 3.01.2021, investors selling covered calls on the S&P 500 generated 0.6% returns for the week! Multiply that by 52 to annualize it, and what do you get? Two days ago, 50,000 contracts were sold. When you consider that about 1 1/2 billion shares trade on the New York stock exchange daily, that’s close to 0%.

It is true that for many, options can be “financial weapons of mass destruction” as Warren Buffett once called them. Nevertheless, investors can do so safely when they know what to do. Buffett also said that risk is not knowing what you are doing. He himself invests in options; he knows what he is doing.

So do long-standing Monday Morning millionaire members. Here is how.

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How is our intrepid, fearless investor doing? NVAX update, March 1, 2021

Last Monday, February 22, 2021, our intrepid, fearless investor sold 15 covered call contracts of Novavax (NVAX), expiry date Friday, February 19, 2021, strike price $290.00  (NVAX C 19FEB21 290.00) and immediately pocketed $17,970.86 — more money before a late breakfast that day than she ever netted in two weeks when she was practising dentistry.

NVAX soon dropped to $230.00 and she lost more on the underlying than she received in premiums on the covered calls. A lot more! $68.37 per share, to be exact for a total of $102,555.00 ($68.37 times 1,500). She acquired her NVAX shares on February 8 at $298.37 per share!

She sees her NVAX shares as a money tree which shrinks and grows and shrinks but constantly throws off cash.

And what are her plans today for this fun portfolio when the market opens at 9:30 AM today?

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How will Biden’s presidency influence the stock market?

From Reagan to Trump: S&P 500 in the first 1,006 trading days of each presidency

  • Ronald Raegan        +25%
  • George H. W. Bush +50%
  • Bill Clinton               + 75%
  • George W. Bush        -13%
  • Barack Obama          +83%
  • Donald Trump          +67%

You can read a detailed, 14-page report on this subject and come away no wiser. This is the most common result of reading most financial information. But if you study the report carefully, you would be popular at cocktail party conversations when these resume.

On Friday, October 30, we asked our members whether they thought that the outcome of the American presidential election would influence the stock market.

  • Yes                 53.6%
  • No                  28.6%
  • Maybe           10.7%
  • I don’t know  7.1%

For details on this issue, see the October 26, 2020, Kiplinger Newsletter article titled How Presidential Elections Affect the Stock Market by Anne Kates Smith and Kyle Woodley.

However, as 28.6% of our members stated, it never mattered much which party won the White House in the past when it comes to your portfolios. Simply stay with six habits of the Monday Morning Program the  and prosper.

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Can understanding history help us predict the future? What can 2020 teach us?

We are close to the first anniversary of the greatest drop in stock market history, namely, the drop of March 2020. That drop was followed by one of  the fastest rebounds in market history. What can we learn from that and the market movements which followed?

Here is what we know for certain.

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Wall Street is not your friend. You can get safe, proven returns, regardless.

 

This post is to welcome all new members who joined us in the last few weeks. The information below is old news to existing members; we are confident that new members will find it revealing.

First, glance in the chart below.

For over 100 years, global equities (the stock market) have given investors the best returns. From 1802 to 2012, that is, for over 200 years, US stocks have done even better. They averaged a 6.6% annual real return. (Siegel, J. J., STOCKS FOR THE LONG RUN)

$10,000.00 invested in the current bull market that started in March of 2009 has grown to an effortlessly earned $40,000.00. One million has grown to four million!

Then, why the title of this post, “Wall Street is not your friend.”? (Bay Street in Canada)

Well, very few investors do as well as the market. Monday Morning members do. (See below.)

A study conducted by Prudential Financial in June 2011  showed results that were fully expected by the knowledgeable but surprising to most. One thousand people were asked two questions.

Question 1. What is your current perception of the stock market?  

There are still benefits to investing 42%
I’ve lost faith in the market 58%

Question 2.When are you likely to put more money into the stock market?

Within a year 25%
Over a year from now 31%
Never 44%

Sitting in a savings account, that $10,000 or one million has gone practically nowhere while the bank used that money to lend out for a lot more than it gave depositors.

The list of reasons why so few investors match market growth is a long one, but it can be summarized in the statement that Wall Street is not your friend. The conflict of interest between Wall Street and Main Street is enormous. One-half of Wall Street income comes from investor trading. Understandably, they encourage it in every way possible. Trading is a losers game for investors.

So how do Monday Morning members participate in stock market growth? Will it continue to grow at its historic rate?

Two important reasons for recent market growth are the current low interest rates and the billions of dollars pumped into the economy.  That money goes where it is treated best, which is the stock market. Will the low interest rates continue?

Federal Reserve Chair Jerome Powell told Congress last Tuesday (February 17) that the economy is “a long way” from the central bank’s goals and policymakers have no plans to raise interest rates.

So how do Monday Morning members benefit from market growth?

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To achieve satisfactory investment results is easier than most people realize

Benjamin Graham once said, “To achieve satisfactory investment results is easier than most people realize.”

Graham is Warren Buffett’s mentor. Warren Buffett is the most quoted man on investing issues.

Gerald Loeb once said, “Any way one looks at it, nothing is more difficult than succeeding in Wall Street.”

Loeb, the author of the highly regarded book The Battle for Investment Survival was the most quoted man on investing issues before Buffett.

“…easier than most people realize…” “…nothing is more difficult…” ???

Graham and Dodd were contemporaries in the same line of work. How their views could be so different is difficult to reconcile.

As we show in our Monday Morning presentations, in less than one hour, we can teach a high school student how to equal the market as represented by the S&P 500. Benjamin Graham speaking.

We also show that over the course of a market cycle (peak to trough to peak), the number of portfolios which outperform the S&P 500 is much closer to 0% that it is to 10%. Gerald Loeb speaking.

So, how do we minimize market declines in our portfolios and maximize on markets that rise?

This is routine thinking to investors with the Monday Morning mindset. We include it here for review and for newer members.

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How is our intrepid, fearless investor doing? NVAX update February 22, 2021

Last Monday, February 15, 2021, our intrepid, fearless investor sold 15 contracts of Novavax (NVAX), expiry date Friday, February 19, 2021, strike price $290.00  (NVAX C 19FEB21 290.00) and immediately pocketed $17,970.86 — more money before a late breakfast that day than she ever netted in two weeks when she was practising dentistry.

NVAX soon dropped to $279.00 and she lost $16,500 on the underlying leaving her $1,470.86 ahead on the transaction.  ($17,970.86 minus $16,500.00)

She sees her NVAX shares as a money tree which shrinks and grows and shrinks but constantly throws off cash.

And what are her plans today for this fun portfolio when the market opens at 9:30 AM?

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