All the news that is fit to print. Yeah, is it?

What will be the impact of the upcoming presidential election on the stock market?

Check out the headlines in the newspapers below, each dealing with the Trump versus Biden election outcome impact on the stock market — if you have the time.

The flawless articles are great examples of English usage at its best. None of the articles are actionable. None will help you improve your investment performance or make a decision.

I subscribe to all these papers so that you don’t need to.

  1. N.Y. Times
  2. Wall Street Journal
  3. The Economist
  4. The Globe and Mail
  5. Manchester Guardian

The authors of these articles are required to produce something on a regular basis even when there is nothing useful to say.

By way of contrast, go to the Monday Morning website and do a search for any investment term. For example:

  1. Saving
  2. Parking money
  3. Money managers
  4. Derivatives
  5. Wills

Any investment term, make it any investment term.

Each search will produce information that investors can do something with. Develop the six habits of Monday Morning Millionaires and grow rich.

As we have repeatedly stated in our posts, with the Habits of Monday Morning Millionaires, luck hardly matters. Good luck!


The Monday Morning Millionaire Program was designed to offer compressed investment convictions. Over the last two decades, the program has outperformed over 90% of portfolios, including professionally managed ones.

The program does not provide any investment advice or endorsements.

With fewer than 300 words, members can read this post in less than five minutes. Following and studying the links imbedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

Daring member’s portfolio adventure. Good or bad? Followup 2 update

We began this series of posts by describing an aggressive member‘s Novavax (NVAX) derivatives adventure with $500,000 worth of the stock.  Our  September 1 post stated: “She lost about $170,000 on the NVAX stock. Writing covered calls for five weeks in a row, she earned about $100,000 in premiums bringing her loss is down to about $70,000. She plans to continue writing covered calls every Monday with expiry date of Friday of the same week, hoping ultimately, to come out ahead.

“I will keep you posted.”

It would be useful to review yesterday’s post.

Several of our members are now writing covered calls and cash-secured puts on NVAX.  From here on, we will keep our comments general rather than specific to make them useful for everybody.

Our aggressive member initially sold 30 just out-of-the-money  contracts of NVAX on Monday with expiry date Friday of the same week.

She kept selling just out-of-the-money covered calls on NVAX every Monday until the underlying security was called away from her. At that point, she is sold just in-the-money cash-covered puts on it.

Yesterday, Monday, September 21, members who sold 30 just out-of-the-money contracts of covered calls or just in-the-money cash-secured puts received a premium of some $US15,500.00.

That brings the original loss of just over $200,000 down to about $39,500.

Our members feel that the balance between the risk of holding NVAX and the derivatives premium returns is acceptable.

We will keep you posted.


The Monday Morning Millionaire Program was designed to offer compressed investment convictions. Over the last two decades, the program has outperformed over 90% of portfolios, including professionally managed ones.

The program does not provide any investment advice or endorsements.

With fewer than 350 words, members can read this post in less than five minutes. Following and studying the links imbedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

 

Daring member’s portfolio adventure. Good or bad? Followup 2

 

The Monday Morning Program recommends passive investing — watching grass grow, watching paint dry. What follows is decidedly NOT passive investing. It is an aggressive member‘s Novavax (NVAX) derivatives adventure with $500,000 worth of the stock. She started out with a loss of just over $200,000 as NVAX dropped from her acquisition price of $174.39 to $92.90 at the beginning of September. At that point, she bought more NVAX lowering her per share cost.

Writing covered calls on Mondays with expiry dates Fridays of the same week since the beginning of her NVAX derivatives adventure, she earned about $130,000, bringing her loss down to about $55,000.

You can see the entire story up to lasr Friday, September 18.

Based on this story, American investors can sell just in-the-money, cash-secured puts again.

Last Friday’s bid/ask range for just out-of-the-money covered call premiums or just in-the-money, cash-secured premiums were $5.25/$6.25. So, investors can expect to earn about $600.00 per contract. Our daring member will earn about $18,000, bringing her losses down to $37,000.

Canadian investors who are involved in this adventure were assigned again and find themselves in cash. In their tax-advantaged portfolios they will need to buy NVAX again at a higher price.

Is buying NVAX again at a higher price a problem?

Then, investors might ask why NVAX? Why not one of the ten most actively traded securities on the New York stock exchange? Here they are in order of volume:

1 Eastman Kodak Co.
2 General Electric Co.
3 Wells Fargo & Co.
4 PG&E Corp.
5 SPDR S&P 500 ETF Trust
6 Transocean Ltd.
7 Bank of America Corp.
8 Coty Inc. Cl A
9 Ford Motor Co.
10 Uber Technologies Inc.

All of  them have derivatives that trade weekly.

What are the premiums available to investors writing covered calls or cash-secured puts on these stocks?

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A question about asset alloction

On September 19, 2020 27, from P. T….DMD, F.R.C.D., Vancouver

Question:

What percentage of your portfolios is in cash?

Not necessarily by design….I  have got into some position that have not exited yet….

Also, would you consider cash committed to a cash-covered put that has not expired as “cash”?

Monday Morning Millionaire Program Answer:

For years, I had nothing but Berkshire Hathaway B. (Symbol BRK.B) — a hundred percent! Berkshire has always had a high percentage of holdings in cash and still does. Shareholders did not and do not need to think about asset allocation.

About a decade ago, I got interested in derivatives. Since BRK has monthly expiry dates and I wanted weekly expiry dates, I got out of it and into 50% SPY, the largest exchange-traded fund which tracks the S&P 500, and 50% in a money market fund (TDB166).

As I got older, I became more conservative and adjusted my portfolios to 40% SPY and 60% TDB166.

As the market kept going up, the cash drag of TDB166 began to bother me and I got back into a 50/50 asset allocation.

And yes, not necessarily by design, investors’ asset allocation will be thrown off by market fluctuations. That is why we need to rebalance when that occurs. Investors who write covered calls with expiry dates one week out, find that they are assigned about half the time. That will overweigh their cash position and throw off their asset allocation — another time to rebalance.

Concerning cash committed to a cash-covered put that has not expired, it is not the same as the cash aspect of your personal asset allocation. Investors can use the cash aspect of their personal asset allocation to buy groceries and pay the rent. They cannot do so using the cash committed to a cash-covered put that has not expired except in a margin account.

Don’t even think of going there.

That is one (of many) reasons why Warren Buffet called derivatives financial weapons of mass destruction. Charlie Munger, Buffett’s partner, stated: “To say that accounting for derivatives in America is a sewer, is an insult to sewage.”

Our posts have frequently stated: “With the Habits of Monday Morning Millionaires, luck hardly matters.”

Good luck!

 

 

Greatest safety – put all your eggs in one basket.

“If someone puts all their eggs in one basket, they put all their effort or resources into doing one thing so that, if it fails, they have no alternatives left.” (Collins dictionary)

Frightening for investors, isn’t it?

But then, from Gerald Loeb, the most quoted man of Wall Street before Warren Buffet:

“The greatest safety for the capable I might say lies in putting all one’s eggs in one basket and watching the basket.”

Loeb’s book The Battle for Investment Survival was published when Buffett was three years old. It has been reprinted countless times; its many pearls I have stood the test of time.

These are arguments for and against diversification.

I once bought a stock the price of which doubled in one day! However, it was such a small percentage of my overall portfolio that the price increase was meaningless. A large price decrease would have been equally meaningless.

Several of our members had more than a hundred different securities in their portfolios when they joined. Many were acquired when commissions were significant. (They no longer are.) Their brokers loved it. To the investor, what possible difference could any security price movement in any direction make to the portfolio, overall?

The Monday Morning program manages this issue in an evidence-based, effective manner.

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Results of members’ asset allocation survey

On Wednesday, September 16, we surveyed our members and subscribers with the following question:

What percentage of your portfolio is in cash or cash-equivalent (money market, bank account, certificate of deposit, credit union account, etc.)?

  1. Less than 50%
  2. 50%
  3. More than 50%

Yesterday, September 17, we tabulated the results as you can see below:

  1. 56.7% have less than 50% in cash or cash-equivalent
  2. 16.7% have 50% in cash
  3. 26.7% have more than 50% in cash or cash equivalent

It is interesting to note that at the end of June, Warren Buffett’s Berkshire Hathaway (symbol BRK) was 60% in cash. It is now 20% in cash. Much of Buffett’s buying was re-purchasing BRK shares. That means that he couldn’t find a better place for the money.

By comparison, note:

  • Apple cash as a percentage of market capitalization is about 30%.
  • Google cash as a percentage of market capitalization is about 14%.
  • Microsoft cash as a percentage of market capitalization is about 25%.

Buffett is an investor like all Monday Morning members. The extent of investments differs but the objectives are similar.

Apple, Google and Microsoft are companies with objectives to build and grow.


The Monday Morning Millionaire Program was designed to offer compressed investment convictions. Over the last two decades, the program has outperformed over 90% of portfolios, including professionally managed ones.

The program does not provide any investment advice or endorsements.

With fewer than 300 words, members can read this post in less than five minutes. Following and studying the links imbedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

 

How to be practical during ultralow interest rates

Which would you prefer — a lower interest rate on your debt or a higher interest rate on your savings account? Can you have both?

The average recent dental school graduate has a debt of $292,159.00 today, according to the American Dental Education Association estimates. For veterinarians and optometrists, the debt burden is in the same league.

For people with these professionals’ earning capacity, there has never been a better time to be in useful debt regardless of what Shakespeare’s Polonius has to say:

Neither a borrower nor a lender be,
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.

Hamlet Act 1, scene 3, 75–77

Useful debt? Dulls the edge of husbandry?

The number of established companies and private businesses which operate without borrowed money today, is much closer to 0% than it is to 5%. The current borrowing environment is the best that it ever has been. Borrowing costs are equal to or less than the rate of inflation. If borrowing is tax-deductible, given today’s rate of inflation, low as it is,  borrowing costs are actually at zero or less.

And husbandry? Established companies and private businesses are husbandry on steroids — working and thinking about the business 24/7!

But what if you are close to retirement or actually retired? The 6% plus interest on your savings which you remember from your youth, is a memory.

Today’s savings accounts can offer 1.05% interest but that will soon go below 1%. Further, lower interest rates will be with us for a long time. Younger people cannot save enough for a comfortable retirement. Retired people living off their savings face a serious longevity risk.

All of us must invest. Today, we can borrow for free. Let us use it to our advantage.

And the best place to invest?

Continue reading “How to be practical during ultralow interest rates”

Unparalleled, shocking bankruptcy. Improving portfolio growth

Exactly 12 years ago today, Lehman Brothers entered the largest bankruptcy protection filing in U.S. history. Why didn’t the Federal Reserve  bail our Lehman like it bailed out AIG, Bear Stearns and other investment banks?

The Federal Reserve Chair Ben Bernanke stated: “A too-big-to-fail firm is one whose size, complexity, interconnectedness, and critical functions are such that, should the firm go unexpectedly into liquidation, the rest of the financial system and the economy would face severe adverse consequences.” Was Lehman not big enough? Many academic papers deal with this issue.

From the perspective of Monday Morning Program member, 12 years ago today was a great time to buy an exchange-traded fund tracking the S&P 500.

Time to remember.

On another note, our September 1 post told how, over several weeks, writing covered calls on Novavax (NVAX), an aggressive member lost just over $200,000 on $500,000 worth of the stock. However, her total premium income of about $118,000 brought her loss down to about $82,000.

Her portfolio growth, negative for now, continues to improve. How?

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Daring member’s portfolio adventure. Good or bad? Followup

Please note that the Monday Morning Program recommends passive investing. What follows is active investing.

Describing an aggressive member‘s Novavax (NVAX) derivatives adventure with $500,000 worth of the stock, our  September 1 post told how, over several weeks, she lost just over $200,000 on the stock. However, her total premium income of about $118,000 brought her loss down to about $82,000.

What did she do after that? Is she headed towards a winning position?

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For proven best investing results

What can investors expect by following the Monday Morning approach to investing?

Based on the history of this approach, over the course of the next decade, MM investors will outperform over 90% of portfolios including professionally managed ones. (Over the short term — several months, other approaches to investing could outperform the MM program.)

For proven best results follow the steps below.

  1. Complete the scorecard exercise.
  2. Complete the risk tolerance exercise.
  3. Determine the asset allocation that you feel best about.
  4. Keep your cash and cash-equivalents in US dollars. (Money market funds, certificates of deposit, savings accounts)
  5. Save and invest in the US economy, the strongest in history.
  6. Confine investing to index investing.

Keep in mind that money will be needed in the next five years does not belong in the stock market.

With the Habits of Highly Effective Investors, luck hardly matters. Good luck!


The Monday Morning Millionaire Program was designed to offer compressed investment convictions. Over the last two decades, the program has outperformed over 90% of portfolios, including professionally managed ones.

The program does not provide any investment advice or endorsements.

With fewer than 300 words, members can read this post in less than five minutes. Following and studying the links imbedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.