A space photo such as the one of China above is a convincing view of the level of industrial activity. Areas of industrial activity and the related energy use are lit up. The dark areas show a complete lack of industrial activity.

This is a continuation of yesterday’s blog in which Beijing claimed that in the second quarter of this year, China had a 6.2% annualized growth. Reviewing data much of which was officially unreported, a Sunday Wall Street Journal article said: “…there is a growing belief among economists, companies and investors around the world that the real picture is worse than the official data.”

Bluntly stated, the Chinese government is lying about its economic growth. Belongs to the same club as President Trump.

Observations certified by  Space photos like the one above show a contraction of industrial activity, not growth. Then there is a web-search index which shows the number of workers who return to work after a major holiday. These numbers are down sharply.

Some Monday Morning Millionaire Program members want to know why the program does not recommend markets other than the American one.

It comes down to the third habit of the six habits of Monday Morning Millionaires, which is, buy the US economy as a whole. (That is, don’t pick stocks, don’t pick countries other than the USA.)

History shows that investors could not do much better than holding shares of the largest 500 companies in the most diversified economy in the world. Further, for investors looking for Chinese exposure, the majority of these companies have a market presence and most countries, including China. That eliminates the risk of being victimized by a culture of twisting facts.

If you are interested in details, see in the Wall Street Journal article.

A space photo such as the one of China above is a convincing view of the level of industrial activity. Areas of industrial activity and the related energy use are lit up. The dark areas show a complete lack of industrial activity.

The Bottom Line

From the Wall Street Journal, September 8, 2019:

“…there is a growing belief among economists, companies, and investors around the world that the real picture is worse than the official data.”

Simply put, the Chinese government is lying.

It is well known that dictatorships show the world how and what these dictatorships want the world to see. They want investors so they entice them with rosy portrayals of economic reality.

Beneath China’s stable headline numbers, there is a growing belief that the real picture is much worse.

We wrote about that previously.

We will expand on the subject in tomorrow’s blog.

Elevator Pitch

The Monday Morning Millionaire Program (15.5% annual return since 2012) promotes passive investing.  Our survey  shows that 37% of our members spend 15 minutes per week managing their portfolio(s) and another 45% spend less than one hour.

Active investors can spend TEN HOURS a day or more, managing theirs!

Over the course of 10 years, fewer than 5% of actively managed portfolios do as well as the Monday Morning Millionaire Program.

Continue reading “SPIVA®; S&P Indices Versus Active”

In 1990, the Toronto Stock Exchange launched financial history’s first exchange-traded fund. They called it “Toronto 35 Index Participation Fund” (symbol TIPs).

There are more ETFs now than there are individual stocks. We can ignore them all except the ones which track of the S&P 500.

The best ETFs to track the S&P 500 are:

1. iShares Core S&P 500 ETF (IVV)
2. Vanguard S&P 500 ETF (VOO)
3. SPDR S&P 500 ETF Trust (SPY)
4. Schwab U.S. Large-Cap ETF (SCHX)
5. iShares S&P 500 Growth ETF (IVW)
6. Guggenheim S&P 500 Equal Weight ETF (symbol RSP)

The first five are market-cap-weighted. The sixth one is equal-weighted.

Writing in Berkshire Hathaway’s 2002 annual letter, the justly renowned “Oracle of Omaha”, Warren Buffett stated that derivatives (options, that is, puts and calls) are “financial weapons of mass destruction.”  Nevertheless, Berkshire Hathaway has some major derivatives positions. How can that be? Well, Buffett once defined risk as not knowing what you are doing. By that definition, the Berkshire Hathaway position is not risky.

Here is one example of what Buffett is talking about. More than 20 years ago, investing in derivatives resulted in a $1.7 billion loss and bankruptcy of California’s Orange County. Some 3,000 public employees lost their jobs and services were reduced. Merrill Lynch & Co., the broker involved, made millions in fees, not surprisingly.

There are other examples. Long-Term Capital Management, with some of Wall Street’s major figures as well as two Nobel Prize-winning economists needed a bailout of billions by more than 10 financial institutions in order to prevent market panic and collapse of the entire financial system.  Much of their portfolio was made up of derivatives but the company was too big to fail.

The Monday Morning Millionaire Program way of investing in derivatives is safe. For interested members, the program recommends the following:

1. Only sell and never buy puts and calls.
2. Do so using our recommended exchange-traded funds and not individual stocks. These are the SPDR S&P 500 ETF (symbol SPY) which has weekly expiry dates and the Vanguard Total Stock Market ETF (symbol VTI), the Vanguard S&P 500 ETF (symbol VOO) and the Invesco S&P 500 Equal Weight ETF (symbol RSP) which have monthly expiry dates.
3. Sell puts and calls in your fun portfolio only.

Investors always make and never lose money selling puts and calls. However, they do give up the opportunity of making even more money if the underlying ETF rises above the selected strike price.

In dropping and lateral markets, this approach outperforms. In rising markets, it underperforms.

On another issue, we recently introduced Level 2 and Level 3 to the “Our Programs” tab. I just finished the first session with a member who scored 47 on our scorecard exercise. He was tasked with five action steps in preparation for our next session. 

Do you see many actionable suggestions in today’s flood of investment writing?

In a Nov. 27, 2013 article titled  50 Unfortunate Truths About Investing, in point 17, The Motley Fool stated: ”Most of what is taught about investing in school is theoretical nonsense. There are very few rich professors.”

The implied message is that the folks at The Motley Fool know something that could make you rich that economics professors don’t know.

I personally know a few economics professors and know of many by reputation. All of them know the meaning of enough. None is interested in the personal bankruptcies which are inevitable given the mindset required to create great wealth. The famous economist Lord Maynard Keynes did become extremely wealthy but he did go through personal bankruptcy.

In a 1999 August issue of the Wall Street Journal, the renowned columnist Jason Zweig stated that an investment system promoted by The Motley Fool was “investment hogwash in its purest form”. Writing in a later edition of Benjamin Graham’s The Intelligent Investor, Zweig called it “one of the most cockamamie stock-picking formulas ever concocted”.

While The Motley Fool is unlikely to swindle subscribers or do anything illegitimate, they do promote their subscriptions aggressively.

The Monday Morning Millionaire Program approach to investing allows members to maintain their career income levels into retirement without encroaching on principal. Investors looking for more need to search elsewhere.

Perhaps follow the advice given by The Motley Fool? Hmm…

On another issue, we recently introduced Level 2 and Level 3 to the “Our Programs” tab. I just finished the first session with a member who scored 47 on our scorecard exercise. He was tasked with five action steps in preparation for our next session. 

Do you see many actionable suggestions in today’s flood of investment writing?

To help you assess your situation and clarify your goals as a do-it-yourself (DIY) investor, we invite you to do our Monday Morning Millionaire Scorecard Exercise!

If you score under 60, consider contacting us and schedule a free half-hour discussion to see whether our Level 2 Program might be suitable for you.

If anyone subscribes to our  Level 2  program thanks to a recommendation from you, you get a $100 Starbucks gift certificate.