The best way to hedge our portfolios during a bear market.

On January 3, the first trading day of this year, the S&P 500 reached an all-time high. From then on, it has been in a steady decline, with some fluctuations, even briefly reaching bear market territory recently. (A decline of 20% or more)

If you search for how to deal with bear markets, you will see a huge number of hits. The bottom line on most of these is that investors need to connect with an adviser.

We need advisers in many areas – taxation, wills, incorporation and on and on. The list is long. Accountants, lawyers, other advisers typically charge $300 an hour, minimum. Most of the time, the money that they save us exceeds their fees.

But when it comes to investing, almost no advisor can equal the S&P 500 over an extended period after fees. In 15 minutes or less, we can teach a high school student how to equal the S&P 500. Do it yourself. (Habit number two)

What about bull markets?

Like love and marriage, horse and carriage, you can’t have one without the other. Over an extended period, the S&P 500 has returned about 10% annually, bear markets notwithstanding.

There are many hedging strategies. Buying options, using managed futures, trend-following, alternative investment strategies are examples. Here too, the list is long. None is reliable under all conditions.

Well, people can ask what is reliable under all conditions? The Monday Morning Method is. Absolutely!

And what is the Monday Morning Method?

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Question and answer about buying the drop.

On May 22, 2022, from Alberta dentist Drew

I love the Q and A!

I was looking at VFV or SPY to track the S&P 500.
After the market fell 10 percent, I put in another 1/3 of the cash from my 50/50 asset allocation. But now, with it down between 15 and 20, I wasn’t sure if I was supposed to wait until the 20 percent drop to put in the other 2/3rds or if I could start hammering in some more cash into the ETF? Maybe another 1/3rd at 15 percent drop?

Our answer

Waiting for the S&P 500 to drop by 20% in order to put in the rest of your cash is an example of variable asset allocation.

That 20% decline is an approximation. You can put the rest of your cash in anytime now and you can hammer in some more cash into into the ETF.

This approach is aggressive. It  recommends borrowing to invest if the S&P 500  drops a further 10%.

No financial advisor would recommend borrowing to invest. However, renowned dentist L.D. Pankey made a lot of money in the stock market using this approach.

It is essential not to invest money which you will need in the next three years or so. Through a market cycle (peak to trough to peak), this is an effective way to invest.

We all need to invest. Saving alone will not buy us a comfortable retirement. However, no one needs to invest this aggressively. Simply maintaining our personal asset allocation will get us the results we want.

With the habits of the Monday morning program, luck hardly matters.

Good luck!

 

 

Should governments phase in mandatory replacement ICE cars with EVs? Survey results.

First, a thank you to all who gifted a membership or a one-on-one zoom meeting to friends and relatives. We think that they make ideal gifts. Consider it.

Next, our sincere gratitude to all members who took the time to respond to our Friday, May 20, survey about internal combustion cars (ICE) and electric vehicles (EVs). Time is an irreplaceable resource. We appreciate your involvement.

You can see our survey results below.

Should governments phase in mandatory replacement ICE cars with EVs? Survey results.

I right strongly agree.

6.3%

Agree

15.6%

We have too much government. People should make this decision on their own.

78.1%

You can you read some worthwhile comments below.

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Mon. May 23, 2022. How our fearless, intrepid investor made out recently and her plans for today

Here is how our fearless, intrepid investor did over the last five weeks in her “fun” portfolio writing covered calls on Novavax (NVAX) on Mondays, expiry dates on Fridays of the same week.  To lower the risk of being assigned, she wrote those further out-of-the-money instead of the usual just out-of-the-money sale, as she did in the past.

On April 22 expiry date, she sold ten covered call contracts on NVAX and got $US227.50.

On April 29 expiry date, she sold ten covered call contracts on NVAX and got $US547.50.

On May 2 expiry date, she sold ten covered call contracts on NVAX (C 06MAY22 56.00) and got $1,170.00. She was assigned and her NVAX shares were called away.

On May 16 expiry date, she sold ten covered call contracts on NVAX (C 13MAY22 68.00) and got $1.520.00.

On May 20 expiry date, she sold ten covered call contracts on NVAX (C 20MAY22 58.50) and got $540.00.

Total premiums received = $US4,005.00 for the last five weeks. She was assigned once out of the five covered-call sales and decided to repurchase NVAX to continue selling covered calls in her “fun” portfolio.

Most “fun” portfolios underperform and cannot equal the S&P 500.  Go here for more about “fun” portfolios,

What will she do when the US market opens at 9:30 AM, today? (Canadian markets are closed for this holiday Monday.)

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Investing way that the Monday Morning Program promotes

The latest BERKSHIRE HATHAWAY INC. SHAREHOLDER LETTER is available.

The last two lines above show the performance of BRK since 1965. Unmatched! However, since 2014, the average Per-Share Market Value of BRK has increased by 13.2% compared to the 15.39% for the S&P 500.

Buffett and Munger predicted many years ago that the day would come that they would not be able to match the S&P 500 performance. The size of the company is so big now that they cannot turn on a dime the way that they used to be able to do.

In fact, Buffett wants his estate to invest most of the money which he is leaving to his wife after he dies, into an index fund that tracks the S&P 500.

That is precisely the way that the Monday Morning Program promotes.

If it is good enough for Buffett and his heirs and successors, should it not be good enough for all investors?

With the habits of the Monday morning program, luck hardly matters.

Good luck!

How much has the US stock market gone up over the long term? How can we benefit?

At 1:00 PM today, I will appear on the program Modern Investing on IBM TV with Sasha Starr.

Here is the YouTube link: https://www.youtube.com/watch?v=rnX1BOJD2qg

I will show a PowerPoint presentation that Monday Morning Program members understand well. You can watch it any time. We welcome your comments.

Now, let us talk about the US stock market, the best-performing market over the last 200 years. With fluctuations, it has gone up an average 0f 9.8% per year since 1928. In general terms, it has been the investor’s best way to grow savings. Of course, we can cherry pick other investment that have done better, say San Francisco and Toronto real estate. But then, to compare apples to apples, we need to cherry pick stock market-listed securities such as Facebook, Amazon, Apple, Netflix, Google and Tesla. For every investment that has done exceptionally a well, there are hundreds which never made it and which never heard of.

So, habit number three is to buy the US market as a whole by purchasing an exchange-traded fund which tracks the S&P 500. SPY is a good example. No stock picking.

Warren Buffett, one of history’s bests investors could not equal that approach between 2020 and 2022. Look at the chart comparing his company BRK, to the market as shown by S&P 500. He stated:

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Questions about the future of SPY

On May 15, 2021, from Dr. Hardik Patel, age 39, Ajax Ontario, Canada,

Questions:

I like all your approaches and am following them. I feel confident investing in SPY and have done so for over the last two years. The market being down, I don’t have a 50:50 allocation any more. Mostly my investments are in SPY now which is OK given my age.

Should I save more cash to invest as the market comes down?

Whats your prediction? This is the lowest market has been since 2020.

Monday Morning Millionaire Program Answer:

Thank you for your questions, Dr. Patel.

The one prediction that we can make with absolute certainty is

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Mon. May 16, 2022. How our fearless, intrepid investor made out recently and her plans for today

Here is how our fearless, intrepid investor did over the last three weeks in her “fun” portfolio writing covered calls on Novavax (NVAX) on Mondays, expiry dates on Fridays of the same week.  To lower the risk of being assigned, she wrote those $10 out of the money instead of the usual just out-of-the-money sale, as she did in the past.

On April 22 expiry date, she sold ten covered call contracts on NVAX and got $US227.50.

On April 29 expiry date, she sold ten covered call contracts on NVAX and got $US547.50.

On May 2 expiry date, she sold ten covered call contracts on NVAX (C 06MAY22 56.00) and got $1,170.00. She was assigned and her NVAX shares were called away.

On May 16 expiry date, she sold ten covered call contracts on NVAX (C 13MAY22 68.00) and got $1.520.00.

Total premiums received = $US3,465.00. She was assigned once out of the three covered-call sales and decided to buy NVAX again to continue selling covered calls in her “fun” portfolio.

Most “fun” portfolios underperform and cannot equal the S&P 500.  Go here for more about “fun” portfolios,

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

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How to benefit from inflation. It could be here for a while.

The media tell us that governments are doing everything possible to tame inflation. Really? Like all borrowers and bond issuers, governments are the biggest beneficiaries of inflation. They repay all debts with money of lesser value. In addition, as the price of goods and services goes up due to inflation, so does the goods and services tax that the government collects.

So governments repay all debts with money of lesser value while collecting more revenue. What’s not to like?

Inflation

 

Winners

Losers
 

Borrowers

Savers

Corporate and government bond issuers

Retirees living on a fixed income

Owners of houses, land, physical assets

Workers on fixed income

Companies and governments paying fixed income salaries

Everybody because of general economic uncertainty

Exporters

Importers

There are several ways to protect ourselves from inflation.

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