Our personal portfolios, 4/22/19

People who write about their market opinions should publish their personal results. Below, you can see my core portfolio annual rates of return as reported by TD Waterhouse yesterday.

Every Tuesday, I publish with comments, Rosi’s and my core portfolios and my fun portfolio holdings and the activity which took place on Monday. Rosi has her fun skiing, cycling in the skiing off-season, making muffins, walking our dog, reading, making our travel arrangements and spending time with our grandchildren. She does not have a fun portfolio.

Fun Portfolio

Last week, ABBV covered calls expired so I was able to write covered calls again. I sold ABBV calls, expiry date April 26, strike price $US79.00 (just out of the money) and got $US1,300.00 per contract – a new high.

This could be the unusually good opportunity which I might apply to our core portfolios but we are in Barbados where I will speak about investing at this years’ Caribbean Dental Program. I will wait for better internet connectivity when we return.

My fun portfolio suffered a serious loss when I committed all of it to ABBV, the underlying, which tanked soon after. Since my fun portfolio makes up only 5% of Rosi’s and my market holdings, it cannot have a major impact overall.  It could, however, come up with an unusually good opportunity which we could apply to our core portfolios.

Core portfolios (all are tax-advantaged)

Following Paul Samuelson’s advice (Samuelson is an economics Nobel laureate) that investing should be like watching paint dry or grass grow, we maintain a 50/50 asset allocation with 50% in a US money market fund (TDB166, now paying 2.24% annually, down from 2.25% last week) and 50% in the Guggenheim S&P 500 Equal Weight ETF (Symbol RSP) with no changes from the previous week. That 50/50 asset allocation equals the market over the course of a market cycle (peak to trough to peak) with half the volatility, that is, half the risk.

 

Buy the US economy, buy entire US market.

One of the habits of highly effective investors is to buy the entire US market at low-cost by acquiring exchange-traded funds (ETFs) which mirror the S&P 500.

The chart above (used with permission from Prof. Dimson) shows why. Investors have made and lost money in every one of the markets you see above; it is easier to make more and lose less in a growing market. A little over 100 years ago, the US market accounted for 15% of the world stock market. Today, it has over a half!

The subject of exchange-traded funds is complex but until recently, the Monday Morning Millionaire Program stated that the three ETF’s shown below are the ones which interest us.

  1. SPDR S&P 500 ETF (Symbol SPY)
  2. iShares Core S&P 500 ETF (Symbol IVV) and
  3. Vanguard S&P 500 ETF (Symbol VOO)

To those three, we recently added the Guggenheim S&P 500 Equal Weight ETF (Symbol RSP)  for reasons we explain in my personal portfolio report of 3/11/2019.  

The habit of buying the entire US market at low-cost by acquiring exchange-traded funds (ETFs) which mirror the S&P 500 is another way of saying don’t pick stocks. It is the third of six habits or highly effective investors. As Monday Morning Millionaire Program members know, these habits are:

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Our personal portfolios, 04/15/19

Can you name any advisers or market Gurus beside Warren Buffett who publish their personal portfolios? Below, you can see mine as reported by TD Waterhouse yesterday.

Every Tuesday, I publish with comments, Rosi’s and my core portfolios and my fun portfolio holdings and the activity which took place on Monday. Rosi has her fun skiing, cycling in the skiing off-season, making muffins, walking our dog, reading, making our travel arrangements and spending time with our grandchildren. She does not have a fun portfolio.

Fun Portfolio

Last week, my cash-secured, uncovered puts on ABBV were assigned and I wound up owning the shares.

Rosi and I are in New Zealand or Tasmania or the Australian mainland or on a cruise ship between them, working to develop Monday Morning Millionaire Program membership. Internet connection is spotty. Since I now own ABBV, I entered a sell order for ABBV calls, expiry date April 18, strike price 81.00 (just out of the money).

The bid/ask spread was $0.71/$0.82 so the estimated total that an investor can expect on this transaction is $US710.00 to $US820.00.

My fun portfolio suffered a serious loss when I committed all of it to ABBV, the underlying, which tanked soon after. Since my fun portfolio makes up only 5% of Rosi’s and my market holdings, it cannot have a major impact overall.  It could, however, come up with an unusually good opportunity which we could apply to our core portfolios.

Core portfolios (all are tax-advantaged)

Following Paul Samuelson’s advice (Samuelson is an economics Nobel laureate) that investing should be like watching paint dry or grass grow, we maintain a 50/50 asset allocation with 50% in a US money market fund (TDB166, now paying 2.24% annually, down from 2.25% last week) and 50% in the Guggenheim S&P 500 Equal Weight ETF (Symbol RSP) with no changes from the previous week. That 50/50 asset allocation equals the market over the course of a market cycle (peak to trough to peak) with half the volatility, that is, half the risk.

 

Develop the habits of highly effective investors and grow rich.

 

For several years now, I have had a $US100,000.00 standing bet payable by the loser to the winner’s favorite charity claiming that observing the habits of highly effective investors will outperform any other investment over the course of a market cycle (peak to trough to peak). Still waiting for takers.

Over the course of a market cycle, investing within a regime of the habits of highly effective investors will outperform over 95% of portfolios including professionally managed ones.  That is done by investing in the S&P 500 index which is made up of the largest 500 US-headquartered companies. It mirrors the performance of the US economy, the strongest economy in history.

The above paragraph is as close as to guaranteed as any statement that one can make in this uncertain world of ours. Over the course of a career, this way of investing will virtually ensure a comfortable retirement allowing investors to maintain their career lifestyle into their retirement years.

So, what are the habits of highly effective investors?

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Our personal portfolios, 04/09/19

Do you know of any advisers or market Gurus beside Warren Buffett who publish their personal portfolios?

Every Tuesday, I publish with comments, Rosi’s and my core portfolios and my fun portfolio holdings and the activity which took place on Monday. Rosi has her fun skiing, cycling in the skiing off-season, making muffins, walking our dog, reading, making our travel arrangements and spending time with our grandchildren. She does not have a fun portfolio.

Core portfolios (all are tax-advantaged)

Following Paul Samuelson’s advice (Samuelson is an economics Nobel laureate) that investing should be like watching paint dry or grass grow, we maintain a 50/50 asset allocation with 50% in a US money market fund (TDB166, now paying 2.24% annually, down from 2.25% last week) and 50% in the Guggenheim S&P 500 Equal Weight ETF (Symbol RSP) with no changes from the previous week. That 50/50 asset allocation equals the market over the course of a market cycle (peak to trough to peak) with half the volatility, that is, half the risk.

Fun Portfolio

I sold ABBV cash-secured uncovered puts at a strike price of $US83.00, expiry date March 19 and received $US1,200.00 per contract — the most that cash-secured, uncovered puts on ABBV, written on a Monday at a just-in-the-money strike price, expiry date on the Friday of the same week, have paid over the last few months.

Very nice but since my fun portfolio makes up only 5% of Rosi’s and my market holdings, it cannot have a major impact overall.  It could, however, come up with an unusually good opportunity which we could apply to our core portfolios.

This particular example could be such an opportunity but investors cannot write puts in tax-advantaged accounts. Writing (selling) covered calls is permitted, however, so I checked the bid/ask range on ABBV for just-out-of-the-money calls, expiry date next Friday and at .60/.68 thought it to be disappointing.

The risk in writing covered calls, if you can call it risk, is missing out on a rise in the underlying price above the strike price should it go that way. Investors keep the premium income, of course, but it is less than the price appreciation.

 

Initial public offerings (IPOs). A good short-selling bet?

University of Florida professor Jay Ritter has as much information on IPOs as anyone would want to see. Take a look at his website.

During the 35 years from 1980 to 2015, over 8,000 IPOs where launched. The first-day returns ranged from 9.5% to 28.4% with an average of 18% and not a single loss. Not one! All of us know of people who made fortunes by investing early in Facebook, Amazon, Apple, Netflix, Google or Tesla.

Launched just a few days ago, the most recent examples of IPOs are Levi Strass (symbol LEVI)  and Lyft (symbol LYFT). We can expect similar performance from them.

So, how can we take advantage of the predictably positive IPO first day returns? The most common way is to be involved with the creation and the development of a company before it goes public. That usually takes years and years of total commitment. There are other simpler ways but none is straightforward.

Other highly predictable outcomes are the negative three-year returns on most of these IPOs. The over 8,ooo IPO’s we mentioned above had negative three-year returns ranging from -1.9% to -44.6% with an average of -18.7% with almost no positive returns. Almost none!

A much simpler way then is to bet on the almost certain three-year negative returns by short-selling the security in question.

What is short-selling? How do we sell short? Can we sell short in a tax-advantaged account?

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Beginning of April, 2019, survey results

In my efforts to increase New Zealand and Australian membership, I am on a cruise ship somewhere in the western Pacific. This note comes to you from there. Not taking the International Date Line nor the Sydney, Australia clock time into account, we sent out our survey near the beginning of April 2019. (Should dental students receive investment education?)

Most of our subscribers are dentists with many veterinarians and optometrists included. Our survey would have been more closely linked to our membership had we asked: “Should health care students receive investment education?” Our members who are not in health care would likely be interested in the results of this survey as well.

  • 53% of our members responded. (Average response rates to surveys are 10% – 15%. Pollsters could improve results by simplifying their surveys.)
  • 85% of those who responded said “yes”.
  • 15% said “no”. Probably the negative ones feel that the curriculum is too crowded as it is.

High-income earners such as healthcare workers are the target of aggressive salespeople.

The need for unbiased investment education is obvious. The Monday Morning Program strives to provide it.

Our personal portfolios, 04/01/19

Every Tuesday, I publish with comments, Rosi’s and my core portfolios and my fun portfolio holdings and the activity which took place on Monday. Rosi has her fun skiing, cycling in the skiing off-season, making muffins, walking our dog, reading, making our travel arrangements and spending time with our grandchildren. She does not have a fun portfolio.

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The happiness index and Monday Morning Millionaire Programmembers

In 1972, the tiny, remote kingdom of Bhutan came up with the idea of measuring gross national happiness    rather than gross national product as an index of progress. The United Nations has just come out with its seventh “World Happiness Report“. “Happiness economics” is a new field which will keep academics occupied.

A new field?

Writing 2500 years ago,  Aristotle would wonder about why it took so long. Slavic people would wonder what took Aristotle so long. They thought about the subject 1000 years before him. “Luck” and “happiness” are synonyms in Slavic languages.

What about happiness versus contentment?

Three-day conferences on the subject, coming up.

Now, the Monday Morning Millionaire Program is about money management. For thousands of years, the relationship between money and contentment has occupied philosophers. The Satisfaction with Life Index shown above, strongly suggests that there is a direct connection between economic strength and happiness.

Even though it has been said that happiness is a matter of disposition and not of circumstance, the Monday Morning Millionaire Program will continue to focus improving members’ economic circumstance.

It is as straightforward as practising the habits of highly effective investors.

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Buy land. They ain’t making any more. Also, my personal portfolio.

I am travelling to New Zealand Australia to meet with Monday Morning Millionaire Program members.  Between hotels and airports, internet connectivity is spotty and my usual Monday Morning blog did not go out.

I apologize.

I am sending it now together with a report on my personal portfolio. Please forgive typos and other mistakes. The writing conditions are less than ideal.

The many people who have made a lot of money investing in real estate by being in the right place at the right time would agree with Will Rogers to whom the expression “Buy land. They ain’t making any more.” is attributed. Nevertheless, in August 2018, the Federal Reserve Bank of San Francisco stated: “The housing crash and the ensuing recession of 2009, has cost every man, woman and child in the US $70,000 each in lost income”. The housing crash did not affect Canadians and for all Monday Morning Millionaire Program members, the ensuing recession was a rare bargain buying opportunity.

The advantages of investing in equities are: 1. good returns, 2. constantly quoted prices, 3. absolute liquidity, 4. transaction costs so low that investors can ignore them and 5. good records. Those five points are why the Monday Morning Millionaire Program recommends investing in the stock market. Real estate doesn’t come close to matching equities when it comes to constantly quoted prices, absolute liquidity and low transaction costs.

To quote Will Rogers about making money in the stock market, he said that it is easy to do. “You buy a stock and when it goes up you sell it. If it don’t go up, don’t buy it.”

For investors who feel that they should own some real estate in order to diversify, a real estate investment trust (REIT) is an ideal vehicle. REITs are companies which own and in many cases operate income-generating real estate. They have all the advantages of investing in equities described above. Research REITs thoroughly if you want to invest in them.  There are many. Many have a good track record combining the best of investing in the stock market with the best of investing in real estate.

______________________________

Now,  here is report my personal portfolio.

Fun portfolio

Once again, my shares of ABBV were not called away at the end of last Friday’s trading, I was able to write (sell) covered calls on these once more. I wrote a strike price of $US80.00, expiry date this coming Friday, March 29 and received US1,540.00 per contract— the most in a long time. Nevertheless, this portfolio is down significantly because ABBV itself (the underlying) took a real beating since I bought it.

My “fun” portfolio represents only 5% of my invested money. It will have a small overall effect regardless of what it does.  This might be the exceptional opportunity which I could then apply to my core portfolios but I am too nervous to buy ABBV.

Rosi has her fun skiing, making muffins, walking our dog, spending time with our grandchildren.

Core portfolios (all are tax-advantaged)

On Monday March 11, 2019, Rosi and I made major changes to our core portfolios.

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