Exploit the astonishing power of compounding

From a man who understood math: “Compound interest is the eighths wonder of the world.”

Earnings tend to grow and then level off with time.

Savings, on the other hand, even invested at the modest return rates, grow quickly with time. Compound interest at work! More extended growth periods produce more impressive results.

What are the practical implications?

The first one deals with debt reduction. Paying off debt as quickly as possible is appealing.  Once debt is paid off, the money that went to interest payments can be used for investing. But….

…Borrowers should consider putting excess cash into an investment which grows exponentially over a longer time period, the S&P 500, for example. Many would come out ahead if they paid off debt as agreed on and not faster.

The average compound annual growth rate (CAGR) of the S&P 500 has been  7.20%, with a standard deviation of 1.54%.  Based on history, we can expect an investment in the S&P 500  to return between 5.7% and 8.7% over a 30 year time period. Most debt caries lower interest payments and shorter time periods!

The second implication focuses on the time frame.

Our June 15 blog post will show how to leave a legacy, how to make your grandchildren into millionaires!

Please note that the Monday Morning Millionaire Program contains opinions only. It does not provide any investment advice or endorsements.

 

 

 

 

It is dangerous to prophesy, specially about the future.

The headline of this post has been attributed to the Danish physicist Niels Bohr as well as to others.

For a better insight into the value of forecasting, it is useful to review our post titled 2018 Market Predictions.

When asked what the markets will do, J. P. Morgan is set to have stated “they will fluctuate”.  Apart from that certainty,  there are only few other reliable market predictors.

Combining a look at market direction with trading volume is frequently useful. In the chart above we can see a falling market on rising volume at the end of February of this year. A  falling market on rising volume frequently predicts a continued market drop. And sure enough, the market continued to fall until the end of March.

After that, the market began to rise on falling volume! Based on history, that suggests that the rise is temporary.

Let us revisit this post in a few months.

Regardless, market direction is unimportant to Monday Morning Millionaire Program members. By maintaining our personal asset allocation, we take profits when the market rises and buy bargains when it drops. Both directions give us satisfaction.

 

Please note that the Monday Morning Millionaire Program contains opinions only. It does not provide any investment advice or endorsements.

Effective portfolio rebalancing for proven results

Before 9:30 AM yesterday (May 25) I was asked by three members when should we re-balance our portfolios.
Comprehensive and easy to understand previous blog posts will answer that question. If you have additional questions, please send them to us.
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Astonishing bankruptcy; a valuable perspective

Hertz (symbol HTZ), the American car rental company,  is universally known. A household name. Founded in 1918, one hundred years later, the company had 10,020 corporate franchisees, 38,000 employees and annual revenues of US$9.5 billion.

Last Friday, May 22, Hertz filed for U.S. bankruptcy protection! In half an hour, the stock dropped by nearly 10%!

Preparing for the bankruptcy, C-suite executives, that is, the chief executive officer (CEO), chief financial officer (CFO), chief operating officer (COO), and chief information officer (CIO) knew perfectly well where the stock was headed. This is inside information which they are not to take advantage of. They might well be absolutely clean.

About two weeks before announcing the bankruptcy, the number of Hertz shares which were sold short, added up to 25.66% of all shares outstanding. By comparison, the number of Americo’s  U-Haul (symbol UHAL) shares which were sold short, added up to 5.11% of all shares outstanding. (Americo rents trailers and trucks used for “do-it-yourself” moving.)

Do C-suite executives have spouses, children, friends and relatives without being personally involved in short selling?

Dear reader, figure it out for yourself.

What does this have to do with the Monday Morning Millionaire Program and the The Six Habits of Monday Morning Millionaires? Simply stated, the third habit for investors is to buy the U.S. economy as a whole, that is, they need to get away from picking individual  stocks.

It is true that by not picking stocks, Monday Morning Program members will never benefit from the phenomenal growth of securities like the FAANG stocks. (Facebook, Amazon, Apple, Netflix and Google) But for every one of the FAANG stocks, there are dozens and dozens of companies which we have never heard of and which lost money for their shareholders.

Over the long run, investors with The Six Habits of Monday Morning Millionaires don’t need to rely on luck. But luck never hurts.

Good luck!

Please note that the Monday Morning Millionaire Program contains opinions only. It does not provide any investment advice or endorsements.

Remarkable results at the lowest cost

With the current high market volatility, investors who write covered calls on the S&P 500 (symbol SPY) are earning over $1,100 per week, per $100,000 invested. For details, call 705-441-4566. This will not last.

Now, on another issue…

Dud stock picks, bad industry bets, vast underperformance — it’s the end of the Warren Buffett era…

…states a Wall Street Journal, Sunday, May 17, 2020 headline.

From its founding in 1965 to the end of 2018 Warren Buffett’s Berkshire Hathaway (symbol BRK) had an unbelievable compound annual growth rate of more than double that of the S&P 500!

For a long time now, the 90-year-old Warren Buffett and his 96-year-old partner Charlie Munger have been saying that the BRK performance is unsustainable. It is far easier to do well managing a portfolio of a few million dollars than it is to do well manage one of tens of billions of dollars.

The chart below, the year-to-date performance of BRK and SPY shows how right they were.

And the chart below shows the year-to-date performance of a typical Monday Morning Millionaire (MMM) portfolio compared to SPY as well as the Toronto Stock exchange index (symbol TSX).

Smaller — easier to manage well. Will MMM portfolios continue to outperform?

The six habits of Monday Morning Millionaires strongly suggest that the answer is “Yes”.

And the cost of membership? About the price of a nice dinner for two.

 

Fundamentals of selling covered calls; tested, better results

Investors selling just out-of-the-money covered call contracts on SPY (or any other underlying security) with close expiry dates, safely earn extra income by pocketing the available premiums. They do give up the opportunity of making even more money if SPY (or any other underlying security) rises above the selected strike price. If that happens, investors get assigned, their underlying shares get called away at the strike price and investors are in cash.

To continue selling just out-of-the-money covered calls on SPY with close expiry dates, investors now need to repurchase SPY, at a higher price this time. Nevertheless, the entire outcome will be profitable.

Here is how.

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Tested and proven ways of prospering during difficult times

BANK OF ENGLAND WARNS U.K. SET FOR “WORST ECONOMIC PERFORMANCE IN 300 YEARS”

Newsweek headline

Unemployment Data Point to a Record Wave of Job Losses

Wall Street Journal headline

Selling derivatives, many Monday Morning Program members in their 60s and 70s made more money in an hour this week then they netted in an entire month during their careers!

The 15-year volatility index chart below shows times when selling derivatives is exceptionally effective.

To find out more, send me an email (milan@drmilan.com).

 

Please note that the Monday Morning Millionaire Program contains opinions only. It does not provide any investment advice or endorsements.

 

 

NOBL and SPY are unsurpassed. Which is better?

NOBL is the market symbol for the ProShares S&P 500 Dividend Aristocrats exchange-traded fund (ETF) composed of 57 U.S. companies that have paid an increasing annual dividend for 25 years or more.

Most are household names.  NOBL is a great widows and orphans security. They can receive regular, reliable quarterly checks over their entire lives and never have to look at their portfolios.  The steady, regular income takes the sting out of inevitable market drops. A 100% NOBL portfolio would be suitable for Monday Morning Program members who want to set it and forget it.

For Canadian Monday Morning Program members, it is obvious from the above chart why we recommend SPY, an ETF that mirrors the S&P 500, over recommending the Toronto Stock Exchange Index fund.

But why does the Monday Morning Program recommend SPY over NOBL? 

Primarily because SPY has a much higher volume derivatives trading than NOBL with more frequent expiry dates. We recommend that Monday Morning Program members only write (sell) and never buy derivatives and that they do so in their “fun” portfolios only.

Occasionally, they will encounter periods of outstanding premium returns during which times they can sell covered calls and cash-secured puts in a part or all of their core portfolios.

High premium returns occur when market volatility is high such as we see in the chart below.

We have such a period at this time.

On another note, at the Berkshire Hathaway annual meeting last Saturday, Warren Buffett again,  confirmed the wisdom of investing in the US market by owning SPY in our personally selected asset allocation. We at the Monday Morning Millionaire Program are clearly on the way.

 

Please note that the Monday Morning Millionaire Program contains opinions only. It does not provide any investment advice or endorsements.

 

 

The most interesting Annual Meeting; guaranteed learning!

Buffett’s and Munger’s usual, center-stage position
during an annual Berkshire Hathaway (BRK) meeting

The  (BRK) annual meeting will be live-streamed this coming Saturday, May 2, at 4:00 PM eastern time.

Follow: https://finance.yahoo.com/brklivestream

Over the 15 years or so during which we owned nothing but BRK, Rosi and I visited Omaha to be with 30,000 investors who attend these meetings. This year, the meeting will be different.

For the first time in over 50 years, 96-year old Charlie Munger, Warren Buffett’s partner, will not be at the front answering questions.

Greg Abel, BRK’s vice chairman of non-insurance operations, will take Munger’s place.

Online visitors will certainly leave the meeting smarter than they were entering it.

 

 

 

Announcing a tested, financially happy retirement!


Ninety-six percent of dentists cannot retire at age 65 and maintain their lifestyle, according to the American Dental Association. That is probably true of all North American dentists, veterinarians and optometrist.

The chart below shows the year-to-date performance of a Monday Morning Millionaire Program member’s million-dollar portfolio. It is  one of six, which he maintains.

The small percentage of people who followed The Six Habits of Monday Morning Millionaires retired comfortably and early unless they chose to stay on the job for the satisfaction derived from it.

What are the Six Habits of Monday Morning Millionaires?

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