Chess and investing; about interesting similarities, about one interesting difference

Chess and investing have interesting similarities and differences.

In chess, each player has 16 pieces. Each player has 20 possible first moves, 400 possible second moves, 197,742 third, and after three moves, 121 million. After seven moves, the number of possibilities is in the billions.

After that, the number soon increases to surpass the number of all the stars and planets and grains of sand on earth combined!

Well, guess what? The number of market choices is greater. Stock market, bond market, money market, foreign exchange market, options market, futures market, multiplied by the number of securities in each, multiplied by what investors can do with each — staggering! Incomprehensible!

In chess, a human player would ignore the vast majority of possibilities and focus only on the few that make sense. A chess-playing computer would assess all of them and play the single most promising one.

Investors similarly ignore most securities and select only a small number to study for buy/sell possibilities. Like in chess, a robo-adviser would assess a huge number of possibilities to make one buy/sell decision.

There is one important, major difference between chess and investing.

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A member’s comments on the Novavax adventure

J.B.P., Ph.D., one of our members, recently made some excellent points about our intrepid, adventuresome member’s Novavax NVAX adventure. We show his comments below.

“First of all, I think your blog is paying way too much attention to her Novavax ups and downs. Your book Monday Morning Millionaire stresses the correct principles of investing and says that no more than 10% of a person’s portfolio should be used in such adventures.

“Since her Novavax investment was $500,000, her portfolio must be worth $5,000,000.  So, since August, when she bought the Novavax shares, I hope she let the grass grow & the paint dry on the other $4,500,000 she had invested. If she followed your advice, she would have invested $2,250,000 in an S&P 500 Index exchange-traded fund and the other $2,250,000 in cash or near-cash.

“The interest rate on the cash from August to December 2020 might have been about 1% /year, so she would get about $9,000 from that. The S&P index was at 3,294/share on Aug 1st and increased to 3,732/share as of Dec 31st, 2020, an increase of 13.3%.

“She would have earned about $299,250 on the $2,250,000 invested in that portion

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Better asset allocation leads to improved portfolio

 

On January 15, 2018, we wrote about a new year’s resolution suggesting that deciding on an asset allocation would be worthwhile.

As your mindset becomes increasingly aligned with the MMM approach to investing, you will see that there is no such a thing as a bad year. When markets tank, as they regularly do, you will see it as an opportunity to buy bargains. When markets rise, which happily happens more often, you will see it as an opportunity to take profits.

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About investment newsletters. Are they useful?

I have known an interesting man for over six decades – for eight years, he was the physician to the wives and children of the king of Saudi Arabia, among other fascinating things. He spoke highly of The Dines Letter in a recent conversation with me. If you look into this investment newsletter, here are some of the claims which you will see:

  • “I subscribed to The Dines Letter and took roughly $125,000 and turned it into $1 million after taxes.”
  • “James Dines, one of the world’s foremost financial forecasters”
  • “…one of the most fantastic investment calls on record…”
  • “Subscribers continue to reap huge profits”

Who can resist that? The knowledgeable can and do.

This newsletter has been in business for over 40 years; it has wide appeal. However, knowledgeable investors are aware of the unimpressive, evidence-based track record of investment newsletters, generally.*

“…been in business for over 40 years…”? So has the Flat Earth Society and numerous religious cults and other organizations which Monday Morning members look into for amusement.

What do we know for certain?

The best that we can say about the Dines Letter is that it has never faced an SEC enforcement action, as have hundreds of advisory services.

 

*Jaffe, Jeffrey F. and Mahoney, James M., The Performance of Investment Newsletters (October 1998). FRB of New York Staff Report No. 48, Available at SSRN: https://ssrn.com/abstract=937407 or http://dx.doi.org/10.2139/ssrn.937407


We have designed the Monday Morning Millionaire Program to offer abstracted investment education. 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.

Members can read our posts in less than five minutes. Following and studying the links embedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

Happy new year! Novavax Dec. 29 update correction. 2020 in review.

All of us at Monday Morning wish all of you a happy, healthy, prosperous and serene 2021!

A sincere thank you from us at the Monday Morning program to all those who bought gift memberships and coaching sessions for friends and relatives.

Click here if you would like to buy a gift membership for someone.

On 2020/12/29 we stated that one of our intrepid, fearless investors sold 24 Novavax (NVAX) covered call contracts (2,400 shares) at the market, strike price $130.00, expiry date this Thursday (not Friday), December 31 (C 31DEC20 130.00) and that she received $3.29 per share for  total of $10,600.00. That brought her losses are down to $27,284.45 ($37,884.45 minus $10,600.00). (Her original loss on NVAX, incurred in August of this year when she bought NVAX at its peak, was $232,407.50 in a $500,000 portfolio.) 

Correction, correction!!

Some of our members with sharp pencils pointed out that 2,400 times $3.29 equals $7,896.00 and not $10,600.00 as we stated. That would have brought our intrepid, fearless investor member’s losses down to $29,988.45 ($37,884.45 minus $7,896.00) and not $27,284.45  ($37,884.45 minus $10,600.00).

Worse that that, NVAX shares dropped to $111.51 bringing the value of that one of her portfolios to $267,624 (2,400 times $111.51). Wrong direction but some headway.

Our sincere apologies for the error! Do keep your pencils sharp.

And now, let us review how our members did in 2020.

On, 2020/11/22 we wrote about the disconnection between the economy and the stock market.

In the past, the stock market and the economy moved in parallel. At this time, however, the economy is at its worst in years while the stock market closed 2020 at a new record high!

The stock market does anticipate what will happen in the economy and we hope that this is the case now. We don’t want to see food lines and high levels of unemployment, shuttered restaurants and places where people traditionally gather.

A more obvious reason could well be that interest rates are the lowest that they have ever been in our lives. Money goes where it is treated best and today, saving is not it. Searching for yield and growth, investors have pushed the market to its present levels.

And what does 2021 have in store for us?

Niels Bohr stated that it is dangerous to prophesy, specially about the future. Two issues are almost a certainty. The first, on March 23, 2020, Federal Reserve announced extensive measures to support the economy. Interest rates will remain low for several years.

For the second issue, let us look at the history of market losses. Over the last hundred years or more, there have been 5% market losses practically every year. Three out of every five years of produced 10% losses, one out of every four years have produced 20% losses, 30% losses occurred once a decade and 40% losses took place once every 20 years.

It is possible to connect the two issues above in many ways. And yes, market losses will occur. However, the Monday Morning mindset will see these losses as opportunities to buy bargains. And when markets return to growth, a long-term certainty, our members will take profits.

Once again, all of us at Monday Morning wish all of you a happy, healthy, prosperous and serene 2021!


We have designed the Monday Morning Millionaire Program to offer abstracted investment education. 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.

Members can read our posts in less than five minutes. Following and studying the links embedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

 

Fully in cash. Waiting for a market correction.

One of our members wrote recently stating that he was entirley in cash and waiting for a market correction in order to invest.

That is an example of market timing.

It might work out well, but the chances are that it will not. The Monday Morning program has a long track record of evidence-based success. The fourth habit that successful investors have is to buy and hold. Investors who have this habit do not try to time markets. They know that over the long run, investors, professionals included, even people who use a vast array of technical indicators, almost never outperform the market over the course of a market cycle because they have timing skills.

What about the opposite, that is, buying at the top? Many investors do exactly that! When markets are rising and expensive, they jump in, and at the opposite end, when markets are dropping and bargains abound, these investors head for the doors.

What do you think would happen if unlucky investors bought only at the very top, at the market peaks, say from 1970 to today?

Given certain conditions, these investors would be winners, big time! Really big!

And what are these conditions?

Number one is save regularly and keep the money in cash until the inopportune market peak.

Number two is do it yourself and avoid adviser fees.

Number three is buy a low-fee, index exchange-traded fund and nothing else.

Number four is buy and hold and never sell until retirement.

At retirement, withdraw 4% to 5% annually.

Do the first four look like the habits of Monday Morning millionaires? That is exactly what they are!

If these investors used the dollar-cost average approach to their savings, they would do twice as well.

“Time in the Market” and not “Market Timing” wins every time. This is an old wall Street wisdom.


We have designed the Monday Morning Millionaire Program to offer abstracted investment education. 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.

Members can read our posts in less than five minutes. Following and studying the links embedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

Announcing how to prosper in spite of losing; Novavax Dec. 29 update

First, a sincere thank you from us at the Monday Morning program to all those who bought gift memberships and coaching sessions for friends and relatives.

Click here if you would like to buy a gift membership for someone.

We have been following the covered calls record of one of our members.  In August  2020, she committed about $500,000 to buy Novavax (NVAX) shares at over $174 per share because the premiums on covered calls were attractive! That was the peak price! In short order, she lost $232,407.50 on the security itself.

By selling just out-of-the-money covered calls on NVAX every Monday after that, with expiry date on Friday of the same week, she brought her losses from $232,407.50 down to $50,364.45 by Monday, December 21, 2020.

When the market opened yesterday at 9:30 AM today, she planned to sell 24 contracts of NVAX out of the money, strike price $135, expiry date, December 31. (NVAX C 31DEC20 135.00) That would have allowed for five dollars of growth if there was to be any. NVAX has been trending upwards and the trend is your friend (until it isn’t).

At market close last Friday, the bid/ask range on NVAX C 31DEC20 $135.00 was $4.85/$5.55 with the largest volume and open interest of any out-of-the-money contracts. Based on that, she expected to get  $12,480.00 ($5.20, which is halfway between $4.85 and $5.55, multiplied by 2,400). That would have brought her losses down to $37,884.45 ($50,364.45 minus $12,480.00) if there was no growth above $135.00 by Friday, December 31, and if there were no losses on the security itself.

If the hoped-for five-dollar growth took place, she would have gained an additional$12,000. That would have brought her losses down to $25,884.45 ($37,884.45 minus $12,000).

By the time she entered the market at 9:40, the above figures had changed.

For the worse!

She entered a sell order on 24 NVAX covered call contracts at the market, strike price $130.00, expiry date this coming Friday, December 31 (C 31DEC20 130.00). It was filled at $3.29 per share for  total of $10,600.00.

That was the lowest premium on NVAX covered calls in recent memory. When she wrote just out-of-the-money covered calls on NVAX on December 14, she got a premium of $7.95 per share!

As it is, her losses are down to $27,284.45 ($37,884.45 minus $10,600.00). 

Looking at this from another perspective, a  $10,600.00 return on $312,000.00 (2,400 times $130.00) works out to 3.40%.

Per week! 

To annualize that, multiply the figure by 52!

Historically, over the long term, passive investing has been the best way for growing savings and is are likely to remain so for many years. Investors can do that by buying an exchange-traded fund that tracks the S&P 500. The Monday Morning program encourages that evidence-based approach to investing.

What you see above is NOT passive investing, however, many of our members are interested, so we write about that once in a while. Stockbrokers love it.

To review yesterday’s wisdoms:

“Investing should be like watching grass grow or paint dry.” Nobel laureate economist Paul Samuelson.

“Invested money is like a bar of soap. The more you handle it the less you have.” Nobel laureate economist Eugene Fama.

“The Stock Market is designed to transfer money from the Active to the Patient.” Warren Buffett, one of history’s greatest investors.

“Passive investing consistently outperforms active investing over the long run.” The Monday Morning program.


We have designed the Monday Morning Millionaire Program to offer abstracted investment education. 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.

Members can read our posts in less than five minutes. Following and studying the links embedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

 

Announcing how to prosper in spite of losing; Novavax Dec. 28 update

First, a sincere thank you from us at the Monday Morning program to all those who bought gift memberships and coaching sessions for friends and relatives.

Click here if you would like to buy a gift membership for someone.

We have been following the covered calls record of one of our members.  In August  2020, she committed about $500,000 to buy Novavax (NVAX) shares at over $174 per share because the premiums on covered calls were attractive! In short order, she lost $232,407.50 on the security itself.

By selling just out-of-the-money covered calls on NVAX every Monday after that, with expiry date on Friday of the same week, she brought her losses from $232,407.50 down to $50,364.45 by Monday, December 21, 2020.

When the market opens at 9:30 AM today, she plans to sell 24 contracts of NVAX out of the money, strike price $135, expiry date, December 31. (NVAX C 31DEC20 135.00) That allows for five dollars of growth if there is any. NVAX has been trending upwards and the trend is your friend (until it isn’t).

At market close last Friday, the bid/ask range on NVAX C 31DEC20 135.00 was $4.85/$5.55 with the largest volume and open interest of any out-of-the-money contracts. Based on that, she should get  $12,480.00 ($5.20, which is halfway between $4.85 and $5.55, multiplied by 2,400). That should bring her and losses down to $37,884.45 ($50,364.45 minus $12,480.00) if there is no growth by Friday, December 31, and if there are no losses on the security itself.

If the hoped-for five-dollar growth takes place, she will gain an additional$12,000. That will bring her losses down to $25,884.45 ($37,884.45 minus $12,000).

The above describes active investing. Stockbrokers love it. Keep the following in mind:

“Investing should be like watching grass grow or paint dry.” Nobel laureate economist Paul Samuelson.

“Invested money is like a bar of soap. The more you handle it the less you have.” Nobel laureate economist Eugene Fama.

“The Stock Market is designed to transfer money from the Active to the Patient.” Warren Buffett, one of history’s greatest investors.

“Passive investing consistently outperforms active investing over the long run.” The Monday Morning program.

Good luck!


We have designed the Monday Morning Millionaire Program to offer abstracted investment education. 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.

Members can read our posts in less than five minutes. Following and studying the links embedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

 

 

How to make big bucks and go broke.

According to the American Dental Association, 96% of dentists cannot retire at age 65 and maintain their lifestyle. Do you think that it is any different for veterinarians or optometrist or any self-employed people, be they American or Canadian?

As a group, dentists have the highest incomes both in the US and in Canada. Veterinarians and optometrists are not far behind.

Making big bucks and going broke happens often enough. Making big bucks does not make one good at managing them.The world’s heavyweight boxing champions all made big bucks and all went broke except for Rocky Marciano. His wife manage their money.

Johnny Depp made $750 million from his films.  Thanks to profligate spending, Depp lives paycheque to paycheque.

Robert De Niro is another example. Why would anyone want to invest in a restaurant instead investing the Monday Morning Program way? Restaurant profit margin’s are below 6% on average, at best.

Before COVID-19.

After COVID-19, De Niro’s restaurant Nobu, lost $3 million in April and another $1.87 million in May. By contrast, retired Monday Morning members are making more on a Monday before breakfast than they ever did in their best week while practicing their profession.

The Monday Morning Program shows that properly selected US market index exchange-traded funds, held in tax-advantaged accounts, have been the investor’s evidence-based, best way for growing savings and are likely to remain so for many years.

A high school student could be taught to invest the Monday Morning way in one easy lesson.

Monday Morning members have the answer. Rich people, like any investor, go broke by ignoring one or more of the six habits of Monday Morning Millionaires.

There is no need to be among them.


We have designed the Monday Morning Millionaire Program to offer abstracted investment education. 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.

Members can read our posts in less than five minutes. Following and studying the links embedded in these posts would take longer. How members manage a post depends on their level of interest and investing knowledge.

 

Season’s Greetings

 

Season’s greetings everyone!

Season’s greetings to you and all the best for health, prosperity and serenity in 2021 and on and on, for many years.

“May you live in interesting times” is an ancient Chinese curse actually, and we have had much of that in 2020. The American presidential election and COVID-19 top the list of events which will forever change our lives, in many ways for the better.

Rosi and I want that for you and yours for 2021 and on and on.