Daily, Monday through Friday, Rosi snd I and live on income earned from selling covered calls and cash-covered puts. Doing so on a daily basis became possible only recently. Monday through Friday, in less than 10 minutes,  we carry out the necessary steps from anywhere on the planet where we can get an internet connection.

The only way to do better than that is to do something illegal.

Here are the steps.

I went to the local Walmart to return a defective device for credit. Walmart is very good at accepting returns for various reasons. However, they would only accept mine if I had a receipt to prove that I had bought the defective item at Walmart. I did not have the related receipt.

My mistake. What did I learn from this mistake, this practice shot? Keep receipts until you are sure you want to keep the item you bought.

Every investor has made investment mistakes, such as buying a security that declined or even went bankrupt.

Think of Enron, Nortel, Pennsylvania Central Railroad, and many others.

What about market timing, such as buying an IPO (Initial Public Offering)? The people launching an IPO know much more about the company than the buyers. Why are they selling? Why are they cashing in their chips?

Think about that.

Three years after an IPO, the average historical return is a negative 18.7%, with almost no positive returns. Almost none!

How can investors protect themselves from poor security selection? From poor market timing?

Here is how.

Recently, one of our American members asked whether all my money except emergency money is in SPY so that I can sell options on most of my savings.

He has been selling daily options on half of his savings and doing quite well.

He keeps the other half in a 401k and will use the 50/50  approach until he retires, which will be quite soon.

My response follows.

There are many government programs designed to help older Canadians stay financially independent. For example, Canadians don’t have health care issues. Retevmo costs $32,000 a month in the US.  Canadians pay a $12 dispensing fee.

So Canadians can depart from a 50/50 (or 60/40 or 45/55) or a similar asset allocation.

To make that possible, Canadians pay more in various taxes than Americans.

1. Saying “I’ll be greedy when others are fearful” is much easier than actually doing it.

2. The gulf between a great company and a great investment can be extraordinary.

3. Markets go through at least one big pullback every year, and one massive one every decade. Get used to it. It’s just what they do.

4. There is virtually no accountability in the financial pundit arena. People who have been wrong about everything for years still draw crowds.

5. As Erik Falkenstein says: “In expert tennis, 80% of the points are won, while in amateur tennis, 80% are lost. The same is true for wrestling, chess, and investing: Beginners should focus on avoiding mistakes, experts on making great moves.”

“If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century, you’re not fit to be a common shareholder and you deserve the mediocre result you’re going to get.” Munger, 2012

6. There are tens of thousands of professional money managers. Statistically, a handful of them have been successful by pure chance. Which ones? I don’t know, but I bet a few are famous.

7. On that note, some investors who we call “legendary” have barely, if at all, beaten an index fund over their careers. On Wall Street, big wealth isn’t indicative of big returns.

8. During recessions, elections, and Federal Reserve policy meetings, people become unshakably certain about things they know nothing about.

9. The more comfortable an investment feels, the more likely you are to be slaughtered.

10. Time-saving tip: Instead of trading penny stocks, just light your money on fire. Same for leveraged ETFs.

11. Not a single person in the world knows what the market will do in the short run. End of story.

12. The analyst who talks about his mistakes is the guy you want to listen to. Avoid the guy who doesn’t — his are much bigger.

13. You don’t understand a big bank’s balance sheet. The people running the place and their accountants don’t, either.

14. There will be seven to 10 recessions over the next 50 years. Don’t act surprised when they come.

15. Thirty years ago, there was one hour of market TV per day. Today there’s upwards of 18 hours. What changed isn’t the volume of news, but the volume of drivel.

16. Warren Buffett’s best returns were achieved when markets were much less competitive. It’s doubtful anyone will ever match his 50-year record.

The more someone is on TV, the less likely his or her predictions are to come true. (U.C. Berkeley psychologist Phil Tetlock has data on this).

19. Related: Trust no one who is on CNBC more than twice a week.

20. The market doesn’t care how much you paid for a stock. Or your house. Or what you think is a “fair” price.

21. The majority of market news is not only useless, but also harmful to your financial health.

22. Professional investors have better information and faster computers than you do. You will never beat them short-term trading. Don’t even try.

23. How much experience a money manager has doesn’t tell you much. You can underperform the market for an entire career. And many have.

24. The decline of trading costs is one of the worst things to happen to investors, as it made frequent trading possible. High transaction costs used to cause people to think hard before they acted.

25. Professional investing is one of the hardest careers to succeed at, but it has low barriers to entry and requires no credentials. That creates legions of “experts” who have no idea what they are doing. People forget this because it doesn’t apply to many other fields.

26. Most IPOs will burn you. People with more information than you have want to sell. Think about that.

27. When someone mentions charts, moving averages, head-and-shoulders patterns, or resistance levels, walk away.

28. The phrase “double-dip recession” was mentioned 10.8 million times in 2010 and 2011, according to Google. It never came. There were virtually no mentions of “financial collapse” in 2006 and 2007. It did come.

29. The real interest rate on 20-year Treasuries is negative, and investors are plowing money into them. Fear can be a much stronger force than arithmetic.

30. The book Where Are the Customers’ Yachts? was written in 1940, and most still haven’t figured out that financial advisors don’t have their best interest at heart.

31. The low-cost index fund is one of the most useful financial inventions in history. Boring but beautiful.

32. The best investors in the world have more of an edge in psychology than in finance.

33. What markets do day to day is overwhelmingly driven by random chance. Ascribing explanations to short-term moves is like trying to explain lottery numbers.

34. For most, finding ways to save more money is more important than finding great investments.

35. If you have credit card debt and are thinking about investing in anything, stop. You will never beat 30% annual interest.

36. A large portion of share buybacks are just offsetting shares issued to management as compensation. Managers still tout the buybacks as “returning money to shareholders.”

37. The odds that at least one well-known company is insolvent and hiding behind fraudulent accounting are high.

38. Twenty years from now the S&P 500 (SNPINDEX:^GSPC) will look nothing like it does today. Companies die and new ones emerge.

39. Twelve years ago General Motors (NYSE:GM) was on top of the world and Apple(NASDAQ:AAPL) was laughed at. A similar shift will occur over the next decade, but no one knows to what companies.

40. Most would be better off if they stopped obsessing about Congress, the Federal Reserve, and the president and focused on their own financial mismanagement.

41. For many, a house is a large liability masquerading as a safe asset.

42. The president has much less influence over the economy than people think.

43. However much money you think you’ll need for retirement, double it. Now you’re closer to reality.

44. The next recession is never like the last one.

45. Remember what Buffett says about progress: “First come the innovators, then come the imitators, then come the idiots.”

46. And what Mark Twain says about truth: “A lie can travel halfway around the world while truth is putting on its shoes.”

47. And what Marty Whitman says about information: “Rarely do more than three or four variables really count. Everything else is noise.”

48. The bigger a merger is, the higher the odds it will be a flop. CEOs love empire-building by overpaying for companies.

49. Investments that offer little upside and big downside outnumber those with the opposite characteristics at least 10-to-1.

50. The most boring companies — toothpaste, food, bolts — can make some of the best long-term investments. The most innovative, some of the worst.

We need advisers for a long list of issues. For example, life insurance, estate planning, retirement planning, debt reduction, record keeping, employee benefits, mortgages, annuities, incorporation, trusts, tax planning, human resource retention, preparing business plan, marketing, branding, social media, hiring, negotiating with landlords, negotiating with suppliers, individual investment plans, registered education savings plans, wills, etc., etc., etc.

But for money management, that is, for investing, to quote David Swensen

In economics, it is customary at the beginning of each year to make predictions for the remainder of the year. We have an unlimited need to foresee the future thus creating marvelous opportunities not only for charlatans and quacks but also for distinguished organizations such as central banks, the OECD, the IMF and more. Note, however, the statement by Niels Bohr that prediction is very difficult, especially about the future.

Monday Morning Millionaire followers don’t need us to predict what the market will do. An internet search for the term “Market Predictions” produces nearly 14,000,000 hits. However, we can contribute two insights. The first deals with the value of market predictions and their usefulness in making investment decisions. Let us first look at the most highly respected sources.

Elsevier publishes many high impact factor, peer-reviewed scholarly journals. One of these is the International Journal of Forecasting. Looking at its record of predictions, in 2001, Prakash Loungani, an economist from the International Monetary Fund stated: “The record of failure to predict recessions is virtually unblemished.” That performance continues.

In one example, the Bank of England predicted economic catastrophe resulting from Brexit. That was nowhere near the case. Familiar territory for the bank; it failed to predict the 2008 crash, so obvious in hindsight.

A memorably glaring example of unexpected predicting failure is that of Irving Fisher. Regarded by colleagues as one of the greatest American economists ever, he is mainly remembered today for stating just prior to the Wall Street Crash of 1929, that the stock market had reached “a permanently high plateau”. Are we at that point again? Apple has enough cash on hand to buy Walt Disney and Coca-Cola outright. Similarly, Warren Buffett has an enormous amount of cash on hand because he feels that the market is overvalued.

We should read market predictions for amusement only.

Our second insight is that market history, unlike predictions, is quite another matter. It can be instructive. For example, it is a fact that a trend is more likely to continue than to reverse itself. But… trend reversal is one of the few absolute investing certainties.

So, how can we bank on this historic fact? When asked what the markets will do, the great depression era financier J. P. Morgan said: “They will fluctuate.” Investors can take advantage of that reliable prediction.

Given these facts, what does the future hold? What would the Monday Morning Millionaire do?

(Yes, both spellings are correct.)

Investment advisers invest clients’ money by putting it into securities suggested by professional analysts. They are paid to do so.

The professionals in the multi trillion-dollar investment management industry want us to believe that what they do is brain surgery and rocket science and that we cannot do without their help.  Looking at the incomes of the people at the top, you would have to agree with that. In a week, they earn more than a brain surgeon or rocket scientist does in a year. In a year, they earn more than a brain surgeon or rocket scientist does in a lifetime. To paraphrase John Kenneth Galbraith, the salary of a top investment banker is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself.

And at the entry level, well, let me quote Michael Lewis from his book The Big Short: Inside the Doomsday Machine.  

“The willingness of a Wall Street investment bank to pay me hundreds of thousands of dollars to dispense investment advice to grown-ups remains a mystery to me to this day. I was twenty-four years old, with no experience of, or interest in guessing which stocks and bonds would rise and which would fall. Believe me when I tell you that I hadn’t the first clue. I’d never taken an accounting course, never run a business, never even had savings of my own to manage.”

And where does the money come from to pay these salaries? Look in the mirror.

The commercial and investment banking industries have several revenue streams. Actively managing wealth for trusting investors, charging deeply buried fees is one of them.

And what do investors get for their money?

At the end of December 2016, Standard & Poor’s Index Versus Active investing records show that over a 15-year period more than 92% of professionally actively managed funds failed to equal the simple act of buying and holding a US market index-tracking exchange traded fund (ETF). Within the next few weeks, the Monday Morning Millionaire Program will show you how to teach a high school student how to outperform over 90% of professionally managed accounts over a period of 15 years or longer.  Selecting the very small percentage of funds which outperform a US market index-tracking ETF can only be done with hindsight.

For now, we need to know that we need advisers for income tax issues, preparing wills, incorporating, setting up tax-advantaged accounts and more. For effective long-term stock market investing, we should manage our own portfolios, although, checking with a trusted, qualified adviser occasionally on a fee-for-service basis is a good idea. Over the course of an investing lifetime, we would outperform practically all professionally managed accounts and we would save the price on a Model S Tesla in fees.

With one exception, with everything that we do in life, more effort produces more satisfaction by achieving better results. “The harder I work, the luckier I get” is a statement that has been attributed to Thomas Jefferson, Abraham Lincoln, Samuel Goldwin and others. Ski instructors talk about quality mileage as being the only way to become a better skier. It takes about ten thousand hours of practice to become proficient in any field according to Malcolm Gladwell in his book Outliers. Everyone’s life experience is aligned with the direct relationship between effort and reward.

There is one exception – stock market investing. (stock market investing, not stock analyzing)

Regularly investing in a US market index-tracking ETF should take no more than 15 minutes on a Monday morning (or any other time).  Paul Samuelson, winner of the 1970 Nobel Memorial Prize in Economic Sciences stated that investing should be more like watching paint dry or watching grass grow. There is no evidence, absolutely none, that working 70-hour weeks or working past midnight produces better results. Goldman Sachs recently banned its junior interns from such a work schedule.

So, what is the secret?

Monday, October 14, was Thanksgiving in Canada, but the US markets were open.

By working hard and smart, I netted about C$400,000 annually when I was in practice.

On October 14, what I made, as shown below, on an annual basis, worked out more than that.

Rosi and I do this daily, Monday through Friday, and live on that income.

Doing so daily has only recently become possible.

On October 14, I took the necessary steps at my daughter’s house before breakfast.

The only way to do better than that is to do something illegal.

Here is what I did.

Monday, October 14, was Thanksgiving in Canada, but the US markets were open.

By working hard and smart, I netted about C$400,000 annually when I was in practice.

On October 14, what I made, as shown below, on an annual basis, worked out more than that.

Rosi and I do this daily, Monday through Friday, and live on that income.

Doing so daily has only recently become possible.

On October 14, I took the necessary steps at my daughter’s house before breakfast.

The only way to do better than that is to do something illegal.

Here is what I did.

In yesterday post, I stated that  using the approach I describe below earns Rosi and me the income we live on as risk-free as possible. In over 50 years of investing, I have found this to yield the best results.

We do this daily, Monday through Friday, and live on that income. Doing so on a daily basis became possible only recently. On October 11, less than 10 minutes, I carried out the necessary steps in a hospital reception room.

The only way to do better than that is to do something illegal.

Here are the steps.