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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?

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(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?

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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.

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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.

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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.

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Using the approach I describe below earns Rosi and me the income we live on. In over 50 years of investing, I have found this to yield the best results.

How risky is it?

The connected risk is tied to the failure of the most robust economy in over 100 years – the American economy. Now, how risky is that? Confucius said: “Study the past if you would define the future.”

The example below shows how we do it.

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We primarily post investment issues and only occasionally depart.

This is such a post.

I recently met a pharmacologist (not a pharmacist) who told me that he takes aspirin daily. The benefits are significant. If you are over 50, consider it whether you’re a man or a woman.

It’s crucial to consult your pharmacist before starting a daily aspirin regimen. They will assess whether it’s safe given your current medications and health conditions and determine the appropriate dosage for you.

Be well and stay well.

Milan

 

It is better to have as much cash as possible to allow buying as many shares of SPY as possible to enable selling puts and calls but leaving enough money aside to buy groceries, pay the rent, budget for holidays, for anything else you might want to buy and for emergencies.

While this approach may contradict the 50/50 asset allocation concept, it can generate a higher income.

How good is this approach?

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Most investors in the stock market lose.

In his book, The Big Short, Michael Lewis states: “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.”

J. P. Morgan Chase CEO Jaime Diamon had an income of $36 million in 2023!

A general surgeon has an annual income of $400 thousand. A general surgeon needs 90 years to earn what Dimon earns in one. (36 million divided by 400 thousand)

And who pays the Wall Street incomes? Look in the mirror.

To minimize these expenses,

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On October 1, we published an article titled Making 16% annually using derivatives. Yesterday, one of our members asked how we select the strike price and premium. We are grateful for this important question.

A strike price just out of the money produces the best returns. So, if SPY trades at $569.28, that is at the money, and just out of the money is $570.

And how do we select the premium?

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