Arguably, our most valuable asset after our health is our time. Unlike most other assets, time lost cannot be regained.

The signal to noise ratio in financial literature is tiny. In other words, the ratio of noise to signal is huge. The amount of time lost reading most financial literature can be huge. Not wanting to contribute to the noise, we at Monday Morning Millionaire limit our blogs to under 500 words. Recently, we decided to send them out more often than every second week only if something takes place that is meaningful to investors.

Our fearless, intrepid investor lost $65,700 in  2021, writing (selling) covered calls on Novavax (NVAX) in her “fun” portfolio.

She is in good company concerning losses writing (selling) covered calls on any security in a rising market. Over the last three years, fund companies have launched over 120 exchange–traded funds (ETFs) that sell covered calls. All underperformed.

Here are her plans for today. We respect Monday Morning Program members’ time, so our posts are under 500 words and actionable.

Owning a home is a part of the North American dream. That is not the case in many countries.

Only 40% of Swiss citizens own their homes. The others rent.

About 60% of Americans and Canadians own their homes. Most of the others hope to, in the future.

The Swiss have a greater per capita net worth than North Americans. Their per capita GDP is also greater. Do they know something that we don’t?

Homeowners in Scottsdale (Arizona), San Jose (California), Rochester (New York), Boise (Idaho), Vancouver (BC), Toronto (ON), have recently seen the value of their homes increase more than the US stock market. The Swiss would be jealous.

However, homeowners in Miami Beach, Naples, Fort Myers, Fort Lauderdale (all in Florida), Columbus (Georgia), Windsor (ON), Sarnia (ON), and several other places have not been so lucky. Many are underwater (their mortgage is larger than the value of their house). Foreclosures are not uncommon.

Nevertheless, even homeowners in areas in which houses have appreciated, can be house rich, cash poor.

The banks, of course, want to lend out as much money as they can possibly do safely. They figure that 28% household income can go to service house debt including mortgage payments, property taxes, maintenance and utilities. People who incur that level of debt can have a very high net worth if they live in areas in which houses have appreciated but often have  little left over for discretionary spending.

Examples of discretionary spending? Travel, weddings, buying a Tesla, adding a screened porch to your house, having large dinner parties with friends and family – all fun things.

Don’t do what the banks want you to do! Don’t go there!

Have you ever seen property taxes go down? Or maintenance costs or the cost of utilities? What if the unexpected arrival of a baby eliminates one of the income sources?

Being house rich and cash poor can be very unpleasant.

What can people who are there to to solve their problem?

Time is an irreplaceable resource. Our sincere gratitude to all members who took the time to respond to our Friday, March 11 survey about COVID and Omicron effect on employment.

You can see our results below.

You can you see some worthwhile comments below.

Our fearless, intrepid investor lost $65,700 in  2021, writing (selling) covered calls on Novavax (NVAX) in her “fun” portfolio. She is in good company. Over the last three years, fund companies have launched over 120 exchange–traded funds (ETFs) that sell covered calls.

Every investment mistake, past or future, was or will be the result of departing from one or more of the six habits of the Monday Morning Program.  You can see why our fearless, intrepid investor, as well as professionally run funds selling covered calls, lost money last year.

Our fearless, intrepid investor has decided to put a hold on selling covered calls, for a while. Instead of reporting how she is doing, we will discuss what works and what doesn’t in selling covered calls in cash- secured naked puts in future Monday posts.

Here is one example.

The percentage return when selling covered calls and cash-secured puts increases with increased volatility of the underlying security. It is important for investors to know why.

Studies show that nearly all money managers, financial advisers and individual investors think they are above average. Is that mathematically possible? No need to comment.

As the chart above shows, the average investor earns less than a half what the market, as shown by the S&P 500, delivers. It’s also well known that after fees, more than 90% of professional money managers cannot equal the S&P 500 over a market cycle (peak to trough to peak).

In less than half an hour, Monday Morning members can teach a high school student how to equal the S&P 500.

The chart also shows that REITs, Emerging Market equities, small-cap and high-yield securities outperformed the S&P 500 from 2001 and 2020.

Why did Monday Morning not recommend any of them?

Two reasons:

At the closing bell on Monday, March 7, the S&P 500 dropped 9.18%, year-to-date. SPY, which tracks the S&P 500 precisely, is an increasingly greater bargain. If you have not re-balanced your core portfolios to your personal asset allocation (mine is 50% SPY  and 50% TDB166, a money market fund), consider it at this time. Call me (no charge) if you want to go over this. (705-441-4566)

Also, if you have not seen it, take a look at our one minute mutual funds video. I promise you some surprises.

Now, today’s message.

A one-minute TV commercial used to cost $1 million. Now, you can create it at home at a cost so low that you can ignore it. Low cost, high quality, great service — only two of the three are possible. That certainty is becoming history. Computers and robots are increasingly making all three possible in many areas.

Before Charles Schwab started his discount brokerage in 1972, stock market transaction costs were directly connected to the size of the trade. Transaction costs often were in the hundreds of dollars. Investors paid close attention to these costs. Today, US brokerages don’t charge for stock market transactions.

Our fearless, intrepid investor lost $65,700 in  2021, writing (selling) covered calls on Novavax (NVAX) in her “fun” portfolio. She is in good company. Over the last three years, fund companies have launched over 120 exchange – traded funds (ETFs) that sell covered calls.

In raising markets such as we have had now had for longer than ever before, selling covered calls underperforms.

The chart above compares the S&P 500 to SVOL (Simplify Volatility Premium ETF), an exchange-traded fund selling covered calls. Like all the others similar to it, SVOL is run by the best trained money managers using the best tools available. These managers, meaning Wall Street and Bay Street, make the money. The investors sleep like babies, meaning they stay up all night and cry.

Why is that?

In raising markets, investors who have sold covered calls are assigned and need to sell the underlying security at its strike price, which is below market price. They’re unable to benefit from the growth of the underlying security.

Attempting to outperform the market, “fun” portfolios ignore one or more of the six habits promoted by the Monday Morning Program. They are not much fun most of the time; they underperform the market.

Every investment mistake, past or future, was or will be the result of departing from one or more of the six habits of the Monday Morning Program.

Sophisticated investors do sell covered calls and cash-secured naked puts.

First, I invite you to visit the Monday Morning website and note a new tab titled “Videos”. Click on that tab and you will see the first of our one-minute videos. This video and all future ones will be short and actionable – big bang for the buck. Call me if you want to discuss any of these. (705-441-4566) Tell others about it.

 Now, some recent revelations:

• Warren Buffett’s Berkshire Hathaway is holding more cash than ever in its entire history.
• Justly famous student of market bubbles, Jeremy Grantham recently stated that the market is in a superbubble and could decline by 50%.
• The market as represented by the S&P 500 is now overvalued by any metric.

Buffett, Grantham and various valuation metrics have stated that the market is overvalued for several years now. During that time Monday Morning members I have done exceptionally well. Following the six habits that Monday Morning encourages, they have nearly doubled their portfolios since 2019.

Buffett and Grantham have not done as well over the last 3 years and further back.

So, how can we protect against a crash?

Continue reading “Is the stock market in superbubble territory? How can we protect against a crash?”