On March 4, 2021 we had a post on SPAC’s. (Special Purpose Acquisition Companies) Our bottom line was “don’t even think about investing in one.”

Forbes wrote about How SPACS Became Wall Street’s Money Tree. Traders known as the SPAC mafia were generating seven digit incomes for themselves working on their next paper-shuffling, tax-avoidance scheme with no socially redeeming features.

Yesterday’s Wall Street Journal had an article titled The SPAC Ship is Sinking. Investors Want Their Money Back.

Don’t read it unless you have the interest and the time. The title says it all. As we stated almost one year ago, “don’t even think about investing in one.”

With the habits of the Monday morning program, luck hardly matters.

Good luck!

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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.

Some of our members are interested in Novavax (NVAX), hence this post.

NVAX is an excellent example of Keynes’s statement, the title of this post.

Four months ago (October 2021), Morningstar rated NVAX as undervalued at an 18% discount and gave it three stars.

On January 17, 2022, Morningstar rated NVAX as undervalued at a 46% discount and kept it at three stars.

On January 19, 2022, Morningstar rated NVAX as undervalued at a 56% discount and moved it to four stars — a great example of a cigar butt investment. Savvy investors are buying more.

The company has $1.5B in net cash and is selling for less than 4X earnings (2022 estimates). It should generate huge cash flow this year.

Even if investors are concerned about what happens post-Covid, with cash flow, the company can always buy into another growth category.

Except for Fidelity, institutions own 51% of NVAX now and are adding more to their existing positions. They recognize the cigar butt nature of this stock.

Only in members’ “fun” portfolios does the Monday Morning Program recommend picking individual stocks (habit number three – buy the US economy as a whole).

It is possible for a “fun” portfolio to outperform by ignoring one or more of the six habits, by selling derivatives, buying cigar butt stocks, etc., but it is unlikely.

No one needs a “fun” portfolio.  However, those investors who decide to maintain one, need to keep it to a small percentage of their overall market holdings. Much of the time, “fun” portfolios are not much fun. Wall Street loves them.

With the habits of the Monday morning program, luck hardly matters.

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.

The percentage of people who invest in the stock market varies among countries. It ranges up to nearly 60% in the United States.

If you do an Internet search for “Percentage of investors who underperform the market” you will find that the track record is terrible. Over a 15 year period, more than 90% of investors, including professionals, underperform the market as represented by the S&P 500. Wall Street wins every time.

As we frequently state, historically, 1.) over the long term, 2.) properly selected US market index exchange-traded funds, 3.) held in tax-advantaged accounts, 4.) in an appropriate asset allocation, have been the investors best way for growing savings and are likely to remain so for many years.

Please note “…the investors best way for growing savings…”. Review our recent post about risk.

With the habits of the Monday morning program, luck hardly matters.

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.

Most risk is in price. If the cost of a security is low enough, investors reduce the risk of ownership. They can still lose; the price can go lower, the security can fall out of bed. Taleb’s Turkey.

All risk arises from ignoring one of more of the six habits which the Monday Morning Program promotes. To eliminate risk entirely and still outperform over 90% of portfolios, including professionally managed ones, investors simply need to have the six habits. (1. Save, 2. Do it yourself, 3. Invest in an entire US market (don’t pick stocks), 4. Buy and hold (don’t trade), 5. Adjust to your asset allocation when it changes by market movement, 6. Avoid complexity)

All investment mistakes that anyone ever made arose from ignoring one or more of the six habits. The same is true about all future investment mistakes.

And the expense ratio (management cost divided by portfolio value)? Zero dollars, 15 minutes per week!

Wall Street does not like investors with these habits. These investors win; Wall Street makes less, much less!

Some of our members spend more time than 15 minutes per week, often much more, because they enjoy it. Few make more in the long run.

With the habits of the Monday morning program, luck hardly matters.

Good luck!

Time is an irreplaceable resource. Our sincere gratitude to all members who took the time to respond to our Friday, January 14 survey about COVID worries.

You can see our results below.

You can you see some worthwhile comments below.

New members, a sincere welcome to you all. In  December of 2021 we set a new enrolment record!

An earnest thank you to everyone who bought gift memberships. This low-cost ($C12.00) gift, appropriate for most people, can solve anyone’s gift-giving problems.

Here, we have another record.  Our 90-plus-year-old member Roy Brown, Founder of ROI Corporation (www.roicorp.com) gifted the 1-on-1 sessions ($C300 per session) to his 10 grandchildren, all grown adults.

Now, back to our fearless, intrepid investor who lost $65,700 in 2021 writing (selling) covered calls on NVAX in her “fun” portfolio.

How much fun do you think it was?

Last Monday, January 10, when the market opened, our fearless, intrepid investor sold 10 covered call NVAX contracts, strike price $5.00 out-of-the-money, expiry date Friday, January 14 (C 14JAN22 131.00). She received $4,010.00 immediate premium income while allowing $5.00 per share for growth, should it take place. The possible total was $9,400.00.

What did happen?

NVAX went from $133.81 on Monday down to $112 on Friday. That works out to a loss of $21.81 per share for a total loss of $21,810.00 for the week. ($21.81 times 1,000)

That was offset by the immediate premium income of $4,010.00 for a total loss of  $17,800.00. ($21,810.00 minus $4,010.00)

All in all, her “fun” portfolio is not much fun now. That is true of most portfolios that ignore one or more of the six habits which the Monday Morning Program promotes. Fortunately, she has enough sense to limit her “fun” portfolio to a small percentage of her overall stock market investments.

We know that the risk of writing cover calls entirely comes from the selected underlying security. Morningstar now states that NVAX is undervalued at a 43% discount — the highest undervaluation in memory for this security.

NVAX has assets that are worth much more and the price of the stock. It has a lot of cash and revenue is expected to rise 10 times from 2020 to 2022 — a true cigar butt stock.

What will she do when the market opens at 9:30 AM today?

On average, people pay $500 a month to finance a car.

Over the last 200 years, the stock market as represented by an exchange-traded fund which tracks the S&P 500, has averaged 10% annually (not inflation adjusted).

Over the course of a 40 year career, $500 a month invested the Monday Morning way will produce — please make sure that you are sitting down;

$2,921,610.87!

Somebody is making money. Is it the car owner?

Borrowing money at low cost to invest in appreciating assets can make sense. Most established companies generally issue bonds which is how companies borrow.

Borrowing money to invest in depreciating assets will lead to poverty in old age. Those who are on that path need to get off it as quickly as possible.

It is never too late to do the right thing.

With the habits of the Monday Morning Program, luck hardly matters.

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.

First, here is how one of our members, an investment banker, sells derivatives safely. His objective is to earn 1%/month — a decent but not greedy return.

He frequently sells puts. The risk in selling derivatives entirely comes from the underlying security involved. Unlike sellers of covered calls, put sellers do not own a security. Their risk comes from having the security put to them should its price drop below their selected market price. With a high volatility security like Novavax (NVAX), investors could get a premium earning 1% per month from a strike price 1/3 or so below the market price at the time. That gives significant protection from having NVAX put to them.

Covered calls and cash-protected puts have identical risk levels. Nevertheless, Canadian investors are not allowed to sell cash-protected puts in tax-advantaged accounts. American investors are allowed to do so.

Now, back to our fearless, intrepid investor. In  2021 she took a real beating writing (selling) covered calls on NVAX. She lost $65,700. As we said, the risk in selling derivatives entirely comes from the underlying security involved. Because of that,  most experienced investors sell derivatives using a safe underlying security  such as an exchange-traded fund that tracks the S&P 500.

The one thing our fearless, intrepid investor did correctly is to do her covered call selling in her “fun” portfolio. Like most departures from the six habits, it has not been a lot of fun, but it makes up a small percentage of her overall assets.

What will she do when the market opens at 9:30 AM today?