Dear friends, It’s April. I spent much of the Easter weekend wearing a t-shirt out to work in the gardens. It was glorious. Today, the forecast is for hail. Tomorrow? Snow. Next week? Oh, I don’t know … dragon fire? And still, it behooves us to be grateful for what we have. The world’s most corrosive force is not greed. It’s envy, which is driven by the sense that what we have just isn’t enough, and bitterness that others have more. That’s a theme that Charlie Munger reflected on repeatedly: “I have conquered envy in my own life. I don’t envy anybody. I don’t give a damn what someone else has ..read more

It’s a good practice to take a thorough review annually of investment performance including fees and taxes. A dual-income household may accumulate a half dozen or more accounts because of tax characteristics, ownership, and goals. A good way to start is to list the accounts in order of planned withdrawals. The next step is to make sure that each account has the appropriate amount of risk and that the assets within are tax-efficient for the type of account. I am in the process of converting Traditional IRAs to Roth IRAs and the conversion is taxed as ordinary income. Municipal Bonds are include ..read more

Introduction: In the March 2024 MFO, I introduced the two main developments in Options in recent years. Zero-Day Options and Options-Based Funds. We learnt about the history of options, the market players involved and benefitting from Options, and started getting deeper into the Funds. In April MFO, through the 2nd and 3rd articles in the series, I hope to dive deeper into Options-based funds. In this article, I want to understand the motivations of the investors in these funds and of the fund managers involved. We want to look at a small selection of these funds qualitatively so we can apprec ..read more

Having looked at the qualitative rationale for why options-based funds are offered by fund managers and sought by some investors, it behooves us to quantitatively analyze options funds’ performance. There is no ONE BENCHMARK that can be used to compare ALL the options funds. That may be a good thing. It’s made me think of what a good way to create a customized benchmark for each fund might look like. The benefit of keeping things focused on the small picture is we can look at one fund at a time, in detail, without drawing too many generalizations. Challenges with option fund performance compar ..read more

Updates The marriage is off: the planned merger of BlackRock Capital Appreciation Fund and BlackRock Large Cap Focus Growth Fund has been canceled. No word on why. Morningstar Magazine featured GoodHaven Fund, which we profiled in July 2023 (“The Rise of GoodHaven Fund”), in their March 2024 issue. Our quick summary: remarkable turnaround. Distinctive portfolio. Disciplined manager. “May not have broad appeal,” because it doesn’t fit neatly into a box. Still, it’s drawing attention. Briefly Noted . . . Carillon Chartwell Income Fund has become the Carillon Chartwell Real Income Fund; with subs ..read more

Dear friends, In like a lion, out like a lamb? The Total Stock Market Index has risen 12% in the past three months, as has the S&P 500. Nvidia stock is up 76% in the same period while semiconductor stocks inched up … 48%. The thermometer in Davenport today topped 76 degrees, just a bit warm for a late winter day. We heard that participants in the March 1st Polar Plunges at locations across the upper Midwest had to be treated for heat stroke. We live in interesting times. The one thing likeliest to help us through them is the support we offer one another, and our joint optimism that we can ..read more

Options – the hottest ticket in town In the 4th Quarter of 2023, for the first time, the daily volume of Options traded in the US eclipsed the daily volume of Futures traded. Options are now the #2 product behind Stocks by volume. There are two particular phenomena drawing our attention – Zero Day Options and Option Strategies embedded in Mutual Funds and ETFs. Some investors might want to get just a rudimentary understanding of Options and recent products, while others might want a deeper dive. I have written two columns. In this month’s column, we’ll take up three major topics: An introduct ..read more

As we go to press, the S&P 500 is at its highest level in history: 5137. It set a record by passing 5000 for the first time on February 12, then another record high of 5100 two weeks later. In reality, of course, the S&P is not rocketing upward. The S&P 7-to-10 is, with the other 490-493 stocks as an afterthought. The top 10 stocks contributed 93% of the index’s 2023 gains. Goldman Sachs declares that the “S&P 500 index is more concentrated than it has ever been,” while Amundi, Europe’s largest asset manager and one of the world’s top six, claims it’s merely “at its highest lev ..read more

There are two paths that investors can follow, and pretty much only two. Path One: Get Rich Slowly. This involves three steps. Invest in a risk-aware strategy. Fund it regularly. Get on with life. There will be ups and downs but, with time, you’ll win. Path Two: Get Poor Quickly. This involves three steps. Obsess about how rich other people are getting. Impulsively chuck money at a magic solution (crypto, meme stocks, SPACs, bleeding-edge tech, NFTs). Watch your anxiety spike as the money you couldn’t really afford to invest becomes the money you no longer have. The estimable Jason Zweig, fres ..read more

Updates Beware of big promises! Several articles have been written recently about BOXX ETF. Alpha Architect 1-3 Month Box ETF which tries to outperform an ultra-cheap vanilla ETF by using an option swap strategy. In theory, the game will allow investors to pay the long-term capital gain rate on their games rather than the ordinary income rate. Here’s the advisor’s description of their strategy: is an actively managed exchange-traded fund whose investment objective is to provide investment results that, before fees and expenses, equal or exceed the price and yield performance of an investment t ..read more