Wiz Daily Journal
Things that are expected to get more “EXPENSIVE” due to Trump's TARIFFS on Wednesday, April 2nd, 2025
Wednesday, April 2nd, 2025
Things that are expected to get more “EXPENSIVE” due to Trump's TARIFFS on Wednesday, April 2nd, 2025
President Donald Trump has dubbed Wednesday, April 2nd, 2025, as "Liberation Day" a time when he aims to announce a series of tariffs designed to liberate the United States from dependence on foreign goods
What's at “RISK” here are HOUSEHOLD FINANCES, the STATUS OF THE U.S. AS A LEADING GLOBAL FINANCIAL FORCE and, the very MAKEUP OF THE WORLDWIDE ECONOMY.
In his proclamation of 25% AUTO TARIFFS last week, Trump accused other nations of “EXPLOITING” America's TRADE DEFICITS.
"This is the beginning of Liberation Day in America," Trump declared. "We're going to charge countries for doing business in our country and taking our jobs, taking our wealth, taking a lot of things that they've been taking over the years. They've taken so much out of our country, friend and foe. And, frankly, friend has been oftentimes much worse than foe."
Economists argue that tariffs would ultimately result in consumers facing HIGHER prices for VEHICLES, GROCERIES, HOUSING and a range of other products, possibly leading to REDUCED CORPORATE PROFITS and SLOWER ECONOMIC GROWTH.
Yet, Trump is convinced that more businesses will start opening factories domestically to sidestep the tariffs, despite the fact that such an industrial pivot could take upwards of three (3) years.
What could get more EXPENSIVE under Trump's tariffs???
CARS
It's been claimed that estimated that TARIFFS on PARTS just from CANADA and MEXICO could lead to costs RISING by roughly $4,000-$10,000, depending on the VEHICLE.
FUEL
Sixty-one percent (61%) of OIL IMPORTED into the US between January and November 2024 came from CANADA.
CAR INSURANCE
A study found that INCREASE PRICES for CAR PARTS could lead to HIGHER AUTO INSURANCE PREMIUMS.
Some ALCOHOLS
MODELO and CORONA - from MEXICO- may get MORE EXPENSIVE under new TARIFFS.
MAPLE SYRUP
You may have to find something else to put on your pancakes. MAPLE SYRUP, from CANADA, is likely to get more EXPENSIVE, according to economists.
HOUSING
A popular LUMBER from CANADA makes up a third (1/3) of that used in the US. These TARIFFS may result in the cost of HOMES INCREASING or FEWER NEW HOMES being developed.
AVOCADOS
Ninety percent (90%) of the AVOCADOS consumed in the US come from MEXICO.
SHOES
A NATIONAL RETAIL FEDERATION report found that shoppers in the US could pay MORE for FOOTWEAR as a result of TARIFFS, because most SHOES bought in the US come from CHINA.
SMART PHONES
Many of the CHIPS found in SMARTPHONES come from TAIWAN, meaning prices could INCREASE by 37 percent (37%).
PEACE & BLESSINGS,
Kenneth Reaves, Ph.D.
The Boring “SECRET” to Financial Success That Everyone Ignores But Should Not
Monday, March 10th, 2025
The Boring “SECRET” to Financial Success That Everyone Ignores But Should Not
Let’s cut to the chase. The single most important financial move that traders/investors can make—the one that’s obvious, easy, and yet criminally neglected—is this: “PAY YOURSELF FIRST”!!!
Oh, I know. That’s not nearly as thrilling as “Buy this obscure tech stock before it 10Xs!!!” or “Here’s how to retire at 35 using only your spare change and sheer force of will!!!”
But if you actually care about GROWING “WEALTH” or just hearing about it… then please continue reading this “WIZ” DAILY JOURNAL article.
“PAYING YOURSELF FIRST” means…BEFORE you pay your mortgage/rent, your car note, student loans or, your bar tab, you siphon off a portion of your income and put it into investments.
PUT YOUR MONEY TO WORK AND MAKE IT GENERATE REVENUE/INCOME THAT WILL GET YOU “P.A.I.D.” FIRST!!!
NO EXCEPTIONS…
NO “I’ll catch up next month”…
NO “But I really need that third streaming subscription because, you know, documentaries.”
And yet, most people do the exact OPPOSITE.
They pay their bills, spend on whatever “NONSENSE” feels “URGENT” at the time (e.g., $7 lattes and yet another pair of athleisure pants), and then, if there’s anything left, they MIGHT toss a few dollars into savings.
Except there never is anything left because “LIFE”—especially the “CAPITALIST”, “CONSUMER-DRIVEN” version of it, is designed to extract every last penny from your grasp.
The beauty of “PAYING YOURSELF FIRST” is that it’s the easiest, laziest way to get rich over time. It requires precisely one (1) decision: AUTOMATE IT…
Here’s how to AUTOMATE the process utilizing three (3) “IDIOT” proof steps:
- Set Up Automatic Transfers – Have a fixed percentage of your paycheck (ideally 15%-20%, but even 5% is better than the BIG FAT ZERO most people invest), automatically deposited into an investment account before you ever see it. If your employer offers direct deposit, allocate a portion of your paycheck so that a chunk goes straight into investments. If your employer does NOT provide this capability, set up an auto-transfer from your checking account the day your paycheck hits.
- Pretend That Money Doesn’t Exist – Seriously. The money in your investment account(s) is NOT for buying groceries, concert tickets, or a “treat yourself” weekend in Vegas. It’s locked away for your “FUTURE SELF”, who will thank you profusely when you are sitting on a comfortable pile of “CASH” instead of subsisting on instant RAMEN NOODLES at age 65.
- Invest Money “INTELLIGENTLY” – If you are just letting that money sit in a “SAVINGS” account earning 0.00001% interest, you are doing it wrong. Put it into a DIVERSIFIED PORTFOLIO—INDEX FUNDS, EXCHANGE TRADED FUNDS (ETFs), MASTER LIMITED PARTNERSHIPS (MLPs), REAL ESTATE INVESTMENT TRUSTS (REITs), BUSINESS DEVELOPMENT COMPANIES (BBCs), DIVIDEND PAYING STOCKS, BONDS, TREASURIES, PRECIOUS METALS or, whatever suits your “RISK” TOLERANCE level.
The problem with “PAYING YOURSELF FIRST” is that it’s too “SIMPLE”!!!
It’s not “FLASHY”…
There are no viral TikTok “INFLUENCERS” shouting about it in their “RENTED” Lamborghinis…
It doesn’t involve “MEME” stocks or some convoluted tax “LOOPHOLE” only known to billionaires.
It also requires DELAYED GRATIFICATION, which is “KRYPTONITE” to the average person.
We live in a world where people finance $1,500 smartphones over 36 months while struggling to put $100 into an Individual Retirement Account (IRA).
Most people crave “INSTANT REWARDS”—why bother INVESTING for a comfortable retirement when you could be enjoying bottomless mimosas at brunch???
But What About DEBT… Should You Pay That First???
Look, if you have high-interest debt (think: credit cards charging you 25% INTEREST like they are the MAFIA), then YES, attack that aggressively.
BUT, don’t use DEBT as an EXCUSE to avoid INVESTING altogether.
Even if you have DEBT, you should still be INVESTING something…
WHY???
Because if you don’t develop the habit now, you NEVER will.
When you finally do get out of DEBT, you will just find new ways to SPEND everything you earn/generate instead of actually building “WEALTH”.
The best part about PAYING YOURSELF FIRST, is that once you set it up, you will forget the money ever existed. You won’t miss it because you never got a chance to SPENDs it… AND one day, years from now, sooner rather than later, you will log into your investment account and see a six/seven figure balance staring back at you.
So go ahead—keep chasing “POORLY” researched stock tips from your barber, scrolling through get “RICH QUICK” schemes, and telling yourself you will start INVESTING “next year.”
OR…just automate your INVESTING today and begin to “THRIVE” while everyone else is still trying to figure out why they are always “BROKE” and struggle to merely “SURVIVE”, it’s your decision to make…
PEACE & BLESSINGS
Kenneth Reaves, Ph.D.
The ATWWI “BLACK SWAN” Survival Kit: Stay Ahead of the Curve
Wednesday, February 19th, 2025
The ATWWI “BLACK SWAN” Survival Kit: Stay Ahead of the Curve
WELCOME to the “NEW ORDER”… “CHAOS!!! and with “CHAOS” comes the mother of all market threats: a “BLACK SWAN”…
A “BLACK SWAN” is not just a cool name for a sinister ballet performance. It’s a MARKET-CRUSHING, ECONOMY-WRECKING event that no one saw coming, except in “HINDSIGHT”, when every armchair analyst suddenly becomes “NOSTRADAMUS”.
Below, I provide five (5) specific ways that YOU, ME, WE the ATWWI FAMILY can protect our hard-earned “WEALTH” from the prospect of a “BLACK SWAN”.
When disaster strikes…
Think 2007… Think COVID-19. The real kick in the teeth???
By definition, a “BLACK SWAN” is UNPREDICTABLE. If you KNEW it was coming, it would NOT be one.
The following chart depicts select “BLACK SWANS” over the past HALF CENTURY. The numbers aren’t pretty:
Two (2) men, more than any others, embody the current age of uncertainty: DONALD TRUMP and ELON MUSK. They are, to borrow from MICHAEL LEWIS, “CHAOS AGENTS”.
LOVE them or HATE them, they are human “MOLOTOV COCKTAILS” thrown into the mix of whatever “ESTABLISHMENT” still exists.
MUSK is a walking “MARKET MOVER”. His whims can turn Tesla (TSLA) stock into a “ROCKET” or a “CRATER” and his Twitter/X feed alone has more economic impact than a FEDERAL RESERVE meeting.
His ventures into ARTIFICIAL INTELLIGENCE (AI), space, and SOCIAL MEDIA are “FASCINATING” but “ERRATIC”, which means markets could be in for some “WILD” swings whenever he has a new idea (or, let’s be real, a “MOOD” swing).
A certain class of “DELUSIONAL” investors believe that “TRUMPIAN” POLITRICKS will keep the “ANIMAL SPIRITS” running high and the “BULL” market stampeding forward. These are the same people who thought REAL ESTATE never “CRASHES” and that this time “MEME” stocks would DEFY GRAVITY...
SORRY, but markets do not run on “VIBES” alone.
I’m old enough to remember hearing celebrity “ANALYSTS” on CNBC aggressively proclaiming in 2007 that the U.S. SUBPRIME HOUSING MARKET was just “FINE” and in 2008 that BEAR STEARNS was on “FIRM” ground…
YEAH, SURE, RIGHT!!!
The problem today???
The sheer level of “UNCERTAINTY!!!
Between an increasingly “UNSTABLE” GLOBAL ORDER, ECONOMIC FRAGILITY, RISING DEBT LEVELS and, a potential FED policy “MISFIRE”, the cracks in the foundation are forming… AND when the music stops, the stampede will be OUT, not in.
Five (5) Ways to “BULLETPROOF” Your Portfolio from a “BLACK SWAN”
Now that we have established that American “POLITRICKS” is a financial minefield, how can YOU, ME, WE the ATWWI FAMILY protect ourselves from the EXPLOSION???
Here are five (5) ways to do so:
1. DIVERSIFY Like Your Life Depends on It
If your portfolio looks like a zealots “SHRINE” to BIG TECH, it’s time to branch out, before reality slams the brakes on your gains. Putting all your eggs in one (1) STOCK, SECTOR or even COUNTRY is like playing financial “RUSSIAN ROULETTE”.
True DIVERSIFICATION means spreading your investments across SECTORS, ASSET CLASSES and GEOGRAPHIES.
Include EQUITIES, BONDS, COMMODITIES, REAL ESTATE INVESTMENT TRUSTS (REITs), and even PRIVATE EQUITY.
It’s about BALANCE, so when one ASSET stumbles, another can carry the weight.
Case in point: EUROPEAN stocks have been quietly OUTPACING their U.S. counterparts so far this year (2025). While Wall Street is wrestling with RATE “UNCERTAINTY” and TECH VOLATILITY, EUROPEAN markets are benefiting from STRONG EARNINGS and ATTRACTIVE VALUATIONS.
The message???
Don’t let HOME COUNTRY “BIAS” limit your gains.
A well DIVERSIFIED portfolio doesn’t just “SURVIVE” DOWNTURNS; it THRIVES in the long run. Play it SMART, HEDGE YOUR “BETS” and let COMPOUNDING do the “HEAVY LIFTING”.
2. Keep Your POWDER “DRY; Hold Ample CASH RESERVES
CASH is the ammunition you need to “SEIZE” OPPORTUNITIES when markets are in TURMOIL.
When a “BLACK SWAN” event strikes, LIQUIDITY is “KING”. The investors who hold CASH RESERVES aren’t “PANICKING”; they’re “PATIENTLY waiting… READY TO BUY HIGH QUALITY ASSETS AT STEEP DISCOUNTS from those who are OVERLEVERAGED and DESPERATE TO SELL.
The last thing you want is to be on the wrong side of that equation—forced to unload your STOCKS, REAL ESTATE or, other INVESTMENTS at “FIRE SALE” prices just to stay afloat, all while sipping a Starbucks latte that suddenly feels like a luxury you can’t afford.
3. Embrace HEDGING Strategies
OPTIONS, GOLD and, INVERSE EXCHANGE TRADED FUNDS (ETFs) exist for a reason. INTELLIGENT investors don’t just ride the “WAVES”—they prepare for “TSUNAMIS”!!!
GOLD has long been the ultimate “SAFE-HAVEN” asset, offering investors protection against ECONOMIC UNCERTAINTY, INFLATION and, GEOPOLITICAL TURMOIL. As market VOLATILITY intensifies and central banks navigate an increasingly complex MACROECONOMIC landscape, the price of the “MIDAS METAL” has been on a relentless UPWARD trajectory in recent months.
With persistent INFLATIONARY PRESSURES, RISING GLOBAL DEBT LEVELS and ONGOING GEOPOLITICAL “STRIFE” fueling demand, GOLD’s rally appears far from over.
HIStorical trends suggest that in times of FINANCIAL STRESS, GOLD not only HOLDS its VALUE but often SURGES to new heights, making NOW a compelling moment for YOU, ME, WE the ATWWI FAMILY to consider increasing our exposure.
4. Beware the LEVERAGE “TRAP”
If you are OVERLEVERAGED when the market “IMPLODES”, CONGRATULATIONS—you have just enrolled in a crash course on financial “DEVASTATION”, and the tuition is BRUTAL. When MARGIN CALLS start rolling in, they don’t knock “POLITELY”…
THEY KICK THE DOOR DOWN AND DEMAND PAYMENT!!!
FORCED LIQUIDATIONS, SPIRALING LOSSES and, EVAPORATING PORTFOLIOS become the “GRIM” reality. The house ALWAYS “WINS” because the market doesn’t care about your “BULLISH” conviction or “WELL-REASONED” thesis. It only cares about COLD, HARD “RISK” MANAGEMENT.
If you are playing with borrowed money when the tide goes out, you won’t just lose your position…
YOU WILL BE “LUCKY” IF YOU STUMBLE AWAY WITH ANYTHING AT ALL!!!
5. Turn Off the “NOISE”
Financial media thrives on “HYSTERIA”. The key is to stay informed without letting every headline dictate your investment strategy. If you find yourself making trades based on social media trends, it’s time for a “DIGITAL DETOX”.
American politics (aka: POLITRICKS) has become an unhinged “FREAK” show with no script and an unpredictable ending. Social media, and even the mainstream news, are awash with DISINFORMATION (aka: LIES).
Investors who think the good times will roll indefinitely are setting themselves up for DISASTER.
The “SMART” money???
It’s QUIETLY preparing for the “UNEXPECTED”. Because in a world where “NORMS” are shattered, the biggest “RISK” isn’t being too “CAUTIOUS”; it’s assuming the “CHAOS” won’t reach YOUR portfolio.
Get “P.A.I.D.” regardless of the “CHAOS”!!!
PEACE & BLESSINGS
Kenneth Reaves, Ph.D.
Why You Should “CLEARLY” Communicate Your Inheritance Plans to Your HEIRS
Friday, February 14th, 2025
Why You Should “CLEARLY” Communicate Your Inheritance Plans to Your HEIRS
Few topics have the potential to DIVIDE families as deeply as INHERITANCE. Even in the most loving families, misunderstandings about how ASSETS are DIVIDED can lead to RESENTMENT, BITTERNESS and, LONG STANDING “RIFTS”.
Two (2) recent accounts that I witnessed highlight this all-too-common problem: family members feeling slighted because their inheritance was less than that of others, leading them to ask their relatives for additional money. These situations underscore a “CRITICAL” TRUTH—OPEN and TRANSPARENT COMMUNICATION TO HEIRS about your intentions toward your HEIRS can help prevent CONFLICT and ensure your “LEGACY” is remembered fondly, not as a source of division.
INHERITANCE disputes often stem from unmet “EXPECTATIONS”. People—consciously or not—form ideas about what they are “ENTITLED” to receive. These “EXPECTATIONS” can be shaped by cultural norms, promises made in the past, or “ASSUMPTIONS” based on family dynamics.
When the final distribution of assets doesn’t align with those “EXPECTATIONS”, feelings of hurt, betrayal, and even entitlement can arise. For the person who created the WILL, the goal was likely to provide for loved ones and ensure fairness. But when INTENTIONS are NOT clearly communicated, the outcome can feel anything but “FAIR”.
EFFECTIVE COMMUNICATION about INHERITANCE PLANS is not just about avoiding disputes. It’s also about showing “RESPECT” to your HEIRS by giving them “CLARITY” and an opportunity to OVERSTAND/UNDERSTAND your decisions. Silence, on the other hand, leaves room for “ASSUMPTIONS” and “MISINTERPRETATIONS” that can lead to unnecessary conflict.
Here’s why discussing your INTENTIONS with your HEIRS is so important:
- Preventing “SURPRISES”: A “SURPRISE” in a WILL often feels like a BETRAYAL. For instance, if one sibling receives a larger share of the inheritance because they provided caregiving for a parent, the other siblings may feel blindsided. Explaining these decisions ahead of time helps MANAGE EXPECTATIONS and fosters OVERSTANDING/UNDERSTANDING.
- Ensuring OVERSTANDING/UNDERSTANDING of Your “VALUES”: Your inheritance plan reflects your “VALUES” and “PRIORITIES”. By sharing your REASONING, you help your HEIRS OVERSTAND/UNDERSTAND the “MOTIVATIONS” behind your decisions. For example, you may choose to leave a larger portion of your estate to a child with greater financial needs or donate part of your wealth to a charity that reflects your “PASSIONS”.
- Addressing “CONCERNS” in Advance: Discussing your plans gives your HEIRS the opportunity to express their FEELINGS or CONCERNS. While the final decision remains yours, these conversations can help you refine your approach and address potential sources of TENSION before they escalate.
Talking about inheritance can feel uncomfortable, but it’s a necessary step to ensure “HARMONY” in the future. Here are some practical steps to guide these conversations:
- Start EARLY: Don’t wait until a “HEALTH CRISIS” arises to start the discussion. The earlier you communicate your plans, the more time your family has to process and OVERSTAND/UNDERSTAND your decisions.
- Be TRANSPARENT: CLEARLY OUTLINE YOUR INTENTIONS, especially if your decisions may seem unequal. For instance, if you plan to leave more to one HEIR due to their caregiving efforts or financial struggles, explain why.
- Involve a NEUTRAL Party: Sometimes, involving a estate planner or mediator can help keep the conversation FOCUSED and NEUTRAL. These professionals can also answer TECHNICAL QUESTIONS and provide “CLARITY” on LEGAL MATTERS.
- Document EVERYTHING: After discussing your INTENTIONS, ensure your ESTATE PLAN is UPDATED to reflect those decisions. A legally sound WILL, TRUST or, ESTATE PLANNING TOOL ensures your wishes are honored.
- Consider Writing a LETTER or Recording a VIDEO: If you find verbal conversations too difficult, consider writing a LETTER or recording a VIDEO to accompany your WILL. (I record a VIDEO for my heirs bi-annually, updating them on what to expect). This allows you to explain your “REASONING” in your own words, providing “CONTEXT” that can help reduce misunderstandings.
While COMMUNICATION is VITAL, it’s equally important to approach the topic CAREFULLY. Here are a few “PITFALLS” to avoid:
- Playing FAVORITES: Even if your inheritance plan includes unequal distributions, avoid language that suggests “FAVORITISM”. Frame your decisions based on PRACTICAL or FINANCIAL CONSIDERATIONS, not PERSONAL PREFERENCES.
- AMBIGUITY: Be CLEAR and SPECIFIC about your INTENTIONS. AMBIGUITY in a WILL or CONVERSATION can lead to conflicting INTERPRETATIONS.
- PROCRASTINATION: Delaying these discussions only makes them harder. “UNCERTAINTY” grows over time, and waiting until a “CRISIS” hits adds EMOTIONAL STRAIN.
While much of the responsibility lies with the person creating the ESTATE PLAN, HEIRS also play a role in fostering OVERSTANDING/UNDERSTANDING and HARMONY. For HEIRS, it’s essential to approach these conversations with an “OPEN MIND” and a willingness to LISTEN…
Recognize that inheritance decisions are deeply PERSONAL and often influenced by factors you may not fully OVRSTAND/UNDERSTAND. Expressing GRATITUDE for what you receive, regardless of the amount, can go a long way in preserving family relationships.
Your “LEGACY” is about more than the ASSETS you leave behind; it’s about the VALUES, MEMORIES and, RELATIONSHIPS you NUTURE. Taking the time to communicate your inheritance plans OPENLY and HONESTLY is one of the most IMPACTFUL steps you can take to protect those relationships.
While these conversations can be challenging, the benefits far outweigh the discomfort. By fostering OVERSTANDING/UNDESTANDING and reducing “UNCERTAINTY”, you can ensure that your “LEGACY” brings your family TOGETHER rather than driving them APART. After all, you won’t be there to soothe hard feelings should your HEIRS feel like they were unfairly treated in your WILL.
PEACE & BLESSINGS,
Kenneth Reaves, Ph.D.
Do Not Burn The Furniture to Heat the House
Wednesday, February 12th, 2025
Do Not Burn The Furniture to Heat the House
When I started out as a stockbroker many, many, many years ago, my manager offered me this advice: “Your clients won’t remember all the times you made them money, but they will remember the one (1) time you lost money for the rest of their lives.”
Despite the profound changes to the global financial system that have taken place since then, that sentiment is as true today as it was then. That’s why I put as much effort into evaluating DOWNSIDE “RISK” as I do to calculating UPSIDE “POTENTIAL”. Focusing on one while ignoring the other is a recipe for FAILURE.
That’s also why I occasionally share questions posed by YOU my “BELOVED” ATWWI FAMILY members that encapsulate that philosophy…
A few days ago, one of YOU asked: “Do you have an opinion on JEPI? They pay great dividends, and I am considering purchasing the ETF.”
I feel it is an important enough topic to share with everyone in the ATWWI FAMILY. I suspect a lot of YOU are contemplating similar investments now and I want to be sure YOU OVERSTAND/UNDERSTAND the “RISKS”.
Five (5) years ago, the onset of the CORONAVIRUS PANDEMIC sent the stock market into a “TAILSPIN”. In just six (6) weeks, the S&P 500 Index FELL 40% before leveling off.
Fortunately, the fiscal and monetary policies enacted by CONGRESS and the FEDERAL RESERVE (FED) quickly stabilized the economy. Six (6) months later, the index was back above its PRE-PANDEMIC “HIGH”.
Despite that poor start, the S&P 500 Index is “UP” roughly 80% over the past five (5) years. Over the same span, the JPMorgan Equity Premium Income ETF (JEPI) has appreciated LESS than 20% as shown in the chart below:
All that GAIN as achieved in the immediate aftermath of the pandemic. After peaking near $63 in December 2021, JEPI reversed direction and has NEVER BEEN THAT HIGH SINCE.
It may surprise you to learn that JEPI’s top “HOLDINGS” include some of the best performing stocks over the past five (5) years. That list includes NVIDIA (NVDA), which is up nearly 2,000 percent over that time span.
In fact, JEPI’s investment strategy relies on owning stocks that are “PERCEIVED” as conferring ABOVE AVERAGE GROWTH potential. For that reason, the fund can “SELL” COVERED CALL OPTIONS against those positions for relatively HIGH PREMIUMS.
Those PREMIUMS are passed on to the fund’s shareholder in the form of DIVIDENDS. In short, JEPI is “SELLING” most of its holdings’ LONG TERM CAPITAL APPRECIATION “POTENTIAL” in exchange for IMMEDIATE INCOME.
At the start of this week while JEPI was trading around $59, its forward annual dividend yield equated to 7.3%. That is far higher than the 4.3% yield available on the 5-year Treasury Note the same day.
HOWEVER, there is a very BIG difference between OWNING JEPI versus OWNING a BOND. If you own the Treasury Note, you know in five (5) years you will get all your PRINCIPAL back.
Not so with JEPI. In fact, getting all your money back in five (5) years is about the best you can do. That’s because the CALL OPTIONS “SOLD” TO GENERATE DIVIDEND INCOME are essentially transferring most of the “UPSIDE” POTENTIAL of the UNDERLYING STOCKS to someone else.
That type of tradeoff is sometimes referred to as “burning the furniture to heat the house.” The house remains standing, but there’s nowhere to sit. In this case, “SELLING” THE CAPITAL APPRECIATION POTENTIAL to someone else is like putting a torch to your living room furniture.
Sometimes, it makes sense to burn the furniture to avoid freezing to death. But other than that, you would be better off finding something else to chuck in the fireplace to stay warm.
When the stock market is RISING, the hidden “RISK” to JEPI’s strategy is difficult for income investors to see. Since they prioritize CASH FLOW over APPRECIATION, they are fine with “STATIC” GROWTH as long as those BIG MONTHLY DIVIDEND CHECKS keep rolling in.
HOWEVER, a STEEP and SUDDEN DOWNTURN in the stock market can reveal the true “COST” of JEPI’s strategy. The COVERED CALL OPTIONS “SOLD” AFTER its HOLDINGS have taken a BIG hit lock in those LOSSES for a long time.
That “RISK” can be avoided by creating your own COVERED CALL WRITING PORTFOLIO. You can mimic JEPI’s strategy, but you can also elect not to WRITE COVERED COVERED CALLS after a major stock market “CORRECTION”.
Instead, you can “SELL” PUT OPTIONS AGAINST those same stocks to generate income…
Once the stock market recovers, you can resume WRITING COVERED CALL OPTIONS. That way, you don’t have to burn any furniture at all!!!
PEACE & BLESSINGS
Kenneth Reaves, Ph.D.