Grow Your Portfolio the Intelligent Way

How a Pre-Socratic Philosopher Got Rich Buying Options

When you think of the world’s greatest investors, you probably don’t think all the way back 2,500 years ago to Ancient Greece.

But you should — and the name that you should think about is Thales of Miletus.

Thales was a brilliant man, and one of the first real Western philosophers and scientists (although “scientist” wasn’t a term used at the time). He is best known for his thesis that “all things are water,” which we know now to be erroneous, but was a groundbreaking thought given the scientific infancy of 6th-century B.C. Moreover, Thales was among the first thinkers to make hypotheses that were testable and falsifiable, bedrock principles of scientific inquiry today, but absent among his fellow thinkers at the time.

According to the Internet Encyclopedia of Philosophy, none other than the great Aristotle identified Thales as the first person to investigate basic principles, the first to question the origins of substances and matter, and therefore the founder of the school of natural philosophy.

Among his accomplishments was the successful prediction of an eclipse of the sun that occurred on May 28, 585 B.C.E. Although it’s not known exactly how Thales was able to predict this event, the most likely explanation is his study of the solar and lunar cycles.

Yet what can we learn, as investors, from Thales?

To answer that, we have to realize that Thales was a philosopher, and a man not particularly concerned with the accumulation of monetary wealth. And because of his lack of wealth, he often was criticized in Athenian society by the elites of the day. So just to prove the elites wrong, and to demonstrate the power of reason and natural philosophy, Thales did something that should put him in the trading history books.

Based on his study, assessment and knowledge of the Greek climate, Thales reasoned that there would be a particularly good harvest one year for olives. But rather than sit on this information, Thales took the next step and put deposits during the preceding winter on all the olive presses in Miletus.

Thales had basically cornered the market on olive presses for a small investment. Stated in modern trading terms, Thales bought call options on olive presses, and paid a small amount for the right to control those presses (i.e. he paid a small premium for the option).

When his prediction of a bountiful olive harvest did indeed come to pass, Thales’ bet paid off handsomely. The boom harvest created heavy demand for the olive presses, and because Thales held a virtual monopoly on the presses he was able to rent them out at a huge profit.

In my opinion, this was perhaps one of the most important events — not only in market history, but in the whole of human history.
The reason why is because Thales demonstrated that “science” and the accumulation of wealth really are connected. And, as the old saying goes, knowledge truly is power. He also demonstrated that if you know what your competition doesn’t, then you will have a tremendous advantage of them.

It is for this life lesson, as well as the accompanying investing lesson of Thales and the olive presses, that we should be thankful for the man from Miletus.

If you want to find out how to profit from life lessons such as those taught to us by Thales, then I invite you to check out my Successful Investing, Intelligence Report and Fast Money Alert advisory services.


ETF Talk: This Diversified Fund Focuses on Dividends

The Fidelity Dividend ETF for Rising Rates (FDRR) tracks an index that reflects the performance of stocks of large and mid-capitalization dividend-paying companies that are expected to grow their payouts and have a positive correlation of returns to increasing 10-year U.S. Treasury yields.

Although an increase in interest rates usually hurts dividend stocks, FDRR’s positive correlation to treasury yields and sector neutrality help protect investors’ returns. In particular, some analysts indicate that FDRR’s exposure to the financial sector reduces the risk associated with rate hikes.

Furthermore, U.S. dividend growth remains impressive even as interest rates are rising. Global consulting market IHS Markit is forecasting that quarterly dividends declared by firms in the S&P 500 will top $115 billion in the current calendar quarter to notch a 2.3% jump from the $112.5 billion declared in Q1.

The fund has a distribution yield of 3.03% and an expense ratio of just 0.29%.

FDRR selects from 1,000 of the largest U.S. stocks and the largest 1,000 developed-market international stocks by capitalization. These stocks then are scored according to their dividend yield, dividend payout ratio, dividend growth, etc. FDRR then invests at least 80% of its $298.6 million total assets in more than 100 qualified holdings. The fund invests primarily in U.S. stocks, with a 10% maximum on international stocks. As a means of diversification, FDRR also does not invest more than 35% in any individual sector.

Over the last year, FDRR has returned 10.51%. Year to date, FDRR has returned 0.74%.

FDRR’s top five holdings are Apple (AAPL), 5.04%; Microsoft (MSFT), 4.13%; JPMorgan Chase (JPM), 2.36%; Johnson & Johnson (JNJ), 2.36%; and Intel (INTC), 2.31%.

FDRR is 25% invested in information technology. 15% in financials, 13% in health care, 12% in consumer discretionary and 10% in industrials. In addition, FDRR is largely skewered towards large- and mid-cap companies, as they make up approximately 95% of the fund’s portfolio.

For investors seeking an investment in a diversified fund built for a rising-rate interest environment, the Fidelity Dividend ETF for Rising Rates (FDRR) could be a great choice.


Celebrating 75 Years of ‘The Fountainhead’

Can reading a novel make a real difference in one’s life?

I know that for me, the answer is an unequivocal “yes.” And, I know I’m not alone, because many people have said that reading that same novel profoundly altered their perspective, deeply challenged their thinking and also inspired them to become who they really wanted to be.

The novel I’m referring to here is “The Fountainhead” by Ayn Rand.

If you don’t know about “The Fountainhead,” it’s the story of Howard Roark, an innovative architect, who, as the author once described him, “struggles for the integrity of his creative work against every form of social opposition.” That struggle for the integrity of his work is really the struggle of the individual vs. the collective, not just in society or politics, but in a single individual’s soul.

As the events of the novel play out, and in what is a brilliant integration of both plot and theme (the two most essential components of a novel), protagonist Roark faces constant challenges from those who are threatened by his genius and who are afraid of his uncompromising independence.

That independence runs so deep for Roark that when a building he designed on the one condition that no changes be made to it is, in fact, changed, he takes matters into his own hands and physically destroys the creation of his own mind.

For those who haven’t read the novel, I’ll stop there, as I don’t want to spoil the profound pleasure that awaits you. Yet the reason I bring the novel up is because this month, on Monday, May 7, fans like me of the “The Fountainhead” celebrated the 75th anniversary of its publication.

While some people I know took time to post accolades to social media sites, others I know actually held “The Fountainhead” parties. I chose to celebrate this life-changing work by discussing its significance with fellow fans, and by talking about the role it has played in so many lives.

That discussion also happened to be recorded, and it’s the latest episode of The Atlasphere podcast.

The Atlasphere is a website designed to connect admirers of “The Fountainhead” and Ayn Rand’s other game-changing novel, “Atlas Shrugged” (hence the site’s name).

The Atlasphere podcast is hosted by my friend Heather Wagenhals, who also happens to host the highly recommended and extremely popular Unlock Your Wealth radio show. Like me, Heather has a love of money, prosperity and helping readers/listeners achieve economic freedom. Also like me, Heather has been profoundly influenced by the works of Ayn Rand.

On this podcast, we were joined by Ed Hudgins, research director of The Heartland Institute, a great organization dedicated to discovering, developing and promoting free-market solutions to social and economic problems. Before Ed was with The Heartland Institute, he was a senior scholar at The Atlas Society, an organization that promotes the philosophy of reason, freedom and individualism espoused in the works of Ayn Rand.

I really enjoyed my conversation with Heather and Ed, and I think readers who are interested in literature, the works of Ayn Rand, the primacy of reason, the morality of capitalism and the eminent virtue of independence portrayed so exquisitely in the character of Howard Roark will find this discussion both interesting and uplifting.

So, if you want to celebrate a great intellectual achievement that’s been influencing people for some 75 years, I invite you to do so with me.


This is Most Difficult Thing  

“The most difficult thing in life is to know yourself.”


Humans are complex. Perhaps the most complex things in the universe. Yet the more we learn about ourselves, the better we can act in advancement of our goals. And the more we can achieve those goals, the more likely it is that we’ll lead fulfilling, happy lives.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.

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