Australia’s path to zero interest rates…

  • Digital money: Your views…
  • The ‘Overnight Dividend’ Secret (Part III)

The Australian reports:

The Reserve Bank has given its most unequivocal hint yet that the cash rate will move closer towards the 1 per cent mark, signalling another cut in the next six months.

In its closely-watched statement of monetary policy, the central bank said its current forecast anticipated its decisions would largely mirror the current expectations of the market, which have been lowered since its prior statement in May.

“The cash rate is assumed to move broadly in line with market pricing as at the time of writing,” the update confirmed.

At this stage futures pricing points to a likely cut in either November or February, which would push the cash rate to a fresh record low of 1.25 per cent.

As we take a glance at the futures market, there is a 35.9% chance of a rate cut in November. That climbs to 40.5% for a February cut to 1.25%.

Interestingly, as far out as July next year, the market has the odds of a cut to 1% as a 16.9% chance.

It makes you think: Is the cycle of interest rate cuts really about trying to stimulate the economy, or is it about getting rates to zero or below, in order to justify the abolition of cash, and the abolition of interest rates?

Such cynicism.

But you wouldn’t bet against it, would you?

On to the markets…

Markets

Overnight, the Dow Jones Industrial Average fell 2.95 points, or 0.02%.

The S&P 500 index gained 0.46 points, or 0.02%.

In Europe, the Euro Stoxx 50 index added 21.28 points, for a 0.73% gain. Meanwhile, the FTSE 100 closed up by 1.59%, and Germany’s DAX index gained 0.57%.

In Asian markets, Japan’s Nikkei 225 index is up 60.27 points, or 0.37%. China’s CSI 300 index is up 0.46%.

In Australia, the S&P/ASX 200 index is up 24.69 points, or 0.45%.

On the commodities market, West Texas Intermediate crude oil is trading for US$41.80 per barrel. Brent crude is US$44.16 per barrel.

Gold is US$1,360 (AU$1,780) per troy ounce. Silver is US$20.37 (AU$26.66) per troy ounce.

The Aussie dollar is worth 76.41 US cents.

Digital money: Your views…

We’ll get straight into your views on digital money today, as we have received plenty of letters.

So much so that we’ll continue to print them each day next week, until we’ve exhausted them all.

As always, when asked, our readers always provide thoughtful insight. It reminds us that we should ask for more reader comments more often.

Remember, if you have anything to say on digital money or any other topic, drop a line to letters@portphillipinsider.com.au and type the subject matter in the subject line.

Now on to the reader mail in response to our comments on central bank-controlled digital money. The first is from subscriber, Rod:

In response to your comments today about digital money, it is not as far fetched as it may sound to some.

I have noted that the vast majority of ideas we take for granted today were originally muted in science fiction novels. People laughed at my making this observation many years ago, but let’s take a quick look at some of our current toys.

  • Wrist watches with built-in phones and cameras = A reality.
  • Tablet computers = A reality.
  • Man on the moon = A reality.
  • 3D imaging = A reality.
  • Laser technology = A reality.
  • Sentient computers = Not that far away.
  • Corporate control over government and taking over government services etc = To some it is here already.

The list goes on and on. One of the science fiction predictions was that everyone would have a personal digital account that was centrally controlled and they would accrue and spend credits either via a personal indicator, chip or thumbprint, or through facial recognition. There would be no other form of payment and if a citizen ran out of credits, they would be locked out of their accommodation. Personally owned living quarters would be only for the extremely wealthy, with the rest living in accommodation that was rented and centrally controlled. The long term goal of the major corporations is to gain control over the rest of the population so that they can control all spending and activities in order to maximise their returns. Consider that a lot of the central banks are privately controlled and you have the perfect base to set the ball rolling.

This link takes you to an article that explains plenty, http://www.globalresearch.ca/world-bank-whistleblower-reveals-how-the-global-elite-rule-the-world/5353130

The way the so-called upper class want to direct the lives and activities of the rest of the population, individual privacy will be, in my opinion, the first casualty. So in answer to your question, I think digital money is inevitable. Reality, more often than not, follows the path proposed by science fiction and I don’t see it changing habits any time soon.

Subscriber, Andrew, offers this money vision of the future:

Most of us have experienced digital money via frequent flyer points but this goes one step further by putting an expire date on the points to encourage spending and not hoarding as to cause financial imbalance to the issuer if a panic run should occur.

Perhaps this may happen to issued currency with expire dates on serial numbers prior to digital money. Banks can swap your current notes for new issued notes and publish expire dates via media outlets. You can swap your expire notes and redeem credits for new notes albeit at a cost for not spending. So spend within an allocated time and get 100% value for your notes or hoard beyond this time and pay a fee! Perhaps when spending is urgently needed to prime an economy you may receive a bonus credit paid for via hoarding fees recovered. Imagine the data this could collate about us individually and collectively. This would also put a dampener on vice, counterfeiting and dead end money trails.

This, from subscriber Gordon K:

I think your spot on with your whole take on what’s really going on here, dose the human race EVER learn by other people’s/Country’s mistakes of there past actions and reactions?

No. We just follow the leader and hope it will work some how differently for us?

Plenty of Education it seems but common sense? Seems that is hard to find now days anywhere. I’d love to see Hollywood make a so called (futuristic) movie using your article as the script plot and finish of this world as we know it, Some people MAY actually get it then.

Thank you and Greg for your terrific work insight and great! heads up on the real deal.

This is what James Grant calls the ‘PhD Standard’. Economists occupying positions in governments and central banks have a whole lot of education. They have a lot of spreadsheets and financial models, too.

Unfortunately, they don’t have much in the way of common sense. It’s because they think economics is an empirical science. In the classification of sciences, economists want to stand alongside physicists, chemists, and mathematicians.

In reality, they should stand alongside the social sciences, such as sociology and psychology — the sciences they see as beneath them.

As we’ve said before, economics is the study of human behaviour. It’s why one of the world’s best economics books is Ludwig von Mises’ Human Action.

Subscriber, Vincent, asks:

Hello and nice insight but, have you ever been to Japan?  “Cash is king” your thoughts!

Once. And that involved staying overnight in an airport hotel, and the rather embarrassing situation of needing to borrow money from a stranger, as I didn’t have any yen on me to pay the ‘exit tax’.

I also hadn’t realised that, at the time (maybe this has changed), my bank card and VISA credit card wouldn’t work there.

That was in 1997. So, yes, I guess cash was king in Japan. Perhaps it still is.

And this from subscriber, Tony:

Just in response to all your reviews, pretty much right on the money Kris (excuse the pun) I enjoy all that you and the crew at Port Phillip Publishing do for ALL us avid readers. Thanks and keep up the great work.

Tony’s email didn’t really add anything to the digital money debate, but it’s nice for the ego!

And in the final letter for today (more next week), subscriber, JN, writes:

You asked for our comments on digital money. You have correctly identified currency wars.  On active service currency was roughly in this order … fresh bread … hard tack rations … chocolate … cigarettes … whisky … sex … gold … and then diamonds. Nobody trusted printed money let alone digital money!

“These are the good old days” as Carly Simon sang some years ago. Let us enjoy each and every moment!

Carly Simon also wrote, ‘You’re so vain’. An apt description of our central bankers, who have come to believe in, and love, the idea that the world revolves around them.

That’s all for today. I’ll be back next week, writing to you from the Emerald Isle. Now over to the last in the three-part interview series with ‘Overnight Dividends’ expert, Matt Hibbard…

Cheers,
Kris

……………………………………………………………………………………………………..

The ‘Overnight Dividend’ Secret (Part III)
An Interview with ‘Overnight Dividend’ Expert, Matt Hibbard

[NOTE: We’ve resisted the urge to overly edit this interview. What you’re about to read is Matt’s unadulterated response to the questions we put to him.]

What do you mean by ‘Overnight Dividend’ options?

What we’re essentially doing is writing ‘put options’ on big, blue chip shares that we’d be prepared to own if they gets ‘put to us’.

For doing so, we will generate an income. Every time we go into the market and do this, we’ll get paid. I’ll send you an instruction on exactly what to do.

When we write a put option, we’re generating a cash sum income.

Now, if the option never gets exercised, it stays in your account. And we can do it over and over again for cash sums of $200…$300…$400…over and over again.

But we’re not just doing it willy-nilly on any share.

We’re only doing it on shares we want to own.

This is actually what the great investors do. Take Warren Buffet, for example. He didn’t just buy Coca-Cola. First he sold puts options on the company and collected cash sums premiums. When he didn’t get exercised, he’d keep the cash and do it again. 

Now in Buffet’s case we’re talking cash sums of millions of dollars. For us we’re doing it to generate hundreds of dollars, but the principle is the same: we’re doing it on shares we’d be more than happy to own.

I’m talking about shares like ANZ, CBA, and Westpac…big companies that will pay you a fully franked dividend twice a year.

And in fact, the dividends you receive on shares we DO eventually own make up the second income stream of this strategy.

But perhaps the most exciting part about the strategy is the third part…

Again, with part one we go into the market and we write a put option. For doing so we receive anywhere between $200 and $400 in our account.

But wouldn’t it be great if we could actually do this multiple times off this one trade?

If these shares end up getting put to us, we can go into the market again and then sell call options against the shares we own.

And you could do this three or four times a year as well. I’ll show you exactly how to do it.

The point is, with one share, you could generate three different sources of income.

And these opportunities are not one-offs. You can do this week in, week out.

Explain how that works…

Let me run through an example so you get an idea.

Let’s say you wanted to buy shares in ANZ. To do that you can go online right now and put an order in to buy ANZ shares with your online brokerage account. That’s what everyone is used to doing.

Then you’ll sit there waiting for a dividend twice a year.

Our ‘Overnight Dividend’ strategy is much more flexible.

First of all, we’re not tying money up in a trade to start off with. Instead of buying ANZ straight away, we write a put option on ANZ.

Here’s what that means…

Say ANZ is trading at $25. We can say we’re prepared to buy ANZ if it comes down to $23 dollars. So we write a put option at $23.

The best thing about this is you actually get paid to do this…

If ANZ drops down to $23 here’s what happens:

a) We’ve already banked this income from writing the option, and

b) We pick up ANZ at a cheaper price than we would if we went to the market today.

That’s why the big investors, the most pragmatic investing souls out there, do this…like Buffett with Coca-Cola. He wants to buy Coca-Cola at a lower price. If it doesn’t hit that price he, doesn’t buy. And he collects the premium anyway. It’s all money in the bank.

He’s not panicking into a trade. Buffet has calculated how he goes about his business. That’s what you have to do in this market. When the market is so volatile, you need a calculated strategy that works in your favour. You can’t just pack all your money in the market on the swing of a stock, and hope it doesn’t go down.

Nor can you just wait for your dividends every six months to come along. What we’re doing with this ‘Overnight Dividends’ strategy is writing an option on something we actually want to own.

I’ll never recommend an option on something that wouldn’t make a good investment in its own right.

The second benefit to this is that you’ll be getting in on a stock you want to own at a better price — lower than what you’d normally have to pay. We’re not just sitting there and saying, ‘Oh it’s trading at $25 today. I’m going to pay $25.’

Our approach is far more favourable.

Before you even do the trade, you know exactly what premium you’re going to get paid, because it’s listed and agreed in advance. So you’re controlling this. You are investing on your own terms. You’re saying, ‘I’m going to buy ANZ, but only if it gets to this price.’

You can see how the big professional guys use it as a way to get into these stocks with a much cheaper price. But not only that, if I don’t ‘get put’ these stocks, they’ll actually just keep generating income month in month out.

So you’re not waking up wondering what the Dow Jones or ASX has done. You’re just thinking, ‘Let’s go into the market right now and scalp more money!’

How often can you do this?

You can pretty well do this day in day out. It comes down to how much you want to do, how active you want to be.

At the start you might just want to get a feel for it and do it once every couple of months.

Whatever you want to do, I’ll keep sending you regular trades to do.

Most people use the strategy every week or at least every month.

What I like about the strategy is the flexibility of it. You’re not dictated to by the market when you do this trade. Like I said, you go in when you want, and pretty much on your own terms.

You pick when you’re going to generate this income. The thing about this service —which hopefully you’ll find appealing — is you don’t have to follow every recommendation I send you. In fact, you might not even do any of them for the first two or three months.

You might just want to follow them, have regular updates on how the trade is going. You might just want to see how it operates. We call it ‘paper trading’ because you’re risking nothing, you’re just seeing if it’s a good fit for you. Just follow my commentary, look at the trade, look at the share price, and see how it goes.

Part of the service is — as I see it — an educational aspect. I’m absolutely passionate about options. I love options. They’re the most versatile financial tool there is.

In Australia, a load of trading companies came out 10 years ago and did all these big sales, flashy promotions about options…and all just went nowhere. They were more interested in selling/trading software and trading programs. That’s why a lot of regular Aussies simply don’t know about something like ‘Overnight Dividends’.

But in America, private investors have been using this sort of approach for 40 years. Day in day out, they go in there, write options, generate cash. It’s not reinventing the wheel. We’re just doing something that’s been tried and tested in America — the home of options trading — for four decades.

How can you equate the idea of accumulating wealth with ‘high risk’ options?

A lot of people see a few headlines or they read something in the paper about options being risky and they run a mile. But I guarantee, if you ask the person who wrote that article to write an essay about options, they couldn’t even write a paragraph about them. Probably not even a sentence!

This is one of those myths that gets perpetuated. If they’re so risky, why would Buffett use them? Why would so many ‘insiders’ use them?

Buffett is the most conservative investor there is. Again, we’re not using leverage. We’re writing options on shares that we actually want to own. As I keep saying, these are the ASX’s 20 best companies. Of course there is still risk involved. After all this is the stock market. But my point is, they’re not some small cap mining stock that might do something in 10 years’ time or go broke in two.

These are companies that are making huge revenues right now.

Take CBA for example, it’s generating eight or nine billion dollars annually — profit. You’re not getting a stock which is a lemon. This is something that’s going to pay you a dividend. And you’re getting it a better price than if you just went and picked it up in the share market. It’s actually lowering your entry price.

It’s essentially just buying shares, but also the potential to start generating a double, and potentially triple, income stream off of them. And this is what my ‘Overnight Dividends’ strategy is all about in my advisory service, Options Trader.

What can I expect from Options Trader?

With this service, I’m going to give you regular alerts on trades (I call these my ‘Fast Cash’ alerts) and show you exactly what to do. You won’t be left on your own. You’ll never be lost because I give this service full support.

But one thing I’m really passionate about is you learning to do it yourself as well. What I’m going to do is take you step-by-step through the process.

Not just about how the strategy works…but also the specifics on entering a trade and opening an options account with a broker.

I’ll show you how to place your trade…what to look out for…exactly what to do and when.

As part of the package — if you take up a trial — I’ll go through the brokers you can use, how much it’s going to cost you, exactly how to set up an account — everything you need to start ‘scalping’ your own overnight dividends.

There’s nothing daunting about it. Because once you look at the order screen, it is no different to buying shares or buying or selling shares like you were on CommSec, NABtrade — or whatever platform you currently use.  

If you can do a normal share trade online, then you can do an options trade online, no problem. But if you’re not comfortable doing that, then I recommend using an offline service. All these brokers have a service where you can ring up. All you have to do is read exactly what I’ve told you in your trade alert, and they’ll place a trade for you.

You might need to do this two or three times until you get comfortable with it. But you’ll find that it pretty quickly becomes second nature to you.

How often will I get a ‘Fast Cash’ alert?

When you get a ‘Fast Cash’ alert in your inbox, it’s going to give you specific instructions on exactly what to do. It will appear just like a Commonwealth Bank share code or CBA. I’ll give you the exact code of the share option we’re trading and the instruction.

I’ll tell you which stock we’re writing the put option on, and at which price.

I’ll also give you a minimum premium that you should expect to receive.

When I say a ‘minimum’, that means I’ll tell you how many cents or how many dollars to put your order in for. If it doesn’t trade at that level, then you don’t do the trade. We’re not chasing stuff here. We’re just generating income on our own terms so we remain in control.

If we miss this trade, the next one will come along. Part of making this work for you is letting go of any trades that we miss and just moving on to the next one.

Every day I scout the market looking for these trades. It’s my passion. It’s not something I only do at the end of the week or end of the month. I’m always in the market looking out for these trades. You might take one in three. You might do all of them. You might do none of them until you get more familiar with options trading. It’s entirely up to you. You are in the driving seat…I’m just giving you the car and a full tank of petrol!

You will get your Fast Cash alert at the close of the business day, by email. That allows everyone to get equal access to the trade at the same time.

So if you get the alert at close of business on Monday, you’d place the trade on Tuesday morning before the market opens. Simple.

I’ll send you these Fast Cash alerts whenever I think there’s a good opportunity for a trade.

Premiums will vary throughout the year. For example, when volatility is higher you’ll get more money for selling options. I’ll give you at least two or three trades every month as a minimum. But there might be times when you might get three or four in one week.

The thing to always keep in mind is this: the goal is for you to generate income from trades you’re happy with. We’re not trying to go and chase money on trades that are low probability or higher risk.

Will I be able to build up my income the more comfortable I get with the strategy?

One of the many things I love so much about options is their flexibility. If you just want to write one contract, one contract is for a hundred shares. That would still generate you some income. But you might do that for a little while and then say to yourself, ‘That’s great, but how do I generate a little bit more? How do I turn $200, $300, $400 into $600, $700 or $800?’

You don’t have to do anything different. All you do is trade more contracts.

Going from trading two contracts to three contracts can generate you an extra 33% return, an extra one third return. Think about that. Think about the difference that kind of level-up can make.

The thing I want to emphasise here is that the strategy itself really works. There’s no two ways about that. It’s one of the most effective wealth builders available to you.

But you have to be comfortable with it. So start off trading small amounts and doing small trades. Then you can build it up at your own level. I won’t be saying you have to do five contracts or 10 contracts or two contracts. It’s up to you to how many contracts you want to trade. But I will encourage you to start off trading small amount of contracts where you could at least earn $200, $300 or $400.

What kind of investor does this strategy suit?

This strategy is something that can suit anyone. I mean that. Because you can trade at whatever level you are comfortable with. I might sound like a broken record, but as long as you stay disciplined, you are always in control here.

Let’s say you’ve got a portfolio which you have built up over time…and it might be one you’ve done with the aim of capital growth. We can use this strategy to spruce up the income side of things, no problem. It works great that way.

Or maybe you haven’t got a huge amount of capital to trade with. You haven’t got thousands or tens of thousands to invest in the stock market, waiting for your dividends twice a year.

Instead you can use that cash in this particular strategy to generate cash income for you now, not next month or next year. This is money that goes in your account the day after you do the trade. Most people do it for the longer term, but it works for short term income hunters too.

If I put a trade on right now, that money will be in my account tomorrow morning. This is something that is real. It’s tangible. And anyone can do this. In my first interview with you, I spoke about my trading experiences. Don’t be put off by jargon. Jargon is just jargon. These are just simple terms you’ll get to know. Pretty soon you’ll sound like a trading nerd — like me!

Don’t be put off by thinking maybe you don’t know enough about it. That’s a good position to be in because I’ll teach you what you need to know. It would be much worse for you to come into this as a bit of a know-it-all without really understanding it fully. A little bit of knowledge can be a bad thing, as they say.

Like I said, anyone can do this. You just have to take your time to get settled. Read everything I send you. Just keep following what I do. Send me an email if you need some clarification. I’ll respond as best as I can, and give you as much information as I can.

But try it out. See if it’s for you. You might love it. Or you might find out it’s really not for you after all. But considering that you could be earning $1,000 extra a month from it…you’ll kick yourself if you don’t at least give it a go.

Why aren’t more people doing this?

That’s a good question. If this could make so much money, why isn’t the whole of Australia doing it instead of playing the lottery?

Well, the reality is that there’s probably hundreds if not thousands of people who are doing this already — all over the world. You just haven’t come across it yourself. You couldn’t even have a guess of how many people or how many funds in America do this every night. They’re generating income as a matter of routine.

Options trading in Australia is growing. But very few people are told how to do it properly. I’d like to put an end to any mystery about it and just show regular people how to get it working for them.

What’s the single biggest reason people should follow this strategy?

The single biggest reason someone should follow this strategy is purely its ability to generate you an income. That’s it. If that’s something you want, then you should do it too. If you didn’t need income, you’re probably not even going to be looking at the markets. You certainly wouldn’t have read this far!

This is something you can actually put into practice. It’s not a stock that might go up three thousand percent sometime between now and the end of the world. It’s something that goes into your account the day after you do it.

It’s something you can do week in week out. As I was saying previously, just start off trading the smallest amount you can. Just take a look at it. Get a feel for it. Six months from now, you might just be absolutely staggered by where you’ve taken this, because it’s a strategy which you can apply to multiple stocks.

There is a steady progression you can follow. You just go from trading one contract to maybe two contracts. Maybe trade that for three or six months, get a feel for it. Maybe you then go from two or three contracts to four or five contracts. You start off really small. As a futures trader, I traded five contracts at a time. It’s almost an embarrassing size; most people would trade 50 contracts. But you would never do that from the start. You’ve just got to build it up. Be sensible. I’ll show you how to do that.

In conclusion, how would you sum this strategy up?

I’ve been trading options for years. I absolutely love them. But I don’t know where in Australia you can actually get a trading service that will tell you how to get started, how to place a trade…and show you a strategy that the professionals use. That’s why I started Options Trader — to show people how to do this properly and profitably. And it works!

That’s why I absolutely love this trading strategy…

a) It’s a cash generating machine.

b) It’s something you can take on and do yourself.

You can use it in the market yourself and generate income for as long as you like.

Best of all, it’s a three stage process, with three lots of income:

First you write put options to generate income.

Then, if you get put to these shares, you can collect dividends along the way.

The third part, perhaps the most exciting, is you could use these shares to generate multiple forms of income going forward, three or four times a year.

You can write options over these shares that you own to generate income. That’s got to be better than just sitting back waiting for two dividends a year.

WHAT HAPPENS NOW

Hi, Kris Sayce here.

I hope you’ve enjoyed this insight into Matt’s extraordinary method for maximising the income you could potentially receive from the biggest stocks on the ASX.

As far as I know, you won’t find this cash generating options strategy being explored by any other publisher of independent financial research.

Big banks and brokerages as well as super wealthy individuals and savvy investors have used it for decades to generate large streams of income. They love it because it produces large amounts of automatic cash.

But the truth is you don’t need to be a connected or a professional trader to use this strategy to build multiple streams of investment income.

Options are a highly misunderstood and often misused trading vehicle.

But the truth is, when used properly, they have the ability to generate multiple streams of income and could actually lessen your risk than if you just put all your capital into one stock.

In fact, I’ve started using Matt’s strategy in my own private portfolio, and I’m delighted with the results.

I think you will be too.

So what happens now?

Tomorrow I will be releasing a very special invitation to experience Matt’s strategy for yourself.

As you will see I have decided to triple the length of the money-back trial period to SIX MONTHS so you can see what this is all about and if it’s right for you.

What’s more, for a very limited time, I’m launching a massive cut-price offer.

All the details will be with you tomorrow at around 2pm.

Finally, we’ll be able to show you Matt’s ‘cash calendar’ and reveal how to scalp regular cash from some of the biggest stocks in Australia.

Stay tuned.