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BEN FRANKLIN AND COMPOUNDING
Wade B. Cook
The best investment in the world is in smiles
Me' thinks it was many eons
ago when Ben Franklin's wise words
on the subject of compounding were
put forth for our thinking population.
So, about 28 people are affected. Just
kidding. Many people who understand
the true nature of wealth creation have
put the typical compounding
strategies into their proper place.
There has to be more, so it goes.
Ben was supposed to have said
something like you can put your
money to compounding and leave it to
BEN FRANKLIN AND COMPOUNDING
build up value and after 300 years or
so, you'd have a bit to live on.
Me' thinks also that interest
rates during his time were slightly
higher than they are CE (Current
Era—I've always wanted to use that
expression since BC and AD are out
of style, as set forth by the cultural
thought police. Heaven forbid we use
the LORD anymore).
So there has to be a better way.
I will suggest it is so. A better way
exists. It is sort of an inside out way
to look at wealth. It starts with
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challenging the old form of
compounding. That is a banks way.
But nobody challenges that banks,
especially if left to far less intrusive
government regulations, serve a
purpose. They lend. They are not
investors. They are not normal risktakers, and therefore offer a payment
for using other people's money. That
rate has to be small, and when you
add insurance and guarantees, along
with complying with odious
regulations, you'll wonder how they
can pay any interest at all. So, 1/2 of
1% seems good to some people.
I hope not you.
I have been called America's
most enthusiastic cash flow
proponent. The reason for this is quite
simple, we all need cash flow. There
are three reasons for investing or
using our time and money in a
business endeavor. They are Cash
Flow or Income; Tax Write-Offs; and
Growth. Of these three the paramount
need is more income. If one generates
more income, especially for an
outside independent source, he or she
can buy all of the boring tax shelters
and growth investments on the
market.
BEN FRANKLIN AND COMPOUNDING
One more point: It takes cash
flow to buy these investments. It is
most difficult to work for someone
else or even run a small business with
all of its demands, and therefore most
difficult to build a grouping of assets
large enough to support a prosperous
retirement. So to add a few words to
the “independent source” mentioned
in the previous paragraph, this must
be a source of income in a more or
less passive nature. To me this means
getting assets to produce income.
There simply are not enough hours in
a day or even a lifetime for the
average American to accumulate a
substantial amount of wealth.
In all of this it truly is a wise
person who realize this need for an
independent source of income, but
also realizes they need to learn from,
even lean on the experiences of
others.
TURBO MONEY
In my new book, TURBO
MONEY, in a chapter on the Mystical
and Magical Truth About Money, I
brought up a simple truth which most
people do not think of too often. Once
presented, people say, “I know that.”
This truth is that most businesses and
real estate succeed because there is
income from an outside party. Think
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of a rental house or even Aunt
Emma’s Pottery Shoppe, without
sales or rents. We know this but then
buy stocks which usually do not have
any income. Most stocks fall into this
growth category.
The stock market is not
generally viewed as a source of
income. Oh, to be sure, there are
companies which pay dividends, and
many people choose those, so we’ll
use that scenario here to make the
point of this subsection. Where does
the money come from to pay out
dividends?
There is a market adage that
goes: “A stock price today is based on
the ANTICIPATION OF FUTURE
EARNINGS.” Notice I didn’t write
that the stock price is based on other
market sentiments, or even on current
earnings (unless that is used to
calculate dividends), but everyone
looks to the future. In traditional
investments—as compared to the
Wade Cook ways of cash flowing the
stock market—the wise person lives
by this motto: FOLLOW
EARNINGS, FOLLOW EARNINGS,
FOLLOW EARNINGS.
Growth is nice and tax writeroffs are needed in their season, but
income, that’s the targeted benefit.
When you hear or read of P/Es or
BEN FRANKLIN AND COMPOUNDING
Price Earnings Ratios—both past,
blended past and future, or future—
they tell the story for a fundamental
point of view. Yes, I acknowledge the
technical point of view but to me it’s
all about measuring the health of a
company—earnings, management,
debt, alliances. And in all of this
earnings is the most important. And
think, when you buy stock, you’re not
really buying the past, except as an
indicator of things to come, but you
are buying what the company will do
in the future.
So back to the point of income
or sales from outside sources. That to
a large extent determines the future of
the stock. A company expanding into
China for example, is a good sign, the
stock goes up. But then trouble with
the Communists and the stock goes
down. Interest rates go up a lot and
stocks go down. Why? Because
companies have to service the debt,
and excess debt drives earnings down.
There is a lot more to this, so I
encourage you to get my book,
INVEST SMART and TURBO
MONEY—this book will rock your
world. It will show you how to get
retired in two or three years
depending on how much money you
have to start. It is very exciting.
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One last point, when I say
investments and businesses need
income from outside sources, one
would think, for the most part, that
stocks don’t qualify. However, I beg
to differ. There are ways to treat the
stock market like a business. I’ll bring
up a simple one. You buy a stock for
the soul purpose of selling it. You
could pick a target price and sell it
then. You could employ my Rolling
Stock strategy and buy and sell in
repeated waves. You could also use
the strategy: Writing Covered Calls.
Any one of these puts the
emphasis on selling. Are you
following the theme of my investing
and trading style. It is this: Know
your exit before you ever go in the
entrance. I love Writing Covered
Calls and there will be a brief
explanation in a moment.
But the point is to use the stock
as an asset upon which you make
money. So, it’s not that the company
of the underlying stock is making
money or not, it is that you are
employing a strategy to have your
stock—in-and-of-itself—make
money. This becomes your
independent source of outside income.
And the other aspect of this is to use
the experiences of others. But where?
BEN FRANKLIN AND COMPOUNDING
Patience, I’ll introduce the where a
little later.
WHAT IS A COVERED
CALL?
A covered call is a way to cash flow
the stock market.
The process combines two well
know ways to make money,
and by this combination, people are
able to generate
monthly income, sometimes several
times month.
In short, one buys the stock and
then sells a call option,
giving someone the right to buy her
stock at a set price,
sometime in the future. The seller
(or writer) of this option
sells the option and takes in the
income for doing so in one day.
This income is spendable or can be
taken out for other uses.
The word covered means that you
actually own the stock.
A call option is the right to buy a
stock. Most people buy
these risky options
and most people lose.
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Writing Covered Calls reverses this
process. We are not
buying options but selling them.
Others take the risk,
we take their cash. By selling we
take in cash and an
obligation to deliver the stock at a
certain price, a price
that we are happy with.
It is a monthly income machine. We
sometimes call it:
RIG, or Repetitive Income
Generator.
MY QUEST FOR INCOME
I've been invited to write some
things for the WIN site and their
THOUSAND DOLLAR
THURSDAYS. It is a pleasure. We
have found some very exciting ways
to cash flow the stock market. This is
knowledge that will help you make
more and keep more. It is easy-tolearn and will help you grow your
monthly income from your home.
Please understand we are pure
educators. We’ll sell a book or two,
but we do not manage your money.
We do not recommend investments,
and in fact, we get nothing out of
what you do.
BEN FRANKLIN AND COMPOUNDING
One new way to look at
compounding is to get your money to
produce more income in a business
sort of way. It doesn't have to be
onerous work, but it cannot be
entirely passive, either. Your money
needs to work as hard as you work.
That is easy to say. But I mean it. You
sleep. You have down time. You take
time off, get sick, and have a million
and one intrusions into your life. Your
money needs to get a better
personality, meaning it works harder,
without all of the distractions listed
above. Money needs to set about
making more money.
Another Ben Franklin quote:
"Money makes money and that
money makes more money."
There you go. That's the secret
to wealth: Get your money producing
money. Hardly an epiphany. The
problem is most people just do not
know how to accomplish this. Most
people never learn the skills and
discipline to achieve an inkling of the
success that is theirs for the taking. It
comes down to awareness of profit
possibilities, productive knowledge
and a desire to bail out of the financial
doldrums—to grow out of your
problems.
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The answer is really not that
hard to find. In fact, once found, it's
quite easy to learn, master and
implement. Here is a simple
statement, but behind these words is a
bright future if you unlearn so much
of what you have learned that just
ain't so. It is this: You need to get
assets working for you so you can quit
your job, retire earlier and retire better
than you've ever thought possible.
To do this you need a tried-andproven strategy. A strategy that works
for you so you don't have to go to
work for you. It's called Assets
Producing Income. Even if you have
very little money to get started,
knowledge comes first, and the way
will be made clear. It's about using the
stock market as a home-based
business. Don't get turned off by the
words "Stock Market." We've found
an exceptional way for you to
generate excess monthly income.
It's not about the future, some
off-distant time and place, but about
NOW. There are two components to
this process. One is the asset, in this
case certain stocks. The second is
selling and taking in cash in one day,
on an option giving someone the right
to buy the stock you purchased.
Whether they purchase it or not, you
get to keep the money, and if they
BEN FRANKLIN AND COMPOUNDING
purchase the stock, you'll probably
make more. This two-fisted process.
It's called Writing Covered Calls, and
it's a cash-flow workhorse. This is sort
of like rental property. Most people
have never thought of using stocks
this way.
What do you need to succeed,
and exceed extravagantly. Read what
Mark Victor Hansen, author of
Chicken Soup for the Soul said about
Wade Cook: "Listen to the master of
our time and you'll get everything
good thing you want."
You'll be amazed at how the
tools work to fix your income
problems. is about the most powerful
technique in the market for generating
monthly income, and income that will
come in repeatedly.
Now, we're sure you have
questions: Like, okay what if the
stock goes down? We've got that
covered. "You still can make money."
This is way to develop a wonderful
way to retire better—again using
these methods for building a great
IRA or Pension and then living a
fulfilling and wealthy retirement.
You'll love getting into more
cash-flow details and techniques.
Selling for more cash, more on the
double-dipping formula, and then
you'll learn more about proxy6
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investing and how to make even more
with less cash tied up and less risk.
This is not "get-rich," but get
rich steady. We call it "Get CashFlow Rich."
“Victory is not won in miles,
but in inches. Win a little now,
hold your ground, and win a
little more later.” —Louis
L’Amour
© 2015 Wade B. Cook.
All Rights Reserved. To connect with
Wade and get more information about
using the stock market like a business,
use this link: http://pwc2.com/wadecook
BEN FRANKLIN AND COMPOUNDING
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