Jump to content

Derek Foster


KFRCanuk
 Share

Recommended Posts

A few people here suggested to write options for income....Derek Foster are you here? 

 

Writing options might be a good idea if you are extremely comfortable with your valuation, but for some people, this could be dynamite.

 

Derek foster is an interesting guy, thanks for the link.  I wonder what kind of jobs he did between pre-retirement.

Link to comment
Share on other sites

Let me get this straight. This guy has written three books since retiring (and by the ripe old age of 34).  Most would reasonably describe his occupation, therefore, as an active, self-employed professional author.  Yet the very hook he uses to promote himself and sell his books is that he is supposedly "retired" at the age of 34.  Doesn't sound like he's retired to me.  It sounds like he's come up with a very ironic basis for selling books - retiring young when in fact he hasn't.

Link to comment
Share on other sites

Ive read about this guy a while ago - in a newspaper article.

Im pretty sure the article was written before he had a book out.

He could have been prodded to write his book/books - who knows.

 

There are a few of us on this very board who are in the same boat as he - "retire" early.

 

To me, retiring early doesnt mean you no longer do good work, its just that to you - you dont think of it as work for a load of different reasons.

 

Good for him. The world would be a better place if more people were happy and didnt have to spend every waking hour doing something they despise.

 

Link to comment
Share on other sites

Derek wrote his first book about 4, maybe 5 years ago.  He billed himself as "Canada's Youngest Retiree" which is a good hook I guess.  The book was quite good, but simple.  He esposes frugality and investing as the means to reach his goal early.  Basically, he finished a degree in commerce in his early 20s, got a few crappy jobs after that.  He decided, like many on this board, that there is a better way and started investing a couple of a hundred every month very early.  He also bought a Condo somewhere.  A bit later he went to Korea to teach English for a couple of years at least and saved a large amount of money.  He kept the real estate and rented it out.  His wife is Korean.

 

All the while he invested in stocks and income trusts that pay dividends and increase their dividends such as Royal Bank or Arc Energy.  I read all three of his books (never bought any mind you).  The first was a Non-fiction best seller in Canada which probably amounts to a check of 25,000 - $50,000.  I would say he has now re-created himself as a financial advisor/author who lives on his investments. 

 

His most recent book talks about writing put options for income.  I cant imagine that strategy has worked so well this winter. I think he practices what he preaches in terms of doing what he likes to do and frugality.   

Link to comment
Share on other sites

FTR,

I did not read any of his books - just the article written some years ago.

 

yes, a frugal person with a house paid off and dividends or capital gains instead of reg employment income (tax benefit) - thats all you need - -especially if  you can get your wife to continue working at the same time - the later which my buddy is trying really hard to accomplish ...lol..seriouslu ;D

Link to comment
Share on other sites

The first was a Non-fiction best seller in Canada which probably amounts to a check of 25,000 - $50,000.

 

He's an interesting character and quite jovial in person.

 

But your numbers are off when it comes to the books.  He's sold about 60,000 in total and he self published them.  That's quite a feat in Canada and shows that he's an excellent marketer.  It also means that instead of earning a buck or two per book he nabs a good deal more.  The total earnings on the books are north of $200k. 

 

He also happens to be a little controversial. 

 

Rather importantly, it's not entirely clear how he got his original 'FU' money.  He did take a big leveraged position on Altria when it was in the dumps in the mid-90s where much of the portfolio is thought to come from.  However, that wasn't mentioned in his books (IIRC) and is a fair bit different from the slow accumulation of dividend stocks.

 

The contradiction between what his books say and how he apparently got his retirement money drives some folks around the bend. 

 

For more, see the following threads on other forums ...

 

http://www.financialwebring.org/forum/viewtopic.php?t=100517

 

and a whole bunch at CB http://forums.canadianbusiness.com/forum.jspa?forumID=22 where Derek appears from time to time.

 

He has something of a anti-fan base ...

 

http://www.canadiancapitalist.com/2009/03/15/selling-puts-isn%e2%80%99t-money-for-nothing

 

http://www.canadiancapitalist.com/2009/03/17/bear-market-valuation-indicators

 

http://www.canadiancapitalist.com/2009/03/18/what-went-wrong-with-the-derek-foster-strategy

 

I could go on.  ;)

Link to comment
Share on other sites

Perhaps more importantly, I'm sure a bunch of us have 'FU' money.  But what's the point to retiring when you're young?  You've still go to do something with your life and I've found that lounging around, while fun for a while, gets boring fast.  :)

Link to comment
Share on other sites

 

Ha, of course he has, he is Canadian.  Be successful in Canada and the majority will attempt to bring you down for some reason.

 

One lesson I have learned the hard way:

"if you want to be successful - how ever you deem that to be - you must first not care what other people think, for there are people who will envy pure happiness itself and make you feel guilty for it"

 

i.e. dont care what other people think, especially when you are doing better then them.

 

Link to comment
Share on other sites

He discloses the Philip Morris trade in the first book. 

 

I didn't know he self published the book Norm.  Thanks for the correction.  In his second book he comments on his book revenues causing him to have to pay tax.

 

If everyone did what he did, or course, no one could do it.  His family takes advantage of the various social assistant things available to Canadians who can prove they are poor to the tax man (also disclosed). 

Link to comment
Share on other sites

He discloses the Philip Morris trade in the first book.

 

Fair enough, I was given his first book but I've yet to make it all the way through.  (I was distracted by other more technical books.)  So far, there's not much there for more seasoned investors but the writing style is clean and straightforward.  He does love his '!' a bit too much.  :)

 

I didn't know he self published the book Norm.  Thanks for the correction.  In his second book he comments on his book revenues causing him to have to pay tax.

 

If everyone did what he did, or course, no one could do it.  His family takes advantage of the various social assistant things available to Canadians who can prove they are poor to the tax man (also disclosed).

 

I suspect your last point is what gets people going.  But he's hardly as bad as the other fellow who suggested living off of welfare/OAS etc.  (I'm forgetting the author at the moment.)  IIRC, Derek just takes the government perks given to him (baby bonus type stuff) and aims to get his income via Canadian dividends which are taxed lightly for low income folks.  (The book income knocks that around a bit.)  I remember running across a survey that indicated that 50% of people admit to cheating on their taxes.  So, it's hard to take anyone to task for legitimate tax planning.

Link to comment
Share on other sites

Ha, of course he has, he is Canadian.  Be successful in Canada and the majority will attempt to bring you down for some reason.

 

One lesson I have learned the hard way:

"if you want to be successful - how ever you deem that to be - you must first not care what other people think, for there are people who will envy pure happiness itself and make you feel guilty for it"

 

i.e. dont care what other people think, especially when you are doing better then them.

 

I've sort of had a similar reaction.  Mind you, its also rather unlikely that most people can retire at 35 by following a simple high dividend yield strategy.  So, he might be an effective book salesman but the strategy doesn't really live up to his hype.  (This is coming from a fellow who also happens to be a fan of dividend strategies.)  Recommending the option stuff to joe and jane investor verges on being reckless.  IMHO, both leverage and options should be left to the more daring and/or experienced investor.  Mind you, both leverage and options can make an enterprising investor rich in short order. 

Link to comment
Share on other sites

 

He's actually a very swift individual, but just marches to a different drummer; & if he doesnt need a huge income to be happy, the more power to him. Because its counter-cultural to the average NA mindset we see it as controversial.

 

A long time ago this might have been Jobs or Wozniak.

Then they got a real job!

 

 

 

Link to comment
Share on other sites

Ha, of course he has, he is Canadian.  Be successful in Canada and the majority will attempt to bring you down for some reason.

 

One lesson I have learned the hard way:

"if you want to be successful - how ever you deem that to be - you must first not care what other people think, for there are people who will envy pure happiness itself and make you feel guilty for it"

 

i.e. dont care what other people think, especially when you are doing better then them.

 

I've sort of had a similar reaction.  Mind you, its also rather unlikely that most people can retire at 35 by following a simple high dividend yield strategy.  So, he might be an effective book salesman but the strategy doesn't really live up to his hype.  (This is coming from a fellow who also happens to be a fan of dividend strategies.)  Recommending the option stuff to joe and jane investor verges on being reckless.  IMHO, both leverage and options should be left to the more daring and/or experienced investor.  Mind you, both leverage and options can make an enterprising investor rich in short order.   

 

 

There you go. From the interview, it sounds like his third book is going to be about naked put selling, which is not a wise course for unsophisticated investors, and which generally requires a hefty cash reserve to provide meaningful cash.

 

Is that really the interviewer's last name? Awesome.

Link to comment
Share on other sites

I read the third book "Money for Nothing" at Chapters in the fall.  He talks all about selling puts.  He then followed it up with an article in Canadian MoneySaver Feb/March- sorry not on line, which I also read at Chapters. 

 

The put selling strategy is basic and RISKY to be touting to lay investors.  The followup strategy adds numerous riskier strategies to the mix.  In it he adresses what to do when your puts go deep in the money (or is it out of the money for the seller - anyway) due to a dropping stock in a down market.  Basically buy them back in and sell new ones at the below the new lower price. 

 

This strategy is risky.  If you run out of available cash or margin you simply cant do it.  So you need a war chest of cash to protect yourself.  IMO there are much better ways to work a war chest of cash in this environment.  Take it from a person with a high risk tolerance.

 

IMO, his most recent book is irresponsible since, as stated above, there is no "money for nothing".  There is money for risk, and more money for more risk. 

Link to comment
Share on other sites

Glad to see the mention of Canadian Moneysaver, which is in my view the #1 paper publication for Cdn value investors.

Particularly folks who are not going to be intense effort bargain prospectors like most of the posters on this board.

 

It is online, for subscribers - but I've always stuck with the paper copy.  Much of the stuff in each issue is not what

I agree with fully, in fact some I disagree with ... but it is stimulating, provides lots of useful reminders and ideas.

 

Website www.canadianmoneysaver.ca has details about paper and online subscriptions.

Link to comment
Share on other sites

Premium writing can be highly profitable, but it's certainly something that would destroy most that attempt it, and rather quickly.

 

Eric has gone over stuff here a pile of times, but basically if you write very high premium options on names you've done fundamental research on, and you have cash to buy the stock (in the instance of puts), it can be highly profitable. But it's always been an area for the pros, many of whom have capital issues now which may be why it's become so much more profitable recently.

 

I have a friend who does this with a portion of his fund and does quite well with very minimal risk, but he's very smart and knows what he is doing. Writing options and spending the float or back-up cash (the nominal you are covering) is suicidal.

 

If one thinks of it was an insurance underwriting operation, it can be quite profitable and enjoyable.

Link to comment
Share on other sites

In all his books prior to his "new" found method for making money with options he preached buying good companies and holding them forever.  He did so by buying companies like RioCan, Royal Bank, etc....as was happy just as long as paying a good dividend so he said he did not care if the stock price went up or down.  He said that he didn't care because he would keep receiving the dividends so did not matter. 

 

In the Globe & Mail article dated March 13, 2009 http://www.theglobeandmail.com/servlet/story/RTGAM.20090312.wrderekfoster12/BNStory/SpecialEvents2/ 

 

Mr "buy and hold" was revealed to have sold pratically all his stocks.  Interesting read. 

 

In my humble opinion I would be leary about taking his advise on options

 

Cheers

Link to comment
Share on other sites

Labrador, thanks for the link. The reporter appeared to be quite prepared and the questions were very good. I have follow Derek Foster and (as has been said previously) wish him well. I am surprised at the about face in his overall investment strategy and also the timing (Feb lows?).

 

Bottom line, I know I would not want to have my every move out there for all to see (and be reported on). Every once in a while I change my mind or decide to do something a little different. Constant process of trying, learning and adapting. Tough enough for me to do on my own...

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...