Ep. 75: The S&P's 1800s-Low Yield, the Income-ETF Shakeout & What to Buy Instead of VOO and QQQ

So if you take $10,000 of your hard earned savings today
and you put it into the greatest wealth creation engine
and human history, the S&P 500,
you were gonna earn less than $9 a month in income.
I mean, you literally cannot even pay
for a basic Netflix subscription with the dividends
from a $10,000 investment in the broader market right now.
It's honestly staggering when you actually sit down
and run the math because we haven't seen a dividend yield
at low on the broader market since the 1800s.
It's crazy.
Welcome to today's deep dive everyone.
Consider this your daily dose of informed investing.co.
We're doing our usual sharp, plain spoken,
completely hype free talk on dividends and income investing.
Always.
And today is Thursday, June 4th, 2026.
Our mission today is singular.
When the traditional plain vanilla index is just
historically expensive and hands you practically
zero cash flow, where do you actually put your money?
Because, frankly, the old playbook.
Just blind buying.
Yeah, that automatic blind buying of the market.
It's currently broken for anyone
who actually needs their portfolio to generate cash today.
Exactly.
So to figure this out, we have a pretty massive stack
of research on the table.
We've got quantitative data from the Motley Fool,
breaking down this historic 1% problem.
Which is a huge problem.
Huge.
And we're looking at sentiment analysis from seeking alpha
about why longtime index investors are just straight up
halting their automatic purchases.
From there, we are dissecting a massive wave
of income ETF liquidations.
Yeah, the yield chasing Fed is officially imploding.
Oh, completely.
But we aren't just here to complain about the problems.
We brought solutions.
We're going to break down a 10 fund sleep well at night
portfolio.
We're looking at a quantitative momentum
strategy.
That one fundamentally alters how you capture growth, by the way.
It really does.
And finally, we're unpacking a brand new highly engineered
options income ETF from Wall Street veteran Carter
Worth plus some individual plays like Build Bear and Devon
Energy.
The through line across all these sources
is, well, it's incredibly clear in an environment where
the market is priced for absolute perfection.
Chasing the flashiest headline yield is a massive trap.
Right.
Your real edge right now is valuation discipline, durable
income, and just mathematically sound strategy.
OK, let's unpack this.
Starting with the elephant in the room, the 1% problem,
the Motley full data spells this out.
And it's a pretty harsh wake up call.
The S&P 500 yield is just hovering around 1%.
Yeah.
So for someone who is retiring tomorrow
and relying on their portfolio to replace their paycheck,
how did we even get to a point where the market pays out
virtually nothing?
Well, it really comes down to understanding the basic fraction
that makes up a dividend yield.
Right.
It's simply the annual dividend paid out by a company divided
by the stock's current price.
Now it is true that structurally some companies
over the last couple of decades have shifted away
from paying dividends.
They prefer stock buybacks.
Exactly.
Buybacks are just more tax efficient for the shareholder.
So that's part of the story.
But the real driver, the reason we are at levels not
seen since the 19th century, is the denominator
of that fraction, the price.
Right.
The prices of the underlying stocks have just completely
exploded upward, leaving the actual dividend payouts
in the dust.
Precisely.
Equity prices, especially for the mega-cap tech companies
that totally dominate a cap-weighted index
like the S&P 500.
It's a usual suspect.
Yeah, they vastly outpaced actual corporate dividend growth.
Investors have basically bid the prices
of these companies up to a point where years, maybe even decades,
of future growth, are already baked into the current share
price.
Well, wait, before we go further in the notes
on the analyst, they keep mentioning
that the equity risk premium has collapsed because of this.
What exactly do you mean by the equity risk premium
in this specific context?
Let's define that for the listener really quick.
Sure, it's a really foundational concept.
The equity risk premium is essentially the extra return
you demand to receive for taking on the risk of the stock market.
Compared to something safe.
Exactly.
Compared to just leaving your money in a risk-free asset,
like a short-term US treasury bill.
So if a T-build pays you, say, 5% guarantee by the government,
you should theoretically demand way more than 5% to buy a stock.
Right, because the stock could just drop by 20% tomorrow.
I'm taking a risk, pay me for it.
Right.
But when the stock market is only yielding 1% in actual cash flow,
and the valuation multiple, you know,
the price you pay for $1 of corporate earnings
when those are historically extreme,
that risk premium basically just vanishes.
You literally aren't getting paid to take the risk.
Oh, you're not.
You're buying into a market that has absolutely no valuation cushion.
If there's even a slight mis-incorporate earnings
or some macroeconomic shock,
there is no margin of safety to break your fall.
And obviously no dividend yield to pay you
while you sit around for years waiting for your portfolio to recover.
Exactly, which perfectly explains the boots on the ground
sentiment we're seeing in that piece from seeking alpha.
Oh, yeah, the author of that piece.
They describe themselves as this long-time die-hard index investor.
The kind of person who preaches the whole gospel
of dollar-cost averaging into vanguards,
VOO, or invest goes QQQ, every single month.
Regardless of what the news says, just buy, buy, buy.
But they are openly stating now
that they are halting their automatic purchases.
And honestly, that is a massive psychological shift.
The automatic recurring purchase of the S&P 500
is basically the holy grail of modern retail investing.
To manually pause that takes a lot of conviction.
So are they saying the index is fundamentally broken?
No, not broken.
They're just practicing valuation discipline.
They recognize that a great company,
or even a great collection of companies,
can still be a terrible investment
if you pay the wrong price for it.
Right, price matters.
It always matters.
They're looking at the math and basically saying,
I am not going to blindly throw my capital into an asset class
that is priced for absolute perfection
when it's handing me zero income protection.
But when the traditional safe route yields nothing,
human nature just kicks in.
People who need income today, like retirees
or people just trying to cover their mortgage,
they get desperate.
They absolutely do.
If they can't get yield from the S&P 500,
they start turning over every single rock they can find.
And desperation is frankly the life blood
of Wall Street product creation.
When retail investors get desperate for yield,
the financial industry is more than happy to package
and sell them.
These highly complex, incredibly risky products
disguised as safe income, which leads us directly
to the great income ETF shakeout
that is literally happening right before our eyes this week.
Let's dig into this because the analyst reports
we have on these ETF liquidations are just staggering.
It's a blood bath out there for these funds.
It really is a call of the whole yield chasing fad,
specifically these single stock and synthetic covered call ETFs.
We aren't talking about one or two obscure funds
closing up shop either.
No, this is a systemic clearing out of the junk.
REX shares is liquidating seven of their funds
on June 9th.
We're talking tickers like PLTI for Palantir,
COII for Coinbase, HOII for Robinhood, MSII for Microstrategy.
Yeah.
And yield max, which has been the absolute poster child
for this hyper-aggressive ETF craze,
they're closing four funds.
Defiance is liquidating two,
including a fund that tracks Carvana.
I mean, these funds were marketing headline yields
of 40, 50, sometimes even 60%.
And it worked.
They attracted billions of dollars in retail capital at first.
People saw a 50% yield paid monthly and they just piled in.
Of course they did.
But the stated reason these funds are closing now
is a combination of low assets and marriage it,
meaning people eventually woke up and pulled their money out
and negative total returns since inception.
Because operating an ETF costs money.
Exactly.
If the capital leaves, the fund just bleeds to death
on administrative and legal fees.
But the real story isn't the fees, is it?
The real story is why the capital fled in the first place.
Why did a fund paying a 50% yield suddenly
lose all its investors?
Because the underlying math of these single stock
high yield funds was just fundamentally flawed.
And the retail investors finally realized
they were being taken for a ride.
Right.
It comes down to a mechanism called net asset value decay
or NAV decay.
If you are an income investor, you have
to understand this concept or you will eventually lose your shirt.
OK, let's raise the math on this for the listener.
Breakdown exactly how a fund can pay me a massive yield
while simultaneously just destroying my portfolio.
Sure.
So these specific ETFs operate by selling covered calls
or synthetic covered calls on a single highly volatile underlying
stock.
Let's use a hypothetical example just to make the math super clear.
Go for it.
Let's call the stock tech shooter.
Perfect.
So let's say a fund tracks this wildly volatile tech stock
called tech shooter.
Tech shooter is currently trading at $100 a share.
OK.
The ETF buys the stock and then sells a call option
giving someone else the right to buy that stock at say $105 next month.
And because tech shooters are so volatile,
option traders are willing to pay a huge premium for that, right?
Exactly.
Maybe they pay $3 a share for that option.
So the ETF takes that $3 premium turns around
and hands it to the investor as a massive dividend.
Right.
$3 on a $100 stock in just one month.
That's a massive yield.
It looks brilliant on paper.
But here is the fatal flaw.
When you sell a covered call, you cap your upside potential,
but you retain 100% of the downside risk.
The steam roller.
Basically, yeah.
Let's play out the month.
Tech shooter has a terrible earnings report
and the stock drops 20%.
It's now sitting at $80.
But the call option, the ETF sold, expires worthless.
So they get to keep that $3 premium.
Right.
And they pay you your $3.
But you're underlying capital.
The net asset value the fund.
Just took a $20 hit.
You are down heavily.
OK, couch.
Now, let's move to month two.
Tech shooter is at $80.
The ETF sells another call option,
capping the upside this time at, let's say, $84.
But this time, Tech shooter gets a massive upgrade
from a Wall Street bank and the stock rocket's back up 25%.
Oh, boy.
So the stock goes back to $100.
Right.
But where is the ETF?
I see where this is going.
The stock recovered completely, but the ETF didn't.
Not even close.
The ETF sold the right to buy the stock at $84.
So even though the actual stock went back to $100,
the ETF's upside is brutally capped at $84.
They missed the entire recovery.
Completely missed it.
So the underlying stock started at $100, dropped to $80,
and went back to $100, a 0% total return.
But the ETF started at $100, dropped to $80,
and only recovered to $84.
It permanently lost 16% of its net asset value in just two months.
Simply because of the path the stock took.
That is asymmetric risk in the exact worst possible direction.
You participate fully in the crashes,
but you lock yourself out of the recoveries.
Precisely.
Month after month, highly volatile stocks swing wildly up and down.
During the down swings, the fund takes the full hit.
During the up swings, the fund's recovery
is artificially capped.
The underlying capital just bleeds out.
I'm looking at this from the perspective
of a desperate retiree, though.
I have to ask the skeptical question here.
Lay it on me.
Let's say I don't care about my principal 30 years from now.
I'm 75 years old.
I just need cash flow to pay my electricity bill by groceries
and cover my property taxes today.
Right.
If an ETF hands me a 40% headline yield in cold, hard cash
every month, isn't there still a place for that?
Even if the ETF's price slowly bleeds out
over the next 10 years.
It is the single most common defense of these products,
and it reveals a fundamental misunderstanding
of what true income actually is.
How so?
Think about it this way.
If you hand a fund manager $100,000,
and they charge you a 1% management fee,
and then they simply hand you back $3,000 a month
of your own money while your balance drops to zero.
You haven't gained anything.
No.
You are cannibalizing your own savings.
You could have just kept $100,000 in a free checking account,
and withdrawn $3,000 a month yourself
without paying Wall Street a fee to destroy your capital.
Wow.
So the yield isn't actually a return on investment.
It's just a return of your own capital.
Exactly.
And honestly, it gets worse.
As the net asset value decays, the absolute dollar amount
to the distribution naturally drops right alongside it.
Because it's percentage.
Right.
A 40% yield on a fund priced at $20 pays you $8 a year.
But when that fund decays down to $10,
a 40% yield only pays you $4 a year.
Your income stream shrinks right alongside your capital.
That is definitely not a sustainable way
to pay your electricity, though.
You will eventually run out of money.
Which perfectly explains the liquidations we're seeing.
The marketing worked for a year,
but eventually investors opened their brokerage apps,
saw that their principal was cut in half,
realized their monthly payouts were shrinking,
and they just pulled the plug.
The math finally caught up with the hype.
Yeah.
And the market is adapting, right?
The analysts noted that issuers like RDX shares
are realizing the single stock gimmick is dead.
They're pivoting.
They are.
They're moving their business model toward broader basket
funds like their FEPI, CEPI, and AIPI products.
Right.
Writing options on broader indices
where the volatility is way lower, which
significantly mitigates that NAV decay we just talked about.
They're even moving to weekly distributions
to try and keep the yield-hungry investors happy,
but they are absolutely stepping away
from the toxic single stock trap.
So what does this all mean?
If the plain vanilla S&P 500 is yielding a miserable 1%
and is wildly overvalued, and the 50% yield single stock
ETFs are literally liquidating and destroying capital.
We are left looking for the intelligent middle ground.
Exactly.
We have to pivot away from the gimmicks
and look at actual, mathematically sound strategies.
We have to find durable income.
Income backed by actual cash flow,
not options engineering that eats your principal alive.
And according to our sources, the anchor of that conversation
is a fund like SCHD, the Schwab US dividend equity ETF.
Let's look at the numbers, because when you place them side-by-side
with the broader market, it is a night and day difference.
It really is.
While the S&P 500 yields 1%, SCHD has a starting yield
of roughly 3.2%.
So that same $10,000 investment we talked about in the intro.
Instead of generating less than $9 a month,
it's paying you $320 a year right out of the gate.
But the real magic here isn't just the starting yield, is it?
Not at all.
The real engine of wealth creation in a fund like this
is the dividend growth.
Historically, the underlying companies held within SCHD
have an annualized dividend growth rate of 9.4%.
Let's trace that out for the listener.
Why is that 9.4% number so critical?
Because it is your ultimate defense against inflation.
If your cost of living is rising at, say, 3 or 4% a year,
but your income stream is growing at over 9% a year,
your purchasing power is actively expanding.
You aren't just trading water.
Exactly.
You are getting wealthier in real terms.
If you buy a stock yielding 3% today,
and they raise that payout by 9% every single year,
your yield on your original investment,
your yield on cost eventually becomes massive.
But how does a fund like SCHD guarantee
that kind of growth, though?
Are they just blindly buying companies that have high yields?
Quite the opposite.
SCHD tracks the Dow Jones US dividend 100 index.
It uses a very strict fundamental screening process.
A company cannot even be considered for inclusion
unless it has paid a continuous dividend
for at least 10 consecutive years.
10 years, wow.
But that's just the first hurdle.
They then filter for free cash flow to total debt,
return on equity, and the actual five-year dividend growth rate.
So they are actively filtering out the companies
that are paying a dividend with debt?
Exactly.
A dividend is cash that cannot be faked.
In a corporate earnings report,
a management team can massage the numbers.
They can use accounting tricks, altered appreciation schedules,
invent adjusted metrics to make the company look profitable on paper.
We've all seen that.
But cash deposited into a shareholder's brokerage account
is binary.
The company either generated the actual free cash flow to pay it,
or they didn't.
By screening for a decade of growing dividends
supported by strong free cash flow,
the ETF inherently filters for high-quality, durable business models.
And the total return data totally backs this up.
The Motley Fool research noted that historically,
dividend growth stocks average at 10.2% annualized return.
Compared to what?
Compared to just 4.2% for companies that cut or eliminate their dividends.
That's huge.
But SCHE is just one tool in the toolbox.
We have a source here from a deep dive analyst
who details what they call an engineered income approach.
They laid out a 10 ETF sleep well at night portfolio.
I love this concept because it addresses the modern reality perfectly.
You don't have to choose between only capital growth or only high yield.
Through precise asset allocation,
you can build a machine that does both.
I'm looking at this list of 10 ETFs, though.
And I have to ask the obvious question, why 10?
That sounds honestly exhausting to manage.
Why not just find one really good hybrid fund
and put all your money there?
Because no single fund performs perfectly
in every macroeconomic environment.
Building a portfolio like this is exactly
like building a professional sports team.
OK, I like sports analogies.
You don't draft 10 quarterbacks.
If you buy 10 pure growth funds,
you get crushed in a tech bear market.
Right.
And you don't draft 10 massive, slow offensive line
and either if you buy 10 pure zero growth covered call funds,
you lose your purchasing power to inflation.
You need a mix of specialized skill sets that complement each other.
OK, let's walk through the roster of this team then.
Let's look under the hood.
The core of the portfolio, the quarterback,
is VOO, the Vanguard S&P 500 ETF.
Right, even with its historically low 1.1% yield,
you still need beta.
You need baseline exposure to the broader American economic engine.
Yeah, over a multi-decade timeline,
the compound capital appreciation of the broader market
is a force you just cannot entirely abandon.
It grounds the portfolio.
Exactly.
Next, we bring in the offensive line
to protect the pocket and grind out the yards.
The dividend growth tier, they allocate to SCHD, which we just discussed,
and FDIV, the Fidelity high dividend ETF.
So this tier is your inflation hedge and your quality filter.
Yep, they bump the baseline yield up to the 3.5% range.
But crucially, they provide that 9% to 10% annual payout growth we just analyzed.
Now we need the specialized players,
the ones who can put points on the board right now, the enhanced yield tier.
They use DVO, the amplify CWP enhanced dividend income ETF.
This pushes the yield up to around 5%.
But how does DVO differ from the single stock ETFs that are liquidated?
Oh, it's totally different.
It is a masterclass in active management done correctly.
The single stock ETFs blindly wrote calls on a single, volatile asset.
DVO holds a portfolio of high quality blue chip dividend payers.
The active managers then tactically sell covered calls on individual stocks within that portfolio.
But only when the technical setup is actually right.
So they aren't just systematically capping their upside every single month regardless of what's happening.
Exactly.
They're looking for opportunistic moments to squeeze an extra 2 or 3% of cash flow out of the portfolio
without surrendering the underlying capital appreciation.
Tactical versus blind, that makes total sense.
Then the portfolio steps up the aggression for the heavy hitting premium income.
They allocate to GPIX and GPIQ, which write options on the S&P 500 and NASDAQ 100 to generate
8 to 10% yields.
They add OVL, the overlay shares large cap equity ETF.
And finally, for the pure high income generators, they use QYLD, a NEOS NASDAQ high income fund
and CHPY, which writes options specifically on the semiconductor sector.
Let's dissect the architecture what they've done here.
They have meticulously blended totally uncorrelated income strategies.
You have traditional cash flow back dividends from SHD.
You have tactical human managed covered calls from DAIVO.
You have broad systematic index option writing from QYLD.
And you have highly targeted sector specific premium capture with CHPY.
Why include a semiconductor option fund though?
That sounds wildly specific.
Because option premiums are priced based on volatility.
We conductors are inherently cyclical and highly volatile.
By writing options on that specific sector, CHPY can capture incredibly rich premiums,
pushing the overall yield of the portfolio higher.
Oh, I see.
And because it's only one of 10 positions, the volatility of the underlying sector doesn't
wreck the entire portfolio if chip stocks have a bad quarter.
Exactly.
It really isn't all weather machine.
If the market goes on a massive tarot way bull run, the covered call strategies will
naturally lag, but your allocations to VOO and SCHD will carry the weight and capture
the upside.
And if the market trades completely flat for three years, your growth stocks will stagnate.
But the massive cash flow from QYLD and CHPY will pump cash into your account, allowing you
to reinvest and accumulate more shares at flat prices.
You are engineering a blended yield of roughly 6%, but retaining solid capital appreciation
potential.
The definition of a sleep well at night portfolio.
You aren't losing sleep over a tech crash and you aren't sweating inflation.
But let's pivot for a second.
OK.
Let's say you aren't strictly an income investor.
Let's say you've listened to the first half of this deep dive.
You agree that the cap weighted S&P 500 and the NASDAQ are dangerously overvalued tech bubbles.
But you still want aggressive capital growth.
Yeah.
How do you capture the upside of this market without stepping on evaluation landmine when
the bubble eventually pops?
It brings us to one of the most fascinating rotation themes in the market right now.
The concept of smarter beta, specifically through quantitative momentum investing.
OK.
Lay it on me.
When passive index funds become dangerously top heavy driven by just five or six massive tech
companies, the passive investor is unknowingly taking on a tremendous amount of concentration
risk.
Right.
And the solution our sources highlight is SPMO, the investment S&P 500 momentum ETF.
The growth numbers on this fund are absurd, honestly.
A short time ago, this ETF had about $700 million in assets today.
It has ballooned to over $15 billion.
That is a colossal wave of institutional and retail money actively fleeing the plain vanilla
index and seeking an alternative.
And it only charges a 0.15% expense ratio.
It's attracting that capital because it isn't just a blind basket of stocks.
It's a quantitative strategy wrapped in a cheap ETF wrapper.
And now its heavy allocations are in the real drivers of the AI, boom, Nvidia, Broadcom,
Micron, Meta.
So it's a tech fund.
No.
And it's vital to understand that.
It is not a technology fund.
It is a math fund.
OK, let's look under the hood of that math because if you are rotating your life savings out
of the S&P 500, you better understand the algorithm you are rotating into.
The elegantly simple, brutal logic of SPMO is what makes it work.
The index it tracks looks at all the stocks in the S&P 500 and ranks them by a momentum
score.
The calculation of that score has two critical steps.
OK, step one.
First, look at the 12-month trailing price growth of the stock.
But, and this is the key, it explicitly excludes the most recent two months of price action
from the calculation.
Wait, that sounds completely counterintuitive.
Why would you ignore the most recent data?
Isn't what happened yesterday more important than what happened 10 months ago?
In quantitative finance, no.
There is a deeply researched phenomenon known as short term mean reversion.
Which means?
The stock shoots up 30% in a frantic three-week period fueled by retail hype and Reddit
rumors.
It is highly statistically likely to pull back, consolidate, or crash in the following weeks.
It gets wildly overbought.
Oh, OK.
If your algorithm includes that recent euphoric spike, you end up buying the stock at the absolute
local top right before the pullback crushes you.
So it's like judging a marathon runner based on their steady pace over miles 5-20 rather
than the absolute dead sprint they put on for the last 100 yards.
The sprint is impressive, but it means they are exhausted and about to collapse.
That is a perfect analogy.
By stripping out the last two months, the algorithm filters out the short term noise, the media
hype, and the euphoric spikes.
It focuses exclusively on the medium term durable underlying trend.
That's really clever.
But the second part of the calculation is where the real armor is forged.
They take that price growth, and they scale the momentum score by the stock's daily
volatility.
Walk me through that.
What does failing by volatility actually do in practice?
It means the algorithm actively punishes erratic, jagged price movements.
Let's compare two hypothetical stocks.
Stock A and stock B both netted a 50% gain over the last 10 months.
Stock A achieved this by going up 5% one week, dropping 3% the next, surging 20% on an unverified
merger rumor, and then crashing 12% when the rumor was denied.
A total roller coaster.
Exactly.
It's a wild gut wrenching roller coaster, but mathematically it ended up 50% higher.
Stock B however, just quietly ground higher.
Up 1% a week, every week, with very shallow boring pullbacks.
It also netted 50%.
Well, I know which one I'd rather have in my retirement account.
Exactly.
And the algorithm mathematically agrees with you.
By dividing the total price return by the daily volatility, stock B will receive a massively
higher momentum score than stock A.
The fund is actively hunting for smooth, steady, resilient uptrends.
It wants stocks that appreciate without terrifying downsides swings.
Wait a second though, I have to ask the skeptical question here.
Whenever I hear the phrase momentum investing, my brain instantly translates that to arriving
incredibly late to the party.
Naturally.
Systematically buying stocks that are already dangerously expensive right before the music
stops in the market crashes.
It is the single most common critique of momentum strategies.
And if you are just blindly buying stocks going up, it is a very valid fear.
But this is exactly why that volatility culture is the secret weapon.
Euphoria by definition is volatile.
When a bubble is inflating rapidly or when it begins to pop, the daily price swings are massive.
With the algorithm punishes volatility, it actively downgrades those euphoric blow-off
top stocks.
It acts as a circuit breaker against buying into a bubble.
Yes.
And the historical proof is in the downside protection.
Yeah, the source has provided the data on this and it is compelling.
During the brutal 2022 bear market, the plain S&P 500 VOO dropped 19%.
The tech heavy Nasdaq QQQ plummeted 34%, but SPMO only dropped 10%.
That is the armor in action right there.
It captured the superior upside during the bull runs, but when the macro environment rolled
over, the stocks that possess the highest momentum combined with the lowest volatility proved
to be the most resilient assets in the market.
The safe havens.
Exactly.
They were the high quality cash-rich names that institutional money flock to for safety.
SPMO outperformed the broader market by 900 basis points in a devastating down year, purely
because it followed its mathematical rules.
Now, for full transparency, the analyst report did note a caveat.
SPMO lagged the broader market in 2023.
It underperformed during the immediate recovery.
And you have to understand the mechanics of market bottoms to know why.
When a market bottoms out after a severe crash, the stocks that lead the initial violent
bounce are almost always the absolute worst quality, most beaten down, highly volatile junk
stocks.
The dead cat bounce.
Right.
The current 80% will bounce 100% in a month, purely on short covering and speculation.
A momentum fund like SPMO, which is holding this safe, resilient, low volatility stocks that
hardly dropped it all during the crash.
It will naturally lag that junk-fueled initial rally.
Exactly.
Momentum strategy structurally underperformed the exact V-shaped inflection point of a market
bottom.
But once the new bull market is established and the junk fades, the strong quality names take
over the leadership again.
With a full cycle, the downside protection makes the total return significantly superior.
Okay.
So we've solved capital growth with the smarter beta of SPMO.
We've solved durable, growing dividends with SHD and the 10 ETF portfolio.
But here is where it gets really interesting.
Oh yeah.
What if a listener wants pure, high-octane options income?
But they want it without the catastrophic NAV decay we discussed earlier.
They want a strategy that actually uses technical analysis and market psychology to stack the
odds rather than just blindly selling covered calls on whatever tech stock is trending on Twitter.
This brings us to perhaps the most sophisticated, genuinely novel piece of research in our stack
today.
We're talking about the worth charting options income ETF.
The ticker symbol is WRTH.
We reviewed a direct interview with Carter Braxton Worth, the CEO and founder of worth charting
LLC.
And let's establish some credentials here because this isn't a retail day trader launching
an ETF from his basement.
Far from it.
Worth is a 35-year Wall Street veteran.
He was a longtime cell side technical research analyst.
He advised massive institutional clients, multi-billion dollar hedge funds and pension plans.
He spent an entire career studying market psychology, relative strength and price action.
And he has now packaged his proprietary institutional grade option strategy into an ETF accessible
to the everyday retail investor.
Which is a major democratization of strategy.
Modern investors rarely get access to true institutional strangle selling mechanics without
paying exorbitant two and 20 hedge fund fees.
The mandate for the WRTH ETF is aggressive and 11-12% target yield paid out quarterly, comprising
a portfolio of roughly 40 equal weighted large cap stocks.
But the yield isn't even the real story.
The magic is entirely in the highly specific mechanics of the trades they execute.
Let's break those mechanics down step by step because the math has to be airtight if you're
promising double-digit yields.
First off, this is not a standard covered coal fund.
Carter Worth strategy revolves around selling out of the money strangles.
For the listener who might not treat options, let's explain what a strangle is.
A short strangle involves selling two different options on the same underlying stock with the
same expiration date.
You sell an out of the money call option, which is a bet the stock won't go up past a certain
price, and simultaneously, you sell an out of the money put option, which is a bet the
stock won't drop below a certain price.
Essentially, you are drawing a wide box around the current stock price, and you are saying
to the market, I will bet you that this stock stays inside this box for the next three weeks.
And if it stays in the box, you keep the cash premiums from both the call and the put.
Exactly.
And statistically, selling short term out of the money options is a high probability strategy
to begin with.
You've noted that broadly across the market, if you sell an option that is out of the
money with less than 20 days until it expires, roughly 70 to 75% of them will expire worthless,
meaning you win the trade.
But worth add strict non-negotiable rules to push that baseline probability well over 90%.
Right.
Rule number one, they exclusively trade large cap stocks.
They explicitly exclude small cap companies, and they completely exclude the entire biotechnology
sector.
They exclude biotech.
The option premiums and biotech are massive because of the risk of an unpredictable force
measure of price move.
In the options world, the biggest threat to a strangle is a stock moving 50% overnight.
Ah, I see.
A small cap company can get bought out by a large arrival over the weekend for a massive premium.
If you sold a naked colon at stock, your losses are devastating.
A biotech company might get unexpected FBA approval, or, conversely, a critical phase three drug
trial might fail on a Tuesday morning.
Using this stock to instantly drop 80% at the opening bell.
If you sold a put on that company, you were just completely wiped out.
Wiped out.
By limiting the universe to stable, massive, mature, large caps, you virtually eliminate the overnight
buyout and trial failure risks.
That makes perfect sense.
Limit the playground to avoid the landmines.
But the real linchpin of this entire strategy, the thing that makes it unique, is the timing.
They do not just randomly sell strangles on large caps.
No, they wait.
They only sell these strangles set 10% out of the money on both sides after a stock has
gapped up or down by 10% or more following a quarterly earnings report.
They wait for the earnings news to hit the wire.
They watch the massive, violent price gap occur, and then they strike.
It is a profound exploitation of market inefficiency and human psychology.
I was trying to visualize this, and the best analogy I could come up with is the insurance
market.
OK, let's hear it.
It's like selling earthquake insurance the morning after a massive city-leveling earthquake.
The insurance premium you can charge that morning is sky high.
Everyone is absolutely terrified.
The ground just shook.
Buildings are damaged.
The panic is visceral.
But mathematically, geologically speaking, the main shock is already over.
The tectonic energy has already been released.
Exactly.
But people are so driven by recency bias and fear that they are willing to pay absurd prices
for the insurance anyway.
That is exactly what is happening in the options chain.
The technical term for it is implied volatility crush.
Volatility crush.
Yeah.
When a company days away from releasing its earnings, the uncertainty is at its absolute peak.
No one outside the boardroom knows the numbers.
Options premiums swell massively because large institutions are buying insurance to hedge
their positions, and retail speculators are gambling, hoping for a lottery ticket payout.
The moment the earnings are released, let's say the numbers are fantastic.
When the stock gaps up 15% in pre-market trading, the uncertainty is instantly resolved.
The actual news is out.
But the emotional hangover, the fear and the greed, are still sloshing around in the market.
The market is incredibly efficient at reprising the baseline.
Thousands of computer algorithms and institutional analysts digest the numbers in milliseconds
and reset the fair value of the stock.
Since that 15% gap occurs, the stock is highly likely to consolidate and trade sideways in
its new higher range.
But the options premiums are still artificially elevated because retail traders are still blindly
buying options, hoping the stock will run another 20% the next day worth fun steps in
at that exact moment.
Let's trace the numbers on that trade.
Stock X just jumped from $100 to $115 on good earnings.
The ETF immediately steps in.
They sell a call at $130 and they sell a put down at $100.
So they give the stock a massive 30 point runway to drift?
Exactly.
And they collect incredibly rich cash premiums because the market is still pricing in panic.
By waiting for the gap to occur, worth eliminates the actual earnings risk entirely and capitalizes
on the post earnings volatility crush.
He estimates this specific setup has a 92% win rate.
Okay, and 92% win rate sounds like a Wall Street cheat code, but I have to ask the hard
question here.
Go for it.
We are talking about selling naked strangles.
In the options trading world, selling naked options is universally described as picking up
pennies in front of a steamroller.
Yes, you win 92% of the time.
You pick up the penny, pick up the penny, pick up the penny.
But that 8% of the time you are wrong.
A steamroller flattens you, wipes out your account and destroys years of gains.
How is this ETF not a ticking time bomb?
It is the most critical question to ask regarding any option strategy, honestly.
If you don't understand the tail risk protection, you shouldn't invest.
Worth address this head on.
They do not leave the steamroller unchecked.
Okay, how do they stop it?
Let's look at the two sides of the trade.
First, the downside.
For every put option they sell, they are 100% cash secured.
Meaning what?
Exactly.
Meaning, all the uninvested capital in the ETF is sitting safely in US Treasury bills earning
the risk free rate.
If they sell a put at $100 and the stock unexpectedly drops to $90, they don't face a margin
call.
They simply use the cash, sitting in T-bills, to take delivery of the stock at $100, exactly
as if they had placed a standard limit by order.
There is no leverage nightmare.
Exactly.
It is mathematically no worse than simply owning the underlying equity.
Okay, so the downside is covered by a mountain of cash, but what about the upside?
What if they sell a call at $130 and the stock gets swept up in an irrational meme-stock
frenzy and blasts to $200?
The losses on a naked short call are theoretically infinite.
The steamroller will crush you.
That is the ultimate tail risk.
And to neutralize it, worth explaining that they can currently buy far out of the money
calls as catastrophic insurance on every single trade.
Oh, I see.
Let's go back to our numbers.
They sell the $130 call to collect the rich premium.
They immediately take a tiny fraction of that premium and use it to buy a call at $150.
So they are building a wall?
Exactly.
This converts the naked call into what is known as a wide-call credit spread.
If the stock goes completely irrational and rockets to $200, their losses are strictly
mathematically capped at the $20 difference between their short call at $130 and their long
call at $150.
The steamroller hits a concrete wall at $150.
Exactly.
At the infinite risk, they secure the downside with treasuries and they harvest the massive volatility
premium on the 92% of trades that stay within the box.
It is a brilliant example of engineered income.
So to summarize the WRTH strategy, target 11 to 12% yields, no biotech, no small caps, wait
for the earnings gap, sell the wide strangle, buy the catastrophic insurance to cap the upside,
and sit in T-bills to cover the downside.
It's methodical, it's discipline, and it proves that you don't have to chase 50% yield
traps to get high income if you rely on intelligent, math-driven strategies instead.
And that transition moves us perfectly from the broad quantitative ETS strategies down to the
granular individual stock level.
Because even in a macro environment where the S&P 500 yields 1% and looks broadly overvalued,
there are always individual pockets of deep value and tactical opportunities for the stock
pickers who know where to look.
Absolutely.
The final section of our deep dive focuses on two specific individual plays highlighted
by our sources.
We're looking at build a bear workshop, ticker BBW, and Devon Energy ticker DVN.
Get two very different plays.
Very.
Let's start with build a bear.
The analysis comes from the dividend collection agency, and this is pitched as a classic
deep value multiple expansion play.
It is a fascinating case study in how retail stigma can create a massive pricing opportunity.
It really is, because most people hear the name build a bear, and their mind immediately
goes to a like a fad from 2005.
They picture a dusty store in a dying suburban shopping mall where you stuff a teddy bear,
it feels outdated.
But the financial numbers tell a completely radically different story.
At the time of the report, the stock is trading around $35.92.
It has a forward price to earnings ratio of just 9.6.
When the S&P 500 is trading well over 20 times forward earnings, a 9.6 multiple is undeniably
screamingly cheap.
All for sure.
It is a 2.47% dividend yield, but here is the real bull case.
The company has absolutely zero debt, none, a pristine balance sheet.
In the first quarter alone, they return $14.3 million to shareholders via dividends, and
another $11.4 million via stock buybacks.
Wow.
They are expanding aggressively, opening roughly 50 new stores, but they are pivoting away
from dying malls and focusing on international markets and high traffic tourist destinations.
And crucially, they are seeing significant margin expansion.
Even though their top line overall revenue was slightly soft year over year, their gross
profit margin jumped from 56.9% to 64.4%.
They are figuring out how to make significantly more profit on every single bear they sell.
The thesis from the source is that Wall Street is severely mispricing the company, because
analysts still view it through the lens of a cyclical dying mall retailer, rather than
recognizing it as a diversified debt-free cash-generating machine.
The analyst targets a 60% upside purely through a mechanism called multiple expansion.
Let's break that down for the listener.
What exactly is multiple expansion, and why is it the holy grail for a value investor?
Multiple expansion is how value investors generate massive returns without needing the underlying
company to invent the next iPhone.
A stock's price is determined by taking its earnings per share and multiplying it by the
PE multiple, which is the premium investors are willing to pay for those earnings.
Right now, because of that dying mall stigma, investors are only willing to pay 9.6 times
earnings for build a bear.
Its price is a distressed asset.
But it's not distressed because it has zero debt and growing margins.
Exactly.
So if the company simply continues to execute, continues to open international stores, and continues
to buy back its own stock, eventually institutional Wall Street will be forced to wake up.
They will realize the stigma is wrong.
The market will recognize that a debt-free cash machine deserves a higher premium, closer
to the retail industry average of perhaps 14 or 15 times earnings.
And if the multiple expands from 9.6 to 15, the stock price increases by over 50%.
Even if the actual underlying earnings of the company do not grow by a single cent.
That is the magic of multiple expansion.
Add in any actual organic earnings growth, plus the 2.4% dividend yield, and you arrive
at that 60% total return target.
It requires patience to wait for Wall Street to change its mind, but the underlying math
is incredibly safe.
It's the exact philosophical opposite of paying 30 times earnings for an AI tech stock and
praying the earnings quadruple over the next five years to justify the price you already
paid.
It's buying a dollar for 60 cents and waiting for everyone else to realize it's a dollar.
Love that.
But let's contrast that with a completely different type of individual stock trade.
Devon Energy ticker DVN.
This analysis comes from the dividend channel, and it is a pure tactical timing play based
on market calendar mechanics.
This one is fascinating because it attempts to scientifically exploit a behavioral anomaly
that occurs around dividend payout dates.
Right.
Devon Energy announced a 32 cent per share dividend with an ex-dividend date of June 15,
2026.
For a quick refresher, the ex-dividend date is the absolute cutoff.
You must purchase the stock before this date if you want to receive the upcoming dividend.
The strategy the analyst is exploring is known as a dividend run.
The dividend run.
The core theory is that in the two or three weeks leading up to an ex-dividend date, retail
investors and yield hungry funds Russian to buy the stock just to capture the payout.
This artificial surge in demand temporarily drives the stock price up.
And the historical data they presented on Devon Energy's specific patterns is quite compelling
on the surface.
It really is.
Look to the two week window prior to the ex-dividend date for Devon's last four payouts.
In March, 2026, the stock ran up $3.53 in that window.
In December, 2025, it ran up 46 cents.
In September, 2025, it actually dropped $1.11, but in June, 2025, it ran up $3.22.
So mixed bagged but mostly positive.
Right.
If you combine the price action across those four specific windows, the price appreciation
was $6.10.
That completely dorsed the actual 96 cents paid out in the dividends themselves.
The strategy dictates that you buy the stock two weeks out, capture the capital appreciation
of the run-up, and then crucially sell the stock the day before it goes ex-dividend.
You sell it to avoid the inevitable price drop that mathematically occurs on the ex-date
when the dividend is extracted from the share price.
OK.
But I have to stop here.
I've got this setup, and it feels a little bit like trying to read tea leaves.
Is buying an energy stock two weeks before a dividend date based on a calendar pattern?
Basically just financial astrology.
We are talking about Devon energy.
They pull oil and gas out of the ground.
Doesn't the macroeconomic price of crude oil completely hijack this entire strategy?
It's like trying to swim against a rip tide.
Your stroke technique might be perfect, your timing might be exact, but the macro current
of the ocean is going to dictate where you end up anyway.
If OPEC makes an announcement, or if there is a geopolitical crisis, crude oil could
move 5% in an afternoon, and this entire $3 dividend run is instantly obliterated.
You hit the nail precisely on the head, and that is a vital, necessary piece of skepticism.
The source explicitly noted this caveat, and it serves as a crucial lesson in tactical
trading.
Yes, the calendar anomaly exists.
Statistically, there is documented buying pressure ahead of an ex-dividend date.
So the psychology is there.
The behavioral psychology is very real, but sector sentiment and underlying commodity
prices are the macro forces that will always, always overwhelm the micro calendar effects.
If the price of West Texas Intermediate crude drops $5 a barrel, Devon energy is going
down.
Regardless of how many retail investors are trying to front run a 32 cent dividend.
The macro always beats the micro.
Exactly.
And validating that skepticism reinforces the entire philosophical theme of our deep dyes today.
The plan over blind pattern following.
Whether you're looking at the 1% yield of the S&P 500, the collapse of the 50% yield single
stock ETFs, or the calendar patterns of Devon energy, you cannot divorce an investment from
its fundamental reality and its underlying risks.
Which brings us to the ultimate bottom line.
Let's tie this entire 60 minute journey together.
We started with a stark, undeniable reality.
The index you've been taught to just buy the S&P 500 is currently yielding roughly 1%.
It is historically expensive and it is priced for absolute perfection.
When the market is in that state, you simply cannot afford to be a lazy investor.
The old rules of setting and forgetting your portfolio for passive income are currently
broken.
And equally important, you cannot afford to be a desperate investor.
Right.
You cannot let the lack of yield drive you to chase the hype.
We thought exactly what happens to the dying single stock ETFs from yield max defiance
and REX shares.
If a fund promises you a 50% yield by selling covered calls on highly volatile junk, you
are going to suffer massive net asset value decay.
They will hand you your own capital back minus a management fee.
Your payouts will shrink as the principal shrinks and eventually the fund will liquidate leaving
you with permanent, irrecoverable losses.
So the question remains, what is the edge?
If passive index funds offer no income and high yield gimmick funds actively destroy your
capital, where is the intelligent middle ground for the retail investor?
The edge is found in three specific pillars, first, valuation discipline.
If you are picking individual stocks, you look for the build a bears of the world companies
with pristine balance sheets, zero debt, actual strategic growth plans, trading at single
digit multiples.
You buy deep value when the rest of the market is irrationally chasing expensive tech growth.
Second, durable income.
Yes, durable, mathematically sound income.
You look to funds like SHD offering a starting yield triple that of the S&P backed by a strict
fundamental screen that guarantees a 9.4% annualized dividend growth rate to fight off inflation.
You look at constructing an engineer, 10 ETFs sleep well at night portfolio that carefully
balances the market beta of VOO, the dividend growth of FDIV, and the structured premium
income of funds like GPIX and QYLD.
You build a diversified machine that generates cash in all weather conditions.
Exactly.
Third, you look for engineered, math driven strategy, smarter beta.
If you want aggressive capital growth, you look at a quantitative fund like SPMO.
It uses a momentum strategy heavily filtered but daily volatility to capture the upside
of the AI boom, while mathematically protecting your downside against the euphoric blowoff tops
that crushed the NASDAQ in 2022.
And if you want high octane options income.
You look at genuinely novel institutional grade strategies like Carterworth, WRTH selling
out of the money strangles only after earnings gaps, playing the implied volatility crush
with strict concrete tail risk protections and a 92% historical probability of success.
It all comes back to recognizing the macro environment you are operating in and actively adapting
your tools to fit that reality.
Exactly.
When the index is this expensive and yields this little, your only edge is valuation discipline,
durability and strategy.
And if I may, I want to leave you with one final, unaddressed thought to ponders, we wrap
up this deep dive.
Okay.
Let's hear it.
It's a macro implication of everything we've discussed today.
We have laid out the logical mathematical case for why retail investors should rotate
out of the overvalued cap weighted S&P 500 and move their capital into these protective strategies
into low volatility momentum funds like SPMO or safe dividend havens like SHT.
But here's the paradox of financial markets.
What if they actually do?
Wow.
What if millions of retail investors and massive institutional funds broadly wake up
to the fact that the index is an expensive trap and they suddenly rotate hundreds of billions
of dollars into those exact same dividend and momentum safety traits?
Do those protective strategies eventually become crowded over valued bubbles themselves?
By fleeing the S&P 500, are we fundamentally eliminating the risk?
Or are we just collectively moving the risk from one side of the boat to the other until the
lifeboats become so heavy that the boat capsizes anyway?
It is the ultimate contrarian dilemma.
The moment a safe haven becomes popular, it ceases to be safe and it is exactly why investing
requires constant vigilance, not blind faith.
That is a brilliant and honestly slightly terrifying thought to end on.
If you've been listening today, take a hard look at your portfolio.
Are you blindly relying on a 1% yield engine?
Are you quietly bleeding out in a 50% yield trap?
Or are you actively engineering your income?
Thank you so much for joining us for this deep dive.
Stay disciplined, stay curious, and as always, thank you for getting informed.
We will see you next time.