Pound and Multi Currency Portfolios Pounded


There is opportunity because the British pound and multi currency portfolios that are short the US dollar have been pounded.

multi-currency-chart

This a six month pound US dollar from finance.yahoo.com as of last week.

This year Merri and I have the delightful task of flying to England for our youngest daughter’s wedding. Way to go Ellie!  It looks like our stay will really be inexpensive.  A hotel that would have cost $200 a night might be (according to Morgan Stanley)  as little as $129.

There are numerous reasons we’ll see below for the weak British pound.  Britain has many problems.  However problems create opportunity or as the British would say “Where there is muck, there is brass”.

So let’s take a look at the pound.

I asked Thomas Fischer at Jyske Global Asset Management for their view and he wrote:  We were contemplating selling pounds in our managed Forex Portfolio but decided not to take a position as it seems a little oversold at the current level (against the USD). Morgan Stanley has a target of 1.29 in the fourth quarter of 2010. The current level is 1.47.   Analysts at BCA think the budget published on June 22nd could be a decider for the direction of GBP.  They  also thinks the pound is  oversold at current levels but feel that a disappointing budget and a possible downgrading from Fitch could mean trouble for the UK economy and the British  pound.

A look at economic data in the Economist shows that Britain is currently low man on the currency fundamental totem pole.

Compared to the US, China, Japan, Canada and the Eurozone Britain has the worst budget balance by far.  The low interest rate on the pound does not compensate for this fact.  However the trade and current-account balances are very good compared to the US. These balances normally have a very negative influence on a currency’s parity so this fact is an indicator of strength.

multi-currency-economic-data

The British economy does not look in a strong position to pull the pound up by its boot straps.

multi-currency-economic-data

Britain’s GDP has dropped.  Industrial production is lagging.   Inflation is higher than in the other countries of this comparison.  Lower unemployment is the only positive factor and 8% is not a good unemployment rate… just not as bad as the US and euro zone.

The stress on BP over the Gulf oil spill also has the short term potential of pushing the pound down even further.

The downwards pressure is most likely to be emotional rather than real. However BP is a huge firm and as the chart from www.finance.yahoo.com shows  BP’s share value in New York as of last Friday fell over 50 percent from the beginning of the Gulf oil spill in April.

bp-chart

Some analysts say the crisis could lead to the takeover or even the bankruptcy of BP which is a global company traded both in London and New York but is seen as one of Britain’s most valuable companies.

There is a huge exposure of British pension funds to BP.  The view that BP is British creates a British pound concern if the company is being continually beaten up by the press.

BP is the third largest oil company in the world, after ExxonMobil and Royal Dutch Shell, with 80,000 employees worldwide as of last December, sales of $239 billion in 2009 and a market value — even after the recent losses — of more than $100 billion.

At a time when Britain is desperate to reduce its deficit, BP is a huge contributor to British tax revenue, paying nearly $1.4 billion in taxes on its profits last year.  They are Britain’s largest tax payer.

Its reputation for large, reliable dividends have made it a favorite of pensions… especially British pensions.

BP’s dividend payments accounted for nearly 13 percent of the dividends handed out by British companies last year, according to FairPensions, a London-based charity.

So continual bad news about BP could be depressive on the pound. This is where opportunity may arise.

BP is British yes, but also has extensive holdings in the United States.  It merged with Amoco, the former Standard Oil of Indiana, in 1998, and about 40 percent of its shares are held by American investors.  It owns a refinery in Texas City, Tex., that is one of the world’s largest, and a 50 percent interest in the Trans Alaska Pipeline, in addition to a huge gasoline marketing operation.

So bad BP news is bad economic news long term.

When incorrect short term news drives the market, opportunity is created and there is a risk that BP’s bad news will over influence selling of the British pound.  Watch for this and if you see it, buy pound investments… maybe even BP.

I asked JGAM their opinion and they replied:

We do not have BP in our portfolio but it is an interesting case. Morgan Stanley is positive on BP and has a target of 600p which was the price at the beginning of the year. The current price is 370 so a good potential. I have attached the Morgan Stanley analysis.

Morgan Stanley says on June 14, 2010: BP plc. BP has indicated this morning that the LMRP containment cap, installed on June 3, is now collecting c.21kboe/d of oil/gas (15kb/d oil plus nat gas that is being flared).  The first planned addition to the LMRP, taking hydrocarbons from the choke line of the failed BoP to the surface via a separate riser, is expected to begin operations in the next few days.  In addition, BP plans to add another 10kb/d of oil processing capacity by the end of June, bringing total processing capacity to 38kb/d – which equates to the high end of the range regarding estimated flow rates, now sitting at c.40kb/d.  BP puts costs to date at $1.6bn, while press reports (e.g. FT, June 14, 2010) suggest the US administration wants an independent third party to administer an escrow account set aside to meet claims.

Valuation methodology and risks: We set our 600p price target based on a DCF valuation at the forward curve (LT $85/bbl). Our DCF assumes a WACC
of 7.5% and a 2% terminal growth rate. We estimate Macondo costs to be c.$14bn and assume a 30% depreciation in the value of the GoM portfolio due to the moratorium to offshore drilling.

Key risks: A more extensive period of uncertainty regarding how and when the oil flow from the Macondo well will be controlled and then ‘killed off’.

Clean-up costs may escalate off the back of a more active hurricane season.

Although BP offers one of the highest dividend yields among the integrateds, its quarterly dividend payment may be increasingly influenced by the political environment.

Having said all this, BP shares could be very attractive because these shares offer good value.

BP is not like GM was… an icon whose times had past. BP is a well funded, successful, globally diversified firm with one huge problem that it appears to be able to afford.

BP pledged to put 20 billion dollars into an escrow account last week.  That is a lot of money… yet is only about a year’s profit for BP. Let’s say they have to triple this amount and pay out 6o billion. This is only three year’s profit for the firm… so, if the share were fairly priced before the spill they are a good buy at half the price even without a profit for three years.

Let me hastily add that I will NOT be investing in BP shares.  Merri and I have given our investment advisers a block long ago.. no pharmaceutical… no alcohol…. not tobacco… no weapons… no oil. So even if BP  was just another oil company… without a terrible corporate culture, I would not be buying.

However I recognize that others have different views so do write about shares I personally won’t buy… for example I often look at Novo Nordisk, the large Danish pharmaceutical company and feel I would not be diligent if I did mention the potential in a BP share speculation.

There may be extra opportunity in many UK companies right now due to the depressive effect of the BP scandal.  BP has lost half its share value. The  London Stock Exchange has also declined since the beginning of the oil spill as we can see on this one year chart of the Financial Times Stock Exchange 100 Index.

ft-index chart

The UK stock market was a good value market even before this decline. We saw in our last major market value update that the London Stock Exchange is one of six top value major markets in the world.

The UK market offers the highest Cash-Flow Return on Equity and Return on Equity.

multi-currency-economic-data

Watch for arbitrage opportunities… where the pound falls so quickly that the price of BP shares listed in London are lower than the BP share listed in the USA.

This is a big enough company that big traders will equalize the BP pound versus dollar price so you would have to be quick if this situation arises.  The more likely opportunity is that emotion over the disaster from the oil spill combined with a weak British pound will make BP shares an extra good value.

I personally am looking at Impax Environmental Markets Trust.  Impax Environmental Markets (LSE: IEM) is a large British investment trust dedicated to alternative energy, water treatment and waste technology. Established in 2002, the company is a constituent of the FTSE 250 Index.

Here is a five year chart of the share price.

impax chart

An investment trust is the British equivalent of a closed end mutual fund.

This fund is dedicated to the environmental and clean tech sectors, with a focus on alternative energy, water and waste. This sector offers some of the most compelling investment opportunities of the 21st century as the world responds to the problems caused by environmental degradation, resource scarcity and climate change.  Impax’s team of professionals have many years of experience in the financial and environmental sectors so they can understand and take advantage of the investment opportunities arising from these growing markets.  Impax is the only pure play environmental investment trust and Impax has a team of 17 investment managers who specialize in finding good environmental opportunities.

Learn more about environmental investing in Copenhagen.

Join Merri and me in Copenhagen for another big value.  The strong US dollar makes this the year to enjoy Europe and Thomas Fischer at Jyske just sent me this note: Gary due to the increasing US dollar the fee for our August seminar in Copenhagen for Americans has dropped from about $2,050 to $1,700, a 15% discount.

I love attending these seminars because of the great speakers and this year one speaker will be Bjorn Lomborg known as the “Skeptical Environmentalist.”

Lomborg is a Danish author, academic, and environmental writer. He is an adjunct professor at the Copenhagen Business School, director of the Copenhagen Consensus Centre and a former director of the Environmental Assessment Institute in Copenhagen.  I have spoken with him at one seminar before and his ideas are worth the trip across the Atlantic.

He became internationally known for his best-selling and controversial book “The Skeptical Environmentalist”.

In 2002, Lomborg and the Environmental Assessment Institute founded the Copenhagen Consensus, which seeks to establish priorities for advancing global welfare using methodologies based on the theory of welfare economics.  You can see some of his ideas at a youtube video here.

See details about Jyske’s bi annual Copenhagen seminar here Global Wealth Management Seminar.

Gary

How We Can Serve You

How to Have Real Safety

Regain Real Security

There is a path to true security.

I was reminded of this once when I made a horrible mistake.  Almost!

The supposed error?  Letting my mind wander six decades back to an hour I spent with a girl.

Learn from this near disaster, seven most powerful sources of wealth, health, security and fulfillment in this era.

The girl was pretty and blond.  Terry was her name. My imagination spanned decades returning to my Oregon roots seeing her as if she were there.

We were 11 or 12 and had known each other since we started Rockwood grade school.  Just buddies, our non-romantic friendship lasted 12 years, from first grade till high school’s end.  Then she went off to Pepperdine College in California.  I started traveling the world.  Never saw her again.  I hope her life has gone well.  But until that reflection I’d never thought much of Terry in so many years.

What could have been the tragic error was letting that memory touch my heart.  Two kids, walking on a crisp, Pacific Northwest autumnal afternoon.

We walked down a sun filled, pine needle covered, dirt path.  Huge, fat, green Douglas firs lined the road.  Traffic was no problem, not many cars.  Crossing Stark Street we turned left, hiking three blocks to 182nd.  There we passed an old clapboard candy store.  I can still hear the wooden sidewalk of that store slap beneath my feet, felt the soggy planks sag and smelled astringent pitch from the fir trees.  Then we turned right, up 182nd for about a mile.  There was Terry’s house.

I carried on, walking through a big field, waist high grass turned straw brown by an early frost.  There were dozens of paths made by who knows what.  Animals perhaps or countless generations of other kids walking home alone from school.  I chose one following it to another wood of tall, rough-barked fir.  Crossing one more field, I climbed a rock wall, struggled through a barbed wire fence (my Mom hated that fence ripping my jeans).  I was home!

Sweet simplicity, that dream.  Two kids holding hands, walking on a dirt trail under a crisp, but blue, sunny sky.  Pure innocence.

My tragic error was looking back.  I returned to Rockwood, Oregon with Merri and my kids to show them this part of their roots.  Following the route, Terry and I had walked were the candy store, grange hall, old wooden buildings and their home spun honesty and charm.

Instead we found six lanes of fast, frantic traffic and road rage.  McDonalds, KFC, strip shopping centers.  The car radio blared warnings of local gangs and drive-by-shootings. Beauty, innocence, sweet simplicity, replaced by drive ins and drive bys.  Gangs and drive-by shootings replacing a tender walk in the sun.  Good bye memories, good bye.

How can our kids walk in places like this?  How can we return to those old feeling of security and comfort?

How can any of us possibly keep pace in this world that’s moving so fast?  Then something inside snapped. “There has to be an answer for honest, hard working folks to enjoy the wonderful opportunities of today and regain what we’ve lost over the past forty years”, I swore to myself.

How can we keep up, without having such a fast paced life we turn into machines?  Where do we find time for God, family, charity, and our friends?  How can we rediscover those sun filled, pine needle covered, dirt paths we want to walk?

“There has to be places that are still innocent and pure”, I thought.  “There has to be a way of life that does not pound us with stress”.

This thinking led me to begin reviewing the thousands of economic and business experiences I have shared with readers over the decades.  This started a search for a simpler way of life and a better place to earn and protect our wealth.

By digging, asking and observing, traveling and talking to investors and investment managers all over the world I found that there are true paths to real security in the here and now.  That knowledge helped me develop courses on how to have natural health, everlasting wealth and purposeful investments.

This knowledge helped Merri and me invest in stocks and real estate all over the world.  It helped us find and develop Merrily Farms into a sanctuary here on Little Horse Creek.

That almost error led us to create an entire portfolio of information on how to keep pace, get ahead, enjoy our modern society but, to enjoy life wherever you choose without having to move too fast.

I want to share this information with a special few in our summer course in the Blue Ridge Mountains where the air is dry, crisp, with a bright sparkling sun.  Our North Carolina woods is a place where we can once again walk down sun filled, pine needle covered, dirt paths beneath huge, fat, green fir and hemlock.

We start the course with this question that can help us get our lives back.

“What would you think in the last 30 seconds of your life if you were the richest man in the world but were unhappy?”

This quote is from the opening slide of our Value Investing Seminar, “How to Secure Your Future With a Value Breakout Plan”.  This a vital question because few investors think about the value of comfort and happiness.  Yet the truth is, those who are comfortable and happy with their investments are likely to make good investment decisions.  If not, no matter how much money an investors has, changes are, they’ll lose.

Bring Value and Purposeful Investing Together

value

Join us to learn how to make safety and profit easier and less time consuming so we can focus on our individual purposes in life.

Become an International Club member and join like-minded souls, who take a positive view and think outside the box for better health, greater income and safer, more profitable investments. Share ideas on how to add value to everything and make 2016 -2017 your best years yet.

In 2016 Merri’s, David’s and my mission is to share our 50 years of experience in international business, investing and living to make ourselves happier, healthier and wealthier.

To reach a wider audience we have shifted our seminars online including the seminar “How to Secure Your Future With a Value Breakout Plan”.

Here is a partial syllabus of this seminar.

  • Three common sense ideas:   Avoid lines.  Go where you are a name not a number.  Decide who you are and what matters to you.
  • Why three economic trends that have make smart investors rich every 30 years are ready for cashing in now.
  • How to look for short term problems that create long term value.
  • Update on the best ten markets for safety and profit.
  • How to diversify in value with Country ETFs.
  • The value of time in investing and life.
  • The economics in cyber wars. How to look back at the economics of war to see ahead.
  • Great new innovations that will ignite a 16 year bull market from 2016 to 2032.
  • The next great fuel.
  • Timing long cycles, economic cycles and seasonality.
  • Investing in Demographics.
  • Trading Down, the biggest global trend ahead.
  • Hidden Inflation .
  • How to protect against pension loss.
  • The Silver Dip 2016. When and how to invest in gold and silver . How to double your position with loans.
  • How to spot currency distortions and borrow low to deposit high.
  • How, Why When & Where to bank abroad.

Club membership is for an entire year and the recorded seminar is just one high point.

In 2016 and 2017 we are conducting online seminars about value investing, natural health and how to write to sell.

International Club members receive all the online seminars free.

In addition club membership includes:

  • Personal investing Course (Pi), normally $297, FREE
  • Self Fulfilled How to be a Self Publisher, normally $299, FREE
  • Eventful Business, normally $349, FREE
  • International Business Made EZ, normally $299, FREE
  • Report “Three Economic Conditions for 50% or More Profit,” normally $29.95, FREE
  • Report “Silver Dip 2015” normally $27, FREE
  • Three online Value Investing Seminars, normally $477, FREE
  • One online Natural Health Seminar, normally $119, FREE
  • One online Writers Camp, normally $299, FREE

Annual International Club (one year) Membership  $1,199

Annual International Club (one year) Membership four quarterly $375 payments

Merri and I have been organizing courses, seminars and newsletters about international and Super Thinking  lifestyles for over 30 years.  The importance of this sharing… by like minded souls… was reinforced when a delegate from a course sent an email that said:

My Dearest Merri and Gary, Thank you for your most gracious hospitality last weekend. I am just thrilled at being a part of your group.  You and Gary were exactly as I imagined you to be, warm friendly, kind, considerate, genuine, helpful, fun, sincere, what else can I say……I felt so comfortable in your presence and learned so much in your course. I was sad to leave the farm that Sunday afternoon.  You made us all feel so welcome and cared about.  You were so kind to make arrangements for a ride with the other delegates from the Charlotte Airport.  They were so nice to me and so helpful, by the time the weekend was over I felt like they were my long lost brothers. Monday morning we all had breakfast at the airport together and I was so sad to see them go, I was sad the weekend was over, perhaps sad is not the right word for how I was feeling perhaps Gratitude is a better way to describe it.  Grateful for having the opportunity to share the weekend with such wonderful, like minded Human Beings, in the beautiful mountains of North Carolina. Thank you Merri and Gary.  Thanks to you I now have new hope and a new direction to move forward in my life.   I know by attending your classes and conferences that through education and due diligence I will make the right choices.

I invite you to be a member of the International Club.

Let’s prosper in these times of change. Won’t you join us in this exciting club and share Merri’s and my lifestyle for the next year?  Join us online.

Club members receive everything we offer in 2016 and 2017.

Annual International Club (one year) Membership  $1,199

Annual International Club (one year) Membership four quarterly $375 payments

Gary



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