Trading Down Part VII


Trading Down Part VII

This series has looked at why a huge new economic era will benefit US and Ecuador real estate.  We have also looked at a different Ecuador property for sale each step of the way.

See a link to see this message’s Cotacachi Ecuador property below.

First, this last report on “Trading Down” asks “What do the following have in common with big business and trading down?”

Ecuador and US real estate…

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Why would Merri and I buy a beat up 180 year old inn in Ecuador?

Christmas trees and Mexicans?

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Ashe County is one of the top Christmas producers in the US. Here is a Christmas Tree farm next to our farm.

North Carolina farm roads…

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We have put in miles of road on our farm.

Deer…

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Here is a nice buck I snapped sneaking though our woods.

Water…   

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We have a lot of water on our land… all running down the mountain.

Ecuador and US real estate… Christmas trees and Mexicans… North Carolina farm and roads… deer and water.

What do these all have in common with trading down?   What is their connection?  They are all connected because they all follow the same universal rule that follows the path of least resistance.

Christmas trees farms are everywhere in Ashe County.  Here they are being grown within the city limits of West Jefferson.  Because Christmas trees are cut and wrapped in late October, early November many Mexicans arrive in the mountains this time of year. We are seeing them everywhere.

They are following the path of least resistance to earn income and the flow north where there is work.

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We have put in over eight miles of roads on our farm shown in blue.

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Usually the first question people ask when visiting our farm is; “This is so remote how did you find this place”?   The second question is “How did you figure out where to put the roads?”

My answer to the road question is simple.  “I did not need a surveyor or engineer.  We have a lot of deer on the farm. I simply followed the deer trails.”

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Here’s two does I photoed feeding in our front yard.

The deer follow the path of least resistance so their trails produce roads that run as level as you can get.

The entire farm is a reflection of this universal rule… not a farm in the Blue Ridge sense, but a…

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global headquarters with a…

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barn like seminar hall hung over Little Horse Creek…

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barns converted to apartments and…

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farm houses and…

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nestled on the creek and…

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tucked in…

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remote parts of the woods, with…

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cozy accommodations so guests from around the world can…

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meet to share global ideas about health and wealth… investing and business.

Those who grew up here are selling their farms so they can move into the city and those like Merri and me from the city are moving to the farms… as technology… cars… trains…. planes… the internet and low cost communications change their utility.

All these… like water following the path of least resistance and flow…

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downhill.

This brings us to the US.   The price of American real estate… compared to European and Japanese has dropped enormously in the last several years.  Even more than it seems when the devaluation of the US dollar is factored in.

This gives America an advantage… cheap offices… cheap gas stations… cheap homes… cheap factories.

Trading down is the process of mankind following the path of least material resistance. Trading down is the process of  big business following the path of least resistance.

Energy of industrialization has been run on  human fuel, farmers moving from rural to urban and suburban environments.  From the farm to the factory as they dramatically improve productivity at a very low cost.  Their enhanced wages increase their consumption.   In short the burst of increased affluence over the past several centuries has been fueled by cheap labor enhanced mainly by fossil fuels.

In this era past big business followed the path of least resistance wherever labor was cheapest in the world.

Globalization and improved technology plus a serious 2008 recession reduced the costs of US labor and enhanced the likelihood that the eleven American benefits we have reviewed in this seven part series will again help the USA be an important leader of mankind into the next socio-economic era.

What About Ecuador and Trading Down?

Ecuador gains from this trading down process in several ways.   First Ecuador real estate and labor were really inexpensive to begin.   Since Ecuador uses the US dollar as its currency, it benefits from the greenback’s fall as Ecuador real estate, labor and debt become less expensive.

In this process of trading down, technology creates a circular flow… just like the flow of farmers to the city and urban dwellers to the farm.  Immigrants move to America as Americans (who no longer have to labor) move out of the US to a less expensive and less cumbersome lifestyle.

The two big losers in the current soci0-economic pact are lenders to the USA and those on fixed incomes.

Ecuador real estate potential is enhanced by increased inflation and this is why Ecuador real estate investing makes sense. Messages at this site monitor investments in Ecuador.

The collapse of the US economy made real estate in America more affordable… but reduced income, jobs and wealth also.  This has forced the US government to stimulate the economy at the expense of the US dollar.  This will cause inflation.

This is forcing many middle class Americans to move to less expensive areas in the US and abroad.

60 million baby boomers have begun to retire.  Many of their pensions and social security will be severely squeezed by inflation, leaving these people with one of five options.

#1: Keep working
#2: Move to less expensive areas within the US
#3: Export their retirement
#4: Live in near poverty
#5: Die

This is one reason I  believe in Ecuador.  Imagine this. 60 million boomers will retire over the next 20 years. We boomers are the most spoiled group of consumers as a demographic class that has ever existed on earth. We were promised the world. We were given the world. Now the magic is about to disappear.

Assume that 10% of these boomers will decide to move to less expensive countries. That’s 6 million people. Where is the most likely place to go? Eastern Europe offers great potential but is a long distance from the US.

Estimating the Number of Americans Who Move Abroad.

My estimates at 105 may also be low. An article in Barrons entitled, “A new life in Panama” by Bob  Adams tells of  a silent immigration of Americans retirees and more, seeking to  work and live in other nations.

I have been writing and speaking and urging people to consider an international life for not quite 40 years. Yet the scale of the  immigration that is taking place now surprises even me.  The author of this article did a survey with over 115,000 respondents.

Any relocating for less than two years or because of military, government or their jobs was eliminated.  The survey uncovered uncovered that 1.6 million  households have already made the decision to relocate. 1.8 million households are seriously considering relocating and 7.7 million households are somewhat seriously considering relocating. The survey suggests that in total, an astounding 10% of American households are considering relocating abroad and another 10% are considering owning a home to either vacation or live part time abroad or 20% of Americans are n the move!

More surprisingly the largest group which is making these plans are in households aged 25 to 34.

If this survey is anywhere near correct (I will assume that Barron’s vetted this at least a bit), then the wave of Americans headed abroad is larger than I believed.

So where will these Americans (Canadians, British, Australians, Kiwis and Continentals who are leaving their homelands as well) go?

Canada is out…too expensive and too cold. Most people will head south.

Mexico stands to be #1. Prices there have risen and there is a lot of anti-gringo sentiment.  After all there have been numerous Mexican-American wars. The building of a fence across the border will not help either.

The law and order crisis in Mexico has also grown. Yet it’s still probably the number one benefactor of this flow due to location.

Cuba, when it opens, will be ripe and good as well. A great place to buy when you can assume no negative political circumstances. The low end Caribbean is also good except for those darn hurricanes that will put lots of people off…plus many water and transportation problems and the fact that few of the islands have a real infrastructure.

Panama is good. There is a lot  of English spoken, many yanks already there, but weather is lousy if you want to be in town (hot and humid) and prices are no longer low.

We see many Americans now moving from Panama to Ecuador.

Ditto for Costa Rica.  The rest of Central America lacks infrastructure though there are some nice gringo settlements although they are expensive.

Colombia and Venezuela are the first nations with the potential for full fledged economies  and infrastructures after Panama and Mexico. They can be wonderful places but security and political risks stop most from going there for now.  If the security/drug/crime issues are resolved and image cleans up…go buy in Colombia.  If the political system shifts in Venezuela this could be a great opportunity.

Argentina & Uruguay? Both Buenos Aries and Montevideo should do well also.  They are further from North America but both have very European flavors.

Ecuador, 3 hours and 45 minutes from the US will benefit as the first nation with a full infrastructure and really low cost of living.

If Ecuador gets just 10% of six million Americans who leave the US, imagine what this means to this nation of 11 million.  This is more than a 5% increase in population. However look at what it means in dollars!

According to the CIA World Fact Book, Ecuador has a Gross Domestic Income of $4,300 per annum per person. That makes a total GDP of $47,300,000,000.

Imagine what happens if the 600,000 gringos have an average income of $18,000 a year per person. That adds $10,800,000,000. This is an annual income that almost equals 20% of the entire national GDP! This is one reason why Merri and I include Latin equities in our investment portfolio and are buying more and more real estate in Ecuador.

Every cloud has a silver lining and two clouds casting shade on the greenback’s value are liberal money supply and political interference to support presidential elections. The silver lining comes in the form of profits made in places where fed up Americans and Canadians decide to go when they leave home.

This is why we have purchased a hotel, an office building, 13 condos and houses, and a 900+ acre hacienda in Ecuador over the last 10 years.

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Our hacienda Rosaspamba.

What if the 11 benefits are not enough?

This report is about global diversification with the US and Ecuador as parts of an overall plan.

I believe the US debt is high and will cause the US dollar to fall, so this report is about being short American currency because the advancements in the US will be due in part to a declining greenback.

As one of the first Americans to write about being an international citizen, I am suspicious of my US enthusiasm.  But I am suspicious of Europe, China and India as well.

That is why since the release of my first book “Passport to International Profit” in the 1970s I have preached and practiced being a One Man Multinational.

The core message in “Passport to International Profit” was to become a one man multinational where you live in one country bank in another country and earn in another  a six point command posture which is to:

Let’s take this one step further. To have a fulfilling lifestyle make your residence in a place you love and want to be. Do not limit yourself to where you are or where you were born.

More than 40 years after we left the USA,  Merri and I still believe that being global is vital from an investing point of view and enlivening for one’s lifestyle.

This does not mean that the US should be excluded as a place to live or invest.

The 11 American benefits reviewed in this series suggests that the USA may remain a leader in the upcoming socio-economic evolution of “Trading Down”.

That is why Merri and I have increased the weighting of our portfolio in the USA.

That is also one reason why Merri and I love Ecuador as a place to own real estate and live.

Gary

Gain From the Volatility of the Next Four Years

However America’s politics turn out, one thing is sure.  There will be volatility in stock markets during the next four years.

The first reason markets will bounce has nothing to do with politics or policies.   The market’s downward shift is simply due regardless of the party or the person in office.

Second the new politics will create an uncertain era. Everyone is shaken whether they are pleased with the election or not and nothing frightens markets like uncertainty.

Third we’ll see rising interest rates over the next 48 months. This will push markets down.

Despite these pitfalls, there is a way to profit using the downtrends  to pick up good value shares.

During nearly five decades of global investing I have noticed found that good value strategies increase through bull markets and bear, through good presidents and bad.  The steps to take are simple.

The first tactic is to seek safety before profit.

We can look at Warren Buffett’s investing strategy as an example.  Buffett success is talked about a lot, but rarely does anyone explain how he make so much money.  That was the fact until some researchers really stripped his operation bare.  They looked at everything and learned the deepest of Buffett’s wealth management secrets.  Fortunately they published all in a research paper at Yale University’s website. that reveals important truths about extending wealth.

This research shows that the stocks Buffett chooses are safe (with low beta and low volatility), cheap (value stocks with low price – to – book ratios), and high quality (stocks of companies that are profitable, stable, growing, and with high payout ratios).

The second tactic is to maintain staying power.  At times Buffet’s portfolio has fallen, but he has been willing and able to wait long periods for the value to reveal itself and prices to recover.

keppler asset management chart

This chart based on a 45 year portfolio study shows that holding a diversified good value portfolio (based on a  good value strategy) for 13 month’s time, increases the probability of outperformance to 70%.  However those who can hold the portfolio for five years gain a 88% probability of beating the bellwether in the market and after ten years the probability increases to 97.5%.  Time is your friend when you use a good value strategy.  The longer you can hold onto a well balanced good value portfolio the better the odds of outstanding success.

The Buffett strategy integrates time and value for safety and profit.

A third tactic is using limited leveraging, tactic in the strategy boosts profit.  Buffett leverages his portfolio at a ratio of approximately 1.6 to 1.   The Yale published research paper shows the leveraging methods used by Warren Buffett to amass his $50 billion fortune.  The researchers found that the returns from Buffett’s investment company, Berkshire Hathaway, far outweighed those achieved by any rival that has operated for 30 years or more.  The research shows that neither luck nor magic are involved.  Instead, the paper shows that Buffet’s success hinges on using leverage at the rate of 1.6.

To sum up the strategy, Buffet uses limited leverage to invest in large purchases of “cheap, safe, quality stocks”.   He limits leverage so he can hold on for very long periods of time, surviving rough periods where others might have been forced into a fire sale or a career shift.

Stated in another way buffet uses logic (buy good value) to have the conviction, wherewithal, and skill to invest with leverage over many decades.

What do we do when we are not Warren Buffett?

May I introduce the Purposeful Investing Course (Pi) for those who want to invest like Warren Buffet, but know they are not.  This course is based on my 50 (almost) years of investing experience combined with wisdom gained from some of the world’s best investment managers and economic mathematical scientists.

Enjoy Extending Wealth

Pi’s mission is to make it easy for anyone to create a three point strategy, like Buffett’s even though they do not have a lot of time for or knowledge about investing.

Pi reveals investing secrets and the sciences that make investing easy, safer, less time consuming and increases the chances of profit.

One secret is to invest with a purpose beyond the cash.  One tactic as mentioned is staying power.  This means not being caught short and having to sell during a period of loss.  This also means having enough faith in a strategy that we stick to the plan.  When we invest with purpose, doing what we love, we enjoy the process more and are more likely to hold on during down times, when most poor investors panic and sell.

Slow, Worry Free, Good Value Investing

Stress, worry and fear are three of an investor’s worst enemies.  They create the Behavior Gap, a trait exhibited by most investors, that causes them to underperform any market sector they choose.  The behavior gap is created by natural human responses to fear.   Pi helps create profitable strategies that avoid losses from this gap.

Spanning the Behavior Gap

Behavior gaps are among the biggest reasons why so many investors fail.  Human evolution makes fear the second most powerful motivator.  (Greed is the third.)  Fear creates investment losses due to behavior gaps.  Fear motivates us more strongly than desire.  By nature investors are risk adverse.

Winning investors though embrace risk because they have a plan based on good value.

Purpose is the most powerful motivator,  stronger than fear and greed, so a strategy with purpose is the most powerful of all.

Combine your needs and capabilities with good value secrets and the math to back up your value selections through the Pifolio – The Pi Model Portfolio

Lessons from Pi are based on the creation and management of a Primary Pi Model Portfolio, called the Pifolio.  There are no secrets about this portfolio except that it ignores the stories (often created by someone with vested interests) and is based entirely on good math.

The Pifolio is a theoretical portfolio of MSCI Country Benchmark Index ETFs that cover all the good value markets using my (almost) 50 years of global experience and my study of the analysis of four mathematical investing geniuses (and friends).

The Pifolio analysis begins with a continual research of international major stock markets that compares their value based on:

#1:  Current book to price

#2: Cash flow to price

#3: Earnings to price

#4: Average dividend yield

#5: Return on equity

#6: Cash flow return.

#7: Market history

We follow this research of a brilliant mathematician and have tracked this analysis for over 20 years.    This is a complete and continual study of international major and emerging stock markets.

This analysis forms the basis of a Good Value Stock Market Strategy.   The analysis is rational, mathematical and does not worry about short term ups and downs.   This strategy is easy for anyone to follow and use.  Pi reveals the best value markets and provides contacts to managers and analysts and Country Index ETFs so almost anyone can create and follow their own strategy.

A country ETF provides diversification and cost efficiency by spreading one simple, even small investment into a basket of equities in a good value stock market.  The costs are low and this type of ETF is one of the hardest for institutions to cheat.  Expense ratios for most ETFs are lower than those of the average mutual fund.

Little knowledge, time, management or guesswork are required.  The investment is simply a diversified portfolio of good value indices.  Investments in an index are like investments in all the shares of a good value market.

Pi matches this mathematical certainty with my fifty years of experience. This opens insights to numerous long term cycles that most investors miss because they have not been investing long enough to see them.

For example in the 1980s, a remarkable set of two economic circumstances helped anyone who spotted them become remarkably rich.  Some of my readers made enough to retire.  Others picked up 50% currency gains.  Then the cycle ended.  Warren Buffett explained the importance of this ending in a 1999 Fortune magazine interview.  He said:  Let me summarize what I’ve been saying about the stock market: I think it’s very hard to come up with a persuasive case that equities will over the next 17 years perform anything like—anything like—they’ve performed in the past 17!

I did well then, but always thought, “I should have invested more!”  Now those circumstances have come together and I am investing in them again.

The circumstances that created fortunes 30 years ago were an overvalued US market (compared to global markets) and an overvalued US dollar.

The two conditions are in place again!  There are currently ten good value (non US) developed markets,  plus 10 good value emerging markets.

Pi shows how to easily create a diversified, worry free portfolio in some of these good value markets using Country Index ETFs.

The current strength of the US dollar is a second remarkable similarity to 30 years ago.   The dollar rose along with Wall Street.  Profits came quickly over three years.  Then the dollar dropped like a stone, by 51%  in just two years.  A repeat of this pattern is growing and could create up to 50% extra profit if we start using strong dollars to accumulate good value stock market ETFs in other currencies.

This is the most exciting opportunity I have seen since we started sending our reports on international investing ideas more than three decades ago.  There is so much more to write and the trends are so clear that I have created a short, but powerful report “Three Currency Patterns For 50% Profits or More.”   This report shows how to earn an extra 50% from currency shifts with even small investments.  I kept the report short and simple, but included links to 153 pages of  Good Value Stock Market research and Asset Allocation Analysis.

The report shows 20 good value investments and a really powerful tactic that shows the most effective and least expensive way to accumulate these bargains in large or even very small amounts (less than $5,000).  There is extra profit potential of at least 50% so the report is worth a lot.

This report sells for $29.95 but you’ll receive the report “Three Currency Patterns For 50% Profits or More” FREE when you subscribe to Pi.

Leverage

Pi also explains when leverage provides extra potential without undo risk.  For example in 1986 I issued a report called “The Silver Dip” that showed how to borrow 12,000 British pounds (at almost 1.6 to 1 dollars per pound the loan created US$18,600) and use the loan to buy 3835 ounces of silver at around US$4.85 an ounce.

Silver had crashed, I mean really crashed from $48 per ounce.  As prices decreased from early 1983 into 1986, total supply had fallen to 449.7 million ounces in 1986.  Mine production was restricted by the low prices at this time, with silver reaching a low for this period of $4.85 in May 1986.  Secondary recovery also was constricted by these low prices.

Then silver’s price skyrocketed to over $11 an ounce within a year.  The $18,600 loan was now worth $42,185.

The loan was in pounds and in May 1986 the dollar pound rate was 1.55 dollars per pound.  So the 12,000 pound loan purchased $18,600 of silver.  The pound then crashed to 1.40 dollars per silver.  The loan could be paid off for $13,285 immediately creating an extra $5,314 profit.  The profit grew to $47,499 in just a year.

Conditions for the silver dip have returned.  The availability of low cost loans and silver are at an all time low.  The price of silver has crashed from nearly $50 an ounce to below $14 as did shares of the iShares Silver ETF (SLV).

silver chart

(Click on chart from Google.com  (1) to enlarge.)   Imagine investing in a spike like this… with leverage!

At the same time the silver gold ratio hit 80, a strong sign to invest in precious metals.

I have updated a special report “Silver Dip 2016” about a leveraged silver speculation that can increase the returns in a safe portfolio by as much as eight times.  The purpose of the report is to share long term lessons gained through 30 years of speculating and investing in precious metals.  While working on the report, when the gold silver ratio slipped to 80 and the price of silver dropped below $14 an ounce, I knew I needed to share this immediately.

I released a new report “Silver Dip 2015” so readers were able to take advantage of these conditions and leverage 1.6 times as a speculation.  That report generated profits as high as 212% and a revised 2017 issue has been produced.

“The Silver Dip 2106”  sells for $39.95 but  you receive  “Silver Dip 2017” FREE when you subscribe to Pi.

Save

Subscribe to the first year of The Personal investing Course (Pi).  The annual fee is $299, but to introduce you to this online, course that is based on real time investing, I am knocking $102 off the subscription.  Plus you receive the $29.95 report “Three Currency Patterns For 50% Profits or More” and the $39.95 report “The Silver Dip 2017 free.

Triple Guarantee

Enroll in Pi.   Get the first monthly issue of Pi, and the report “Three Currency Patterns For 50% Profits or More” and “The Silver Dip 2016” right away.

#1:  I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free purposeful investing.

If you are not totally happy, simply let me know.

#2:  I guarantee you can cancel your subscription within 60 days and I’ll refund your subscription fee in full, no questions asked.

#3:  I guarantee you can keep “Three Currency Patterns For 50% Profits or More” and “The Silver Dip 2106” report as my thanks for trying.

You have nothing to lose except the fear.   You have the ultimate form of financial security to gain.

Subscribe to the Pi for $197.   You Save $158.95.

Gary

 

 

 



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