What R U Going to Do? – Part Six Multi Currency Investing for Rich/Poor


Here is how to do some multi currency investing (and business perhaps) in businesses that serve the rich & the poor.

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How can growing sales of Ferrari’s at $250,000 a pop help you?

Recent messages in this series looked at how part of our future is set by the current flow of events. For example can we bet on inflation? Of this we can be pretty sure. We can also bank on the fact that part of the current flow is “expanding distances between the rich and the not so rich”.

At a time when unemployment remains high and inflation cuts deeply into the purchasing power of pensions, savings and wages… some segments of the economy are getting much richer.

A recent USA Today article “CEOs reap huge payouts in 2011, corporate filings show” by Gary Strauss outlines why. Here are excerpts:  If 2010 was a banner year for CEO pay gains, 2011 could provide even bigger windfalls.

A USA TODAY analysis of corporate filings through early July shows CEOs reaping huge 2011 payouts, largely due to stock option valuations up sharply from pre-recession levels.

“Some of the gains are humongous,” says Paul Hodgson, a compensation expert for Governance Metrics, who expects more executives to reap big 2011 payouts.

Wall Street’s 2½-year bull market is fueling mega-paydays across a swath of corporate America, from aging industrial giants to young dotcom firms. Yet it also is highlighting the growing wage divide between executive suites and rank-and-file employees.

U.S. workers averaged $46,742 in 2010, up 2.6% from 2009.  A June GovernanceMetrics analysis found average compensation among S&P 500 CEOs rose to $12 million in 2010, up 18% from 2009 — and that’s not counting the potential multimillion-dollar value of stock or stock options, which are granted at set prices and provide holders profits as stock values rise.

Among CEOs cashing in:

* Includes salary, bonuses and other compensation, gains from exercised stock options, vested shares and changes in pension value and deferred compensation for CEOs at Standard & Poor’s 500 companies.

Sources: Governance Metrics, Bureau of Labor Statistics

• John Hammergren, McKesson Corp. The health care services CEO pulled in $150.7 million, up 190% from 2010’s $51.8 million.

• Ralph Lauren. The CEO of fashion powerhouse Polo Ralph Lauren received compensation worth $75.2 million, up 53% from $49.3 million in 2010.

• Mark Donegan, Precision Castparts. The parts supplier CEO earned $32.3 million, including $22.4 million from stock options.

• Paul Marciano, Guess. The fashion marketer CEO had compensation worth $29.2 million for 2011, including $17 million from options — up 137% from 2010’s $12.3 million. .

Corporate governance experts say such paydays are excessive.

“It’s insane,” says the Value Alliance’s Eleanor Bloxham. “Corporate boards have bought into the idea that they have to pay up for performance. There’ll be more of the same until institutional investors decide CEOs aren’t worth what they’re being paid.”

Another July 2011 USA Today article “Compensation for corporate directors rises sharply” by  Strauss says:

Compensation for corporate directors is rising sharply, a USA TODAY analysis of early 2011 proxy filings finds. Behind the gains: higher cash retainers, fees and rising values of stock and stock option grants.

Directors at the USA’s biggest 200 publicly traded companies received a median $228,000 in 2009, according to pay consultant Pearl Meyer & Partners, meaning half earned more, and half earned less. By contrast, the median income of U.S. households fell 1% in 2009 to $49,777, according to Census Bureau figures.

Board service can be far more lucrative. Apple directors averaged more than $984,000 in 2010. Occidental Petroleum directors averaged nearly $420,000 and Hewlett-Packard’s board more than $381,000.

This influx of great wealth to a few means we should not be surprised to read that luxury sales are up.  A July 15, 2011 Economics newspaper article “Sales growth: The luxury goods industry is booming, particularly in China”  by by Márcio Cabral de Moura says: The fine goods industry expects sales growth of eight percent and is growing twice as fast as the global economy.

Sales of the luxury industry is set after a study by management consultancy Bain & Company by eight percent to 185 billion euros. Especially in China, demand for luxury of the rich is growing rapidly.

In February and March reported the manufacturer’s own stores and department stores, luxury double-digit growth rates. Most of the summer collection is already sold. “Furthermore, the shops full orders for the upcoming autumn / winter season ordered, especially in accessories, leather goods, watches and jewelry increased their sold-out stocks,” says the projects presented by Bain and the Italian Association of luxury goods Fondazione Altagamma study. The retailers were “confident that customers will shop with the same momentum as before the economic crisis.”

The largest luxury goods market continues to be the United States with a sales increase of eight percent to 52 billion euros. In Europe this year, Bain expects a sales growth of seven percent. “Above all, the growing prosperity in China, sales will inspire and lead to opening of new stores mark” – the demand in the People’s Republic will grow by about 25 percent to 11.5 billion euros, according to the study.

This trend means that the not so rich will have even less purchasing power because this change drives a wedge into the market place… makes luxury goods cost even more, while those without super income are forced to trade down.

We might not like this trend, but since we know it… we can do something to protect our own financial position and gain from this shift as well.

For example we can profit from trading down.

We looked at the opposite effect in an article Doubling Up and Trading Down at an earlier article posted at this site. That article outlined how to invest in the trend of trading down as a growing part of the American population lose purchasing power.

Another way to gain from the trend  is to invest in luxury businesses. Last year I would have recommended doing this through the Claymore, ETF ROB.

Unfortunately fund manager Guggenheim went through a housecleaning in late 2010 and one result was to shut down that ETF which had its top holdings in Hermes, BMW and Wynn Resorts.  The fund had a very low correlation to big consumer sector funds because it focused only on the wealth brands, be they financials (7.5 percent of the fund), industrials (7 percent) or more traditional retail companies.

ROB’s formula was to go after only companies that offered high luxury items.  This was a multi currency ETF as well.  Only 23 percent of the fund was invested in the U.S.. Most of the fun was invested around the industrialized world—Japan, the U.K., France, Germany, etc.

ROB was the perfect use of the ETF structure that let investors into many markets, in one theme that is otherwise hard to capture due to the complexity.  This broad foreign diversification make the 32-stock ROB portfolio a bit tricky to replicate for the average investor but watching the types of shares that were in that portfolio for opportunity may be worthwhile.

Here are a few of the shares: Mercedes owner Daimler AG (OTCBB: DDAIF) –  Swatch (SWGAF.PK)), – BMW (BAMXY.PK) – Christian Dior (CHDRF.PK)  – Coach (NYSE: COH) – Polo Ralph Lauren (NYSE: PL) – Saks (NYSE: SKS) – Sotheby’s (NYSE: BID) – Tiffany (NYSE: TIF) – Wynn Resorts (NYSE: WYNN).

With no retail mutual funds focusing on the luxury group, mutual fund investors can look at actively managed, broad retailing funds like Fidelity Select Retailing (FSRPX) or Rydex Retailing (RYRIX).

Another overseas option to investigate is Global X China Consumer ETF (CHIQ)  that tracks the Solactive China Consumer Index which is designed to reflect the performance of the consumer sector in China. It is comprised of selected companies which have their main business operations in the consumer sector and are domiciled in China or have their main business operations in this country.

iShares Switzerland (amex: EWL ) is an exchange-traded fund heavily concentrated in luxury goods, one of the sectors that Switzerland is best-known for though this also gives exposure to pharmaceuticals and Swiss financial services.

Another was to gain from this trend is to have your own micro business that caters to the luxury sector.

This is one of several reason why we are working with John and Candace Newman of Oil Lady Aromatherapy who offer the purest essential oils. Essential oils are a luxury that brings beauty as well as good health.

Merri and I have know Candace for decades and have used her products for as many years.  Each month I remind readers about essential oils.

Here is what Candace wrote this month: When living in Florida for over 33 years, mosquitos & no-see-ums (?) ruled the summers. Now that John, Muga our dog and I are in Colorado, high and dry, at 7,000 ft, one would think things would be different. Not so good. Our 6-7 week season of no-see-ums love my tender Florida skin, and Muga’s sweet little pink belly. Even John experiences the fascination of red welts. Then there’s the mosquitoes.

Since pure essential oils are too strong to apply directly on animals (not with cats at all) … the best remedy we’ve found for our chocolate lab-mix Muga is our Skin Calm Gel. She loves the aroma & waits to lick my fingers (safe & calms her down due to Chamomile & Lavender in the formula). Yes, she’ll lick her belly, but first I rub it in well and distract her with some on my hands for licking.

John and I go for the straight Tea Tree as soon as possible and dab it right on the spots. We alternate this with Skin Calm Gel. It’s a family-pack affair and we’re grateful for the non-toxic relief.

Candace sent this special offer.

tea-tree-special

Learn more and order the summer special here

Essential Oil Luxury Opportunity

The luxury market is especially connected to perfume… skin care and beauty products.

 

An Excerpt from a CNN.money articles entitled $2,000 a bottle for skin cream?! Yes – and sales are up” says: When La Prairie introduced its latest skincare product — at $500 a pop — Saks had to limit purchases to six at a time. Call it a clear sign of a recovery: Sales of luxury skincare have rebounded sharply.

In 2010, sales of prestige skincare products sold in U.S. department stores reached $2.7 billion, according to the NPD Group, an 8% increase from 2009.

“That market has seen as resurgence at the end of the recession,” noted Alexis Wolfer, editor-in-chief of online magazine the Beauty Bean.

We have been working for many years with a number of businesses who have products or services that we love.  These companies are headquartered in many places… Switzerland, Denmark, Ecuador, Spain, Canada as well as the USA and all of them offer global potential… business opportunity almost anywhere.

We write about many of the products of these companies often… though we are not paid.. but just because we like their products and hope you’ll enjoy them too.

We have now started a program to help our readers create their own micro business working with these businesses as referrers, dealers and distributors.

What a match… tens of thousands of readers, many wanting to earn globally… meeting some great… really unique global businesses tied together with a communication system that can bring all this: training…. communicating and networking.

Our online course International Business Made EZ is already geared to help readers learn how to do business abroad… anywhere… anytime.

We have now expanded this course into an annual service that updates readers with business ideas, leads, and tips, contacts, etc.

We have started the beta program and the good news is that we are not charging a penny more more.  Our International Business Made EZ online course and our International Business Made EZ seminars remain the same price though we’ll now offer subscribers an entrance to doing business with many turnkey businesses.

The overall service can bring you the following benefits:

#1: Connect you via our our online course “International Business Made EZ” to here and now specific business opportunities.

#2: Keep you in touch with other readers in the program, share business tips, ideas, contacts and even website support in some instances.

We are starting with these five businesses first.

#1: Candace Newman Essential Oils

#2: Jyske Global Asset Management  (JGAM)  See more about the JGAM referrer program

#3: Bio Wash

#4: Roses

#5: Ecuador Imbabura Export Products

Our first program is already under way with JGAM and we have set our first training session for October 10, 2012.  The second program is with John and Candace and we are looking for readers who would be interested in buying at wholesale to distribute. If you have an interest please send a note to me at gary@garyascott.com.

 

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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