The photo below shows the risks in inflation. Recently when mom decided to sell the old family house I took over the stack of old family albums and while pouring through them stumbled across this hospital receipt for my birth at Portland Sanitarium Hospital.
I wonder what you can get in the hospital today for 79 bucks?
We have to make our money increase its purchasing power if we want to keep up. Where in the world should we invest to do this?
Is the stock market the best place to go? Tom Ruggie of RuggieWealth Management threw out some thoughts in his latest Weekly Commentary.
Ruggie wrote: Is the “cult of equity” dying?
Since 1912, stocks have returned on average 6.6 percent per year after inflation, according to Bill Gross, the legendary bond manager from PIMCO. Recently, Gross ruffled some feathers when he wrote that the historic 6.6 percent return “is an historical freak, a mutation likely never to be seen again as far as we mortals are concerned.” Histrionics aside, Gross makes a point that deserves elaboration.
Gross believes that, in the future, less of the country’s wealth will be captured by capital (the financial markets) and more will flow to labor (as higher wages) and government (in the form of higher taxes). For the past 30 years, he said, capital markets were the big winner, as real labor wages and corporate taxes declined as a percentage of GDP. By his analysis, that will start to reverse with the capital markets being on the losing end.
Is Gross right?
Well, his chief critic, Wharton professor Jeremy Siegel, emphatically says no. In an August 2 Bloomberg interview, Siegel made the following three rebuttals to Gross:
1. The 6.6 percent real return was similar in the 19th century in the U.S., too, so it’s not just a 20th century anomaly or “historical freak.”
2. Other researchers have discovered non-U.S. equity markets with similar 6 to 7 percent real return averages over the past century, further supporting the idea that the U.S. is not an anomaly.
3. Often, when the media declares “equities are dead,” that’s a sign a bull market is just around the corner – remember the infamous August 1979 BusinessWeek “The Death of Equities” cover story? Three years later, stocks took off on one of the century’s greatest secular bull markets.
So, who’s right, Gross or Siegel?
It turns out they both could be right. The key is your timeframe. Since markets fluctuate, we’ll likely see periods when the market delivers more than a 6.6 percent real return and other times when it’s less. However, simply buying and holding on for dear life hoping Gross is wrong probably isn’t the best strategy. Rather, rigorous analysis of all the investment opportunities and careful portfolio tweaking could be the solution.
http://www.flickr.com/photos/garyascott/7791480010/in/photostream
Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
COULD THE THREE WORDS “PRIME CHILDBEARING AGE” FORESHADOW the next big up move in the stock market? We’re all familiar with the “Baby Boom” generation and the massive impact they’ve had on society. But, less noticed is their offspring, dubbed the “Echo Boom.” Nearly 80 million strong, “they will be become the next dominant generation of Americans,” according to CBS News.
Today, the number of women in “prime childbearing age” is surging and is at an all-time high. While the recent recession and lingering weak economic environment caused many Echo Boomers to postpone childbirth, this could change quickly if the economy picks up speed.
If this potential pent-up demand for babies actually materializes, we could see a spike in births that helps drive consumer spending, corporate profits, and the stock market higher. This potential demographic trend is one reason to be optimistic about America’s economic future.
Ruggie recently bought into his RWM Dynamic All Asset Strategy Portfolio:
iShares Biotechnology and iShares REIT REZ
I could not agree more. We have a larger… more integrated…global economy with more wealth and productivity than ever before. These shares make sense to me because there will be increasing demand for real estate and food.
You can learn more about Ruggie and these shares from Morgan Hatfield at Ruggie Wealth. mhatfield@ruggiewealth.com
Warren Buffet falls on the side of equities.
Buffet’s thinking would seem to fit with Ruggie’s.
Buffet said earlier this year (bolds are mine): “Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as ‘safe.’ In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge. Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as the holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur. Governments determine the ultimate value of money, and systemic forces will sometimes cause them to gravitate to policies that produce inflation. From time to time such policies spin out of control.
Even in the U.S., where the wish for a stable currency is strong, the dollar has fallen a staggering 86% in value since 1965, when I took over management of Berkshire. It takes no less than $7 today to buy what $1 did at that time. Consequently, a tax-free institution would have needed 4.3% interest annually from bond investments over that period to simply maintain its purchasing power. Its managers would have been kidding themselves if they thought of any portion of that interest as ‘income’.”
Currency investments are for money which has a reason to fail the risk test. The owner agrees to give up purchasing power in the long run to have more stability and certainty in the short run.
“The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century.
This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future.”
My own preference — and you knew this was coming — is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola (KO), IBM (IBM), and our own See’s Candy meet that double-barreled test. Certain other companies — think of our regulated utilities, for example — fail it because inflation places heavy capital requirements on them. To earn more, their owners must invest more. Even so, these investments will remain superior to nonproductive or currency-based assets.
Whether the currency a century from now is based on gold, seashells, shark teeth, or a piece of paper (as today), people will be willing to exchange a couple of minutes of their daily labor for a Coca-Cola or some See’s peanut brittle. In the future the U.S. population will move more goods, consume more food, and require more living space than it does now. People will forever exchange what they produce for what others produce.
“Our country’s businesses will continue to efficiently deliver goods and services wanted by our citizens. Metaphorically, these commercial “cows” will live for centuries and give ever greater quantities of “milk” to boot. Their value will be determined not by the medium of exchange but rather by their capacity to deliver milk. Proceeds from the sale of the milk will compound for the owners of the cows, just as they did during the 20th century when the Dow increased from 66 to 11,497 (and paid loads of dividends as well). Berkshire’s goal will be to increase its ownership of first-class businesses. Our first choice will be to own them in their entirety – but we will also be owners by way of holding sizable amounts of marketable stocks. I believe that over any extended period of time this category of investing will prove to be the runaway winner among the three we’ve examined. More important, it will be by far the safest.”
Ruggie and Buffet’s thinking agree with what I wrote earlier this year: Here are three simple facts about investing and the global economy that also support the long term potential of equity markets and that can help you spot distortions in equity markets.
The first fact: Overall we should expect the global economy to grow at about 3% per annum.
This first fact was confirmed by Alan Greenspan in his excellent book, “Age of Turbulence”. He wrote:
“A major aspect of human nature-the level of human intelligence-has a great deal to do with how successful we are in gaining the sustenance for survival. As I point out at the end of this book, in economies with cutting-edge technologies, people, on average, seem unable to increase their output per hour at better than 3% percent a year over a protracted period. That is apparently the maximum rate at which human innovation can move standards of living forward. We are apparently not smarter to do better.”
This gives us a baseline for how much an investment should grow.
If an economy rises faster than 3%, it is distorted. During early stages of excessive growth, investors will be attracted. Shares will rise faster.
If the economy remains robust, shares become overbought. Then watch out! A correction will come.
This leads us to the second fact which is “All investments have risk”.
Rather than wasting time trying to avoid risk… which cannot be done, investors should look at three risk elements instead.
#1: How much risk is there in any particular investment?
#2: What perceptions do the markets have of the risk?
#3: What risk premium is due?
Bank accounts and government bonds, for example, are perceived as the safest investments (especially if government guaranteed). A look at their long term history shows that they pay about 3%. If a bank account or government bond pays less…in the long term it’s bad. If it pays more…that’s better. The idea is that bank accounts will not really make money. They will just keep up with growth…at 3%.
To get real growth requires taking risk. If an investment appears to be less safe, it will pay more than 3%. This is called a risk premium. Bonds pay more than bank accounts because they are perceived to be less safe. Stocks pay more than bonds because they are perceived even riskier. Emerging market stocks pay more than major market stocks. Emerging market bonds pay more than major markets bonds.
Over the long run, bonds issued in countries and currencies perceived to be stable pay 5% to 7%.
Stocks in major countries should pay 7% to 10% annual return in the stock market as a function of global growth, long term earnings growth plus risk premium (above bank accounts and bonds).
To attain higher growth than 7% to 10% investors must either increase risk, trust luck or spot distortions.
This is good because the market is almost always wrong. Most investors always try to avoid risk. Most investors dump their wealth into investments that are perceived to be safe. This creates excessive demand and lowers value and actually makes the original perception wrong.
Knowing this helps wise investors spot deceits in the dimension of time.
Take, for example, the emerging market trend that has been created by an imbalance in labor costs around the world.
There are 6.6 billion people on this earth (give or take a few hundred million). 1 billion of these people live on a dollar a day. 2.5 billion live on two dollars a day. This means that there is a vast pool of cheap labor that can create goods at bargain prices. Mature economies are buying these goods at such an increased rate that 20% of all goods produced now cross a border, mostly from poor countries to the rich.
This means that emerging economies are growing much faster than 3%. They are catching up and this has caused major markets to slow down.
Yet emerging economies are perceived to have greater risk.
Smart investors have seen the value create by this distortion and have been cleaning up. They have been paid a huge risk premium when the risk has not been real!
The risk has been eliminated by low labor costs in poor countries and improvements in communications and transportation.
From 200o to 2010, the average annual return on emerging markets was 19.81% compared to 10% for major markets.
The Emerging Markets longest down turn was six months and the biggest drop 55%. For major markets, the longest down turn was also six months and biggest drop 53%.
We can see that there has been no more risk in emerging markets than major markets... plus the upside has been much better. This has now changed and you’ll see why below after looking at the third fact.
The third fact: Periods of high performance are followed by times of poor performance.
Emerging stock markets have outgrown major markets by about 7.5 times in the last seven years. Yet their economies are only growing about twice as fast.
Major markets have grown on average about 6.5% per annum for the past seven years….a little below what they should.
This has led to the point where emerging equity markets around the world correct down and major markets up a bit.
Yet in times of global panic as we have seen, all markets tend to drop. This means that at this time, major markets which may have been somewhat undervalued and should be rising are being pushed down by the drop of emerging markets (which should correct themselves).
Understanding these three facts leads us to know that a portfolio of European shares is a great bargain at this time…. but there is a special time risk.
Micheal Keppler stated in his recent major market valuation:
In my more than 30 years’ experience, I have never seen such a bad sentiment towards continental Europe. After a strong start in 2012, chances are good for a continuation of rising stock prices in general for the coming years.
If history is any guide, chances are better still for the Major Markets Top Value Model Portfolio.
This view is supported by our implicit three-to-five-year projection for the compound annual total return of the Equally-Weighted World Index, which now stands at 15.3 %, down from 17.6 % last quarter.
The upper-band estimate of 13,835 by March 31, 2016 implies a compound annual total return of 20.7 %; the lower-band value of 9,223 corresponds to a compound total return of 9.0 % p.a. Even our worst case makes equities look attractive — please see chart below, which shows the entire real-time forecasting history of Keppler Asset Management Inc. for the Equally Weighted World Index.
These numbers are based on relationships between price and value over the previous fifteen years. Given the current low levels of interest rates – real rates are negative in most places – I would like to point out that we do not have to be right with regard to the magnitude of our projections, but only directionally for investors to make money.
This is why we have been recommending High Yield shares. Most are major market equities that provide income and growth potential… plus make it easy to diversify.
This is why we are weighted into Northern European and Italian banking shares shares that we feel offer extra special value and extra risk premium.
There you have it. Understanding the 3% solution and what markets have done show a distortion. Blue chips may be oversold more than emerging shares now.
In the long term, emerging shares will rise. Poor people remain and are willing and able to make goods that others will buy. This will push their economies higher faster than in major economies. Yet for now the three percent solution shows that major markets and high quality shares especially European are more likely to recover from the current doldrums first.
Buffet Seems to Have Similar Philosophies
Berkshire Hathaway recently added energy shares, National Oilwell Varco and Phillips 66 to their portfolio.
Buffett’s firm also tripled its stake in Bank of New York Mellon, from 5.6 million shares to 18.7 million (banking). It also raised its stake in DirecTV from 23 million shares to 28 million.
Berkshire doubled its position in the newspaper publisher Lee Enterprises Inc., to 3.2 million shares. The company maintained its stakes in other publishing companies, Gannett Inc. and The Washington Post Co. (Publishing).
Four of my major equity holdings are in the same sectors:
Brookfield Renewable Power (Energy)
Unicredit & Jyske Bank (Banking)
Axel Springer AG (Publishing)
Sky Deutschland AG (TV)
Buffet and I may agree on the sectors that may be undervalued, but the difference is I am speculating on shares in Northern Europe that earn mostly in Northern Europe. This is based on my belief that markets have oversold the Euro weakness and that even shares which do not earn much outside Germany and strong Northern European economies are oversold. If the Euro fails, these Northern European companies are likely to do especially well in a currency reform.
This is more speculative than Buffet or Jyske’s JGAM who are totally out of the Euro at this time. Fund managers have to be more sensitive to short term movements. Because I manage only my own funds and have a longer time frame I can wait for this Euro weakening to unravel.
Whatever your time frame…. whatever your beliefs, you do need your money to increase its purchasing power and equities are one of the best ways to do this. I feel it is important to look for Where in the World it is best to invest in equities now.
See a huge Ecuador real estate shift that creates investing opportunities as well.
Gary
Join Merri and me with Thomas Fischer of Jyske Global Asset Management and Larry Grossman of Sovereign International Pension Services to see where in the world to invest in 2013.
Super Thinking + International Investing & Business Seminar
Super Thinking + International Investing & Business Seminar, February 1-2-3, 2103 in Mt Dora Florida.
This is the premier seminar we have been conducting every February for over 30 years. This February is special because the best opportunities come at the darkest hour and that time is here. Learn how to…
#1: Borrow yen at 2.5% and gain a 5% profit in three weeks.
#2: Turn $499 into $142,020… per year.
#3: Buy a beach view Ecuador home for $16,000.
Review these ideas in warm and sunny Lake County, Florida, with over 1,000 named lakes and the charm of historic Mt. Dora. This a special place especially at the this time of year.
(Click on photo to enlarge).
These are balmy winter days I shot of the Florida winter from…
my canoe.
Forces have come together for the biggest economic expansion in history. Huge profits are waiting in business and investing… whether you are just starting… in the middle… are ready to retire or want to start an entirely new career.
One reason for this timing is cyclical. Equity markets are selling at some of their best valuations in years.
This optimistic outlook is based on the development of earnings, cash flows, dividends and book values.
When you look at the big picture… from the turn of the century until now the entire global economic history has been a series of slow downs and catch ups, but over the long run values in the stock market have risen about 9.1 percent, respectively, compounded annually.
There are always emotional reasons for slow downs… as we have seen in the past five years… the worries of double dip recessions… high unemployment… concerns about fiscal cliffs. Such fears hold investors back. Yet global population growth and advances in production and prosperity are relentless. Values increase as prices stagnate. Then markets break free and rocket upwards creating wealth, prosperity and growth.
Economic breakouts create fortunes. This February we get to share with you three… enormous profit possibilities…. one in business…. one in investing and one in Ecuador.
All the facts have come together. The next boom is about to begin.
We can see the power of breakouts from the last BIG ONE in 1979. Warren Buffett saw it coming. He mentioned it in a famous 1979 Forbes article “You Pay a Very High Price in the Stock Market for a Cheery Consensus”.
Everything looked bleak.
The 1980s recession, the worst since the Great Depression, was about to begin. Yet in 1979 Buffett said…. BUY NOW. On August 13, 1982 the biggest global bull stock market in history began.
The Dow’s 1982 to 1999, relentless 17 year climb is just one breakout we can see.
Click to enlarge.
1979 was the darkest hour. The herd was thinking negatively. The reality? A boom was on! Then in 1999 another economic contraction began and has been with us till now… 14 years. The cycle is repeating. This is the beginning of an even bigger boom.
“It’s not what’s happening that counts. It’s what you do with it.”
Make no mistake… Merri and I have been able to help readers have better lives, less stress and to make fortunes during these last 17 economically depressed years. Yet the simple fact is that the really big profits come at the start of a boom. This is why I want to kick off 2013 with you and share more than my usual confidence and enthusiasm.
The upcoming February seminar is divided into three main sessions.
Each session helps you learn how to gain freedom, remove stress, earn more and do more good in and for the world.
Session One : International Micro Business – “How to Have a Positive Global Income”. You can turn $499 in $142,020 a year, even in small towns.
Session Two : Ecuador Living and Real Estate.
Sessions Three: International & Value Investing Outside the Box.
Here is a partial syllabus of the seminar:
SESSION ONE: How to Turn Your Passion into a Profitable Microbusiness. A micro business can be the best investment you can make. Start small and magnify your investment with your effort, enthusiasm and energy.
* Turn $499 into $142,020 through writing and publishing… without risk. In just one year. Cash in on the blowback from the global community. The global economy is good but big business… big government…. big medicine and global everything is also impersonal, often harsh and inhumane. This expansionary process leaves us believing in nothing. We are cynical of the global banks… the aggressive police… the intrusive government… the big church… the monetized medicine… the negative media… the unfair laws…. the failing currencies… all the broken promises.
Yet as humans, we have to believe in something and our last bastion… the one we can see, hear, taste, smell and feel is our local community… either as a place or as a collection of like-minded souls.
This is also where we can actually accomplish something and actually have an impact at doing some good.
On January 1st, 2013, Merri and I launched a new business “Positive Community Magazines” (PCM) with David Cross our webmaster and Dave & Sherry Johnson. This opportunity is for anyone young or old. PCM offers excellent income… less stress, fulfillment and positive service to the community. This business helps publish positive community magazines in small towns or to small communities of highly focused, like-minded souls.
Warren Buffett believes so much in this potential that he is buying newspapers in small towns all over America.
In 2012 Berkshire Hathaway purchased 63 small and mid-sized daily and weekly newspapers throughout the United States.
He plans to buy more and says: “I like buying individual papers at the right prices.”
Buffett stated that Berkshire is not buying big newspapers or more newspaper shares because he believes in the value of local communities.
In February, you’ll meet Dave & Sherry Johnson who had a good life until times turned sour during the 2007 recession. They lost everything so they moved to Asheboro, North Carolina which Forbes magazine highlighted as “One of America’s Ten Fastest-Dying Towns in the USA”. They started a community magazine and from the ashes it has risen from success to success. They now earn over $17,000 a month. They came to our Writer’s Camp. We saw their amazing business model and let no moss grow under our feet before asking them if they would help us spread this incredible concept around the world.
We know trends when we see them and this is even more exciting than the trend we saw in Ecuador’s expansion 17 years ago.
As an Independent Community Publisher of Positive Community Magazines, you will publish positive, upbeat community publications dedicated to representing, encouraging and celebrating the community you serve by focusing on the lifestyles, talents, gifts and contributions of the people who live and work there. Plus you’ll earn as much as $17,635 a month.
Learn how to gain a proven business model with training – archive of articles – design templates – access to low-cost printing – marketing materials – and a very, very low investment (as little as $499) to start.
The Money – Here is the Proforma Income for a 64-page Magazine
In the model magazines the ad revenues run around $13,000 (40% ads/$500 per ad page) and editorial revenues of $4,635 or a gross income of $17,635 a month.
Printing and operational expenses are in the $5,800 range leaving profits of $11,835. You increase the bottom line if you do more of the design and distribution work yourself.
Other advantages of magazine publishing include the freedom to set your own schedule, PRESS credentials, prestige, service to the community, philanthropy, being in the know and having a well respected profession.
Saves Lives. Here is just one example of the good you can do. Sherry Johnson shared this story.
She wrote: Gary, we even save lives. In one issue of their magazine they told the story of a little boy who was struggling with a rare disease that caused life-threatening seizures. One day, while his mom was out shopping, the little boy had a seizure so she rushed him to the hospital.
She called ahead and the nurse met her at the emergency room. As it happens, the nurse had read the article in the magazine (which someone had brought to the nurse’s lounge) and she recognized the little boy from the article. Since she knew immediately what was wrong with him, no time was wasted and he was treated quickly. They were told that this particular seizure was especially bad and that the article probably saved his life. This doesn’t happen every day but once in a lifetime is good enough!
Downtown Mt. Dora, Florida
Another session in the seminar shows “How to have an international micro business.” These sessions are highly practical and usable. They focus on how to use modern technology to start global micro businesses based around a website, with minimal investments of time and capital.
By starting small and building with stepping stones and a harmonious focus, Merri and I have learned how to own profit generating phrases at Google. We, along with our webmaster, David Cross, share the secrets of how you can use words to create your own global income.
The seminar shares how we us “Seven Ps” (Person, Problem and Promise, Product) to zero in on key word phrases. The Fifth P (Promise) develops new customers. The Sixth P is the Prospecting Path and Seventh P is the Presentation that creates income.
Learn about other microbusiness possibilities…
In the global micro business sessions we’ll see ideas on how to:
* Create Export Businesses
* Earn from Self Publishing and Writing
* Develop Internet Sales
* Cash in on Ecuador Business Ideas
* Find Organic Agricultural Business Ideas
* Profit With Health Business Ideas
* Turn Ideas for Tours and Seminar Businesses into Profitable Lifestyles
* Create a Multi Dimension extra income lifestyle.
Multi dimensional living can create a lifestyle that brings better health and lasting “real” wealth. Many readers are choosing a multi dimensional lifestyle, living on a farm and earning in other ways such as writing.
Activity on the farm in North Carolina. It’s tax deductible and profitable but…
I cannot call it work.
Merri and I have been fortunate. The self publishing business has treated us well. However a great deal of our financial stability also comes from being multi dimensional. We have lived on our own farm and seminar camp and orange grove and in our own Ecuador hotel and hacienda. We are always fixing things up…. buying broken places or taking broken ideas and making them whole.
For decades we have been buying houses and fixing them… painting, restructuring and such. This is our hobby… that happens to be profitable… or maybe that’s our business and writing is the hobby that also happens to be profitable?
The point is what we do is not work. We just regularly do what we love and figure out how to earn income in the process. The adage framed on my desk given to me by a beloved Indian Pundit is “Action is Thy Duty… Reward Not Thy Concern“. With this motto and a bit of common sense living joyfully and earning merge.
Our daughter, Cinda, and David Cross, our son-in-law webmaster and granddaughters, Sequoia and Teeka, have taken this lifestyle route as well. Cinda loves animals so is a veterinarian and specializes in animal acupuncture which she can do at their farm.
David has his website and voice-over business he can run from their farm and the girls love working in the gardens.
David and Cinda’s multi dimensional farm. They now produce 60% of their food and earn extra income selling their excess organic crops.
Using the Bio Degradable “Bio Wash” to gain added value we have been able to double our production and quadruple the profits in our orange grove.
In the multi dimension segment of the seminar we review how to spot “live on agri and B&B opportunity” in small towns and Ecuador. We’ll also look at Bio Wash, that we have supported now for nearly 20 years. We’ll show the environmental as well as health and business benefits it brings.
Join Merri and me at our Super Thinking + Investing and Business Seminar – February 1-2-3 , 2013, Mt. Dora, Florida.
See How to Attend this Seminar for $177 instead
SESSION TWO: Ecuador Living. Talk about catching an early wave… Merri and I caught the Ecuador expat trend right at its beginning 17 years ago. We brought readers who joined us in Ecuador then… some amazing opportunities. This cycle has matured but there are still great bargains if you know what to do. No one has as much experience and as many contacts in this field. This experience is also dependable. We do not sell Ecuador real estate so you won’t be hearing any hidden agendas.
A beach house for $16,000? Is that bargain enough? You cannot beat experience when it comes to learning all the ins and outs and buying real estate in a country like Ecuador.
For example after more than a dozen years of traveling… working… buying and selling real estate and running businesses in Ecuador… we led Jean Marie Butterlin from France to the coast and he began scouring the beaches from Manta, north to Pedernales… finding the bargains…. meeting the landowners… understanding the rules, regulations and customs.
That experience made him the expert of Ecuador beach real estate so that bargains could be found and so his clients could overcome the biggest problems and intelligently buy real estate on the coast.
We’ll share how to buy beach property intelligently.
Here is Jean Marie’s second beach home…. secluded overlooking this…
isolated beach home for just…
$16,000.
You’ll learn how to overcome one of the biggest mistakes most real estate buyers make on the beach.
Dr. Andres Cordova will speak and join me in updating Ecuador real estate and residency rules.
Dr. Andres Cordova speaking at our seminars.
Andres is our friend and Ecuador attorney. He is the grandson of one of Ecuador’s more famous presidents and was a senior partner in a law firm that represents Ecuador’s treasury.
We’ll also review how to create an Ecuador export business as Merri and I have for many years.
Roberto Ribadeneira speaking at our seminar about how he can shop, ship and charge for Ecuador export businesses.
We’ll review the Ecuadorshop Logistics service that provides all these services for exporters in importers into the USA.
We’ll share how Roberto provides an exclusive service that helps readers who export from Ecuador monitor production and quality and assure timely delivery.
This is a great service that provides every detail for importing products into the USA. We have used this logistics service ourselves for years and became the largest shipper of Ecuador roses last Christmas. One big benefit is that the service can send each product direct to the buyer in the USA. The Ecuadorshop Logistics service makes small and medium scale Ecuador exporting possible.
Join Merri and me at our Super Thinking + Investing and Business Seminar – February 1-2-3 , 2013, Mt. Dora, Florida.
See How to Attend this Seminar for $177 instead
Session THREE – International & Value Investing Outside the Box. This session shows how to protect your investments and savings, plus what to do with extra profits you’ll earn.
* Borrow Low Deposit High & Multi currency investing. Few decisions will be as important to your wealth as WHICH CURRENCIES to held your wealth. This has been our area of expertise since the 1970s… plus we have worked with Jyske Bank…. one of the largest currency traders in the world for decades.
On December 12, 2012 one USA dollar would buy 82.44 yen. January 4, 2013 that same dollar would buy 88.23 yen.
Yet this is not a fast trading for forex profits strategy. The Multi Currency Sandwich is based on long term, extra earnings from positive carry.
Let’s review a simple Multi Currency Sandwich example.
Here are the current invest loan interest rates from Jyske Bank.
(Click on photo to enlarge).
In this example we invest $350,000 (we’ll see how to invest smaller amounts in a moment). We borrow $520,000 in US dollars at 2.62% and $130,000 in euro at 2.5%. This is the loan ratio used by JGAM at this time and gives us $1 million to invest.
We invest in two bonds. $200,000 is in a bond issued by Santos denominated in euro with a coupon of 8.25%. The bond comes due 22-09-2070. This is a medium risk bond and yields of about 6.9%.
The second investment is $800,000 in the US dollar denominated bond offered by Danske Bank with a 7.125% coupon due 21-09-2037. This is a medium risk bond yielding about 5.9%.
The return on the Santos bond is appx: $13,800
The return on the Danske bond is appx: $47,200
The total return is $61,000.
The loan cost in euro is $3,250 (2.5% on $130,000).
The loan cost in dollars is $13,780 (2.6% on $520,000).
The total loan cost of $17,030 leaves a positive carry (extra profit). The total return after the loan cost $43,970 or about 12.5% return on the $350,000 invested. That return is diminished by one time, upfront loan costs on the first year of $1,300. Then there are no added loan costs for the five year term of the loan.
The figures above are used for illustration purposes only. These are not recommendations as a portfolio would be far more diversified.
The risk in in the bonds… not currency parities. Euros and dollars were borrowed. Equal amounts of Euros and dollars were invested.
Now let’s look at the same example but with borrowed yen. The yen loan creates potential forex profit… or loss.
In this example one dollar equals about 82 yen.
Assume the same multi currency sandwich was created… but with $650,000 worth of borrowed yen instead of loans in dollars and euro.
The interest rate for yen is lower… only 2.5% versus 3.125% for the US dollar. This bumps the return up to almost 12.8%.
However the forex potential is what becomes interesting. At 82 yen per dollar this requires a 53.3 million yen.
Assume that the yen returns to the purchasing power trend of 117 as shown in the chart below.
Chart from Bloomberg.com shows the yen at 117
(Click on chart to enlarge)
A shift from 82 yen per dollar to 117 yen per dollar is a 35% drop. If those dollars and euros bought back yen at the 117 parity it requires only $455,555 to repay that had been worth $650,000. The forex profit is $194,445 or an extra 29% beyond the positive carry. If that drop took three years to happen and one held the bonds (and their value did not change)…. the total return over three years would be 67.4%.
That is the upside. For a loss of the same magnitude the yen would have to rise from 82 yen per dollar to 53 yen per dollar… a highly unlikely event.
Thomas Fischer Sr. VP and forex advisor for Jyske Global Asset Management will update leverage strategies. Two other investment advisers and brokers will review how to diversify in bonds and shares and review the forex risks to make sure that such a speculation can work for you.
Thomas Fischer will review the portfolios they manage. This year they easily beat their benchmarks. We have no exposure to the euro and in our leveraged portfolios we use a 100% euro funding. As you can see this has also led to a return of 18.4% in a speculative performance (medium risk with 2X).
Here is JGAM’s record.
Click on this photo to enlarge.
Betting Against the Yen for Even Smaller Amounts.Lou Shinamin at Ruggie Wealth will outline opportunities using ETFs.
Lou recently wrote: I am watching a very nice cup and handle pattern forming on the Japanese Yen. Aside from Forex, the easiest way to take advantage of the dollar strengthening against the Yen would be to look at the ETF : YCS . Ultra short Japanese yen.
Lou will update the market and positions that make current sense in February.
Multi currency investing offers five enhanced benefits… asset protection…. greater privacy… broader diversification… forex potential and positive carry potential. The seminars teaches how to gain these benefits.* Stocks that rise from the cycle of war, productivity and demographics. Cycles create recurring profits. Economies and stock markets cycle up and down around every 15 years as shown in this graph.
These stock market bull and bear cycles are based on cycles of human interaction, war, technology and productivity.
Economic downturns create war. Military struggle (like the Civil War, WWI, WWII and the Cold War (WWIII), super charge inventiveness that creates new forms of productivity…the steam engine, the internal combustion engine, production line processes, jet engines, TV, farming techniques, plastics, telephone, computer and lastly during the Cold War, the internet. The military technology shifts to domestic use. A boom is created that leads to excess. Excess leads to correction. Correction creates an economic downturn and again to war.
Investments in the winner of WWIV. The war quietly took place… and the US won. This has created special opportunity for many shares.
Here are just three specific examples we’ll review:
United States Steel Corp. (NYSE: X). The American steel industry recently received the economic equivalent of a gift from the heavens: natural gas. Industrial firms in Pittsburgh are sitting on top of an oil-rich formation that stretches from New York to Ohio… with modest estimates suggest of at least 100 trillion cubic feet of gas.
The switch from coal to cheaper natural gas will save U.S. Steel hundreds of millions of dollars a year. Foreign competitors in Europe and Asia will need to pay much more. Many economists say that this new gas reserve will fundamentally shift global economic logic to uniquely benefit the United States. Yet prices of US Steel shares have remained stagnant.
Alliant Techsystems (NYSE: ATK). The Department of Homeland Security is planning to buy a further 750 million rounds of ammo in addition to the 450 million rounds purchased earlier this year.
ATK Delivers 2 Billion 7.62mm Rounds to the U.S. Army from the Lake City Army Ammunition Plant (LCAAP) and 350 Million 5.56mm Enhanced Performance Rounds Using Modernized Production Line Equipment in a $131 Million in Small-Caliber Ammunition Order.Since assumption of LCAAP manufacturing operations in 2000, ATK has increased the production rate for 7.62mm ammunition five-fold in direct support of U.S. Army requirements. Alliant Techsystems manufactures everything from rockets for NASA to big weapons, space rockets, launch vehicles, missiles, missile-defense interceptors, satellites and bullets. In fact it is the world’s largest manufacturer of bullets. Over the past 10 years, the company produced an average return on equity of 31.51% but the share price is in the dumps. Defense sector shares have been selling at historically cheap valuations and ATK shares have been selling at ratios even below the industry average. The 10 year average P/E ratio for its shares has been 18% but is currently below 10% about half the ten year average.
Aegion/Insituform (NASDAQ: AEGN). Aegion is a water investment that makes sense because “Where there is muck, there is brass”. The world’s water supply has too much muck! Investing in water simply makes sense in every way. IN the last equity boom, $1,000 invested in water utility stocks at the end of 1981 grew $39,980 at the end of 2001, more than double the growth of S&P 500. The fundamentals for the future are even better.
Decentralized, or distributed, water treatment will make up a huge part of the future water business. If you can use water over and over again at its point of use, that’s beats any other technology because you don’t have to transport the water. Aegion is a leader in trench less water line replacement. Their process is the most widely used trench less method for restoring structural integrity to and removing infiltration from sewers so worn out water treatment systems can continue to be used rather than replaced.
* More Water. Other water investment we review include Water Asset Management, Allianz RCM Global Water Fund, PFW Water Fund, Kinetics Water Infrastructure Fund, the Geneva-based Pictet Global Water Fund, SAM Sustainable Water Fund based in Zurich the Irish Calvert Global Water Fund.
* My Portfolio Review. I am always looking for value so my portfolio changes as events unfold.
Here is a typical portfolio I hold at JYSKE and update the changes I have made and why.
Type Int. Rate % of portfolio
Savings US $ 0.125% 5% Currency
Savings EUR 0.125% 1% Euro
Savings Pounds 2% GBP
Equities
Jyske Invest Turkey 2% Lira
JI European Equity 5% Euro
Suntec Reit 2% SGD
Hyflux Water 2% SGD
Jyske Bank shares 4% DKK
KGHM Polska Miedz (Copper Silver) 5% PLN
Brookfield Renewable Power 5% CAD
Unicredit Itakian Bank 3% Euro
Axel Springer AG German Publisher Euro 2%
Sky Deutschland AG German TV Euro 2%
Silver Wheaton Corporation Silver 5% US$
Bonds
Ishares Maci Latin Amer 5% Mixed Latin
JI Emerging Local Bonds 4% Mixed
JI Emergin Market Bonds 3% Mixed
Mexican Bonos MxnGvt 2% MXN Rate 8.000% Mature 19.12.2013
Bond Bombardier Inc. 2% Can$ 7.250% 15.11.2016
Bond Rabobank, Nederland 4% NOK 4.000% 29.05.2013
Bond European Investment 5% AUD 6.000% 14.08.2013
Bond Kreditanstalt Für 5% CAD 4.950% 14.10.2014
Bond European Ivtment BK 5% NZD 6.500% 10.09.2014
Euro Invment BK Turkey 3% TRY 10.000% 28.01.2011
Euro Investment BK Brazil3% BRL 11.125% 14.02.2013
Bond Brazil GVT 3% BRL 12.500% 05.01.2016
Bond Brazil GVT 3% BRL 12.500% 05.01.2016
Bond Euro Invment BK 3% AUD 6.000% 14.08.2013
Bond Kreditanstalt Für 2% NZD 6.250% 15.04.2013
Bond Euro Invment BK 3% PLN 6.500% 12.08.2014
Bond Mexican Fixed Rate 3% MXN 8.000% 17.12.2015
Loan -3% USD Interest rate 2.5%
You’ll gain details on how to actually buy such shares and bonds from Mike McDonald at Aegis Capital Corporation.
* Lake County Real Estate. Shirley Peacock our broker in Lake County will share why the value is special here and our search for good value real estate in this area.
* British Skipton Building Society 10% Variable Bond due 12/12/18 paying 10.1%. See why Britain put an American in charge of the Pound and how this makes England an even more attractive currency to hold now.
Established in 1853, Skipton was among the first building societies and is Britain’s fourth largest building society with £13.9bn of assets and over 100 branches across the UK. They just reported a £22.3m pre-tax profit for the six months ending June 30, 2012, an increase of 253 per cent on the £6.3m profit it made in the first six months of last year.
* Position Update on British Bond ETFs. For investors who want broader diversification into higher yield British bonds the “iShares Markit iBoxx GBP Corporate Bond 1-5 ETF” is open to almost all investors.
* Three high yielding shares to consider: HSBC (symbol HBC) (Finance, 6.36% Depositary Shares, Non-Cumulative Preferred Stock, Series B) -Royal Bank of Scotland (Symbol RBS) 7.25% Noncumulative Dollar Preference Shares Series H ADR and the ETF “iShares S&P U.S Preferred Stock Index Fund” (Symbol PFF). This etf has over 200 holdings and almost one fourth are in the financial sector. All ten of the largest positions as shown below are in the financial sector.
* What’s Up With Gold and Silver? One session looks at my current position on gold and silver and asset protection specialist Rich Checkan will review the state of the precious metal markets and potential problems ahead for US dollars. He’ll outline how interest rates at zero eliminate opportunity costs of diversification in precious metals and foreign currencies. He’ll review the firm commitment by the US government to winning the battle of the printing presses and what impact this could have in U.S. dollars.
Another reason to join us in February is the pension protection session.
The power of pensions invested globally to preserve wealth can be seen by Mitt Romney’s individual retirement account. The news reported during this run for President that Romney’s IRA holds more than $20.7 million.
Pension and IRA expert Larry Grossman will review how to maximize IRA investment gains so they can accumulate tax-free in an IRA with overseas investments. The method used by tax lawyers is to have the IRA invest through an offshore affiliate of the private-equity firm, known as an offshore blocker corporation. Any special tax is avoided because the IRA is investing in the offshore corporation, not in a private-equity partnership.
Finally and perhaps most important… you learn how to use Super Thinking.
The BIG ONE is coming but its not what’s happening that counts. It’s what you do with it.
The educational program Merri and I have developed uses a different form of frequency modulation that opens enormous opportunity for expansion, understanding, peacefulness as well as greater wealth.
FM teaching uses frequency (in music and with each sense… sight…. smell, tactile and even smell) to integrate brain waves so the process of absorbing, processing and recalling information is vastly accelerated. This brings forth the three C’s: Calm, Clarity and Coherence.
FM creates relaxed concentration… a key to happiness, health and success.
You learn whole brain thinking that can help improve your freedom, satisfaction and income through business.
This part of the seminar helps us integrate their brain waves so they are more intelligent, intuitive and relaxed.
The Super Thinking sessions show three ways (baroque music, relaxation and nutrition) to get into and stay in a state of relaxed concentration… a mental state shown to enhance almost every human capability… especially writing.
Merri and I are explorers so we have used this techniques for decades. We are always looking for what’s next… trying to stay on or ahead of the leading edge and need ways to think outside he box.
The Super Thinking sessions share how we do this to live better…. using frequency modulation to be smarter… stronger…. more energetic… more aware, friendlier, compassionate, happier and healthier.
We are in our 45th year of business and we share what we have learned and where this is leading our activities in our upcoming seminar. Join us.
Spotting new trends and applying them to our micro business has brought us a strong and continual flow of income through good times and bad. More importantly the process has been fulfilling…. beneficial to society and healthy. Now you can benefit from the latest… and perhaps strongest… of all the trends we have stumbled upon.
Applying the concepts of super thinking to spotting trends over the past 45 years has helped thousands of our readers make and save millions. The success of our readers has been a driving force in our lives yet we have always wanted to do more so continued looking deeper at ways we can share how to have income, stability, good health and contentment.
Join us to learn our most recent experiences and most advanced concepts and ideas.
Join Merri and me at our Super Thinking + Investing and Business Seminar – February 1-2-3 , 2013, Mt. Dora, Florida.
There are two more Reasons to be in Mt. Dora February 1-2-3. One is old time values.
The Lakeside Inn seen from Lake Dora.
130 years ago three local, and reasonably successful individuals, sitting around around one afternoon when one of them says “hey… lets build a hotel”. The three agreed, plans were drawn up, materials were ordered and work began. The year was 1883, Mount Dora was still called Royellou, Chester Arthur was President, and it would still be several years before the railroad would make its way in to town. This leaves the Lakeside Inn as the oldest, continuously operated hotel in the State of Florida. The Inn is just across the street from our meeting place and is celebrating its 130th Anniversary throughout 2013 with a number of special events and celebrations.
Mt. Dora Arts Festival. This is is ranked in the top hundred art shows in the US. It’s a juried fine arts festival, for art lovers, casual festival-goers and families.
Downtown Mount Dora, with its New England architecture and breathtaking views of Lake Dora is the backdrop for this event. In addition to the endless rows of fine art, including oil paintings, watercolors, acrylics, clay, sculpture and photography, the festival features local and regional musical entertainment at a main stage in Donnelly Park.
The event draws over 300,000 visitors and features more than 285 artists from all over the world.Super Thinking + Investing and Business Seminar -
Join Merri and me at our Super Thinking + Investing and Business Seminar – February 1-2-3 , 2013, Mt. Dora, Florida.
See How to Attend this Seminar for $177 instead
Join Merri, me and the following speakers:
* Thomas Fischer of Jyske Bank, who will talk about International investing, forex, plus borrowing low to invest high.
* Rich Checkan of Asset Strategy who will update the state of the precious metals markets.
* Dr. Andres Cordova updating Ecuador real estate and monetary, residency and tax regulations.
* Dave and Sherry Johnson. How to turn $499 into 142,035 with Positive Community magazines in small towns.
* Shirley Peacock. Lake County real estate.
* Mike McDonald. Aegis Capital Corp.
* Lou Shinamin. Ruggie Wealth
* Larry Grossman. Sovereign Pension Management.
Join Merri and me at our Super Thinking + Investing and Business Seminar – February 1-2-3 , 2013, Mt. Dora, Florida.
See How to Attend this Seminar for $177 instead
Warren Buffet’s description of investment types at Fortune.finance
