A reader sent this note in response to our recent article about green and renewable investing and the Bullitt Center.
Like Solyndra and other projects, if it is not economically profitable it will be a failure. The biggest expense for any building is property taxes, the utilities are incidental. At $600 a square foot for construction, the rents will not attract any renters. Without parking it will be totally unattractive, except for some Green non-profit. With taxes, space will rent for well over $50 per square foot at a 6% CAP rate. Green is the fool’s gold of the environmentalist.
There is no doubt that the reader has a point. The Bullitt Center may not make a profit. The Bullitt Center may be just about R&D. This is why it is funded by an NGO. But we still have to keep trying to tackle problems like the environment. We still have to use our capital to evolve and to follow what is dear to our hearts.
Here are important reasons to Merri and me why we invest in green.
Our grandchildren, Teeka and Sequoia.
Leo, Fran, mom and me… four generations.
Garren, Cheri, mom and me.
Mom is 90 in June and her generation sacrificed plenty for us boomers. So if I were to lose on an investment that experiments on ways to make our grandchildren’s world a better place… good for me.
However there are plenty of ways to help the environment AND make the world a better place.
First, renewable energy can be profitable. Take Brookfield Renewable Power shares as an example. I first wrote about and invested in these shares August 2010.
Brookfield Renewable Power share chart from www.finance.yahoo.com. (Click on chart to enlarge.)
That’s not a bad return in my opinion.
Since that time the share price has almost doubled and the shares have paid a regular excellent dividend averaging over 5%.
The trend continues as well. A recent Forbes article entitled “Brookfield Renewable Energy Partners Named Top 25 Dividend Stock With 4.58%”
Brookfield Renewable Energy Partners LP (Toronto: BEP-UN) has been named as a Top 25 dividend stock, according to the most recent Canada Stock Channel ”DividendRank” report. The report noted that among the coverage universe, BEP.UN shares displayed both attractive valuation metrics and strong profitability metrics. The report also cited the strong quarterly dividend history at Brookfield Renewable Energy Partners LP, and favorable long-term multi-year growth rates in key fundamental data points.
The report stated, ”Dividend investors approaching investing from a value standpoint are generally most interested in researching the strongest most profitable companies, that also happen to be trading at an attractive valuation. That’s what we aim to find using our proprietary DividendRank formula, which ranks the coverage universe based upon our various criteria for both profitability and valuation, to generate a list of the top most ‘interesting’ stocks, meant for investors as a source of ideas that merit further research.”
The annualized dividend paid by Brookfield Renewable Energy Partners LP is $1.38/share, currently paid in quarterly installments, and its most recent dividend ex-date was on 12/27/2012.
See a long-term dividend history chart for BEP.UN, in the article linked below.
I’ll be the first to add that hydro power is not a perfect answer to improving the environment… so one may want to look for other ways.
The green portfolio leveraged with a Japanese yen loan we recommended. In 2007 it rose 260% in a year.
Here is that green portfolio which was a blend of venture and established green shares.
Taking some green risk can improve your overall investment returns with green investing and modern portfolio theory.
The idea of blending green and non green and established green (like Brookfield) with venture green fits nicely into Modern portfolio theory.
Modern portfolio theory balances a portfolio between risk and non risk investments to maximize portfolio expected return and minimize risk.
Here is a traditional MPT stock bond chart showing that the best risk reward ratio for a portfolio is 60% shares and 40% bonds.
Two decades ago when emerging markets were considered, the non traditional high risk portfolio… Modern portfolio theory showed that a 70% major markets and 30% emerging markets balance created the best return with the lowest volatility at that time.
You can combine modern portfolio theory and venture capital management to make renewable energy and green energy improve your profits as you use your investments to do something that you feel is important.
Risk Vs. Reward
The key to successful green investing is to approach this as a venture capitalist and to adhere strictly to value investing concepts. In the case of green ventures the value is determined by risk versus reward.
You might be investing in an untested venture. the reason for doing so is that it will turn into the next big thing.
With mature businesses value is much easier to determine based on dividend, yield, sales, price earnings ratio, cash flow and the history of the share price in its sector and its market.
One of these is available for ventures. Here are some of the factors to look for in new ideas.
Management. First and foremost a venture investment is an investment in the management of the company.
Market. How big is the potential? We can see the downside (zero) and the consequences of it. How big can the idea grow?
Competitive Edge. What does the idea have that cannot be duplicated quickly once it proves itself?
Regulation. Look at the potential regulatory and legal issues are involved.
An important reason to invest in green is because this is fulfilling to you.
When you make a profit investing in your life’s mission, you gain the best possible profit. However recognize that most ventures fail. Venture capitalists invest with the idea that a little returns a lot… so they invest a little in a lot of ventures. The few ventures that bring huge profits make up for the many that lose. Add these ideas to the power of environmental concerns and your portfolio can make the world a better place and create profits that turn others green with envy.
Missions Create Real Value InvestmentsHere are six predictions where profits are guaranteed. They are absolute guarantees because I made these predictions over the past 49 years. They were correct and had you invested in the six predictions you may have become unbelievably rich. Each had a cycle so the really great opportunity is past.
You can still use these six predictions though, because they lead to the seventh prediction that I am investing in now.
See the six predictions to learn how to cash in on the seventh prediction. Use my 49 years of global investing research to gain slow, profitable, worry free investing… plus discover how even your amazing investments could earn 1,237% more!
Prediction #1 – 1970s: Invest in the Hong Kong Stock market. This prediction was in my first published report “Three Secrets for Investing Abroad”. The Heng Seng Index was around 700. Since then it has risen to over 21,000, an increase of 30 times.
Heng Seng chart from www. yahoo.com. Click to enlarge. Compare that to the Dow which has risen only 17 times.
Prediction #2 – early 1980s: Invest in London real estate. Prices looked so good that Merri and I conducted London real estate tours. The first house I bought in central London cost $35,000. Today the average price in this area is almost 2.5 million dollars (1.6 million pounds).
Prediction #3 – later 1980s: Invest in Isle of Many Real Estate. You could buy an ocean front house for $20,000. Merri and I shifted our seminars and tours from London to the Isle of Man. By the 1990s that price had risen 10 times. When the UK market crashed in the early 1990s, Manx values doubled. The average house price went from around $125,000 in 1995 to about $375,000 by 2007.
Prediction #4 – early 1990s: Borrow yen at low interest rates and deposit in dollars at high interest rates and related currencies.
See full chart at Fxtop.com
Three times, our predictions of when to borrow and or invest in yen created fortunes.
Prediction #5 – 1997 – Invest in Ecuador real estate.
Those who have been reading our site for some time know that beginning in the late 1990s through mid 2000s we sold much of our Florida real estate and began buying Ecuador property. We ured readers to join in the adventure, fun and profit.
Prediction # 6 – 2009: Invest in Smalltown USA. In 2009 we switched strategies again. We started selling our Ecuador real estate and began buying back in small towns in Florida.
Wall Street Journal article (1)
Since then we have accumulated numerous rental properties in central Florida. The Wall Street Journal recently reported: “Existing homes sales this year are expected to hit levels not seen since just after the peak, in 2006, driven by strong job growth, low interest rates and a gradual loosening of lending standards, according to the National Association of Realtors.”
The area we recommended and have written about is part of the fastest growing metropolitan area in the USA. The New York Times article (2) said: “The Villages, Florida: In 2014, its population rose more quickly than that of any other census area in the United States, climbing 5.4 percent, compared with 0.7 percent for the nation as a whole.”
Investing in each of these six predictions myself has created financial security. I’ll share the investment I am making now in a moment. First look at these three golden rules of investing because though I have achieved every financial goal that most people simply dream of, I know that all can be lost because of three golden rules of investing.
Experience taught me that these are the three most important rules of investing.
Investing Rule #1: There is always something that you and I, nor anyone, does not know.
Investing Rule #2: Human nature stacks the odds against us all.
Investing Rule #3: Someone is always trying to steal from us all.
Because 2015 is the count down year of my 50th anniversary of talking and writing about savings and investments, I want to share vital information about these three golden rules and 47 more you.
The “50 Golden Rules of Investing” are the 50 best investing lessons I have accumulated from five decades of global travel, investing and business. The stories mostly come from mistakes made, plus some decisions that reaped really rich rewards. Before I explain how you can have these 50 Golden Rules let’s look at the first three of “Golden Rules of Investing” in more detail.
Golden Rule of Investing #1: “There is always something we do not know”.
History is littered with this fact. The Titanic was called “unsinkable”. There was “peace in our time” in 1938. “Dewey Defeats Truman” in 1948. The Edsel was produced in 1958. In 1968 Business Week wrote: “With over 50 foreign cars already on sale here, the Japanese auto industry isn’t likely to carve out a big slice of the U.S. market.”
After working in US investments for two years, I took my first flight to Hong Kong in 1968. I wished I had known then what I know now! That’s not how life works though. There is always something we do not know. This rule applies to everyone, dumb and smart, young and old, big and small.
A late 1870 Western Union memo said: “This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.”
Associates at RCA told David Sarnoff in the 1920s: The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?“
The chairman of IBM said in the 1940s: “I think there is a world market for maybe five computers.”
Margaret Thatcher missed her own greatness, in 1974 she said: “It will be years — not in my time — before a woman will become Prime Minister.“
A Boeing engineer missed knowing when after the first flight of the 247, a twin engine plane that holds ten people, he said: “There will never be a bigger plane built.”
So here we are. We know what happened in the past. Looking ahead is never quite so certain, but we have to invest anyway. To live without knowing for sure and with inaccurate beliefs is part of human nature.
The way we react to this certainty of uncertainty leads to Golden Rule of Investing #2.
Golden Rule of Investing #2: Human nature stacks the odds against us.
When we invest in the unknown, millenniums of human evolution kick in. Doubts arrive, especially if the investment falters. Our fears and doubts create an investor phenomenon called the “Behavior Gap”.
The behavior gap is the difference between the rate of return earned from a diversified portfolio that is rebalanced correctly and the rate of returns earned by investors who move their money around in an emotional response to market ups and downs.
Behavior gaps are among the biggest reasons why most investors fail (and few succeed). Hasty, emotional decisions based on fear and greed cause portfolio to significantly under perform the market in which they invest.
A large body of psychological and physiology research, including magnetic resonance imaging, shows that most human beings do not make the correct logical decisions to overcome the power of emotion when making or losing money. Neuroscientists have even shown that making money stimulates the brain with dopamine, almost like cocaine. Financial loss however, or even the threat of loss, is like a physical attack. Fear, anger and grief release adrenaline and cortisol. The heart rate and blood pressure rise. We sweat and become alert ready to fight or flee.
These reactions are hardwired into our bodies. We cannot change this fact and only a minority of investors can overcome this biology through education, experience, or genetic good luck. Human evolution makes fear the more powerful motivator. Fear and greed based investments create losses due to behavior gaps. Fear motivates us more strongly than desire, so by nature we are risk adverse.
Risk aversion causes us to act oddly when it comes to spotting value. Warren Buffet again highlights the problem by comparing behavior to the price of hamburgers at McDonalds versus shares. If the price of a Big Mac falls, he doesn’t become afraid and worry. He buys more and feels good that he’s paying less for the same hamburger.
Buffet acknowledges, however, that fighting fear is easier said than done. “There is no comparison between fear and greed. Fear is instant, pervasive and intense. Greed is slower. Fear hits.”
Fear, as our most powerful motivator, creates a problem. Every day, we are conditioned to have fear. So much frightening information is thrown around that fear becomes a habit. Fear is the norm. Almost every establishment that structures our society tries to make us feel fear. The system says, “Break the law (there are so many laws now) and we’ll put you in jail or make you a disgrace”. Many medical, legal and insurance professionals use a lot of fear. So too do law enforcement, education and governments.
We are so bombarded with bad news, risk and warnings that fear has an ingrained position in our routine. The ritual of fear is hard to break when immersed in a daily flood of alarm.
Learn how to beat the behavior gap with trailing stops. Trailing stops uses logic to create a discipline that increases emotional stability as they reduce risk and increase the potential for profit.
Let me share a real life example. One of my long term investments has been in shares of Jyske Bank.
I had a passion and purpose for investing in Jyske shares. I knew the bank, their structure and staff well. This is a bank that does not pay its staff bonuses. The CEO does not make that much more than the staff. There are no corporate limos, jets or or other such extravagances. I believe strongly in this type of financial ethics structure and wanted to promote the idea of more ethical financial institutions. My purpose of promoting ethical financial institutions gave me the courage to hold onto Jyske shares during downturns. Because I did not support those beliefs with the mathematics, I gave up huge amounts of profit. I earned 257,679 kroner instead of 1,056,069. I lost this because of the behavior gap.
My original investment turned 100,000 Danish kroner into 357,679 Danish kroner. This has been a great return but the investment could have grown to 1,156,069 Danish kroner instead if I had enhanced my purpose by using a system of trailing stops.
We invested in Jyske shares at DKK96.50 on 2nd September 2002. We sold half in April 2006 at DKK352.50. The share price of the remaining shares we hold have never dropped below our purchase price. As of May 2015 the share price was DKK329.
My passion to support for institutional ethics made me feel better than the profit about this investment. I gained enormous enjoyment visiting Copenhagen and gained friendships and immense knowledge from many of the bank’s management and staff. These assets were priceless.
Could I have also gained a better profit if I had combined these benefits with a mathematical process? Great benefits gained from 50 years of investing are many wonderful friends who know more about parts of investing than I do. I contacted one of these friends Richard Smith, creator of the smart trailing stops system called Smart Stops 2.0. I asked him to calculate the exact dates that his mathematical system would have created alerts that the Jyske shares were good value or not. Here are the alerts his trailing stop system would have given for the Jyske shares I held:
Exit @ 325.50 on 6/13/2006. All the shares are sold bringing in DKK337,218.
Buy @ 321.98 on 10/9/2006. The DKK337,218 buys 1047 shares.
Exit @ 404 on 6/8/2007. This sale grosses DKK422,988.
Buy @ 118.5 on 3/20/2009. The DKK422,988 buys 3,569 shares
Exit @ 170 on 8/10/2011. This sale grosses DKK606,730.
Buy @ 173.40 on 2/1/2012. The DKK606,730 buys 3,499 shares.
Still in @ 330.4 on 4/22/2015. The share value at this time is DKK1,156,069.
Wow, what a difference. If I had followed the trailing stops and buy signals, the investment would have been much safer, plus increased 11 times instead of 3.5 times.
To help increase profit and safety, based on these two golden rules, I have created a new course called “Purposeful Investing” (Pi for short). Pi creates and studies in real time numerous portfolios based on differing investing strategies with and without trailing stops.
Pi helps you understand the pros and cons of each portfolios so learn how to customize a long term strategy for profit and safety that works best for you based on your own financial needs, assets and skills.
Pi also helps you reduce costs and protect your savings, pensions and investments against the third rule.
Golden Rule of Investing #3: There is always someone trying to rob you. Pi helps overcome the behavior gap and review of the costs and institutional risk of each strategy.
Thank you Merrill Lynch. One great friendship and lesson gained at the beginning of my 50 year investing career was an accountant who worked with me and then became a broker for Merrill Lynch, Pierce, Fenner & Smith in Hong Kong. This friend was amazing with numbers. He shared with me his frustration over Merril’s commission system used to calculate his income. He told me that Merrill broke investments into categories and the category that paid the highest commissions often included the riskiest investments. Even worse he complained that he was expected to sell a certain amount of the high risk category. He quit after a short time due to what he called Merrill’s “irreconcilable ethics”.
That was a revelation! Financial institutions who are supposed to care for our money do not always offer advice that is in our best interest. Over time I saw a correlation, the larger an investment firm, the less trustworthy they may be.
I am thankful for that lesson learned nearly 50 years ago. Financial institutions look out for themselves first and their customers. second, if at all.
The investment industry is ripping off small investors. More than half of all American households will not have enough retirement income to maintain the living standards they were accustomed to before retirement. The standard solution to this problem is to save and invest more money. This glosses over that fact that Wall Street is bleeding savers dry.
A research paper by John C. Bogle, founder and former chief executive of Vanguard Investment Managers shows that a big part of the problem is the failure of investors to earn their fair share of market returns. The research found that advisers mostly recommended investment strategies that fit their own financial interests. They reinforced their clients’ misguided biases, encouraging them to chase returns and advising against low-cost options like low-fee index funds. Kent Smetters, an expert on finance at the University of Pennsylvania’s Wharton School, stated the problem succinctly, “It is superslimy” he noted. This leads us to the third Golden Rule.
Management Dilemma at Big Financial Institutions
The intentions of management at most big financial institutions must be suspect. The systems are focused on enhancing the girth of their own wallets rather than those of account holders. The system encourages them to take risks. If they win… they get huge bonuses. If they lose, they get golden handshakes. This is not a new trend… just one that is more exposed as excesses in the entire system are stretched by the nature of democracy and aging demographics.
Few rational people trust big bank and brokerage management anywhere.
Big banks and brokers use many ethically challenged techniques. One example is “Spoofing”, a part of unethical computer “Frequency Trading”. “Spoofing” was born when equity markets turned to computerized trading. Spoofing has been made illegal in an attempt to close this loophole.
A New York Times article, “In Britain, Libor-Rigging Conspiracy Case Is Also a Test for Regulators” shows that spoofing is only one way that the financial industry has been ripping off many of its investors.
The article tells how British authorities have charged one 35-year-old former trader from Citigroup and UBS with eight counts of conspiracy to commit fraud. This trader was not acting alone. The indictment claims he was a ringleader among more than a dozen traders engaged in manipulating the London Interbank Offered Rate, or Libor, a reference rate used to set various others, including those for student loans and mortgages.
These were not back street shady operators either. UBS, Citbank, Barclays, Deutsche are some of the banks who have paid more than $9 billion to settle allegations that some of their traders manipulated Libor and other related interest rate benchmarks. Is this a one off incident? The article says: In total, banks have paid more than $160 billion since 2009 to settle charges related to issues such as rigging interest rate benchmarks, manipulating currencies, mis-selling insurance, packaging toxic mortgages and evading taxes, among others.
The allegation is that traders intentionally moved the rates close to the time of the fix to benefit their own trading books. The traders even joked about this and in one email, a trader said, “If you ain’t cheating, you ain’t trying.”
This is one more example of greed dominating the history of investment trading. Since equity trading began there has been a never ending battle between authorities and unethical trading. Every time a loophole is closed, another is found. We cannot depend on the authorities to totally protect us as investors. Nor can we expect our banks and brokers to protect us either.
The New York Times best seller “Flash Boys: A Wall Street Revolt” by Michael Lewis tells the tale of how big banks and brokers have been ripping off investors. The book shows how since the late 1800s banks and stock brokers and traders have been legally stealing (and sometimes illegally) from investors by front running. Front running is the practice of a bank, stockbroker, trader or someone taking advantage of advance knowledge of your order to buy or sell a stock or bond. The front runner executes an order for its own account and immediately resells at a higher (or lower if you are selling) price to you.
The slice in each case is small but it is estimated that these high frequency traders are pulling as much $5 billion per year, perhaps as much as $15 billion per year or even higher. Those billions are dollars out of your pocket (and mine) and every other investor who is trying to make an honest investment.
Flash Boys shows how much of the financial industry is geared up only for their profit rather than yours. The system creates a gap between investors and the market, a group of middlemen who earn fees, commissions, and rebates from order flow and volume. They add little actual value to the market but take huge amounts of pay.
The day after the book’s release the Federal Bureau of Investigation announced an investigation into high frequency trading, in particular about possible front running, market manipulation, and insider trading. On May 1, 2014 the SEC announced a $4.5 million fine for the New York Stock Exchange and two affiliated exchanges, on charges related to Lewis’ book.
Stock Exchange excesses are just a tiny fraction of the problem. Alayne Fleischmann, a securities lawyer for Chase JP Morgan, became a whistle blower in one of the biggest cases of white-collar crime in American history, exposing secrets that it is claimed JPMorgan Chase CEO Jamie Dimon paid $9 billion to keep the public from hearing. This was pointed out when she said: “I could lose everything. But if we don’t start speaking up, we’re going to get the biggest financial cover-up in history. It was like watching an old lady get mugged on the street, I thought, ‘I can’t sit by any longer.'”
This one rip off is just the tip of the iceberg that has been chilling our investment, savings and pensions for 17 years. The SEC website (4) shows a list of over 170 fines levied on some of the biggest financial institutions that mislead their customers into bad investments. The SEC site says that they charged Citigroup’s principal U.S. broker-dealer subsidiary with misleading investors about a $1 billion. Just a few of the other banks and brokers you’ll read in that list include names you see every day. Merrill Lynch, Bank of America, Wachovia, Wells Fargo, UBS Securities, Goldman Sachs, Credit Suisse Securities (USA), Morgan Stanley are a few. These same firms that tout “We are here to help your finances,” have really been out to rob you.
The book says: No matter what regulators did, some other intermediary found a way to react so there would be some form of front running. If you read the book, you’ll see that your chances of knowing what really goes on with your investments are pretty slim.
Pi looks at how to protect against shady investment advice, unreasonable and hidden fees as well as how to protect us from our “Behavior Gap”.
Most of all Pi helps you gain the ultimate form of financial security, investments with purpose and profit. When you subscribe to Pi I will include you in the “50 Golden Rules of Investing Program,” without any additional cost or obligation. Each month in “Pi” we’ll delve more deeply into four or five “Golden Rules of Investing”.
The greatest benefit if Pi is learning the seventh prediction right now.
The Seventh Prediction. In the 1980s. A remarkable set of 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 Buffet 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.
Beat the robbers with 50% profits.
Despite the predators on Wall Street who are waiting to take big gouges out of your savings and wealth, equities are still the best place to invest for the long term. This chart from the 24 page Keppler Asset Management 2014 Asset Allocation Review shows that over the past 80+ years equities have dramatically outperformed other types of investments.
Click on chart to enlarge.
Because of the predators on Wall Street (and every stock market in the world) the search for good investments requires a relentless search for value. Your investments have to be good enough to reap an outstanding profit even after the parasites siphon off part of the profit.
To take advantage of the once every 17 year circumstances, I chose to track Keppler Asset Management who continually researches developed and emerging markets globally. Keppler is one of the best market statisticians in the world and numerous very large fund managers use his analysis to manage funds such as State Street Global Advisors. Keppler compares the value of each share in each market based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return. From this study of monumental amounts of data Keppler develops a Good Value Stock Market Strategies. The analysis is based on long term, rational, mathematical facts and does not worry about short term ups and downs.
From Keppler I learned that market timing is not the way to get these high profits. Another graphic from the 2014 Keppler Asset Allocation Review explains why.
Click on image to enlarge.
A dollar invested 88 years ago in Treasury bills rose to $20.58. The same dollar invested in U.S. stocks over the 88 years grew to be was worth $4,677, UNLESS you missed the best 43 months. Literally all of the the Dow’s growth in 1,056 months came in 43 of those months. Your odds have been one in 24, better than roulette perhaps, but not good enough. Plus even after these odds, the predators are going to take their cut. You have to ask, “Am I that good at timing?”
The better alternative to timing is investing long term indexing based on value. Long term strategic investing in market indices reduces the amount of trading. Low trading activity is important because trades are where you are most vulnerable to predatory tactics.
A part of the long term strategic trading is to invest in low fee diversified Index ETFs. This simplifies your search for value because it focuses your research into lumps.
A comparison of US versus German stock market indexes gives an example of lump research and you can create good value, low cost, diversified portfolios that offer maximum potential for profit as they reduce risk.
Keppler’s research shows that Germany’s stock market is a good value market. Keppler lumps all the shares (or at least 85% of the shares) into the calculations. There is no attempt to select any one specific share. Keppler’s research shows that the US stock market index (a lump of about 85% of all the US shares) is now a bad value.
Germany has the world’s fourth largest economy. The country is the third largest exporter in the world and in 2013 recorded the highest trade surplus in the world making it the biggest capital exporter globally. Yet German shares have been overlooked. German share prices are cheap.
The German Stock Market as of January 2015 in terms of US dollars has a relative price to book value ratio of .78, a relative price earnings ratio of 0.87 and a relative dividend yield of 1.12. The US Stock Market has a much higher relative price to book value ratio of 1.29, a relative price earnings ratio of 1.07 and a relative dividend yield of 0.81. German shares cost much less, compared to the values and earnings, than US shares. German shares pay much higher dividends as well.
Keppler predicts that the US Stock Market (which is ranked as a sell market by Keppler) will have an annual index gain for the next five years of 3.1% and a total return (with dividends) or a total five year return of 21.7%. The same calculations for the German Market predicts an average annual index gain over the next five years of 7.5% and a total return (with dividends) or a total five year return of 47.3%.
Which would you rather buy, a 47.3% return sold for 78 cents on the dollar or a 21.7% return sold for $1.29 on the dollar?
You can forget about any specific share in the US or Germany and invest into an index (in this case the Morgan Stanley Capital Index) which represents about 85% of all the shares traded on the exchange.
You can invest in ETFs that passively invest in all the shares of the index in stock markets that offer good value. iShares investment company for example has an ETF that invests in 85% of the shares traded on Wall Street.
This ETF icalled the iShares USA (symbol EUSA) has risen from 22.91 to 43.40 or 89% in the past five years.
iShares also offers an ETF that invests in about 85% of the stocks listed on the German Stock Exchange (Symbol EWG). EWG has risen from 19.70 to 28.13 or 42% in the past five years.
Keppler’s lump reseach shows that Germany is a good value market. One simple (even very small) investment in iShares Germany MSCI Index ETF gives you a portfolio of almost all the shares traded on Germany’s largest stock exchange in Frankfurt. This ETF is a share traded on the New York Stock Exchange. The ETF invests in 85% of the shares in Germany. This ETF is a passive fund that does not try to outperform the growth of the German Stock Market. The managers simply track the investment results of the MSCI Germany Index. This makes it easy to capture the powerful economic circumstances that are unfolding now.
Just investing in Germany is not enough. There are currently ten good value developed markets, Australia, Austria, France, Germany, Hong Kong, Italy, Japan, Norway, Singapore and the United Kingdom. Plus there are 12 good value emerging markets. You can easily create a diversified portfolio in each or all of these countries with Country Index ETFs.
Investing in many stock markets through ETFs gives you opportunity in the second economic wave, a rising US dollar. Preserving the purchasing power of your earnings, savings and wealth requires currency diversification.
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 you start using strong dollars to accumulate good value stock market ETFs in other currencies.
Chart from snbchf.com Click on chart to enlarge.
Look at that dollar spike against the Swiss franc in 1985. The dollar rose then against the yen, the German mark, British pound and all major currencies. Imagine the profit you could have made, had your known that the greenback was set to fall 50% in the next two years.
Conditions for a dollar downfall are set again.
For example because of fears about the euro, EWG, the German ETF is down 9 percent over the last 12 months and down 8 percent over the last six months. These declines are created by currency concerns. When the euro regains strength, the shares have the potential to appreciate even more.
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 Keppler Asset Stock Market and Asset Allocation Analysis so you can keep this as simple or as complex as you desire.
The report shows 22 good value investments and a really powerful tactic to use that allows you to accumulate these bargains now even in very small amounts (even $5,000). There is extra profit potential of at least 50% so the report is worth a lot.
Research shows that most people worry about having enough money if they live long enough. I never thought of that. I just wanted to live long enough to see the remarkable economic opportunity that started in 1980 start again and those that continue to offer opportunity. This powerful profit wave has begun. I made it and am glad you did too. Even more I look forward to the next 17 years and sharing how to have more than enough money for the rest of your life.
Enroll in Pi. Get the first monthly issue of Pi, the first five “Golden Rules of Investing” and the report “Three Currency Patterns For 50% Profits or More” right away.
#1: I guarantee you’ll learn ideas about investing that are unique and that can rescue stress as they help you enhance your profits through slow, worry free purposeful investing.
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#3: I guarantee you can keep the golden rules of investing you have received and “Three Currency Patterns For 50% Profits or More” report as my thanks for trying.
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