The Power of Thrift


There is power in investing thrift.  Avoid frequent trading.  Reduce investing costs. Don’t get ripped off by Wall Street.

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Image from WSJ.com article “Wells Fargo, Awash in Scandal, Faces Violations Over Car Insurance Refunds”  (1)

How bad are the thieves who are supposed to look after our money?   The big guys can cheat their customers again and again.  The New York Times article above shows how this bank has ripped off its customers for a third time in just one year.

The article says:  Wells Fargo, the scandal-plagued bank, is facing new regulatory scrutiny for not refunding insurance money owed to people who paid off their car loans early.

This is the third such incident revealed in just the last year, for just this bank.

How many shenanigans are not revealed in this industry?

Last year, Wells Fargo bank employees created millions of credit card and bank accounts that customers had not requested.  They robbed customers of millions.

Last month, this same bank was found to have forced unneeded collision insurance on consumers who financed their car purchases.  That practice hit 800,000 customers caused 274,000 people to be delinquent and 25,000 cars to be wrongly repossessed.

Now the Federal Reserve Bank of San Francisco is investigating a different insurance rip off related to a different type of insurance called guaranteed auto protection insurance, or GAP.

It is not mandatory for car buyers to carry GAP insurance, which typically costs $400 to $600. But car dealers push the insurance, and lenders like it because of the protection it provides.  When borrowers pay off the loans early, Wells Fargo should have provided a refund of some of the GAP insurance premium.

Guess what… they did not.

We are on our own!  We should not expect the authorities to protect us.

The Wall Street Journal article “When Brokers Want to Move Your Money Out of a Very Good Thing” (2) explains why.

The article says: So far this year, here’s what our friends in the federal government have done for — and to — citizens who hope to find simple ways to save enough money for retirement without anyone robbing them blind.

■ Continued a year’s long fight against a rule that requires many retirement advisers to act in their clients’ best interests.

■ Reversed a rule that would have made it easier for states to create retirement savings plans for people who don’t have one at work.

■ Abandoned a new federal program to help lower-income savers, young ones in particular.

The article tells how brokers allegedly persuaded about 200 people to move money out of a safe government plan and put the funds in expensive annuities, earning hefty commissions.  The overall costs in the government plan are about as low as employer-based retirement savings plans get,  about 38 cents for every $1,000 someone had invested.

Moving investors out of the plan earned four brokers about $1.7 million in commissions, at the investor’s expense.  Once again Wall Street used investors hard earned savings to line a broker’s pocketbooks.

We publish The Purposeful investing Course (Pi) to help readers improve their investment trading discipline so they can increase profits, reduce risk, reduce trading costs and save time.

The core of the Pi strategy is to use math based financial news to invest in a portfolio of equities in the best value stock markets using country ETFs.  These mathematically calculated valuations do not change quickly, and the portfolios researched by Pi have not traded once in the last two years.

This creates an enormous thrift.

One big question about how to manage these Pi portfolos called Pifolios is “What to  do when markets have a severe correction?”

Here is an excerpt from a recent Pi Update that looks at two strategies for dealing with market downturns but keeping costs down.

The first strategy is hold on and continue to accumulate value.  This works well if an investor has time for the portfolio to ride before cash is required.  If one sticks to the strategy (and does not bail out at the bottom), this strategy requires the least time.  Investors can focus on more important aspects in life.

Plus trading costs are kept at a minimum.

The second strategy is to use math to spot trends and use trailing stops (based on market momentum not entry price) to get out of a market before it severely declines.

This strategy offers the best long term profit, IF an investor can stick to the strategy AND ALSO uses the same math to get back into the market as it recovers.

As the US Stock Market leaps from all time high to all time high, it’s time to ask ourselves “When will the US stock market bull be over?   What to do about it?”

At Pi we track market momentum in all the Pi ETFs at Tradestops.com.

On June 16, 2017 Dr. Richard Smith CEO of Tradestops wrote: “Is This 9-Year Bull Market Over?”

We are well into the ninth year of a bull market that has barely seen any 10% corrections, much less a 20% drop.  But warning signs that this bullish market are coming to an end have begun to show up.

The three danger signals mentioned at that time were:

#1: The short-term trend of the Dow Jones Transportation Average (DJTA) was to the downside, yet the short-term trend of the DJIA was to the upside.

The  Dow Theory states that (DJTA) must also be trading at new highs for the new highs of the Dow Jones Industrial Average (DJIA) to be confirmed, otherwise the trend of the DJIA is not sustainable.

Since 1999, each time this has occurred has been the precursor of a downward move in the DJIA.

#2: The divergence in the DJIA and the Nasdaq Composite Index (COMP).  The DJIA was trading at new highs, yet the COMP was trading more than 2% off its most recent highs.

Since 1971, there have been 12 times that the DJIA has been at new highs with the COMP at least 2% off its highs.  In 9 of the previous 11 occurrences, the DJIA has moved lower.

#3: Commercial traders in the DJIA had a historically-large net negative position.  When their positions have been negative in the past, it has led to downturns in the DJIA.

Last week Dr. Smith warned again in an editorial titled “Is the Bear About to Pounce?” and pointed out that the divergence  of the Dow Jones Transportation Average (DJTA) from the  Dow Jones Industrial Average (DJIA) has grown.

The short-term trend of the DJTA is to the downside, yet the short-term trend of the DJIA is to the upside.

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The benefit that Tradestops offers investors is a Stock State Indicator of specific shares that suggests price levels for rising trailing stops as the markets rise.

Dr. Smith also wrote in last week’s editorial:  “No matter what happens with the markets, however, I’m not worried. I’ve got my stops in place. I know what I’ve got at risk and I’m comfortable with it. Could something go terribly wrong? You bet. That’s what my stops are for. They’re like having your seat belt on in the car.

“On the other hand, could something go terribly right? Absolutely! The entire summer has seen the stock market climb a wall of worry to new all-time highs. Just today we saw stronger than expected job creation. Upside surprises are always a possibility.

“My stops protect me on the way down, but they’ve also been moving higher and capturing greater profits on the way up. We should never forget that trailing stops are just as important for “unlimiting your upside” as they are for limiting your downside.”

Warnings of a Wall Street crash lead us to other important questions.

Will other stock markets fall in tandem with the US?

Will other stock markets rise as investors pull out of the US and invest in other markets.

Whatever the answer, the best place to be is still in good value markets.  The best strategy is still to use math based financial news to reveal good value and to invest equally in good value markets.

Trailing stops is an additional way to protect again a global secular stock market slide.

Pi uses math to reveal the best value markets.  Pi also uses math at Tradestops.com to see the momentum of these good value markets.

For example, we can see that all the ETFs in the Pifolio have green SSIs (Stock State Indicators).

The Stock State Indicators at Tradestops.com act as a full life-cycle indicating the health of your stock. They are designed to tell you at a glance exactly where any stock stands relative to Dr. Smith’s proprietary algorithms.

What this signal indicates is the current health of the stock (performing well, or in a period of correction, or stopped out).

The SSI will tell you one of five things:

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Momentum based on the latest 521 days of trading is a key component of the Stock State Indicator (SSI) system.  A stock changes from red to green in the SSI system only after it has already gone up a healthy amount and has started a solid uptrend.

How SSI Alerts Are Triggered

If the position has already moved more than its Volatility Quotient below a recent high, the SSI Stop Loss will trigger.  This is an indicator that the position has corrected more than what is normal for this stock.  It means to take caution.

Below are the Major and Emerging market Pifolios that we track at Tradestops.com.

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Click on images to enlarge Equal Weight Good Value Developed Market Pifolio.

All the ETFs in the Developed Market Pifolio currently have a green SSI.  This is also the case for the Good Value Emerging Market Pifolio below.

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Good Value Emerging Market Pifolio.

We do not know when the US market will fall.  We only do know that it will.  We also do not know if, when the US market corrects, global markets will follow or rise instead.

The fact that the Pifolios are invested in good value markets reduces long term risk.

Additional protection can be added by using trailing stops based on the momentum of each stock in the Pifolio.

Take for example, the iShares MSCI United Kingdom ETF.  This ETF has a green SSI at this time.

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iShares MSCI United Kingdom ETF (Symbol EWU)

Pi purchased the share at $31.26 and it is currently at $34.43 and rising.  Tradestop’s algorithms suggest that if the price drops to $31.69, its momentum will have stopped and it is trading sideways.  The stop loss price is currently $29.86.  If EWU continues to rise, both the yellow warning, and the stop loss price will rise as well.

There are numerous signs that the nine year US stock market bull will end.  No one knows for sure when or how severe the correction will be.

When the bear arrives, what will happen to global and especially good value markets?  We do not know the answer to this question either.

What we do know is that the equally weighted, good value market Pifolios have the greatest potential long term and that math based trailing stops can be used to protect against a secular global stock market correction when it comes.

You can learn how to use Tradestops.com to improve investing discipline.

Gary

(1) www.nytimes.com: Wells Fargo, awash in scandal, faces violations over car insurance refunds

(2) www.nytimes.com: When brokers want to move your money out of a very good thing

Increase Safety – Earn More

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The Purposeful investing Course (Pi) is NOT about fast moving, speculative stock and currency trading.  Pi is about slow, worry free, good value investing from finding good value. 

There are only three reasons why we should invest.  We invest for income.  We invest to resell our investments for more than we had invested.  We should invest to make the world a better place.

We should not invest for fun, excitement or to get rich quick.  Let’s put our time to better use.

This is why the core Pi model portfolio (that forms the bulk of my own equity portfolio) consists of 19 shares and this position has not changed in over two years.  During these two years we have been steadily accumulating the same 19 shares and have not traded once.

This good value portfolio is based entirely on good value financial information and math.

The Pifolio is a theoretical portfolio of MSCI Country Benchmark Index ETFs that cover all the good value markets developed using my 50 years of investing experience and study of the mathematical market analysis of Michael Keppler and his company, Asset Management.

In my opinion, Keppler is one of the best market statisticians in the world.  Numerous very large fund managers, such as State Street Global Advisers, use his analysis to manage over $2.5 billion of funds.

The Pifolio analysis begins with Keppler who continually researches international major stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return.  He compares each major stock market’s history.

Fwd: keppler

Michael Kepler CEO Keppler Asset Management.

Michael is a brilliant mathematician.  We have tracked his analysis for over 20 years.   He continually researches international major stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return.  He compares each stock market’s history.  From this, he develops his Good Value Stock Market Strategy and rates each market as a Buy, Neutral or Sell market.  His analysis is rational, mathematical and does not cause worry about short term ups and downs.  Keppler’s strategy is to diversify into an equally weighted portfolio of the MSCI Indices of each BUY market.

This is an easy, simple and effective approach to zeroing in on value because little time, management and guesswork is required.  You are investing in a diversified portfolio of good value indices.

A BUY rating for an index does NOT imply that any stock in that country is an attractive investment, so you do not have to spend hours of research aimed at picking specific shares.  It is not appropriate or enough to instruct a stockbroker to simply select stocks in the BUY rated countries.  Investing in the index is like investing in all the shares in the index.  You save time because all you have to do is invest in the ETF to gain the profit potential of the entire market.

To achieve this goal of diversification the Pifolio consists of Country Index ETFs.

Country Index ETFs are similar to an index mutual fund but are shares normally traded on a major stock exchange that tracks an index of shares in a specific country.  ETFs do not try to beat the index they represent.  The management is passive and tries to emulate the performance of the index.

A country ETF provides diversification into a basket of equities in the country covered.  The expense ratios for most ETFs are lower than those of the average mutual fund as well so such ETFs provide diversification and cost efficiency.

Here is the Pifolio.

70% is diversified into Keppler’s good value (BUY rated) developed markets: Australia, Austria, France, Germany, Hong Kong, Italy, Japan, Norway, Singapore and the United Kingdom.

30% of the Pifolio is invested in Keppler’s good value (BUY rated) emerging markets: Brazil, Chile, China, Colombia, the Czech Republic, South Korea, Malaysia and Taiwan.

The Pifolio consists of iShares ETFs that invested in each of the MSCI indicies of these BUY markets.

For example, the iShares MSCI Australia (symbol EWA) is a Country Index ETF that tracks the investment results the Morgan Stanley Capital Index MSCI Australia Index which is composed mainly of large cap and small cap stocks traded primarily on the Australian Stock Exchange mainly of companies in consumer staples, financials and materials. This ETF is non-diversified outside of Australia.

iShares is owned by Black Rock, Inc. the world’s largest asset manager with over $4 trillion in assets under management.

The Pifolio is the main portfolio we study in our Purposeful investing Course.  Then we add spice with leveraged speculations that offer additional profit potential often using leverage.

My fifty years of global investing experience helps take advantage of numerous long term cycles that are part of the universal math that affects all investments.

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 the ten good value non US developed markets and none good value emerging markets mentioned above.

Pi shows how to easily create a diversified, worry free portfolio that includes each or all of these countries with Country Index ETFs.

The current strength of the US dollar is a second remarkable similarity to 30 years ago.  Three decades past, in 1985 the dollar rose along with Wall Street.  Profits came quickly over three years.  Then in 1988 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.

Guarantee

Enroll in Pi.   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 anytime within 60 days.

#2:  I guarantee to cancel your subscription and refund your subscription fee in full, no questions asked.

  Subscribe to the Pi for $197.

Gary

 


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