Tag Archive | "Financial economics"

Robbing All Investors – All the Time


Years ago, a major stock brokerage firm coined the phrase “Measuring Success One Investor at a Time” in their promotions.   There have been many “One (fill in the blank)” at a Time” type of ads since.

Regretfully the reality is that for the overall financial industry, a more accurate promotion would be “Robbing All Investors – All the Time”.

One example of financial robbery is “Spoofing”, one part of a form of unethical computer trading called “Frequency Trading”.  “Spoofing” was born of changes in equity markets made by 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 as many investors as it can.

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  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 stock 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.

Maintain a relentless search for value, think long term, diversify and buy and sell based on numbers that support the logic of your strategy, not based on panic or euphoria in the market.

Gary

(1)  In Britain, Libor-Rigging Conspiracy Case Is Also a Test for Regulators

Not All ETFs Are Equal


Our latest report shows ways to get good low cost, global, good value diversification with ETFs.   Like all investments not all ETFs are of equal value.   As the popularity of ETFs grow, so too do the introduction of vogue ETFs that do not represent such great value.

One readers sent this excellent question about ETFs:  Hi Gary,  thanks for the interesting report.  At first glance I believed the idea of ETFs to be a great opportunity, however, after a deeper look it seems the parasites are having their way with ETF investors as well.  I am not sure about all of the ways in which the bankers fix ETFs to their favor but, for example, I see that some ETFs don’t rise as much as the index they are tracking rises, and falls further when that index falls.   Also, with an ETF your investment is only as good as the ultra leveraged derivative bets made by the investment bank that issues them.  So if that investment bank goes bust, your investment probably will too.  In other words, by purchasing an ETF issued by Morgan Stanley you are taking on some of the risk that Morgan Stanley remains solvent and that the entire derivatives market remains liquid.  Unlike holding real shares of real corps in Germany, for example, that are tied directly to the solvency and liquidity of those businesses.

The title of this message, “Not All ETFs are Created Equal” is the first answer to this question.   Four websites are linked below to help clarify this fact.  Like all investment types there are different horses for different courses.

Here are a few points to help each reader decide if ETFs are good for their financial strategy and if so, which ETFs are the right ones.

To begin we need to remember the overlying rule of all investments, “Caveat Emptor”, buyer beware.  A better phrase is “Buyer Be Aware”.   We need to be sure we understand the strategy of the specific ETFs we invest in. We need to look inside the ETF to see what shares are held in its portfolio.  ETFs are required to disclose their portfolio on a  daily basis at the fund’s website.

We need to read the prospectus carefully to understand the investment strategy of the ETF as this can have a significant impact on, income, tax and timing of profits.

Some ETFs use cap-weighted baskets of securities, others use fundamental-weighted baskets, and some even use derivative products.  There are even some now that use an active or quasi-active management style.  Each investment approach carries with it very different risk/return profiles and tax consequences.

Many index ETFs look the same, but operate very differently.  Review risks, costs and timing with your advisor to be sure that the ETFs you choose fits your specific situation.  ETFs are a hybrid of stock and mutual fund.  As a mutual fund, good ETFs have very low fees, but as stocks their price is ruled by supply and demand. ETF market prices can differ from net asset value.  We want to avoid buying ETFs at a premium (price much higher than net asset value).

The purchase of an ETF creates a brokerage commission every time it is bought or sold.  Brokerage commissions are usually fixed from a few dollars per trade to $20 a trade.  The more we buy at one time the lower the cost as a percentage of the investment.  This favors larger lump-sum investments and means that dollar cost averaging in small investments should be avoided.  The transaction costs can hurt a dollar-cost averaging in small amounts.  Larger quarterly or semi annual investments may be better than small monthly purchases.

We should consider the total costs before investing.  An expense ratio tells how much an ETF costs.   The expense ratio doesn’t include the brokerage commissions.

The average ETF has an expense ratio in the 0.50%, which means the fund will cost you $5.00 in annual fees for every $1,000 invested.  The best bet for small investors is to use online brokers that charge low or no commissions, IF the ETFs they offer fit our needs.  We look for brokers who offer what we need.  Smaller brokerage firms may have a limited selection of ETFs.

We look for the most widely-used and easy to trade ETFs for safety and to reduce buy and sell spreads.  Many ETFs that track long-standing indexes such as the S&P 500 have stood the test of time.  Many new ETFs stretch the definition of indexing.   Be careful of new indexes that track unusual segments of the market.   Avoid newfangled ETFs unless you understand them well.  Beware of leveraged ETFs. These investments are usually composed of derivative instruments and aim to provide investors with daily performance that tracks the underlying index (including leverage).  These are helpful for professional traders making bets on a daily basis, but ordinary investors should avoid them.

We need to be careful of thinly traded ETFs.  We can usually sell an ETF at any time during the trading day, but the growing number of narrowly-focused and exotic ETFs have not passed the test of time and many are more expensive.

We avoid these funds unless we really know what we are doing and the ETF specifically fits our strategy.   Passively managed ETFs are designed to track an index. Actively managed ETFs permit the fund manager to buy and sell securities and derivatives according to a stated strategy, described in  the prospectus.   A benefit of index ETFs is they are transparent and are not dependent on a fund manager who might lose his touch, retire or quit.  The exotic and managed ETFs do not provide this benefit.

ETFs can be sold short and many have related options contracts, which allow investors to control large numbers of shares with less money than if they owned the shares outright.  These positions can create short term aberrations in the ETF share price so we check them out.

Esoteric ETFs can have low trading volume and larger spreads which increases cost and volatility. Avoid a liquidity problem, by using larger funds that have proven themselves.  We avoid this problem by looking for substantial assets and large daily trading volume.

Here is a summation of what Merri and I do and you may want to do as well.  We look for two types of ETFs.  One is passive ETFs that fit into our strategy of investing in good value markets around the world.  The second are active ETFs that focus on high income, good value shares in good value markets.  We dollar cost average on a quarterly basis to keep buying commission costs down.  We buy long term positions to keep tax and selling costs down.   We look for ETFs in these two categories, that have low expense rations, large portfolios and high trying volume.

Gary

(1) New York Stock Exchange  What you should know about ETFs

(2) www.dailyfinance.com  10 rules before investing in ETFs

(3) CNCB- ETFs – what you should know

(4) Wall Street Journal How to Choose an ETF

Bull or Bear


The super heated stock market leaves most investors thinking they have enjoyed a really terrific bull market run.

Their lack of seeing the big picture, plus a bit of government fiddling with interest rates, obscures an odd truth.  This has not been a bull market at all.

Yesterday’s message, “Reverse Engineering Profits” (1) showed that a lot of investment advisers are preparing for a bear equity market.  History suggests that they are wise to do so, but for the wrong reason.  When that correction arrives, it will signal a shift that will fool most professional investors.

Screen shot 2014-09-30 at 9.44.58 AM

War and Peace – Bull and Bear.  This chart of the Dow Jones Industrial Index gives a huge clue that can help you be prepared to really cash in.

A benefit of investing, writing and speaking about international investments for 46 years are the feelings gained beyond logic.   Over this length of time numerous heart thumping ups and gut wrenching downs have come along.  Experiencing these emotions provides a degree of confidence that allows one to wander from the thundering herd.

These feelings, combined with history and logic suggests that the upcoming global stock correction will signal the end of a 14 to 17 year bear and the beginning of the a bull market that will run till about 2028.

What? A bull market?  The Dow and S&P are near all time high levels!

Yet a multitude of economic facts and a long view of market activity show that we are near the end of a 15-17 year bear cycle that began 14 years ago in 2000.

This chart of the DJI from 1960 to 1980 shows that over 16 years  the Dow moved from 995 to 776, a 22% loss.  Then in 1982 a bull market began that lasted for 17 years.

Screen shot 2014-09-30 at 9.45.13 AM

These cycles are based on an underlying phenomenon of nature that leads to peace and war.

Screen shot 2014-09-30 at 9.45.22 AM

You can see the 15 to 17 year cycle similarities by comparing the 1960 to 1980  with the  2000 to 2014 chart.

Here is how the cycle goes.  There is a war.  The struggle of war leads humanity to throw away all concepts of return on investment and create new technology regardless of the cost.

After the war the new technology is domesticated.

This domesticated technology improves human productivity.

Markets oversell the benefits gained from the technology and create a bubble.

The bubble breaks and the markets crash.

The crash leads to an economic recession which leads to war. The cycle starts all over again as the War and Peace – Bull and Bear chart above shows.

The Dow has moved in approximate 15-17 year bull and bear cycles. The market rises in the bear cycles but not much…plus there is a lot of sideways motion that can chop the non thinking investor to pieces.

For example, in the last bear from 1966-1982, the Dow fell from 995 to 776, a 22% loss.

If this logic is correct we are near the end of a 15-17 year down cycle which began 14 years ago in 2000.

The questions are: What war?  What great new technology?  When exactly?

The future will reveal the answers to these questions, but for now the important point is that we should be prepared.  Expect a correction in stock markets.  Expect the  economic tension created by this fall to erupt into some sort of epic struggle.  There are plenty of socio-economic fissures that can crack, Ukraine, ISIS, Ebola, Hong Kong not to mention global warming.  These will not be the reasons for the correction.  Whatever lightening bolt that stampedes the herd will simply be from the storm that has been building for 14 years.

This could happen next week, next month, next year or in a couple of years.  These cycles are not exact and they are distorted by human interference such as the current, very low interest rates that governments have created to stimulate economies.

When the correction takes place, your understanding of this big picture will help you know this is the beginning, not the end of a bull cycle.  This can help you grab good value bargains because short term thinking investors will wrongly believe the bear has begun.

There are plenty of steps you can take to profit and prepare now if you see the big picture.  Seeing a bear that most investors think is a bull is the first step.  Correct thinking is always the foundation of smart action and it is great to know that this foundation is really strong.

Gary

We’ll look at seven ways to invest into this positive scenario at the Montreal seminar October 10-11-12.

(1) Reverse Engineering Profits

Avoid Lines – Three Stock Market Concerns


Seek Value in investing and business.  Avoid lines.  Lines reveal excessive current demand.  Excessive current demand reduces value.

traffic-shots

Lines of Traffic.

One major factor in choosing our homes in Ecuador, in Florida and North Carolina is lack of traffic.  We look seriously at this factor in our investing and business as well.  We want to begin with good value before everyone else is there.  We get out when the lines are formed.  Our old life in London certainly taught us a lot!

This leads to three concerns about the US stock market.

First, look at the Dow Jones average, up and up and up.  Lines are formed.

Second, remember the importance of seven year cycles.  Almost every philosophy that reflects on existence notes the importance of seven year cycles.  The sabbatical represents a time of rest, a turning point, a change or shift.

In the 1800s French economist, Clement Juglar, noted the idea of the seven year economic cycles (7-11 years actually) popular in the 1800s.  Joseph Schumpeter, another great economist, broke those cycles into four stages: expansion, crisis, recession and recovery.

When I look at the Dow and think 2000, 2007 and 2014, I think about the impact of this being the seventh year and time for a break.

www.finance.yahoo.com

Image Dow Jones Industrial Average chart from www.yahoo.finance.com    (Click on image to enlarge)

Third, we have another subprime loan bubble ready to burst.

One (of many) reasons for the 2007 crash was a burst subprime home loan bubble.  The bubble was created when banks bundled their home loans and sold them on the stock market.  Since the banks were not keeping the loans they did not care if they were good or not.  Banks misrepresented the quality of the loans and investors in the market took the loss.

Banks have paid out over 100 billion in fines and the chart below from the Economist article shows how many big banks were involved.

economist article image

The Next Bubble to Burst

Next to a home what could be more important to an American?   Their car!  The new bubble is subprime car loans.  As with subprime home loans, the banks that make the loans do not keep them. The loans are bundled and passed onto stock market investors.

NYT Image

Image from New York Times auto subprime bubble article

The New York Times article “In a Subprime Bubble for Used Cars, Borrowers Pay Sky-High Rates” tells how millions of Americans with shoddy credit are easily getting loans from used car dealers.   Some of these dealers do not care if the loan can be repaid and even provide false information.

Why would lenders be so careless?  The article explains when it says:  The explosive growth is being driven by some of the same dynamics that were at work in subprime mortgages.  A wave of money is pouring into subprime autos, as the high rates and steady profits of the loans attract investors.  Just as Wall Street stoked the boom in mortgages, some of the nation’s biggest banks and private equity firms are feeding the growth in subprime auto loans by investing in lenders and making money available for loans.

And, like subprime mortgages before the financial crisis, many subprime auto loans are bundled into complex bonds and sold as securities by banks to insurance companies, mutual funds and public pension funds — a process that creates ever-greater demand for loans.

Officials at the Office of the Comptroller of the Currency have expressed concerns that the banks are amassing too many risky auto loans.   The agency issued a report that pointed out the increasingly lax terms and growing risks.

One credit rating firm says there are nearly $150 billion worth of these sub prime loans.

“It appears that investors have not learned the lessons of Lehman Brothers and continue to chase risky subprime-backed bonds,” said Mark T. Williams, a former bank examiner with the Federal Reserve.

Seek value.  Don’t line up with other investors and make the popular investment or business idea.

One Easy Way to Seek Good Value Markets and Equities

I use a seven step global value review process  that begins with a major market and emerging market value analysis by Keppler Asset Management.

We follow this analysis by our friend, Michael Keppler, because 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 major stock market’s history.

From this, Keppler develops his Good Value Stock Market Strategies. His analysis is rational, mathematical and does not worry about short term ups and downs.

He, in my opinion, is one of the best market statisticians in the world. Numerous very large fund managers use his analysis to manage funds such as State Street Global Advisors.

The next step is I track the investments made by the funds managed by State Street Global Advisors that track Keppler’s analysis.

Here is the latest investment breakdown of the State Street Global Advantage Major Market fund.

State Street Major Market Fund

I use the investment breakdown as a bellwether and compare ETFs, mutual funds or shares that fit my financial needs.

In this way my investing is directed by value instead of fashion and popular trends.

Making money in a micro business is easy.  Keeping what you earn and save not so simple.  Both the making and the keeping are easier when you avoid lines and seek value instead.

Learn how to seek value, cut losses and take profits with a magic calculator

Learn how to Borrow Low & Deposit High

Gary

Enjoy the two for one offer that ends this week.  Learn how to earn with self publishing at a Writer’s Camp.  Learn how to and where to invest at the Montreal International Investing seminar.

 

Three Current Multi Currency Equity Warnings


Here are three current multi currency equity warnings.

Long term market predictions rely on value and fundamentals rather than unpredictable short term fashion and emotion.  These long term indicators are dependable and accurate whereas the emotions that move the daily market are not.

In 2007  I wrote at this site:  Long term World Report readers know how much I believe in 30 year market cycles and that we are currently in a 15 year downward cycle supported by a history of over 100 years.

These cycles are intricately connected with waves of productivity.  Each productive evolution has been fueled by new technology, water power first, then steam, the internal combustion engine, jet engine, TV, telephone, computer and internet…all little productive ducks in a row…each helping mankind process more.  Each technology grew in perfection due to a war.

You can see this quite clearly, in the graph below, how each upwards cycle rises after a war (postwar boom) and how the market then crashes before the next upcoming war.

The first postwar boom probably started in about 1865. We cannot see this as the chart does not start until 1890. I am guessing the 1865 date because this was the end of the War between the States. This war was a battle over cotton the primary ingredient used in the water powered industrial revolution, an era dominated by textiles.

We can see this boom carrying on up through 1900.

The first fifteen year downwards cycle began in 1900 a downfall leading to WWI in 1914. There were a couple of short term blips (which also occurred in other cycles) probably one caused by the Russo-Japanese War which ended in 1905 when President Theodore Roosevelt mediated the Treaty of Portsmouth. The blip you see in 1907 was called the panic of 1907 and was caused by a run on the banking system. This was stopped by J.P Mogan’s importation of $100 million of gold from Europe , but the correction was only temporary as the chart clearly shows.  (This is important as we’ll see in a moment.)

Don’t we wish that the world’s economic problems could be solved with a mere $100 million of gold today?

Anyway at the end of WWI we see the next post war boom which runs up to 1929.

Then comes the next fifteen year down cycle from 1929 to 1945.

As in the last cycle there is a sharp downward blip in the middle caused by a run on U.S. banks which is once again mitigated by intervention, this time, FDR’s Presidential election and the New Deal.

There is a nice postwar boom 1946 through 1968 once again followed by a fifteen year downfall. (Note the sharp downwards blip in the middle caused when high inflation, a devaluing US dollar, and rising oil prices once again shook the U.S. banking system).

1968 began the next 15 year downwards cycle which was the rundown to WWIII (Reagan-Thatcher versus the Evil Empire), albeit a cold war.  That war caused the end of the USSR and the nuclear threat we had lived under. 

That ending in 1980 kicked off a post war boom that ran (surprise-surprise) for about 15 years until the crash of 1998.

Is this a coincidence or a pattern? If history has anything to do with the future then we can expect the following:

#1:  The next big bull market in Wall Street will begin about 2012.

That prediction was spot on and shows how accurate these long term fundamentals can be.

Three Warnings

online.wsj.com/news/articles/SB30001424052702304672404579188422879933300\

“New-Issue Flurry Hints At Trouble” for Markets by E.S. Browning

Just as financial markets were recovering from the Washington turmoil, a new danger signal has started blinking, in the form of a flood of stock and bond issues.  Many people see no problem. They find the new-issue action exciting, as the hoopla over last week’s $2.1 billion offering by Twitter Inc. TWTR -2.70% showed.

But when new issues become as massive as they are today, it can mean markets are overheating and getting ready to give back some gains. That is why some experienced investors weren’t wearing party hats at the Twitter celebration.
“I wouldn’t be surprised by a market correction here. I don’t think anyone would,” said Michael Farr, president of Farr, Miller & Washington, which oversees more than $950 million in Washington, D.C.

Another Wall Street Journal article “Stocks Regain Broad Appeal – Individual Investors Are Returning to Stocks, Which Could Be Bad”  by Alexandra Scaggs says:    Mom-and-pop investors largely sat out the early years of the stock-market rebound, many of them still rattled by the 37% decline in the S&P 500 index in 2008. Meanwhile, institutions such as insurers fueled a broad rally by pouring cash into the market.

Five years after the financial crisis, individual investors are piling into stocks again amid signs that the U.S. economy is slowly gaining steam. But the renewed optimism among retail investors is considered by many professionals to be a warning sign, thanks to a long history of Main Street arriving late to market rallies.

Cyclic Warning

We show this graph at our International Investing & Business seminars.

economic cycles

Click on chart to enlarge.

We are exiting the recovery stage where authorities relax money supply and there is high unemployment and high levels of uncertainty when the best place to invest is in shares.

We are entering a boom cycle where the best place to invest is cash, with rising inflation, falling unemployment and PE multiples expand.

Biggest Warning – Value

The recent post at this site Why the US dollar will fall  reviewed the Keppler Asset Management’s best value developed equity markets and Keppler’s implicit three to five year projection.

Keppler wrote:  Our implicit three-to-five-year projection corresponds to a compound annual total return estimate of 10.6 % in local currencies — down from 13.4 % last quarter. The upper-band estimate implies a compound annual total return of 15.8 %, while the lower-band estimate corresponds to a compound annual total of a 4.6 % return.

http://www.flickr.com/photos/garyascott/10645871053/in/photostream/

Growth rates of important fundamentals have kept up relatively well in the current low-interest environment: While the annual book value growth (September 2013 over September 2012) for the Equally Weighted World Index in local currencies dropped to 4.8 % from 7.5 % at the end of last June, both, cash flow and earnings growth accelerated to 5.1 % (previous quarter: 4.8 %) and 6.0 % (1.0 %), respectively. Dividend growth, which jumped to 7.6 % year over year at the end of June, slowed down a bit to an annual growth rate of 6.9 % at the end of the third quarter.

Monetary easing and high opportunity costs continue to drive equity prices. As expressed here before, multiples continue to expand: The price/earnings ratio of the Equally Weighted World Index which bottomed in September 2011 at 10.8 has now reached a new 42-month high at 16.4 – up from 14.2 at the beginning of the year. This 15.4 % increase of the price/earnings ratio in the first nine months 2013 now exceeds the 14.3 % year-to-date total return of the Equally Weighted World Index. Since the 43 3⁄4-year average price/earnings ratio of the Equally Weighted World Index is 15.2, we are now slightly above the historic average, but far from being excessive, considering that we experienced p/e-ratios in the high twenties on several occasions in the past. Multiple expansion will most likely continue in the current low-interest environment.

These implicit three-to-five-year projections are considerably down from recent years and earlier this year.

What can we do?

During the 2007 to 2009 meltdown, I was investing in bonds and have been reaping some nice rewards.  In 2010 I began investing the bond maturities into equities and really inexpensive Florida real estate to hold as rentals.  Now where?  I have a buildup of cash and hate this zero return stuff.  However I do have a solution shared in tomorrow’s message.

Until then, good investing and may everything else be bright as well!

Learn more about multi currency investing via Canada and Denmark from Thomas Fischer at Thomas@enrasset.com

Non Americans contact  Henrik Boelling at Henrik.boellingtoft@jbpb.dk

Save $200 on November early bird specials for Super Spanish courses and the February 2014 International Investing & Business course.

Gary

I am starting the 2014 update of my Report Borrow Low – Deposit High.  All subscribers to this report will automatically receive this update upon its publication.

WSJ New-Issue Flurry Hints At Trouble For Markets

WSJ Stocks Regain Broad Appeal

More Problems Emerge in Multi Currency Market


More Problems Emerge in Multi Currency Market.

Our multi currency message entitled Important Multi Currency Shift of two weeks ago said: We can see a huge multi currency market shift  in this Emerging Market Value Update.   There was a huge value shift of global stock markets in 2010.

Prior to the 2010 shift we weighted our recommendations toward investments in emerging markets.  They enjoyed faster growth than developed markets.  Then in 2010 we warned that values had flipped.  Developed markets offered better value than emerging markets.

Now the values have flipped again.  This update suggests that this is a good time to take profits on over weighting of developed market shares and to re calibrate one’s portfolio to an over weighting of emerging market shares.

See what that emerging market news means for this share Riocan REIT.

REIT

Up 112% since

REIT

The year’s drop in this share price creates value and a high yield.

Both images from www.ca.finance.yahoo.com

We can see the continued revaluation of emerging markets in the weekly market update at Jyske Global Asset Management which says:

Turmoil in Emerging Markets

Paradoxically, the prospect for an improving US economy, and the thereof scaling back of the extraordinary monetary measures is exhibiting the weaknesses in the Emerging countries – causing investors to flee.  

Since May, international investors have reduced their exposure to emerging markets in expectation of an imminent scaling down of QE (Quarterly Earnings).  The selloff culminated this week where especially India and Turkey got severely hit with plunging currencies and surging bond yields, bringing back memories to the Asian financial crisis in 1997/98.

In India, the rupee plunged to a record low and benchmark Indian bond yields surged to a 12-year high in a panic-response to last week’s limited domestic capital control.

India’s large current account deficit and inability to introduce substantial economic reforms have made the rupee especially vulnerable to capital outflow. Since May, the Rupee have depreciated almost 20% versus the US dollar.

Eric Roseman at ENR Asset Management, who will take over the management of the funds held by American investors at Jyske as of September, also noted the potential emerging problems in his August Outlook.

A growing conflict in Egypt risks tipping the Middle East into a wider conflict, possibly threatening Iran, Iraq, Turkey and Israel. The United States, thus far, has failed to contain the Egyptian crisis. U.S. foreign policy failure holds the cards for possibly re-balancing the actors in the Middle Eastern theater, if Egypt slides deeper into political turmoil and distances itself from the United States.

From a regional perspective, the major markets continue to offer lower relative volatility than the emerging markets and we continue to overweight advanced economies in 2013; India’s deepening economic crisis is another dose of bad news for emerging markets.

This suggests that long term opportunity is building in emerging markets.

For shorter term, especially for investors who require income, high yield shares in major markets still make sense.

Eric also wrote:  Our asset allocation still favors high quality equities that mostly pay dividends.

We still recommend Colony Financial (CLNY) sporting a yield greater than 7% and trading at a 13% discount to book-value.

Riocan REIT (REI. UN), Canada’s largest commercial REIT, has fallen sharply but trades at incredible values at this price. Riocan sells at a 52-week low, trades at 7.9 times trailing earnings and yields 5.86%

For more details, American investors should contact Thomas Fischer at fischer@jgam.com

Other Investors contact Henrik Boellingtoft at Jyske Private Bank at Henrik.boellingtoft@jbpb.dk

 Which to choose?

So where should one invest, in emerging markets or good value high yielding shares like Riocan?

My reply to the reader’s question below should help answer this question.

Gary,  Your recommended stock, Hyflux, has done poorly since your call. Unfortunately, I own it.  Do you still like it??  I know emerging market stocks are down; perhaps this is in sympathy.

My reply:  Yes, we have this in our portfolio as part of our long term growth strategy.

There are three negative elements at this stage.  One is the overall emerging market downgrade.  Singapore can hardly be called an emerging market but its main business is in emerging markets.

The next negative is the strong US dollar.  Over the last year the greenback has risen versus the currency in which the Hyflux shares are denominated.  

singapore dollar

US dollar rising against Singapore www.finance.yahoo.com chart

This to me creates extra value because the fundamentals for the Singapore dollar are strong and for the US dollar weak.

US GDP Growth last year 1.4%

Singapore GDP Growth last year 3.8%

US current account balance for last year  -$425 billion or -2.7% of GDP

Singapore current account balance for last year  +$49 billion or +19% of GDP

US Budget Balance as % of GDP for last year -4.5%

Singapore Budget Balance as % of GDP for last year +0.7%

US Unemployment  7.4%

Singapore Unemployment  2.1%

US$ Interest Rate 10 year bonds  2.71%

Singapore $ Interest Rate 10 year bonds 2.45%

This is a classic indicator that it is a good time to borrow US dollars and invest in Singapore dollars.

Third, Hyflux has substantial investments in the Middle East and I believe this has been detrimental. However they are good managers and also are in China and both China and the Middle East need water… so we continue to hold for the long term.

However note in our personal portfolio breakdown that this only represents 2% of our holdings.  We see this as a long term capital opportunity, but you should work with a financial adviser to see what portion of your portfolio should be geared to income and what part capital appreciation. You could also plan what portion of your investments should be dedicated to short, medium and long term growth based on your financial position and needs.

Multi currency subscriber can see our 2103 portfolio breakdown at our password protected site.

Gary

Get a password and our multi currency portfolio report (normally $79)  free when you enroll in our October or February Investing and Business course.

Learn about the Singapore dollar breakout and when breakouts earn the greatest profits.

Good Value Emerging Stock Markets


Emerging stock markets have offered better value than major markets for over a decade.

However, there are good value and bad value emerging markets.

Emerging markets are growing much faster than major markets.

This fact has created great opportunity over the past four decades.  Emerging stock markets have risen about twice as fast as stock markets in mature economies with very little extra volatility or downside.

Overall, emerging markets still offer better potential than mature markets, but one must choose the correct markets with care… because there is always something we do not know… especially in emerging markets.

This is why seeking value is so important. Value is the harmonious aspect of existence that wishes to fill every void.  Value is the ecstasy that harmonizes away the agony of imbalance.  Value means you are buying what is NOT in demand at a price lower than the object’s or share’s worth.

This is why once a quarter we look at an emerging equity market value analysis by Michael Keppler.

If you are a new subscriber learn about Keppler Asset management here.

Keppler’s latest analysis this October says:

After their setback in the second quarter 2010, Emerging Markets equities resumed their recent uptrend, which started in March 2009.

In the third quarter 2010, the MSCI Emerging Markets Total Return Index (December 1988 = 100) gained 12.8 % in local currencies, 18 % in US dollars and 5.9 % in Euros.

Year to date, the MSCI Emerging Markets Index is up 7.9 % in local currencies, 10.8 % in US dollars and 16.4 % in Euros.

Of the three regional indices, Asia was up 12.1 %, Europe Middle East and Africa (EMEA) advanced 13.3 % and Latin America gained 14.1 % last quarter.

In the last nine months ending in September 2010, the three regional indices gained 8.7 %, 9.4 % and 4.6 %, respectively. Performance numbers are in local currencies unless mentioned otherwise.

Twenty markets advanced and one market declined in the third quarter. Peru (+24.9 %), Colombia (+24.3 %) and  Thailand (+24 %) performed best.

Morocco (-0.9 %), the Czech Republic (+0.5 %) and Mexico (+8.4 %) came in last.

Compared with their levels at the beginning of the year, twenty markets likewise were higher and one market declined.

The biggest winners this year have been Thailand (+33.9 %), Colombia (+33.4 %) and the Philippines (+31.9 %).

The Czech Republic (-1.3 %), Brazil (+0.1 %) and Taiwan (+1.4 %) have performed worst year-to-date.

There has been no change in our performance ratings last quarter. The Top Value Model Portfolio contains the nine national MSCI markets:

Brazil,

the Czech Republic,

Egypt,

Hungary,

Poland,

Russia,

Taiwan,

Thailand,

Turkey at equal weights.

According to our performance ratings, a combination of these markets offers the highest  expectation of risk-adjusted returns.

SELL CANDIDATES (Low Value)   Chile            India           Indonesia       Korea.

NEUTRALLY RATED MARKETS China           Colombia      Malaysia      Mexico         Morocco      Peru    Philippines     South Africa.

Selecting good value stock markets is the first step in selecting good equity investments. You can find some extraordinary shares in any markets but you increase your odds when you look in markets that offer good value.

Gary

Warning!  I recommended investing in Turkey shares last July and that market has skyrocketed since (See my recommendation at International Investments in Turkey)

An October 25, Economist article says:  Economist warns investors about Turkish stock market

Investors can still make money from the İstanbul Stock Exchange but they, especially small investors, must be cautious of a bubble in the market, a senior economist warned on Monday.

Over the past couple of weeks, the İstanbul Stock Exchange had been rising to record high levels, Nurhan Toğuç, chief economist of Ata Investment, recalled.”We see a bubble at these levels in emerging markets. People can still make money but small investors must be very careful,” Toğuç said.

See how and why I have been investing in Turkey shares in my two reports on how to find value here.

Belong to the International Club

The Huge 2018 Risk

Here is a huge risk that could explode in 2018.

I hope I am wrong.

According to Treasurydirect.com, as of October 31, 2017 the cost of interest on  the total US public debt of $20,467,375,664,755.32 (20 trillion+) was $24,411,569,716.36 (24 billion+).

The 36 cents isn’t much of a problem.  The other 20 trillion is.

This is good news and bad… the rock and the hard spot.  The bad news is that the rock (US federal debt) is getting bigger….harder to miss.  The Congressional Budget Office (CBO) projected in 2010 (the debt then was a bit over 14 trillion) that, under law at that time, debt held by the public would exceed $16 trillion by 2020, reaching nearly 70 percent of GDP.

They sure goofed on that.  Here we are… not quite into 2018 and debt has shot past 20 trillion.

How could the CBO be so wrong? 

The CBO screwed up because they could never imagine that the Fed would push interest rates so low… and keep them there.  The interest rates are so low that the government can borrow and borrow and still afford the interest.

For example, US Federal government interest this year will amount to around $483 billion on the 20 trillion of debt.  Yet in 2008 on debt of only $9,229,172,659,218.31 (9 trillion +) the interest that year was $451,154,049,950.63 (451 billion +).

Interest payments in 2017 are 7% higher than they were in 2008.  Yet the debt is over 100% higher.  

Very low interest rates have helped the government borrow.  Low interest has also helped the US stocks reach all time high prices.

Here is the very hard spot.  The downside is that low interest has reduced earnings of investors.  Low interest has ruined the lifestyles of many who have retired.

Here is what happened and why the problem may exist for quite a bit longer.

If investors can increase the interest rate to 6% from the lousy 1% (or so) they earn now, they gain 1,263% more over 30 years.  Anyone living off interest, who is drawing down their portfolio over 20 years, makes 57% more annual income every year.

But if investors get 6% interest instead of 1%, the government has to also pay more on it debt.

The government will resist raising rates because it will ruin their budget, cause a collapse of the stock markets and destroy the US dollar.  

Rising interest rates, that we would like to see as investors, will create an almost unimaginable debt crisis.  If government interest goes to 6% it is like the $20+ trillion national debt  rising to 100 trillion!  Unless there are some huge tax increases, a 5% increase in interest rates would increase the national debt by five times.

A tax increase?  The current tax act being proposed reduces, not increases, revenue.

This is not a theoretical problem for the future. This is not something that our children and grandchildren will have to deal with.  This is a problem in the here and now.

Interest rates create a massive problem on two sides of the same coin.  Raise rates the massive national debts ruins the purchasing power of currencies.  Keep interest rates low and capitalism does not work for investors.  Politicians simply borrow more (on our behalf) but for their benefit.

Learn how to have more freedom and time, less stress, better health care, extra income, greater safety and profit in your savings despite America’s deficits, debt and currency risk.

Fortunately there are secrets that will allow a few to live much better, free of debt and worry despite the decline in the dollar’s purchasing power.   My wife, Merri and I, have traveled, lived, worked and invested around the world for nearly 50 years to gain this information.

Let me share the basics of this data and how we can be of help through 2018.

The first fact behind this secret is that things are really good in the western world.  Despite many problems, we are surrounded by more abundance and greater opportunity than almost anyone has ever enjoyed, anywhere, ever.   To enjoy a fair share of this wealth, all we have to do is understand human nature and learn how to invest in the new economy, as it changes and becomes new, again and again.

Merri and I have made seven huge transitions in the 50 years.  Each has allowed us to always stay ahead of losses that the majority of Americans suffer.  We are in another transition right now and want to share why and what to do so you can stay ahead and live a richer, independent life through 2018 and beyond.

A falling US dollar is one of the greatest risks we have to our independence, safety, health, and wealth, but also brings a window of huge profit as I explain below.   Though the greenback has been strong for a number of years, its strength is in serious jeopardy.  The growing federal deficits increase the national debt and this with rising interest rates propels a growing debt service.

When the Dow Jones Industrial Average recently passed 20,000, another milestone of “20” took place that has a much darker meaning to your and my spending power.  The U.S. national debt passed the $20 trillion mark.

The problem is that the Dow will come back down.  National debt will not fall.

The double shock of money fleeing Wall Street and US debt skyrocketing, will destroy the purchasing power of the greenback.

Go to the store even now.  Statistics say inflation is low, but buy some bread or, heaven forbid, some fresh vegetables like peppers or fruit.   Look at the cost of your prescription or hospital bills.  Do something simple like have your car serviced at an auto dealer.  Look at the dollars you spend and you’ll see what I mean.

The loss of the dollar’s purchasing power erodes our independence, our freedom and our savings and wealth as well. 

At the same time, low interest rates by big banks and higher health care costs soak up the ever diminishing income and savings we have left.  According to a Gallup poll, the most unpopular three institutions in America are big corporations & Wall Street banks, HMOs and Congress.

Yet there is little we can do because these institutions are in control.

Over the last 50 years the average income for 90 percent of the American population fell.  Our health system is restricted by a Kafka-esque maze of legislation and insurance regulations that delay, frustrate, and thwart attempts by patients and doctors from proper medical care.  Big banks and corporations restrict our freedom of choice.  The business customer relationships are no longer transactions between free equals.

Banks can trap us in indebtedness at every age from student loans to mortgages to health care costs.  They pay almost nothing on our savings.  They hide unexpected fees and payments in complex and unreadable documents.  Banks and big corporations routinely conceal vital information in small print and then cheat.  Weak regulations and lax enforcement leave consumers with few ways to fight back.  Many of these businesses ranging from cable TV to phone and internet service to health insurance have virtual monopolies that along with deceptive marketing destroys any form of free market.

These same companies control the credit-scoring agencies so if  we don’t pay unfair fees, our credit scores will plunge and we could lose the ability to borrow money, rent an apartment, even to get a job.  Many consumers are forced to accept “arbitration clauses” in lieu of  legal rights.  The alternative is to lose banking, power, and communication services.

Big business has also usurped our privacy.  Internet companies sell our personal data.  Personal information is pulled from WiFi and iPhones track and store our movements.  The government can access this information, sometimes without subpoenas.  There’s a lot that we don’t know, often withheld under the guise of “National Security.”

The glow on Western democratic capitalism has dimmed… or so it seems.  The US, leading the way, is still a superpower with economic, innovation and military might, but the institutions that should serve the people have become flawed or broken.

America’s infrastructure is in shambles.  The nation’s bridges are crumbling, many water systems are filled with toxins, yet instead of spending more to fix this, we build more prisons.  The 2.2 million people currently in  jail is a 500 percent increase over the past thirty years.  60% of the inmates belong to ethnic groups.  Not just non-white ethnic groups are suffering.  Annual death rates are falling for every group except for middle-aged white Americans.  Death rates are rising among this group driven by an epidemic of suicides and afflictions stemming from substance abuse, alcoholic liver disease and overdoses of heroin and prescription opioids.

America’s middle class is shrinking.  Nearly  half of America’s income goes to upper-income households now.  In 1970 only 29 percent went to this group.  How can we regain our freedom, our happiness and our well being in such a world?

What can we do?

Gain a better, freer life is to combine better health, higher income and greater savings for a happier, more resilient lifestyle. 

Merri and I will celebrate our 50th year of global living, working, investing and researching to find and share ideas on how to have simpler, low stress, healthier, more affluent lifestyles.  Our courses, reports and email messages look at ways to gain:

#1:  Global micro business income.

#2:  Low cost, natural health.

#3:  Safer, more profitable, investments that take little time or cost to buy and hold… so you can focus on earning more instead

Many readers use our services for just one of these three benefits.  They focus only on health or on earning more or on better, easier investing.

27 years ago Merri and I created the International Club as a way for readers to join us and be immersed in all three of these benefits.   The International Club is a year long learning program aimed at helping members earn worry free income, have better affordable good health and gain extra safety and profits with value investments.

Join us for all of 2018 NOW.

The three disciplines, earning, health and investing, work best when coordinated together.  Regretfully the attacks on our freedom are realities of life.  There is little we can do to change this big picture.  However we can change how we care for our health, how we earn and how we save so that we are among the few who live better despite the dollar’s fall.

We start with better lower cost health care.

Club membership begins by sharing ways to be free of the “Secret Hospital Charge Master”.   Just as governments hide truth behind “National Security”, big health care businesses hide medical truths behind “Charge masters”.  Most hospital charge masters are secret because big business does not want us to know how much hospital costs have risen.  Motivations beyond our good health, like corporate greed, want to keep us in the dark about health care cost.

Despite rising health care costs, a report from the Centers for Disease Control & Prevention shows that hospitals are the last place we want to be for good health.  One report shows that hospital-acquired infections alone kills 57% more Americans every year than all car accidents and falls put together.

Often, what patients catch in the hospital can be worse than what sent them there.  Governments and health care agencies agree  – antibiotic resistance is a “nightmare.”  An antibiotic-resistant bacteria may be spreading in more hospitals than patients know.  About one in every 25 hospitalized patients gets an infection and a 2013 report from the Journal of Patient Safety showed that medical errors are the third-leading cause of death in the country.

Along with the risk of hospital acquired illness and medical errors, the second huge threat to our well being… is health care costs, especially at hospitals.  This is why charge masters are so often secret.  There are few risks to our wealth that are greater than a hospital stay.

I have created three natural health reports are about:

#1: Nutrition

#2: Purification

#3: Exercise

Each report is available for $19.95.  However you’ll receive this free as club member and save $59.85.

Club members also receive seven workshops and courses on how earn everywhere with at home micro businesses.  We call this our “Live Well and Free Anywhere Program”.   The program contains a series of courses and reports that show ways to earn and be free. These courses and reports are:

  • “International Business Made EZ”
  • “Self Fulfilled – How to Write to Sell”
  • Video Workshop by our webmaster David Cross,
  • The entire weekend “Writer’s Camp” in MP3
  • The report “How to Raise Money Abroad”
  • Report and MP3 Workshop “How to Gain Added Success With Relaxed Concentration”
  • The course “Event-Full – How to Earn Conducting Seminars and Tours”

This program is offered at $299, but is available to you as a club member free.  You save $299 more.

Next, club members participate in an intensive program called the Purposeful investing Course (Pi).  The purpose of Pi is finding value investments that increase safety and profit.  Learn Slow, Worry Free, Good Value Investing.

Stress, worry and fear are three of an investor’s worst enemies.  These destroyers of wealth can create a Behavior Gap, that causes investors to underperform in any market good or bad.  The behavior gap is created by natural human responses to fear.  Pi helps create profitable strategies that avoid losses from this gap.

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

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

There are seven layers of tactics in the Pi strategy.

Pi Tactic #1: Determine purpose and good value.

Pi Tactic #2: Diversify 70% to 80% of portfolio equally in good value developed markets.

Pi Tactic #3: Invest 20% to 30% equally in good value emerging markets.

Pi Tactic  #4:  Use trending algorithms to buy sell or hold these markets.

Pi Tactic  #5:  Add spice speculating with ideal conditions.

Pi Tactic  #6: Add spice speculating with leverage.

Pi Tactic  #7:  Add spice speculating with forex potential.

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

#1:  Current book to price

#2:  Cash flow to price

#3:  Earnings to price

#4:  Average dividend yield

#5:  Return on equity

#6:  Cash flow return

#7:  Market history

We combine the research of several brilliant mathematicians and money managers with my years of investing experience.

This is a complete and continual study of what to do about the movement of international major and emerging stock markets.  I want to share this study throughout the next year with you.

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

The costs are low and this type of ETF is one of the hardest for institutions to cheat.  Expense ratios for most ETFs are lower than those of the average mutual fund.  Little knowledge, time, management or guesswork are required.  The investment is simply a diversified portfolio of good value indices.  Investments in an index are like investments in all the shares of a good value market.

Pi opens insights to numerous long term cycles that most investors miss because they have not been investing long enough to see them.

The Pi subscription is normally $299 per annum but as a club member you receive Pi at no charge and save an additional $299.

Profit from the US dollar’s fall.

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!

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

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

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

This report sells for $29.95 but when you become a club member you receive the report, “Three Currency Patterns For 50% Profits or More” FREE.

Plus get the $39.99 report, “The Platinum Dip 2018” free.

With investors watching global stock markets bounce up and down, many missed two really important profit generating events.  The price of silver dipped below $14 an ounce as did shares of the iShares Silver ETF (SLV).   The second event is that the silver gold ratio hit 80 and has remained near this level, compared to a range of the 230s only two years ago.

Now there is a new distortion ready to ripen in the year ahead.

These two events are a strong sign to invest in precious metals.

I prepared a special report “Platinum Dip 2018”.   The report explains the exact conditions you need to make leveraged precious metal speculations that can increase the returns in a safe portfolio by as much as eight times.  The purpose of the report is to share long term lessons about speculating in precious metals gained through 30 years of speculating and investing in gold and silver.

The low price of silver offers special value now so I want to send you this report because the “Platinum Dip 2018” offers enormous profit potential in 2018.

The report “Platinum Dip 2018” sells for $39.95 but club members receive it free as well.

The $39.95 new “Live Anywhere – Earn Everywhere Report” is also free.

There is an incredible new economy that’s opening for those who know what to do.  There are great new opportunities and many of them offer enormous income potential but also work well in disaster scenarios.

There are are specific places where you can reduce your living expenses and easily increase your income.  Scientific research has shown that being in such places actually make you smarter and healthier.  Top this off with the fact that they provide tax benefits as well and you have to ask, “Where are these places?”.

Learn about these specific places.  More important learn what makes them special.  Discover seven freedom producing steps that you can use to find other similar places of opportunity.

The report includes a tax and career plan broken into four age groups, before you finish school, from age 25 to 50 – age 50-to 65 and what to do when you reach the age where tradition wants you to re-tire.  (Another clue-you do not need to retire and probably should not!)

The report is very specific because it describes what Merri and I, our children and even my sister and thousands of our readers have done and are doing, right now.

Live Anywhere – Earn Everywhere focuses on a system that takes advantage of living in Smalltown USA, but earning locally and globally.

This report is available online for $39.99 but International Club members receive it free.

Save $418.78… “plus more” when you become a club member.

Join the International Club and receive:

#1: The $299 Personal investing Course (Pi).   Free.

#2: The $299 “Live Well and Free Anywhere Program”. Free.

#3: The $29.95 report “Three Currency Patterns For 50% Profits or More”. Free.

#4: The $39.99 report “Platinum Dip 2018”. Free

#5: The three $19.99 reports “Shamanic Natural Health”.  All three free.

#6: The $39.99 “Live Anywhere – Earn Everywhere” report. Free.

#7: A subscription to the Purposeful investing course… Plus more.

These reports, courses and programs would cost $767.78 so the 2018 membership saves $418.78, “plus more”.

What’s the “plus more”?

Join the International Club for $349 and receive all the above online now, plus any online reports, online course updates or online programs we create throughout 2017 all at no additional fee. The club membership entitled you to everything.

The International Club membership is $499, but we want to encourage our first 100 members for 2018 to join quickly so we are currently accepting discounted membership at $349. 

Join the International Club for $349 and receive all the above online now, plus all reports, course updates and Pi lessons through the rest of 2017 and all of 2018 at no additional fee.

Click here to become a member at the discounted rate of $349

Gary 


International Investing 3% Solution


Here is the international investment three percent solution.

From 2005 into 2007 stock markets almost everywhere provided incredible returns. For example I work with Denmark ’s second largest bank. They are global equity experts and one of the portfolios (the Green Environment Portfolio) we created together rose 266.3% in one year. Another (The Emerging Market Portfolio) rose 114.2% in 2006 and 122.6% in 2007.

Yet in each case these portfolios also encountered gut wretching drops on their way up. That Green Portfolio for example in July 2007 dropped 103.22% in one month. The Emerging Market portfolio also moved like a yo-yo (see below).

In fact, over the last three years, despite impressive gains, there have been two periods of global market panic when almost every stock market dropped….like a stone….only to recover like a rocket ship.

The  in late 2007 we saw a huge wave of dumping shares.

This begged three questions.

#1: “Was this the big one?” Yes it was.

#2: “Will markets again recover…and when?”  They did.  In 2009 there was a huge recovery.

#3: This is an even more important question. “How can we as investors know what’s coming with at least a semblance of accuracy?”

The answer to this third question is  important because when a recovery comes, history suggests it will be sudden and dramatic.

You can see the recovery potential in the performance of the portfolios we created and tracked last year from November 2006 to October 2007. Equity markets collapsed in a month but recovered even faster. The portfolios utterly collapsed from July 20 to August 17. Then they rose between 40% and 128% in just two weeks.

Portfolios 2007 July 20 Aug 17 Aug 31 Oct 31
Swiss Samba 45.84% 15.19% 26.42% 53.32%
Emerging Market 67.67% 30.50% 58.18% 122.62%
Dollar Short 40.31% 9.14% 20.29% 48.19%
Dollar Neutral 38.07% 13.56% 22.33% 38.67%
Green 214.15% 110.93% 155.84% 266.30%

If the recent stock market dive is just another short term correction, some investors will make fortunes.

We saw stocks explode up from 2003 to 2007, then crash 50% in 2008 and rise almost as much in 2009.

stock-markets-index-chart

The gray line is the Morgan Stanley Global Stock Index… the green the performance of the State Street Global Advantage Fund.

Here are three simple facts can help you spot distortions in equity markets.

The first fact was confirmed by Alan Greenspan in his excellent book, “Age of Turbulence”.

“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.”

That’s a huge fact. Overall we should expect the global economy to grow at about 3%.

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 doe the market 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%. So if a bank account or government bond pays less…in the long term it’s bad. If it pays more…that’s better. Yet 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 trying 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 perception wrong.

Knowing this helps wise investors spot trends created by distortions.

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.

The global economy grew 5% last year…way ahead of 3%. Mature economies are growing only 2.3% each year on average….so there is a lot more growth in emerging economies. Thus emerging stock markets are growing faster than matured stock markets as well.

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  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 was also six months and biggest drop 53%.
In 2009 the Morgan Stanley Major Market Index was up +32.5%. The 2009 Emerging Market Index up +79%. In the first none months of 2010  the Major Market is up + 1.3% and 2010  for Emerging Markets up 8.2%.
So there was no more risk in emerging markets than major market… plus the upside has been much better.

Finally we come to 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 means that it is probably time for emerging equity markets around the world to correct down and major markets up a bit.

Yet in times of global panic as we have recently 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 global shares is the most likely bargain at this time.

This is why we have been recommending High Yield shares at this time. Most are major market equities that provide income and growth potential… plus make it easy to diversify.

There you have it. Understanding the 3% solution and what markets have done shows 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 the rich 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 are more likely to recover from the current doldrums first.

Global investing has proven itself to be more profitable. Why not? Modern communications and transport coupled with a vast pool of low cost labor almost guarantees this fact. Now knowing three more facts based on the 3% solution can give you an edge when it come to taking advantage of the ups and downs in this global trend.

Study 54 High Yielding shares in my latest international investing report “Running Risk” $49.

Gary

Belong to the International Club

The Huge 2018 Risk

Here is a huge risk that could explode in 2018.

I hope I am wrong.

According to Treasurydirect.com, as of October 31, 2017 the cost of interest on  the total US public debt of $20,467,375,664,755.32 (20 trillion+) was $24,411,569,716.36 (24 billion+).

The 36 cents isn’t much of a problem.  The other 20 trillion is.

This is good news and bad… the rock and the hard spot.  The bad news is that the rock (US federal debt) is getting bigger….harder to miss.  The Congressional Budget Office (CBO) projected in 2010 (the debt then was a bit over 14 trillion) that, under law at that time, debt held by the public would exceed $16 trillion by 2020, reaching nearly 70 percent of GDP.

They sure goofed on that.  Here we are… not quite into 2018 and debt has shot past 20 trillion.

How could the CBO be so wrong? 

The CBO screwed up because they could never imagine that the Fed would push interest rates so low… and keep them there.  The interest rates are so low that the government can borrow and borrow and still afford the interest.

For example, US Federal government interest this year will amount to around $483 billion on the 20 trillion of debt.  Yet in 2008 on debt of only $9,229,172,659,218.31 (9 trillion +) the interest that year was $451,154,049,950.63 (451 billion +).

Interest payments in 2017 are 7% higher than they were in 2008.  Yet the debt is over 100% higher.  

Very low interest rates have helped the government borrow.  Low interest has also helped the US stocks reach all time high prices.

Here is the very hard spot.  The downside is that low interest has reduced earnings of investors.  Low interest has ruined the lifestyles of many who have retired.

Here is what happened and why the problem may exist for quite a bit longer.

If investors can increase the interest rate to 6% from the lousy 1% (or so) they earn now, they gain 1,263% more over 30 years.  Anyone living off interest, who is drawing down their portfolio over 20 years, makes 57% more annual income every year.

But if investors get 6% interest instead of 1%, the government has to also pay more on it debt.

The government will resist raising rates because it will ruin their budget, cause a collapse of the stock markets and destroy the US dollar.  

Rising interest rates, that we would like to see as investors, will create an almost unimaginable debt crisis.  If government interest goes to 6% it is like the $20+ trillion national debt  rising to 100 trillion!  Unless there are some huge tax increases, a 5% increase in interest rates would increase the national debt by five times.

A tax increase?  The current tax act being proposed reduces, not increases, revenue.

This is not a theoretical problem for the future. This is not something that our children and grandchildren will have to deal with.  This is a problem in the here and now.

Interest rates create a massive problem on two sides of the same coin.  Raise rates the massive national debts ruins the purchasing power of currencies.  Keep interest rates low and capitalism does not work for investors.  Politicians simply borrow more (on our behalf) but for their benefit.

Learn how to have more freedom and time, less stress, better health care, extra income, greater safety and profit in your savings despite America’s deficits, debt and currency risk.

Fortunately there are secrets that will allow a few to live much better, free of debt and worry despite the decline in the dollar’s purchasing power.   My wife, Merri and I, have traveled, lived, worked and invested around the world for nearly 50 years to gain this information.

Let me share the basics of this data and how we can be of help through 2018.

The first fact behind this secret is that things are really good in the western world.  Despite many problems, we are surrounded by more abundance and greater opportunity than almost anyone has ever enjoyed, anywhere, ever.   To enjoy a fair share of this wealth, all we have to do is understand human nature and learn how to invest in the new economy, as it changes and becomes new, again and again.

Merri and I have made seven huge transitions in the 50 years.  Each has allowed us to always stay ahead of losses that the majority of Americans suffer.  We are in another transition right now and want to share why and what to do so you can stay ahead and live a richer, independent life through 2018 and beyond.

A falling US dollar is one of the greatest risks we have to our independence, safety, health, and wealth, but also brings a window of huge profit as I explain below.   Though the greenback has been strong for a number of years, its strength is in serious jeopardy.  The growing federal deficits increase the national debt and this with rising interest rates propels a growing debt service.

When the Dow Jones Industrial Average recently passed 20,000, another milestone of “20” took place that has a much darker meaning to your and my spending power.  The U.S. national debt passed the $20 trillion mark.

The problem is that the Dow will come back down.  National debt will not fall.

The double shock of money fleeing Wall Street and US debt skyrocketing, will destroy the purchasing power of the greenback.

Go to the store even now.  Statistics say inflation is low, but buy some bread or, heaven forbid, some fresh vegetables like peppers or fruit.   Look at the cost of your prescription or hospital bills.  Do something simple like have your car serviced at an auto dealer.  Look at the dollars you spend and you’ll see what I mean.

The loss of the dollar’s purchasing power erodes our independence, our freedom and our savings and wealth as well. 

At the same time, low interest rates by big banks and higher health care costs soak up the ever diminishing income and savings we have left.  According to a Gallup poll, the most unpopular three institutions in America are big corporations & Wall Street banks, HMOs and Congress.

Yet there is little we can do because these institutions are in control.

Over the last 50 years the average income for 90 percent of the American population fell.  Our health system is restricted by a Kafka-esque maze of legislation and insurance regulations that delay, frustrate, and thwart attempts by patients and doctors from proper medical care.  Big banks and corporations restrict our freedom of choice.  The business customer relationships are no longer transactions between free equals.

Banks can trap us in indebtedness at every age from student loans to mortgages to health care costs.  They pay almost nothing on our savings.  They hide unexpected fees and payments in complex and unreadable documents.  Banks and big corporations routinely conceal vital information in small print and then cheat.  Weak regulations and lax enforcement leave consumers with few ways to fight back.  Many of these businesses ranging from cable TV to phone and internet service to health insurance have virtual monopolies that along with deceptive marketing destroys any form of free market.

These same companies control the credit-scoring agencies so if  we don’t pay unfair fees, our credit scores will plunge and we could lose the ability to borrow money, rent an apartment, even to get a job.  Many consumers are forced to accept “arbitration clauses” in lieu of  legal rights.  The alternative is to lose banking, power, and communication services.

Big business has also usurped our privacy.  Internet companies sell our personal data.  Personal information is pulled from WiFi and iPhones track and store our movements.  The government can access this information, sometimes without subpoenas.  There’s a lot that we don’t know, often withheld under the guise of “National Security.”

The glow on Western democratic capitalism has dimmed… or so it seems.  The US, leading the way, is still a superpower with economic, innovation and military might, but the institutions that should serve the people have become flawed or broken.

America’s infrastructure is in shambles.  The nation’s bridges are crumbling, many water systems are filled with toxins, yet instead of spending more to fix this, we build more prisons.  The 2.2 million people currently in  jail is a 500 percent increase over the past thirty years.  60% of the inmates belong to ethnic groups.  Not just non-white ethnic groups are suffering.  Annual death rates are falling for every group except for middle-aged white Americans.  Death rates are rising among this group driven by an epidemic of suicides and afflictions stemming from substance abuse, alcoholic liver disease and overdoses of heroin and prescription opioids.

America’s middle class is shrinking.  Nearly  half of America’s income goes to upper-income households now.  In 1970 only 29 percent went to this group.  How can we regain our freedom, our happiness and our well being in such a world?

What can we do?

Gain a better, freer life is to combine better health, higher income and greater savings for a happier, more resilient lifestyle. 

Merri and I will celebrate our 50th year of global living, working, investing and researching to find and share ideas on how to have simpler, low stress, healthier, more affluent lifestyles.  Our courses, reports and email messages look at ways to gain:

#1:  Global micro business income.

#2:  Low cost, natural health.

#3:  Safer, more profitable, investments that take little time or cost to buy and hold… so you can focus on earning more instead

Many readers use our services for just one of these three benefits.  They focus only on health or on earning more or on better, easier investing.

27 years ago Merri and I created the International Club as a way for readers to join us and be immersed in all three of these benefits.   The International Club is a year long learning program aimed at helping members earn worry free income, have better affordable good health and gain extra safety and profits with value investments.

Join us for all of 2018 NOW.

The three disciplines, earning, health and investing, work best when coordinated together.  Regretfully the attacks on our freedom are realities of life.  There is little we can do to change this big picture.  However we can change how we care for our health, how we earn and how we save so that we are among the few who live better despite the dollar’s fall.

We start with better lower cost health care.

Club membership begins by sharing ways to be free of the “Secret Hospital Charge Master”.   Just as governments hide truth behind “National Security”, big health care businesses hide medical truths behind “Charge masters”.  Most hospital charge masters are secret because big business does not want us to know how much hospital costs have risen.  Motivations beyond our good health, like corporate greed, want to keep us in the dark about health care cost.

Despite rising health care costs, a report from the Centers for Disease Control & Prevention shows that hospitals are the last place we want to be for good health.  One report shows that hospital-acquired infections alone kills 57% more Americans every year than all car accidents and falls put together.

Often, what patients catch in the hospital can be worse than what sent them there.  Governments and health care agencies agree  – antibiotic resistance is a “nightmare.”  An antibiotic-resistant bacteria may be spreading in more hospitals than patients know.  About one in every 25 hospitalized patients gets an infection and a 2013 report from the Journal of Patient Safety showed that medical errors are the third-leading cause of death in the country.

Along with the risk of hospital acquired illness and medical errors, the second huge threat to our well being… is health care costs, especially at hospitals.  This is why charge masters are so often secret.  There are few risks to our wealth that are greater than a hospital stay.

I have created three natural health reports are about:

#1: Nutrition

#2: Purification

#3: Exercise

Each report is available for $19.95.  However you’ll receive this free as club member and save $59.85.

Club members also receive seven workshops and courses on how earn everywhere with at home micro businesses.  We call this our “Live Well and Free Anywhere Program”.   The program contains a series of courses and reports that show ways to earn and be free. These courses and reports are:

  • “International Business Made EZ”
  • “Self Fulfilled – How to Write to Sell”
  • Video Workshop by our webmaster David Cross,
  • The entire weekend “Writer’s Camp” in MP3
  • The report “How to Raise Money Abroad”
  • Report and MP3 Workshop “How to Gain Added Success With Relaxed Concentration”
  • The course “Event-Full – How to Earn Conducting Seminars and Tours”

This program is offered at $299, but is available to you as a club member free.  You save $299 more.

Next, club members participate in an intensive program called the Purposeful investing Course (Pi).  The purpose of Pi is finding value investments that increase safety and profit.  Learn Slow, Worry Free, Good Value Investing.

Stress, worry and fear are three of an investor’s worst enemies.  These destroyers of wealth can create a Behavior Gap, that causes investors to underperform in any market good or bad.  The behavior gap is created by natural human responses to fear.  Pi helps create profitable strategies that avoid losses from this gap.

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

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

There are seven layers of tactics in the Pi strategy.

Pi Tactic #1: Determine purpose and good value.

Pi Tactic #2: Diversify 70% to 80% of portfolio equally in good value developed markets.

Pi Tactic #3: Invest 20% to 30% equally in good value emerging markets.

Pi Tactic  #4:  Use trending algorithms to buy sell or hold these markets.

Pi Tactic  #5:  Add spice speculating with ideal conditions.

Pi Tactic  #6: Add spice speculating with leverage.

Pi Tactic  #7:  Add spice speculating with forex potential.

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

#1:  Current book to price

#2:  Cash flow to price

#3:  Earnings to price

#4:  Average dividend yield

#5:  Return on equity

#6:  Cash flow return

#7:  Market history

We combine the research of several brilliant mathematicians and money managers with my years of investing experience.

This is a complete and continual study of what to do about the movement of international major and emerging stock markets.  I want to share this study throughout the next year with you.

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

The costs are low and this type of ETF is one of the hardest for institutions to cheat.  Expense ratios for most ETFs are lower than those of the average mutual fund.  Little knowledge, time, management or guesswork are required.  The investment is simply a diversified portfolio of good value indices.  Investments in an index are like investments in all the shares of a good value market.

Pi opens insights to numerous long term cycles that most investors miss because they have not been investing long enough to see them.

The Pi subscription is normally $299 per annum but as a club member you receive Pi at no charge and save an additional $299.

Profit from the US dollar’s fall.

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!

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

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

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

This report sells for $29.95 but when you become a club member you receive the report, “Three Currency Patterns For 50% Profits or More” FREE.

Plus get the $39.99 report, “The Platinum Dip 2018” free.

With investors watching global stock markets bounce up and down, many missed two really important profit generating events.  The price of silver dipped below $14 an ounce as did shares of the iShares Silver ETF (SLV).   The second event is that the silver gold ratio hit 80 and has remained near this level, compared to a range of the 230s only two years ago.

Now there is a new distortion ready to ripen in the year ahead.

These two events are a strong sign to invest in precious metals.

I prepared a special report “Platinum Dip 2018”.   The report explains the exact conditions you need to make leveraged precious metal speculations that can increase the returns in a safe portfolio by as much as eight times.  The purpose of the report is to share long term lessons about speculating in precious metals gained through 30 years of speculating and investing in gold and silver.

The low price of silver offers special value now so I want to send you this report because the “Platinum Dip 2018” offers enormous profit potential in 2018.

The report “Platinum Dip 2018” sells for $39.95 but club members receive it free as well.

The $39.95 new “Live Anywhere – Earn Everywhere Report” is also free.

There is an incredible new economy that’s opening for those who know what to do.  There are great new opportunities and many of them offer enormous income potential but also work well in disaster scenarios.

There are are specific places where you can reduce your living expenses and easily increase your income.  Scientific research has shown that being in such places actually make you smarter and healthier.  Top this off with the fact that they provide tax benefits as well and you have to ask, “Where are these places?”.

Learn about these specific places.  More important learn what makes them special.  Discover seven freedom producing steps that you can use to find other similar places of opportunity.

The report includes a tax and career plan broken into four age groups, before you finish school, from age 25 to 50 – age 50-to 65 and what to do when you reach the age where tradition wants you to re-tire.  (Another clue-you do not need to retire and probably should not!)

The report is very specific because it describes what Merri and I, our children and even my sister and thousands of our readers have done and are doing, right now.

Live Anywhere – Earn Everywhere focuses on a system that takes advantage of living in Smalltown USA, but earning locally and globally.

This report is available online for $39.99 but International Club members receive it free.

Save $418.78… “plus more” when you become a club member.

Join the International Club and receive:

#1: The $299 Personal investing Course (Pi).   Free.

#2: The $299 “Live Well and Free Anywhere Program”. Free.

#3: The $29.95 report “Three Currency Patterns For 50% Profits or More”. Free.

#4: The $39.99 report “Platinum Dip 2018”. Free

#5: The three $19.99 reports “Shamanic Natural Health”.  All three free.

#6: The $39.99 “Live Anywhere – Earn Everywhere” report. Free.

#7: A subscription to the Purposeful investing course… Plus more.

These reports, courses and programs would cost $767.78 so the 2018 membership saves $418.78, “plus more”.

What’s the “plus more”?

Join the International Club for $349 and receive all the above online now, plus any online reports, online course updates or online programs we create throughout 2017 all at no additional fee. The club membership entitled you to everything.

The International Club membership is $499, but we want to encourage our first 100 members for 2018 to join quickly so we are currently accepting discounted membership at $349. 

Join the International Club for $349 and receive all the above online now, plus all reports, course updates and Pi lessons through the rest of 2017 and all of 2018 at no additional fee.

Click here to become a member at the discounted rate of $349

Gary 

International Investing Update


Here is an International Investing Update:

We need to continually update our investment plans to protect the purchasing power of our savings, investments and pensions.

Let’s begin this international investment update with a look at the state of the market for bonds.

At Jyske Bank’s most recent Global Wealth Seminar, one of the great speakers was Tommy Leung. He is in charge of the bond trading for UBS in London… so I really enjoyed listening to him and then talking more about bonds over dinner.

tommy-leung

Tommy Leung speaking to Thomas Fischer and other speakers at the Jyske Global Wealth Seminar.

Tommy pointed out that there may be a bond bubble in several segments of the bond markets.

This chart from his speech at the Jyske conference shows how bonds out- performed shares even during the credit crisis.

global-bonds-2010-

He showed how some segments of the corporate bond yields are near…

global-bonds-2010-

20 year lows. This is what a bond bubble is about… low yields.  This means that bonds are expensive.

However Tommy looked at some segments of the bond market that still offer potential.

Here is another slide from his presentations.

global-bonds-2010-

Summed up this slide says to me: There are still opportunities in high yield investment grade bonds. Avoid the below investment grade (BBB) issues.

Some bond issues he reviewed included the bonds below:

Name: New World Resources Miners   (NWORLD)

Bond: 7.875% 2018

Rating: BB-

Yield:  7.13%

Name: Rhodia Chemicals RHA

Bond: 7% 2018

Rating: BB-

Yield: 6.30%

Name: Obrascon Huarte Lian Construction OBRAS

Bond: 7.375% 2015

Rating: BB-

Yield: 8.57%

Name:  Virgin Media Cable VMED

Bond: 9.5% 2016

Rating: B+

Yield: 6.05%

Name: Campofrio Food Group Food CPFSM

Bond: 8.25% 2016

Rating: B+

Yield: 7.68%

Be sure to check with your investment adviser for current bond yields as they continually change.

Leung also  mentioned high yielding equities.

With the global economy in a shaky recoverywith continued high US and Western European unemployment and… since equity markets had bounced strongly after the recession, we are likely to see a period of high uncertainty volatility and low growth in stock markets.

Yet we face great inflation risk.  The huge debt and public spending in both the US, Europe and Asia will at some time lead to global inflation.

The normal investments thus are equities, high yielding bonds, commodities, real estate or one’s own business.

If bonds  are expensive and equities risky, where does one go?

High yielding equities may be the answer.

Jyske Global Asset Mangers (JGAM) believe this and have produced a report “High Dividend Paying Stocks” that identifies 54 high yield shares.

JGAM wrote:  As the next few years most likely will show subdued economic growth, we believe that less cyclical companies and companies paying high dividend yields have become even more attractive.

With interest rates at historic lows, money in the bank generates little or no return, while the yield from government bonds -2.6% for the 10-year Treasuries – is not that appealing. We believe there are a great number of high-quality equities which offer a yield in excess of cash and bonds.

In addition to their attractive dividends yield above that of cash and bonds, most also offer good prospects for long-term growth.

We have prepared a list of companies we find interesting. High dividend yield stocks tend to be less risky and volatile than growth stocks, as long as they keep pumping out the dividend. This may partly be due to investors being content with sitting back and collecting their checks when the market gets rough. Please note though, they are still stocks and in case of a new contraction, these may to varying degree be negatively affected by this.

Here are seven of these shares that I like and will review at our October 7 to 10 International Investing and Business Course.

American Water Works Co USA USD  provides drinking water, wastewater and other water-related services in multiple states and Ontario, Canada. The Company’s primary business involves the ownership of regulated water and wastewater utilities that provide water and wastewater services to residential, commercial and industrial customers.

E.ON AG E.Germany EUR operates in power generation and gas production businesses.
The Company’s operations include electric generation at conventional, nuclear, and renewable-source facilities; electric transmission via high-voltage wires network; regional distribution of electricity, gas, and heat; power trading and electricity, gas, and heat sales.

Endesa, S.A. Spain EUR generates, distributes, and trades electricity in Spain, Italy, France, Portugal, North Africa, and Latin America. The Company distributes natural gas, operates co-generation plants, and treats and distributes water.

Enel S.p.A. Italy EUR 3 generates, transmits, distributes, and trades electricity.
The Company operates hydroelectric, geothermal, and other generating plants. Enel, through subsidiaries, also provides fixed-line and mobile telephone services, installs public lighting systems, and operates real estate, factoring, insurance, telecommunications, and Internet service provider businesses.

Veolia Environnement France EUR operates utility and public transportation businesses. The Company supplies drinking water, provides waste management services, manages and maintains heating and air conditioning systems, and operates rail and road passenger transportation systems.

Land Securities Group Plc UK GBP a property investment and management company. The Group invests in real estate, including offices, shops and shopping centres, out of town retail locations, supermarkets and industrial/warehouse facilities throughout the United Kingdom. Land Securities’ portfolio also consists of a small percentage of hotel, leisure and residential properties.

Suntec REIT Singapore SGD is a real estate investment trust.
This Asian company was  established with the objective of investing in income-producing real estate properties which are used primarily for retail and office purposes.

You can get the report on all 54 shares including a table that JGAM has prepared mid-August that shows:

#1: Latest share price
#2: Latest paid dividend
#3: Yield  – latest paid dividend as a percent of latest share price
#4: Whether the dividend is paid annually, semiannually or quarterly
#5: Bloomberg recommendation – on Bloomberg analysts following the company stating thei4 recommendation to Buy, Hold or Sell
#6: Bloomberg 12 month Price Target – is an average on the analysts price targets
#7: Morgan Stanley – Their 12 month price target and recommendation
(UW = Under Weight – EW = Equal Weight – OW = Over Weight) and Percentage Upside/downside on the 12 month price targets from Bloomberg and Morgan Stanley.

To obtain this report, contact Thomas Fischer at JGAM at fischer@jgam.com

Or join me with Thomas Fischer, Jean Marie Butterlin at Team Ecuador, David Cross, my webmaster, Bob Shane  and Ann Russell Roberts for our October seminar…coming up in the Blue Ridge with all its autumnal glory!

Enroll here. $749 Reserve here –  $999  Reserve for two

I also believe there is excellent opportunity for income and growth in real estate… especially in Florida and Ecuador.

This is why we are continually adding Ecuador properties in our Ecuador Multiple Listing like this house in Guayaquil.  Here you gain rental income potential and appreciation potential when inflation surges.

Guayaquil House

guayaquil-house-for-sale

2 story, 3 bedroom, 3 bath home.  Large European style kitchen, guest bathroom, foyer, living room dining room, laundry room and a very large backyard. Ciudad Celeste is near the Babahoyo River.   Upgrades on closets, lighting and cabinets.

This is a gated community with tennis court, olympic size swimming pool, social area, gym. Maintenance fee is $55 a month.

See more details and contacts under “Guayaquil House” at our Ecuador MLS.

Gary


Global Investing & Major Market Value Update


We’ll see a global investing major market value update in a moment.

First, let’s look at this important data that Thomas Fischer at Jyske Global Asset Management (JGAM) just shared.

Thomas Fischer is Senior Vice President of Jyske Global Asset Management.

thomas-fischer-jyske

Thomas began his banking career in 1975. In 1978  he started in the trading room as a Foreign Exchange dealer, and spent the next 22 years trading currencies. During this trading career he spent 2 years in London and 10 years in Germany where he was head of the international currency section of a major German brokerage company.

During his time in Germany he successfully completed an MBA focusing on the external environment and corporate finance.  In 2000 he joined Jyske Bank Private Banking and was promoted to Manager of International Client Relations in 2001.

In 2008 Thomas joined the newly established Portfolio Management Company Jyske Global Asset Management (JGAM), as Senior Vice President.  He is  a member of JGAM’s Investment Committee focusing on our Foreign Exchange strategy.  He travels the world giving presentations about the markets and the investment opportunities at JGAM.

Yesterday’s message Global Investment Portfolios Focus looked at JGAM’s medium risk international investment portfolio.

This portfolio has been updated and Thomas wrote:  On July 15 JGAM’s Investment Committee held its monthly meeting, deciding on how to invest our managed portfolios. All trades agreed at the meeting have now been carried out and therefore we can publish the changes we have made.

The overall asset allocation remained at a neutral position in all asset classes except for a small overweight position on cash in low and medium risk portfolios.

However Thomas added more. Here is information on what the future that we should all be thinking about.

The markets have been caught in a verbal fight between optimists and pessimists. The latter group most prominently presented by Princeton University Economist Paul Krugman, has warned policy makers that the world is heading for the worst depression since the thirties.

Mr. Krugman has on many occasions warned that the US is in danger of falling into a deflationary trap. He is advocating for a much more aggressive stimulus plan as unemployment remains stubbornly high, with little job creation at private companies.

The Federal Reserve Chairman Ben Bernanke however, has been more optimistic and recently expressed that the US economy is on track to continue to expand in 2010 and 2011. World trade is up 20% year-on-year but is recovering from extremely low levels.

The optimists also argue, that the corporate sector should start investing soon and thereby improve the employment picture. When the corporate sector increases spending, nominal growth should pick up and help improve budget deficits.

According to The Economist magazine, the recent uncertainty may be down to a fundamental battle between bond investors who benefit from a debt deflation solution to the current crisis; and equity investors who gain more from a nominal growth solution to deficits. The jury is still out and with no clear indication of where we are heading, uncertainty will rule the market. We still believe that we are heading for a recovery and a growth scenario, but as long as the “war” between optimists and pessimists are raging in the media we maintain our neutral positions.

After four consecutive quarters with rising equity prices, Global equities had their first down quarter since March 2009. In the second quarter 2010, the Morgan Stanley Capital International (MSCI) World Total Return Index (with net dividends reinvested, December 1969 = 100) declined 11.2 % in local currencies, 12.7 % in US dollars and 3.5 % in euros.

So who will win out… the optimists or the pessimists?

Personally  I am prepared for either scenario.  In our last International Investing & Business Conference we looked at seven places to inest now that can prosper in either a positive or negative economic scenario.

#1:  Value Markets

#2: Multi Currency Spreads Increase Cash

#3: Emerging Markets

#4: Wellness

#5: Water Alternate Energy

#6: Truth & Cohesion

#7: Real Estate

Value holds a special place for investors and business people… local or global because value is another way of seeing distortions.  Distortions are vacuums and nature abhors a vacuum.  Imbalances will always correct themselves. To have success in investing or business… one simply has to spot good value.

Understanding value is the tricky part. 

This is why once a quarter we look at a major equity market valuation analysis by Michael Keppler.

If you are a new multi currency subscriber learn about Keppler Asset Management here.

For the last quarter to the end of June 2010, Keppler points out that  year to date, the MSCI World Index lost 7.1 % in local currencies and 9.8 % in US dollars. However, due to the 14.6 percent decline of the US dollar to 1.2249 versus the euro, the world equity benchmark index gained 5.6 % during the last six months, if performance is measured in euros.

Two markets advanced in the second quarter and sixteen declined. Denmark (+4.5 %), Sweden (+0.3 %) and Singapore (-0.1 %) performed best.

Japan (-14.8 %), Austria (-14.3 %) and Italy (-13.4 %) came in at the bottom.

Year-to-date, four markets are up and fourteen markets are down. The best performing markets in the first half of 2010 were Denmark (+21.7 %), Sweden (+8.8 %) and Belgium (+1.2 %). Spain (-21.4 %), Italy (-14.8 %) and Norway (-13.7 %) performed worst year-to-date.

Performance numbers are in local currencies unless mentioned otherwise.

The Top Value Model Portfolio currently contains the following six “buy” rated countries at equal weights:  Austria, France, Germany, Italy, Singapore and the United Kingdom. Keppler’s current ratings suggest that a combination of these markets offers the highest expectation of long-term risk-adjusted returns.

Keppler’s neutral value markets are now: Australia, Japan, Netherlands, Norway, Spain.

The low value (sell) markets are:  Belgium,  Canada, Denmark, Hong Kong,  Sweden, Switzerland and USA.

Keppler also added:  As the chart below indicates, our implicit three-to-five-year projection for the average annual gain of the Equally-Weighted World Index now stands at 14.3 % p.a., up from 11.9 % three months ago.  The two main reasons for this increase are (1) the Index dropped by 9 % during the second quarter and (2) fundamentals have improved: Earnings are up 16.6 % — the larger part of the increase coming from disappearing write-offs — and dividends grew by 4.1 %. In addition, the low interest rate environment makes stocks look attractive.

keppler-value-equity-market-analysis

Keppler’s implicit three-to-five- year projection provides some profound clues about how to invest and conduct business ahead.

His statistics suggest to me that the economy and markets are still going to grow.  The pessimists… according to my interpretation of these numbers… lose.

This is not the only indicator I track that suggests positive days ahead… not immediately… but over the next three to five years.

From now until October offers a special micro window of opportunity…. maybe one of two before 2002… when the next 15 to 17 year bull cycle will begin.

Right now seasonality is dragging markets down until around November.  Perhaps we’ll see one more good bear pull April to November 2011.  Then the recovery will begin in earnest. From now until then, history suggests times will be bleakest… a great time to find good value.

Thomas Fischer also mentioned the beauty of Denmark’s summer and wrote:

Summer has arrived in Denmark and we are basking in glorious sunshine. We hope the weather will “perform” for the next few months and thus create a warm background for our August Copenhagen seminar.

We have a range of world class speakers and should have some really exciting presentations. We will furthermore have excursions allowing you to get a closer look at our beautiful city. We will conclude the seminar Saturday evening with a gala dinner and opera arias performed by some of the best Danish opera singers from The Royal Danish Opera. We hope you will take this opportunity to come to Copenhagen and experience some renowned Danish “hygge”/coziness. You can see the whole program and a short video at the below link at http://jgam.com/copenhagen-seminar-2010

When we forwarded the invitation in April the price was approx. $2,050 per person in a double room, but since then the USD has strengthened against the Danish Kroner and the price today is approx. $1,700. The price includes accommodation including breakfast at the Copenhagen Marriott Hotel just voted the best hotel in Denmark, reception at our offices, seminar fee, excursions, lunches and a gala dinner with entertainment and dancing.

Danes have been voted the happiest people in the world and now we also have the best restaurant in the World. The restaurant is called NOMA which is a concatenation of the two Nordic names Nordisk (Nordic) and mad (food). The chef, Rene Redzepi, uses only Scandinavian ingredients and how about this for a starter: crunchy baby carrots served with edible “soil” made from malt, hazelnuts and beer, with a cream herb emulsion beneath.

Our slogan “Global investments with a personal touch” is not just a slogan we really enjoy any opportunity to meet with our clients and friends. We sincerely hope that you will join us in August in Wonderful Copenhagen.

See details on how to join Merri and me at Jyske’s bi annual Copenhagen seminar here Global Wealth Management Seminar.

Merri and I walk  the waterfront every day when we are in Copenhagen.  We love…

investment-course

the sights, the…

investment-course

cafes and…

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open air.

Merri and I hope to meet you in Denmark in August!

Gary

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