Posted on 03 September 2016.
Hope springs eternal and value is a signpost that leads along the hopeful path.
One of the key themes in my first book, Passport to International Profit, (published in the 1970s) was “The sun always shines somewhere”. This thought has been in and remains a foundation of everything I do.
Decades of studies of global stock market cycles suggest we’ll see a serious short term equity correction. The current market rise has lasted much longer than history suggests. This means a sharper, faster contraction will take place when it comes.
This means enormous opportunity is ahead. The most important lesson I have learned in fifty years of writing and speaking about investing and actually investing globally for 48 years is to invest as much as is possible during stock market crashes.
This chart shows the entire real-time forecasting history of Keppler Asset Management Inc. for the KAM Equally Weighted World Index. Keppler’s projections are based on relationships between price and value over the previous fifteen years. These are moving forward in monthly increments so they thus evolve steadily to an ever-changing norm. Starting in October 2008, the actual performance of the index fell below the lower forecast band, where it stayed through April 2014 (5 years and 7 months). Since then, the Index has fallen below the lower forecast band again this year in February as well as in May and June. In the past, index levels below the lower forecast band turned out to be attractive entry points for long-term investors.
Look at how well long term investors who added extra investments during the 2000 and 2007 crashes have profited.
Create a strategy of having fun by investing in what you know. Knowing the basics behind your investments is important because belief in the idea is vital. Yet risk is always our partner. Even when we invest in what we know, there will be events we cannot see or expect. Integrating what we love and know with value, reduces risk.
Embrace risk. Adapt. Look for contrasts and trends. Seek value. Bet the most on the positive when events are the most negative.
Expect that the World Will Remain Standing!
The press always focuses on doom and gloom. Current news always makes the world seem about to end.
Yet despite all the negative headlines, we have lived through the Cold War and MAD, Y2K, GridX II, the Peak Oil Crisis. etc. etc. etc. Chicken Little is always out there, selling the sky is falling. Don’t buy into this story!
History suggests that there will always be opportunity. The sun always shines somewhere.
See three economic events where the forecasts and news got it seriously wrong (from Wall Street Journal article below).
Brexit is the latest example of how negative news can blind us to reality. After Brexit, the advice in our Purposeful investing Course (Pi) was “Invest More” in the UK. This is because we rely on financial news instead of economic news.
A Wall Street Journal article last week, “When Economic Doomsayers Stumble: Cautionary Tales From Brexit, Grexit and U.S. Budget Battles” (1) firmed up why numbers should be trusted more than conjecture and opinion.
The article says: Experts often look to stay ahead of worst-case scenarios, building up a long list of cataclysms that never were.
It’s early, but data so far suggest the British decision to leave the European Union could be another example of a recurring phenomenon: expert predictions of dire consequences to political decisions that end up proving overheated.
“Forecasters often feel incentivized to pump up the probability of worst-case scenarios” said Philip Tetlock, an expert in political forecasting at the University of Pennsylvania. Forecasters may inflate the probability of disasters, as a way to increase the salience of a warning, or because they believe that proving prescient will be something they can boast about, while proving mistaken will be something most people forget. “Over time, this has some corrosive effect on trust in the expert community,” he said. In the immediate aftermath of the vote, many market economists forecast recession would begin almost immediately.
It’s now been two months since British voters on June 23 cast their ballots to exit from the European Union, and it’s becoming unclear if the recession so many feared will materialize—at least in the near term. The FTSE 100 (The London Stock Market Index) climbed to near-record levels by the middle of August. Nor has the wider economy shown many signs of a coming downturn. The leading U.K. home builder, Persimmon PLC, said interest in home buying has remained “robust” and predicted good autumn sales.
The Brexit advice at this site was not based on our knowledge of the UK economy. We did not turn to a review of European history. We did not simply take a contrarian view. The UK was a good value market, before, during and after Brexit. Consequently UK shares were already part of our portfolio. Brexit simply improved the value. Based on this, our advice was “Don’t sell UK shares. If you want some extra speculation, buy a bit more”.
A comparison from the “Keppler Asset Management Summer 2016 Developed Market Analysis” shows why it was easy to recommend a UK country ETF as an equally weighted part of a good value portfolio.
Shares in the UK were selling at 1.74 time book and 21.5 times price earnings. The average dividend yield in the UK markets was 4.15%. Compare this to the US share average of 2.83 times book 22 times earnings and with a 2.13% average dividend.
In other words UK shares were selling for almost 40% less price to book than US shares and paying almost double dividends.
The Pi strategy is to hold equally weighted amounts of country ETFs in good value developed and emerging markets (70% developed and 30% emerging). Brexit made no change from that basic platform. The fall of the British pound created an extraordinary opportunity for those who wanted to speculate. Our Pi course reviewed two opportunities, add an extra weighting of the British market ETF, or even riskier but with greater potential, add an extra weighting of the British market ETF using a US dollar margin loan.
We live in a very positive world. So many incredibly wonderful events take place every day that it is not worth mentioning in the news. This leaves a void filled by the worst negative drama enhanced by opinion and conjecture. Bad news sells papers (and visits to websites) while financial news can be boring.
Take advantage of the fact that as the thundering herd panics and rushes from one potential cliff to another, it is usually wrong. There is no cliff. The signs created by panic are simply deviations that eventually lead back to the true path to profit best signposted by good value.
(1) www.wsj.com Forecasts of brexit gloom may be overdone
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Start this weekend. Learn how to improve the safety and profit of your savings and investments by selecting diversified, good value investments in a multi-currency portfolio during stock market downturns. Few decisions are as important to our wealth as the value of the markets and currencies we invest in.
Many investors missing the great long term risk, the falling US dollar. The greenback has been strong for the past five years, but this is temporary. The dollar’s strength came after the great recession of 2009 just as there was a temporary dollar strength after the great recession of the 1980s. In the 1980’s that dollar strength lasted five years. Then the dollar collapsed over 50% versus major currencies. Now the greenback is in a similar place.
The strong US dollar and low interest rates created a bigger than normal stock breakout, but the US market has been in an overall bear trend since 2000. Now both, the market and the greenback are scheduled to fall.
This year I celebrate my 51st anniversary in the investing business and 49th year of writing about global investing. Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades. This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in our seminar.
Stock and currency markets are cyclical. These cycles create extra profit for value investors who invest when everyone else has the markets wrong. One special seminar session looks at how to spot value from cycles. Stocks rise from the cycle of war, productivity and demographics. Cycles create recurring profits. Economies and stock markets cycle up and down around every 15 to 20 years as shown in this graph.
The effect of war cycles on the US Stock Market since 1906.
Bull and bear cycles are based on cycles of human interaction, war, technology and productivity. Economic downturns can create war.
Here is the war stock cycle. Military struggles (like the Civil War, WWI, WWII and the Cold War: WWIII) super charge inventiveness that creates new forms of productivity…the steam engine, the internal combustion engine, production line processes, jet engines, TV, farming techniques, plastics, telephone, computer and lastly during the Cold War, the internet. The military technology shifts to domestic use. A boom is created that leads to excess. Excess leads to correction. Correction creates an economic downturn and again to war.
Details in the online seminar include:
* How to easily buy global currencies, shares and bonds.
* Trading down and the benefits of investing in real estate in Small Town USA. We will share why this breakout value is special and why we have been recommending good value real estate in this area since 2009.
* What’s up with gold and silver? One session looks at my current position on gold and silver and asset protection. We review the state of the precious metal markets and potential problems ahead for US dollars. Learn how low interest rates eliminate opportunity costs of diversification in precious metals and foreign currencies.
* How to improve safety and increase profit with leverage and staying power. The seminar reveals Warren Buffett’s value investing strategy from research published at Yale University’s website. This research shows that the stocks Buffet chooses are safe (with low beta and low volatility), cheap (value stocks with low price-to-book ratios), and high quality (stocks of companies that are profitable, stable, growing, and with high payout ratios). His big, extra profits come from leverage and staying power. At times Buffet’s portfolio, as all value portfolios, has fallen, but he has been willing and able to wait long periods for the value to reveal itself and prices to recover.
This chart based on a 45 year portfolio study shows that holding a diversified good value portfolio (based on a good value strategy) for 13 month’s time, increases the probability of out performance to 70%. However those who can hold the portfolio for five years gain a 88% probability of beating the bellwether in the market and after ten years the probability increases to 97.5%.
Time is your friend when you use a good value strategy. The longer you can hold onto a well balanced good value portfolio, the better the odds of outstanding success.
Learn how much leverage to use. Leverage is like medicine, the key is dose. The best ratio is normally 1.6 to 1. We’ll sum up the strategy; how to leverage cheap, safe, quality stocks and for what period of time based on the times and each individual’s circumstances.
Learn to plan in a way so you never run out of money. The seminar also has a session on the importance of having and sticking to a plan. See how success is dependent on conviction, wherewithal, and skill to operate with leverage and significant risk. Learn a three point strategy based on my 50 years of investing experience combined with wisdom gained from some of the world’s best investment managers and economic mathematical scientists.
Enjoy investing more with slow, worry free, good value investing. Stress, worry and fear are three of an investor’s worst enemies. These are major foundations of the Behavior Gap, a trait exhibited by most investors, that causes them to under perform any market they choose. The behavior gap is created by natural human responses to fear. The losses created by this gap grow when investors trade short term, under stress.
Learn how to put meaning into your investing by creating profitable strategies that combine good value investments with unique, personal goals.
Learn what I am doing with my good value portfolio. My personal investment portfolio comes from a continual analysis of international stock markets and a comparison of 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.
We’ll update the good value markets for the beginning of 2017 next week, but the markets included in this 2016 portfolio are:
These markets have been chosen based on four pillars of valuation.
• Absolute Valuation
• Relative Valuation
• Current versus Historic Valuation
• Current Relative versus Relative Historic Valuation
The online seminar also reveals how to use Country ETFs to easily construct a diversified, risk-controlled, equally weighted representative country portfolios in all of these good value countries.
To achieve this goal my portfolio consists of Country Index ETFs that track an index of shares in a specific country. These country ETFs provide diversification into a basket of equities in the good value countries. The expense ratios for most ETFs are lower than those of the average mutual fund as well so such ETFs provide diversification and cost efficiency.
This is an easy, simple and effective approach to zeroing in on value because little management and guesswork is required.
The seminar also discloses the results of a $80,000 share purchase cost test that found the least expensive way to invest in good value. The keys to this portfolio are good value, low cost, minimal fuss and bother. Plus a great savings of time. Trading is minimal, usually not more than one or two shares are bought or sold in a year. I wanted to find the very least expensive way to create and hold this portfolio so I performed a test.
The Test for Low Cost Trading
Research put every part of this portfolio in place, except knowing the best, easiest and least expensive way to buy. A search for an optimal way to buy and hold boiled down to two methods. One tactic to test was to use a unique online broker that appeared to offer the lowest cost deal. The other approach was to use a community bank in Smalltown USA. The small town bank that I use looks after my 401K trust account and the service is first class. The benefit of small banks is that they still treat us as a human beings (instead of a number) and when we need, it’s easy to go right to the top to answer a question or get a problem resolved. There are no call centers and the bank and the person looking after my account is just around the corner.
I created a test to see which offered the least expensive service.
Working with my banker in Smalltown USA, I created two accounts, one at the online broker and the other at the bank. I placed $40,000 in each.
I set up the order for the country ETFs online, while my trust manager set up orders for the identical amounts of the same shares in his system. Then we got on the phone, coordinated our timing and on a count of three each pushed the button “BUY”.
I share the results of this test in the seminar. The savings that can be gained on any purchase of country ETFs has the potential to be more than the cost of the seminar.
I have good news about the cost of the seminar as well. For almost three decades the seminar fee has been $799 for one or $999 for a couple. Tens of thousands paid this price.
In this special offer, you can get this online seminar FREE when you subscribe to our Personal investing Course.
The Purposeful investing Course (Pi) teaches exactly what to do in situations such as we are seeing in global stock markets now. This course is based on my 50 years of investing experience combined with wisdom gained from some of the world’s best investment managers and economic mathematical scientists.
Enjoy Repeated Wealth
Pi’s mission is to make it easy for anyone to have a strategy and tactics that turn market turmoil into extra profit.
Pi reveals investing secrets and the sciences that make investing easy, safer, less time consuming and increases the chances of profit.
One secret is to invest with a purpose beyond the cash. Another tactic is to have staying power. This means not being caught short and having to sell during a period of loss. This also means having enough faith in a strategy that we stick to the plan. When we invest with purpose, doing what we love, and when we believe in the basic mathematics of value, we enjoy the process more and are more likely to hold on during down times, when most poor investors panic and sell.
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 (almost) 50 years of global experience and my study of the analysis of four mathematical investing geniuses (and friends).
The Pifolio analysis begins with a continual research of international major stock markets that compares their value based on:
#1: Current book to price
#2: Cash flow to price
#3: Earnings to price
#4: Average dividend yield
#5: Return on equity
#6: Cash flow return.
#7: Market history
We 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 2017 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.
A country ETF provides diversification and cost efficiency by spreading one simple, even small investment into a basket of equities in a good value stock market. The costs are low and this type of ETF is one of the hardest for institutions to cheat. Expense ratios for most ETFs are lower than those of the average mutual fund.
Little knowledge, time, management or guesswork are required. The investment is simply a diversified portfolio of good value indices. Investments in an index are like investments in all the shares of a good value market.
Pi opens insights to numerous long term cycles that most investors miss because they have not been investing long enough to see them.
For example in the 1980s, a remarkable set of two economic circumstances helped anyone who spotted them become remarkably rich. Some of my readers made enough to retire. Others picked up 50% currency gains. Then the cycle ended. Warren Buffett explained the importance of this ending in a 1999 Fortune magazine interview. He said: Let me summarize what I’ve been saying about the stock market: I think it’s very hard to come up with a persuasive case that equities will over the next 17 years perform anything like—anything like—they’ve performed in the past 17!
I did well then, but always thought, “I should have invested more!” Now those circumstances have come together and I am investing in them again.
The circumstances that created fortunes 30 years ago were an overvalued US market (compared to global markets) and an overvalued US dollar. The two conditions are in place again! There are currently ten good value (non US) developed markets, plus 10 good value emerging markets.
Pi shows how to easily create a diversified, worry free portfolio in some of these good value markets using Country Index ETFs.
The current strength of the US dollar is a second remarkable similarity to 30 years ago. The dollar rose along with Wall Street. Profits came quickly over three years. Then the dollar dropped like a stone, by 51% in just two years. A repeat of this pattern is growing and could create up to 50% extra profit if we start using strong dollars to accumulate good value stock market ETFs in other currencies.
This is the most exciting opportunity I have seen since we started sending our reports on international investing ideas more than three decades ago. The trends are so clear that I have created a short, but powerful report “Three Currency Patterns for 50% Profits or More.” This report shows how to earn an extra 50% from currency shifts with even small investments. I kept the report short and simple, but included links to 153 pages of Good Value Stock Market research and Asset Allocation Analysis.
The report shows 20 good value investments and a really powerful tactic that shows the most effective and least expensive way to accumulate these bargains in large or even very small amounts (less than $5,000). There is extra profit potential of at least 50% so the report is worth a lot.
This report sells for $29.95 but you’ll receive the report, “Three Currency Patterns For 50% Profits or More” FREE when you subscribe to Pi.
Plus get the $39.95 report “The Silver Dip 2017” 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.
These two events are a strong sign to invest in precious metals.
I prepared a special report “Silver Dip 2017” about a new leveraged speculation that can increase the returns in a safe portfolio by as much as eight times. The purpose of the report is to share long term lessons 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 “Silver Dip 2017” offers enormous profit potential in 2016.
Subscribers who acted on the report when it was originally issued picked up a fast 54.1% profit. The report updates what to do in 2017.
Save $517.90 If You Act Now
Subscribe to the first year of The Personal investing Course (Pi). The annual fee is $299, but to introduce you to this online, course that is based on real time investing, I am knocking $102 off the subscription. Plus you receive FREE the $29.95 report “Three Currency Patterns For 50% Profits or More”, the $39.95 report “Silver Dip 2016”, the $49 report “How to Grab Sequential Value Profits” and our latest $297 online seminar for a total savings of $517.90.
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