Two economic forces have come together to create extra special profits.
I know because the same combination occurred in London during the late 1970s and allowed me to increase an investment eleven times in two years by buying property then.
Earlier in 1970 I had lived in London, England for a year, then moved to Hong Kong. During that time I also maintained a home outside of San Francisco, California.
This was a time of great inflation. My homes in California and in Hong Kong appreciated greatly. In the mid 1970s, when I moved from Hong Kong back to London, I noticed that London real estate was priced about the same as it had been in 1970. This puzzled me. Why had London property prices remained flat despite inflation?
On investigation, I learned that there had been a huge real estate crash in 1970 which continued to dampen real estate prices six years later despite the rampant global inflation. I felt this was a great distortion as European property prices had risen, but London prices had not. Yet London offered the best utility as the center of the English speaking world. This, to my way of thinking, created a huge distortion.
It’s late 1976. Britain faced a sterling crisis. In less than two years the pound has fallen from $2.40 to $1.60. Investors had no faith in the British economy, or the government that ran it. The government’s budget was a mess. Investors were ditching the pound.
The plummeting pound pushed the economy to breaking point. Prime Minister Callaghan, in desperation borrowed as much as possible, £2.3 billion from the IMF.
At that time, the British pound collapsed to its lowest level ever (a pound per dollar for a short time) so the distortion widened. This meant in US dollar terms London property had dropped almost 50% while property in other major cities of the western world had increased in price by three or four times.
The house I bought was right next door and very similar to this house in Bedford Park, London W4.
This house in West London was 34,000 pounds, 9,000 pounds down (then $9,000). I took a mortgage for 25,000 pounds ($25,000). I lived in the house and three years later the pound had recovered to 2.2 dollars per pound plus London real estate had caught up with property in other major western centers. I sold the house for 115,000 pounds or $253,000 a profit of $244,000 on a $9,000 investment.
Now it’s the US dollar that is very low.
You will have seen articles something like the the September 7, 2009 Bloomberg article “Weak Dollar? Currency, at 10-Year Low, May Fall More” by Bo Nielsen.
An excerpt says: Anyone who says the dollar is weak after it fetched a record-low $1.3681 against the euro and the fewest pence against the pound in 25 years is expressing a euphemism.
The currency may decline at least another 10 percent by the end of 2008, say Jay Bryson, an economist at Wachovia Corp., and Kenneth Rogoff, the former chief economist at the International Monetary Fund. The dollar has only fallen 3.4 percent in the past two years to a 10-year low, according to a Federal Reserve index that weighs trade with 38 countries including China, Mexico, Canada and countries in Europe. It tumbled 30 percent in the three years ended 1988.
“Dollar weakness will be broad-based and could last for years,” said Bryson, a global economist at Charlotte, North Carolina-based Wachovia who previously analyzed currencies at the Federal Reserve.
Investors are dumping dollars, lured by higher returns elsewhere. The U.S. will grow more slowly than Europe for the first time since 2001 and Japan for the first time in 16 years, the IMF forecasts. The difference in yield between 10-year German bonds and Treasuries has shrunk to the smallest since 2004.
Those who read this site regularly or subscribe to our multi currency course know that I reported my personal portfolio and recommended getting out of the US dollar in February 2009. See that recommendation here.
I showed that my portfolio was 86% out of the greenback.
My liquid portfolio currency allocation was reported as Brazilian real 4%, Denmark kroner 33% , euro 31% , British pound 10% , Turkey lira 8% , US$ 14%.
I also mentioned in February that I was going to start buying Florida real estate.
So Merri and I began looking and in our research found that there appears to be a hole in the market for Central Florida property selling in the million to $750,000 range. There seems to be no buyers at all. We have been watching prices tumble hundreds of thousands.
We are viewing one property next week that started at $800K+. It just dropped $100,000 last week from $395,000 and is now down to $295,000.
This is about a 25% drop in that house’s price in six months. That’s pretty good!
Now look at what this means in depreciated dollar terms.
Here is a chart of the euro to US dollar from yahoo.finance.com from February 2009 to September 10, 2009 when this was written.
In February a US dollar bought .80 euro so that house at $395,ooo cost 319,200 euro. Now a US dollar buys about .68 euro so this house at $295,000 costs about 200,000 euro.
That is a drop in that house price of 37% in six months in terms of euro. That’s even better!
Here is the magic in this hidden, built-in profit. For most of the market, the profit is hidden. Most investors are not comparing currencies and real estate prices. Yet these distortions will filter through. Eventually European investors…. or those like me who are holding currencies other than dollars will see this distortion and cash in.
I, and now you, just have an advantage because we are always looking at both markets… currency and real estate.
Ecuador Real Estate Cheaper as Well
This also creates better value on Ecuador real estate. Take for example one penthouse property I am selling at $139,000.
This is a perfect property for those who want peace… quiet…and instant access to miles of empty, warm Pacific beach.
This two room, top floor penthouse is at Palmazul and includes use of the the swimming pool, tennis courts… and spa. You can dine here, one floor below.
The units are fully equipped… kitchen…
with full size fridge.
and sunsets to kill for.
Long walks on the beach… you can amble at low tide for ten miles and not see a soul.
Luxury bathrooms with bathtub…
and a king size bed with view and caressed by the ocean breeze.
This unit would have cost 111,000 euro in February. Now the price has dropped to 94,500 euro… just from the dollar’s fall.
The US and Ecuador property markets offers a rare opportunity to make extra profit now because of hidden added value from the US dollar’s fall. History suggests that real estate is a real asset so its price rises as the currency its counted in falls.
These corrections take time because most property owners do not calculate their property in multi currency terms. Those of us who watch this can gain extra profit now.
The article above is an excerpt from a recent Multi Currency update. Learn more about multi currency investing. Subscribe to our multi currency course.
The greatest asset of all is the ability to earn globally in many currencies.
This is why we are providing a special three for one offer with our course Tangled Web… How to Have an Internet Business. This can help you create your own internet business.
Our emailed course “Tangled Webs We Weave – How to Have Your Own Web Based Business” is a continuing educational program. You receive the first 28 lessons when you enroll and a new lesson every week or two.
This course teaches how to create a web based business and is developed from the ongoing experiences that we have from our successful and profitable internet business.
This course is well worth the enrollment fee of $299… but currently you also receive two additional courses FREE.
The other two courses are #1: International Business Made EZ, and #2: Self Fulfilled – How to be a Self Publisher.
These two courses have sold for $398 and thousands have paid this price. We add them to your course at no added cost as I believe they will help you develop a better business in these crucial times.
Even Better Get All three Courses Free
To make this offer even more compelling, I am giving everyone who enrolls in our North Carolina or Ecuador International Business & Investing seminar in October or November all three courses, “Tangled Web… How to Have an Internet Business Course,” “Self Fulfilled- How to be a Self Publisher” and “International Business Made EZ” free.
Join us with Jyske Bank and my webmaster David Cross in West Jefferson North Carolina. Learn more about global investing, how to have an international business at the seminar.
Or head south to Ecuador!
October 16-18 Ecuador Southern coastal tour
Oct. 21-24 Ecuador Import Export Tour
Oct. 25-26 Imbabura Real Estate Tour
Join us with Peter Laub of Jyske Global Asset Management in Ecuador. Learn more about global investing, how to have an international business at the seminar.
Nov. 6-8 IBEZ Ecuador Seminar
Nov. 9-10 Imbabura Real Estate Tour
Nov. 11-14 Ecuador Coastal Real Estate Tour
Join us in the mountains and at the sea. Attend more than one seminar and tour and save even more plus get the three emailed courses free.
Attend any two Ecuador seminar or tours in a calendar month…$949 for one. $1,349 for two.
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