Investing Value of Time & Space


We have three dimensions of time and space.  That’s really all we have.  At least, that’s all we know.  The time space macro view doesn’t help investors much.   But specific measures of an investor’s time and space can help select good value shares.  Being well timed is the essence of good value investing.  Knowing your time horizons (time) can help you decide how far (space) your investments can go.   Value investing requires knowing your time, not timing and in setting your investment’s space.

Take for example shares of TFC Corp, an Australian company that grows and process rare sandalwood.

TFS Corp chart

Chart from au.finance.yahoo.com

The Lunacy of Timing

TFC Corp. shares a thinly traded, highly volatile shares.

On February 04, 2014, a message posted at this site entitled “A Most Valuable Investment” recommended an investment in TFC Corp. (symbol TFS), the soil to oil sandalwood growing, processing and retailing company.  I liked this company’s ten year prospects so much that I wrote a report with my friend Candace Newman, an essential oil expert, on why the investment made sense.  We published the report at Amazon.com.

Screen shot 2014-01-28 at 5.28.13 PM

Sandalwood Investment Report

The price of a TFC Corp. shares when that report was issued was $1.13.   Although I recommended a ten year time frame, just six months later the share price had reached (10 September 2014)  $2.22.  That’s a  95% gain in half a year!  95% gain would not be all that bad in ten years.

However by November 20, 2014 the price had dropped to $1.21 per share.  That’s a 45% loss in just over a month!

Wait a minute….actually it’s a 7% gain in nine months.

The only difference between the loss and the gain is time.

Time rolled on and by May 18, 2015 the TFC Corp. share price was $1.95.  That’s a 61% gain in just 6 months, or a loss if you look at it from the September 2014 frame of time.

Then the price dropped again to $1.42 by July 2015.

Now in September 2015 the price per share is $1.53.  That’s a 31% loss from the high of a year ago or a 35% profit from the February 04, message.

The only difference in any of these profits and losses is time.

Imagine the fortune we could have reaped if we could really control timing.  An investment of $10,000 in February  2014 bought 8,849 shares.  Selling in September 2014 at $2.22 brought $19,644.  Those funds, reinvested a month later at $1.21,  bought 16,235 shares which sold six months later (May 2015 at $1.95 per share) for a gross of $31,658.  Buying again in July at $1.41 bought 22,295 shares that are worth $34,111 at the $1.53 per share price.

Of course anyone that good at timing would have also sold the shares short on the way down and made even more.

The problem is, no one can really do that.  No one is that good at timing.  We are mere mortals locked in the NOW time and space.  History shows that market timing simply does not work because the future (and share prices) are fogged by the mists of  time.  In fact my experience from working with thousands of investors suggests that most investors would not buy at the $1.13 price and sell at $2.22.  The frailties of human nature mean that most investors are more likely to  have jumped in around $2.00 a share and then bailed out as the share price slammed back to $1.21.

Trying to time price movements of shares simply does not work for most of us as investors.

Using trailing stops on shares as volatile as TFS  isn’t very effective either.  I asked Dr. Richard Smith of Tradestops.com.

He is the authority on how to use trailing stops.  His reply was:  I took a quick look at TFS Corp. for February  2014 when you recommended the shares.  At the time the Volatility Quotient was 35%.  Currently the volatility quotient is about 41%.  It does look like the Smart Trailing Stop triggered on the drop from $2.22 to $1.21 from Sep to Dec. That was a drop of about 45%, which exceeded the VQ of about 40% by early December.  So while the TradeStops system would have helped folks understand the risk in this case, I’m afraid that it would have stopped folks out around break-even if they had gotten in at $1.19.  I do think that once you start to see VQ’s in the 40% and above range that it’s good to think of the investment as likely being an all or nothing bet.

Richard agrees with my experiences that investors who try to time investments generally do so backwards, they get in and out exactly the wrong way.  They buy high and sell low.

He said:  The reality I would also add is that a big part of using a semi-algorithmic approach to investing is addressing the “behavior gap”.  One of the key questions is COULD an investor have lived through the moves or might he/she has thrown in the towel at the bottom of the violent down move… not made any profit whatsoever (maybe even taken a loss) and then missed the ensuing up move.  Much of my work is based in how investors REALLY behave and offering them alternatives to the bad ideas of their own that they too often succumb.

My general advice to readers is forget about investment timing.

Spend your time understanding your time horizons instead and then select good value shares that fit into that logic.

Ask yourself.  How long before I need this money?  Will I need this money to produce income? If so when?

Finally, after you understand your time, control your investing space.   Set your targets of space.  The first space target is, how far can a share price fall before we sell?  The second space target is how far will we let the share rise before we set a stop loss?

Investors who focus their time on answerable questions about their investing time and space have greater safety, increased profit and less stress than those who engage in market timing.

Gary

Learn more about Dr. Richard Smith and how to use smart trailing stops here.

Or hear from Dr. Smith about Smart Trailing Stops at our October 17-18 Value Investing Seminar.

Gain From the Volatility of the Next Four Years

However America’s politics turn out, one thing is sure.  There will be volatility in stock markets during the next four years.

The first reason markets will bounce has nothing to do with politics or policies.   The market’s downward shift is simply due regardless of the party or the person in office.

Second the new politics will create an uncertain era. Everyone is shaken whether they are pleased with the election or not and nothing frightens markets like uncertainty.

Third we’ll see rising interest rates over the next 48 months. This will push markets down.

Despite these pitfalls, there is a way to profit using the downtrends  to pick up good value shares.

During nearly five decades of global investing I have noticed found that good value strategies increase through bull markets and bear, through good presidents and bad.  The steps to take are simple.

The first tactic is to seek safety before profit.

We can look at Warren Buffett’s investing strategy as an example.  Buffett success is talked about a lot, but rarely does anyone explain how he make so much money.  That was the fact until some researchers really stripped his operation bare.  They looked at everything and learned the deepest of Buffett’s wealth management secrets.  Fortunately they published all in a research paper at Yale University’s website. that reveals important truths about extending wealth.

This research shows that the stocks Buffett 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).

The second tactic is to maintain staying power.  At times Buffet’s portfolio has fallen, but he has been willing and able to wait long periods for the value to reveal itself and prices to recover.

keppler asset management chart

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 outperformance 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.

The Buffett strategy integrates time and value for safety and profit.

A third tactic is using limited leveraging, tactic in the strategy boosts profit.  Buffett leverages his portfolio at a ratio of approximately 1.6 to 1.   The Yale published research paper shows the leveraging methods used by Warren Buffett to amass his $50 billion fortune.  The researchers found that the returns from Buffett’s investment company, Berkshire Hathaway, far outweighed those achieved by any rival that has operated for 30 years or more.  The research shows that neither luck nor magic are involved.  Instead, the paper shows that Buffet’s success hinges on using leverage at the rate of 1.6.

To sum up the strategy, Buffet uses limited leverage to invest in large purchases of “cheap, safe, quality stocks”.   He limits leverage so he can hold on for very long periods of time, surviving rough periods where others might have been forced into a fire sale or a career shift.

Stated in another way buffet uses logic (buy good value) to have the conviction, wherewithal, and skill to invest with leverage over many decades.

What do we do when we are not Warren Buffett?

May I introduce the Purposeful Investing Course (Pi) for those who want to invest like Warren Buffet, but know they are not.  This course is based on my 50 (almost) years of investing experience combined with wisdom gained from some of the world’s best investment managers and economic mathematical scientists.

Enjoy Extending Wealth

Pi’s mission is to make it easy for anyone to create a three point strategy, like Buffett’s even though they do not have a lot of time for or knowledge about investing.

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.  One tactic as mentioned is 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, we enjoy the process more and are more likely to hold on during down times, when most poor investors panic and sell.

Slow, Worry Free, Good Value Investing

Stress, worry and fear are three of an investor’s worst enemies.  They create the Behavior Gap, a trait exhibited by most investors, that causes them to underperform any market sector they choose.  The behavior gap is created by natural human responses to fear.   Pi helps create profitable strategies that avoid losses from this gap.

Spanning the Behavior Gap

Behavior gaps are among the biggest reasons why so many investors fail.  Human evolution makes fear the second most powerful motivator.  (Greed is the third.)  Fear creates investment losses due to behavior gaps.  Fear motivates us more strongly than desire.  By nature investors are risk adverse.

Winning investors though embrace risk because they have a plan based on good value.

Purpose is the most powerful motivator,  stronger than fear and greed, so a strategy with purpose is the most powerful of all.

Combine your needs and capabilities with good value secrets and the math to back up your value selections through the Pifolio – The Pi Model Portfolio

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 (often created by someone with vested interests) and is based entirely on good math.

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 follow this research of a brilliant mathematician and have tracked this analysis for over 20 years.    This is a complete and continual study of international major and emerging stock markets.

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 matches this mathematical certainty with my fifty years of experience. This 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.  There is so much more to write and the trends are so clear that I have created a short, but powerful report “Three Currency Patterns For 50% Profits or More.”   This report shows how to earn an extra 50% from currency shifts with even small investments.  I kept the report short and simple, but included links to 153 pages of  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.

Leverage

Pi also explains when leverage provides extra potential without undo risk.  For example in 1986 I issued a report called “The Silver Dip” that showed how to borrow 12,000 British pounds (at almost 1.6 to 1 dollars per pound the loan created US$18,600) and use the loan to buy 3835 ounces of silver at around US$4.85 an ounce.

Silver had crashed, I mean really crashed from $48 per ounce.  As prices decreased from early 1983 into 1986, total supply had fallen to 449.7 million ounces in 1986.  Mine production was restricted by the low prices at this time, with silver reaching a low for this period of $4.85 in May 1986.  Secondary recovery also was constricted by these low prices.

Then silver’s price skyrocketed to over $11 an ounce within a year.  The $18,600 loan was now worth $42,185.

The loan was in pounds and in May 1986 the dollar pound rate was 1.55 dollars per pound.  So the 12,000 pound loan purchased $18,600 of silver.  The pound then crashed to 1.40 dollars per silver.  The loan could be paid off for $13,285 immediately creating an extra $5,314 profit.  The profit grew to $47,499 in just a year.

Conditions for the silver dip have returned.  The availability of low cost loans and silver are at an all time low.  The price of silver has crashed from nearly $50 an ounce to below $14 as did shares of the iShares Silver ETF (SLV).

silver chart

(Click on chart from Google.com  (1) to enlarge.)   Imagine investing in a spike like this… with leverage!

At the same time the silver gold ratio hit 80, a strong sign to invest in precious metals.

I have updated a special report “Silver Dip 2016” about a leveraged silver 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 gained through 30 years of speculating and investing in precious metals.  While working on the report, when the gold silver ratio slipped to 80 and the price of silver dropped below $14 an ounce, I knew I needed to share this immediately.

I released a new report “Silver Dip 2015” so readers were able to take advantage of these conditions and leverage 1.6 times as a speculation.  That report generated profits as high as 212% and a revised 2017 issue has been produced.

“The Silver Dip 2106”  sells for $39.95 but  you receive  “Silver Dip 2017” FREE when you subscribe to Pi.

Save

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 the $29.95 report “Three Currency Patterns For 50% Profits or More” and the $39.95 report “The Silver Dip 2017 free.

Triple Guarantee

Enroll in Pi.   Get the first monthly issue of Pi, and the report “Three Currency Patterns For 50% Profits or More” and “The Silver Dip 2016” right away.

#1:  I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free purposeful investing.

If you are not totally happy, simply let me know.

#2:  I guarantee you can cancel your subscription within 60 days and I’ll refund your subscription fee in full, no questions asked.

#3:  I guarantee you can keep “Three Currency Patterns For 50% Profits or More” and “The Silver Dip 2106” report as my thanks for trying.

You have nothing to lose except the fear.   You have the ultimate form of financial security to gain.

Subscribe to the Pi for $197.   You Save $158.95.

Gary

 

 

 


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