Be Prepared for Pension Risk


Prepare to embrace change in pensions.

I have been warning readers about an especially severe 30 year cycle shift (and how to profit instead of lose), since  January 28, 2015.  The forces have been building and history suggests that around this time, (there are always a few years of leeway) there will be an economic and stock market correction.

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Chart from unclassified OECD report on pensions. (1)

The correction will start when some trigger kicks off a wave of panic.  We never know what the trigger will be and it usually doesn’t even matter. The trigger is just a trigger that starts corrections of distortions that have been building for three decades.

When this next distortion breaks loose, which it will, the infrastructure we take for granted will change in ways we never thought possible.  This is not bad.

One likely trigger will be changes  in pensions.

According to the Financial Times, last year,  Angel Gurría, the OECD’s secretary-general, said: “Pension funds and life insurers are feeling the pressure to chase yield . . . and to pursue higher-risk investment strategies that could ultimately undermine their solvency.  Low interest rates have also caused problems for such funds because bond yields are used to calculate the value of their liabilities. When yields fall, the estimated value of their future liabilities increases. (2)

Detroit’s 2013 bankruptcy reminded investors that government’s local, state, national and international owe billions more than anyone knows, trillions actually.

This is a global problem as recent research by Citigroup found that governments across the developed world have promised much more than they can to current and future retirees.

This threatens the value of government bonds and the entire global economy.

Twenty countries of the OECD (the Organization for Economic Cooperation and Development is an international economic organization of 34 countries, founded to stimulate economic progress and world trade, democracy and market economies) have promised their retirees a total $78 trillion.  Much of this promise is unfunded.

That is almost double the $44 trillion total national debt of those 20 countries. These pension  obligations do not show up as obligations on government balance sheets.

The total global government debt may be three times larger than revealed. Numerous countries have promised more than they can deliver.  The real figures remain obscured because governments fear a decline in their credit rating which will increase the gap.

Many economists believe this will lead to a total collapse in society.

More likely than a sudden head-on collisions between bondholders and pensioners, there will be trading down.   National governments, states, provinces, counties, cities, school districts and other organizations cut services, raise taxes and pay pensions that have less purchasing power.

A New York Times article outlines how Citigroup used demographics to calculate the global buildup of overwhelming invisible pension obligations. (3)

There was a golden era after World War II.  A growth spurt promised the world to a young and growing population. This aging population is now stressing pension systems that have limited or no funding.

Aging populations mean that retirement systems no longer work.  There are not enough younger workers to support the retired.

This a global dilemma.  China now has seven workers to support every retiree. This number will fall to two workers per retiree over the next 30 years or so.  Japan will have even less, around one worker per retiree.

Some other seasoned investment publishers (whom I have worked with for over 30 years) tout the idea that all of our systems will be tightly controlled or closed: our bank accounts, credit cards, wire transfers, ATMs, even the internet could shut down.

These publishers say that stock markets will crash wildly out of control. They suggest that Social Security checks will be at risk. Gas stations will be shut but there won’t be much reason to drive anyway.  Everything we use on a daily basis will be hit.  A food supply shutdown will create shortages and closings of super markets and restaurants.

They also know that fear sells subscriptions.

However, I believe that the correction will be softer.  We’ll see many suffer a growing inequality of purchasing power instead of a complete and sudden shutdown.

There will still be money, still be gas (or some better form of energy), still be banks, still be food in the stores.  The quality could be lower and many won’t be able to buy as much.

On the other hand those who embrace the change will see much greater wealth and a happier richer healthier lifestyle.

This gradual loss of purchasing power means we still have time if we act, now.

There are some events we cannot predict or prepare for. Who saw the internet coming for example?  There is always something we don’t know so we often think in faulty ways by adding up everything that could go wrong without adding in the new technologies that can change everything.

This gives us a backwards looking view and leaves us unprepared to cash in on the next new thing.

I choose to spend my time making myself better and investing in value rather than worrying about a future that definitely will be different than imagined.

Gary

Join Merri, David and me over the next year to create a plan that benefits from change.

(1)  http://www.oecd.org unclassified official documents

(2) www.ft.co OECD Pensions

(3) www.nytimes.com 2016 study-finds-public-pension-promises-exceed-ability-to-pay

Make Safe More Profitable With the Silver Dip

May 2017 will be my 51st anniversary of being in the investment & finance business.  This is the 49th year since I started talking about international investing, (I started a Hong Kong mutual fund business in May 1968).

Since that time, my investing goals have been based around spotting contrasts and trends.

One current trend is that the valuations of US shares are dramatically overpriced  in every fundamental way.   The Morgan Stanley MSCI Index USA currently sells for 2.81 times book value, compared to the MSCI Europe Index that sells for 1.68 times book value.   The US PE Ratio is 21.2 versus 18.2 in Europe and the average US dividend yield is 2.15% versus 3.69% in Europe.  Shares in Europe on average are a far a better value.

When you use a long time dimension and diversify correctly, investing in value such as this has always created the highest profits and greatest safety.

I use this strategy because using a value strategy also takes the least work and has the lowest stress!

Then I look for ways to add spice and extra profit short term distortions.

For example in 2015 I spotted two distortions.  They were contrasts that  had reaped huge rewards for me and many of my readers 30 years ago.  I quickly issued two reports, one for each trend.  After a  year one of the distortions has already returned 210.58% in the last year.

A new contrast has even more potential in 2017.

One of the reports released, “Silver Dip 2015” looked at potential profits in silver because when the US stock market falls, the price of gold and silver rise.  I have been a gold bug for almost 50 years and spotted this fact long ago.

The “Silver Dip 2016” report reviewed a way to profit from silver and gold because of a mathematical, historical fact.  When the silver/gold ratio rises over 80, silver is more likely to rise than gold.  That ratio is even higher now than it was in 2015 so silver may not create the extraordinary profits this year.

The “Silver Dip 2017” offers a new ideal speculation.

The second distortion, explained below, has greater long term potential and all but guarantees short term profits in gold, silver and the currenct hot speculation.

There is no question that a long term correction is coming.  Only the full timing can be in doubt.  The question we must ask is, “Could the big break come in 2017 and could it break upon us right now?”  The answer is “Yes”.  When the bubble bursts, it can cause the perfect economic storm that makes a few investors, who are ready, rich.

I have been warning readers about this stock market correction (and how to profit instead of lose), since  January 28, 2015.

Zero interest is the sucker punch that can devastate millions of investors.  This is a Ponzi scheme where governments rob money from the future and spend it badly in the here and now.  Each downward economic wave of the last 30 years has created a larger mountain of debt that brings the world closer to an economy where there is no more future money to steal.  The only way governments can afford to borrow more is to take it for nothing.  That’s zero interest.  In worst case scenarios, governments can charge you to borrow your own money.  In Europe some bonds now have negative interest.

shouldn’t pay us anything.  Even worse they could charge a negative interest rate on our bank accounts and lock our money into the system.  The alternative is to invest in a risky, over priced stock market and morbidly weak currency.

Over priced stocks and an over priced US dollar are the third sucker punch!

To date we have been able at least to choose where and in what currencies we invest.  This is where we encounter the one-two-three punch.  The zero or negative interest rate destroys the purchasing power of our savings.  Capital controls lock us into a weak currency or market so we cannot take profits or protect our purchasing power from this inflation and currency loss.

Our savings, pensions and wealth can be floored by a combination of a falling stock market, crashing US dollar and inflation.

The purchasing power of the US dollar will fall.   Trading down is working in many ways.  Even if  pensions can pay what they have promised, the money in dollars won’t buy as much.  Coffee isn’t free with meals.  Many ordinary foods (tomatoes, peppers, almonds and walnuts as an example) and yes, maple syrup become luxuries.

Social Security won’t be as useful either, if it is paid at all.  Could Social Security really default?  The answer is “Yes, it could”.  An October 8, 2013 Reuters article at finance.yahoo said:  “President Barack Obama warned last week that Social Security benefits might not go out ‘on time’ if Congress does not raise the debt ceiling.  Should seniors and disabled Americans really be worried about their benefits if the U.S. government runs out of borrowing capacity later this month?  The answer is YES.”

I can make these predictions based on 30 year trends because I have been writing and teaching global investing for almost 50 years.  Long term experience helps me spot distortions and cycles that have been building for even as long as 30 years.   This experience has helped me steer my readers in the right direction again and again.

I invite you to join me and a small selective group who for the next year will participate in an intensive program called the Purposeful investing Course (Pi). The purpose of Pi is finding value to protect our savings, pensions, income and wealth from these two devastating economic conditions.

I’ve been watching this 30 year distortion take shape and believe that 2017 could very well be the year of a huge shift.

Slow, Worry Free, Good Value Investing

Stress, worry and fear are three of an investor’s worst enemies.  They 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 (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 into 2018 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.

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

I updated the special report now “Silver Dip 2017” about a 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 my 30 years of experience speculating and investing in gold and silver.

The low price of one commodity offers special value now so I want to send you this report because the “Silver Dip 2017” reveals how to gain enormous profit potential in the year ahead.

Save $428.95 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 $27  report “Silver Dip 2015” and our latest $297 online Value Investing Seminar for a total savings of $428.95.

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 online Value Investing Seminar 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 “Silver Dip 2015” plus the Value Investing Seminar as my thanks for trying.

You have nothing to lose except the fear.   You gain the ultimate form of financial security as you reduce risk and increase profit potential.

Subscribe to a Pi annual subscription for $197 and receive all the above.

Gary