Worst Pension Problems of All


What’s one of the worst pension problems of the world?   Developed economies offer pensions based on emerging market assumptions.

When emerging economies emerge they enjoy a rapid growth spurt.  Labor costs are low.  Regulations are few.   Farmers moving from the land to the factory need little training and offer one of the cheapest boosts in productivity of all.  Small business people work day and night.  Safety, fair wages and the health of workers are not prime factors.  Survival is the key. Low wages and poor conditions are better than starvation, which is the worst condition of all.

A middle class forms. Workers gain some political clout, demand more (as they should) and their children move into higher level careers.  Costs and the time required to prepare the population for the workplace rise.  Some money has to be set aside for the portion of the work force that does not step up to the next level.  Growth slows.

If the economy gets it right, some new technology and new way to produce and live and cooperate comes along; electricity, the steam engine, the car, radio, TV, computer internet and so forth.  Each product creates new productivity and a new market and even developed economies surge ahead from the making and buying of the innovation.

In between each great innovation, there is a transition stage where economic growth stagnates:  the people, government and industry try to stimulate growth in artificial ways and when this does not work, they panic as a whole and become risk-averse.

During the emerging stage of an economy, the option for poor people is to put in full effort, or die or live a life too miserable to contemplate.  Developed economies in a transition stage have some fat available, some capital to hold onto and fight over the way its shared.

The developed Western economies are in eras of transition.  There is plenty of innovation,  artificial intelligence, gene therapy, robotics and software apps.   But almost all of it is incremental innovation, not revolutionary and none of this brings better standards of  living for the majority.

For example, driverless cars are an incremental innovation integrating cars and computers.  This innovation can free hundreds of thousands from having to work as drivers.  But what will those who were the drivers do?  A few will become richer, Tesla, Uber and such will make billions.  Maybe the economic numbers will even rise.  Yet a higher portion of the population will be poorer.

The car on the other hand was a revolutionary innovation.  This replaced the horse and buggy, but every horse and buggy driver could become a car driver and everyone who had access to a car could go further, carry more, reach new markets, etc.  The majority became richer.

Economies grow by helping workers labor more effectively.  When changes help everyone work together to produce more, the total factor productivity rises.  The majority profit.  The total factor productivity is the real factor behind a nation’s economic growth.  The growth peaked in the US in the 1950s at a rate of 3.4% a year as technology such as electricity, aviation and antibiotics worked their way into the mainstream.

“Total factor productivity” has steadily slowed since the 1950s and in the last ten years has averaged about half a percent.

A Wall Street Journal Article “The Economy’s Hidden Problem: We are Out of Big Ideas” points out why the standard of living for the majority has stagnated.  “Outside of personal technology, improvements in everyday life have been incremental, not revolutionary.  Houses, appliances and cars look much like they did a generation ago.  Airplanes fly no faster than in the 1960s.  None of the 20 most-prescribed drugs in the U.S. came to market in the past decade.”

Until the next big technological advance comes along, economic stagnation is likely to continue.

The global economy continues to grow.  There are more people making and consuming more products and services, but that growth has slowed down to the point that those who have not advanced technologically do not get a big enough slice of the pie to be satisfied.  Even without any great new thing, the developed world has still created incredible riches over the past half century.  The global economy has more than doubled.  Yet a huge portion of  the developed workforce has had almost no growth in real income.   Slow growth in developed countries has been the norm for decades.  This has caused the workforce and voters to be unhappy.

One way politicians and big businesses quell this discontent is by promising future benefits, without creating a way to actually delivering them.  Pensions and Social Security are prime examples.

For example Calpers, (California Public Employees’ Retirement System) the largest pension in the U.S, promises future benefits based on the calculation that it will earn 7.5% on its investments each year.   Last year it earned only 2.4%.

Calpers is reducing this 7.5% expected rate 7.5% with a goal to ultimately reduce the rate to 6.5%, although that could take decades.  The rate was already reduced from 7.75% after a disappointing 1% gain in 2011.

The problem is that even 6.5% will be too high unless some revolutionary innovation comes along.

This puts politicians and businesses between a rock and a hard spot because lower investment returns for future benefits mean greater contributions are required now.  Government costs and taxes increase or there is a reduction in government services.  Businesses are forced to increase pension funding or reduce promises of future benefits that are offered to workers.

Social Security is in the same boat.  Even before the new federal administration takes office the chairman of the House Social Security subcommittee, has introduced a 54-page bill, “Social Security Reform Act of 2016”, that would slash Social Security benefits for all but the very poorest beneficiaries.  The bill helps the lower level earners in some ways by eliminating the retirement earnings test so its easier to double-dip wages and Social Security benefits.  Minimum benefits for those who worked their lives through with low wages would also be increased.

Yet there are many downsides for those on the lower side of earnings and wealth.  The retirement age would be raised to 69.  Cost-of-living adjustments would be cut.  Taxes that high earners now pay on a portion of their benefits would even be cut.  In other words, higher earners would benefit.  The poorer segment of the economy would also be far more vulnerable to most government’s biggest trick:  inflation.  More dollars promised for the future, but those dollars when delivered buy less.

Unfunded promises made in years past with overly optimistic promises have sold the future short.   The future is here and now and the purchasing power of pensions and Social Security are deteriorating.   Many investors, economists, politicians and leaders are confused.  The slow growth has angered much of the public.

We can profit from this fact because most people don’t realize that this is the norm.   Since the 1800s, the industrialization of the world has risen in 30 year fits and starts in a “Cycle of War”.

The “Cycle of War” begins when there is a conflict of such urgency that all concepts of return on investment are thrown out the window.  Huge resources are thrown at refining new technology to help win the struggle.   After the war, the technology shifts from military to domestic use and great increases of productivity are gained.  The productivity leads to new fortunes and starts an economic bubble.  The bubble overextends and bursts.  The burst leads to economic stress and new struggles.  Once again R&D accelerates and leads to new and refined technology.

Fwd: dji-chart tgas:"2011-12-17"

We can see the “Cycles of War” by looking at this chart of the Dow Jones Industrial Index.  WWI, WWII, and the Cold War (Reagan and Thatcher fighting the Evil Empire) could be called War III.

The chart below suggests that the cycle is out of whack, with the Dow nearing 20,000.  Perhaps low interest rates or worries about the Middle East, China, Europe. The yuan and euro leave investors with fewer options than the US stock market.  If so and if the theory is still relevant, we’ll see a sharper than normal correction.

 

stock chart

Logic dictates that we should ask, “When and where is the next war?”  An even more important question, “What new technology which changes everything will emerge?”

The thrust of the next war might have to do with cyber security and communications.   If so, we can see skirmishes heating up from the hacking of political emails, theft of a billion Yahoo accounts and viruses in NSA code.

The reality is we cannot know what war will erupt.  We have even less chance of  guessing what the next revolutionary innovation will be.  Startup investors protect against this by investing a little in many innovators, expecting to lose on most but win big on a few.  Venture investors who bet on Compaq, Commodore, Burroughs, Control Data, Honeywell, Netscape, Origin Systems, Sirius Software, Apple and Microsoft, may have had an 80% failure but probably did well overall because of the two winners in the portfolio.

This type of investing suits some investors well.  A little of such speculation may be good for most investors.  Mostly, though, we should protect our wealth and savings beyond our pensions and Social Security with slow moving, low cost, highly diversified good value investments.

The simplest such investment is a single global equity ETF such as the Vanguard Total World Stock ETF (VT).  If you seek a balance to US investments, the Vanguard FTSE All-World ex-US ETF (symbol VEU) invests only in 2,537 non US shares.  VEU is huge ($24.6 billion under management) and has a really low expense ratio of 0.13%, 88% lower than the average expense ratio of funds with similar holdings.

Pensions and Social Security may not be enough to secure a future.  Unfunded promises based on unrealistic growth are subject to reduced purchasing power.  Whichever approach you take to securing your future, look beyond the promises and put your trust in value rather than political promises.

Gary

See how I diversify in slow moving, low cost, highly diversified good value investments with Pi.

Investing Beyond the Boom

Warren Buffet once warned against the Cinderella effect.

He said “Don’t be fooled by that Cinderella feeling you get from great returns.  Nothing sedates rationality like large doses of effortless money.  After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball.  They know the party must end but nevertheless hate to miss a single minute of what is one helluva party.  Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.”

Cinderella may have lost a shoe when she fled the party to meet a midnight curfew.  We can lose much more when we rush from a crashing stock market.

Most investors face emotional dangers that build in rising markets.

Almost everyone feels good.

But the clock of economic reckoning is ticking.

No wants to see it.  Nothing rises forever and especially… not everything at the same time.

Yet no one wants to leave the party until the end.

But many edge closer to the door.

When the clock chimes there could be a stampede even though leaving in a hurry may be the worst way to go.

Here are seven steps that can help avoid this risk.

  • Choose investments based on markets instead of shares.
  • Diversify based on value.
  • Rely on financial information rather than economic news.
  • Keep investing simple.
  • Keep investing costs low.
  • Trade as little as possible.
  • Make the decision process during panics automatic.

One strategy is to invest in country ETFs that easily provide diversified, risk-controlled investments in countries with stock markets of good value.  These ETFs provide an easy, simple and effective approach to zeroing in on value.  Little management and less guesswork is required.  The expense ratios for most ETFs are lower than those of the average mutual funds.  Plus a single country ETF provides diversification equal to investing in dozens, even hundreds of shares.

A minimum of knowledge, time, management or guesswork are required.

The importance of…

easy…

transparent…

and inexpensive. 

Keeping investing simple is one of the most valuable, but least looked at, ways to avoid disaster.  Simple and easy investing saves time.  How much is your time worth?  Simple investing costs less and avoids fast decisions during stressful times in complex situations where we are most likely to get it wrong.

Fear, regret and greed are an investor’s chief problem.  Human nature causes  investors to sell winners too soon, and hold losers too long.

Easy to use, low cost, mathematically based habits and routines help protect against negative emotions and impulse investing.

Take control of your investing.  Make decisions based on data and discipline, not gut feelings.  The Purposeful investing Course (Pi) teaches math based, low cost ways to diversify in good value markets and in ETFs  that cover these markets.  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 With Pi

Pi’s mission is to make it easy for anyone to have a strategy and tactics that continually maintain safety and turn market turmoil into extra profit.

One secret is to invest with a purpose beyond the immediate returns.  This helps create faith in a strategy that adds stickiness to the plan.

Another tactic is to invest with enough staying power so you’re never caught short.

Never have to sell depressed assets during periods of loss.

Lessons from Pi are based on the creation and management of Model Portfolios, called Pifolios.

The success of Pifolios is based on ignoring economic news (often created by someone with vested interests) and using financial math that reveals deeper economic truths.

One Pifolio covers all the good value developed markets.  Another covers the emerging good value markets.

The Pifolio analysis begins with a continual research of 46 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

This is a complete and continual study of almost all the developed major and emerging stock markets.

This mathematical 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.

Learn how to invest like a pro from the inside out.

At the beginning of 2019 my personal Pifolio is based on select ETFs in the Keppler Developed and Emerging markets.  My Pifolio is invested in Country ETFs that cover seven developed and three emerging markets:

Norway
Australia
Hong Kong
Germany
Japan
Singapore
United Kingdom
Taiwan
South Korea
China

Don’t give up profit to gain ease and safety!

Regardless of economic news, these markets represent good value and have been chosen based on four pillars of valuation.

  • Absolute Valuation
  • Relative Valuation
  • Current versus Historic Valuation
  • Current Relative versus Relative Historic Valuation

When you subscribe to Pi, you immediately receive a 120 page basic training course that teaches the Pi Strategy.   You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.

You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last two years.  Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.

Included in the basic training is an additional 120 page PDF value analysis of 46 stock markets (23 developed markets and 23 emerging stock markets).  This analysis looks at the price to book, price to earnings, average yield and much more.

You also receive two special reports.

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!

30 years ago, the US 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 in this special offer, you 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 2019” free.

With investors watching global stock markets bounce up and down, many missed two really important profit generating events over the last two years.  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, compared to a ratio of 230 only two years before.

In September 2015, I prepared a special report “Silver Dip 2015” about a silver speculation, leveraged with a British pound loan, that could increase the returns in a safe portfolio by as much as eight times.  The tactics described in that report generated 62.48% profit in just nine months.

I have updated this report and added how to use the Silver Dip Strategy with platinum.   The “Silver Dip 2019” report shares the latest in a series of long term lessons gained through 40 years of speculating and investing in precious metals.  I released the 2015 report, when the gold silver ratio slipped to 80.  The ratio has corrected and that profit has been taken and now a new precious metals dip has emerged.

I have prepared a new special report “Silver Dip 2019” about a leveraged speculation that can increase the returns in a safe portfolio by as much as eight times.

You also learn from the Value Investing Seminar, our premier course, that we have been conducting for over 30 years.  Tens of thousands of delegates have paid up to $999 to attend.  Now you can join the seminar online FREE in this special offer.

This three day course is available in sessions that are 10 to 20 minutes long for easy, convenient learning.   You can listen to each session any time and as often as you desire.

The sooner you hear what I have to say about current markets, the better you’ll be able to cash in on perhaps the best investing opportunity since 1982.

seminars

Tens of thousands have paid up to $999 to attend.

This year I celebrated my 51st anniversary 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.

stock-Charts

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.

The chart above shows the war – stock market cycle.  Military struggles (like the Civil War, WWI, WWII and the Cold War: WW III) 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.

Use time not timing.

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.

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%.

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.

The online seminar also reveals  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 this test.

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, but online the seminar is $297.

In this special offer, you can get this online seminar FREE when you subscribe to our Personal investing Course.

Save $468.90 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 2019” and our latest $297 online seminar for a total savings of $468.90.

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Triple Guarantee

Enroll in Pi.  Get the basic training, the 46 market value report, access to all the updates of the past two years, the two reports and the 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, easy diversified 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:  You can keep the two reports and 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 Pi now, get the 130 page basic training, the 120 page 46 market value analysis, access to over 100 previous Pifolio updates, the “Silver Dip 2019” and “Three Currency Patterns For 50% Profits or More” reports, and value investment seminar, plus begin receiving regular Pifolio updates throughout the year.

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

Your subscription will be charged $299 a year from now, but you can cancel at any time.

Gary