89% of all Investments Suffered


For the past 50 years I have been investing internationally and have watched six bear markets decimate millions of investors.

I’ve been asking myself about the 7th… bear market.  “How bad it will be?”

Yesterday, NASDAQ  entered bear territory (down 20% from high).  The Russell 2000 index, which tracks shares of smaller companies and seven of the S&P 500’s 11 industrial sectors are also now in a bear mode.

This should not be a surprise…  nothing keeps rising forever.

The question now is “how and where” to invest?  This answer is not so simple.

dow

The Dow Jones Industrial Index was down 16% from its October 2018 high.

The Dow Jones Industrial Index is also near a 20% correction.  That index has dropped 16.6% from its October high as of yesterday.

So the bear appears to be attacking every aspect of the US stock market.  So the “when” for  US shares may not be the best any time in the immediate future.

The problem of “where” is worse!

Research by Deutsche Bank recently indicated that 89% of all investment classes, in dollar terms, are suffering a loss in 2018.

2018 has not been a beauty for investors, even beyond the stock market.  That 89% figure makes this year the worst ever, for investments overall, since 1901.

A quick review of the previous six bear markets might help us understand what to do now.

The normal definition of a bear market is one where stock prices fall for a sustained period, dropping at least 20 percent from their peak.  Here are the six bears I have experienced previously and some of their implications.

November 1968 to May 1970
Duration: 18 months
S&P 500 loss: 36.1 percent

Rapid growth pushed inflation up into the 6-percent-a year range.  The President of the USA was unstable (Richard Nixon) and there was a groundswell change in attitudes toward the government dominated by public resistance to the growing U.S. involvement in Vietnam.

That first bear market I lived through was really a bull and a bear for me.  In May 1968, I moved to Hong Kong to sell US mutual funds to the Chinese.  That was a really bad short term move, getting investors into US stocks right before the bear.  My business nearly went broke!

The good news was that this was the beginning of  one of the greatest bull markets ever… in Hong Kong.  The Hang Seng  market index rose from 100 to over 18,000.  I switched focus from selling US shares to the Chinese to writing about Hong Kong shares to Americans.   My career was born.

January 1973 to October 1974
Loss: 48.0 percent
Duration: 21 months
S&P 500 loss: 48.0 percent

War in the Middle East (Yom Kippur War), volatile oil prices and the risk of a presidential impeachment all helped create a recession that caused a huge decline in the market.

This bear created an entire demographic cohort in America.  Boomers like me (born in mid 1940s) were promised the world and we got it.  Opportunity was rich in the late 1960s.  Boomers like my sister (born in mid 1950s) were promised the world, but the good times were taken away.  This segment of the population entered a job market that was bereft of opportunity.  The letdown changed how they lived and thought and they become known as Jonesers… “just Jonesn along”, with a yearning or craving for a fulfillment of their huge expectations

November 1980 to August 1982
Duration: 21 months
S&P 500 loss: 27.8 percent

Gosh I loved that bear.  Inflation was running double digits and the Federal Reserve under Volker raised the federal funds rate from 11.2% to 20% by June of 1981. This helped cause the 1980-1982 recession and a national unemployment rate of over 10%. The good news was that I was being paid 17% on my investments in major banks.

The bad news was that the borrowers who had to pay those high interest rates were seriously messed up and this stalled the economy and stock market.

August 1987 to December 1987
Duration: 3 months
Loss: 33.5 percent

This bear was created more by technology than economics. Computerized “program trading” was in its infancy and helped bring on the Black Monday crash of Oct. 19 when the Dow fell 22.6 percent.  This plunge, not seen since the Panic of 1914  added to fears of of a US dollar devaluation and led a short term bear.

March 2000 to October 2002
S&P 500 loss: 49.1 percent
Duration: 30 months

Technology again created this mess, but in a different way.  The shift to an internet world created a dot-com bubble that removed investors from their senses.  Stock prices on new Internet companies that had hardly any profits led to senseless market values. Often companies with no real history or profit were worth more than  established “old-economy” corporate giants.

October 2007 to March 2009
S&P 500 loss: 56.4 percent
Duration: 17 months

Bubbles that create a departure from price to profit common sense are usually the root of bear markets.  The bubble that created this bear was the housing bubble.  When house prices plunged and rising mortgage delinquency rates ruined both the stock and credit market.

I started gobbling up houses and I still like these investments (for me – but real estate is a personal thing) even better than shares.

Will this seventh bear in my career be a big, bad one?

Thee six bear stock markets I have lived through provide plenty of  lessons.

One lesson to heed now is about the risk when the share prices of new tech companies become totally unhinged from earnings and profit.  For example in 2017,  Tesla’s stock market cap value surpassed those of Ford and GM, making it the leading automobile company in terms of stock market price.  Really?

Almost every condition that led to previous recessions exists now.  There is an unpopular war in the Middle East, continual and rising political tension, Volatile oil prices, an overvalued US dollar.  Statistics do not show inflation yet, but any shopper knows that that’s an illusion and the reality of a tight employee market, embargoes and rising prices will soon set in.

All that’s missing are higher interest rates and these have been creeping upwards.

Most of all there has been soaring stock prices and exuberant speculation in “what’s new and in fashion”.

There are plenty of reasons why this bear market could be sustained and serious, but no one knows.   This could be a one month “Bear of 2018” or there might be a big bad bear that lasts into 2019 and perhaps beyond.

What we do know is that bear markets force investors to rethink their ideas about value.

The Time for Value is Near

Value investing has become a growing bargain during the dismal 2018.

ENR chart

It’s no secret that value-based equities in the United States and overseas have lagged their growth equities since 2009.

It’s unusual for value to lag growth this long (see above chart).

Value has badly trailed growth in this cycle for the same reason tech shares bubbled in 2000 and house prices bubbled in 2007.

The thundering herd had been caught in the mania of high tech and has ignored price to profit connections.

The recent declines in tech shares that are feeding this bear suggest that we’ll soon see a return to value.

In the short term there may be no good place to hide.   Low interest rates make cash investments pitiful and creates risk for investments in bonds.

Longer term, as with all bear markets I have watched… some really great equity bargains will appear.

bull bear chart

The chart above shows the US bull and bear stock markets since the 1920.

Regardless of what happens in the following months, history is clear… if we simply get in the market… hold on and do not bail out during bear markets… we come out ahead.

Personally I have been accumulating country ETFs that invest in good value markets and won’t change a thing, except invest in even more.  You can see why I maintain this simple, easy, low stress strategy below.

Only time will tell how deep, long or serious the new US stock market bear will be so don’t be stressed!  Enjoy the weekend and holidays and remember Warren Buffet’s take on stock market investing.

Buffett said: “To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life.  When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household.  When hamburgers go up in price, we weep.  For most people, it’s the same with everything in life they will be buying — except stocks.  When stocks go down and you can get more for your money, people don’t like them anymore.”

This is a holiday bear market that could bring some precious gifts of profit to those of us who are value investors.

Gary

The Only 3 Reasons to Invest

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The stock market has always been the best place of places to protect and increase wealth over the long haul.   Yet it’s also been the worst place to lose money, a lot of it, quickly.

There are only three reasons why we should invest.  We invest for income.  We invest to resell our investments for more than we had invested.  We invest to make our world a better place.

The goal of investing should be to stabilize our security, bring feelings of comfort and elimination of stress!

We should not invest for fun, excitement or to get rich quickly. We should not divest in a panic due to market corrections.

This is why my core stock portfolio consists of 19 shares and this position has hardly changed in three years.  During this time we have been steadily accumulating the same 19 shares and have traded only three times.

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This portfolio is built around a strategy that’s taught in my Purposeful Investing Course (Pi).  I call these shares my Pifolio.

This portfolio more or less matched the S&P 500 until May 2018.  Then a stronger US dollar made the portfolio look like it was falling behind.   This currency illusion creates a special opportunity we’ll view in a moment.

This portfolio above is based on stock price to value analysis built around 91 years of stock market data.

The value analysis is used to create a portfolio of MSCI Country Benchmark Index ETFs that cover  stock markets that are undervalued.  I have combined my 50 years of investing experience with the study of the mathematical market value analysis of Michael Keppler, CEO of Keppler Asset Management.

In my opinion, Keppler is one of the best market statisticians in the world.  Numerous very large fund managers use his analysis to manage over $2.5 billion of funds.  However because Keppler’s roots are in Germany (though he lives and operates from New York) and most of his funds registered for the European Union, Americans cannot normally access his data.

I was lucky to have crossed paths with Michael about 25 years ago, so I am one of the few Americans who receive this data and you will not find his information readily available in the US.

In a moment you’ll see how to remedy this fact.

The Pifolio analysis begins with Keppler’s research that continually monitors 46 stock markets and compares 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.  Then Keppler takes market’s history into account.

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Michael Kepler CEO Keppler Asset Management.

Michael’s analysis is rational, mathematical and does not cause worry about short term ups and downs.  Keppler’s strategy is to diversify into an equally weighted portfolio of the MSCI Indices of each good value (BUY) market.

This is an easy, simple and effective approach to zeroing in on value because little time, management and guesswork is required.  You are investing in a diversified portfolio of good value indices.

A BUY rating for an index does NOT imply that any one stock in that country is an attractive investment.  This eliminates the need for hours of research aimed at picking specific shares.  It is not appropriate or enough to instruct a stockbroker to simply select stocks in the BUY rated countries.  Investing in the index is like investing in all the shares in the index.  You save time because all you have to do is invest in the ETF to gain the profit potential of the entire market.

To achieve this goal of diversification the Pifolio consists of Country Index ETFs.

Country Index ETFs are similar to an index mutual fund but are shares normally traded on a major stock exchange that tracks an index of shares in a specific country.  ETFs do not try to beat the index they represent.  The management is passive and tries to emulate the performance of the index.

A country ETF provides diversification into a basket of equities in the country covered.  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.

Here is the Pifolio I personally held at the beginning of 2019.

70% is diversified into Keppler’s good value (BUY rated) developed markets: Australia, France, Germany, Hong Kong, Italy, Japan, Norway, Singapore, Spain and the United Kingdom.

30% of the Pifolio is invested in Keppler’s good value (BUY rated) emerging markets: Brazil, Chile, China, Colombia, the Czech Republic, South Korea, Malaysia and Taiwan.

iShares Country ETFs make it easy to invest in each of the MSCI indicies of the good value BUY markets.

For example, the iShares MSCI Australia (symbol EWA) is a Country Index ETF that tracks the investment results the Morgan Stanley Capital Index MSCI Australia Index which is composed mainly of large cap and small cap stocks traded primarily on the Australian Stock Exchange mainly of companies in consumer staples, financials and materials. This ETF is non-diversified outside of Australia.

iShares is owned by Black Rock, Inc. the world’s largest asset manager with over $4 trillion in assets under management.

There is an iShares country ETF for every market.

How you can create your own good value strategy.

I would like to send you, on a no risk basis, a 130 page basic training course that teaches the good value strategy I use.   I call this strategy Purposeful Investing (PI).  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 get this course when you enroll in our Purposeful Investing program (Pi) with a triple guarantee.

Triple Guarantee

Enroll in Pi.  Get the 130 page basic training, a 46 stock market value report, access to all the updates I have sent in the past three years, two more reports on investing (described below) and an 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, 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.

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 2018” 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