Risks of the Other Riots


What will it take to bring the US stock market down?

Looking at risks in the US economy is not enough.  Looking at any one economy is too narrow a view. We live in a global economy.

www.weforum.org

Image from www.weforum.org

Take for example the US trade with China.  Tariffs and a weaker US dollar make US goods more competitive abroad, but makes all the products that we buy from the other 75.26% of the global economy more expensive!

There is a bigger problem that goes beyond economics.

When a nation has economic hardships, the leaders of the nation always blame someone else.  This can shift global economic concerns into dilemmas of war.  Drastic economies lead to military problems.  They always have and always will.

One bigger problem is in Russia.

Russia’s economy is suffering.  This has led to riots as the NYT.com article “Moscow Police Arrest More Than 1,300 at Election Protest” explains.

The protest was the latest in a series of street demonstrations as economic hardship has dented President Vladimir V. Putin’s approval ratings.

The protest, which not authorized by the government, was the latest in a series of street demonstrations staged as President Vladimir V. Putin’s approval ratings have dipped amid economic hardship.

A likely result will be increased tensions between Russia and Europe, more interference in Western elections and greater nuclear risks.

An even bigger problem in China.

China’s economy has also slowed down which is creating considerable internal tension.

The most obvious manifestation of China’s internal struggle is shown in the NYT.com article “Clashes and Tear Gas as Hong Kong Police Confront Protesters in Yuen Long”.

After firing multiple rounds of tear gas, riot police officers on Saturday briefly clashed with protesters inside the same Hong Kong train station where an armed mob had attacked demonstrators last weekend.

The wave of protests sweeping Hong Kong began in early June and has targeted draft legislation, since shelved, that would have allowed extraditions to mainland China. The demands have since grown to include broader democracy and an independent investigation into accusations that the police used excessive force against demonstrators.

The Chinese internal struggles have already led to growing military tension with the US.

wsj.com

This image is from the NYT.com article  “China Reacts to Trade Tariffs and Hong Kong Protests by Blaming U.S.”

Chinese officials and news outlets have accused the United States of being behind the protests in Hong Kong.

A popular news anchor watched by hundreds of millions of Chinese poured scorn on the United States, using an obscenity to accuse it of sowing chaos. A prominent official blamed Washington directly for the antigovernment protests upending Hong Kong.

Pointed hostility toward America, voiced by Chinese officials and state-run news organizations under the control of an all-powerful propaganda department, has escalated in recent weeks in tandem with two of China’s big problems: a slowing economy complicated by trade tensions and turbulence in Hong Kong that has no end in sight.

As nations spiral downwards from negotiation and diplomacy into threats, the chances of accidents grow and increase the downward spiral.  Businesses and investors understand these realities of social economics and  become uncertain.

Uncertainty is any markets greatest threat and the NYT.com article “Spiraling Trade Tensions Threaten Economy as Trump Pressures China” shows that the market is reacting now.

Global trade tensions escalated this week as the United States renewed its tariff war with China, sending major stock indexes tumbling as fears of an economic slowdown rattled investors around the world.

The S&P 500 index had its worst week of trading this year, as shares on exchanges from Tokyo to London fell on Friday — one day after President Trump announced new tariffs on another $300 billion worth of Chinese imports following stalled negotiations. Beijing’s response was swift.

“China’s position is very clear that if U.S. wishes to talk, then we will talk,” Zhang Jun, China’s new ambassador to the United Nations, said Friday. “If they want to fight, then we will fight.”

As the two sides appeared to drift further from a deal, Japan and South Korea veered toward their own trade confrontation on Friday, injecting greater uncertainty into the region.

The reverse can be true.  If China and the US suddenly announce a new trade deal… the US stock market could explode upwards.  The existing trade tensions are creating and will continue to create inflation.  The main way to combat this is by investing in equities.  Those are positive factors that could cause US (and other) stocks markets to continue to climb.

Know one knows how these tensions are going to release… in negotiation and better deals or greater military tension and even war.

What we do know is that tension is high, almost everywhere and many stock markets, especially the US, are already a poor value with high prices and low dividend yields.

This is why it’s more important than ever to invest in good value.  See how below.

Gary

The Only 3 Reasons to Invest

garyheadshot

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.

A model portfolio that dates back to 1969 has dramatically outperformed almost every stock market in the world.

https://www.flickr.com/photos/garyascott/50454088533/in/dateposted-public/

A hundred US dollars invested in that portfolio in 1969 is now worth $44833 compared to $100 invested in an equity weighted world index being worth $11,548.

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.

Fwd: keppler

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 2020.   There have been no changes since.

70% is diversified into Keppler’s good value (BUY rated) developed markets: China, 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, Colombia, 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 Germany (symbol EWG) is a Country Index ETF  that tracks the investment results of the MSCI Germany Index. The fund is at all times invested at least 80% of its assets in the securities of its underlying index that primarily consists of all the large-and mid-capitalization companies traded on the Frankfurt Stock Exchange.

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 in our Pifolio.

This year I celebrated my 52nd 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.

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.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.

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.

keppler

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.

Save $102 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.

Triple Guarantee

Enroll in Pi.  Get the basic training, the 46 market value report, access to all the updates of the past two years,  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 reports 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, 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 $99 a year from now, but you can cancel at any time.

Gary

(1) www.nytimes.com/2019/07/27/world/europe/moscow-protest-election-russia.html?nl=todaysheadlines&emc=edit_th_190728?campaign_id=2&instance_id=11106&segment_id=15626&user_id=208b2cbe62eb7b536babab791d172bc7&regi_id=483172790728

(2)  www.nytimes.com/2019/07/27/world/asia/hong-kong-protests.html?nl=todaysheadlines&emc=edit_th_190728?campaign_id=2&instance_id=11106&segment_id=15626&user_id=208b2cbe62eb7b536babab791d172bc7&regi_id=483172790728

(3) www.nytimes.com/2019/08/02/world/asia/china-trump.html?nl=todaysheadlines&emc=edit_th_190803?campaign_id=2&instance_id=11317&segment_id=15843&user_id=208b2cbe62eb7b536babab791d172bc7&regi_id=483172790803

(4) www.nytimes.com/2019/08/02/business/economy/china-us-trade-threats.html?nl=todaysheadlines&emc=edit_th_190803?campaign_id=2&instance_id=11317&segment_id=15843&user_id=208b2cbe62eb7b536babab791d172bc7&regi_id=483172790803