Inflation Rips


RIP… Boomer pensions, investments and savings. 

But we cannot.  Boomers cannot rest because inflation is about the rip.

Numerous messages at this site have warned about the fact that the “lies, damn lies and statistics” reality has been in effect for some time.   Inflation, for a large part of the population, is much higher than statistics show.

Anyone who shops for their own food (as I do) can attest to this fact.

Now even the Fed is admitting this truth and also admitting that there is nothing they can do about it.

In a monetary world gone crazy, the Federal Reserve Bank, as much as many may hate it, was the last line of defense against irresponsible politicians who create inflation.

pixabay

There has been a lot of inflation in the products and services that matter most to a majority of society, such as food and housing, even though this monetary reality has been tamped down in several ways.

First statistics have been manipulated to make it look like there is less inflation. For example if steak became more expensive for the common man, it was replaced in the Cost-of-Living index with hamburger or some lower cost alternative.

This creates life style erosion inflation. Prices do not rise so much.  Choices just become more limited or quality drops.  We can live for the same price… just not as well.

Second, we gained an enormous productivity bump with cell phones and the internet. Inflation comes when money supply expands past productivity… so this bump helped keep costs down… but again we paid a price in loss of freedom. When the phone was tied to a cord, an was free. Now wherever we go… whenever… work can get in touch.

Third, energy costs dropped due to shale oil recovery tactics.

A “Peak Oil” crisis that would push energy prices into higher zones did not  appear.  Instead the US reclaimed its position as a major oil producer and  even exporter of oil.   This is terrible for the environment in the long term and we’ll probably pay huge prices down the road… but for now, this helped temper inflation.

Fourth, the 2009, 2010 quantitative easing helped businesses keep going and prepare for the greatest economic boom we have every seen.  This surge in wealth was fueled by the transition from a wired, physical reality to an cloud based, virtual reality led by tech companies like Amazon, Facebook, Google, Apple, etc.

Fifth the way employers hire morphed drastically.   The man in the grey flannel suit is gone!  During the last decade Amazon.com became the 2nd largest employer on earth chasing after Walmart, the largest.  This was a signal of a huge social economic transition, but one of the biggest inflation fighting difference is the way Amazon and WalMart (and other tech companies employee people… without pensions…. without health care…. without job security… as part time workers.

This new hiring technology and the gig economy lowers the cost of living, at the price of income and wealth equality.  The few get richer as more move towards the poverty line. This may be why the “Black Lives Matter” demonstrations and riots have so many white supporters in places like Portland Oregon where only 6% of the population is black.

The unrest is more about growing wealth inequality in all races, rather than cultural inequality.

Sixth, the gig economy, AIRBNB and Uber are great examples, shifted trillions of dollars in
homes and cars and other personal assets into commercial assets.  AIRBNB for example added over a million hotel rooms into the world without a penny of construction investment.  Uber likewise created an incredible global fleet without spending a penny on automobiles. Think about what these additions did to keep hotel and taxi costs down. These are hug anti inflation events.

Seventh the Fed kept interest rates low so businesses could produce products and services for less.  Regretfully these low rates also let politicians borrow wantonly so they could push now problems into the future and accumulate huge piles of government debt.

Many of these one time inflation dampening events have taken place. There is not much left to stop runaway inflation.  The Fed’s ability to raise interest rates is (or rather was) the last line of inflationary defense.

The Wall Street Journal article , “Fed Weighs Abandoning Pre-Emptive Rate Moves to Curb Inflation”, (1) shows that even this protection is now gone.

The article says: Central bankers look to change long-running strategy to encourage lower rates, shift unemployment-inflation dynamic.

The Federal Reserve is preparing to effectively abandon its strategy of pre-emptively lifting interest rates to head off higher inflation, a practice it has followed for more than three decades.

Instead, Fed officials would take a more relaxed view by allowing for periods in which inflation would run slightly above the central bank’s 2% target, to make up for past episodes in which inflation ran below the target.

“It would be a significant change in terms of how they are thinking about” the trade-off between employment and inflation, said Jan Hatzius of Goldman Sachs. “A lot of those things look very different now from the way they looked a few years ago,” he said.

The change being contemplated now is a way of essentially telling markets that rates will stay low for a very long time. Markets have likely already picked up on this change, given the continued declines in long-term interest rates.

The Fed formally adopted the 2% inflation goal, a level it regards as consistent with healthy economic growth, in 2012. At the time, short-term rates also were pinned near zero. But central bankers, economists and investors still expected those rates to return to more normal levels of 4% or so once the economic expansion matured.

Inflation and low interest rates will help stock markets remain strong.  This is good for investors, if they have time to let their investments grow.

The US stock market is likely to see the “2020 Decade” as one of high volatility.  Investors who have to draw on their  investments for income are at risk of loss if they have to draw down on their investments during times of market correction.

One answer to this problem is to invest in equities that fight inflation and pay higher dividends.

Gary

Add Safety & Get Paid 154% More

Get paid more now!

Current markets have turned economic history upside down.  Normally bonds pay the highest interest rates and add safety to a portfolio.  Not right now.

This chart from the New York Times article “The Mystery of High Stock Prices” (1) shows that equities pay a higher yield than bonds.

wsj.com

Most Important, Get Paid the Most Now!

Just because US stocks pay more than dollar denominated bonds, does not mean they offer the best income deal.  In fact the chart below shows that US shares pay one of the lousiest yields of the 46 stock markets we monitor around the world.

The US MSCI Index pays a modest 1.91%.  That’s a terrible yield, but better than the 1.6% you can get in AA rated corporate bonds.

Nine solid, top value stock markets (shown below) not only add diversification and the best long term profit potential, they pay 71% higher yield, 3.27% compared to the US yield of 1.91%.

This is why my core stock portfolio consists of a handful of top value share ETFs and this position has hardly changed in five years. 

Let me explain why this strategy adds safety, increases long term appreciation potential and pays almost double short term income right now.

In a moment, I’ll show how to push that yield to 4.07% per annum without adding additional risk.

keppler62020

During the past five years, I have been steadily accumulating the same good value ETFs.  I have traded only three times, so my trading costs, my fuss, fiddle and time spent have been kept to an absolute minimum.

I have been investing in iShare country ETFs.  Each one invests in the MSCI Index of one of the top (or neutral in the case of Canada and Australia) value markets above.

My strategy protects against stock market volatility and yet has potential for the best gains long term from rising share prices by holding an equally weighted portfolio of the best value based country ETFs.

The Purposeful Investing Course tracks 46 stock markets around the world into determine which markets offer the best value.

Since no one knows what the future will bring, investing in value makes the most long term sense.

Plus Value ETFs are Safer

The people who dominate stock markets include a pack of thieves.  This fact has always been true.  We were recently reminded of this fact when Wirecard AG, one of Europe’s most prestigious companies, listed on Germany’s premier stock-market index, the Dax 30 fooled everyone including its top grade, longtime auditor, Ernst & Young GMBH.

The shares in German fintech company Wirecard AG (symbol WDI fell 63.74% as it filed for insolvency proceedings, after revealing that more than $2 billion in cash missing from its balance sheet was all a fraud.  The company’s market value fell to less than €500 million from almost €13 billion in a week.

Investors have seen this type of rip off again and again, really big scams from Enron to Bernie Madoff and these are just the tip of the iceberg.

Shares in stock markets are manipulated all the time.  Stock markets (in fact almost all types of markets) are led by sharks plain and simple.  Count on this fact.  This is the nature of the beast and the number one goal of many big businesses is to take as much of your money as they can to line their pockets.

In the Wirecard AG example many  thousands of investors have seen their hard work, their thrift, their security and hopes for the future disappear, even though they seemingly did everything right by investing in a blue chip, new era, high tech company.

A study of 92 years of investment returns shows that, despite the fraud and cheating and deceit, stock markets are still a good way to make your money grow… if you invest long term and diversify.

keppler

Our Pi strategy makes it harder for cheaters to grab your wealth because it’s very hard to manipulate an entire stock market, much less a dozen or so stock markets around the world.

Manipulators have a hard time tricking an entire market, especially larger markets.  If you get the best value country ETFs, your chances of long term profits improve.

Our Purposeful Investing Course (Pi) teaches an 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.

Sticking to math based stock market value and country ETFs eliminates the need for hours of research aimed at picking specific shares.   Investing in an index is like investing in all the major shares of the market.  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 Pi portfolio consists of iShare Country Index ETFs managed by Black Rock, Inc.

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.

I am updating my plan to increase my average yield to as much as 4.07%.

My developed market portfolio has been diversified into nine developed markets: Austria, Germany, Hong Kong, Italy, Japan, Norway, Singapore, Spain and the United Kingdom.

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

The average yield of these nine markets combined was 3.27% as of June 2020.  By replacing the three lowest yielding markets, Austria (.64%), Germany (1.83%)  and Japan (2.51%)  with two better yielding neutral markets Australia (4.57%) and Canada (3.54%) the average annual yield on the entire portfolio rises to 4.07%.

4.07% is 154% higher than the 1.6% you can currently earn on AA rated corporate bonds!

The ETFs provide higher income and incredible diversification for safety, plus the highest long term profit potential.

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 almost every market.

Here’s 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.  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.

You also receive a 100+ 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 of all 46 markets.

This year I will celebrate my 52nd anniversary of global investing and 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 the Pi course.

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%.

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 $124.50 off the subscription.

Guarantee

Enroll in Pi.  Get the basic training, the 46 market value report and access to all the updates of the past two years, plus all new updates over the next year.

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 in the first two months for a full no fuss full refund.

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

Due to the COVID-19 pandemic we have cut the subscription to $174.50.  You save $124.50!

Then because this global recovery from the pandemic is going to take years, we’ll maintain your subscription at just $99 a year rather than $299.  Your subscription will be autorenewed in 2021 at $99, though you can cancel at any time.

Click here to subscribe to Pi at the discounted rate of $174.50

Subscribe to Pi today and you get a year’s subscription 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.

Gary

(1) www.nytimes.com: mystery of high stock market prices

wsj.com: Fed weighs abandoning pre emptive rate moves to curb inflation