Three Prong Boomer Investing


Last Saturday’s message look at how current economic circumstances is transferring wealth from Boomers to younger generations.

That message outlined how low interest rates are one of the economic conditions that shifting purchasing power away from Boomers to younger generations.

A wealth transfer is good.  Our children and grandchildren need economic success too, but we Boomers, born from 1946 to 1964, should also have a way to invest to protect our standards of living.   Helping younger generations increase their affluence does not accomplish much if they  they have to spend their new gotten gains caring for destitute parents and grandparents!

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How low can they go?

Capitalistic logic suggests that interest rates on long term savings should at least equal inflation so the investments maintain purchasing power.

That is not what’s happening now globally .

My friend Thomas Fischer at ENR Asset Management sent me this note during the week that shows an amazing new interest phenomenon that’s about to take place in Denmark.

Hi Gary

A new low (or high depending on your angle) for Danish mortgage rates!  A 10 year fixed mortgage minus 0.50% will be introduced on Oct 1!

Imagine that… the bank pays you to borrow!

Such low rates force us to make riskier investments and that’s OK, if we are prepared for it.

However we have lived in an atmosphere that trained us and the entire economic system to use interest bearing instruments for asset safety, especially when the investments are needed to provide income.

Long term, the stock market is a good place to invest, but the chart below from macrotrends.com, shows that, as in the 1930s and 1960s,  when the US market falls from an all time high, it can take 30 years to recover.

macrotrends chart

The recovery time gap was much shorter  after the 2000, 2010 and 2020 crashes.  Or were these recoveries part of another 30 year trend that is not over for another decade?

We cannot dismiss the chance that we are in a 30 year era that started in 2000 and will end with the Dow Jones Industrial average being around 16,000 (the 2000 high) in 2030.

Maybe we will see this.  Maybe we won’t.  Younger investors are in a better position to be OK because history suggests there will be a super appreciation after the old high is truly breached.

Many Boomers cannot wait till 2030 to find out.  They’ll need to draw on their equity investments before then.

What should Boomers do?  Start with what you love and create PIEC wealth.

There is a three path strategy that Merri and I have followed over the decades for fulfillment and wealth.  I call it PIEC  Investing (Personal Income Earning Corridor).

PIEC concepts of financial prudence differ from traditional approaches of accumulating wealth because the first investment in our investment strategy is based on our passion…  not neccesarily profit.   Our total PIEC portfolio comes in three layers: a fulfilling micro business, then a layer of very safe investments followed by a third, much smaller layer of speculative deals.

The first layer of our PIEC is a fulfilling micro business.  When we do what we love, our own micro business is the most important financial asset we can have.  PIEC investors reverse the priorities.  Instead of working for money to save and invest,  they focus their prime effort on doing something they enjoy.  Then they learn how to enjoy the effort in some profitable way by combining lifestyle with the necessary task of accumulating wealth.

The ability to provide a service or a skill is the safest as well as most meaningful investment of all.  This combines our money with time, energy and our desires.  There is no more effective way to combine wealth, health and a fulfilled lifestyle.

Merri’s and my passion are writing and appreciating rental real estate.

I am up usually before the dawn writing… not just for the income but because I love the process.

rental

One of the many houses we bought, rented and resold.

Later in the day, we drive around, almost every day, looking for  houses for sale.  We have a certain niche of house we want to buy.  We’ll rent it for at least a year, then freshen and fix it up (better kitchen, bathrooms, yard) for resale.  We enjoy the looking. It’s like mining for gold and that specific house (we know it when we see it) is like a big nugget of gold.

The feeling as we drive around is, “the hunt is on”!  We also enjoy the creative process that comes in upgrading the house.

Writing and real estate are the micro businesses we love that brings us profit and helps the wealth transfer from our generation to the next.  We share the profits we make on the upgrades with our younger helpers.

The second step is our good value equity portfolio.  The majority of our PIEC diversification is in a portfolio of country ETFs that invest in good value stock markets. (See more on this below).

These good value ETFs,  I would like to hastily add, have not kept up with the US market for the past five years.

Our equity investments over the last half decade would have gained more had we invested just in the NASDAQ or the S&P 500 or DJI indices.

A five year comparison with other markets however is not the point, or at least it should not be.

There will always be something better than your investments.

Your portfolio should not be created to get the highest return in the world, because we never know what any one equity or market will do in the future.

Every person’s portfolio should be geared to their unique wants, needs and desires.

My good value portfolio first and foremost takes very little time, energy or cost to manage.  Those savings are important to me as I need my time for real estate and writing.

Second though my portfolio has under performed the US equity markets for the past five years, it has appreciated much better than inflation and paid about 3.5% in dividends.  That’s my goal to beat inflation and get 3% income or more.

Third, without fuss and without bother and without time, energy and trading costs, I continue to accumulate value that, based on mathematical probability, will provide the highest long term return.

When I began accumulating value market ETFs at the end of 2015 the average price-to-book of the good value portfolio was 1.26 with an average dividend of 3.51%.   That compared to the US MSCI Index price-to-book of 2.62 and an average dividend of 2.24%.

Here were the value statistics I used to start my good value portfolio in December 2015.

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Now the price-to-book of the good value portfolio is still 1.26, but the US MSCI Index price-to book has skyrocketed 4.11.

The average dividend of my good value portfolio is still above 3 percent at 3.36%.  The US average dividend has collapsed to just 1.56%.

keppler

It’s also worth noting that the USA MSCI Index is at 4.11, near the MSCI World all time high of 4.23.

Based on the math, my equity investments have become increasingly better deals.

The third layer of diversification is our speculation.   Modern portfolio theory suggests that safe investments are enhanced and made safer by adding a small amount of higher risk deals.  This also allows us to fulfill any casino mentality we might have left if having our own business is not enough.

Our speculations over the past half decade include an investment in sandalwood, plus extra weighting in China, extra weighting in the UK and in the silver ETF SLV.

The extra Chinese (up 32%) and silver investments (SLV is up 72%) have done OK.  The UK (down 22%) and sandalwood have not (the sandalwood company went bust) done well.

A friend, an investment manger I have worked with for decades and trust, sent me a note two days before the IPO of Snowflake.

Hi Gary, I’m having breakfast with an employee of a company that uses Snowflake in London.

She told me the Snowflake IPO tomorrow would be a very good buy. Its a cloud data warehouse that has a unique template for coding etc. My friend’s company uses it and Warren Buffet has taken a stake. She told me many banks are looking to outsource own data warehouses to snowflake.

That was a good tip, the shares went from $120 a share to $245 a share first day.

I did not take up this tip because it’s in the human nature to worry more about loss than about profit and the goal of my investments is to sleep better.

The way I overcome risk aversion is to invest in ideas I have confidence in.  Since I know little about data warehousing, it did not fit into my strategy.

Investing in rumors, tips and the news, leaves me very uncertain and vulnerable to risk aversion.  I knew nothing about Snowflake. I do not feel comfortable with IPOs so passed on the tip and do not feel bad in the least that I did not double an investment over night.

Instead I have been making higher interest loans secured by real estate to younger friends who I know, like and trust.  The loans generate income that is higher than inflation and while they do not have “double your money overnight potential”, they provide a great deal of fulfillment by helping people we care about.

This three step strategy enhances our investing safety, increases our odds of extra profit, but most importantly matches our needs at our age and brings greater satisfaction and fulfillment into our lives.

Boomers, our standards of living are under attack.   This is part of the natural order, the old giving way to the new, but we can profit by helping rather than hindering this process.

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.

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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