Tag Archive | "Deutsche bank"

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.


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.


The Only 3 Reasons to Invest


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.


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 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.


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.


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.


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.


When “Too Big to Fail” is Too Small

An economic earthquake has started in Germany, unhinging a bank that is “Too Big to Fail”.   

Our world turned upside down when, starting in late 2007, the real estate bubble popped.  Many Americans saw their homes slide underwater, their stock prices plummet and the earnings on their safe savings collapse to zero return.  That  financial ruin was created very much in part by banks that were “Too Big to Fail”.

Now as stock markets reach all time highs, another debacle is rising.  The tremors have already started, aftershocks from 2009, that can create a greater economic landslide.  One scandal in Germany has spread to the US and is growing.  This calamity can make the safety net of “Too Big to Fail”, too small.  The disintegration that ensues could ruin average investors in three ways.

The failure comes because the bigger the bank, the more corrupt it seems to be.  This makes sense. These banks have little to lose.  Why not cheat and take risks?  When fraud and speculation fail, the bank is bailed out by taxpayers.   No one, except the customer, gets too badly harmed.

Wells Fargo is an example.  Even after new regulations and backups were put in place after 2009, this entire organization continued to treat clients with complete disdain.  To make matters worse the cheaters at the top of Wells Fargo were not really punished.  In fact they were pretty well paid considering they were crooks.  They were caught leading an organization with organized, outright fraud (smaller doses of the same thing would have sent you and me to jail).  The CEO of Wells Fargo resigned as the scapegoat.  A point was made that he did not receive any severance pay.

However filings show that after leading the bilking of millions, he did keep more than $100 million in stock, plus received pension benefits exceeding $24 million.  Poor guy, but I guess that seemed better than a federal jail.

The heart of the “too big to fail problem” has been bonuses paid to bank employees and executives.  The employees are motivated to take risks.  If the risk pays off, they are rewarded.  If the risk turns into disaster, the government steps in with your and my dollars.  Government regulations since 2009 have helped stop this excess.

Government intervention has made banking harder, but in the case of big banks, which are backed by taxpayer dollars, the extra government oversight has not stopped the problem of big banks taking advantage of us.  

But now, the trend will likely reverse.  There are three reasons why.

First, banks will have more opportunity to cheat because of increased stock market turmoil.  Every part of the US stock market has reached an all time high.  Yet global stock market volatility has also picked up.  Whether Donald Trump does a good job or not, one thing we can be sure he will do is bring uncertainly.  Nothing makes markets shakier than the unknown.  The fact that Trump voters were not the majority adds to this fear.

Second, the next administration will favor big overseas banks.  These big overseas banks have especially taken advantage of investors and home owners.  Foreign big banks have acted with impunity and need to be regulated, but we can expect the next US administration to ease regulations on these banks.

For example, one of the most corrupt and heavily fined overseas banks, Deutsche Bank, is in a special position to gain favors.

Deutsche Bank has been a special leader in all types of nefarious activity.  This was a lead bank in ripping off mortgage holders and investors with bad mortgages that created the great recession.  The US is trying to collect $14 billion in fines to settle claims on bad mortgage-backed securities that helped the cause of 2008 financial crisis.

The bank has plenty of problems.  In addition to the fines, it has extensive financing in London real estate that could be harmed by any economic slowdown created by Brexit.  Deutsche has remained a leader in commercial mortgage-backed (CMBS) loans.  They were the top CMBS  lender in 2015 and 2016.  Upcoming legislation could hurt this source of revenue.  There is also a probe related to embargo violations of equity trades for wealthy clients in Russia. Plus the International Monetary Fund has said that Deutsche Bank is “the most important net contributor to systemic risks”.

These facts should be enough to cause a breakup of the bank.  This could in turn contribute to helping get a grip on other overseas lenders that are still being investigated for similar offenses and could face penalties.  These banks include the Royal Bank of Scotland, Barclays, Credit Suisse and UBS.

Yet Deutsche Bank happens to be one of the largest lenders to Donald Trump.

A Mother Earth Jones article “Trump’s Huge Conflict of Interest With a Big Foreign Bank Keeps Getting Worse” says: (1)

Deutsche Bank is in deep trouble. Its stock price has plummeted in recent days after the Justice Department demanded the gigantic German bank pay $14 billion to settle claims regarding its sale of bad mortgage-backed securities in the the run-up to the 2008 financial crisis. The bank’s shares fell to a new low on Tuesday over reports it might be seeking a bailout from the German government—which Deutsche Bank has denied. The crisis has exposed the fragile state of one of the world’s largest banks, but it also highlights a potential massive conflict of interest for Donald Trump.

In the past few years, Trump obtained $364 million in loans from Deutsche Bank via four mortgages on three of his prized properties: Miami’s Doral National golf course, Chicago’s Trump International Hotel and Tower, and the newly opened Trump International Hotel in Washington, DC, a few blocks from the White House. A foreign entity holding so much of Trump’s debt—financial leverage that could affect the decision-making of a future commander in chief—has raised alarms among ethic watchdogs. But with Deutsche Bank floundering, the possible conflicts posed by Trump’s loans are compounding.

The financial health of Deutsche Bank is important for Trump’s corporate empire. Because of Trump’s history of failed projects and repeated bankruptcies, many of the world’s top banks have long stopped doing business with him. Deutsche Bank was one of the only major banks—perhaps the only—that would work with him, and their relationship has been rocky.

But Trump has maintained his relationship with Deutsche’s so-called “private bank”—an arm of the bank that caters to wealthy people and has more flexibility in its lending standards than the corporate side. The four loans Trump currently has with Deutsche Bank are each from the private bank, a Deutsche Bank official told Mother Jones.

Deutsche Bank is also one of the largest originators of U.S. commercial real estate loans.  If Deutsche Bank were to close its US operations, there could be a negative effect in the commercial US real estate industry in multiple ways.  This creates an added conflict of interest for Donald Trump and the next administration.

Third, we’ll see rising interest rates.  Banks will raise interest rates as fast as they can.  The key to bank profitability is “Net Interest Margin”, the difference between the rate banks pay for deposits and money and what they charge for loans. 

The chart below from the St. Louis Federal Reserve Bank shows that bank net interest margin has been at an all time low.  The figures also reflect how and when the US Treasury bond rates rise, that there is an even higher Net Interest Margin increase shortly after.

fed chart

When interest rates collapsed in the late 2000s, banks made extra profit from one time.  Their securities portfolios rose, loan defaults slowed and the cost of deposits fell.  Yet over time as new loans brought lower yields and the one-time boosts were gone, the lower interest rates squeezed bank profit margins.

The government and the Fed will want higher rates to avoid runaway inflation.  As the government increases borrowed spending, inflation will rise higher than the Federal Reserve’s target of 2 percent.  The Fed will increase interest rates.  The Fed is against inflation.  There is a powerful motivation to protect the aging population as more and more boomers go onto a fixed income.  In addition the Fed’s board of governors has two openings that Trump will fill with anti-inflation choices.  This increases the odds that even before inflation picks up, the government and the Fed will be aggressive at increasing interest rates.  This will strengthen the US dollar short term but hurt the US stock market because the strong dollar reduces the value of revenue generated overseas.

The rising interest rates will be accompanied by inflation.  The government and the Fed do not want inflation but they will create it anyway.  They will spend more and reduce tax that increases US debt financed by savings from Europe, China and Japan.  Currently, America’s gross debt is more than $19 trillion, or 105 percent of GDP.  This has been sustainable in recent years because interest rates have been at historic lows.  As rates rise from slightly over 2 percent today to over 4 percent by 2019, government interest payments will more than triple from $250 billion in 2016 to more than $800 billion in 2026.  By 2030, interest alone will represent over 14 percent of the federal budget.  If interest rates rise even higher,  Federal payments will be even greater—a one percentage point increase costs the country an additional staggering $1.6 trillion over a decade.  If interest rates returned to the record-high levels of the 1980s, the country would pay $6 trillion more in interest alone.

The dollar will fall because almost half of this debt will be owed to countries abroad, especially Japan and China.

rate charts

The U.S. dollar has soared on bets that the US will see inflation. The U.S. dollar recently hit a one year peak.  Currencies especially in emerging markets have fallen to new lows.  The higher interest rates and stronger U.S. dollar are causing the weakest risky assets to plummet.  Interest rates on U.S. Treasury 30-year paper at 3% are triple that of Germany’s 30-year yields of barely 1%.  A closing of this gap as Europe increases its interest will create a US dollar drop.

The cost of living will rise.  Higher interest rates will push up prices for almost everything and push stock prices low.  All of this hurts banking profitability and makes it more likely that big banks will cheat more.

Here are three steps to take that can protect your investments in this scenario. 

Protection #1: Avoid Too Big to Fail Banks.  When you use a global bank, you are not using just one institution.  You are dealing with a big business that owns multiple banks in different regions.  This has costly implications for how far the bank’s equity goes, and how small safe the particular bank you choose really is.  Plus banks with two or more sub banks have more ways to take advantage of investors.  For example, one division of a bank can be recommending an investment to customers while having another unit in another country sell the investment short.  The bank makes money in three ways: creating the investment, selling the investment to customers and selling it short when the investment implodes.

Distinct national or regional entities held locally are much simpler to repair or dismantle when things go wrong.  Banks create such ringfenced operations in several places, so regulators cannot see the big picture and to keep their ripped off rewards from fines and penalties.

Use local community banks where you can know your bankers, what they are doing and where their reputations are their most important asset.

Protection #2:  Invest in Commodities and Add Defensive Hedges.  The price of everything in America is expected to rise.  This will push up the price of silver and gold.  An example of a defensive hedge is the AdvisorShares Ranger Equity Bear Fund.

Recently a lesson in our Purposeful investing Course said:

For clients who hold 65% or more in common stocks, we strongly suggest buying the Advisor Shares Ranger Equity Bear Fund (NYSE-HDGE).  Though not an inexpensive product (management fee is 2.9% per annum), this team-managed short-selling fund is unique in the ETF industry. The Fund’s investment objective is capital appreciation through short sales of domestically-traded equity securities. If you hold 65% or more in equities, we strongly recommend buying a 5% to 10% allocation to HDGE to help offset portfolio losses.

The intelligent strategy for growth-based portfolios is to buy the cheapest companies in the world accompanied by growing dividends. This ETF bets against the most expensive stocks.  Now because most of the US stock market is so expensive, this shorting option adds protection against a severe market crash.

The number two Golden Rule of Investing is “periods of high performance are followed by periods of low performance”.

The graph below shows how this ETF has performed very poorly over the last seven years, which is why it makes sense to invest in this safety investment now.

stock chart

Stock chart of HDGE AdvisorShares Ranger Equity Bear Fund (2)

Protection #3:  Use Math to Support Your Purpose and Spot Value.  Truly knowing ourselves is the most important part of investing.  When we don’t learn our limits as investors, it doesn’t matter how much we know about markets.  Emotions are the undoing of most investors!

Invest with Purpose.  All the events described above can destroy our purchasing power in the next four years.  The biggest risk is what we will do to ourselves when there is volatility.

A New York Times article “Aligning Your Investments with What Motivates You” explains the Alpha, Beta, Gamma, and Phi of investing. (3)  These measures  represent ways to judge investments.

The article says:  Alpha measures an investment’s performance against a market index.  If the Standard & Poor’s 500-stock index is up 10 percent and a mutual fund is up 15 percent, for example, that 5 percentage point difference is alpha.

Beta is the return of any given market. And charting beta is what a passive index fund does. Comparing different indexes, beta helps investors in deciding how to allocate their investments.

Then the article explains that Gamma measures the impact on returns of five areas more complicated financial planning; Optimal asset allocation, Dynamic withdrawal strategy, Guaranteed income products (i.e., annuities), Tax-efficiency, Liability optimization.

Phi quantifies how motivation affects long-term investment returns.  Phi is the factor that holds all the others together which we have been harping on Pi’s importance for decades.   Without a good Pi  ratio, its not likely that an investor will stick with the strategy that was created using Alpha, Beta and Gamma.

The financial giant, State Street Corp, did an 18 month study of 7,000 individual and investment professionals to get as better understanding of the role that Pi plays in making investment decisions.  The study examined what motivated a person to invest, or not, in the first place.

The study found that some investment motives are based on greed but most come from fear.  Use greed and fear to make investment decisions has a negative effect on long-term performance.

The study found that a deep sense of purpose is what caused a high phi score.

The article says:  “It’s not about outperforming markets or peers, and it’s not an asset-gathering measure of performance,” she said. “The performance has to be defined as sustainable and with a deeper sense of purpose.”

Most of us make good investment decisions but are not confident enough to stick to them.  Consequently we sell our winners too soon.  When we make poor decisions, we take them personally and hold onto losers too long.

This is why the study of 7,000 found that investors with socially responsible ideals did best.

The dual goal of profit and achieving some social benefit  provides a purpose beyond returns.  This brings comfort and determination to the investments.

Our Purposeful investing Course (Pi) helps improve the Phi of investing by teaching how to define three aspects of investing that are generally ignored; purpose, habits and incentives.

Learn to focus your investments using purpose as the most important investment goal.  The purpose of money becomes more important  the amount.

Learn how to create habits and routines that keep us on the path of our unique purpose.  The market will do all it can to distract us from our goals.  Understand that our banks, our brokers, the media, the government and commerce all have agendas to take our money away from us.   Habits and routines protect us from this.

Changing incentives to accomplishing a purpose instead of a numerical (percentage or profit) goal helps us adopt better behavior.  We react to accomplishing our meaningful purpose instead of drama created by media or short term whims in markets.

The study showed that changing incentives in this way improved phi when they had a meaningful impact on a person’s investment strategy.

The study found these facts: Every one-point increase in people’s orientation toward investment goals with a purpose — and the scale is 0 to 3 — equated to 42 percent greater odds that the investors know what they are paying in fees, 37 percent greater odds that investors are not rejecting their financial adviser, 38 percent greater odds that the people consider investing in socially responsible investments and 79 percent greater odds that investors will trade less frequently, the research found.

As in so many others cases, two of the most important factors of success are keeping costs and trading activity low.  These are among the most powerful ways to increase wealth.  Having greater fulfillment as well as more wealth is a bonus that we call “Everlasting Wealth”.

Whether you like to trade or hold, Pi helps you invest based on financial mathematical information rather than the spin, rumor and conjecture of the daily economic news.  Figure out what is really important in your life.  Find ways to invest in that purpose.  When you do, you’ll be on a solid path to everlasting wealth that is not so easily diverted by the daily drama that seems to be unfolding in the modern world.


(1) www.motherjones.com Trumps conflict getting worse

(2)  Stock chart of HDGE AdvisorShares Ranger Equity Bear Fund

3) WSJ.com Aligning investments with motivation

“If I Live Long Enough, I’ll Really Cash In Next Time”

Periods of good investing performance are always followed by periods that are bad.

Think about this…

The US dollar has risen over 50% above its lows of 2011.   The greenback is at its highest level versus the Chinese yuan since 2008.  India’s rupee is at an all-time low against the buck.  Other Asian currencies, the Singapore dollar and Malaysian ringgit have plunged to depths not seen since the financial crisis of 1997-98.  The euro, Mexican peso and Canadian dollar have crashed.  In other words, the US dollar is in a period of high performance.

What happens is the greenback is in a free fall.  Smart investors can cash in huge profits.

Yet there is a bigger economic problem that can ruin the purchasing power of your cash faster than you can imagine.

While the dollar was rising non US governments and businesses accumulated almost ten trillion dollars of debt denominated in US dollars.

The terror in this debt is that it acts as a destructive and very rapid financial amplifier.  Dollar debt is like a short position.  When the dollar rises, borrowers scramble to short-cover their position by selling their own currency.  This defeats the purpose of their hedging as it increases the strength of the dollar.  So they short even more.  Those short sales create an upward dollar spiral.  The buck rises higher and higher, based entirely on fear and speculation.

When that leverage energy is spent the currency stalls and plummets out of control… like now.

The last time we saw such a upwards spiral was from 1980 to 1985.  The dollar rose 50% in those five years.

Guess what?

Then it collapsed 50% in just two years.

The US dollar is in a similar position as at the beginning of Ronald Reagan’s first term in the 1970s.  This was a time of widening budget deficits, rising interest rates and a US dollar surge.  This created a problem then, as it does now, and creates huge opportunity for those in the know.

The rise of the dollar, the debt and the US stock market creates an especially dangerous conflict because Donald Trump wants to balance America’s trade.  A stronger dollar makes this impossible because it pushes up the cost of US material, US labor and US exports.

The overpriced dollar, the poor value of the US stock market (compared to other markets) create a dollar crisis and a special opportunity for you and me as investors.

“If I Live Long Enough, I’ll really cash in next time”.    I made this promise to myself in the 1980s.   A remarkable set of economic circumstances helped anyone who spotted them become remarkably rich.  Some of my readers made enough to retire.  Others picked up 50% currency gains.  I invested as much as I could handle then as the profits rolled in for about 17 years.  I had wished I could have invested more.

Now those circumstances are here again.

And I have…

invested more… a lot more… betting again the dollar.

The swollen stock market prices, huge dollar denominated debt and weakening dollar are three patterns that can create a fast 50% profit.

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 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.

There is a way to accumulate good value equities denominated in the following currencies of special strength, including the Euro, Canadian dollar, Singapore dollar, British pound, New Taiwan dollar and Chinese yuan.

The report reveals 21 special non dollar equities that have the greatest opportunity for safety and appreciation.

I kept the report short and simple, but include links to 153 pages of global stock market and asset allocation analysis so you can keep this as simple or as complex as you desire.

The report shows 22 good value investments and a really powerful tactic to use that allows you to inexpensively accumulate these bargains now even in very small amounts (even $5,000).  There is extra profit potential of at least 50% so the report is worth a lot.

Research shows that most people worry about having enough money if they live long enough.   I never thought of that.   I just wanted to live long enough to see the remarkable economic opportunity that started in 1980 come again so I could hit the jackpot.  This powerful profit wave has begun.  I have made the investment myself  suggest you investigate this in my report “Three Currency Patterns For 50% Profits or More.”

Order the report here $29.95

My Guarantee

Order now and I’ll email the online report “Three Currency Patterns For 50% Profits or More” in a .pdf  file right away. 

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 purposeful investing.  If you are not totally happy, simply let me know within 60 days and I’ll refund your subscription fee in full, no questions asked.

You can keep the report “Three Currency Patterns for 50% Profits or More”  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.

Order the report here $29.95

Or get this report free.  Subscribe to the Purposeful Investing Course (Pi) described below.



Ecuador Tickets

See how to save up to $658 on Ecuador tickets to the Galapagos Island tours plus one of the most important international investing thoughts you may see this year.


First, here is an international investing thought we reviewed at our  recent International Investment and Business Course. Then we’ll look more at Ecuador tickets and how to get Galapagos cruise savings.

Yesterday’s message International Investment Gains looked at the fact that the Dow has moved in 15 to 17 year up and down cycles.  We saw that the Dow is into the twelfth year of a down cycle that started in 1998.  When we compared the Dow’s movements for the last two years to the equivalent time in the previous (1968 to 1982) down cycle, we saw that these two years had an amazing 93% correlation.

This led us to the question…What is next?  See below in blue what the Dow did between 1980 and 1982.

The chart below from Moore Research compares the Dow from 1978 through 1980 to the Dow of the last 18 months. The Blue line is what happened in the equivalent period in the 1970s for the next two years.  Ignore the black line (this is how the Dow has just moved). There should not be and is little correlation.

What is important is understanding the blue line. This what the Dow did during in the equivalent period (1978 to 1980) in the 1968 to 1982 downturn. The black line represent the Dow’s recent activity and should not matter.

This is a really important international investment thought. If history repeats,  if the Dow’s movement from now to mid 2011 has as strong a correlation as 2007 to 2009 had to 1978 to 1980, then the current uptick in the US market is simply bait leading most investors to slaughter!

This chart suggests that soon we will see a sharp correction in the market followed by a period of  very volatile sideways movement.


Jyske Global Asset Management is suspicious of markets as as well.  Thomas Fischer, Senior VP JGAM, spoke at our July 2009 International Investment Course about the fact that the current upwards trend in the market is not supported by economic fundamentals.

He reconfirmed this when he shared market comments yesterday that said:

Another week with positive trends in global markets. The MSCI World Index is up 1.37% this week but uncertainty about the direction of the market is beginning to show. On Tuesday the Chinese stocks plunged 5% as investors became nervous about the fast share price gains in the Shanghai Composite Index of almost 80% in 2009. The banking industry has seen some very good second quarter reports, but many banks have dramatically increased their provisions against bad loans due to continued pressure on the credit environment. On Tuesday the share price for Deutsche Bank tumbled 11% even though it reported a net income of USD $1.4 billion in the second quarter as bad loan provisions of USD $1.4 billion spooked investors. Consumers are still “maxed out” and with rising unemployment and none existing wage pressures. It will probably take some time before consumers return to the shopping malls in droves as indicated in the consumer confidence number for July showing a fall from 49.3 to 46.6. The big $64,000 question is whether we will have inflation or deflation and at the moment it certainly does not look like inflation. The Fed’s latest survey (Beige Book) shows an economy that is still very weak and the so called  “green shoots” will take a long time to grow.

Jyske Bank and JGAM are one of the few truly international banks that still provides a service for Americans. Learn more about JGAM from Thomas Fischer at fischer@jgam.com

In other words… be very cautious about speculating in the equity market.

See an entire report on this as a Multi Currency Portfolios Course subscriber.

Or join us to update what is happening at at our October 9, 10,  11 IBEZ North Carolina Seminar

Here is what a delegate shared about our July seminar:

Merri, My wife and I would like to thank you and Gary for a wonderful course. We thoroughly enjoyed all the information presented by Gary, Thomas and David. And we thank you for your hospitality with having us to your lovely “piece of paradise” in Lansing. The lunch was delicious and your presentation of import/export items was quite interesting.  We look forward to visiting Ecuador in September of 2010. And we look forward to visiting and staying at your hotel in Cotocatchi. Thank you again for a truly life changing and life enhancing weekend. Best regards,

Now let’s look at how a  $119 Ecuador Living subscription can help you save up to $658 on Ecuador Galapagos tickets on one of the most luxurious Galapagos cruises on this catamaran the M/S Nina with this excerpt from the Ecuador Living article Ecuador Galapagos Tickets.

Our friend Kjetil Haugan, the largest Galapagos Ecuador cruise operator just sent us this note.

Dear Friends!  Greetings from Haugan Cruises!

I would like to remind you of the promotions on our fleet for July until December 2009. Please find our special deals below.

The M/C Nina.


The Nina is also a 16 passenger luxury catamaran, with four main deck double or twin cabins, two single cabins and four upper deck  double cabins, with a king size bed.


Nina King

All the cabins have a private balcony and the windows can be opened, except for the single cabins that have sealed windows, but still have a little balcony.

The Nina offers eight day cruises only and the normal cruise fee is $4,390 per person in a double cabin.


Nina Deck

We are offering 2 x 1 deals August 25 – September 1 and Nov 24th to Dec 1st.

We are offering a $1,000 discount  + a flight ticket (Quito to the Galapagos) for August 18 – 25th and September  8 – 15th September 15th – 22nd, Oct 13th – 20th, Oct 20th – 27th and Oct 27th – Nov 03.

For additional information and added discounts see Ecuador Galapagos Tickets.

This is the ticket to the Galapagos, Ecuador!

Haugan tours pays tour operators commissions on these tours but as publishers we do not accept commissions so pass this on to our subscribers in the form of savings that amount to as much as $658.

If you are an Ecuador Living subscriber, contact us to calculate your 15% discount for your Ecuador Galapagos tour.

If you are not an Ecuador Living subscriber and want to go to the Galapagos, you can save money AND have your subscription free!  Learn how to subscribe here.


Join Merri me and Thomas Fischer of JGAM and our webmaster David Cross in North Carolina this October.

Learn more about global investing, how to have an international business and early retirement in Ecuador at the course.

Oct. 9-11 IBEZ North Carolina

Or join us in Ecuador and learn more about living and retiring in Ecuador.

Sept. 17-21 Ecuador Spanish Course
Sept. 23-24 Imbabura Real Estate Tour
Sept. 25-28 Ecuador Coastal Real Estate Tour

Oct. 21-24 Ecuador Import Export Tour

Nov. 6-8 IBEZ Ecuador
Nov. 9-10 Imbabura Real Estate Tour
Nov. 11-14 Ecuador Coastal Real Estate Tour

Attend any two Ecuador courses or tours in a calendar month…$949 for one.  $1,349 for two.

Attend any three Ecuador courses or tours in a calendar month…$1,199 for one.  $1,799 for two.

See other Ecuador tickets to Galapagos cruises here.