Tag Archive | "dollar"

Warning from UCSB Faculty Website


I see these figures from the 1980s as a warning about the US dollar NOW.  The numbers come directly from the faculty website of the University of California at Santa Barbara website.

From UCSB.edu site

Image taken from University of California at Santa Barbara website (see link below). Click on numbers to enlarge.

In a moment we’ll look at why these numbers can show us how to earn a lot of extra profit and more importantly protect our savings from loss. They’ll also show why this warning has a deep sense of urgency…. (right now).

First, let me share a very short story relevant to these numbers. A reader sent this last week and whether you act upon the information we can gain by the numeric warning below…  This story is worth pondering for at least this weekend.

Autobiography in Five Short Chapters
By Portia Nelson

Chapter One

I walk down the street.
There is a deep hole in the sidewalk.
I fall in.
I am lost.
I am helpless.
It isn’t my fault.
It takes forever to find a way out.

Chapter Two


I walk down the same street.
There is a deep hole in the sidewalk. 
I fall in again.
 I can’t believe I am in this same place. 
But, it isn’t my fault.
It still takes a long time to get out.

Chapter Three

I walk down the same street. 
There is a deep hole in the sidewalk. 
I see it there.
 I still fall in. It’s a habit… but,
 My eyes are open.
 I know where I am.
 It IS my fault.
 I get out immediately.

Chapter Four

I walk down the same street.
 There is a deep hole in the sidewalk. 
I walk around it.

Chapter Five

I walk down another street.

If we have access to history and we can see holes in the street does it not make sense to take a different street now?

The numbers, (I have repeated them below) show the value of the US dollar to the German mark.

The early 1980s recession was the most severe recession (worse than 2009 in many ways) in the United States since the great depression.  This began in July 1981 and ended in November 1982.  The United States and Japan exited recession relatively early, but high unemployment would continue to affect other OECD nations through at least 1985.

From UCSB.edu site

The German mark had gained a lot of strength against the US dollar. In 1971, one dollar would buy 3.643 marks. By 1980, the dollar would buy only 1.713 German marks.  Then came the recession and the thundering herd panicked.   A stampede into the US dollar ensued. This was not a good idea but stampedes created by panics rarely are.  The dollar skyrocketed back up to 2.427 by the end of the recession 1982… but Europe and emerging markets took longer to recover as they have after the 2009 recession.  The US dollar continued to rise all the way back up to one dollar buying 3.172 German marks at the beginning of 1985.

This panicked rise was not supported by fundamentals but the dollar rose for five years through and after the recession.

Then suddenly investors looked at the fundamentals of the US economy versus Europe and said OMG!  The herd panicked in reverse!  In the next year the dollar lost all the strength it had gained over the five years and collapsed even further the next year.  The dollar never recovered until… 2009, when there was another great recession.

Now let’s work through the math. 2009… plus five years brings us to ugh… 2014.

Is this another OMG moment for global investors?  The time is near or already here.

The Wall Street Journal said on Thursday  October 24, 2013 in an article enittled “Dollar Sinks; Euro Tops $1.38” says: The dollar fell to a 23-month low against the euro after data showed growth in the U.S. manufacturing sector at its lowest point in a year, bolstering the case for continued economic stimulus from the Federal Reserve.

The disappointing factory data led investors to sell the dollar against most currencies, including the euro, which jumped to $1.3826, its highest level versus the greenback since November 2011.

“The dollar for weeks has been in steady decline as persistent fragility in the U.S. job market suggests the Federal Reserve would keep policy at full-strength into next year, a much longer horizon than previously thought,” said Joe Manimbo, an analyst at Western Union.

A serious dollar correction could have started and diversification into other currencies makes a lot of sense… now.

History is no guarantee of the future… but fundamentals are and the US dollar with weaker fundamentals than most currencies has shown illogical strength for almost five years.

It could now be entering an extremely large hole.  We have walked down this street before.  There is no reason for us to risk falling into this hole again.

Diversify into at least three currencies… now.

Gary

Our report multi currency report “Borrow Low Deposit High” shows how to diversify into three currencies at three levels…. $10,000 to $100,000, $100,000 to one million and over one million.

How to Gain With Multi Currency Value Investments

Old Accord Creates New Profits – Multi Currency Investments.

Earn more with multi currency stock market breakouts.

Improve Safety – Increase Profits

Learn how to improve the safety of your savings and investments by selecting good value and diversified investments in a multi-currency portfolio.

Few decisions are as important to your wealth as the value of the markets and currencies you invest in.  This has been our area of expertise since the 1970s and we have worked with and advised some of the largest currency traders in the world.

Gain Protection First – Against the Dollar’s Purchasing Power Loss.  In 1913 the The Federal Reserve Act created the Federal Reserve Bank to protect the purchasing power of the US dollar, which has since lost about 94% of its purchasing power.  Here is its price compared with gold since 1900.

priced in gold

Dollar chart from pricedingold.com (1)

The Fed has let the dollar lose most of its strength plus has allowed interest rates to fall so low, that safe investments cannot keep pace with the drop in purchasing power.

multi-currency-chart

Chart from Grandfather Economic Report (2)

Many investors have forgotten about the risk of a falling dollar because the greenback has been strong for the past five years.  This temporary dollar strength came after the great recession of 2009 just as there was temporary dollar strength after the great recession of the 1980s.  Then about six years after the recession, an agreement was made by major governments to weaken the dollar.

There was a severe global economic recession affecting much of the developed world in the late 1970s and early 1980s.  The United States and Japan exited the recession relatively early, but high unemployment would continue to affect Europe and the UK through to at least 1985.  As a consequence between 1980 and 1985, the US dollar had appreciated by about 50% against the Japanese yen, Deutsche mark, French franc and British pound, the currencies of the next four biggest economies at the time. Then the governments reached an agreement and exchange rate values of the dollar versus the yen declined by 51% from 1985 to 1987.

Now the world is again in the same place.  The recession is over.  Europe is a bit behind in recovery and the dollar is higher than before the recession.

There is no reason for the greenback to be  strong.

The agreement in 1985 was called the Plaza Accord.   Over just two years the greenback dropped nearly 50% versus other major currencies.  The next accord will generate great profits for those who know what to do while it ruins the purchasing power of dollar back investments.

The strong US dollar and low interest rates have created one of the biggest stock and multi currency breakout opportunities in history.  Learn how to create a plan to profit from multi currency shifts ahead.

One reason for the potential gains is that stock markets and currency values are cyclical.  Due to low interest rates created by the 2009 economic downturn, the US and a few other equity markets have risen to some of their highest prices, ever.  These markets offer very poor value now.  The steep valuation creates incredible profit potential but also hides some enormous risks.  Learn how to develop an investing strategy based of earnings, cash flows, dividends and book values to increase potential for profit and reduce the risks.

Next Extra Profit Created by Value Breakouts

Over the history of US equity markets, the  price of overall markets have risen about 9.1 percent, respectively, compounded annually.  Yet over more than a hundred years of stock market activity,  a majority of the profits have come from just a very few dramatic breakouts.

Equity markets are ruled in the short term by emotions that create unpredictable ups and downs.  Numerous fears of defaults, worries of double dip recessions, high unemployment, concerns about fiscal cliffs, hold investors back.  Yet global population growth and advances in production and prosperity are relentless economic fundamentals that increase value.

When fear holds back a a fundamentally rising value, rising profit potential grows.  Values increase as prices stagnate.  Then markets break free and rocket upwards creating wealth, prosperity and growth.

Find out which breakouts are likely to take place next.

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 years as shown in this graph.

stock-Charts

The effect of war cycles on the US Stock Market since 1906.

Bull and bear cycles are based on cycles of human interaction, war, technology and productivity.  Economic downturns create war.

Here is the war stock cycle.  Military struggles (like the Civil War, WWI, WWII and the Cold War: WWIII) 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.

Learn how the Cyber War (WWIV) may change the way we live and act and how this will affect currencies and investments.

Learn:

* 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), but 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.

keppler asset management chart

This chart based on 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 outperformance 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%.

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.

Learn how much leverage to use.  Leverage is like medicine, the key is dose.  Buffett leverages his portfolio at a ratio of approximately 1.6 to 1.  This rate of expansion by the way is called the “Golden Ratio”.  It is a mathematical formula that controls the growth of most natural things; trees, the shape of leaves, the spiral of shells, as well as the way economies and societies grow.

We’ll sum the strategy, how to leverage cheap, safe, quality stocks and for what period of time based on your 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 (almost) years of investing experience combined with wisdom gained from some of the world’s best investment managers and economic mathematical scientists.

Enjoy investing more with slow, worry free, good value investing.  Stress, worry and fear are three of an investor’s worst enemies.  These are major foundations of the Behavior Gap, a trait exhibited by most investors, that causes them to underperform any market they choose.  The behavior gap is created by natural human responses to fear.  The losses created by this gap grow when investors trade short term under stress.

Learn how to put meaning into your investing by creating profitable strategies that combine good value investments with unique, personal goals.

Learn how to span the behavior gap.  Behavior gaps are among the biggest reasons why so many investors fail.  Human evolution makes fear the second most powerful motivator.  (Greed is the third.)  Fear creates investment losses due to behavior gaps.  Fear motivates us more strongly than desire.  By nature investors are risk adverse, when they should embrace risk.  Purpose is the most powerful motivator,  stronger than fear and greed.  One powerful way to overcome the behavior gap is to invest with a purpose.

Combine your needs and capabilities with the secrets and the math of our good value model portfolio.

Share ideas about my good value portfolio.  My personal investment portfolio comes from a continual analysis of international stock markets and a comparison of 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.

Markets included in this portfolio are:

• Norway
• Australia
• Hong Kong
• Japan
• Singapore
• United Kingdom
• Taiwan
• South Korea
• China

These markets have been chosen based on four pillars of valuation.

• Absolute Valuation
• Relative Valuation
• Current versus Historic Valuation
• Current Relative versus Relative Historic Valuation

Learn how to use Country ETFs to easily construct a diversified, risk-controlled, equally weighted representative country portfolios in all of these good value countries.

To achieve this goal my portfolio consists of Country Index ETFs that track an index of shares in a specific country.  These country ETFs provide diversification into a basket of equities in the good value countries.  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.

This is an easy, simple and effective approach to zeroing in on value because little 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 stock in that country is an attractive investment, so you do not have to pick and choose shares.  You can invest in the index which is like investing in all the shares in the index.  All you have to do is invest in an ETF that in turn invests passively in all the shares of the index.

Learn 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 a test.

The Test for Low Cost Trading

Research put every part of this portfolio in place, except knowing the best, easiest and least expensive way to buy.  A search for an optimal way to buy and hold boiled down to two methods.  One tactic to test was to use a unique online broker that appeared to offer the lowest cost deal.  The other approach was to use a community bank in Smalltown USA.  The small town bank that I use looks after my 401K trust account and their service is first class.  The benefit of small banks is that they still treat us as a human beings (instead of a number) and when we need, it’s easy to go right to the top to answer a question or get a problem resolved.  There are no call centers and the bank and the person looking after my account is just around the corner.

I created a test to see which offered the least expensive service.

Working with my banker in Smalltown USA,  I created two accounts, one at the online broker and the other at the bank. I placed $40,000 in each.

I set up the order for the country ETFs online, while my trust manager set up orders for the identical amounts of the same shares in his system.  Then we got on the phone, coordinated our timing and on a count of three each pushed the button “BUY”.

The results of this test  show how you can gain on any purchase of country ETFs.

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 2017” and our latest $297 online seminar for a total savings of $468.90.

ecuador-seminar

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 2017” and “Three Currency Patterns For 50% Profits or More” reports, and value investment seminar, plus begin receiving regular Pifolio updates throughout the year.

Subscribe to a Pi annual subscription for $197 and receive all the above.

Your subscription will be charged $299 a year from now, but you can cancel at any time.

Gary

 

Gary

(1) Dollar chart from pricedingold.com

(2) Grandfather Economic Report

 

 

 

 

See German  mark history

Terror on Currencies


There is terror in investing markets because of currencies.

gary and jens

Gary Scott speaking about currencies with Jens Lauritzen djrector of Jyske Private Bank.  Jyske is among the leading currency traders in the world.

World stock markets continue to slide as this chart of the Morgan Stanley Capital Index  at Bloomberg.com for November shows.

msci-chart

Yet November is generally a month when stock market are strong. One part of the market terror driving markets down is to create by fear the fate of the US dollar.

When I first started investing in and writing about multi currency investing in the 1970s… the formula for making forex profits was simple…  invest in the currencies where the governments were employing economic sanity… such as Germany and Japan.  Bets against the US dollar almost always worked because the US government continued to spend more than it earned.

Then these other countries caught on to America’s bad habits.   Germany went into debt bailing out East Germany. Then the Germans partnered up with other insane spenders (Italy, Greece, Spain, Ireland) gave up the Dmark and joined in the euro.

Japan had a bubble burst that was as bad or worse as the 2008 US shakedown… but fifteen years earlier.  The Japanese government became one of the biggest spenders of all.

Plus Germany and and Japan have rapidly aging populations.

Japan has also fallen behind as a global competitor in many other ways.  Beyond its demographic troubles, Japan’s productivity per worker is terrible, and there is not enough opportunity for  women and older people. Immigration is almost non existent so there are no new ideas and energy to help stimulate a vibrant society.

On top of these problems, the US dollar is rapidly losing its role as the reserve currency of the world… which without an alternative leaves everyone worried… concerned… in a state of fear of the unknown.

The only way to protect against this fear is to invest in a spread of currencies and take advantage of currency contrasts and trends.

This leads us to the stage where understanding global currency markets is so complex that unless it is one’s daily business the only way to overcome the complexity is with the most simple, basic equations.

This is how Jyske Global Asset Management trades currencies. Though Jyske is among the most active currency traders in the world, JGAM takes fundamental positions based on basic formulas.

Here are JGAM’s November 2010 positions in currencies. (They may change positions during a month but in November made no changes.)

Existing positions:

Short US dollar – Long the Singapore dollar

JGAM says: The Asian economies are struggling with increased inflation pressures and will have to accept appreciating currencies to fight inflation. Singapore is already at the top of the comfort zone identified by the monetary Authority of Singapore (MAS) and this should thus indicate that an appreciating currency is acceptable. We therefore keep our current  Singapore dollar (SGD) position and keep the existing stop loss at 1.3415.
Position taken: Sold USD and bought SGD at 1.2889

Size: 20% of AUM
Stop loss: 1.3415 (-4.08%)
Target: 1.25

Long EURO –  Short US dollar

JGAM says: The Federal Reserve (Fed) last week moved to implement QE2 as expected. The Fed will buy US Treasuries to the tune of USD 600 billion over the next 9 months. The initial market reaction was a significant US dollar (USD) weakness and the EUR/USD moved to 1.4285. More Quantitative Easing means that US short term interest rates will remain near zero for an extended period and should suggest that the USD remains weak. However, renewed fear about the Irish economy and its banking sector spooked the markets this week and has weakened the euro (EUR) to currently 1.3700.
Position taken: Bought EUR and sold USD at 1.4009

Size: 20% of AUM
Stop loss: 1.3580 (-3.06%)
Target: 1.45

Short US dollar –  Long Mexican peso

JGAM says: The Mexican peso (MXN) should still benefit from increased risk appetite and the search for yield in a low yielding environment. We thus keep our long MXN and our defined stop loss at 13.60. Position taken: Sold USD and bought MXN at 12.6423

Size: 20% of AUM
Stop loss: 13.60 (-7.58%)
Target: 11.85

Long Great Britain pound – Short US dollar

JGAM says: The British pound (GBP) is testing the important 1.6000 chart point and if broken could move to the August 2009 high at 1.7000. UK GDP growth was surprisingly strong at 2.8% year over year in the Q3 and with inflationary pressures high this should keep Bank of England (BoE) on the sidelines with further Quantitative Easing. Position taken: Bought GBP and sold USD at 1.5921

Size: 20% of AUM
Stop Loss: 1.5300 (-3.90%)
Target: 1.6370

US investors can invest directly in the JGAM fund that holds these positions ($100,000 minimum).

Details are available from Thomas Fischer at fischer@jgam.com

Canadian and other non US investors can learn how to invest in forex and currency positions from Rene Mathys at mathys@jbpb.dk

Gary