Tag Archive | "Emerging"

International Investing Trick


Here is a global diversification trick that may do well in the likely global economic scenario ahead. Buy good value shares internationally as markets dive during the summer dip.

In a moment we’ll look at some Ecuador health ideas… first the investing trick.

Global equity markets have been in a bear market rally for six months but are now hitting the summer blues due to seasonality.

Share prices will probably drop now. Chances are there will be a strong global equity slump at least through October 2009.

This will create extra value in equity markets and provide good opportunity to pick up high value long term.

The bear market is likely to carry on until 2012-13, but good value shares acquired during dips are more likely to spike early and have extra potential after the bear ends.

Now through October 2009 could be a good time to invest in high value shares for long term appreciation.

But which shares… in which markets?

One way to approach this is to look for extra value created by inefficiencies in markets…to find markets where the values are best.

Statistically this is the best way to be absolutely sure of the best long term returns.

There are numerous investment managers who use very strict valuation criteria (usually based on dividend yields, cash flow, price earnings) to spot the best value markets.  They then try to apply similar criteria to select good value shares in the good value market.

The next goal is to decide how much should be weighted in major market and how much in emerging markets.

Here is a comparison of the Morgan Stanley Major Market versus Emerging Market indices.

The MSCI World Index is a market capitalization weighted index that measures the equity market performance of developed markets.  It includes 23 developed market country indices : Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States.

The MSCI Emerging Market Index includes Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.

MSCI Indices performances.  Total per annum return over:

Major                            Emerging
15 years    4.10%                   5.41%
10 years  -3.85%                   9.11%
5 years    -2.77%                  11.16%
3 years   -10.81%              -00.17%
1 year      -20.81%             -27.53%
3 mos.      14.30%               27.53%

Regardless of the time frame observed,  the emerging equities almost always seriously outperformed major markets… but as a class they also dropped further in the 2008 downturn.

Here is a year-on-year comparison for the past five years.

Major                   Emerging
2003  10.74%           29.63%
2004    6.46%           16.51%
2005   26.17%           54.41%

2006     7.40%          18.23%

2007     -1.66%         25.71%
2008   -50.30%      -37.64%
2009      5.39%         34.79%  3 months

This history suggests that emerging markets deserve a substantial ranking.

However before becoming too aggressive in over weighting emerging markets, we have to keep in mind two thoughts.

First economic thought. The last 15 years has been a catch-up era when the investing world caught on to the idea that emerging markets offered great opportunity.

Second economic thought. A great deal of emerging growth came from debt financed exports to the developed world. This leaves emerging economies holding huge amounts of debt for customers who may not be able to repay the debt nor continue to buy the same volume of goods as before.

The easiest way for investors to invest in good value during dips is via a value mutual fund.

You can select a value major market fund, a value emerging market fund or a value diversified fund.

The benefit of a value diversified fund is that the professional manager decides how much to weight in emerging and major markets.

For example I just sent a lesson to our multi currency subscribers that showed a US traded international diversified value fund that has risen 36.08% in the past quarter ending June 30, 2009.  This fund is 86% in major markets and 14% in emerging markets.

Learn how to read about this fund as a multi currency subscriber.

The most valuable asset we can have in tough economic times is good health. This is why we studied Ecuador health ideas at our June tour.

Cotacachi is considered sacred by the shamans… a place of wonderful mountains that ring the valley.  This is Mt. Cotacachi to the west.

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Mt. Imbabura to the east.

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The valley is surrounded by mountains like these twin peaks…

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creating wonderful, mystic  sunrises.

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The first afternoon of the tour we visited La Mirage Spa and the Shamana Estella.

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She began a theme that the many shamans we visited confirmed.   She said that the three keys to better health, increased longevity, more energy and fulfillment are good nutrition, proper exercise and good sleep.

The purpose of the Ecuador shamanic tour is to learn ways to unlock this healthy  combination in a natural low cost way!

The second day we joined Clemencia, the Shamana of Zuleta and drove 15 minutes from our hotel Meson de las Flores to Otavalo market where we visited the local food market…

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filled with fruits…

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vegetables…

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flowers and …

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herbs.

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Here is the shamana speaking to the group with Merri and Mauricio translating.

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We learned the importance of the herbs to make good teas that hydrate the body are cedron, chamomile and lemon verbena.

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We learned how other herbs relax such as chamomile and valerian root. Plus we were told to boil lettuce in milk as a prebedtime drink for better sleep.

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On the other hand, tea from cinnamon, paprika, cloves and ginger help reduce sluggishness in digestion and to speed the system when we need to be fired up.

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You can read this entire report as an Ecuador Living subscriber.

Gary

We hope you’ll join us and enjoy Ecuador’s or North Carolina’s beauty soon.

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Sunrise from Meson de las Flores.

July 24-26 IBEZ North Carolina

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

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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.

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Multi Currency Question – Recession


Here is a good multi currency question about the global recession.

Recessions create opportunity for multi currency investors, but not always in the short term. Good value oriented multi currency investors may even suffer more during downturns. Recessions improve value in multi currency portfolios but the profits from this value comes only when markets recover.

Value investors are not market timing investors. This is good because most market timers usually lose in the long term.

Well diversified multi currency portfolios reduce volatility but do not eradicate it totally as is explained in the answer to this good multi currency question.

Here is the multi currency question:

“HI Gary, First let me send my love to you and Merri from Israel and thank you for your sharing of info. The question I have is: With the credit problems and banks going under and reduced credit globally shouldn’t this bring down global valuations on stocks? Wouldn’t it be a risky time time to be invested in most stock markets? I read that it is the credit that is propping up the share value. I also read that it is possible for 150 banks to go under, that seems like it would be a huge ripple effect. It seems that it is not isolated to just the states, last week I read about the Danish bank in serious problems. I remember you recommending property, commodities and shares to fight inflation. Do you think the shares rewards outweigh the risk in times like these? Thanks for any insight without panic.”

Here is a reply about multi currency investing that you may find worth study.

Thanks for your question.

First, we are not advocates of market timing. Remember rule number seven of the Seven Rules of Global Investing. “Value is reflected long term. Equity markets are efficient in the long run but are not effective short term due to human behavior”.

Having said this, we do realign the weighting of our investing activity based on our beliefs of where the 30 year market cycle stands. To learn more about the thirty year cycle.

Longer term subscribers know that we began warning about equity markets in August 2007 (the 17th to be exact) when we wrote: “Such historical measures are so inexact that we cannot predict just from them what will happen in the short term. The numbers are close enough that we could be entering the fourth sub cycle down (similar to 1976 to 1978). If so expect a sustained drop in markets for two to three years.” See the entire warning here.

Our September 21, 2007, message said: “Equity markets dropped again violently last month. Now these markets have recovered again. Yet this may be a last gasp party. This drop of interest rates at a time when inflation is beginning to soar could lead to a rapidly falling US dollar. We can see from the chart here that the dollar has done almost nothing but drop for 40 years (that chart is below). Yet much more dollar dropping could be in store.”

The October 14, 2007 message stated: “Periods of high performance are followed by times of low returns. We never know for sure when an upwards cycle will stall. Fundamentals look good for a bright 2008 in emerging and equity markets, but this can change quickly so to give our readers a better perspective, this year we are reducing leverage and adding a sixth portfolio with no leverage to study”.

Oct. 15, 2007 we wrote: “Okay, it’s time to turn the burner down.”

We offered a “leverage dwindling” warning on Oct. 26 where I explained to readers that I had eliminated even my modest leverage and wrote: “There is a final reason I liquidated my leverage now…to lead by example. Too many readers are thinking that the dollar short or dollar neutral Portfolios are only up 38% or 48% for the year. When one thinks that way they could be headed for trouble, so I hope investors will follow my lead and take greater care with their leverage.”

The November 8, 2007 Black Friday interim message warned about all the points above and more. At that time I let readers know that I had reduced the equity portion of my personal portfolio to 6%.

My published portfolio at that time was.

Real Estate 43.0%
Euro 10.5%
Emerging markets 10.0%
Danish kroner 9.9%
US$ 8.2%
British pound 6.0%
Swedish kroner 4.0%
NZ$ 3.7%
Aust. $ 1.0%
Canadian $ 1.0%

The liquid portion of my portfolio was

Cash 9.7%
Equities 6.0%
Bonds 31.7%
Emerging Equities 1.5%
Emerging Bonds 8.5%

There is a chance that equities will fall further. Yesterday’s Multi Currency Portfolio update focused on why value investments tend to drop more in downturns than the norm.

However, this is the best way to make long term multi currency profits…buy good value shares on the downside. One can never predict when the market will turn and when it does turn most market timers get in too late.

I lean towards real estate rather than shares because this is fun for me.

The way each person should position the multi currency portfolio should be based on what they love, enjoy and know best…real estate, commodities or shares. All three asset classes offer more potential than any one person can capture in a lifetime. Why not go with what brings the greatest joy in your life?

Regards,

Gary

P.S. Don’t miss our offer that expires the end of July 2008 for Fresh Ecuador Roses 50 FREE

Learn how to be a better multi currency investor.

Join us and stay at our farm for Susan Rotman’s business intuition course.

Dine with Merri’s excellent home cooking served outdoors in the cool mountain air.

outdoor-cooking

See dates for our Autumn courses and tours:

Visit the San Clemente condos and real estate from Manta north and south. Here are the condos going up.

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Ecuador Coastal-Quito Real Estate Tour

Ecuador Super Thinking + Spanish Course

Enjoy learning at our Cotacachi hotel

open-air-learning

Ecuador Imbabura Real Estate Tour

International Investing and Business Made EZ North Carolina

Ecuador Ecuador Import Export Course

International Investing and Business Made EZ Ecuador

See discounts for attending more than one course.