Tag Archive | "Emerging Markets Equities"

Emerging Market Value Analysis – Spring 2015

Maturity is an important reason to invest in value so here is the Spring 2015 Keppler value analysis of emerging markets.

Before we start remember the great value of your mother and Ecuador roses!


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Value, Maturity and Wealth

As we mature, our financial abilities and objectives shift.

First, we can lose some of our financial skills.  A New York Times article “Cognition Slips, Financial Skills Are Often the First to Go” (1) says that “studies show that the ability to perform simple math problems, as well as handling financial matters, are typically one of the first set of skills to decline in diseases of the mind, like Alzheimer’s.  Research has also shown that even cognitively normal people may reach a point where financial decision-making becomes more challenging.”

The article tells of one 80 year old, who losing these skills married a much younger woman who cashed $40,000 in blank checks sent by his credit-card issuer and emptied the contents of his $123,000 annuity, leaving the man with little more than a giant tax bill.

The truth however is that our metal powers do not have to diminish with age.  They can grow better.   Gene Cohen MD, PhD, a world authority on mental aging as director of the Center on Aging, Health and Humanities at George Washington University has written a book “The Mature Mind” (1).  The book shows that lost of mental skills with age is a myth. The book shows how, as we get older we actually get better at thinking.

Cohen shows five activities to sustain power, clarity and subtlety of mind:

* Exercise mentally
* Exercise physically
* Pick challenging leisure activities
* Achieve mastery
* Establish strong social networks

This is one reason Bob Gandt and I have written a book on how to achieve mastery. Watch for its release.

Cohen’s book describes how intelligence improves in four “age stages”.

(1) Re-evaluation, from mid-thirties to mid-sixties, where we realize our mortality and reconsider our lives.

(2) Liberation, from mid-fifties to mid-seventies, where the question is ‘If not now, when?’ as people experiment with new ways.

(3) Summing up, from late sixties through eighties, where people seek to share, give something back and complete unfinished business.

(4) Encore, from late seventies onwards, where major life themes are re-stated and re-affirmed.

In other words, as we mature, “age stage advancements” allow us to see the forest as well as the trees and understand bigger pictures so we are not trapped in personal and petty issues, like whether a particular stock will move up or down today, tomorrow and the next day.

As our thinking matures, our horizons expand and long term strategies that trust in value allow us to protect our finances but spend our time on bigger issues than the day to day movements of our portfolio.   

This is one reason why once a quarter we review all developed and emerging equity markets that Keppler Asset Management’s Global Market Value analyses.  If you are a new reader, you can learn more about Keppler Asset Management by clicking here.  Keppler Asset Management

Once you have determined how to find value investments, one of the more important parts of your strategy is to determine what portion is investment is in developed markets and what portion in emerging markets.

Currently emerging markets (based on the MSCI emerging market index) are selling at 1.33 price to book value and at a 13.9 price earnings ration.  The average dividend yield is 3.2%

Developed markets (based on the MSCI market index) are selling at 2.28 times price to book value and at a 19.3 times price earnings ratio. The average dividend yield is 2.37%.

Emerging markets offer better value than developed markets.  This is because they tend to be more volatile and have greater short term risk.   Here is a three step approach to deciding which and how much emerging markets should be in your portfolio mix.

#1:  Select from the Top Value Markets.  They statistically offer the best opportunity of all.

#2: Determine how many emerging markets you’ll have in your portfolio.  Keppler’s analysis suggests equal weighting of the top value emerging markets.

#3:  Calculate the best percentage of emerging markets to developed markets in your portfolio.  The typical weighting is 70% in developed markets and 30% in emerging markets.  Review your goals and circumstances to determine the best weighting for you.

You can see Keppler’s Developed Market Analysis here

Here is the Keppler Developed Market Good Value Analysis – Spring 2015.

Recent Developments & Outlook

After a lackluster performance in 2014, emerging markets advanced strongly in the first quarter 2015.

The MSCI Emerging Markets Total Return (TR) Index advanced 4.9 % in local currencies, 2.2 % in US dollars and 15.2 % in Euros.

In the last fifteen months, the MSCI Emerging Markets TR Index was up 10.3 % in local currencies, flat in US dollars and up 28.3 % in Euros.

The MSCI Emerging Markets TR Index (December 1988 = 100) now stands at $ 1,334 and € 1,370.

The Euro accelerated its recent downtrend, dropping 11.2 % versus the US dollar in the first quarter 2015 and now stands at 1.0740 — down 22.1 % compared to its level of 1.3780 at the end of 2013.

Among the three regional indices, Asia and Europe, Middle East and Africa (EMEA) both advanced 5.7 % in the first quarter 2015, while Latin America gained 1.2 %.  Compared with year-end 2013 levels, Asia gained 13.8 %, EMEA advanced 8.6 % and Latin America eked out a 0.2 % gain.  Performance is in local currencies unless mentioned otherwise.

Seventeen markets advanced in the first quarter and six markets declined.

The best performing markets were Hungary (+22.0 %), Russia (+15.7 %) and the Philippines (+9.8 %).

Greece (-20.4 %), Colombia (-11.6 %) and Turkey (-6.5 %) performed worst last quarter.

Over the last fifteen months, eighteen markets advanced and five markets declined.

Egypt (+43.9 %), Indonesia (+39.2 %) and the Philippines (+39.0 %) performed best, while Greece (-45.6 %), Colombia (-12.8 %) and Korea (-2.6 %) came in last.

The Top Value Model Portfolio based on the Top Value Strategy gained 5.4 % in local currencies, 0.7 % in US dollars and 13.4 % in Euros in the first quarter 2015.

In the last fifteen months, the Top Value Strategy gained 5.0 % in local currencies, lost 12.0 % in US dollars and advanced 12.9 % in Euros. The Top Value Model Portfolio (December 1988 = 100) now stands at $ 23,506 and € 24,126. For details on the recent performance of the national MSCI Emerging Markets indices, benchmarks and strategies, please see page 6.

There were no changes in our country ratings last quarter.

The Top Value Model Portfolio contains twelve markets — Brazil, Chile, China, Colombia, the Czech Republic, Hungary, Korea, Malaysia, Poland, Russia, Taiwan and Thailand — at equal weights. According to our analyses, an equally-weighted * combination of these markets offers the highest expectation of long-term risk-adjusted performance.

* Note: Due to high geopolitical risks, we have assigned lower than equal weights in the portfolios we advise to the four Eastern European markets Czech Republic, Hungary, Poland and Russia, which suffer most from the sanctions against Russia.

The table below shows how the Emerging Markets Top Value Model Portfolio compares to the MSCI Emerging Markets Index and to the MSCI Developed Markets Index at the end of the first quarter 2015, based on selected assets and earnings valuation measures:

keppler emerging market chart

Click on image to enlarge.

Based on our valuation and return analyses, the asset class “Emerging Markets Equities” is now undervalued by 24 % versus the MSCI World Index.

Furthermore, our Emerging Markets Top Value Model Portfolio is now undervalued by 13 % versus the MSCI Emerging Markets Index and by 34 % compared to the MSCI World Index of the developed markets. This bodes well with regard to potential outperformance over the next three to five years for the emerging markets in general and for the Emerging Markets Top Value Model Portfolio in particular.

Michael Keppler
New York, April 22, 2015



(1) New York Times As Cognition Slips, Financial Skills Are Often the First to Go

(2) The Mature Mind

Mature mind

Get “The Mature Mind” at Amazon.com

The Ultimate Investing Secret

The ultimate investing secret is the simple fact that investment opportunities come and go in cycles.  

Because we have been watching the trends for decades, we spot many distortions  we saw decades ago as they create repeat opportunities.  For example, our 1986 report “The Silver Dip” showed readers how to turn $250 into over $45,000 in a year.   When we spotted the same repeat distortion in silver’s price in 2015, we issued our report “Silver Dip 2015”.   Those who acted on the report made as much as 200% in 2016.

There is another phenomenal distortion that has been building for a number of years.   Here is how I (and you can as well) am cashing in on this trend.

“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.

Then the cycle ended.  Warren Buffet 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!

Now I see those circumstances headed our way again.

The Dow Jones Industrial recently soared past 20,000 and reached an all time high.   So why aren’t average investors all rich?   There are several answers.  First, even though the Dow has peaked, for the last 17 years the US stock market has been in a bear trend.  You’ll see why in a moment.  Another reason why the investors have not done so well is because of currency loss.

One final reason why profits have not been so good.  Someone, probably someone you trust, has been stealing from you.

One of the biggest obstacles in profiting from the upcoming circumstances has been and remains the financial system.  The reality is that banks and brokers have been structuring investments that are sure to lose.  They sell you on these investments and then another division of the very same bank (or broker) that recommended the investment, bets against you.   The bank knows that the investment is toxic.  To add insult to injury, many of these same institutions cheat you on the way in and the way out (when you buy and sell a share) of the bad investment.  Most brokers and bankers are interested in your money making them rich, not in helping increase your wealth.

Three Patterns Create 50% profits.

Despite the predators on Wall Street who are waiting to take big gouges out of your savings and wealth, equities are still the best place to invest for the long term.  This chart from the 24 page Keppler Asset Management Asset Allocation Review shows that over the past 80+ years equities have dramatically outperformed other types of investments.


Click on image to enlarge.

Good investments require a relentless search for value.   Your investments have to be good enough to reap an outstanding profit even after the parasites siphon off their part.

To take advantage of the once every 17 year circumstances, I chose to track Keppler Asset Management who continually researches developed and emerging markets globally.  Keppler is one of the best market statisticians in the world and numerous very large fund managers use his analysis to manage funds such as State Street Global Advisors.  Keppler compares the value of each share in each market based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return.  From this study of monumental amounts of data Keppler develops a Good Value Stock Market Strategies.  The analysis is based on long term, rational, mathematical facts and does not worry about short term ups and downs.

From Keppler I learned that market timing is not the way to get these high profits.  Another graphic from the Keppler Asset Allocation Review explains why.


Click on image to enlarge.

A dollar invested 88 years ago in Treasury bills rose to $20.58.  The same dollar invested in U.S. stocks over the 88 years grew to be was worth $4,677, UNLESS you missed the best 43 months.  Literally all of the the Dow’s growth in 1,056 months came in 43 of those months.   Your odds have been one in 24, better than roulette perhaps, but not good enough.  Plus even after these odds, the predators are going to take their cut.  You have to ask, “Am I that good at timing?”

The better alternative to timing is to invest in long term indexing based on value.  Long term strategic investing in market indices reduces the amount of trading.  Low trading activity is important because trades are where investors are most vulnerable to predatory tactics.

A part of the long term strategic trading is to invest in low fee diversified Country Index ETFs.  This simplifies the search for value because it focuses research into lumps.

A comparison of US versus German stock market indexes gives an example of lump research and you can create good value, low cost, diversified portfolios that offer maximum potential for profit as they reduce risk.

Keppler’s research shows that Germany’s stock market is a good value market.  Keppler lumps all the shares (or at least 85% of the shares) into the calculations.  There is no attempt to select any one specific share.  Keppler’s research shows that the US stock market index (a lump of about 85% of all the US shares) is now a poor value.

Germany has the world’s fourth largest economy.  The country is the third largest exporter in the world and has recorded some of the highest trade surplus in the world making it the biggest capital exporter globally.  Yet German shares have been overlooked.  German share prices are good value.

For example, recently the German Stock Market had a relative price to book value ratio of  .78,  a relative price earnings ratio of  0.87 and a relative dividend yield of 1.12.  The US Stock Market has a much higher relative price to book value ratio of 1.29, a relative price earnings ratio of 1.07 and a relative dividend yield of 0.81.  German shares cost much less, compared to the values and earnings.  German shares pay much higher dividends as well.

Keppler predicts that the US Stock Market (which is ranked as a sell market by Keppler) will have an annual index gain for the next five years of  3.1% and a total return (with dividends) or a total five year return of 21.7%.  The same calculations for the German Market predicts an average annual index gain over the next five years of 7.5% and a total return (with dividends) or a total five year return of 47.3%.

Which would you rather buy,  a 47.3% return sold for 78 cents on the dollar or a 21.7% return sold for $1.29 on the dollar?

You can forget about any specific share in the US or Germany and invest into an index (in this case the Morgan Stanley Capital Index) which represents about 85% of all the shares traded on the exchange.

You can invest in ETFs that passively invest in all the shares of the index in stock markets that offer good value.  iShares investment company for example has  an ETF that invests in 85% of the shares traded on Wall Street.


This ETF is called the iShares USA (symbol EUSA) and in this example rose from $22.91 to $43.40 or 89% in the past five years.

iShares also offers an ETF that invests in about 85% of the stocks listed on the German Stock Exchange (Symbol EWG).  EWG rose  from $19.70 to $28.13  or 42% in the past five years.


Keppler’s lump research shows that Germany is a good value market.   One simple (even very small) investment in iShares Germany MSCI Index ETF gives you a portfolio  of almost all the shares traded on Germany’s largest stock exchange in Frankfurt.  This ETF is a share traded on the New York Stock Exchange.  The ETF invests in 85% of the shares in Germany.  This ETF is a passive fund that does not try to outperform the growth of the German Stock Market.  The managers simply track the investment results of the MSCI Germany Index.  The MSCI Germany Index is designed to measure the performance of the large and mid cap segments of the German Index which is composed of the stocks of 54 different German companies and covers about 85% of all the German equities.  Germany’s ten largest companies compose about 60% of the index.  These ten companies are:  BAYER (Health Care) composes 9.91% of the index – SIEMENS (Industrials) 7.89% – DAIMLER (Consumer Discretionary) 7.04% – BASF (Materials)  6.81% – ALLIANZ (Financials) 6.65% – SAP STAMM (Info Tech) 5.69% – DEUTSCHE TELEKOM (Telecom Srvcs) 4.46% – DEUTSCHE BANK NAMEN  (Financials) 3.66%  – VOLKSWAGEN VORZUG (Consumer Discretionary) 3.18% – BMW STAM (Consumer Discretionary)  3.15%.

You lump your research.  You lump your investment.  This makes it easy to capture the powerful economic circumstances that are unfolding now.

Just investing in Germany is not enough.  There are currently ten good value developed markets, Australia, Austria, France, Germany, Hong Kong, Italy, Japan, Norway, Singapore and the United Kingdom.   Plus there are 11 good value emerging markets.  With even a couple of thousand dollars you can easily create a diversified portfolio in each or all of these countries with Country Index ETFs.

Investing in many stock markets through ETFs gives you opportunity in the second pattern of the falling US dollar.  Preserving the purchasing power of your savings and wealth requires currency diversification.

The strength of the US dollar over recent years is a second remarkable similarity to 30 years ago.   In 1980, the 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 has been growing, is seriously overdue and could create up to 50% extra profit if you start using strong dollars to accumulate good value stock market ETFs in other currencies.

For example because of fears about the euro, EWG, the German ETF dropped 9 percent in 12 months.  These declines are created by currency concerns.  When the euro regains strength, the shares have the potential to appreciate even more.

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.  I kept the report short and simple, but includes links to 153 pages of Keppler Asset 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 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 hot 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.”

buy Three Economic Patterns Create 50% Profit

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 “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.

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I look forward to the next 17 years and sharing how to have more than enough money for the rest of your life.