Tag Archive | "IBM"

Cotacachi Real Estate Protection


Cotacachi real estate protection and more.

Recent messages have looked at the growth potential of Ecuador real estate.

We have been at this area in Cotacachi where this dirt road is being paved…seeing its rapid progress.

cotacachi-real-estate

We’ll see more of the progress below. First  let’s look more at the process of  how I search for Cotacachi real estate… or actually property anywhere.

The principle of the search is vital because many people who thought of retiring will not be able to do so.  Those on fixed incomes are always those who fare worst during economic upheavals.

The US dollar is at considerable risk due to high US debt.  So too is Social Security.

In addition corporate pension are not looking good.  In the late 1990s our messages voiced a lot of concern about how corporate pensions were dramatically
underfunded.

Then the stock market recovery in the mid 2000s eased this problem.  2002 was  a low point for America’s pension funds.  The top 500 corporations had a combined  pension deficit exceeding $200 billion.   Thanks to a boom in the global economy  which allowed catch up contributions and strong stock market gains, this combined deficit turned into a combined surplus of $60 billion by the end of 2007.

The 2008 market and economic crash destroyed this surplus. It is estimated that the combined pensions of these same 500 company pensions have lost almost $265 billion in 2008.  The estimates are that 200 of these 500 pension funds are now less than 80 percent funded. They have less than 80 cents for every dollar of benefits promised.

The puts corporations between a rock and  hard spot. because The Pension Protection Act of 2006, passed due to a string of big corporate bankruptcies and pension failures in the early 2000s forces companies to fund pensions on a regular schedule.

The funded ratio s important because the 2006 law forces companies to bring their plans up to 100 percent funding in seven years, starting in 2008. They have to be t 92 percent funded this year, 94 percent next year etc.  That’s the rock.

The hard spot.  There are tow. The pensions values are way down due to stock market collapse and profits are now low or non existent.

Companies are asking Congress to excuse them from having to replenish the required amounts now and this is likely to happen.  The business reality is you cannot extract blood from a turnip nor make a corporation to pay money it does not have into a pension.

Forcing pension funding on man corporations will simply push the firms into bankruptcy.

Some firms will be bankrupt anyway and the federal government will have to insure their plans through the Pension Benefit Guaranty Corporation.  This insurance is limited so people can lose benefits.  Yet even the limited benefits are more than America can afford. This puts added pressure on the greenback thus reducing purchasing power of the pensions even more.

Yet what is the choice?  If companies are required to put new money into pensions they will not have the cash to keep business going.

This is  a serious concern for some firms like NCR Corporation, I.B.M., Rockwell Collins, the ITT Corporation, Northrop Grumman and the Pactiv Corporation.  Their pension obligations are five or six times larger than their next biggest liability.

In short pensions are millstones dragging these corporations down.  How can these firms grow and prosper in today’s competitive atmosphere when a huge chunk of their income is sucked into pension obligations rather than growth?

The bottom line…pensions lose.  History suggests they always have. Logic says they always will.

So what does one do?

#1:  Most important… stay fit… body and mind. You’ll have to keep earning your keep and you cannot do this without energy.  Do not just rely on the expensive pharmaceutical solutions either. This is why our upcoming courses have a health element.  See Beyond Logic.

#2: Diversify currencies. Usually the way pensions are ruined is through currency destruction rather than non payment.. Social Security and the Pension Benefit Guaranty Corporation will make sure you get exactly the dollars promised.  the only problem us that the dollars will by less.  Maybe much less.

#3: Diversify in global shares. History shows this is always the best long term investment.

Here is an excerpt from yesterday’s multi currency lesson on why diversifying into global shares now makes sense.

“We have not seen anything like this since the end of the 40s: dividend yields of 5 percent and more, while 10-year US government bonds offer yields of only 2.5 percent!

Will investors be emotionally able to take advantage of the stock market crash of 2008, or will recent losses make them succumb to a bear market psychology? Are there lessons to be learned from historical parallels to today’s markets?

Book value growth is the most important component of long-term stock market returns. It comprises not only the annual earnings growth but also the change in value of a company’s net assets. If the valuation of a stock does not change, book value growth and stock price performance are identical. However, as a rule, stock prices fluctuate much more strongly than the underlying book values due to changes in valuation.


The irrational investor comes into play here, driving prices up during times of euphoria or, as is currently the case, driving prices down during times of pessimism.


As a result, the first decade of the new millennium threatens to provide a negative return — during the first nine years, the return was  – 1.7 percent per year!
This would make it the first decade with negative nominal total returns after the quasi zero return for US stocks in the 30s.

Low valuations and a lack of investment alternatives

Interestingly, these negative returns have yet to reflect poor fundamentals: Over the past nine years, the companies included in the MSCI USA Index had an average annual earnings growth of 4.4 percent, cash flow growth of 6.7 percent, and dividend growth of 6.6 percent.

The decline in stock prices since the end of 1999 is due to valuations falling 50 percent over the same period. Therefore, the problem of low total returns is rooted in the past:

In December 1999, investors were willing to pay 31 times earnings and 5.8 times book value for US stocks included in the MSCI USA Index.

Today’s price/earnings ratio is 13.5 and the price to book value ratio is
1.7. These are not yet bargain valuations in absolute terms. What makes stocks attractive today is the lack of investment alternatives.

In other words, it is mainly opportunity costs, in particular the low yields of fixed-income securities, that make stocks interesting investments today.
The current price/earnings ratio of the MSCI USA Index of 13.5 implies an earnings yield of 7.4 percent (100/13.5). Even if one assumes the depression scenario of the 30s, i.e. flat stock prices over 10 years, and assumes that corporate earnings will shrink 1.5 percent per year on average for the next 10 years, the earnings yield of the MSCI USA Index would still be 6.5 percent at the end of 2018 — 2.6 times higher than today’s 10-year US government bond yields. Such a drastic earnings decline would correspond to the average drop in earnings of the companies contained in the S&P 500 Index during the decade of the depression ending in 1939 — a scenario that is overly pessimistic in my view.

Favorable outlook for US stocks

A more realistic assumption would be for book value to grow in the order of 6 to 8 percent over  the next 10 years. Based on this expectation, the Dow Jones Industrials Index stands a good chance of exceeding, over the next 10 years, its previous high of 14,164.53 reached on October 9, 2007.

From the year-end 2008 level of 8,776.39, this would require an average annual price return of only 4.9 percent (which is below the historical average), with a dividend yield of  currently 3 percent per annum thrown into the bargain.
The risk of losing money with US stocks over the next 10 years is therefore minimal from today’s perspective, while it is a certainty that investors will not earn more than 2.5 percent per annum with US government bonds over the next 10 years.

You can read this entire lesson and Keppler’s entire conclusion as a multi currency portfolio course subscriber.

#4: Diversify in real estate. History shows this is always the second best investment.

#5: Diversify residences and lifestyles… globally if you can.This is why Merri and I live in North Carolina and Ecuador. Each place has some problems and risks…but we have options as events unfold.

Remember globalization is really the way humanity should evolve.  The concept of nations, borders, superior races, cultures and creeds are fictions of the global imagination and liabilities we have inherited from our past.   Modern technology means we should deal with whoever…anywhere in the world serves us best.

As the world has evolved we have progressed but bad times hinder this type of growth. This creates opportunity if we stay focused on reality. Invest in globalization. Sell that which hinders globalization short!

Match your living to your investing.  Go where you choose. I like Ecuador for its sweet people, great weather, natural beauty, fresh food and low cost living. North Carolina offers small town USA benefits were we can enjoy nature and if necessary even feed ourselves in the worst times.  This is why Merri and I are in Ecuador. We love the lifestyle and the real estate opportunity. 

We also love the progress here in Cotacachi.  Here is that paved road today.

cotacachi-real-estate

They have turned the road and a great deal of the cross street is cobbled now as well.

cotacachi-real-estate

This work is done by sweet, humble people who just get to work and get the job done.   There is no crew of four, with one working and three standing round, here.cotacachi-real-estate

Learn more about Ecuador as an Ecuador Living subscriber.

#6: Hold some commodities as insurance.
We’ll probably never need it…but it makes us feel better. I keep more than enough gold socked away and expect my children will inherit it. So far it has been my worst investment over the last 30 years until I add in the value of sleeping well at night instead of worrying…”am I guessing wrong”!

#7: Remember that every day of life is a gift!
We do not need big cars, loads of shopping and new things and expensive materialism to be happy.  Turn your passion into profit and do what you love.  The prospect of working, serving and being useful beyond this age that society has determined we can be and should retire should be fun and exciting.

I look forward to sharing this excitement with you.

Gary

Join us in Cotacachi this February.

Feb 9-11 Beyond Logic Keys to More Wealth & Better Health

Feb. 13-15 International Business & Investing Made EZ

Feb. 16-17 Imbabura 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

Sunny Multi Currency Investments


Sunny multi currency investments are here. Yet many multi currency investors are missing the opportunity because of dark clouds created by oil.

“The price of sex is death.”

One must ask what does this have to do with multi currency investing?

This was the opening statement in a health seminar conducted some years ago at our farm by Dr. Jay Glaser. Jay is an MD, Ayurvedic physician and one of the best healers I know.

Every year we try to sponsor a course conducted by some great teacher. one year we had an Ecuador Yatchak, Alberto Taxco. Another year a Vedic Priest, Dr. D.S. Dixit spoke. Our astrologer Blaine Watson taught a course another year and last year Vaidya R.K. Mishra taught a course. Once Bob Shane a scientist taught a course on quantum healing. Here is Blaine Watson and Vaidya Mishra teaching at our farm.

Multi-currency-courses

Here Thomas Fischer teaches multi currency investing.

multi-currency-teacher

Delegates enjoy a coffee break on our front porch

multi-currency-delegates

This year Susan Stanton, a business intuitive, also an attorney instructed a group here at the farm.

Merri and I cook and take care of our guests, plus gain the benefit of listening in as we work.

One interesting aspect has emerged from every one of these courses, the underlying truth of frequency…the idea of a start that concludes with a transformation…a beginning followed by an epic struggle that denies an end. The life of everything, living, business…technology…nations is ruled by this process…birth, growth, stability and finally transformation.

This is a universal truth…the kind that wise investors seek when they invest.

When we see something in the establishment breaking down, we have two choices.

#1: We can be afraid and try to stop or ignore nature’s inevitable evolution.

#2: We can ask what is being born from this death? What Phoenix lays n the ashes?

There is opportunity in every part of the cycle but nature gives greater rewards from creation.

Creation is the universal driving force!

Henry Ford made a bigger fortune from the end of the horse and buggy than collectors who preserved buggies and are holding gold mines in their collectables now.

This brings me to the oil crisis. There is a lot of fuss about how society is going to survived if we have reached peak oil. The noise about this risk reminds me vaguely of the “how will we survive Y2K” ruminations of the late 1990s.

To many forget that every evolution creates fear. Even the oil slurping automobile had trouble in its infancy. In England (The best early car designs were all in Europe and England…not the USA) there was stiff opposition from companies running horse-driven coaches.

These horse and buggy businesses then were the establishment. They felt threatened just as the oil using establishment does now.

In the mid-1800s toll fees for “early cars” were steeply hiked. Britain’s Red Flag Act was passed in 1865. The Act limited speeds to about four miles per hour required that every “road locomotive” have three attendants – one to steer, one to stoke and one to walk 150 feet ahead of the vehicle, bearing a red flag, signaling the driver when to stop.

Another auto act passed 13 years later did away with the red flag, but still required a man on foot to warn horse-driven wagons.

Now Opec and associates may have shot themselves in the foot by letting oil prices rise too far. Eventually oil consumption has to be reduced…because of supply and environmental fundamentals.

The recent high cost of crude oil may have accelerated the shift.

Headlines are appearing about multi currency companies like:

“GM eyes electric car future, joins with power companies on Volt technology”

“Prius to get solar-powered air conditioning”

“Toyota promises plug-in hybrid vehicle”

A recent article by Paul Davidson, in USA TODAY is especially important. This article says:

“Semiconductor companies are rushing into the solar power business faster than a Pentium-driven computer, promising to turn a niche form of renewable energy into a mass-market product.

“Since May, computer powerhouses Intel (INTC), IBM (IBM) and National Semiconductor (NSM) have barreled into solar energy, joining hundreds of fellow technology mainstays. Virtually every chipmaker is weighing a solar play, says Rhone Resch, head of the Solar Energy Industries Association.

“We have a classic Silicon Valley land rush,” says T.J. Rodgers, CEO of Cypress Semiconductor (CY), which owns 56% of SunPower.

“Drawing the stalwarts is solar’s 40% annual growth, says Gartner analyst Jim Hines. The 50-year-old chip business is expanding only about 5% annually after years of torrid growth.

“Like the computer chip, solar cells use silicon or another semiconducter as a basic part. By replicating the chip industry’s high-volume automated manufacturing, tech companies can deliver solar at prices competitive with grid power faster than the industry’s current 2010-15 target, he says.

“IBM, in May unveiled a breakthrough concentrated photovoltaic (CPV) system that magnifies sunlight to 10 times the energy from today’s CPV units, cutting the number of solar panels needed. A liquid metal absorbs heat so the semiconductor doesn’t melt, technology IBM developed to cool high-power computer chips. IBM last month announced a new technique for thin-film solar — which uses 1% of the semiconductor in standard panels — to cut costs and boost efficiency. IBM says it will license both technologies.

“Intel. The No. 1 chipmaker this month said it’s investing $38 million in German solar panel maker Sulfurcell. That followed the June spinoff of its own fledgling solar unit.

“National Semiconductor. The chip giant last month said its new technology can boost energy output in solar panels by minimizing losses from shade. It drew from its expertise in power management in cellphones. Executive Ralph Muenster wants to make passive solar systems “smarter.”

The big guns are moving into solar energy. Watch for multi currency investments in this field.

We’ll see more on why and how this can bring profit to multi currency investors in tomorrow’s message.

Until then, Good multi currency investing.

Gary

Join us October 3-5 for the Blue Ridge leaf change.
International Investing and Business Made EZ North Carolina

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See this 150 acre property for sale at $50,000 on our Imbabura tour.

Ecuador Import Export Cours

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Learn how to import roses and dozens of other products in our import export and Business Made EZ courses.

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Multi Currency Portfolio Review


Multi Currency portfolios are vital in today’s global and inflationary economy.

Yet its hard for Americans to invest multi currency portfolios abroad.  US authorities place such stringent regulations on banks that have US clients that many overseas banks no longer open accounts for Americans.

This is likely to get worse because a federal has now authorized the IRS to use John Doe summons to request information from overseas banks about U.S. taxpayers who may be using Swiss bank accounts to evade federal income taxes.  These summons are used to obtain information about possible tax fraud by people whose identities are unknown.  This is unprecedented.  How can a bank know if an account holder  has hidden an account from the IRS?

There are still easy ways to invest in multi currency portfolios.

The first is buying shares in a global company that earns outside the US.

General Electric for example has huge non dollar earnings. More than half itscome from abroad.  This is true of many US shares you can buy on a US  stock exchange.  IBM, for example derives 65 percent of its revenue from overseas.  Sch a share is a multi currency portfolio unto itself.

Another multi currency tactic is to buy a mutual fund that invests only in non dollar bonds or shares.

Take the Dodge & Cox International Stock (DODFX) Fund as an example.

This fund invests in a diversified portfolio of medium-to-large non-U.S. equities. This billion dollar no  load mutual fund had an average annual growth of over 24% per annum over the last five years. Investors can start with $2,500.

Overseas banks still provide extra privacy, asset protection and help investors access the greater currency experience in investing and lending that many non dollar bankers have.

Jyske Bank, Denmark’s second largest bank,  for example has registered a subsidiary (Jyske Global Asset Management or JGAM) with the American SEC so it conforms to US regulations.

This is a tax neutral opportunity. American account holders must report income and earnings just as they would a US account. W9s must also submit if account holders invest in US shares, funds or bonds.

Yet beyond the tax man, investors have their assets away from prying eyes and held in a legal system that offers asset protection.  Banking may be safer as well. Denmark is ranked by Moodys as one of the safest nations in which to bank.

JGAM’s service offers risk profiled portfolios ranging from low risk (LR) to speculative (SP) and with or without US dollar investments included..  JGAM managers use a top down global economic analysis that looks at markets and financial conditions around the world and recommend asset class allocations for each risk level.  Then they select individual shares/mutual funds and exchange traded funds (ETF) for these allocations.
In all there are 17 portfolios opportunities each month.  Investors, based on their risk profiles, choose what percentage they want in fixed income, equities, alternatives (commodities metals etc) and cash.

Here for example are JGAM’s latest multi currency portfolio asset allocation breakdowns.

Low Risk Multi Currency Portfolio:  Fixed Income 70%,  Equities 20%,  Alternatives 5%,  Cash 5%.

Medium Risk Multi Currency Portfolio: Fixed Income, 40%,  Equities 50%,  Alternatives 5%, Cash 5%.

High Risk Multi Currency Portfolio:  Fixed Income  10%, Equities 80%,  Alternatives 5%,  Cash 5%.

Speculative Multi Currency Portfolio:  Fixed Income  20%, Equities 60%,  Alternatives 10%,  Cash 10%.

Let’s look at the low risk (LR) portfolio in more detail.

Normally Jyske would recommend that 80% to 100% of low risk portfolios are in fixed income.  Due to global inflation the managers are currently suggesting a tactical shift to underweight bonds, and overweight alternatives (commodities) and cash.

Then the JGAM managers offer a list of good value shares, bonds, funds and ETFs  that investors can choose.

Each equity is ranked as low medium or high risk to help the account holder to further refine their asset allocation.

You can see the low risk portfolio list here.

A similar process is used for bonds denominated in eleven currencies, US dollars, euro, British pounds,  Australian dollar, New Zealand dollar, Russian ruble, Brazilan real, Hungarian forint, Turkish lira, Icelandic kroner and South African rand.

This system allows investors to have multi currency portfolios that are custom fit to their circumstances and needs.

Now comes the interesting part about banking abroad….multi currency borrowing as well as investing.

For many investors, a multi currency portfolio is enough.  However some want added leverage and Jyske’s system allows multi currency borrowing.

Jyske will accept the portfolio as collateral and lend to leverage the investments at the following interest rates, depending on the amount borrowed:

US$                                  4.125%  to 4.875%
Swiss franc                       4.250%      5.000%
Japanese yen                   2.500%      3.250%
Singapore $                      3.000%      3.750%

Jyske’s current loan recommendation is to borrow 50% Swiss francs, 30% US$ and 20%  Japanese yen. At the median interest rate this creates an average loan rate of 3.58%.   Such loans can have a magical impact on performance even with low risk portfolios.

Say that a low risk portfolio of $100,000 yields 5%.  If $100,000 is borrowed, the portfolio now has $200,000 and at 5% earns $10,000 a year.  Interest costs are $3,580, so the return on the $100,000 is bumped up to $6,420 or 6.42% instead of 5%.

If $200,000 is borrowed the $300,000 portfolio yielding 5% earns $15,000 a year with loan costs of only $7,160. That means the $100,000 now earns $7,840 or 7.84% double the yield without leverage.

When markets are rising such leverage can create spectacular profits in some of the riskier portfolios. In 2007, a Green Portfolio consisting of five environmentally oriented equities, that I created with Jyske’s help, using two times leverage, rose 266.23% in one year!

Plus in many instances a borrowed currency can lose value versus the invested assets so there is an extra forex profit.

Yet forex returns can result in losses as well.   The leverage creates added risk and volatility. That same green portfolio that rose so fast, also dropped 100% in just a month during 2007 before rising again 150% in the next three months. Plus there are extra fees to think about when borrowing so always check with your banker first.  Consider the added risk carefully and never leverage more than you can afford to lose.

You can get more information on Jyske Bank from Thomas Fischer, Senior Vice President at fischer@jgam.com

A rising global population and growing global economy creates stress on world resources and encourages inflation. The same demographic stresses also put downwards pressure on the US dollar and this creates even more inflation.

Fortunately the same technology that helps create these pressures also allows us to survive and prosper from inflation through multi currency investing.

Gary

P.S. Join me with JGAM at our next two International Investing and Business Made EZ Courses.

multi-currency-meeting-in-autumn

Enjoy the leaf change this October and International Investing and Business Made EZ North Carolina

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Or enjoy our hotel in Ecuador in November and International Investing and Business Made EZ Ecuador

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