Tag Archive | "investment bank"

Global Multi Currency Economic Update


Here is a global multi currency economic update.

See below why I show this chart again and again.

The biggest of the seven trends I have cashed in on over the past 42 years has been the declining US dollar.  This chart of the greenback’s fate from the Grandfather Economic Report says it all. The buck has collapsed over the decades and anyone who has bet against it, as I have has reaped a fortune, except…

multi-currency-chart

at our June North Carolina Quantum Wealth seminar we saw how sometimes such as from 1979 to 1985 the US dollar was strong. Speculators who just bet against the buck were bucked out of the profit zone.  Anyone who shorted the dollar… long term… in 1979 had to wait until about 1987 before they saw  it drop below the 1979 level.  So we cannot just randomly bet against the dollar and expect automatic profits.

There are risks to betting against the US dollar as speculators are seeing now.

This is why at the Quantum Wealth course, I outlined seven places to invest now.

Only one of these might include speculating against the US dollar, which is #1:  Multi Currency Interest Spreads.

#1: Multi Currency Interest Spreads
#2: Value Markets
#3: Emerging Markets
#4: Wellness
#5: Water Alternate Energy
#6: Truth & Cohesion
#7: Real Estate

There are several ways to speculate against the greenback.  Personally I use the multi currency sandwich. I borrow dollars at low interest rates and invest the funds on dollar related currencies…. currently the New Zealand, Canadian, Australian dollars and Mexican peso.

This is a slow, partly hedged speculation versus the dollar… but forex profits are not my main goal.   The interest differential is what assures my profit… if I can wait for the dollar to drop.  My loan cost on dollar loans is currently below 3%.   My average yield is 6.31% so I am paid about 3.31% to borrow the dollar.

Here is an example of how this works.

100K ea. MXN BONOS  10% Due 2024 117  = 8%
EUR INVT BNK AUD 6.0 2013 101.49  5.56%
EUR INVT BNK NZD 6.5 2014 104.77  5.38%

Average 6.31%  + $18,930

Loan cost      $   9,000

Return           $   9,930

Plus Forex Potential

There is some new bad news to this for US investors.  Regulations on overseas banks by the US have become so extensive that many non US banks will no longer accept Americans.  Even Jyske Global Asset Management has had to increased its minimum account for advisory clients to $ 1 million.
The news is not all bad.  Non Americans can still use this technique and Americans can also borrow low and deposit high IF they let JGAM make the portfolio decisions.

To help US investors, JGAM provide managed portfolios with a $100,000 account minimum ($200,000 if they want loans). This is compared to the minimum of 150,000 euro required for non US investors to start.

In either case these minimums are among the lowest for investment banks.

To get complete details, US investors should contact Thomas Fischer at fischer@jgam.com

Non US investors should contact Rene Mathys  at mathys@jbpb.dk

Investors with smaller amounts can best diversify through ETFs and Investment Trusts on the US and UK stock exchanges.

There is some other really good news though that we looked at in our June Quantum Wealth course.

The key to borrowing low and depositing high is to find strong currencies… with low interest rates… when their strength is not supported by economic fundamentals. Right now three currencies are in this state… the US dollar, the Swiss franc and the Japanese yen.

Jyske and JGAM (and I ) are taking advantage of this fact in their managed and discretionary portfolios.

Lars Stouge, the President of JGAM, recently sent me a full analysis of the US dollar and I have copied it here for you… so you can see why the current US dollar strength creates unusual opportunity.

Analysis on USD/EUR

14 June 2010 By Lars Stouge

Summary

Historically the US dollar (USD) has shown a down-trend against first the German D-Mark (DEM) and later the euro (EUR), periodically interrupted by significant appreciations. However, lately the USD has strengthened again moving close to its fair value. Relative prices, real bond yields and yield curve differences between the US and the eurozone explain to some extent movements in the USD.

If the business cycle in the US moves further ahead of the eurozone, it is likely that real bond yield spreads and yield curve differences will become even more favorable for US securities, increasing the demand for the USD.

History

In 1972 the Bretton Wood system was abandoned and the USD became a free floating currency against most major currencies including the DEM. In 1999 the DEM was substituted by the EUR when a single currency area was created in Europe, the eurozone.

The graph below shows the development in the USD since 1970 against first the DEM and later (since 1999) against the EUR, indexed with 1972 at 100. The graph slopes downwards with a total loss in the value of the USD of almost 60%. However, the down-trend was interrupted by large movements up in both 1980-85 and 1995-2001.

multi-currency-update

Purchasing power

The Purchasing Power Parity (PPP) theory explains the long trend development in the USD. As prices in the US have risen more than in Germany and the eurozone, the US has lost purchasing power and therefore, the USD has fallen in value to compensate for the loss in the US competitive position.  

multi-currency-update
The graph shows how well the estimated1 PPP explains the downward slope in the USD. When the USD index moves above the PPP-line, the USD is overvalued (i.e. too expensive compared to relative prices) and when the USD moves below the PPP-line, the USD is undervalued. At the present price level of approximately 1.20 USD per EUR we are close to parity, i.e. at fair value.

In the graph below we have taken out the PPP component of the USD by measuring the USD-index relative to the estimated PPP. The graph shows that in 1972, 1981-1986 and again in 1999-2002 the USD was overvalued. The rest of the period the USD was undervalued.
multi-currency-update

Estimated by use of simple linear regression.

Interest rates and bond yields

The deviation from PPP could be caused by spreads in (real) interest rates and (real) bond yields. When investors expect a yield or interest rate pickup on a currency, they will invest until expectations of future depreciation correspond to the yield or interest rate difference (this is called the Interest Rate Parity, IRP). Until the level of IRP has been reached investors will buy the currency with the high (real) yield or interest rate and the currency
increases in value.

We have examined how short interest rate spreads and long bond yield spreads, both in nominal and real (i.e. inflation adjusted) terms, correlate with the PPP deviation of the USD. To cut it short, the analysis shows that the real bond yield spread best explains the development. The graph is shown below. For example the overshooting USD in the beginning of the 1980’s is explained by the real bond yield spread in favor of the USD.

Other considerations

However, the model has its limitations. As can be seen from the last graph not all USD movements around its PPP value is explained by the real bond yield spread. For example in the beginning of the 1990’s the USD continued to depreciate to become more undervalued despite a favorable movement in the real yield spread.

Also, when the USD became overvalued up to and after year 2000 it happened without a movement in the real yield spread. There are several reasons why the model has its limitations as explained in the following.

One reason is that many other factors than the real yield spread influence a currency. Relative growth, productivity, balance of trade and payments, debt burdens and a number of other factors determines the price of a currency. However, many of the factors not considered directly in our model do indirectly have an influence, as these factors also determine relative price levels, inflation, interest rates and bond yields. Therefore, indirectly our model captures other determining factors.
multi-currency-update
Another reason why the model has its limitations is that the price of a currency today is determined by investors expectations of future real bond yields and other possible determining factors. In our simple analysis we have used actual price levels and bond yields. It is difficult to measure or estimate market expectations and only if markets are efficient and investors are rational (i.e. never make mistakes) then expectations will be fulfilled.

To sum up, one should be careful not to rely too much on a simple model as the one presented in this memo. However, even more sophisticated models also lack prediction power.  Actually, in the very short run (days and weeks) analysis prove that the best prediction in the currency market is to flip a coin.

Yield curves

The aspect of expectations can to some extend be modeled by examining yield curves. A yield curve reflects the markets expectations of future interest rates. E.g. if the long bond yield is higher than the short interest rate it is an indication that investors expect short term interest rates to rise. Therefore, by comparing yield curves we get a measure of which currency should expect to see the largest rise in interest rates. The graph below shows the yield curve difference between the US and the eurozone plotted against the USD’s deviation from PPP.

Except from the period 1991-93 where the yield curve in the US versus the eurozone formed a temporary peak, the yield curve difference explains well the development in USD’s deviation from Purchasing Power Parity.

Conclusion

In 2010 the USD has strengthened to a fair value against the EUR close to 1.20 USD per EUR. We assess that the USD could become even stronger and become overvalued. This could happen if the US economy continues to move ahead of the eurozone and cause the real bond yield and the yield curve in the US to distance itself even further from the eurozone.

Short term free floating currencies move like a random walk making today’s price the best prediction of tomorrow’s price.


multi-currency-update

However, we warn against using the simple model presented in this memo as a prediction tool. The prime
purpose of the model is to evaluate if the USD is over, under or fair valued.

The phrase that jumps at me in this analysis is:

Actually, in the very short run (days and weeks) analysis prove that the best prediction in the currency market is to flip a coin.

Fundamentals and value rule the direction of currency parities.  Human emotions rule the swing of currencies as parities become overbought and or oversold.  When you can be paid to borrow a currency that has become strong but is not supported by fundamentals (like borrowing the Swiss franc, Japanese yen or US dollar to invest in higher yielding currencies) you can take advantage of these human emotional errors.  

Join Merri and me with Thomas Fischer in Copenhagen this August or next October in North Carolina when we will update our portfolio positions.

The strong US dollar makes this the year to enjoy Europe and Thomas Fischer at Jyske just sent me this note: Gary due to the increasing US dollar, the cost for our August seminar in Copenhagen for Americans has dropped from about $2,050 to $1,700, a 15% discount. (THE COST INCLUDES MOST OF THE FOOD, TRIPS, MAKING THE CONFERENCE A GREAT BARGAIN.)

I love attending these seminars because of the great speakers.

This year speakers include will be Bjorn Lomborg known as the “Skeptical Environmentalist.”  See more on Lomborg here.

Another speaker will be Jeff Rubin. Rubin was the Chief Economist for CIBC, a North American investment bank for 20 years. See more about Rubin here.

Kenneth Rogoff  the Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University and former Chief Economist for the International Monetary Fund is also a speaker. See more at Rogoff.

Because updating multi currency strategies is so important in today’s investing world, another speaker is Daniel Brehon, the foreign exchange strategist, for Deutsche Bank AG. Deutche Bank is Germany’s largest bank and one of the laregst banks in the world with 1,999 branches situated in 70 countries.  The bank has significant regional diversification and substantial revenue streams from all the major regions of the world.

They have established strong bases in all major emerging markets, and therefore have good prospects for business growth in fast-growing economies, including the Asia-Pacific region, Central and Eastern Europe, and Latin America.

In Europe, Deutche Bank is well placed to benefit from resilient conditions in Europe and Germany in the euro zone.  The bank began in the 1870s and now employs more than 80,000 people in 72 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets.

Deutsche Bank has offices in major financial centers including New York, London, Frankfurt, Paris, Moscow, Amsterdam, Toronto, São Paulo, Singapore, Hong Kong, Tokyo and Sydney. Furthermore, the bank is investing in expanding markets, such as the Middle East, Latin America, Central & Eastern Europe and Asia Pacific.

See details on how to join Merri and me at Jyske’s bi annual Copenhagen seminar here Global Wealth Management Seminar.

Some great things about the Copenhagen conference are the seminar of course…then there’s the stunning food and the wonderful visits included…This package includes:  accommodation at the Copenhagen Marriott Hotel for four nights, (25-28 August) including breakfast,  Reception and dinner at the bank’s Copenhagen offices, seminar fee and materials for the seminar sessions on Thursday, Friday and Saturday. full lunches on Thursday, Friday and Saturday, canal & harbour tour on Friday in the late afternoon, four-course gala dinner with entertainment and dancing on Saturday evening, and a Sunday excursion including lunch.

Merri and I always go on the excursion also to Silkebord with a drive out into the country, lovely food, picnic cruise and a chance to see the main office and the trading center.  This is always our most interesting, favorite and delightful conference…and we hope you will join us there!  We love the stroll along the harbor, the fresh air, wonderful meals and interesting people from all over the world.

Gary

See Ecuador real estate for sale at the Ecuador MLS

How We Can Serve You

How to Have Real Safety in 2020

The most important investment you can make in 2020, is in yourself. 

Invest in more time.  Invest in less stress. Invest in greater security.That’s why four years ago we created the Purposeful Investing Course (PI) because when it comes to finances, 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.

We should not invest for fun, excitement or to get rich quick, or in a panic due to market corrections.

The core model portfolio we teach in the PI Course rarely changes, but is highly diversified in thousands of shares around the world… so there is higher long term profits, less stress and greater safety.

The portfolio consists of 19 country ETFs.  During the four years since we created the Purposeful Investing Course and set up a $40,000 real time portfolio at Motif Brokers, we have held the same 19 shares and have only traded three times.

The portfolio started with $40,000 and has risen to $53,591 ($49,015 in shares and the balance in accumulated cash).

The portfolio did really well from 2015 to 2018, better than the DJI Index.  Then as the US dollar grew in strength it fell behind.

The chart below shows the actual results of thos portfolio compared with the S&P 500.

motif

 

This good value portfolio above is based entirely on good value financial information and mathematically based safety programs developed around investing models that date back 91 and 24 years.

The Pifolio is a theoretical portfolio of MSCI Country Benchmark Index ETFs that cover all the good value markets developed combining my 50 years of investing experience with study of the mathematical market value analysis of Keppler Asset Management.

In my opinion, Keppler is one of the best market statisticians in the world.  Numerous very large fund managers, such as State Street Global Advisers, use his analysis to manage over $2.5 billion of funds.

The Pifolio analysis begins with Keppler who continually researches international major 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.  He compares each major stock market’s history.

Fwd: keppler

Michael Kepler CEO Keppler Asset Management.

Michael is a brilliant mathematician.  We have tracked his analysis for over 20 years.   He continually researches international major 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.  He compares each stock market’s history.  From this, he develops his Good Value Stock Market Strategy and rates each market as a Buy, Neutral or Sell market.  His 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 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 stock in that country is an attractive investment, so you do not have to spend 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 use.

70% is diversified into Keppler’s good value (BUY rated) developed markets: Australia, Austria, France, Canada, Germany, Hong Kong, Italy, Japan, Norway, Spain, Singapore 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.

The Pifolio consists of iShares ETFs that invested in each of the MSCI indicies of theseall 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.

The fact that the Pifilios are invested in all the shares of the MSCI Index in each good value market reduces long term risk.

When the US stock market bull ends, know one knows for sure how long or how severe the correction will be.

When the bear arrives, what will happen to global and especially good value markets?

No  one knows the answer to this question.

What we do know is that the equally weighted, good value market Pifolios have the greatest potential long term and that math based trailing stops can be used to protect against a secular global stock market correction when it comes.

My fifty years of global investing experience helps take advantage of numerous long term cycles that are part of the universal math that affects all investments.

What you get 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 four 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” 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 “Silver Dip” 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” 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.

seminars

Tens of thousands have paid up to $999 to attend.

In 2020 I celebrate my 54th anniversary in the investing business and 52nd year 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.

In this special offer, you can get this online seminar FREE when you subscribe to our Personal Investing Course.

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” 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.

Gary