Tag Archive | "ipos"

The Casino of Life


How are casinos and stock markets the same?

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Well, both can be addictive.   When the stock market is in a raging bull phase, it’s like a party no  one wants to leave. The continual creation of wealth for doing nothing (that’s imagined) stimulates the brain’s reward system.  The higher and longer the market rises, the greater the stimulation.

Investing in a bull market without a strategy is gambling and can become as addictive as the slots.

A Mayo Clinic  article (1) says: Compulsive gambling, also called gambling disorder, is the uncontrollable urge to keep gambling despite the toll it takes on your life. Gambling means that you’re willing to risk something you value in the hope of getting something of even greater value.

Gambling can stimulate the brain’s reward system much like drugs or alcohol can, leading to addiction. If you have a problem with compulsive gambling, you may continually chase bets that lead to losses, hide your behavior, deplete savings, accumulate debt, or even resort to theft or fraud to support your addiction.

Gambling can ruin your life.  The answer to a Quora.com question, “What is the saddest thing a casino dealer has seen at their table?” shows how damaging addiction can be.

I worked in the Slots department of a Reno casino while in college. One night I walk up on a woman who had hit a progressive royal flush on nickel video poker – her win was around $215. She was crying so I ask if she was okay. Her reply was that she was not going to get evicted and she could get her guitar back from the pawn shop with the winnings. After we paid her, she insisted on tipping us $20 (pretty generous for a win on a nickel machine). I tried to gently refuse but policy was to graciously accept the tip and my supervisor was there. Even sadder was that she kept playing – I tried to casually encourage her to leave but she kept on playing and ended up putting nearly $100 back into the machine. I never learned if she got evicted or got her guitar back.

What’s the difference?

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The big difference is that in the long run, in a casino the odds are against you.  In stock markets the odds, in the long run, when properly diversified, are stacked for you.

With only a few exceptions, if you play the casinos long enough, you are guaranteed to lose.

With only a few exceptions, if you have a diversified portfolio in a stock market, and hold for an extended period you are guaranteed to win.o

However, it is all too easy to treat stock markets like casinos.

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The image above is from the Wall Street Journal article, “IPO Market Parties Like It’s 1999”.

The article tells how even in the midst of a recession, investors are pouring money into newly public companies at levels on par with the dot-com era.

The article says: Many businesses are struggling. Millions of Americans are out of work. But the IPO market is the hottest it’s been in years—and 2020 could be its biggest year ever.

With three months left on the calendar, U.S.-listed initial public offerings have raised nearly $95 billion through Wednesday, according to data provider Dealogic. That already surpasses the totals of every year except 2014 since the tech bubble in 2000. It’s nipping at the heels of 2014, when IPOs raised $96 billion, more than a quarter of it by Alibaba Group Holding Ltd. BABA 1.81%

Bankers, lawyers and executives say that if the frenetic pace keeps up, 2020 will eclipse the tech-boom years of 1999 and 2000, when investors feverishly pumped money into burgeoning internet stocks before they crashed to Earth.

Investors are gobbling up these new listings, with this year’s IPOs posting the biggest gains during their trading debuts since 2000, at 22% through Wednesday. On average, 2020 IPOs have risen roughly 24% from their original prices.

This type of euphoria is a sign that investors are treating markets like casinos.  Investors are not investing, they are gambling.  Investors are buying with only one expectation, that their holdings will continually rise.   There is no strategy for obtaining value.

The higher and faster a market rises the greater the danger.

Two quotes from Yuvall Harari, author of “Sapiens” explains the danger.

The first quote explains the nature of the risk.

Nothing captures the biological argument better than the famous New Age slogan: ‘Happiness Begins Within. ‘ Money, social status, plastic surgery, beautiful houses, powerful positions – none of these will bring you happiness. Lasting happiness comes only from serotonin, dopamine and oxytocin.

Our nature is to seek pleasure and especially in the current turbulent times, a kick each morning as the stock market rises, is better than a cup of coffee.

This trap is easy to fall into, because an ever rising stock market is such a simple story.

Harari explains it in the second quote:  “Humans think in stories rather than in facts, numbers, or equations, and the simpler the story, the better.”

Protect yourself  with facts, numbers and equations.

Value equities bring higher returns long term.

The 41 year Risk & Return charactoristics of investing in value can be seen in the numbers below.

Over 606 months, value shares returned 12.9% per annum versus 9.86% for an equally weighted portfolio of all shares.

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The chart below shows the difference in return more graphically.  $100 invested in the top value shares, over the 41 years, grew to $44,843 versus $11,548 for the equally weighted portfolio of all shares.

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Time is the key!  Please note that in the past 10 years of the Risk & Return charactoristics above that the equally weighted portfolio of all shares has out performed the value shares seven years out of ten.

The chart below shows that the S&P 500 has also outperformed my value share strategy so far in 2020.

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Yet the fact remains that value shares currently pay twice as much dividend (on average) and are selling at less than a third price-to-book  of US shares.

See more about how to invest long term in value shares below.

Gary

Add Safety & Get Paid 154% More

Get paid more now!

Current markets have turned economic history upside down.  Normally bonds pay the highest interest rates and add safety to a portfolio.  Not right now.

This chart from the New York Times article “The Mystery of High Stock Prices” (1) shows that equities pay a higher yield than bonds.

wsj.com

Most Important, Get Paid the Most Now!

Just because US stocks pay more than dollar denominated bonds, does not mean they offer the best income deal.  In fact the chart below shows that US shares pay one of the lousiest yields of the 46 stock markets we monitor around the world.

The US MSCI Index pays a modest 1.91%.  That’s a terrible yield, but better than the 1.6% you can get in AA rated corporate bonds.

Nine solid, top value stock markets (shown below) not only add diversification and the best long term profit potential, they pay 71% higher yield, 3.27% compared to the US yield of 1.91%.

This is why my core stock portfolio consists of a handful of top value share ETFs and this position has hardly changed in five years. 

Let me explain why this strategy adds safety, increases long term appreciation potential and pays almost double short term income right now.

In a moment, I’ll show how to push that yield to 4.07% per annum without adding additional risk.

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During the past five years, I have been steadily accumulating the same good value ETFs.  I have traded only three times, so my trading costs, my fuss, fiddle and time spent have been kept to an absolute minimum.

I have been investing in iShare country ETFs.  Each one invests in the MSCI Index of one of the top (or neutral in the case of Canada and Australia) value markets above.

My strategy protects against stock market volatility and yet has potential for the best gains long term from rising share prices by holding an equally weighted portfolio of the best value based country ETFs.

The Purposeful Investing Course tracks 46 stock markets around the world into determine which markets offer the best value.

Since no one knows what the future will bring, investing in value makes the most long term sense.

Plus Value ETFs are Safer

The people who dominate stock markets include a pack of thieves.  This fact has always been true.  We were recently reminded of this fact when Wirecard AG, one of Europe’s most prestigious companies, listed on Germany’s premier stock-market index, the Dax 30 fooled everyone including its top grade, longtime auditor, Ernst & Young GMBH.

The shares in German fintech company Wirecard AG (symbol WDI fell 63.74% as it filed for insolvency proceedings, after revealing that more than $2 billion in cash missing from its balance sheet was all a fraud.  The company’s market value fell to less than €500 million from almost €13 billion in a week.

Investors have seen this type of rip off again and again, really big scams from Enron to Bernie Madoff and these are just the tip of the iceberg.

Shares in stock markets are manipulated all the time.  Stock markets (in fact almost all types of markets) are led by sharks plain and simple.  Count on this fact.  This is the nature of the beast and the number one goal of many big businesses is to take as much of your money as they can to line their pockets.

In the Wirecard AG example many  thousands of investors have seen their hard work, their thrift, their security and hopes for the future disappear, even though they seemingly did everything right by investing in a blue chip, new era, high tech company.

A study of 92 years of investment returns shows that, despite the fraud and cheating and deceit, stock markets are still a good way to make your money grow… if you invest long term and diversify.

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Our Pi strategy makes it harder for cheaters to grab your wealth because it’s very hard to manipulate an entire stock market, much less a dozen or so stock markets around the world.

Manipulators have a hard time tricking an entire market, especially larger markets.  If you get the best value country ETFs, your chances of long term profits improve.

Our Purposeful Investing Course (Pi) teaches an 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.

Sticking to math based stock market value and country ETFs eliminates the need for hours of research aimed at picking specific shares.   Investing in an index is like investing in all the major shares of the market.  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 Pi portfolio consists of iShare Country Index ETFs managed by Black Rock, Inc.

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.

I am updating my plan to increase my average yield to as much as 4.07%.

My developed market portfolio has been diversified into nine developed markets: Austria, Germany, Hong Kong, Italy, Japan, Norway, Singapore, Spain and the United Kingdom.

iShares Country ETFs make it easy to invest in each of the good value markets.

The average yield of these nine markets combined was 3.27% as of June 2020.  By replacing the three lowest yielding markets, Austria (.64%), Germany (1.83%)  and Japan (2.51%)  with two better yielding neutral markets Australia (4.57%) and Canada (3.54%) the average annual yield on the entire portfolio rises to 4.07%.

4.07% is 154% higher than the 1.6% you can currently earn on AA rated corporate bonds!

The ETFs provide higher income and incredible diversification for safety, plus the highest long term profit potential.

iShares is owned by Black Rock, Inc. the world’s largest asset manager with over $4 trillion in assets under management.

There is an iShares country ETF for almost every market.

Here’s how you can create your own good value strategy.

I would like to send you, on a no risk basis, a 130 page basic training course that teaches the good value strategy I use.  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 two 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.

You also receive a 100+ 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 of all 46 markets.

This year I will celebrate my 52nd anniversary of global investing and 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 the Pi course.

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.

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 out performance 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%.

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 $124.50 off the subscription.

Guarantee

Enroll in Pi.  Get the basic training, the 46 market value report and access to all the updates of the past two years, plus all new updates over the next year.

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 in the first two months for a full no fuss full refund.

You have nothing to lose except the fear.   You gain the ultimate form of financial security as you reduce risk and increase profit potential. 

Due to the COVID-19 pandemic we have cut the subscription to $174.50.  You save $124.50!

Then because this global recovery from the pandemic is going to take years, we’ll maintain your subscription at just $99 a year rather than $299.  Your subscription will be autorenewed in 2021 at $99, though you can cancel at any time.

Click here to subscribe to Pi at the discounted rate of $174.50

Subscribe to Pi today and you get a year’s subscription to Pi now, get the 130 page basic training, the 120 page 46 market value analysis, access to over 100 previous Pifolio updates, plus begin receiving regular Pifolio updates throughout the year.

Gary

(1) www.nytimes.com: mystery of high stock market prices

(1) www.mayoclinic.org/diseases-conditions/compulsive-gambling/symptoms-causes/syc-20355178

(2) www.wsj.com/articles/ipo-market-parties-like-its-1999-11601052419