Tag Archive | "magic calculator"

Behavior Gap


Behavior gaps are among the biggest reasons that many fail (or succeed) when investing.

Human evolution makes fear a most powerful motivator.  Fear creates investment losses due to behavior gaps.  Fear motivates us more strongly than desire, so by nature we are risk adverse.  The seven rules of investing below can help us overcome fear and bridge the behavior gap.

Humans act oddly when it comes to spotting value.  Warren Buffet highlights this by comparing behavior to the price of hamburgers at McDonalds versus shares.  If the price of a Big Mac falls, he doesn’t become afraid and worry.  He buys more and feels good that he’s paying less for the same hamburger.

He acknowledges, however, that fighting fear is easier said than done. “There is no comparison between fear and greed.  Fear is instant, pervasive and intense.  Greed is slower.  Fear hits.”

A recent article at this site Investing Spurts showed how one of my investments that turned 100,000 Danish kroner into 357,679 Danish kroner could have grown to 1,156,069 Danish kroner instead if I had tracked, and then followed, the trailing stop and reinvesting the recommendations created by the Magic Calculator.

TFC Corp

Jyske Bank share price since September 2002.

We invested in Jyske shares at DKK96.50 on 2nd September 2002. We sold half in April 2006 at DKK352.50.  The share price of the remaining shares we hold have never dropped below our purchase price.  As of May 13, the share price was DKK329.

Could I have done better with a trailing stop system like the Magic Calculator?  Richard Smith, creator of the Magic Calculator, calculated the exact dates that his system would have created buy and sell numbers:

Exit @ 325.50 on 6/13/2006.  All the shares are sold bringing in DKK337,218.

Buy @ 321.98 on 10/9/2006.  The DKK337,218 buys 1047 shares.

Exit @ 404 on 6/8/2007.   This sale grosses DKK422,988.

Buy @ 118.5 on 3/20/2009.  The DKK422,988 buys 3,569 shares

Exit @ 170 on 8/10/2011. This sale grosses DKK606,730.

Buy @ 173.40 on 2/1/2012.  The DKK606,730 buys 3,499 shares.

Still in @ 330.4 on 4/22/2015.  The share value at this time is DKK1,156,069.

Wow, what a difference if one follows and uses the trailing stops.  The trailing stops and re buy signals increase the investment by 11 times versus 3.5 times in the other scenario.

Here is the big question.  Would I have bought and sold  during these recommendations?

I asked Richard Smith his thoughts.  His reply was:  “A big part of using a semi-algorithmic approach to investing is addressing the “behavior gap”.

One of the key questions is COULD an investor have lived through the Jyske moves or might s/he have thrown in the towel at the bottom of the violent down move… not made any profit whatsoever (maybe even taken a loss) and then missed the ensuing up move.

Much of my work is based in how investors REALLY behave and offering them alternatives to the bad ideas of their own that they too often succumb to.  Richard.

The seven “Golden Rules of Investing” can help us eliminate our behavior gaps.

#1:  Place a higher priority on numbers rather than good stories.

#2:  Use common sense and logical thinking.

#3:  Do not care too much about day to day volatilility. The short term process of buying and selling takes too much time. This short term process leaves too little time to analyze and forecast.

#4: Do not care too little about strategy.

#5: Turn on the auto pilot and normally add to your position.

#6:  Do not panic.

#7: Do not let feelings influence you too much.

Gary

Investing Beyond the Boom

Warren Buffet once warned against the Cinderella effect.

He said “Don’t be fooled by that Cinderella feeling you get from great returns.  Nothing sedates rationality like large doses of effortless money.  After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball.  They know the party must end but nevertheless hate to miss a single minute of what is one helluva party.  Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.”

Cinderella may have lost a shoe when she fled the party to meet a midnight curfew.  We can lose much more when we rush from a crashing stock market.

Most investors face emotional dangers that build in rising markets.

Almost everyone feels good.

But the clock of economic reckoning is ticking.

No wants to see it.  Nothing rises forever and especially… not everything at the same time.

Yet no one wants to leave the party until the end.

But many edge closer to the door.

When the clock chimes there could be a stampede even though leaving in a hurry may be the worst way to go.

Here are seven steps that can help avoid this risk.

  • Choose investments based on markets instead of shares.
  • Diversify based on value.
  • Rely on financial information rather than economic news.
  • Keep investing simple.
  • Keep investing costs low.
  • Trade as little as possible.
  • Make the decision process during panics automatic.

One strategy is to invest in country ETFs that easily provide diversified, risk-controlled investments in countries with stock markets of good value.  These ETFs provide an easy, simple and effective approach to zeroing in on value.  Little management and less guesswork is required.  The expense ratios for most ETFs are lower than those of the average mutual funds.  Plus a single country ETF provides diversification equal to investing in dozens, even hundreds of shares.

A minimum of knowledge, time, management or guesswork are required.

The importance of…

easy…

transparent…

and inexpensive. 

Keeping investing simple is one of the most valuable, but least looked at, ways to avoid disaster.  Simple and easy investing saves time.  How much is your time worth?  Simple investing costs less and avoids fast decisions during stressful times in complex situations where we are most likely to get it wrong.

Fear, regret and greed are an investor’s chief problem.  Human nature causes  investors to sell winners too soon, and hold losers too long.

Easy to use, low cost, mathematically based habits and routines help protect against negative emotions and impulse investing.

Take control of your investing.  Make decisions based on data and discipline, not gut feelings.  The Purposeful investing Course (Pi) teaches math based, low cost ways to diversify in good value markets and in ETFs  that cover these markets.  This course is based on my 50 years of investing experience combined with wisdom gained from some of the world’s best investment managers and economic mathematical scientists.

Enjoy Repeated Wealth With Pi

Pi’s mission is to make it easy for anyone to have a strategy and tactics that continually maintain safety and turn market turmoil into extra profit.

One secret is to invest with a purpose beyond the immediate returns.  This helps create faith in a strategy that adds stickiness to the plan.

Another tactic is to invest with enough staying power so you’re never caught short.

Never have to sell depressed assets during periods of loss.

Lessons from Pi are based on the creation and management of Model Portfolios, called Pifolios.

The success of Pifolios is based on ignoring economic news (often created by someone with vested interests) and using financial math that reveals deeper economic truths.

One Pifolio covers all the good value developed markets.  Another covers the emerging good value markets.

The Pifolio analysis begins with a continual research of 46 major stock markets that compares their value based on:

#1:  Current book to price

#2:  Cash flow to price

#3:  Earnings to price

#4:  Average dividend yield

#5:  Return on equity

#6:  Cash flow return.

#7:  Market history

This is a complete and continual study of almost all the developed major and emerging stock markets.

This mathematical analysis forms the basis of a Good Value Stock Market Strategy.   The analysis is rational, mathematical and does not worry about short term ups and downs.

This strategy is easy for anyone to follow and use.  Pi reveals the best value markets and provides contacts to managers and analysts and Country Index ETFs so almost anyone can create and follow their own strategy.

Learn how to invest like a pro from the inside out.

At the beginning of 2019 my personal Pifolio is based on select ETFs in the Keppler Developed and Emerging markets.  My Pifolio is invested in Country ETFs that cover seven developed and three emerging markets:

Norway
Australia
Hong Kong
Germany
Japan
Singapore
United Kingdom
Taiwan
South Korea
China

Don’t give up profit to gain ease and safety!

Regardless of economic news, these markets represent good value and have been chosen based on four pillars of valuation.

  • Absolute Valuation
  • Relative Valuation
  • Current versus Historic Valuation
  • Current Relative versus Relative Historic Valuation

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 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.

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 2019” 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 added how to use the Silver Dip Strategy with platinum.   The “Silver Dip 2019” 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 2019” 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.

This year I celebrated my 51st anniversary 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.

Stock and currency markets are cyclical.  These cycles create extra profit for value investors who invest when everyone else has the markets wrong.  One special seminar session looks at how to spot value from cycles.  Stocks rise from the cycle of war, productivity and demographics.  Cycles create recurring profits.  Economies and stock markets cycle up and down around every 15 to 20 years as shown in this graph.

stock-Charts

The effect of war cycles on the US Stock Market since 1906.

Bull and bear cycles are based on cycles of human interaction, war, technology and productivity.  Economic downturns can create war.

The chart above shows the war – stock market cycle.  Military struggles (like the Civil War, WWI, WWII and the Cold War: WW III) super charge inventiveness that creates new forms of productivity…the steam engine, the internal combustion engine,  production line processes, jet engines, TV, farming techniques, plastics, telephone, computer and lastly during the Cold War, the internet.  The military technology shifts to domestic use.  A boom is created that leads to excess.  Excess leads to correction. Correction creates an economic downturn and again to war.

Details in the online seminar include:

* How to easily buy global currencies, shares and bonds.

* Trading down and the benefits of investing in real estate in Small Town USA.  We will share why this breakout value is special and why we have been recommending good value real estate in this area since 2009.

* What’s up with gold and silver?  One session looks at my current position on gold and silver and asset protection.  We review the state of the precious metal markets and potential problems ahead for US dollars.  Learn how low interest rates eliminate  opportunity costs of diversification in precious metals and foreign currencies.

* How to improve safety and increase profit with leverage and staying power.  The seminar reveals Warren Buffett’s value investing strategy from research published at Yale University’s website.  This research shows that the stocks Buffet chooses are safe (with low beta and low volatility), cheap (value stocks with low price-to-book ratios), and high quality (stocks of companies that are profitable, stable, growing, and with high payout ratios). His big, extra profits come from leverage and staying power.  At times Buffet’s portfolio, as all value portfolios, has fallen, but he has been willing and able to wait long periods for the value to reveal itself and prices to recover.

Use time not timing.

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%.

Learn how much leverage to use.  Leverage is like medicine, the key is dose.  The best ratio is normally 1.6 to 1.  We’ll sum up the strategy; how to leverage cheap, safe, quality stocks and for what period of time based on the times and each individual’s circumstances.

Learn to plan in a way so you never run out of money.  The seminar also has a session on the importance of having and sticking to a plan.  See how success is dependent on conviction, wherewithal, and skill to operate with leverage and significant risk.  Learn a three point strategy based on my 50 years of investing experience combined with wisdom gained from some of the world’s best investment managers and economic mathematical scientists.

The online seminar also reveals  the results of a $80,000 share purchase cost test that found the least expensive way to invest in good value.  The keys to this portfolio are good value, low cost, minimal fuss and bother.  Plus a great savings of time.  Trading is minimal, usually not more than one or two shares are bought or sold in a year.  I wanted to find the very least expensive way to create and hold this portfolio so I performed this test.

I have good news about the cost of the seminar as well.   For almost three decades the seminar fee has been $799 for one or $999 for a couple. Tens of thousands paid this price, but online the seminar is $297.

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

Save $468.90 If You Act Now

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 $102 off the subscription.  Plus you receive FREE the $29.95 report “Three Currency Patterns for 50% Profits or More”, the $39.95 report “Silver Dip 2019” and our latest $297 online seminar for a total savings of $468.90.

ecuador-seminar

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 2018” 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.

Your subscription will be charged $299 a year from now, but you can cancel at any time.

Gary

 

 

 

 

 

 

Sandalwood Makes the News Again


Sandalwood makes the news again, but in a terrible way.   We can gain valuable ideas about portfolio selection from this news.

Last year, I wrote about investing in TFS Corp., a sandalwood company after reading a Wall Street Journal article that explained how sandalwood has become so valuable that the police shot dead one of India’s most notorious sandalwood smugglers, known as Veerappan.

tFS corp

See latest TFS Corp share chart www.finance.yahoo.com.

The demand for sandalwood grows as a BBC article “Indian police kill 20 suspected red sandalwood smugglers” (1) tells how Police in India’s Andhra Pradesh killed at least 20 suspected red sandalwood smugglers.

The article says: Sandalwood smuggling is rampant in southern India, with a tonne selling for tens of thousands of dollars on the international black market.

The police are being questioned and investigated about using excessive force but this conflict shows how the growing value of sandalwood means that laborers are willing to risk their lives to harvest this wood.

TFS Corp. is located in Australia and is the only company with a viable plantation plus a vertical soil to oil sandalwood business that includes a sandalwood essential oil distillery and sandalwood skin care brand product.

The shares have risen form $1.19 a share to $1.68, but as the chart above shows, this has not been a smooth ride.  The shares of TFS Corp. are so volatile each investor should ask “should I invest in this company and if so, how much?

Sandalwood has great value and  TFS Corp. has an opportunity to tap into this value, but will they and how long will this take?  If so how much can a TFS Corp. share grow?

Our research found that over ten years the share price could reach $10 per share.  If so, this represents about a 900% gain from the $1.19 price at the time of our recommendation.

However, there is always something we do not know.  This is a high risk investment, plus not every investor has a ten year timeline.  Even more important our minds are not correctly geared to make volatile investments.  Fear provides about twice as much input as greed when we invest.

Many studies have found that fear is controlled within the brain by the amygdala, an almond-shaped part of the brain involved in emotion and decision-making.

We may make rational decisions about investments to begin.  But as the price of the investment moves (up or down) the fear of loss (the unrealized loss or the loss of the gain) kicks in.  Our perception of what’s happening causes blood flow to shift from the brain’s rational center, the frontal cortex, and flow to the amygdala where our emotions are activated.

We become less likely to use reasoning, judgment and planning and often respond to our emotions instead. We can stop thinking through our choices and act out of fear.

From an evolutionary standpoint, fear is good as a neural circuit that helps keep us stay alive in dangerous situations.  In investing this is not so good because our perceptions about the danger of loss activates pathways that send information to the amygdala, which is likely to trigger emotional responses like hiding or fleeing.

We are attacked by our fear of loss.  The reaction tends to be to hide or run which in the financial world tends to be to hold onto bad investments that have dropped in price and sell good investments that have risen.

Let’s use the roller coaster TFS Corp. share price to illustrate why volatile shares have an increased human emotional risk.

Investors who invested when I first wrote may have jumped in February 2015 at $1.19.  Over the next seven months the shares scorched up to $2.22 for a quick 86% profit.   Investors who bought at $1.19 or near began to think, “Should I sell and take that profit?”  Remember the analysis shows that the shares could go to $10 per share.

Then TFS  announced that a Nestle owned company will buy $500 million worth of sandalwood oil from them over the next ten years.  The share price did not rise in a logical way.  The price plummeted back to $1.22 instead.  These are thinly traded shares and I suspect that some major shareholders took profits.

Many investors by this time were be thinking, “Should I sell and get my money back”, (if they invested at the $1.19 price).  Those who had waited and invested at $1.40, or $1.80 or $2.00 per share more likely thought “OMG,  I have lost! I must to get out to save what’s left.”

This is why I have been introducing readers to the Magic Calculator, a service that assesses the potential volatility of shares around the world and creates a trailing stop.

The correct way to have bought the TFS Corp. shares was to set a downside target based on one’s needs and total portfolio and stuck with this target through the ups and downs that thinly traded shares tend to have.

The Magic Calculator helps in setting such targets.

Last week, I invited Richard Smith, a PhD in Mathematics, the inventor and operator of the Magic Calculator to visit Merri and me at our home.  His information was so fascinating that our meeting lasted over five hours.

The Magic Calculator eliminates a huge amount of the mental process required for good investing by turning the question of “When should I sell?” into a mathematical model rather than a mental churning complicated by our human reactions to fear and desire.  We desire a profit and fear a loss.  This conflict can cause most investors to make poor investment decisions time and time again.  This is not an error on any investor’s part.  This is a fabric of human nature.

The Magic Calculator also estimates the volatility of shares.  For example TFS Corp shares has a high volatility rating of 40.  This means that the share is likely to lose as much as 40% of its price.  This is powerful information because it helps decide how much of any specific shares we might want to risk.

For example if the maximum loss we feel we should sustain is $10,000, then $25,000 is the most we would want to risk on TFS Corp. stock.  If the investment of $25,000 drops 40%,  the loss is $10,000.

I asked Richard if he could calculate the process of TFS Corp from the time I made that recommendation at $1.19.

He replied:  I took a quick look at TFS Corp.  Was it around January, 2014 that you recommended TFS?  At the time the Volatility Quotient (VQ) was 35%.  Currently the volatility quotient is about 41%.

It does look like the Smart Trailing Stop triggered on the drop from $2.22 to $1.21 from September to December 2014. That was a drop of about 45%, which exceeded the VQ of about 40% by early December.

So while the Magic Calculator would have helped folks understand the risk in this case, I’m afraid that it would have stopped folks out around break-even if they had gotten in at $1.19.

I do think that once you start to see VQ’s in the 40% and above range that it’s good to think of the investment as likely being an all or nothing bet.

Here are three valuable benefits from this information.  First, we can see how much to risk when we see a 40% VQ… everything we invest.  We do not invest more than we can afford to lose.  Second, this clears our mind, we do not have to keep spending time thinking, “Should I sell  – should I hold – should I buy more?”  If we made an all or nothing bet, then we forget about it and let it ride through the turmoil.

This has been the correct action since the shares were $1.19.  Now the shares are in the $1.60 range.  Investors from 2013 have made over 200% return.  Investors who invested last September  may have lost as much as 26%.

Those who analyzed the potential of Sandalwood and the prospects of TFS Corp.  are investing in what they believe . With a VQ of 40%  we may want to logically recheck the performance of the company and the value of sandalwood, but the day to day performance of the share price should be noise we ignore.

New York mathematics PhD. who created the Magic Calculator made a startling investment confession.

Over the years, we have had great success at giving readers information on markets and currencies that were about to explode… up.  Yet one problem we have always had is helping each individual figure out which of these opportunities suits him or her best.  More importantly we have never had a way of helping individuals decide when it is best to sell any specific investment.

Recently I found a solution to these problems when I received this note from Richard Smith.  I am testing his service and recommend that you do as well.

Gary

Richard sent me this note.  Hi, my name is Dr. R. Smith (I have a PhD in mathematics from Binghamton University in New York).  You don’t know me, but I think you’ll want to hear my story.

You see, I love investing. Always have… even though I’ve never really been that good at it.

Over the years, I’ve made just about every mistake in the book.  Whether it’s selling too soon on stocks that go up… selling too late on stocks that go down… or following the investing herd off a cliff over and over again.  You name it, I’ve done it.

I’ve personally lost a bundle.

But not too long ago something happened to me that literally reversed my fortune – and enabled me to get back everything I lost (and I mean everything), plus hundreds of thousands of dollars more… over the course of just 48 months.

The amazing thing is… I didn’t even have to change which investments I was making!

So what happened exactly?

I don’t want to spoil the surprise about exactly what I did, but I strongly encourage you to take a minute to check it out.

You can get the full details here.

Sincerely,

Dr. R. Smith

(1) Indian police kill 20 suspected red sandalwood smugglers