Tag Archive | "stock markets"

Mexican Vs. Canadian Stocks


Where’s it better to invest, Canada or Mexico?

I was recently speaking with a Pi subscriber and mentioned that I included shares in the iShares Canadian Market ETF (Symbol EWC).

We discussed the benefits of diversifying into country ETF that represent good value stock markets and I mentioned that I included a Canadian ETF in my portfolio even though the Keppler analysis we use to define good value only rates it as a neutral value market.

The subscriber later sent me this note.

Gary, I was mulling what you’d mentioned about adding Canada to your portfolio. What about the Mexico ETF (EWW)? Is there a reason not to include neighboring countries?

My reply was that I have never thought through the geographic dimensions of a market’s value, but being next to the USA might add some benefits to a market.  Mexico might especially be depressed right now due threats of tariffs on its products shipped to the USA.

However the philosophy at Keppler Asset management is that markets take economic and political factors into account so they are reflected in the numerical fundamental value factors such as price to book, price earnings and dividend yield.

Keppler’s analysis, ranks Mexico as a sell rated (poor value) market. Canada is a neutral ranked market.

keppler

Comparing price to book, Mexico is selling at 2.01 times books compared to Canada’s 1.80.

Mexico’s 15.8 PE ratio is lower than Canada’s 17.5 PE but Mexico’s 2.81% average dividend does not compare well with and Canadian 3.21% average dividend.

keppler

From a performance point of view, the Canadian ETF has far outperformed Mexico in the past five years.

Here’s the Canadian ETF’s performance.

tradestops.com

Here’s the Mexican ETF’s performance.

tradestops.com

Of course past performance is no indicator of the future, but both of these ETFs are trending up at this time.

Value oriented investors (me included) would still leave Mexico out of our portfolio, but this could be a good time to add the Canadian ETF.

Gary

The Only 3 Reasons to Invest

garyheadshot

The stock market has always been the best place of places to protect and increase wealth over the long haul.   Yet it’s also been the worst place to lose money, a lot of it, quickly.

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.

The goal of investing should be to stabilize our security, bring feelings of comfort and elimination of stress!

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

This is why my core stock portfolio consists of 19 shares and this position has hardly changed in three years.  During this time we have been steadily accumulating the same 19 shares and have traded only three times.

motif

This portfolio is built around a strategy that’s taught in my Purposeful Investing Course (Pi).  I call these shares my Pifolio.

This portfolio more or less matched the S&P 500 until May 2018.  Then a stronger US dollar made the portfolio look like it was falling behind.   This currency illusion creates a special opportunity we’ll view in a moment.

This portfolio above is based on stock price to value analysis built around 91 years of stock market data.

The value analysis is used to create a portfolio of MSCI Country Benchmark Index ETFs that cover  stock markets that are undervalued.  I have combined my 50 years of investing experience with the study of the mathematical market value analysis of Michael Keppler, CEO of Keppler Asset Management.

In my opinion, Keppler is one of the best market statisticians in the world.  Numerous very large fund managers use his analysis to manage over $2.5 billion of funds.  However because Keppler’s roots are in Germany (though he lives and operates from New York) and most of his funds registered for the European Union, Americans cannot normally access his data.

I was lucky to have crossed paths with Michael about 25 years ago, so I am one of the few Americans who receive this data and you will not find his information readily available in the US.

In a moment you’ll see how to remedy this fact.

The Pifolio analysis begins with Keppler’s research that continually monitors 46 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.  Then Keppler takes market’s history into account.

Fwd: keppler

Michael Kepler CEO Keppler Asset Management.

Michael’s 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 good value (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 one stock in that country is an attractive investment.  This eliminates the need for 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 held at the beginning of 2019.

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

iShares Country ETFs make it easy to invest in each of the MSCI indicies of the 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.

There is an iShares country ETF for every market.

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.   I call this strategy Purposeful Investing (PI).  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 get this course when you enroll in our Purposeful Investing program (Pi) with a triple guarantee.

Triple Guarantee

Enroll in Pi.  Get the 130 page basic training, a 46 stock market value report, access to all the updates I have sent in the past three years, two more reports on investing (described below) and an online 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.

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.

https://www.flickr.com/photos/garyascott/4622973658/in/photolist-83vX1o-83vWFN-83vL4y-83vJp1-83sBB8-83vHnm-83sAi6-83syGk-83opmC-7ZSdvK-7ZVo8W-7VHwoi-6Vu1vH-6VtZNX-6Vy4vQ-6VtYzv-6Vy3FS-6Vy3zj-6Vy3n7-6Vy2oS-6Vy26y-6VxZsh-6VxXYw-6PoGaT-6PoEAa-ny4g5h-dmecbq-dmec9s-gFehE6-gym1XL-gym1TC-gyhYgC-gsdfvC-gsdLR8-gsdfhm-gsdLQg-gsdLHc-gseoSK-gseoTB-bt5TxH-bt3zWa-bt3yXK-bt3fG6-bt3fbP-bt3b4K-bt3726-bdMKog-bdMJwp-bdMJt8-bdMJi8

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

Value Reflection


Here is why we need to use mathematically based value information, rather than economic news, to make investment decisions.

Come back with me in time.

Take advantage of my 50 years investing experience.

Gain lessons learned from my decisions.

And sometimes stupidity.

I was a gold and silver speculator in the 1970s and 1980s.

I made a lot of money.

Then I gave most of it back…

Stupid.

My profits came when gold and silver spiked in the late 1970s.

“This will go on forever”, I thought.

“Instability between the USA and the Soviet Union will push up the price of  gold.”

I thought.

Secretary Brezhnev died November, 10 1982.  A power struggle took place in the Kremlin.  Yuri Andropov became the new General Secretary.  US−Soviet relations deteriorated rapidly.   In March 1983, President Ronald Reagan dubbed the Soviet Union an “evil empire”.   September 1, 1983 the Soviets shot down of Korean Air Lines Flight 007  with 269 people including a sitting US congressman, Larry McDonald.

“Gold is really going to sky rocket now!”

I thought.

I bought!

This historical chart of gold’s price (that period is lined in red) shows how that went well.

gold

Gold’s price crashed.

I lost.

Let’s apply this lesson to yesterday’s wall Street Journal article “Gold Prices Fall to Seven-Week Low as Dollar Strengthens” (1)

The article says:  Gold prices fell to a nearly two-month low Monday, weighed down by a stronger dollar.

Gold for December delivery edged down 0.7% to $1,275.80 a troy ounce on the Comex division of the New York Mercantile Exchange—the most actively traded gold contract’s lowest close since Aug. 8. Prices have fallen in four of the last five sessions and in three consecutive weeks since hitting their highest level in more than a year, with concerns about interest-rate increases and a stronger dollar hurting the precious metal.

Investors have also largely shaken off recent geopolitical risks, weakening demand for gold and other haven assets that typically rise during times of political turbulence. Gold prices fell Monday even after voters in Catalonia backed independence from Spain in a referendum that was boycotted by opponents and marred by violence, and after President Donald Trump rejected dialogue with North Korea.

This could suggest that its time to sell gold.

My math based value assessment suggest the opposite.

It’s closer to the time to buy gold.

There are seven layers of tactics in the value based Purposeful investing (Pi) strategy.

Pi Tactic #1: Determine purpose and good value.

Pi Tactic #2: Diversify 70% to 80% of portfolio equally in good value developed markets.

Pi Tactic #3: Invest 20% to 30% equally in good value emerging markets.

Pi Tactic  #4:  Use trending algorithms to buy sell or hold these markets.

Pi Tactic  #5:  Add spice speculating with ideal conditions.

Pi Tactic  #6: Add spice speculating with leverage.

Pi Tactic  #7:  Add spice speculating with forex potential.

An “ideal condition” is a rare distortion of an economic fundamental that history has shown “almost always” reverses itself.  

The words “almost always” indicates that there is always risk, but our in depth analysis of gold’s price at Pi shows that based on inflation anytime gold drops below $1,225 the price is distorted, is a good value and is time to buy.

In other words we are at a price where its almost time to begin accumulating gold.

More of  yesterday’s Wall Street Journal news “U.S. Stocks Close at Records” (2)  suggest that US shares are really hot.  The article says: Dow industrials, S&P 500, Nasdaq Composite and Russell 2000 close at records together for the first time since July.  Major U.S. stock indexes advance.  Euro falls after Catalan vote. Spanish bonds, stocks under pressure.  U.S. stocks clinched new records Monday, as fresh economic data bolstered investors’ beliefs in a resilient economy.

Over past decades I have experienced how readers react when markets continually jump from high point to high, so I am issuing the following warning for the third time in a week.

No one knows when the super heated US stock market will begin its next bear trend.

What we do know is the value of the US market compared to its history and to other stock markets around the world.

The numbers below from Keppler Asset Management, another source of data we follow at Pi,  shows that the price-to-book of the MSCI US Share Index at 3.13 price-to-book is still well below the super inflated price to book of 4.23 in December 1999.

keppler

A bear will again descend on Wall Street.

The autumn and winter months ahead are a likely time.

Yet we cannot be sure.

We can still see profits and growth in US shares and we will… until we won’t.

All stock markets have risk and volatility, but that if you invest in the top ten good value markets, that have a price-to-book of just 1.43,  this is a much better deal than paying 3.13 price to book  for US shares that are their record high.

Take extra caution in your equity investments now.  The volatility quotient of the DJI is about 10%.

The trend is bullish so the trend won’t break until the DJI drops below 20,000.

That could happen in minutes tomorrow… or any day.

Remain alert.  Short-term trading algorithms can cause market trends to shift at astounding speed.

Prepare now what you will do if the markets panic.

Create a plan based on math based good value economic data.

Include watching the price of gold.

When the crash comes, stick to you plan.

Do not panic.

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

Do not let feelings influence you too much.  Use logic and math instead.

Gary

(1) www.wsj.com: gold prices edge lower

(2) www.wsj.com: stock markets off to a strong start

 

Gary Scott – International Investment Value Q&A


Gary Scott – International Investment Value Q&A

Saturday is the day we can express opinions and answer questions to enjoy the wisdom of the masses.  This issue focuses on international investment value.

Each day when I complete my message, I ask myself, “Is there something here that is interesting… and useful that can help make our readers’ lives better?”

We live in a universe of unlimited abundance and wisdom.  Yet that infinite wisdom also uses time to make everything go.

Other times the masses can be impossible and… crazy even in the short term.

In fact short term it is usually best to avoid the masses. See why at “avoid the masses”

A number of readers sent me a question in response to our article “Manta to Bahia Progress” that mentioned a 38 acre beach sit for sale at $15,000. that I wrote about in 2001.

Reader Question: Gary, Thanks for your daily missives, very educational.  The 38 acres you mention, could you please provide me with more info?  I would like to locate this on Google maps. Thank you for expanding on this info, Patrick.

My reply:  Thanks for getting in touch.  Please reread as that quote as it was from an article I wrote in 2001.  In the article I underlined 2001 as I worried readers would miss that fact that the road south is now over a decade old.

However I phrased this badly because a number of readers missed the point and requested the same data you have.

Regretfully you are ten years too late when it comes to looking south but I reviewed that old article to point out what happened back a decade as the new road north can have same impact and I’ll get to toot my horn about this ten years from now (or maybe sooner).

We’ll keep looking for contrast distortions and trends that might help you spot potential now for profits in the years ahead and look forward to sharing 2011 with you. 

Reader’s comment to my message explaining why I paid off my US dollar leverage because I am concerned about currency turmoil in Europe and the US in 2011.  Dear Gary,  I would like to make you aware if you are not to China’s commitment  to protect the Euro. This is new news and they are talking about loaning five billion dollars to Portugal. They have already offered some assistance to Greece.  I do not see the Euro exchange rate dropping very much with that backing. Best regards to you and Merri.

My Reply: Thanks. I hope you are correct. Instability in Europe would not be a good scenario.  However such news does not encourage me. The fact that Europe and China are publishing the fact that China is making these loans probably means that both Europe and China are worried.

Anytime any politician tells me not to worry… I start doing so… hence my added caution.

There is another reason to have concern over dollar euro turmoil.

A recent Economist article entitled “Squaring the triangle” points out the impact that low bond rates have on currencies and the stock market.  Here are excerpts:

Photo from the Economist article “Squaring the Triangle”.

THROUGHOUT 2010 financial markets have reflected a strange confluence of views. Government-bond yields have been low (outside peripheral Europe), indicating that investors are expecting low inflation and slow economic growth. But gold, an inflation hedge, has risen steadily, while American equities, a play on growth, have performed well.

This threefold combination cannot last for ever. That it has persisted for so long is probably down to the Federal Reserve’s quantitative easing (QE), which gave comfort to bulls in all three asset classes. The gold bugs saw QE as inflationary, equity enthusiasts saw the tactic as boosting growth and the bond markets had the comfort that the Fed would be the “buyer of last resort” for Treasuries.

Oddly enough, it was the launch of the Fed’s second round of QE in November that seems to have broken the logjam. The ten-year Treasury bond yield has increased from 2.56% to 3.53% since then, with an extra spurt after the announcement of an agreement to extend America’s Bush-era tax cuts, supplemented by a cut in the payroll tax.

Yet in the long run creating money to prop up asset prices is not a sustainable tactic.

Higher bond yields have other consequences that might not be quite so welcome. Mortgage rates in America have risen, casting a further pall over the subdued housing market. Influenced by the Treasury market, yields in Britain and Germany have risen by a third to a half of a percentage point over the past month, even though both countries are making strenuous efforts to keep their budget deficits under control. Higher yields in Germany, which sets the benchmark for other euro-zone countries, put pressure on peripheral borrowers.

Stockmarket investors should also think carefully before they celebrate too wildly over rising bond yields. After all, bulls were previously arguing that low yields were good news for equities, as they encouraged investors to move out of fixed-income assets in search of higher returns. On the best long-term measure, the cyclically adjusted price-earnings ratio, Wall Street looks overvalued on a multiple of 21.9, some 33% above the historic average. That already seems to price in a significant rebound in corporate profits. (Bolds and underline are mine).

The fundamental problem remains. In a “normal” American economy, with 2% inflation and 3% real GDP growth, government-bond yields ought to be around 5%. But yields at that level would be too high for the health of the housing market, the stockmarket and for other governments worldwide. The markets are no closer to resolving that dilemma than they were at the start of 2010.

Here is why I believe this creates a concern.  Governments have done a lot to stimulate the global economy.  This has created debt and soverign debt instability as it pushed up the stock market, but did not really get the industrialized economies growing.  This leads to inflation and higher interest rates which could slow economies again and cause currency turmoil and stock markets to fall.

We review how to invest in these condtions at our February Investing and Business Semainrs in Mt Dora.  See details below.

Reader’s comments: Ecuador real estate is a bubble in the making. Subject: Manta to Bahia Progress

My reply. The bubble may already be made in many parts of Ecuador. This is great for those of us who began buying 15 years ago but it’s also why we have been urging readers for some time to take advantage of unknown areas and why we warn DO NOT TRY to FLIP real estate in Ecuador.

See my previous articles on why you should not try to flip real estate anywhere at http://www.garyascott.com/2010/12/15/11138.html
and http://www.ecuadorliving.com/2010/12/28/investing-in-ecuador-real-estate.html

Read the messages above to see the importance of always seeking value. This is why we always warn: “Merri and I recommend that you Visit First. Then Rent before you buy. Make sure that Ecuador is the place you love and enjoy.  Then buy when you are sure.”

Some places and investments grow too expensive.  Others become really cheap.  Ecuador has become much more expensive than when Merri and I first started living and investing there 15 years ago.   However there is still good value for those who take the time to learn the real estate market and search for value.

See http://www.garyascott.com/2010/12/01/11066.html

After I announced that all visa applications for Ecuador many readers sent comments.

Reader’s Comments: Sounds like it is more of an internal government problem, rather than an  immigration problem. This might give the government a chance to make the process more straight forward, why wouldn’t Ecuador want retires money and knowledge, those that really want to be apart of the local communities and contribute, not those just trying to make a fast buck. I still plan to move to Cuenca the end of this month, I am just finalizing the details now. Thank you for the information, I really appreciate the information you make available, it really helps to gain a true picture of the country from someone that cares.

My friend from Florida moved to Cuenca three weeks ago and has her two children enrolled in school and is already making friends with the locals, not too many single ladies are capable of that on their own, and she and her children are just now learning the language. Now there is a story very few would have to tell. She had no contacts there before moving and only visited Ecuador briefly before making the decision to move there permanently.

Another reader wrote: I have had lunch with the members of the referred to immigration office before and after the removal of the Director for corruption. He was not well liked by the staff and they are witness against him.

My comment.  What makes Ecuador a great place are the people. This is why a woman with two children could move there alone and gain so much support, not because of a government plan.  The best scenario in my opinion would have been that the government never even became aware of the expats coming in.  Let them do as Ecuador’s constitution is designed…. treat all equally in the eyes of the law.  Ecuador does not need special benefits to attract expats and whatever a government does… they’ll most likely get it wrong.  My belief is the less government the better.

However Pandora is probably out of the box on this issue so remember the key to success is adaptability!

Gary

The most powerful protection in life is to be able to earn income globally… not depend on governments.  Learn how to earn below.