One benefit to Ecuador Living Club membership is that the club can make discrete inquiries when required. For example one member just asked about a felony conviction of 20 years ago. Would this affect his resident visa application? We checked without mentioning names and found that the process only looks back five years. That was good to know.
Another point in Ecuador is its currency, the US dollar, is at risk.
However we can turn the weak dollar into multi currency investing opportunity when we reflect on a Tale of Two Cities.
A note from a concerned multi currency reader revealed ideas about good times and bad… the ups and downs… joys and sorrows… expansions and contractions – the frequencies that compose every measure in this symphony we call life.
This multi currency investor wrote: Hi Gary Scott! A long term reader trying to learn as much as possible before coming to Super Thinking International Investing Business Seminars. Due to Newsmax I got tuned into Aftershock Survival Summit with Robert Weidemer who says real estate values going to dive down double dip from now until 2016. He says don’t buy real estate now… rent until the significant declines hit. What to do?
The answer came from Charles Dicken’s “A Tale of Two Cities” as it starts: It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way.
I replied to the reader. There are always multi currency problems and opportunities regardless of the current public mindset.
There is always someone predicting an upcoming disaster. There is always someone lauding the upcoming boom. However dire and manic predictions never cover the entire picture. Nor is the state of the canvas all that important. It is what we do with the paint we possess that will determine our affairs, our fate and our fortunes in the coming days.
There are some good reasons to expect another shock between now and 2016. Since 2000 our research (and our notes to readers) have shown that global equity markets are in a bear cycle of 13 to 20 years.
This last downwards pressure creates a huge opportunity. This may be last bargain basement for investments that many of us will see.
First… the world has a bigger global population with greater productive capacity and better ability to trade. In other words, the really big picture is more production and more consumption. Bigger… greater… better. More people…. more to do…. more opportunity.
Second… we have more energy and use it better. The industrial revolution has been fueled by fossil fuels and farmers (coming off the farm into the factory). The increase in global natural gas and oil reserves along with the many steps that have been taken to increase fossil fuel efficiency are encouraging.
A September 2013 New York Times article “How We Learned Not to Guzzle” by Ralph Cavanagh says: Over the past 40 years, we have found so many innovative ways to save energy that we more than doubled the economic productivity of our oil, natural gas and electricity.
Government data indicate that our energy-saving efforts already have yielded some amazingly good news. Our factories and businesses are producing substantially more products and value with less energy, which goes to the heart of the president’s climate strategy. In fact, energy use in the United States has been dropping since 2007, and last year’s total was below the 1999 level, even though the economy grew by more than 25 percent from 1999 to 2012, adjusted for inflation.
At the same time, the amount of oil we are using in our vehicles, homes and businesses continued to decline last year, down 14 percent from a peak in 2005. Surprisingly, oil use was lower in 2012 than in 1973 (when the nation’s economy was only about a third of its current size). The main reason is that we are demanding better mileage from our vehicles and driving them less. (see a link to the entire article below).
Third… the value analysis from Keppler Asset Management shows an implicit three-to-five-year projection that the Equally Weighted World Index is expected to rise to 12,259 from its current level of 7,401 in three to five years. This corresponds to a compound annual total return estimate of 13.4 % in local currencies – up from 12.8 % last quarter. The upper-band estimate of 14,710 by June 30, 2017 implies a compound annual total return of 18.7 %, while the lower-band estimate of 9,807 corresponds to a compound total return of 7.3 % p.a.
Click on charts to enlarge. Read more about Keppler’s best value stock markets below.
In other words, the stock market should be good.
Fourth… our long term analysis of 30 year stock market cycles suggests that we are in the 13th year of a bear cycle that normally last 15 years so should expect a bull market to start fairly soon and last until about 2030.
Fifth…there is a new wave of technology that is changing the global socio-economic efficiency. This has the potential to create the buzz and exciting news that will stimulate non thinking expansion and reduces non thinking fear at the .com bubble news in the 1990s. Those who do think can take advantage of the values created by distortions from the thundering herd as it stampedes up or down.
Sixth…the new wave of communications ability and technology allows society to tap productive markets (older people) who normally would leave the work place and become a social expense.
Seventh…changes in weather and the reorganization of emerging economies such as the Middle East will continue to stimulate the economy.
That is seven pieces of good news.
However, there are three negative forces we’ll want to avoid:
NF#1: The same technology that helps the economy also helps those in charge of the technology take advantage of the public. We can see this in the New York Times article “The Rich Get Richer Through the Recovery” by Annie Lowrey that says: The top 10 percent of earners took more than half of the country’s total income in 2012, the highest level recorded since the government began collecting the relevant data a century ago, according to an updated study by the prominent economists Emmanuel Saez and Thomas Piketty.
The top 1 percent took more than one-fifth of the income earned by Americans, one of the highest levels on record since 1913, when the government instituted an income tax.
The figures underscore that even after the recession the country remains in a new Gilded Age, with income as concentrated as it was in the years that preceded the Depression of the 1930s, if not more so.
To read “The Rich Get Richer” see the link below.
NF#2: During the last 15 year bear cycle the US and many other nations have badly increased debt.
US National debt alone is now near 17 trillion dollars or over $148,000 per person. That’s just Federal debt. State, County, City, Personal all make this worse.
See more US debt data at the www.usdebtclock.org link below
The US is not unique in this problem and has led many governments to confiscate pensions.
The Christian Science Monitor article “European nations begin seizing private pensions” by Jan Iwanik shows how governments have started tackling private pension funds in a stronger way. The article says: Hungary, Poland, and three other nations take over citizens’ pension money to make up government budget shortfalls.
People’s retirement savings are a convenient source of revenue for governments that don’t want to reduce spending or make privatizations.
The most striking example is Hungary, where last month the government made the citizens an offer they could not refuse. They could either remit their individual retirement savings to the state, or lose the right to the basic state pension (but still have an obligation to pay contributions for it). In this extortionate way, the government wants to gain control over $14bn of individual retirement savings.
The Bulgarian government has come up with a similar idea.
A slightly less drastic situation is developing in Poland.
The fourth example is Ireland. In 2001, the National Pension Reserve Fund was brought into existence for the purpose of supporting pensions of the Irish people in the years 2025-2050. However, in March 2009, the Irish government earmarked €4bn from this fund for rescuing banks. In November 2010, the remaining savings of €2.5bn was seized to support the bailout of the rest of the country.
The final example is France. In November, the French parliament decided to earmark €33bn from the national reserve pension fund FRR to reduce the short-term pension scheme deficit.
Since that article, Poland, the largest of central Europe’s emerging economies, did take over many of the assets held by private pension funds, including treasury bonds, to a state vehicle.
Also in Cypress as part of a last-minute $13 billion deal with international lenders to prevent the country from financial collapse, deposit-holders with more than 100,000 euros will face big losses up to 40% of their assets.
This is not likely to happen in the US. There hasn’t been a depositor haircut in the U.S. since the Great Depression.
Instead the government has been putting pressure on private pension managers to be safer and has been subtly coercing them to invest in the US dollar and US bonds. Because the US is a currency issuer the government can create conditions so more dollars are printed which leads to the third problem.
NF#3: Terribly weak dollar fundamentals. The one thing I have learned about stocks and currencies is you can never predict what will happen short term as both markets are ruled by emotion.
However you can also be sure that long term the markets will be ruled by fundamentals and four important currency fundamentals are:
* Trade Balance and Current Account
* Federal Debt as % of GDP
* Federal Deficit as % of GDP
* Interest rate
The US is among the worst of any developed nation in four of the five these fundamentals.
Concerns over these weak fundamentals are compounded by the history of the dollar after the 1980s recession. The dollar showed a strength that was not supported by fundamentals in the 1980s with a steep decline after.
This chart is from a great report about dollar fundamentals at Financial Sense Editorials.(See link below)
These facts suggest that the dollar could have a serious decline in forex parity and purchasing power and should not be trusted as the only currency held.
This is what we look at in the multi currency sessions of our International Investing and Business seminar October 4-5-6. There is always someone telling us that it’s the best times. There is always someone warning it’s the worst.
Our seminars explains why the times are both and looks at how to take advantage of the new wisdoms and avoid damage from the old foolishness.
This is our 45th year of creating ways to serve. to earn and diversify our savings and investments to protect against loss of the dollar’s purchasing power.
We share what we are doing and what one can do in small and large ways at our seminars and courses.
Read more about our philosophy about how to earn and invest below.
Multi Currency Value Investing Seminar
Old Accord Creates New Profits – Multi Currency Investments.Learn about multi currency stock market breakouts at our Online Value Investing Seminar and save $502 or more.
The Value Investing Seminar is our premier course that we have been conducting every October and February for over 30 years. Now you can join the seminar online.
Improve Safety – Increase Profits
Learn how to improve the safety of your savings and investments by selecting good value and diversified investments in a multi-currency portfolio.
Few decisions are as important to your wealth as the value of the markets and currencies you invest in. This has been our area of expertise since the 1970s and we have worked with and advised some of the largest currency traders in the world.
Gain Protection First – Against the Dollar’s Purchasing Power Loss. In 1913 the The Federal Reserve Act created the Federal Reserve Bank to protect the purchasing power of the US dollar, which has since lost about 94% of its purchasing power. Here is its price compared with gold since 1900.
Dollar chart from pricedingold.com (1)
The Fed has let the dollar lose most of its strength plus has allowed interest rates to fall so low, that safe investments cannot keep pace with the drop in purchasing power.
Chart from Grandfather Economic Report (2)
Many investors have forgotten about the risk of a falling dollar because the greenback has been strong for the past five years. This temporary dollar strength came after the great recession of 2009 just as there was temporary dollar strength after the great recession of the 1980s. Then about six years after the recession, an agreement was made by major governments to weaken the dollar.
There was a severe global economic recession affecting much of the developed world in the late 1970s and early 1980s. The United States and Japan exited the recession relatively early, but high unemployment would continue to affect Europe and the UK through to at least 1985. As a consequence between 1980 and 1985, the US dollar had appreciated by about 50% against the Japanese yen, Deutsche mark, French franc and British pound, the currencies of the next four biggest economies at the time. Then the governments reached an agreement and exchange rate values of the dollar versus the yen declined by 51% from 1985 to 1987.
Now the world is again in the same place. The recession is over. Europe is a bit behind in recovery and the dollar is 50% higher than before the recession and there is no reason for the greenback to be strong.
The agreement in 1985 was called the Plaza Accord. Over just two years the greenback dropped nearly 50% versus other major currencies. The next accord will generate great profits for those who know what to do while it ruins the purchasing power of dollar back investments.
The strong US dollar and low interest rates have created one of the biggest stock and multi currency breakout opportunities in history. Learn how to create a plan to profit from multi currency shifts ahead.
One reason for the potential gains is that stock markets and currency values are cyclical. Due to low interest rates created by the 2009 economic downturn, the US and a few other equity markets have risen to some of their highest prices, ever. These markets offer very poor value now. The steep valuation creates incredible profit potential but also hides some enormous risks. Learn how to develop an investing strategy based of earnings, cash flows, dividends and book values to increase potential for profit and reduce the risks.
Next Extra Profit Created by Value Breakouts
Over the history of US equity markets, the price of overall markets have risen about 9.1 percent, respectively, compounded annually. Yet over more than a hundred years of stock market activity, a majority of the profits have come from just a very few dramatic breakouts.
Equity markets are ruled in the short term by emotions that create unpredictable ups and downs. Numerous fears of defaults, worries of double dip recessions, high unemployment, concerns about fiscal cliffs, hold investors back. Yet global population growth and advances in production and prosperity are relentless economic fundamentals that increase value.
When fear holds back a a fundamentally rising value, rising profit potential grows. Values increase as prices stagnate. Then markets break free and rocket upwards creating wealth, prosperity and growth.
Learn how to use value as a guide for spotting these breakouts that create fortunes.
Sign up for our current Value Investing Seminar and learn the latest breakout possibilities in global equities, currencies, real estate and commodities.
For example the seminar shows the potential for a breakout of the Singapore dollar.
US dollar rising against Singapore www.finance.yahoo.com chart
The US dollar has been rising without valid economic reasons versus the Singapore dollar since the middle of 2011. The rise has been especially strong since mid 2014. This currency distortion creates extra value opportunity because the fundamentals for the Singapore dollar are strong and fundamentals for the US dollar weak. This is exactly the type of breakout position we look for and share in this seminar.
Here are the currency fundamentals:
US GDP Growth last year: 2.2%
Singapore GDP Growth last year: 2.9%
US current account balance for last year: -$758 billion or -2.5% of GDP
Singapore current account balance for last year: +$49 billion or +21.2% of GDP
US Budget Balance as % of GDP for last year: -2.6%
Singapore Budget Balance as % of GDP for last year was a low: -0.7%
US Unemployment: 5%
Singapore Unemployment: 2.0%
US$ Interest Rate 10 year bonds: 2.19%
Singapore $ Interest Rate 10 year bonds: 2.57%
These are economic signs of a currency’s strength. They show a classic indicator that it is a good time to borrow US dollars and invest in Singapore dollars.
Where to Invest
The seminar reviews many ways to diversify currencies for investors large and small.
For example almost anyone can invest in the Currency Shares Singapore Dollar Trust (FXSG) managed by Guggenheim Partners.
Guggenheim manages a stable of currency ETFs under the Currency Shares brand.
These ETFs are traded on the New York Stock Exchange so even small investors can diversify in other currencies.
One of the ETFs is the CurrencyShares Singapore Dollar Trust (FXSG). The investment seeks to reflect the price of the Singapore Dollar. This provides a low cost, simple, cost-effective means of gaining investment benefits similar to those of holding Singapore Dollars.
Find out which breakouts are likely to take place next.
Merri and I have been able to help readers have better lives, less stress and to make fortunes during up and down markets for over 30 years. The simple reason for this is that we aim for the really big profits earned at the start of a breakout.
In 2016 I want to kick off the year with you and share why I have confidence and enthusiasm about the breakouts that are near.
Here is a partial syllabus of this online seminar:
International & Value Investing Outside the Box. This session shows how to take advantage of unusual currency breakouts.
Here is an example. At our October 2012 seminar we told delegates that the Japanese yen was too strong and was likely to weaken early in the next year. In the next six months, the US dollar rose 13% against the yen. On December 12, 2012 one USA dollar would buy 82 yen.
Delegates who acted and sold the yen short picked up an extra 13% forex profit in nine months.
There is a second way they could have earned. They could have borrowed Japanese yen at a low interest rate (2.5%) and invested the borrowed yen into a Dow Jones Industrial ETF for this six month period.
In this example $100,000 was invested and used as collateral to borrow $100,000 worth of Japanese yen at 2.50%. The rate was 82 yen per dollar so to get $100,000, 8,200,000 yen was borrowed.
The $200,000 was invested in a Dow Jones Industrial ETF… a mutual fund traded on the New York Stock Exchange.
The ETF rose, along with the Dow, 12.85%.
The Dow as shown in this chart rose over 12% from January to July 2013.
The loan cost per year is $2,500 (2.5% on $100,000). The $200,000 portfolio rose $25,700 (12.85% of $200,000). In other words, the $100,000 originally invested grew $23,200 in six months.
That is the positive carry without the forex profit. Plus there is a forex gain as well.
By July a dollar would buy 100 yen!
To pay off the 8,200,000 loan would have cost $82,000 at the rate of 100 yen per dollar adding another $18,000 of profit.
The portfolio is worth $223,200 less $82,000 loan payoff or $141,200. That translates into a total six month profit of 41.2%.
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 years as shown in this graph.
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 create war.
Here is the war stock cycle. Military struggles (like the Civil War, WWI, WWII and the Cold War: WWIII) 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.
Learn how the Cyber War (WWIV) may change the way we live and act and how this will affect currencies and investments.
Details in the 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), but 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.
This chart based on 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 outperformance 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%.
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.
Learn how much leverage to use. Leverage is like medicine, the key is dose. Buffett leverages his portfolio at a ratio of approximately 1.6 to 1. This rate of expansion by the way is called the “Golden Ratio”. It is a mathematical formula that controls the growth of most natural things; trees, the shape of leaves, the spiral of shells, as well as the way economies and societies grow.
We’ll sum the strategy, how to leverage cheap, safe, quality stocks and for what period of time based on your 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 (almost) years of investing experience combined with wisdom gained from some of the world’s best investment managers and economic mathematical scientists.
Enjoy investing more with slow, worry free, good value investing. Stress, worry and fear are three of an investor’s worst enemies. These are major foundations of the Behavior Gap, a trait exhibited by most investors, that causes them to underperform any market they choose. The behavior gap is created by natural human responses to fear. The losses created by this gap grow when investors trade short term under stress.
Learn how to put meaning into your investing by creating profitable strategies that combine good value investments with unique, personal goals.
Learn how to span the behavior gap. Behavior gaps are among the biggest reasons why so many investors fail. Human evolution makes fear the second most powerful motivator. (Greed is the third.) Fear creates investment losses due to behavior gaps. Fear motivates us more strongly than desire. By nature investors are risk adverse, when they should embrace risk. Purpose is the most powerful motivator, stronger than fear and greed. One powerful way to overcome the behavior gap is to invest with a purpose.
Combine your needs and capabilities with the secrets and the math of our good value model portfolio.
Share ideas about my good value portfolio. My personal investment portfolio comes from a continual analysis of international stock markets and a comparison of 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.
Markets included in this portfolio are:
• Hong Kong
• United Kingdom
• South Korea
These markets have been chosen based on four pillars of valuation.
• Absolute Valuation
• Relative Valuation
• Current versus Historic Valuation
• Current Relative versus Relative Historic Valuation xxxxxx
The seminar also reveals how to use Country ETFs to easily construct a diversified, risk-controlled, equally weighted representative country portfolios in all of these good value countries.
To achieve this goal my portfolio consists of Country Index ETFs that track an index of shares in a specific country. These country ETFs provide diversification into a basket of equities in the good value countries. 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.
This is an easy, simple and effective approach to zeroing in on value because little 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 pick and choose shares. You can invest in the index which is like investing in all the shares in the index. All you have to do is invest in an ETF that in turn invests passively in all the shares of the index.
The seminar also discloses 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 a test.
The Test for Low Cost Trading
Research put every part of this portfolio in place, except knowing the best, easiest and least expensive way to buy. A search for an optimal way to buy and hold boiled down to two methods. One tactic to test was to use a unique online broker that appeared to offer the lowest cost deal. The other approach was to use a community bank in Smalltown USA. The small town bank that I use looks after my 401K trust account and their service is first class. The benefit of small banks is that they still treat us as a human beings (instead of a number) and when we need, it’s easy to go right to the top to answer a question or get a problem resolved. There are no call centers and the bank and the person looking after my account is just around the corner.
I created a test to see which offered the least expensive service.
Working with my banker in Smalltown USA, I created two accounts, one at the online broker and the other at the bank. I placed $40,000 in each.
I set up the order for the country ETFs online, while my trust manager set up orders for the identical amounts of the same shares in his system. Then we got on the phone, coordinated our timing and on a count of three each pushed the button “BUY”.
I share the results of this test in the seminar. The savings you can gain on any purchase of country ETFs has the potential to be more than the cost of the seminar.
I have good news about the cost of the seminar as well. For almost three decades the seminar fee has been $799. Now because we have conducted the Value Investing Seminar online, you can save thousands. With the webinar, you save the cost of travel and accommodations, plus due to the fact that we don’t have to hire an expensive seminar room, we have dropped the fee from $799 to $297. You save $502 on the fee alone plus eliminate the cost of travel and accommodations.
You can sign up for all three of the seminars that we’ll conduct this year and save even more. As markets change we update the Value Investing Seminar, every four months, October, February, May. Then we conduct the seminar in person in July or August. The seminar available now has just been updated from our October 2015 seminar.
We have a special program for those who would like to join two, or all three of the seminars.
Two online Value Investing Seminars seminars: $397. You receive the updated October 2015 seminar now and the February 2016 seminar online.
All online Value Investing Seminars in 2016 $447. You receive the updated October 2015 seminar now and the February and May 2016 seminar online.
Read more about our philosophy about how to earn and invest at PIEC Investing