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.
Read more about our philosophy about how to earn and invest at PIEC Investing