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Ecuador: Distortion & Trend

When Merri and I first arrived in Ecuador from Naples in the 1990s, we visited the Ecuador coast.  Property that would cost millions in Naples were only a few thousands in Ecuador.  “What a distortion!” I thought and started buying Ecuador real estate.

ecuador-beach-prices

When we first started buying Ecuador real estate houses like this in an Ecuador gated community, they were $30,000, including the land price.

Ecuador property is far more expensive now but when contrasted with beach price trends elsewhere, still good value.

Spot economic distortions and trends that create or destroy value.  This is the way to invest for everlasting wealth.  The contrasts and trends are the creators of opportunity.

This site’s March 8, 2o14 message reviewed shares in the Australian sandalwood corporation TFS Corporation. The message reviewed how the shares have risen from A$1.20 to A$1.71 in just over a month when they were first recommended at this site.

finance.yahoo.com chart

Click on image

Those TFS shares by the way have now risen to A$1.87, up from A$1.20 in six weeks.

More importantly the message looked at how these shares have extra built-in value.

That message evoked a number of emails.  Numerous readers wrote with notes like: “Well done on the TFS call”.

On the other hand one reader wrote:  Telling people to invest in the Australian dollar shows you haven’t got a clue on how to invest.  I suggest you stop giving this type advice and stick to other areas pertaining to Ecuador in the future.

That difference of opinion is what creates a market.  However I found it interesting that my reply to both complimentary and derogatory remarks was the same.

I replied to all:  Sometimes we get these great short term results. However this is not what we are looking for.  Don’t take me wrong. We’ll take quick profits when we can get them.   We’ll even brag about them, but honestly they make us look smarter than we are.

When we hit short term home runs like in these examples, that’s just lucky timing. Our assessments and decision are based on a well thought out value analysis aimed at creating intelligent diversification and steady growth of investments in the long term.   Gary

Finding value requires looking for contrasts and trends that go against the popular opinion.   The process is like mining for gold, moving a lot of dirt for the few nuggets found.   This means not every day produces an idea worth writing about.  The nuggets take months and sometimes years.

For example before sandalwood, it was back in December 2012 that we spotted a contrast between the value of the yen and dollar.  The yen was too high.   We recommended borrowing yen.

In the next three months after that message to borrow the Japanese yen, the dollar appreciated over 12% versus the yen higher than the skyrocketing Dow Jones Industrial average.

Those who borrowed yen and invested in the Dow Jones industrial average… earned both the 9.5% and 12% profit or 21.5%… in three months.

Before that we can look back to 2009 when we recommended investing in Florida rentals.

At the beginning of 2014 we wrote: Now we are seeing great results from that 2009 advice.

A Wall Street Journal online article entitled “U.S. Rents Rise Again as Market Tightens” by Dawn Wotapka says:   Landlords raised rents by an average of 0.8% to $1,083 a month in the quarter.

NYT Image

Apartment landlords continued to push through higher rents in many cities in the fourth quarter, offering little relief for renters who have seen increases over the past few years.

Nationwide, landlords raised rents by an average of 0.8% to $1,083 a month in the quarter, according to a report to be released Tuesday by Reis Inc., REIS -0.05% a real-estate research firm. While that is below the previous quarter’s 1% increase, it is above the 0.6% gain seen in 2012’s final quarter. Rents climbed 3.2% for all of 2013.

The vacancy rate, meantime, fell to 4.1% in the fourth quarter from 4.6% in the year-earlier quarter, remaining well below the 8% peak at the end of 2009.

We also warned at the beginning of this year that a big part of the Florida real estate opportunity is now gone.  One house we just looked at in Mount Dora sold for $99,000 in 2010. It is back on the market at $299,000.

Before that we look back to 20o7.  In 2006 we recommended five leveraged portfolios.  The leverage loans were in Japanese yen and the Czech Coruna.  Their performance was great (see below).  The Green Portfolio was especially good because investors as a whole still did not believe in alternate energy.

The Green Portfolio consisted of six shares in water purification, alternate energy and environmental mitigation.  Few investors believed in this type of investment art that time and as the Green idea caught on, this portfolio rose 266.30% in 2006.   Here is a chart in a December 2006 message.

Portfolios 2007 Aug 17 Aug 31 Sept 9 Sept 28 Oct 5 Oct 31
Swiss Samba 15.19% 26.42% 30.86% 44.40% 47.94% 53.32%
Emerging Market 30.50% 58.18% 67.95% 103.22% 105.22% 122.62%
Dollar Short 9.14% 20.29% 23.16% 42.71% 42.06% 48.19%
Dollar Neutral 13.56% 22.33% 24.22% 34.74% 37.19% 38.67%
Green 110.93% 155.84% 170.22% 220.22% 236.47% 266.30%

Then in early 2007 the velocity of appreciation ramped up.   The Green Portfolio rose another 50.5% in one month!  The thundering herd had caught on, had stampeded in and were trampling value.   Those shares seemed too expensive to me.  The numbers made no sense in relation to what the companies could earn.

Here is the chart in a February 2007 message.

TOTAL APPRECIATION TO DATE
Portfolio
Dec. 22
Dec. 29
Jan.11
Jan 22
Swiss Samba
3.18%
8.10%
5.92%
10.10%
Dollar Neutral
5.09%
7.94%
7.87%
12.38%
Emerging Market
5.91%
15.11%
4.46%
14.90%
Dollar Short
11.74%
12.91%
6.91%
9.71%
Green
27.70%
34.77%
35.95%
50.15%

That was enough, I alerted readers in Bold.

* * * Changes in My Portfolio * * *

BASED ON VALUE THINKING LAST WEEK I LIQUIDATED ALL MY EQUITY MUTUAL FUNDS AND SHIFTED INTO SWEDISH AND DANISH BONDS INSTEAD.

Most stock markets looked like poor value to me.  I exited into very safe bonds and was in a holding mode when the market crashed.

Value Perspective

I did not know that these shares would do so well in 2006.  I did not know that stock markets globally would collapse later that year.  All the decisions were made looking at contrasts, trends and how they related to value.

With this in mind the view on value investing is the classic book, “The Intelligent Investor” written by Benjamin Graham and Jason Zweig with Warren Buffet as a collaborator.  This investment book outlines no-fail value strategies without gimmicks. The book is filled with wisdom about investing.

Intelligent Investor

You can order this at Amazon.com here.

You can also order the Sandalwood Investing Report. Though the shares are up over 50% in the last month this share has plenty of built-in value with potential for a $10 price over the next 10 years.

Screen shot 2014-01-28 at 5.28.13 PM

You can learn all about the TFS sandalwood share investment in the Sandalwood Investing Report at  Amazon.com

Spotting economic contrast and trends that create value is a sure way that investments and savings can grow faster than the loss of purchasing power.  Ignore what the market is doing. Examine instead the potential value.

Gary

New 4 Webinar Series: “How to Spot Distortions & Trends that Create Value”.

Merri and I have been conducting International Economic Update Seminars every three to six months for over 30 years.   Now for your convenience we are adding “Economic Distortions & Trends” webinars.

The first in a series begins next week and I would like to share the first webinar with you FREE.

The first  webinar is one hour and 15 minutes and covers:

Global Economic Update:  How to Spot Value From the Past & Present For the Future covers”

* How to Spot Distortions & Trends in:
Equity Markets
Currencies
Countries
Bonds
Real Estate
Technology –Economies & Business
Commodities
Business and self publishing

* The Global Economy since the 1800s
How to see the Future Now and get the wind behind your back

*   How Why and When to gain the five point command posture.
Live in one Country
Bank in a 2nd Country
Invest in at Least Three Currencies for Diversification
Earn in a 4th country
Embrace Change

*   The Importance of Resource & Productivity Transition thru Technology
In History & Politics
In Communications
In Consciousness & Mindset Transition
In Demographics
In Cycles

What the Six Major Technological Eras Mean to Investing and Business Now

*  How to Invest in the Real Fuel Shortage Beyond Fossil Fuel

*  The Importance of Demographics in Business & Investing

*  How to Spot Repeat Bull and Bear Cycles.
How hey affect Business and Investing.
What to do When History Repeats Itself.

4 Webinar Series: “How to Spot Distortions & Trends that Create Value”

Each webinar lasts one to one and a half hours.  The webinars are $49 each, but when you enroll in this new webinar series, the first is free.  In addition, if you enroll in all four webinars the fourth is only $1 more.

When you enroll now, you’ll receive the first webinar right away.  Each future webinar will arrive in approximately two weeks.   Enjoy webinar #1.   If not entirely satisfied, just let me know and I’ll provide a prompt refund.  To thank you for your time and trust, I’ll send the 2nd webinar at no cost as well.

Enroll here.

Webinars #1 and #2 $49

Webinars  #1 – #2  and #3 $98

Webinars  #1 – #2 – #3 and #4 $99.