Purposeful Investing

Here are six predictions where profits are guaranteed.  They are absolute guarantees because I made these predictions over the past 49 years.  They were correct and those who invested in the six predictions became unbelievably rich.  Each had a cycle though, so the really great opportunity is now past.

You can still use these six predictions though, because they lead to the seventh prediction that I am investing in now.

See below the six predictions to learn how to cash in on the seventh prediction.  Use my 49 years of global investing research to gain slow, profitable, worry free investing… plus discover how even your amazing investments could earn 1,237% more!

Prediction #1 – 1970s: Invest in the Hong Kong Stock Market.  This prediction was in my first published report “Three Secrets for Investing Abroad”.  The Heng Seng Index was around 700.   Since then it has risen to over 21,000, an increase of  30 times.

Heng seng chart

Heng Seng chart from www. yahoo.com.  Click to enlarge.  Compare that to the Dow which has risen only 17 times.

Prediction #2 – early 1980s: Invest in London real estate.  Prices looked so good that Merri and I conducted London real estate tours.  The first house I bought in central London cost $35,000.  Today the average price in this area is almost $2.5 million (1.6 million pounds).

daily mail graph

Graph from Daily Mail.

Prediction #3 – later 1980s: Invest in Isle of Man Real Estate.  You could buy a nice ocean front house for $20,000.  Merri and I shifted our seminars and tours from London to the Isle of Man.  By the 1990s that price had risen 10 times.  When the UK market crashed in the early 1990s, Manx values doubled. The average house price went from around $125,000 in 1995 to about $375,000 by 2007.

Prediction #4 – early 1990s: Borrow yen at low interest rates and deposit in dollars at high interest rates and related currencies.

Yen chart

See full chart at Fxtop.com

Three times, our predictions of when to borrow and/or invest in yen created fortunes.

Prediction #5 – 1997  – Invest in Ecuador real estate.

IMF charts

Those who have been reading our site for some time know that beginning in the late 1990s through mid 2000s we sold much of our Florida real estate and began buying Ecuador property.  We urged readers to join in the adventure, fun and profit.

We purchased numerous condos on the beach and in the Andes, almost 1000 acres of hacienda and even a hotel.  Prices were ridiculously low. Pretty soon hundreds of my readers were buying Ecuador real estate as well.

Prediction # 6 – 2009:  Invest in Smalltown USA.  In 2009 we switched strategies again. We started selling our Ecuador real estate and began buying back in small towns in Florida.

wsj chart

Wall Street Journal article (1)

Since then we have accumulated numerous rental properties in central Florida.  The Wall Street Journal recently reported: “Existing homes sales this year are expected to hit levels not seen since just after the peak, in 2006, driven by strong job growth, low interest rates and a gradual loosening of lending standards, according to the National Association of Realtors.”

The area we recommended and have written about is part of the fastest growing metropolitan area in the USA.  The New York Times article (2) said:  “The Villages, Florida: In 2014, its population rose more quickly than that of any other census area in the United States, climbing 5.4 percent, compared with 0.7 percent for the nation as a whole.”

Investing in each of these six predictions ourselves has created financial security.   I’ll share the investment I am making now in a moment.  First, let’s look at the first golden rule of investing because though I have achieved every financial goal that most people simply dream of, I know that all can be lost because of this rule.

Investing Rule #1:  There is always something that you and I, nor anyone, does not know.

Because 2015 is the count down year of my 50th anniversary of talking and writing about savings and investments, I want to share vital information about these rules and 49 more.

The “50 Golden Rules of Investing” are the 50 best investing lessons I have accumulated from five decades of global travel, investing and business.  The stories mostly come from mistakes made, plus some decisions that reaped really rich rewards. Before I explain how you can get these 50 Golden Rules let’s look at the first in more detail.

History is littered with this fact that there is always something we do not know.  The Titanic was called “unsinkable”.  There was “Peace in our time” in 1938.  “Dewey Defeats Truman” in 1948.  The Edsel was produced in 1958.  In 1968 Business Week wrote:  “With over 50 foreign cars already on sale here, the Japanese auto industry isn’t likely to carve out a big slice of the U.S. market.”

Gary Scott

After working in US investments for two years, I took my first flight to Hong Kong in 1968. I wished I had known then what I know now!   That’s not how life works though.  There is always something we do not know.  This rule applies to almost  everyone, listless and smart, young and old, big and small.

A late 1870 Western Union memo said:  “This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.”

Associates at RCA told David Sarnoff  in the 1920s:  “The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?

The chairman of IBM said in the 1940s: “I think there is a world market for maybe five computers.”

Margaret Thatcher missed her own greatness, in 1974 she said: “It will be years — not in my time — before a woman will become Prime Minister.

A Boeing engineer missed knowing when after the first flight of the 247, a twin engine plane that holds ten people, he said:  “There will never be a bigger plane built.”

gary scott

2015

So here we are.  We know what happened in the past.  Looking ahead is never quite so certain, but we have to invest anyway. To live without knowing for sure and with inaccurate beliefs is part of human nature.

The Seventh Prediction.  In the 1980s.  A remarkable set of 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 Buffet 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 best place to invest for the long term is in shares.  This chart from the 24 page Keppler Asset Management 2014 Asset Allocation Review shows that over the past 80+ years equities have dramatically outperformed other types of investments.

keppler

Click on chart to enlarge.

The search for good investments requires a relentless search for value.  Our investments have to be good enough to reap an outstanding profit even after the parasites siphon off part of the profit.

To take advantage of the once every 17 year circumstances, I chose to track Keppler Asset Management who continually researches developed and emerging markets globally.  Keppler is one of the best market statisticians in the world and numerous very large fund managers use his analysis to manage funds such as State Street Global Advisors.  Keppler compares the value of each share in each market based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return.  From this study of monumental amounts of data Keppler develops a Good Value Stock Market Strategies.  The analysis is based on long term, rational, mathematical facts and does not worry about short term ups and downs.

From Keppler I learned that market timing is not the way to get these high profits.  Another graphic from the 2014 Keppler Asset Allocation Review explains why.

keppler

Click on image to enlarge.

A dollar invested 88 years ago in Treasury bills rose to $20.58.  The same dollar invested in U.S. stocks over the 88 years grew to be was worth $4,677, UNLESS you missed the best 43 months.  Literally all of the the Dow’s growth in 1,056 months came in 43 of those months.  Your odds have been one in 24, better than roulette perhaps, but not good enough.  Plus even after these odds, the predators are going to take their cut.  We have to ask, “Am I that good at timing?”

The better alternative to timing is investing long term indexing based on value.  Long term strategic investing in market indices reduces the amount of trading.  Low trading activity is important because trades are where you are most vulnerable to predatory tactics.

A part of the long term strategic trading is to invest in low fee diversified Index ETFs.  This simplifies your search for value because it focuses your research into lumps.

A comparison of US versus German Stock Market Indexes gives an example of lump research and you can create good value, low cost, diversified portfolios that offer maximum potential for profit as they reduce risk.

Keppler’s research shows that Germany’s stock market is a good value market.  Keppler lumps all the shares (or at least 85% of the shares) into the calculations.  There is no attempt to select any one specific share. Keppler’s research shows that the US stock market index (a lump of about 85% of all the US shares) is now a bad value.

Germany has the world’s fourth largest economy.  The country is the third largest exporter in the world and in 2013 recorded the highest trade surplus in the world making it the biggest capital exporter globally.  Yet German shares have been overlooked.  German share prices are cheap.

The German Stock Market as of January 2015 in terms of US dollars has a relative price to book value ratio of  .78,  a relative price earnings ratio of  0.87 and a relative dividend yield of 1.12.  The US Stock Market has a much higher relative price to book value ratio of 1.29, a relative price earnings ratio of 1.07 and a relative dividend yield of 0.81.  German shares cost much less, compared to the values and earnings, than US shares.  German shares pay much higher dividends as well.

Keppler predicts that the US Stock Market (which is ranked as a sell market by Keppler) will have an annual index gain for the next five years of  3.1% and a total return (with dividends) or a total five year return of 21.7%.  The same calculations for the German Market predicts an average annual index gain over the next five years of 7.5% and a total return (with dividends) or a total five year return of 47.3%.

Which would you rather buy,  a 47.3% return sold for 78 cents on the dollar or a 21.7% return sold for $1.29 on the dollar?

You can forget about any specific share in the US or Germany and invest into an index (in this case the Morgan Stanley Capital Index) which represents about 85% of all the shares traded on the exchange.

You can invest in ETFs that passively invest in all the shares of the index in stock markets that offer good value.  iShares investment company for example has  an ETF that invests in 85% of the shares traded on Wall Street.

This ETF icalled the iShares USA (symbol EUSA) has risen from 22.91 to 43.40 or 89% in the past five years.

iShares also offers an ETF that invests in about 85% of the stocks listed on the German Stock Exchange (Symbol EWG).  EWG has risen from 19.70 to 28.13  or 42% in the past five years.

ishares

Keppler’s lump research shows that Germany is a good value market.   One simple (even very small) investment in iShares Germany MSCI Index ETF gives you a portfolio  of almost all the shares traded on Germany’s largest stock exchange in Frankfurt.  This ETF is a share traded on the New York Stock Exchange. The ETF invests in 85% of the shares in Germany.  This ETF is a passive fund that does not try to outperform the growth of the German Stock Market. The managers simply track the investment results of the MSCI Germany Index.  This makes it easy to capture the powerful economic circumstances that are unfolding now.

However, just investing in Germany is not enough.  There are currently ten good value developed markets, Australia, Austria, France, Germany, Hong Kong, Italy, Japan, Norway, Singapore and the United Kingdom.  Plus there are 12 good value emerging markets. You can easily create a diversified portfolio in each or all of these countries with Country Index ETFs.

Investing in many stock markets through ETFs gives you opportunity in the second economic wave, a rising US dollar.  Preserving the purchasing power of your earnings, savings and wealth requires currency diversification.

The current strength of the US dollar is a second remarkable similarity to 30 years ago.  The 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 you start using strong dollars to accumulate good value stock market ETFs in other currencies.

Screen Shot 2015-07-26 at 12.03.44 PM

Chart from snbchf.com   Click on chart to enlarge.

Look at that dollar spike against the Swiss franc in 1985.  The dollar rose then against the yen, the German mark, British pound and all major currencies.  Imagine the profit you could have made, had your known that the greenback was set to fall 50% in the next two years.

Conditions for a dollar downfall are set again.

For example because of fears about the euro, EWG, the German ETF is down 9 percent over the last 12 months and down 8 percent over the last six months.  These declines are created by currency concerns.  When the euro regains strength, the shares have the potential to appreciate even more.

This is the most exciting opportunity I have seen since we started sending our reports on international investing ideas more than three decades ago.  There is so much more to write and 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 Keppler Asset Stock Market and Asset Allocation Analysis so you can keep this as simple or as complex as you desire.

The report shows 22 good value investments and a really powerful tactic to use that allows you to accumulate these bargains now even in very small amounts (even $5,000).  There is extra profit potential of at least 50% so the report is worth a lot.

Order the report here $29.95

Research shows that most people worry about having enough money if they live long enough.  I never thought of that.  I just wanted to live long enough to see the remarkable economic opportunity that started in 1980 start again and those that continue to offer opportunity.  This powerful profit wave has begun. I made it and am glad you did too.  Even more I look forward to the next 17 years and sharing how to have more than enough money for the rest of your life.

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Gary

(1)  WSJ Real Estate Moving on up

(2)   The Giant Retirement Community That Explains Where Americans Are Moving