Below is what I wrote about the U.S. stock market two years before it crashed. No one wanted to listen then. Now many wish they had. May I review this with you before we look at my latest Global Economic Update?
Here is what I wrote: “Expect troubled times ahead. We have seen an economic miracle, but will global economies and stock markets continue to climb? Maybe, but each step higher brings the markets closer to the moment when they will fall. Learn in this Global Economic Update 12 reasons why you can survive the five fatal economic flaws described below.
The world's economic jig may be up. There are five reasons why your investments are facing increased risk now.
The world may move shortly into an era of desperation economics. There are five compelling social-economic facts every investor must now face. These facts suggest bad news for investors. These forces can spell the ruin of millions of investors over the next four years. A shift of wealth such as society has not experienced for sixty years could take place.
I am increasingly concerned with the economic morality of the world. The declining fiscal responsibility has reached a point where it could now have a very negative effect on the world's economy. This loss of financial honor comes from a system of materialism that increasingly promotes spend now-pay later and enhances the idea that it is all right to take without giving. These false economic ideals unfortunately flow against the laws of nature and will eventually create destruction, just like any pattern of consumption that does not have matching production.”
How true these predictions became! Not only did the stock market crash, but we have seen American business wracked by morality scandals.
In that same message I added:
“There are only three ways to gain enough wealth to be financially independent.
* Wealth Building Option #1: Let time (and compound earnings of your savings) make your wealth grow.
* Wealth Building Option #2: Let increased earnings of your savings make your wealth grow.
* Wealth Building Option #3: Let increased amounts of savings make your wealth grow.
Regretfully I, and millions of other baby boomers, now over fifty years of age have run out of the option of time. Compound earnings are the most certain and powerful way to financial independence. But for compound interest to really work requires at least 35 years and even better 45 years. 20 year old investors have time. $10,000 earning 8% per annum grows to $343,140 by the time they are 65. 30-year-old investors still have time because $10,000 still grows to $159,140 by the time they are 65. But 50+-year- old investors do not have enough time. $10,000 earning 8% grows to only$29,370 by age 65. Much of the power of compound earnings has been lost!”
This has regretfully become even truer. Today we have a low interest rate environment. Stock markets have crashed (as predicted) and now are once more on their way up but only in the short term (18 to 32 months). Overall they are in a ten to fifteen year period of sideways volatility. For more on this see https://www.garyascott.com/market/606/ and https://www.garyascott.com/market/670/
Bond yields are also very low. Young investors still have time and can sit these slow times out for a bit, but those who need to draw on funds now or within the next ten years are forced to look for more dynamic ways to invest, without giving up too much safety. Here are seven places we can now go.
#1: Invest in distortions. There are regions in the world where returns are unusually high, because previous problems had distorted returns upwards. Places to look for are the areas where the problems are lessening but the perception of risk is still high. Latin American bonds may fit this category now. You can see an entire review of Latin American economics at http://www.jbpb.com/3.0_market_insight/3.4_analyses.asp?sLangID=uk&iAnalysisTypeID=4. Plus go to https://www.garyascott.com/makingwealth/618/
#2: Tax Liens. These are investments guaranteed by county governments that pay up to 25%. This may seem too good to be true but is not. The downside is you have to work harder to invest in tax liens as someone should look at every property that has a lien before investing. This is what keeps the numbers of investors down and hence creates such a high return. For more details go to https://www.garyascott.com/tedthomas/.
#3: Borrow Low-Deposit High. Low interest rates can work on your behalf as you can now use existing shares and bonds you hold as collateral to borrow dollars as low as 3.3755 and Japanese yen as low as 1.6275%. For more details contact Thomas Fischer at Jyskebank at FISCHER@jyskebank.dk
#4: Invest in undervalued real estate. Property always has been and always will be a great store of value. Under populated property 25 to 125 miles from major population centers offers special potential now. For more go to https://www.garyascott.com/lostprovince/203/ and https://www.garyascott.com/ecuador/549/ and https://www.garyascott.com/health/556/ and https://www.garyascott.com/makingwealth/651/
#6: Invest in yourself. Start your own business. Go to https://www.garyascott.com/65thoctave/291/
I look forward to sharing more ideas on how to achieve success in these fields in the year ahead! Until then, good global investing.
P.S.Officers from Jyske Bank will speak at our upcoming International Business Made EZ Course, in Quito, Ecuador on Investing in Distortions (including Latin America and Borrow Low-Deposit High). I will cover the other subjects above.
Then in March, I will give an updated global economic predictions at a special course in Delray Beach, Florida sponsored by the Oxford Club.