International Investments – Three Big Birds

by | May 29, 2006 | Archives

* International Investments: History Now Warns Us

* Natural Health Tip: Don’t Worry With Fennel Soup

* Ecuador Real Estate: Ecuador Real Estate and the US Dollar

A recent message quoted Bob Marley’s song “Three Little Birds” singing “No Need to Worry”:. However, the US equity market is flipping us three big birds that say “there is plenty to worry about here”.

The first worry is the hundred year plus trend that our messages have looked at for over a decade. This trend says that the market runs in 15 year (+ or -) up and down waves. Back in 1999, when the Dow was screaming towards all time highs we shared a graph showing these US stock market 150 month waves. First for 150 months or so the market goes up. Then for 150 months it goes down.

The graph also showed how these waves tend to flow in 2 to three year mini cycles. The market goes up for two or three years and then down for tow or three years.

You can see the graph at

Right on schedule in the year 2000, after the Dow soared above 12,000, the bear market began and over the next three years a downturn took it into the 8,000 range.

Sure enough in 2003 things began to look better. The bear market recovery began and has lasted from January 2003 (about three years). This brings the Dow back into the 11,000 range.

Now the market is beginning to look sour. It should. The graph has told us so.

You can see the five year chart of the Dow

The second bird is seasonality. SEE ARTICLE

This message says: “The end of May is the month when seasonality dangers begin and this reoccurring trend appears to be running true to form.”

In January 2004 I wrote “October has traditionally been a month when we see stocks markets fall. This is based on statistical analysis (see our message about seasonality) showing basically in all major equity markets, nearly all returns are achieved from the beginning of November through the end of May. So October is the equity markets darkest hour. The end of May has arrived, so you have been reminded! Historically for the next five months the chances of equity profits are at their lowest. Risks are the highest.”

Also take note. The last climb of the Dow began (surprise surprise) last November. SEE DETAILS

The third bird is the falling US dollar. This is likely to chase overseas investors out of the US equity markets and hasten any weakness that is already there.

These three technical factors coincide now with the weak fiscal fundamentals (high federal debt and huge current account deficit) in the US. They create a self reinforcing downwards loop. The weak dollar drives down the market, and as investors flee the market they trade in their dollars for other currencies. The sell off drives the dollar down so more investors flee the US market. This could be ugly.

Of course I could also be wrong. History never repeats exactly as it did before. Plus there will always be some shares that do well. Just be aware that three historical birds are singing us a tune “you do need to worry.” Be cautious with your US dollar and equity investments now.

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Learn about investing in emerging currencies, gold, silver, Ecuador, import-export, overseas markets and more. Join Merri and me at our September 15-16-17, 2006 International Business and Investing Made EZ course in North Carolina. Review where to invest and do business now and learn which markets and currencies may be strong in the year ahead. Our May course was overbooked and the September session is already filling up fast. Our free accommodations are reserved on a first come first served basis so do not delay! DETAILS

Natural Health Tip: Don’t Worry With Fennel Soup

Really though, we should not worry, just be aware…and act accordingly. If we find that we do worry a lot, we may have an air imbalance. In ayurvedic terms our bodies are composed of three elements, air, fire and water. The key to good health is keeping these three elements in balance, just like a car requires the proper mix of gas, air and fire. Each element when out of balance gives rise to emotional as well as physical disturbances. Too much fire and we feel anger. To much water enhances depression and too much air makes us worry.

Our emotions can give us clues to imbalances. Some simple steps can help us stay in balance. For example, if we worry too much try focusing on eating pace (in other words SLOW DOWN!). Sip hot water through the day and eat and drink more fennel. To make fennel tea, mix fennel seeds and hot water. That’s pretty simple but can bring a profound calming.

Here is a recipe for fennel soup as well.

3 cups of fennel, thinly sliced
1/4 cup chopped parsley
1/4 teaspoon fennel seed
1 celery rib, diced
1/2 avocado, diced
6-8 carrots, chopped

Bring the fennel, parsley, seed, carrots and celery to a boil. Let this steep. Add in the avocado. Enjoy the taste and be worry free as well!

On the subject of Ayurved, Dr. D.K Mishra, Ashta Vaidya, one of the most advanced ayurvedic healers, is conducting a course Ecuador January 8-10, 2007. DETAILS

Ecuador Real Estate: Ecuador Real Estate and the US Dollar

If the US dollar falls what does this mean to Ecuador? Recently a reader sent me this note:

“Gary your thoughts on this article in regard to Ecuador and the dollar value there. Thank you.

‘LONDON (AFX) – The OECD has warned that the eventual rebalancing of the US current account gap ‘looks increasingly unavoidable’ and will send shock waves across the globe, starting with a slump in the dollar’s exchange rate.

‘The OECD said in its world economic outlook that the depreciation faced by the dollar could be ‘of the order of one-third to one-half.’

‘The adjustment in the deficit would ‘need to induce a sharp slowdown in US domestic demand and that this would have adverse spill-over effects on other economies both through the trade and asset revaluation channels,’ it said.”

I believe that a drop in the US dollar could actually benefit Ecuador. Because the greenback is Ecuador’s currency, it has competitive troubles with competing nations such as Peru, Colombia and Argentina when they devalue their currencies versus the dollar. In the long term being dollarized is good as it reduces inflation and stops politicians from turning on the printing press.

A US slow down will not seem good for the global economy though in the short term. Like all disciplines, the change appears to create pain. However the world has stretched this imbalance, letting Americans for a very very long time buy and buy stuff they cannot pay. The politicians have not corrected this, so the market will instead. The US really cleans up by the way. If the dollar drops by half, the spending power of the payback of the huge US debt is cut in half as well. Bad news for those who hold the dollar. Good news for future US tax payers.

This is true for Ecuador also. As the purchasing power of the dollar falls, so too does Ecuador’s significant US dollar debt!

The total impact of such a huge shift in economic arrangements is quite murky but one thing is clear. In US dollar terms, Ecuador real estate will rise. All commodities, labor and real estate will rise in US dollar terms as the US currency loses purchasing power.

Ecuador has some other fundamentals that could help it do well in a global crunch. First, the people are sweet and easy going with few expectations of government care. Second, the country is rich with earth, water and sun. Crops grow everywhere and it is typical as in the picture below that people have a huge garden right at their home. Third, Ecuador’s low capital, low cost labor environment could be more stable during difficult times. Finally Ecuador as a leading oil exporter gains. As the dollar drops, Ecuador’s debt drops and oil prices rise, helping fill in gaps.

Be aware, this fundamental shift in how the world’s economic system works is fraught with danger. The world has been feasting on debt and America’s unruly consumption. When the dollar falls dramatically and the global currency system comes unhinged, everyone will feel the diet. Some will embrace it and move ahead. Most will suffer and where this suffering leads is impossible to tell.

Here is that typical house near our village of Cotacachi, Ecuador with the garden.

Join us at our next Super Thinking – Super Spanish course. Meet Dr. Vaca. See real estate for sale. Learn how to learn better. Speak Spanish. DETAILS

Until next message, I wish you freedom from worry through good health and knowledge!