International Investments – Luck and a Fat Tail Shock

by | Jun 9, 2006 | Archives

* International Investments – Fat Tail Shock
* Natural Health Tip – Be Careful of Fat Tails
* Ecuador Real Estate – Thanks for the Views

At age 60 we start to lose friends (and parents if we are lucky enough for them to still be with us). Each loss is mourned and we are reminded. See the beauty every day. (Like the scenery at the end of this message.)

Each passing also reminds me of a secret I have never shared…so after 40 years it’s time. Perhaps it will help others keep perspective when they are sad or sorry. The thing is I have been living on loaned time for four decades.

The year was 1966. I was 20, married and our first daughter had been born. I was working 50 hours a week pumping gas, managing a small block of apartments (for free rent) and taking 15 quarter hours of night school at Portland State College (that’s three hours a night, five nights a week plus home work). In other words even then, I did not have gobs of extra time.

A beloved uncle passed and I was rushing from work to my new home near Milwaukie, Oregon to get ready for the funeral. We had just moved there. I didn’t know my way around and a hoped for gravel road short cut turned out to be a dead end. Hurrying to recover the lost minutes I pushed the little 2 seater, bug eye, Austin-Healy Sprite I was driving (flying actually by that time) to its maximum envelope. A stop sign was missed (I still swear it was blocked by a tree).

Stomping on the brakes pushed the car out of control directly onto the paved highway and into the path of a 16 wheeler semi-auto truck and trailer. Bang. Everything went black. Next surprise and a tangled mess. Those old Sprites were not composed of much. The truck hit hard enough that all the knobs popped off the dash. Destroyed was not quite the right word for that car. Cremated is perhaps better. Coming back, I jumped out and tried to push the tangled ruins off the road. She would not budge. Rushing to a nearby house, I borrowed a phone to call the police. The madam there said, “Did you see that? That guy had to be killed.” Little did she know that guy was me!

It was not until 30 years later that I learned I had broken my knee and my back in that wreck. I never went to the doctor. Just carried on. The car was totaled, really crushed and everyone who looked at the mangled driver’s seat, steering wheel and such all said the same thing, “How did you survive”? I cannot even explain how I got out of the car. Don’t remember a thing of it. So here’s the point. Every time something happens that’s bad. I think of that rushed 20 year old who with that one stupid error could have left his wife widowed and daughter without a father.

So if you are past 20. You have some good luck somewhere too. Remember to say thanks. More about that broken back on Monday. Now onto broken markets.

International Investments – Fat Tail Shock

Let’s also give thanks to a lively reader who sent me an article written by Morgan Stanley about the Turkish economy and Fat Tail Shock.

Read the article and you’ll see that the writer was using the term “Fat Tail” to dazzle and puzzle us 99% of the world who do not understand mathematical terms such as “probability distributions”, “standard deviations” and “5-sigma events”. However smart guys like that cannot fool me. I have a secret called Wikipedia which says:

“In finance, fat tails are considered undesirable because of the additional risk they introduce. For example, an investment strategy may have an expected return, after one year, that is five times its standard deviation. Assuming a normal distribution, the likelihood of its failure (negative return) is less than one in a million; in practice, it may be higher. Normal distributions that emerge in finance generally do so because the factors influencing an asset’s value or price are mathematically “well-behaved”, and the central limit theorem provides for such a distribution. However, traumatic “real-world” events (such as an oil shock, a large corporate bankruptcy, or an abrupt change in a political situation) are usually not mathematically well-behaved.”

Retrieved from

Good now that I am even more confused let me at least outline some of the things about the Morgan Stanley article on Turkey I did understand.

They say that the Central Bank of Turkey’s new governor, Durmus Yilmaz, signaled an increase in short-term interest rates and confirmed the bank’s readiness to intervene in the foreign exchange market. This is good.

The article also pointed out that this is not the first time Turkey is experiencing a fat-tail shock. In 2004, for example, when the US Federal Reserve started raising interest rates, the lira depreciated almost as much as the current episode and the annual inflation rate increased from 7.1% in June 2004 to 9.4% at the end of the year. Eventually, however, strong economic fundamentals restored balance and the Turkish market once again took off.

Morgan Stanley’s view is that as long as the government keeps fiscal consolidation on track and incomes policy in line with inflation targets, the current rise in inflation should remain temporary. I concur.

They point out that Turkey’s economic fundamentals remain strong and that the current wave of risk reduction that is affecting emerging markets will eventually come to an end. I agree with this as well.

You can read the entire message at

These are essentially positive comments and my inclination based on the fundamental importance of this nation as the crossroads between Christianity and Islam suggests that Turkey will do well in the long run. I was among the very first who began recommending Turkey as a place to invest nearly 20 years ago. I recall the event well, a dinner in a Japanese restaurant in Orlando with our International Club. I can even recall a number of the delegates who were there. A few were startled. I expect a few laughed. Those who listened and heeded have seen thousands of percent returns!

Turkey has seen a number of ups and downs in the past decade. Yet the potential is vast! We, as a society, cannot ignore this market! The last time Merri and were in Istanbul I was impressed by a view of alabaster minarets and a golden arch.

Ochre shadows from setting sun cast patterns on laden tables sultry in the salt air. Market perfumes lurked in purple alleyways and beckoned the milling crowd. We watched the market, its hoards of shoppers shuffling through a square overlooked by graceful Mosques and a McDonald’s restaurant.

This was the height of contrasts! Europe and Asia meet here at the Bosporus Strait in a melange that creates one of the most exotic, diverse cities in the world. East and West. Mind and Heart. Mystic and Logic, Ancient temples and modern skyscrapers. Whirling Sufi dervishes gracefully spin for God while dancers at modern discos are lost in the material world. Istanbul has it all and in many ways represents nature’s irony that requires two contrasts to fit before something can be whole.

A successful Turkey can help mankind be whole so even if it was not a good place to invest, we would and should need to do it. But Turkey is a smart place to invest for those who want to take on extra risk for higher potential growth.

Learn about investing in emerging and major currencies, gold, silver, Ecuador, import-export, overseas markets and more. Join Merri, Thomas Fischer from Copenhagen and Steve from Ecuador 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. Learn more about Ecuador import and export from Steve. Our May course was overbooked and the September session is filling up fast. Our free accommodations are reserved on a first come first served basis so do not delay! Go to

Natural Health Tip – Be Careful of Fat Tails

Another reader, noting a comment that Merri and I do not each much cheese, wrote: “What do you do for protein? We cannot eat fish for the mercury.”

Here is our reply. Quinoa is a protein mainstay, the only complete vegetable protein. Our creek is full of trout-no mercury here. Venison on occasion. Lots and lots of eggs. We have to keep up with our three very fat happy productive hens. Fresh yogurt made from boiled milk placed in green bottles in the sun. Fresh non-fermented cheese (buy in Latin section of super market) called queso fresco. (In Ecuador this farmer’s cheese is everywhere…and no fermented cheeses at all except from American style grocery stores.) Cottage cheese, farmers and ricotta cheese. Kefir.

Cheese is not the problem. Too much fermentation and fat are the things we try to avoid. The yogurt and kefir are exceptions as the fermenting agents have some benefits. All the harder to digest curd foods are best eaten at lunch. Organic chicken is a good source.

Some sea food can be eaten if small. Regarding mercury, sardines, herrings and such are still okay as they are at the bottom of the food chain. The mercury problem compounds at you rise through the chain as it concentrates. Having said all this, the way you get protein should depend on your body’s nature, your surroundings, your activity and your current imbalances.

This is why reviewing your lifestyle with a healer who is experienced in nutrition and healing is good.

Vaidya K.S. Mishra is a master healer in the eight avenues of ayurvedic healing and will help us learn how to eat better at our June 16-17-18 course here at the farm. He is a healer with immense healing knowledge to share. This course will be an experience that immerses you in naturally healthy surroundings, such as the pure water, clean air, silence, freedom from electromagnetic radiations, specially prepared food. Join us at Merrily Farms. Our free accommodations are now all reserved but we have space for two or three more delegates who can stay at a nearby. DETAILS

Ecuador Real Estate – Thanks for the Views

You see views like this all the time in Ecuador, an ancient Incan ruin amidst a filed of wildflowers. This is one reason why our friends and delegates come again and again.

P.S. Join us in Ecuador for our Super Thinking – Super Spanish course. Enjoy the sun! See great views! Inspect real estate for sale. Shop in the great markets. Laze in the warm thermal pools as you learn to speak Spanish. Do not delay we only have four spaces left! DETAILS

Be thankful this weekend. See the beauty.