International investments rise and fall based on value. A reader just sent this note to Merri. “Tell Gary he was right on about closing his position in China.. Good Call.”
Only time will tell exactly how these international investments will perform, but I am happy today, to have divested the Asian equities three weeks ago. Yahoo’s news about international investments yesterday suggests this is correct. It says:
“TOKYO – Chinese stocks bounced back Wednesday after their biggest decline in a decade, but stock markets in Asia and Europe fell for a second day amid investor jitters about possible slowdowns in the Chinese and U.S. economies. Shares in Japan, South Korea, Singapore, Malaysia, India, Australia and the Philippines all tumbled more than 2 percent after Wall Street suffered its worst day since the Sept. 11, 2001, terrorist attacks. But as the day progressed, several Asian markets trimmed big early losses, and analysts said the sell-off was most likely a temporary correction to cool overheating markets, although they warned that markets would likely remain volatile for awhile. ‘We don’t need to worry about a big reduction from here, but this correction could continue for the next couple months,’ said Shinichi Ichikawa, an equity strategist with Credit Suisse First Boston in Tokyo.”
We should consider three international investments points the Credit Suisse analyst made.
International Investments Point #1: We always need to worry about big reductions. Controlling losses is of critical importance for long-term investment success because returns are connected geometrically rather than arithmetically. If an investor loses 10 percent, the gain required to recover from the loss is not 10, but 11.1 percent. As losses increase, it becomes ever more difficult to break even. To recover from a 33.3 percent loss, one needs a 50 percent gain, and a 100 percent gain is required to erase a 50 percent loss.
International Investments Point #2: No one, including this analyst, really knows what will happen.
International Investments Point #3: The Asian markets could well see a downwards correction for longer than two months. Last year international investments in emerging stocks stumbled in April and were depressed until August. Investors who could see into the future (I was not one of them) sold in March and bought again in July. Others (me included), held on. Other investors panicked, sold out and lost.
This year however I sold out my international investments in Asia three weeks ago almost at the very top of this latest rise.
Why was it bail out time for me this year and not last?
There are three reasons. Understanding them can help us accumulate wealth with international investments.
International Investments Bailout Reason #1: Value. In real estate three things count most, location, location and location. In equities three different things count, value, value and value. I am not a market timer. Market timing almost never works! I look at value. I have worked with Jyske bank and Michael Keppler, two of the value experts of the world, for nearly 20 years. Last year many emerging markets dropped, but the value of these markets remained good.
This year though these markets were rising their value turned bad.
International Investments Bailout Reason #2: Portfolio Management. These messages have looked at the importance of PIEC investments and three phase investing for years. Each of us should invest in what we enjoy and do best. We should focus our biggest investment there, (first phase). This first phase is normally our business or income producing activity. Second phase investments should be in safe, secure investments such as AAA bonds. The third phase is our higher risk, higher yielding investments such as equities. This third phase should be a smaller portion of our portfolio. As reported, Merri and I have stepped up our real estate investments in Ecuador. (See why in tomorrow’s message). So it made sense to my portfolio to reduce some aspect of our third phase investments. Ecuador Real Estate looks like a better value than equities to me. So I took profits on the shares and reinvested into AAA rated bonds.
International Investments Bailout Reason #3: Personal. Also as reported astrology is a part of my decision making process. My liquidation took place at a time when my chart suggested strongly that I sell very profitable holdings. There was also a reason for me to invest in Scandinavia. A recent message shared this fact and said:
“Value in the Stars. There is one more reason why I like Scandinavian countries. Merri’s and my astrological charts suggest that we are very compatible with these countries.”
One reader responded with this: “Gary, O´Gary, Please send out an immediate follow-up to tell us that that remark is completely and solely tongue-in-cheek. Assure you are not really a mystic who lets some utter nonsense like astrology, the reading of tea leaves, or the examination of chicken entrails play any part in the critical decision making process of trading investments, where a clear, objective mind is absolutely imperative. Tell us you were grinning ear-to-ear and laughing your ass off when you wrote those words as a joke. Tell us, PLEASE!”
I wonder if this reader liquidated his Asian shares in his international investments portfolio just weeks before this latest big drop? International investments are rarely objective. There however is a more important point. Every person should a unique information processing system that is comfortable. The purpose of having money is to feel more comfortable. Consult with experts yes, but in the end, have a way to make decisions.
In my case, I believe that we are more than our logic. I believe that everyone should have their own way of reaching their own deeper inner wisdom. I use astrology as one of numerous methods to help me touch deeper wisdom than my logic. This has worked for me again and again and I feel comfortable with how my track record fits my and my family’s needs.
Yet these are not the only measures used. Observation is another. Take our February 12, 2007 message that showed the benefits of international investments by speculating in Ecuadorian bonds. That message said:
“Let me be clear. Investing in Ecuador bonds is a big speculation. Losses could well be incurred. The point is this speculation may be a good value because the premium you are paid to take the risk is higher than need be.”
This was a huge winning comment as Ecuador paid its bond interest on time February 15 and Ecuador bond values skyrocketed. A blend of value, gut instinct and observation of how the Ecuadorian government and Ecuadorian people had been acting helped me make that decision.
Plus it is incredibly important for your international investments to have good advisors. The core I look for in every investment review is value. Our relationships with Jyske Bank and Michael Keppler is a huge asset. Each has been a valued advisor for nearly 20 years or more. Each has an exceptional value analysis system that is invaluable in our information processing system.
The world is catching onto to how good these firms are in advising on international investments.
TOP-GEWINN, a widely read Austrian financial magazine recently said: “The Global Advantage Major Markets High Value fund, which follows Keppler’s strategy is one of the “most stable equity funds in the world.”
e-fundresearch identified twelve global “Equity Funds for Scaredy Cats,” in other words, funds for investors who expect a difficult environment for stocks in the next few years but still would like to benefit from their substantially higher long-term return potential compared to bonds and other fixed-income products. The funds were presented in the January edition of TOP-GEWINN and in the e-fund journal of January 29, 2007. Out of a total of 406 global equity funds registered for distribution in Austria, only a dozen (i.e. less than 3 percent) fulfilled all three requirements that e-fund research set for these fund products for all seasons: #1: A minimum 10-year track record- #2: A “bear beta” of less than one versus the MSCI World Index and #3: A 10 year return that beats the MSCI World Index. A ”bear beta” of less than one means that the fund beat the benchmark in bear market environments over the ten years.
The Global Advantage Major Markets High Value is ranked third in this list with an annual excess return of 7.4 percentage points. This fund was the only fund among the twelve “Bulwarks for Stormy Markets” that has a “bull beta” of greater than one. This means that not only did the fund lose less during bear markets but it also gained more during bull markets, confirming our view that value and growth are two sides of the same coin.
Jyske Bank’s Mutual Fund affiliate has also gain increasing attention for its success. In February 2006, Global Investor Magazine named Jyske Invest the no. 1 equity manager in Europe based on the Fund’s Morningstar rating. At year-end 2006, Flemming Larsen from Jyske Invest was named Danish Portfolio Manager of the Year by the independent analyzing agency, Dansk Aktieanalyse.
In 2007 Morningstar named Jyske Invest the best-performing mutual fund group in Denmark. At the same time, Jyske Invest was ranked the best-performing mutual fund group in the category “Overall Group Small over 3 years” in Switzerland, Germany and France by Lipper, the top fund analyzing agency. Jyske Invest was also awarded the prize as the best-performing mutual fund group in the category ”Mixed Assets Group Small over 3 years” in Switzerland, Germany and France as well as in the category “Nordic” which covers Scandinavia.
J.I. Growth Strategy Fund was named the best-performing fund in the category “Mixed Assets EUR Aggressive Global over 3 years” in Switzerland, Scandinavia and Germany. J.I. Stable Strategy Fund was named the best-performing fund in the category “Mixed Assets EUR Conservative Global over 3 years” in Switzerland, Scandinavia, Germany and France. Finally, Jyske Invest was ranked the best-performing mutual fund group in the category “Best Specialized Fund Group over 1 year” by Standard & Poor’s in Holland. At the same time, J.I. Balanced Strategy Fund was named the best-performing fund in the category “Asset Allocation Global Neutral”.
Jyske and Keppler’s help have a lot to do with the great performance of the five 2007 international investments multi currency portfolios we are tracking. The performance of these portfolios since November 1, 2006 is below.
Our next update will show how well the portfolios survived the current international investments equity drop. You can learn how to track these portfolios with us at https://www.garyascott.com/catalog/bldh/
You can continue this message and see seven Ecuador export pictures at https://www.garyascott.com/international_investments/250.html
Until next message, may your international investments be good.
Join us in the winter sun at our upcoming courses and tours.
Mar. 16 -18, Fri.- Sun. International Business and Investing Made EZ. Two account executive from Jyske Bank will join with me to update global economics and we’ll share many ways to have an international business. See https://www.garyascott.com/catalog/IBEZec/
Mar. 19 – 21, Mon.- Wed. Andes Extension & Real Estate Tour. Ecuador grass is better and really inexpensive!
Mar. 23 – 25, Fri. – Sun. Shamanic Mingo Tour. See https://www.garyascott.com/catalog/mingo/
May 25 – 27, Fri. – Sun. International Investments and Business Made EZ in North Carolina. Thomas Fischer joins me to update global economics again.