Delegates enjoyed a meal in our teaching kitchen.
We had a full house for the course. More and more people are coming because they realize that ways of life, as we know them, are changing forever. Multi currency investing is becoming a necessity.
The course was conducted here at our deep woods seminar hall.
A recent article in USA Today by Sandra Block entitled “The incredible shrinking nest egg” pointed this out.
The article says: “For years, stock investors have been led to expect average annual returns of 8% to 10%. Similarly,many people have assumed that their home would appreciate by roughly 10% a year. Both assumptions, though rest on two decades of outsize returns. Many financial analysts are predicting a prolonged period of below-average returns on both stocks and home equity. Investors who rely on historical returns for the past 50 years will ‘probably overestimate what we’re likely to see in the future,’ says Chris Jones, chief investment officer for Financial Engines, a retirement-plan consultant. “
At the multi currency sessions in the course, we showed delegates why upcoming change makes this article right and wrong. More importantly we showed delegates how to react to the change so that the shifts can rig extra safety, security and profit.
Here are a few points that delegates learned that shows why this is a bad and good time.
First, as far as stock markets go, this correction is understandable and was expected. Messages at this site warned about it for months before it took place last year.
* Returns in equity markets had been phenomenal from 2003 to 2007. A correction was expected if for no other reason times of good performance are always followed by times of low performance.
* The most important demographic of the economic world has not changed.
There are still increasing numbers of people producing and consuming more in more efficient ways.
* The previous equity growth was not a bubble. High GDP Growth and falling interest rates plus earnings explained more than 100% of global equity returns over those four years.
There has not been a general expansion of P/E multiples. Equities were not expensive when the correction began last November. P/E ratios were about the same at 15 times earnings, about as 1987 when a huge rise in markets though 1999 drove P/E ratios to 25.
During breaks delegates ambled in these woods.
* We should expect 7% to 10% annual return in the stock market as a function of global nominal GDP growth and long term earnings growth plus risk premium.
* Periods of low growth are followed by periods of high growth. This is the time to accumulate shares.
* Inexpensive equities in quality companies that pay a reasonable return are better investments now than they were six months ago..
This means that the comment in the USA Today article, “we will see a prolonged period of below-average returns on both stocks and home equity.” is most likely wrong. This is especially likely because governments have reduced interest rates and flooded markets with liquidity.
Therefore the 11 steps of dealing with a purported economic crisis remain.
#1: Do not worry too much about short term noise.
#2: Do not worry too much about day to day volatility.
#3: Turn on the auto pilot and normally add to your position.
#4: Do not panic.
#5: Do not let feelings influence you too much.
#6: Do not count on extra ordinary returns. Be realistic.
#7: Expect change.
#8: Do not underexpose yourself for the long term.
#9: Embrace risk.
#10: Sell your losers and let your winners run.
#11: Add some restructuring stories to your portfolio.
Yet the same liquidity that will kick start the stock market and economies out of the doldrums will probably make another comment in the USA Today article true:
“Investors who rely on historical returns for the past 50 years will ‘probably overestimate what we’re likely to see in the future’.
This is because liquidity and stock markets and real estate markets will rise, but the US dollar will lose even more purchasing power.
To beat this loss of dollar power, one must invest in equities, real estate and/or commodities. Yet this may not be enough. We’ll also need to invest in these three inflation fighting investments in new avenues and in different ways.
Future messages will look at how and where.
During the course Thomas Fischer introduced Jyske Bank’s new JGAM investment management service for US investors.
The three fundamental investment ideals that form the core of investing remain.
Learn more about multi currency investing at our multi currency portfolio course.
Learn more about fighting inflation with Ecuador real estate and our Ecuador Living Service
Until then, good global investing to you.