Big Multi Currency Investing Lesson #1: Value affects everything.
Readers for the past several months have been telling me how investing in commodities is a no brainer. I agree long term..but…commodity prices cannot defy the laws of good value!
We see proof of this as prices of oil, gold and other commodities collapse. Plus remember long term equity prices have historically outperformed commodities by almost three times. See more on this.
Another big Multi Currency Investing Lesson #2: Leverage works…on the upside and down. of stocks, currencies and commodities. We reviewed this in detail in our August 7, 2008 multi currency investing lesson.
Third big Multi Currency Investing Lesson: Being right long term does not matter if you are wiped out in the short term.
This is why this course is based on the premise that the best way to create long term investment profits is in equities and the best way to invest in equities is to get good value in the shares you buy.
We filter the investments we review in these lessons in ways
#1: Are the shares traded in a good value market?
#2: Does the share trade at fair Price to Earnings and Price to Cash Flow ratios?
#3: Does the share pay a good value dividend?
#4: Do the share have a good value relative to their previous price?
#5: Does the company have rising earnings?
#6: Has the share price been rising?
#7: Is the company’s management good and is their product or service line in
a wave of the future?
One portion of this filter is to keep track of global market values so we follow the analysis of our friend, Michael Keppler. Michael continually researches international major stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return. He compares each major stock market’s history.
From this he develops his Good Value Major Stock Market Strategy. His analysis is
rational, mathematical and does not worry about short term ups and downs.
He, in my opinion, is one of the best market statisticians in the world. Numerous very large fund managers use his analysis to manage funds such as State Street Global Advisors.
Here is a summary of Keppler’s current comments on recent developments & outlook in international major markets that covers the month of July 2008 and is issued in August.
AUGUST 2008 Developments & Outlook
Global equity markets extended their recent downturn into the third consecutive month.
In July, the Morgan Stanley Capital International (MSCI) World Total Return Index declined 1.8 % in local currencies, 2.4 % in US dollars and 1.5 % in euros.
Year to date this index has declined 14.4 % in local currencies, 12.8 % in US dollars and 18.2 % in euros.
The US dollar gained 1 % versus the euro last month, but has lost 6.3 % during the first seven months of this year to 1.5603.
Of the eighteen markets covered here, two advanced, fifteen declined and one market (Spain) was unchanged in July.
Switzerland (+2.3 %), Singapore (+0.1 %) and Spain (unchanged) were the three best performing markets;
Norway (-9.5 %), Austria (-8.6 %) and Belgium (-7.5 %) came in at the bottom of the range of monthly returns.
Year to date, Canada has been the only market with a positive return (+0.7 %).
The next best markets were Denmark (-9.7 %) and Japan (-11.7 %).
Belgium (-33 %), Italy (-25.2 %) and the Netherlands (-23.4 %) came in last.
Performance numbers are in local currencies unless mentioned otherwise.
Keppler’s Top Value Model Portfolio (which State Street fund managers use to manage their Global Advantage funds was down 2.7 % in US dollars and down 3.6 % in euro underperforming the MSCI World Total Return Index by 0.9 percentage points in local currencies, 1.2 percentage points in US dollars and 1.1 percentage points in euros.
Year to date, the Top Value Model Portfolio is down 22.2 % in local currencies, 17.8 % in US dollars and 23 % in euros, underperforming between 4.8 and 7.8 percentage points, depending on the currency.
There is no change in Keppler’s performance ratings this month. The Top Value Model Portfolio contains the seven national MSCI markets Belgium, France, Germany, Italy, the Netherlands, Spain and the United Kingdom at equal weights.
Keppler’s SELL CANDIDATES (Low Value) are: Austria , Canada, Denmark, Hong Kong, Singapore, Switzerland , U.S.A.
Keppler’s NEUTRALLY RATED MARKETS are: Australia , Japan , Norway , Sweden .
For more details on Keppler’s analysis, contact Roderick Cameron at 1-212-245-4304 or email email@example.com
Recent lessons have reviewed the fact that value portfolios tend to drop more than their bell weather indices during downturns. Thinking this through would make sense. This month’s major market review supports this lesson. MARKET CORRECTIONS CREATE GOOD VALUE.
Join me with Jyske Global Asset Management to learn more about value investing.
We’ll all have a meal together at the farm.
Let our friendly staff at El Meson de las Flores serve you during the Ecuador course.