Through 2007, 2008 and into 2009; the economic corrections have fixed this. We knew that this stabilization would eventually push real estate and equity prices too low and hence create remarkable value.
There are now several indicators that this value is here. The first is the recent success in IPO markets… especially the recent Rosetta Stone IPO.
The Wall Street Journal said at http://online.wsj.com/article/SB123989075002225289.html said.
The IPO market continued its winning streak, with Rosetta Stone Inc.’s initial public offering of stock gaining nearly 40% in its first day of trading.
The language-software company was the fourth deal in 2009 to rise on the first day of trading and the best-performing IPO in the U.S. in a year.
The Arlington, Va., company’s stock closed at $25.12 a share on the New York Stock Exchange, up from the IPO price of $18. A total of 6.25 million shares were sold for a dollar more per share than the expected range of $15 to $17
There is also some brighter news in the financial sector.
Goldman Sachs announced it had higher than expected profits and will pay back USD 10bn it borrowed via (TARP).
Bank of Florida Corp. (one of my shareholdings) announced it is withdrawing its application for funding from TARP.
The bank (NASDAQ: BOFL), had asked for up to $40 million. Key ratios measuring capital are high at Bank of Florida and the bank’s belief that it has the capital to continue to weather this economic storm makes the downsides of TARP unacceptable. The bank’s management believes that if it needs more capital, there are other less burdensome and more stable capital sources than TARP.
Union Bank of Switzerland stock is up more than 15% this week. Deutsche Bank, Credit Suisse, JP Morgan and Citigroup all indicated an ending of the credit crunch.
Plus there are trillions of dollars in liquidity waiting in the sidelines that could create a sudden recovery.
When equity markets recover the uptick usually comes in a sudden spurt. This means we are approaching a time when it makes to add equities for the long term.
The recent recovery in the Dow and the upwards sideways motion in equity markets is another suggestion that we may be seeing a good price range to buy in now.
Finally, as the chart below shows, the best time to buy equities are at times when there are the following conditions:
#1: A rush to liquidity.
#2: Authorities relax money supply.
#3: Inverted yield curve.
#4: High unemployment.
#5: High uncertainty.
Four of the five elements exist and the fifth (inverted yield curve) would exist if authorities were not pumping so much liquidity into banks.
This government induced liquidity creates currency instability that threatens to erode the purchasing power of all currencies.
Warren Buffet mentioned this problem when he said: “Clinging to cash equivalents or long-term government bonds at present yields is almost certainly a terrible policy if continued for long. Holders of these instruments, of course, have felt increasingly comfortable – in fact, almost smug – in following this policy as financial turmoil has mounted. They regard their judgment confirmed when they hear commentators proclaim “cash is king,” even though that wonderful cash is earning close to nothing and will surely find its purchasing power eroded over time.”
I remain highly diversified from a currency point of view. Here is my current currency breakdown.
Currency Distribution of Investments:
Danish kroner 24%
British Pound 8%
US Dollar 12%
Canadian Dollar 3%
Norway kroner 4%
NZ Dollar 3%
Sweden kroner 7%
Brazil real 3%
Hungary Forint 6%
Turkey Try 6%
The liquid portion of my portfolio is mainly in cash now.
However the time has come or is near when taking more risk makes sense. The bold have incredible opportunity. The meek investor could die a quiet death via the loss of purchasing power.
I am looking at buying more shares… plus am looking to buy more real estate.
About half my portfolio is now in real estate. Only 5% or so is in shares.
The way to reap fortunes now is by spotting value from overselling in markets.
I am grappling with these value thoughts as I search Florida real estate at this time.
Certainly Florida real estate prices have dropped.
A Times magazine article, “The Hope in America’s Foreclosure Capital” by Nancy Gibbs shows how change and big problems are creating opportunity. (a link to the full article is at the end of this message).
The article says:
This is how empires rise and fall, pulling our fortunes along with them. Start with virgin territory: back in 1957, the Rosen brothers of Baltimore flew over Cape Coral, Fla., in a plane, liked what they saw, paid $678,000 for the farmland and started dredging 400 miles (640 km) of canals, which is more than Venice can claim. It was a peaceful place for old people — Cape Coma, folks called it, until about five years ago, when the gold rush began. Numbers made no sense; people got drunk and reckless. And then they got crushed. Cape Coral–Fort Myers, once the third fastest growing metro area in the country, last year became the foreclosure capital of America.
Marc Joseph grew up here, the Realtor son of a Realtor dad. He watched the market go mad and had his revelation: now is the moment to get back in — and stake your claim. At 41, he did not expect to be driving around Cape Coral in an old church bus that he bought off Craigslist, painted dollar green and emblazoned with the motto “ForeclosureToursRUs.com.” But most people had no idea how to buy a house from a bank, and many were too scared to try, so he decided to lead tours of the new economic frontier. He is a revivalist for this apocalyptic age, living an American story as old as the pilgrims and the 49ers and every pioneer who ever saw opportunity where everyone else saw only ruin.
It’s gotten so bad that the courts have had to hire extra judges to handle the 1,000 foreclosures a day — that works out to roughly one every 30 seconds.
The speculators are back — but they’ve changed; he has investors up North who are buying houses sight unseen, for cash. (The conditions? No mold, no Chinese drywall.) And then there are the newly pissed off and liberated: the guy in his 40s who’s tired of watching his IRA shrivel, who calls and says, “I’m coming down,” who wants six houses at $50,000 each, nice flat homes that he can rent to people who are sick of shoveling snow or climbing stairs. That’s less than the land used to sell for; it’s as if you get the house for free.
“You have to play fair, put in a decent price.” And then, just maybe, there will be rewards for the patient and prudent. “Someone else’s loss,” he says, “is another’s blessing.”
The greedy got punished, the new prospectors say. But maybe this is just how the life cycle has to work to restore balance to the world. Painted on the side of the green bus is a house being sprinkled with a watering can (“Watch your investment grow!”) and a tree with dollar bills hanging on it. Anything can grow here in all this hope and sunshine, if you bury your fear deep enough.
Merri and I have started our search for more Florida real estate.
Now we are combining these clues with our experience and logic to find value… that works for us… in our particular situation because all value is relative.
However we need make the error of thinking that just because a price of something has dropped dramatically that it is a good value.
Take of example the price of gold. Was it a good long term value when it had dropped from almost $700 an ounce to barely $300 an ounce in the early 1980s? The long term chart from http://goldprice.org/30-year-gold-price-history.html below suggests not.
The price over the next 15 years fell much lower and today 25 years later has only increased 200%… an average of 8% per annum simple return… not much better than inflation.
Gold has been trading lower this week as a result to the overall positive sentiment and data indicating deflation rather than inflation.
One place to look for value in equities is in the portfolios we tracked for several years. Take for example our Green Portfolio. The global economic downturn has driven the price of many shares down.. but has not stopped basic essential needs… like our need for a cleaner environment.
The Green Multi Currency Portfolio we created and tracked with Jyske Bank was based on a holding of shares in water and alternate energy. The starting date for the portfolio was November 1, 2006. This was the 2007 Green Portfolio.
EUR Seche Environnement
DKK Novozymes B
DKK Vestas Wind Systems
JPY Kurita Water Industr.6370
EUR Q-Cells Ag
SGD Hyflux Ltd
The idea of the 2007 Green Portfolio was to enhance capital value through holding shares in businesses that help grapple with rising energy costs and environmental concerns.
That portfolio rose 266% in 2007… then plummeted more than 100% in 2008.
Are these shares now too low… considering the companies and the long term problems they solve?
Shares of companies denominated in strong currencies that provide excellent solutions to great needs can offer special value.
Take the water share denominated in Singapore dollars… Hyflux.
Hyflux Ltd is listed on the Singapore Stock Exchange and has proprietary water filtering systems. Hyflux does business in China, India, the Middle East and North Africa (MENA) region as well as Singapore and Southeast Asia.
These shares have fallen from a high of $4.88 to $1.72 as you can see in the chart below from uk.finance.yahoo.com
Two Danish shares are in that portfolio as well, Novozymes B and Vestas. Previous lesson show why the danish kroner is one of my favorte currencies at this time.
Jyske Bank now has a buy recommendation on Novozyme shares and rates with low risk with a DKK 382 price and DKK 515 target.
Novozymes has high sales growth and has been robust in this recession. The company also benefits from a continuing strength in US dollar.
Novozymes is market leader in the profitable enzymes market, and Jyske expects that Novozymes will be able to deliver continued high growth and profitability.
Vestas is the world’s largest wind turbine manufacturer. Its 4th quarter 2008 growth was much stronger than expected. Net earnings were 25% higher than expected as were stronger-than-anticipated sales and improved efficiency.
Despite the economic crisis, Vestas is facing high growth over the coming years, and the management has established a strong background.
Demand for renewable energy is likely to grow. Demand has been dampened due to financing problems, but an easing of bank problems could help in this area.
Increased oil prices and environmental problems will both benefit Vestas.
These are three shares worth looking at. Check with your financial adviser to see if they fit into liquidity and risk parameters f your financial needs.
Yet a rush is probably not required.
Seasonality suggests that we will not see any big upwards move for some months. Over a 30 year study the Dow grew 8.16% overall. All of that growth and more (8.36% per annum average) came in the months of November through April. The average annual growth per annum over thirty years in May to October was only 0.37%. In other words… history suggests that every day we move closer to May, the chances of any more major recovery in 2009 diminish.
Having said this… we are in a time when past performance means less.
Our next lesson looks at Keppler’s latest value update and Keppler says:
“The euphoria in the second half of the 1990s made our estimates look too
conservative in retrospect, the current pessimistic world economic outlook makes them appear rather aggressive now. Stock prices were much higher in 2000 than where we thought they should have been and are much lower now compared to where we thought four years ago they might be today, and where we currently think they should be.”
In other words our studies two years ago were looking from the very heights of market pricing. Today we may be looking from the very depths of the same mechanism. Either view… the very top or the very bottom… tends to distort and cloud perspective. So take any past measure of market potential with more grains of salt… except one… real end user value.
We’ll study how to spot this in greater detail next lesson. Until then good global investing.
Here is an explanation of our investing, business and Ecuador courses and tours for 2009.
Ecuador real estate tour inspecting $30,000 coastal condos.
A recent message looked at how spring seems to explode upon us… how some types of change seem to happen in a very short time.. the buds appear… the dandelions suddenly open etc. This season roars in like a lion… as does other types of change.
Ecuador real estate tour enjoying lunch on the beach.
Destructive change can also evolve in a sudden way. One day the gates of Rome were sacrosanct. The next day the barbarians were there… inside the gates.
The Soviet Union seemed to disintegrate quickly . It did not slowly decay.
So our courses and tours are based on seven foundations of prosperity in change.
Ecuador real estate tour taking a break on the beach.
Our mission is to provide useful interesting information that helps make our lives better.
Delegates in the textile markets.
During this time of enormous economic, social and lifestyle change, the focus of this mission has narrowed to help readers combine more income with safer wealth and greater freedom.
Ecuador real estate tour inspecting coastal house.
This narrower focus reflects itself in five ways:
#1: Ecuador Living.
#2: Multi Currency Investing.
#3: International Earning Potential.
#4: Natural good health.
Ecuador real estate tour inspecting $18,000 coastal condos.
These five focal reflections are supported by seven foundations of prosperity in change.
Here are the seven fundamental elements we look for in every business… investment and health idea we review.
#1: Is it good value.
#2: Does it provide diversification.
#3: Does it offer a service to the global community.
#4: It it healthy.
#5: Is it relevant to one’s individual circumstance.
#6: Is it practical and achievable.
#7: Is it part of one’s destiny.
Imbabura real estate tour taking a break at Meson de las Flores.
We deliver the information we uncover in three ways.
Emailed courses and ezines. We have four:
#1: Free. Garyascott/Ecuador information daily ezine
#2: Ecuador living service. ($119 a year).
#3: Multi currency course. ($175 a year).
#4: Tangled Web – How to have a web International Business Made EZ Course ($299).
Delegates having fun… dancing in Meson at night.
International Investing and Tangled Web Business Course Seminars. We have three more scheduled in 2009.
Nov. 6-8 International Tangled Web Business & Investing Made EZ Seminar Cotacachi Ecuador
International Tangled Web Business & Investing Made EZ Seminar delegates hearing from Thomas Fischer of Jyske Bank.
Ecuador Spanish seminar courses, Export and Real Estate Tours. We have 12 more courses & tours scheduled in 2009.
Delegates with Shamana of Zuleta.
Ecuador export delegates visit wood carvers village.
Ecuador export delegates visit Otavalo markets.
Ecuador export tour delegates see how natural carpets are woven.
Spanish course delegates in meeting room at Cotacachi Museum next to Meson de las Flores.
Oct. 21-24 Ecuador Import Export Expedition
Ecuador export tour delegates learn how to bargain.
Ecuador tour delegates eat well. Here is Eduardo serving hand made chocolate coconut rolls at a Meson coffee break.
We provide discounts for delegates who attend two or three courses and tours in a month.
Attend any two Ecuador courses or tours in a calendar month…$949 for one. $1,349 for two.
An Ecuador real estate tour delegate bought this beach condo for under $80,000.
Plus during the month of April, (this offer expires April 30) we are offering an extra special 2-4-1 deal.
Because we remain a small family business we already offer our seminar and tours at about half the price of our competitors. We recognize that many people have financial strains and we have made really special offers to keep prices low.
Our 2-4-1 offer lets you attend any one of the May or July 2009 Ecuador tours free if you enroll in one of our three International Tangled Web Business & Investing Made EZ courses, in July, October or November.
Merri and I will not be on the May & July tours in Ecuador since we also have courses to conduct in the US those months. The 2-4-1 allows those who want to see Ecuador in May or July to also be with Merri and me at another time without any additional fee.
You get two courses for the price of one. Enroll in any of these courses that Merri and I will conduct below and choose any one May or July tour free.
July 24-26 IBEZ North Carolina + Tangled Web
Oct. 9-11 IBEZ North Carolina + Tangled Web
Nov. 6-8 IBEZ Cotacachi + Tangled Web
Imbabrura real estate delegates inspect a mansion for sale.
There is no need to hurry either. If you are not sure about attending two tours, sign up and attend the real tour now… then we’ll knock the tour fee off our International Tangled Web Business & Investing Made EZ courses, in July, October or November fee later.
You can also still take advantage of the two or three course discount as well.
For example, if you choose to attend all three of the May or July Ecuador tours… both real estate and export tours, then you can have the two or three courses discount and still attend a July, October or November International Tangled Web Business & Investing Made EZ course free.
You can enroll in one, two or three of these courses below
Take Two for One. Attend any of the three courses below and select any one of the tours above free.
Imbabura real estate tour delegates inspect mountain spa for sale.
Or sign up for two or three of the May or July 2009 tours and attend any of the International Tangled Web Business & Investing Made EZ seminars FREE.
Attend any two Ecuador courses or tours in a calendar month…$949 for one. $1,349 for two.
Attend any three Ecuador courses or tours in a calendar month…$1,199 for one. $1,799 for two.
This offer expires April 30 2009.
Our Ecuador tour delegates learn from one another. Here delegates at Meson review their last lesson.
We hope to meet you.