October Major Market Value Update

by | Oct 25, 2009 | Multi Currency Investing

This multi currency update focuses on value of major equity markets and reviews Michael Keppler’s just released three month Major Market Value Analysis.

If you are a new multi currency subscriber learn about Keppler Asset management here.

Here is Keppler’s Recent Developments & Outlook

On the equivalent page of the Spring 2009 issue of this report, I wrote that Benjamin Graham’s margin of safety indicated that much better times may lie ahead for global equity investors.

Now, six months later, the Morgan Stanley Capital International (MSCI) World Total Return Index (with net dividends reinvested, December 1969=100) recorded its second consecutive quarterly double-digit gain after a string of seven consecutive negative quarters ended in March of this  year.

Both the second and the third quarter 2009 total returns of the MSCI World Index are among the top ten quarters since the inception of the Index at the end of 1969:

MSCI World Total Return Index
Quarter ending Change in Local Currencies (%)
March 1975  24.4
December 1998  19.0
December 1999  18.0
March 1986  17.0
March 1987  16.7
June 2009  16.5
June 2003  15.2
March 1998  15.1
December 1982  15.1
September 2009  14.8

Last quarter, the MSCI World Index advanced 14.8 % in local currencies, 17.4 % in US dollars and 12.7 % in euros.

There were no changes in our performance ratings last quarter: The Top Value Model Portfolio currently contains the six “Buy”-rated countries Austria, France, Germany, Italy, Singapore and the United Kingdom at equal weights.

Our current ratings suggest that these markets offer the highest expectation of long-term risk-adjusted returns.

Neutral value markets are Australia, Japan, Netherlands, Norway, Spain and Sweden.

Keppler’s analysis shows that low value markets are: Canada, Belgium,  Denmark, Hong Kong, Switzerland and USA.

Here is how all the major equity markets have performed the last quarter and this year.


Keppler’s implicit 3 to 5 year return projection for the Equally Weighted World Index, which stood at its all-time high of 27.8 %  p.a. six months ago, continues to decline mainly due to rising stock prices, but also due to the deteriorating earnings environment  and unusually high depreciation levels of the recent past, which have by now shown up in the balance sheets of many companies.

After having dropped to 20.7 % p.a. at the end of June, our 3 to 5 year return projection now stands at 15.4 % p.a..  Keppler  mentions these numbers with the usual caveats: Forecasts are dangerous, especially when they concern the


Here is what this chart means:  First Keppler’s projections for value investments shows that equities will continue to appreciate (long term) into 2014.  Based on this long term projection you can see (in red) how the market crash caused the expectation of higher major appreciation to meet Keppler’s projections (in blue) from 2009 to 2014.

You can also see how the overbuying in 2000 projected a market depreciation to reach Keppler’s projection. Equilibrium was met in 2003 and late 2005 as well as 2009.

In other words a value analysis of major markets suggests that they have far less profit potential now than they had at the beginning of the year.


Here is the balance of our 20o9 course and tour schedule.

Nov. 9-10 Imbabura Real Estate Tour

Nov. 11-14 Ecuador Coastal Real Estate Tour

December 6-8 Blaine Watson’s  Beyond Logic & Shamanic Tour

December 9-10 Imbabura Real Estate Tour

December 11-13 Ecuador Coastal Real Estate Tour

In 2010 Merri and I will personally teach on five dates.

Arrival dates are always one or two days earlier. Please double check with us before booking flights.

Feb. 11          Super Thinking + Quantum Wealth Florida
Feb  12-14     International Investing & Business Florida
Mar. 11-14     Super Thinking + Spanish Course Florida
June 24         Super Thinking + Quantum Wealth North Carolina
June 25-27    International Investing and Business North Carolina
Oct.    7           Super Thinking + Quantum Wealth North Carolina ($749)
Oct.  8-10      International Investing & Business North Carolina ($749)
Nov.   4-7       Super Thinking + Spanish Course Florida

We hope you will join us.

Overall market value is just one of many filters we should use when we review value. The seven steps we use in our reviews include

#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

Michael Keppler also reminds investors not to misinterpret the investment analysis implicit in the Country Selection Strategy. A country is BUY-rated based on the valuation levels reflected in the MSCI benchmark index of country. A BUY rating therefore does NOT imply that any stock in that country would be considered an attractive investment.

To invest according to the Country Selection Strategy it is necessary to
construct diversified, risk-controlled, representative country portfolios in
every BUY rated country, weighting each country approximately equally in the
overall portfolio. It is not appropriate to instruct a stockbroker to simply to select stocks in the BUY rated countries.

For more details on Keppler’s analysis, contact Roderick Cameron at 1-212-245-4304 or email roderick.cameron@kamny.com