Let the month of August be a reminder… to beware.
Is the year 2020 the beginning of the Roaring 20s? Or is it the end. The answer could have a huge and prolonged impact on your finances.
For example in August 1929 (91 years ago) the Dow Jones Industrial average soared to 5696. Then the boom ended and that level was not reached again for nearly 30 years. By August 1959, the Dow was 5895.
The red Xs on this www.microtrends.net chart show the Dow fro 1929 to 1959
The Roaring 20s have a lot of similarities to recent years. The President (Warren G. Harding) came into office with a slogan much like “Make America Great Again” ( the slogan was “bring back normalcy”).
The 20s (then) had seen huge technological advancement made available to the public (automobiles, telephones, movies, radio, and electrical appliances and the beginning of aviation as a business). There was rapid industrial and economic growth, creating jobs and raising wages so a much lager public had money to save and invest.
The public decided to put a lot of that savings in the stock market because the 1920s was also the first time the public began to believe that US dollar, which had been losing purchasing power, would not gain back its value.
The consumer price index was used for the first time in 1919, to track big inflation of the previous several years after WWI. Since 1913 the cost of ordinary things had more than doubled. The dollar had recovered from previous inflations after previous wars but this time the reduction in purchasing power stuck.
This was the first time that the dollar had not held its value in the long term. The public saw that the greenback had and would continue to lose a substantial part of its purchasing power forever.
This led to the public’s participation in stocks in the 1920s and reduced traditional forms of saving cash and coin.
Credit for the Model T, priced at $260, was a stimulus in the roaring 20s.
The low interest rates created by the Great Recession of 2007 has created a similar push on investors to get into the stock market or other inflation fighting investments.
That stimulus has certainly been good for Merri and me.
Our hands off value stock portfolio has produced better dividends than the bank and given some great capital gains.
Our real estate investments which are more hands on have done even better. Years ago I published the first edition of “Live Anywhere-Earn Everywhere” that recommended investing in Lake County Florida and Ashe County North Carolina.
We did as we recommended and this has turned out especially well. In some cases the price of property we purchased has doubled. The real estate markets in both counties are super hot!
The success creates a big question. Are we at the beginning or end of the roaring 20s?
A lot of the property we have invested in no longer has a rent-price relationship that makes any sense. Property prices have shot up much faster than rents can rise.
Everything I understand about economics… the deficits, debt, unemployment, suggests an economic downturn and inflation, but everything is so unpredictable, it is hard to answer the question, “should I buy or should I sell”.
I imagine this is how Precious Metals dealers felt during the 1970s price run up. I recall a $10 spread on the price of silver, $48 and ounce to buy and $38 an ounce to sell. The dealers could not trust conditions then no more than I trust conditions now.
On the subject of precious metals, If you have been buying or holding gold and silver, you have some tidy profits as well. This leads to the same question “should I buy or should I sell” so I asked Rich Checkan, at Asset Strategies International, (1) my goto precious metals dealer what he thought.
Rich sent this reply.
Correction, or End of the Bull?
By Rich Checkan, President, Asset Strategies International
Recently we shared a Market Update with you to catch you up to speed on the emergence of this current bull market in gold and silver and why we believe it will continue for some time.
Since then, gold and silver dipped in price. Which right away leads investors to ask… “Is that the end of the bull?”
Today, I’d like to give you an update on that dip, and share with you some sage advice from Bernard Baruch… and how I use that advice to ensure I never miss the top of a gold and silver bull market.
This is why I never fear bull market dips. I always embrace them.
First, the update…
Gold is up roughly 30% this year. Silver is up roughly 55% on the year. Much of both occurred over the past couple months… and actually higher percentages at the recent peaks.
Fueled by Covid-19 fears… It was too much, too fast.
Like any market, when it gets overheated, profit-taking brought the euphoria down a notch or two.
Remember, precious metals bull markets tend to last about a decade. We are either 1 year in or 4 years in, depending upon whom you ask. In both cases, we have a long way to go.
Also, the past bull market saw 650% gold appreciation, and 1,000% silver appreciation in 10 years. We are nowhere near those numbers. We still have a long way to go.
The pull-back needed to happen for the market to be healthy. Dips should be embraced, not feared. They are opportunities to buy well in this rising bull market.
Even after the pullback, gold is up 30% this year, and silver is up 55% this year. Both are just fractions of what they are expected to achieve in the end.
Stay the course…
Some Sage Advice
But, how will you know when it is the end? How will you know when it isn’t just a bull market dip?
Truth be told, you probably can’t know for sure. But, you don’t need to know either… if you take heed of the advice of sage investor, Bernard Baruch.
One of Bernard Baruch’s most inspirational quotes for me, led me to my technique for not missing the top. He said, and I paraphrase, “I don’t want the first 20% or last 20% of profits from any investment. All I want is my 60% in the middle.”
In other words, he did not invest until a trend was established, and he didn’t wait until the bitter end to sell… hoping to catch a top.
Here’s how I put that proven wisdom into action for myself…
Time for Action
I buy gold and silver for two reasons – wealth insurance and profit.
After 25 years of speaking with investors, I believe most fall into these two buying categories. (There are traders as well, but perhaps I can address that in the future.)
I’ve found that whether or not investors say they want wealth insurance or profit, they tend to all want both… just weighted toward their stated preference.
Wealth insurance is…
The store of purchasing power, with high liquidity, for a potential financial crisis they hope to never have.
Therefore, I treat my gold for wealth insurance a certain way. I keep my 10% allocation at that level at all times. I never sell it regardless of the gold price hitting new all-time highs or new short-term lows, unless I have a financial emergency. If I have one, I sell immediately to meet the need. Then, as soon as possible afterwards, I replenish to my 10% for the next potential crisis I hope I never have… at any price.
As you can see, my gold purchased for wealth insurance has no care at all about tops or bottoms. I need it always. I have it always. Period.
But, gold and silver for profit is a different story. For me, that’s another 10% to 15% of investible assets – but only in gold and silver bull markets.
Here is where I follow the wisdom of Mr. Baruch.
I wait for the trend to establish itself. This occurred in May of 2019 with gold’s break-out. Then, I buy.
As gold and silver climb in price in the bull market, I rebalance my position all along the way… along with all my other for-profit investments.
If gold or silver doubles, I sell half. No emotion. I just do it.
If I see dips, I add. No emotion. I just do it.
And, as you can imagine, if I do this all along the way, I am taking profits while I continue to participate in the bull market. As one of my mentors, Glen O. Kirsch, used to say, “Nobody ever went broke by taking a profit.”
The only tricky part of this strategy is recognizing the beginning of the bear market as opposed to another bull market dip.
I do this with the convergence of a few key signals…
1) I look for a bull market to end around the 10-year mark.
2) I look for gold to appreciate around 2 to 3 times it’s previous bull market high.
3) I look for a Gold to Silver Ratio (GSR) of 35-50. In other words, I look for it to take 35 to 50 ounces of silver to buy 1 ounce of gold.
4) I play close attention to sentiment. When everyone is talking about the money they are making in gold, you might want to locate the exit.
If we catch the top exactly, great.
If sell a little early, great.
If we sell a little late, great.
In any of those cases, I am pretty certain we would have already taken our 60% profits out of the middle.
This is how you can Keep What’s Yours in a gold and silver bull market, and never miss the top… or at least not miss it by enough to matter!
That’s good advice from Rich and I take a similar strategy with real estate.
Over the last two decades, Merri and I have invested in good value areas where the rent return ratio made sense. Whenever we looked at a perspective purchase, our biggest question was, “how much can we rent it for”.
The way we take profits, but keep the money in the real estate market, is when a property has appreciated so much we can rent it for a reasonable return, we sell it and invest the proceeds in another property in an area we feel is undervalued where there is a reasonable rent return ratio.
In this way we keep our income flowing and continually build our capital gains potential.
We use the same strategy in our easy, low trade, slow trade, good value strategy explained below. We monitor 46 stock markets around the world. When a stock market (based on price to book, price earnings and average dividend yield) is a good value we invest in its MSCI Index through a country ETF. When it falls in neutral or poor value territory (again based on based on price to book, price earnings and average dividend yield) we sell and reinvest in good value markets. This strategy provides maximum safety, the least in time and trading fees spent, and statistically yields the highest long term profit.
The Roaring Twenties introduced some great new products, Jazz and dancing for instance became popular. There were many wonderful social and cultural advancements, cars, movies, the idea of broadcast. These advances brought “modernity” to a large part of the population.
Everyone enjoyed the party… while it lasted. The Great Depression that followed diminished that joy and pushed a ugh part of the population onto the bread lines into the soup kitchen.
So keep this question in mind as you invest… “are we are the beginning or end of the 20 Roaring 20s?”
Gain Safety, Profit & Get Paid Double
The stock market has always been the best place of places to protect and increase wealth over the long haul. Yet it’s also been the worst place to lose money, a lot of it, quickly.
There are only three reasons why we should invest. We invest for income. We invest to resell our investments for more than we had invested. We invest to make our world a better place.
The goal of investing should be to stabilize our security, bring feelings of comfort and elimination of stress!
We should not invest in social networked protests that guarantee loss either. This is like burning our houses down in protest.
If we want to change the world, we should invest in good equities that bring profit and use the extra wealth to create something beneficial for mankind.
We should not invest for fun, excitement or to get rich quickly. We should not divest in a panic due to market corrections.
This is why my core stock portfolio consists of 16 shares and this position has hardly changed in five years. During this time we have been steadily accumulating the same Top Value ETFs and have traded only a few times.
The study below shows a value based model portfolio that dates back to 1969 dramatically outperformed the US Market and almost every stock market in the world.
Over 51 years the Top Value Strategy (with dividends reinvested) appreciated 12.5% per annum compared to the 10.74% for the Dow Jones industrial Index (with dividends reinvested). This is a 1.76% per annum difference. This may not seem like much, but in the long term the difference is huge. 12.5% increases $10,000 to $4,062,362.22!. 10.74% turned the Dow’s $10,000 into $1,817,734.62 in 51 years.
No matter how we look at it, over time, value investing always wins!
Our portfolio is built around a strategy that’s taught in my Purposeful Investing Course (Pi). I call these shares my Pifolio. The course shows how to use the value analysis of Keppler Asset Management to create a portfolio of ETFs that cover undervalued stock markets. I have combined my 50 years of investing experience with the study of the mathematical market value analysis of Michael Keppler, CEO of Keppler Asset Management.
In my opinion, Keppler is one of the best market statisticians in the world. Numerous very large fund managers use his analysis to manage billions of dollars in funds. However because Keppler’s roots are in Germany (though he lives and operates from New York) all of his funds are registered for the European Union citizens, Americans cannot normally access his data.
I was lucky to have crossed paths with Michael over 25 years ago, so I am one of the few Americans who receive this data so I can share it with Pi subscribers.
The Pifolio analysis begins with Keppler’s research that continually monitors 46 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. Keppler looks at these numbers and takes market’s history into account.
Michael Kepler CEO Keppler Asset Management.
Michael’s analysis is rational, mathematical and does not worry about short term ups and downs. Keppler’s strategy is to diversify into an equally weighted portfolio of the MSCI Indices of each good value (BUY) markets.
This is an easy, simple and effective approach to zeroing in on value. Little time, management or guesswork is required. You are investing in a diversified portfolio of good value indices.
A BUY rating for an index does NOT imply that any one stock in that country is an attractive investment. This eliminates the need for hours of research aimed at picking specific shares. It is not appropriate or enough to instruct a stockbroker to simply select stocks in the BUY rated countries. Investing in the index is like investing in all the shares in the index. You save time and gain incredible diversification because all you have to do is invest in the ETF to gain the profit potential of the entire market.
To achieve this goal of diversification the Pifolio consists of Country Index ETFs.
Country Index ETFs are similar to an index mutual fund but are shares normally traded on a major stock exchange that track an index of shares in a specific country. ETFs do not try to beat the index they represent. The management is passive and tries to emulate the performance of the index.
A country ETF provides diversification into a basket of equities in the country covered. The expense ratios for most ETFs are lower than those of the average mutual fund so they provide diversification and cost efficiency.
Here is the Pifolio I personally held at the beginning of 2021. There have been no changes since.
70% is diversified into Keppler’s good value (BUY rated) developed markets: Germany, Hong Kong, Italy, Japan, Norway, Singapore, Spain and the United Kingdom.
30% of the Pifolio is invested in Keppler’s good value (BUY rated) emerging markets: China, Brazil, Chile, Colombia, South Korea, Malaysia and Taiwan.
There is one trick Pi subscribers learn about China which is different from the rest of the funds.
iShares Country ETFs make it easy to invest in each of the MSCI indicies of the good value BUY markets.
For example, the iShares MSCI Germany (symbol EWG) is a Country Index ETF that tracks the investment results of the MSCI Germany Index. The fund invests at least 80% of its assets in the securities of its underlying index that primarily consists of all the large-and mid-capitalization companies traded on the Frankfurt Stock Exchange.
iShares is owned by Black Rock, Inc. the world’s largest asset manager with over $4 trillion in assets under management.
There is an iShares country ETF for every market in our Pifolio.
This year I celebrate my 53rd anniversary of writing about global investing. Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades. This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in our seminar.
How you can create your own good value strategy.
Stock and currency markets are cyclical. These cycles create extra profit for value investors who invest when everyone else has the markets wrong. One special part of your course looks at how to spot value from cycles. Stocks rise from the cycle of war, productivity and demographics. Cycles create recurring profits. Economies and stock markets cycle up and down around every 15 to 20 years as shown in this graph.
The effect of war cycles on the US Stock Market since 1906.
Bull and bear cycles are based on cycles of human interaction, war, technology and productivity. Economic downturns can create war.
The chart above shows the war – stock market cycle. Military struggles (like the Civil War, WWI, WWII and the Cold War: WW III) super charge inventiveness that creates new forms of productivity…the steam engine, the internal combustion engine, production line processes, jet engines, TV, farming techniques, plastics, telephone, computer and lastly during the Cold War, the internet. The military technology shifts to domestic use. A boom is created that leads to excess. Excess leads to correction. Correction creates an economic downturn and again to war.
The next four years will be a period of high overseas stock growth.
The chart below shows the last 26 years of real-time forecasting by the global equity analyst we track to make our portfolio decisions.
The analyst is Keppler Asset Management and the index they create The KAM Equally Weighted World Index is 15.4% below the value that the analyst forecast four years ago in September 2016.
The chart shows how in the past, two and a half decades there have been four opportunities (red Xs) when the entry levels in global markets were below or around the lower valuation band. In the previous three low points like this, there has always been the highest growth and positive returns three to five years later.
So it’s good to know that if you invest in global stock markets overall, now, you’ll make capital gains over the next four or five years.
More importantly you get paid more income now!
Current markets have turned economic history upside down. Normally bonds pay the highest interest rates and add safety to a portfolio. Not in recent years!
The standard now is that equities have been paying a higher yield than bonds.
Top value stock markets (shown below) pay higher dividends. That’s one of the main reasons they are considered top value. They improve diversification, give the best long term profit potential, and as the chart below shows, pay almost twice the the average US dividend yield.
Plus Value ETFs are Safer
The people who dominate stock markets include a pack of thieves. This fact has always been true.
Shares in stock markets are manipulated all the time. Stock markets (in fact almost all types of markets) are led by sharks plain and simple. Count on this fact. This is the nature of the beast and the number one goal of many big businesses is to take as much of your money as they can to line their pockets.
A study of 92 years of investment returns shows that, despite the fraud and cheating and deceit, stock markets are still a good way to make your money grow… if you invest long term and diversify.
Our Purposeful Investing Course (Pi) strategy makes it harder for cheaters to grab your wealth because it’s very hard to manipulate an entire stock market, much less a dozen or so stock markets around the world.
Manipulators have a hard time tricking an entire market, especially larger markets. If you get the best value country ETFs, your chances of long term profits improve.
Pi teaches an an easy, simple and effective approach to zeroing in on value because little time, management and guesswork is required. You are investing in a diversified portfolio of good value indices.
Sticking to math based stock market value and country ETFs eliminates the need for hours of research aimed at picking specific shares. Investing in an index is like investing in all the major shares of the market. You save time because all you have to do is invest in the ETF to gain the profit potential of the entire market.
Here’s how you can create your own good value strategy.
I would like to send you, on a no risk basis, a 130 page basic training course that teaches the good value strategy I use. You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.
You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last two years. Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.
You also receive a 100+ page PDF value analysis of 46 stock markets (23 developed markets and 23 emerging stock markets). This analysis looks at the price to book, price to earnings, average yield and much more of all 46 markets.
This year I will celebrate my 53rd anniversary of global investing and writing about global investing. Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades. This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in the Pi course.
Time is your friend when you use a good value strategy. The longer you can hold onto a well balanced good value portfolio, the better the odds of outstanding success.
A 45 year portfolio study shows that holding a diversified good value portfolio (based on a good value strategy) for 13 month’s time, increases the probability of higher performance to 70%. However those who can hold the portfolio for five years gain a 88% probability of beating the bellwether in the market and after ten years the probability increases to 97.5%.
Subscribe to the first year of The Personal investing Course (Pi). The annual fee is $299, but to introduce you to this online, course that is based on real time investing, I am knocking $124.50 off the subscription.
Save $124.50 If You Act Now
The global recovery from the pandemic is going to take years, so we have not only lowered the initial fee for the course, we have reduced the subscription to just $99 a year rather than $299. Your subscription will be autorenewed in a year at $99, though you can cancel at any time.
Enroll in Pi. Get the 130 page basic training, a 46 stock market value report, access to all the updates I have sent in the past five years right away, plus numerous updates over the next year.
#1: I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free, easy diversified investing.
#2: I guarantee to send you monthly updates that are based on a study of every share in 46 stock markets around the world. These updates will show the values, the earnings of all these markets and categorize each market as Top Value (buy), Neutral Value (hold) or Poor Value (sell)
#3: If you are not totally happy, simply let me know. I guarantee you can cancel your subscription within 60 days and I’ll refund your subscription fee in full, no questions asked.:
You have nothing to lose except the fear. You gain the ultimate form of financial security as you reduce risk and increase profit potential.
When you subscribe to Pi, you immediately receive a 120 page basic training course that teaches the Pi Strategy. You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.
You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last five years so you can back track if you desire. Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.
Subscribe to a Pi annual subscription for $174.50 and receive all the above.
Your subscription will be charged $99 a year from now, but you can cancel at any time.