I trusted a law of nature when without any engineering or measuring, we created about eight miles of road on our farm. Mos of it turned out level even though the land has a lot of rises and falls. Someone once asked me, “How in the heck did you manage to keep it so level”.
The answer was simple. “I just tracked deer trails”. Deer do not waste energy when they don’t have to. They walk a level path.
Nature always takes the easiest trail!
Miles of level trails at the farm
Businesses in alcohol, tobacco, gambling, gaming, drugs and investing take advantage of nature’s gravitation to the easy path.
So too does our brain. That’s why they are wired to seek rewards. Easy brings pleasure. Hard gets pain.
The pleasure comes in the form of dopamine, the neurotransmitter, the that makes us feel good.
Nature provided humans with this pleasure stimulation to keep us hunting and foraging so we would have enough food for our families. Mankind has evolved, but the pain and pleasure response remains and companies have learned how to hijack that reward system. The primitive bit of the brain that gives us an immediate reward without much thinking and without much logic is still functional.
Companies have learned how to stimulate the parts of the brain, that releases dopamine when we have an immediate gain. This is big business! A lot of companies involved in alcohol, tobacco, gambling, gaming and investing make the most of this fact. They learn how to stimulate the parts of the brain, that releases dopamine when we have an immediate gain.
Watch an addict at a slot machine. You’ll see what I mean.
Robinhood uses addictive tactics
An NBC article “Gambling addiction experts see familiar aspects in Robinhood app” (1) reveals the problem.
This investing app makes it fun to invest, makes it easy to borrow on investments for leverage and has helped cause some dramatic losses when its systems have been flooded with success.
While the broader public may have gotten its first glimpse this week of the troubling and addictive nature of trading apps like Robinhood, gambling experts, finance watchers and even rival trading apps have long been thinking about how to address these problems.
“The online day trader with problems is indistinguishable from the online gambling addict,” said Keith Whyte, the executive director of the National Council on Problem Gambling, pointing to graphics like the iconic green confetti that displays on a user’s phone when a Robinhood trade executes. “A lot of this is directly taken from the user experience of casinos: It encourages immediacy and frequent engagement.”
A Wall Street Journal article, “Robinhood, Three Friends and the Fortune That Got Away” (2) gives a perfect example of how big business uses addictive technology to take advantage of the small investors.
The article tells how the Robinhood app helped a trio of school photographers fall into an addictive online trading frenzy last year, Their early wins almost led them to trouble.
The trio started with all the danger signs. They had some quick wins right away. One of them quadrupled his investment in a hurry. Another made more money in a few days from the market than a month’s work at his day job.
“What color lambo you buying?” he texted his friends, joking about market riches delivering six-figure Lamborghini sports cars. “I’m buying three,” His Robinhood account had ballooned to $52,500.
Because they started during a brief bull phase, the thrill of online trading—for a time, making more money than they ever thought possible, minimized the concept of risk.
This was fun! They engaged in lots of group texts and held several video meetings to discuss investments. They said: “With Robinhood, you’re seeing your account go up, and it’s that same euphoric feeling. The social interaction between themselves and several social networking sites reinforced their invincibility.
Social media and investing-made-easy apps like Robinhood have given new investors a chance to operate in concert with millions of others world-wide. They connect online, much like multiplayer videogames, and drive manias in individual stocks. The Robinhood app logged more than 2.6 million downloads just in March 2020,
The sudden success led the three investors to leverage their bets using margin loans, money they borrowed from Robinhood to buy more securities. Access to borrowed funds for anyone with $2,000 is a central feature of the Robinhood Gold account.
It seemed like they couldn’t lose.
They were exhibiting all the danger signs, easy, fast profits, visions of material excess, excessive trading (one of the trio made 1600 trades in a year), continual engagement and magnifying the entire excess with borrowed funds.
One of the three even dreamed about stocks and woke up in the night to check his portfolio.
Then early in 2021 the house of cards all started to tumble down.
On the morning of Jan. 28, the app didn’t allow them to buy GameStop. They could only sell and trade options. “Dudes some shady s— is happening,” one texted his two friends.
Their losses forced them to meet margin calls and sell stock, that had crashed, to make the payments.
One wrote: “I just wanna throw up,”. Another said he cried thinking about his massive loss.
Of the three, one gave up, got out and has losses to pay off, just like any bad gambler. One ended up with a $700 profit. The third has losses but is hanging onto his positions in hopes they will rebound.
“We all joked about having matching Lamborghinis,” one said. “But at the end of the day, the three of us are grounded and rooted enough to just want to provide for our families.”
So the disaster was not all that great and maybe at least two of the three will be better investors. As reformed addicts… they’ll invest responsibly.
Do not get me wrong. I have nothing against the Robinhood App. In fact my eldest grandson’s graduation present from me was money to invest through Robinhood (along with a free subscription to my Purposeful Investing Course).
The addiction is not created by the new technology. I made the same mistakes in the 1970s during gold and silvers run up. There were no computers or internet or social networks then. Gold rose from $35 and ounce and silver peak in the 1970s at a never seen again since $48 an ounce. I leveraged myself to the hilt and lucked out only through some sheer luck made some money. I gave back a lot of the profits as well and am thankful for the losses as they were lessons that helped me be a more value oriented, cautious investor long term.
Big wins and sharp losses are visceral educations that can prepare us to invest intelligently. These are better than any other way of learning! They are good lessons for new investors if they are not so severe they create serious financial strain.
The reason for this warning today is that all the US stock indices are near all time highs. Stock prices are buoyant and there is a lot of mania in the market.
History suggests that equities are the best way (beyond one’s own business) for investors to make money long term. However the upwards movement of stock markets is always marred by some sharp downward thrusts.
We are at a phase when non of the old norms seems applicable. Don’t rely on a complete absence of the old order. Fundamentals do matter and many of the basics of the global economy suggest a retraction.
Don’t stop investing, but be aware, beware and take care.
Stock markets are led by a den of thieves. The history of Wall Street and every stock market like it is that the big winners are rarely small investors and turn out to be robber barons.
From the book, “Myth of the Robber Barons”
Whether the robber barons wear top hats or green felt caps, the emphasis is on the word robber and the robbing is rarely for giving to the poor. Don’t let any of them use addictive habits to rob you!
That why I recommend PIEC (Personal Income Earning Corridor) to get you in the market, keep you in the market and avoid loss.
The Only 3 Reasons to Invest
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. 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 how a value based model portfolio that dates back to 1969 has outperformed almost every stock market in the world.
The US market has not been even close to the top performer over the long term.
The DQYDJ Dow Jones Industrial Calculator (1) shows that an investment in the Dow Jones (with dividends reinvested) has risen at an average of 10.74% over the last 50 (51 actually) years.
That’s 10.74% is pretty good, but an analysis of 51 years performance of all the developed stock markets shows that (using country indices as hypothetical investments) investing in the top value (not top performing) markets would have returned 12.5%.
The chart below shows the analysis.
An annual return of 12.5% compared to the 10.74% US return is a 1.76% per annum difference. This may not seem like much,
In the long term the difference is huge. Calculations from the investor.gov site (2) shows that $10,000 invested at the 10.74% compound rate turns $10,000 into $1,817,734.62 in 51 years.
Wow, that sounds pretty good until you look at the results of the 12.5% rates. $10,000 grows to $4,062,362.22!
Investing in the top value (not the top return) markets earned $2,244,627.60 EXTRA!
$4,062, 362.22 means you would have $2,244,627.60 MORE by investing in good value markets versus $1,817,734.62 earned investing in the US market. That almost 125% more money!
Here are the best value developed markets at this time (as of end of March 2021).
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.
Save $124.50 If You Act Now
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 that down to $174.50 in this special offer. Plus I am reducing annual renewals from $299 to only $99.
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. I call this strategy Purposeful Investing (PI). 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 get this course when you enroll in our Purposeful Investing program (Pi) with a triple guarantee.
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.