World Without Income

by | Sep 27, 2021 | Archives

Be Careful of  REITs.

For over 50 years I have been writing about ways to keep your money (and freedom) away from governments and big business.

One theme that has been a regular thread in these five decades of thought is how the promises made by the establishment have been, are being and will be broken.

One such promise made to Boomers in the democratic, capitalistic societies is the promise that if one saves and builds capital, it can provide income to help support the Golden Years.

Tens of millions of families got on that merry-go-round and reached for that brass ring of capitalism. Many got it!

merry go round

Was reaching for the brass ring worth it?

Regretfully, governments have been cheating so when the time for paybacks on the brass ring began (around 2006), some guarantees had to be reversed.

About the time Boomers reached 65 or 66 years of age, the time that the Golden years had been promised, western government borrowing for excessive (often wanton and wasteful) spending had created so much debt, that they could not continue without ultra low interest rates that allowed them to keep paying for existing debt and create even more.

Interest rates were pushed down, near to and in some instances, below zero.

The hard earned and saved earnings of the middle class became useless as the income producing tool that had been promised.

Today our capital either has be be burned or invested in high risk deals where both the government and big business continue their rip offs.

Governments find it easy to manipulate inflation data so they can keep providing ultra low interest rates that guarantee that investments in government debt will lose purchasing power.

Big business create high risk investments that are higher risk than they appear so income starved investors will lose purchasing power in the stock market game.

One of the latest ploys used by the stock markets pros is to overprice REITs.

A recent Wall Street Journal article “Investing for Income in a World Without Any” (1) explains how REITS have added risk now.

The article says: Billions of dollars have poured into real-estate investment trusts this year. But chasing a hot asset class can cool it off.

What’s often regarded as a substitute for bonds and is up nearly 30% so far this year? Real-estate funds, that’s what.

Before you join the hordes of investors who have poured billions into them this year, you should realize that you won’t be getting in on the ground floor—and the elevator is already crowded.

Real-estate investment trusts own, operate or finance income-producing commercial or residential properties. More than 100 mutual funds, closed-end funds and exchange-traded funds invest primarily in REITs and similar assets. Together they manage more than $224 billion, according to Morningstar.

With interest rates still in the cellar and fears of inflation heating up, investors have flocked to these funds, whose income over time has tended to exceed rises in the cost of living.

Let me share a story that might help you understand why you should be cautious with REITS now.

Last year I purchased the house below, as a rental unit.

neapolitan

This is a cute, but small (1,000 square foot), 3 bedroom, 2 bathroom house.

I was able to buy this at a good price.  The seller was motivated and I offered cash and shortened the normal 15 day inspection period to three days.

It required some fix up, a new septic system, a new air conditioner and some roof work.  I rented it out and as part of my inventory refinement program (as described in my “Neapolitan Effect” report), after a year put the house back on the market.  The sale after costs would net me about 20% profit for the year.

I put this on the market at a price that made little sense, in my mind, as a rental.  The price to rent ratio was nowhere close to what I look for.

Despite what I considered aggressive pricing, I had an immediate full price, cash offer with the 15 day inspection period reduced to five days.  Darn it, I had asked for to little! (though you never go broke taking a profit).

The buyer who made that offer was a Limited Liability Partnership, named something like “DGL XIII Lake Owner 2 L.P.

I did not accept by the way.  Next day I had an above asking price offer.  Nice.

The point of this story is that this partnership was willing to pay too much for that house and quickly.  They had jumped all over it literally on the day it was listed.

Why?  The buyer was willing to pay too much for the house (as a sensible rental unit) because they were going to package it and sell the package on the real estate market.

Investors who are still chasing the dream are at risk of making a poor stock investment because big business is touting REITS as the income investment  in a world without income.

Buyers Beware!

Gary

 

garyheadshot

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.

keppler

keppler

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.

Fwd: keppler

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.

keppler

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.

keppler

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. 

keppler 4-2021

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.

keppler

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.

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.

Gary

 

(1) www.wsj.com/articles/investing-for-income-in-a-world-without-any-reits-11631888978?mod=itp_wsj&mod=djemITP_h

 

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