“The Neapolitan Effect”

There is a special way to find profits and opportunity in good times and bad.  Look for similarities, distortions and trends to spot old opportunities in new places.

“We should have seen 2020 coming”.

With 2020 hindsight we can make such a comment.   Yet truth be told, the year 2020 fooled almost everyone.

The year had a convergence of what many would call, bad luck.  There was a perfect storm of negativity, election squabbles, pandemic, bigger forest fires, more hurricanes, stock market collapses (and recovery) and a crippled economy.

Nothing seemed to be as it should be.  We could not understand what’s happening right in front of us. Life was (and remains) like it’s never been (in our lives) before.

When this happens we have to rise above the daily stuff and see a bigger picture.  We need to gain a broader historical perspective because what’s never happened in our lives has happened again and again before.

When we expand our horizons beyond just the year or decade, we can see nothing that happened in 2020 is new.

We need to prepare for and take advantage of even more change!

History professor Yuval Noah Harari, summed up why we need to become expert at spotting change in his book “Homo Deus: A Brief History of Tomorrow“.

He wrote: Centuries ago human knowledge increased slowly, so politics and economics changed at a leisurely pace too. Today our knowledge is increasing at breakneck speed, and theoretically we should understand the world better and better. But the very opposite is happening. Our new-found knowledge leads to faster economic, social and political changes; in an attempt to understand what is happening, we accelerate the accumulation of knowledge, which leads only to faster and greater upheavals. Consequently we are less and less able to make sense of the present or forecast the future. In 1016 it was relatively easy to predict how Europe would look in 1050. Sure, dynasties might fall, unknown raiders might invade, and natural disasters might strike; yet it was clear that in 1050 Europe would still be ruled by kings and priests, that it would be an agricultural society, that most of its inhabitants would be peasants, and that it would continue to suffer greatly from famines, plagues and wars. In contrast, in 2016 we have no idea how Europe will look in 2050. We cannot say what kind of political system it will have, how its job market will be structured, or even what kind of bodies its inhabitants will possess.”

Accelerating change and a social economic world we hardly know should not surprise us because nature works in bell shaped curves and we are well over the hump in a cycle of prosperity that began after the second world war. This cycle fooled us into thinking we knew what was happening.

 

Nature works in bell shaped curves and human beings (surprise-surprise) are part of nature.  Our actions, our societies, successes and failures are controlled by this rise and fall reality.

The good news about all this change is that material affluence in human society has continued to rise in a series of bell shaped curves for at least the last 500 years.  We are at the end of a curve now, but can have every reason to expect the slowdown to be of short duration.

Before we can understand how to make profits that jump from one opportunity to the next, it’s important to get our thinking straight about these good times and bad times and know where we really are, right now.

History suggests that we are in a 500 year good time period.

We can see upwards positive growth starting around 1500 in the chart below from the ourworldindata.org website.

ourworldindata.org/grapher/world-gdp-over-the-last-two-millennia

The 2000 years covered in the chart above makes the growth of global prosperity over the last 500 years look fairly smooth.  The chart (below) with a shorter time span of only 500 years begins to reveal the up and down nature of this growth.

Three important steps in spotting one opportunity that leads to another are:

•  Recognize the up and down nature of growth
• Know which part of the cycle is unfolding
• Respond to it to the current trend.  

Down waves such as now are perfect times to prepare for the next upward waves.

The chart below from the World Bank’s website shows how volatile growth has been for the last twenty years.

These charts suggest that we are in a short term down cycle in a long term upwards drift.

To enhance this historical view, let’s  look back to the beginning growth spurt around 1500. This upwards trend was likely fueled by the invention of the printing press.

According to “The Invention and History of the Printing Press”: Around the late 1430s, a German man named Johann Gutenberg was quite desperate to find a way to make money. At the time, there was a trend in attaching small mirrors to one’s hat or clothes in order to soak up healing powers when visiting holy places or icons. The mirrors themselves were not significant, but Gutenberg quietly noted how lucrative it was to create mass amounts of a cheap product.

During the 1300s to 1400s, people had developed a very basic form of printing. It involved letters or images cut on blocks of wood. The block would be dipped in ink and then stamped onto paper.

Gutenberg already had previous experience working at a mint, and he realized that if he could use cut blocks within a machine, he could make the printing process a lot faster. Even better, he would be able to reproduce texts in great numbers.

Instead of using wood blocks, Gutenberg used metal instead. This became known as a “movable type machine,” since the metal block letters could be moved around to create new words and sentences.

With this machine, Gutenberg made the very first printed book, which was naturally a reproduction of the Bible.

Image from www.psprint.com:

Understanding that the printing press is among the technologies that kicked off the industrial revolution is worthy of remembering.

Later in this report we’ll see the importance of communication as a root of human cooperation in the five century upwards waves of prosperity.

Humans are at the top of the food chain basically because their ability to communicate in such intricate and flexible ways allows us to cooperate flexibly in very large numbers.  Large-scale human cooperation, is based on shared agreements of ideas and concepts, such as nations, money, corporations, etc.  These tools of social economic cohesion are figments of our imagination that allow us to cooperate with strangers even though they may be long distances away.

This is an important point to remember.  Human prosperity depends on effective communication that improves cooperation.

Now let’s look at how these up and down cycles seem to be speeding up.

There is an old family cemetery at our farm in North Carolina.  Many of the older graves are marked simply by a stone.

But the five headstones shown here, though not new as they date back to the turn of last century, have the deceased’s ages etched in the stone:  86, 91, 95, 100 and 115.

Yep, the fifth headstone on the right shows that this long lived lady was born in the late 1700s and lived into the early 1900s.

“What change she must have seen!”, I thought.

For this report, I decided to find out what change took place from 1800 to 1900 and my research found 30 important inventions that were introduced into society in that century.

30 Inventions from 1800 to 1900

Battery
stethoscope
Matches
microphone
Typewriter
Sewing Machine
Mechanical Reaper
Corn Planter
Dishwasher
Bicycle
Mechanical Calculator
Telegraph
Postage Stamp
Gyroscope
Airship
Glider
Vacuum flask
Gramophone
Traffic Light
Telephone
Carpet Washer
Motorcycle
Escalator
Roller Coaster
Diesel Engine
Automobile
Barbed Wire
Stapler
Portland Cement

The tin can came in 1810 so maybe some of of this 115  year old’s last meals came from cans.  She might have thought, “what a revelation and joy to have vegetables, that I have not preserved,  in the winter”.  Now we think “canned food, yuck!”

Think about the impact these 30 inventions have had on the world!

This is important… to think about how technology changes the world because… spotting contrasts created by technology helps us understand how to make profits that jump from one opportunity to the next.  For example, in this report we’ll look at one special place where there is new opportunity because, though it’s very remote and isolated, it has fiber optic broadband connections to every home in the county.

A lot of the change these inventions bring creates disruption.

Take the disruption created by the sewing machine.  According to nevadainventors.org/30-inventions-1800s:  “Usually, local tailors at that time made money from stitching with bare hands; the only crude means they had to settle for. The fear of losing their jobs to the mechanical machine made them hate the invention.”

A Big Disruption!

The global economy and prosperity keeps rising, in long upwards peaks followed by short downward troughs and we have been in an enormous upwards peak since 1945.

I recently had tea with two friends.  One of the friends is retired and a little older than me.  He was telling me tales of when he was a kid living in the Blue Ridge of North Carolina.  He recalled his father setting up the first Ford distributorship in the county and how he worked for Ford in the 1940s.

Ford would send a crate load of parts for car generators by railroad.  The parts arrived at the  Todd North Carolina train station. He picked them up,  unpacked them, wrapped a specified number of turns of wire around the pole shoes which caused them to become electromagnets, called field coils.

He then packed up the finished generators and put them back on a train that would eventually get them to Detroit.

The other friend I has tea with, much younger than me, is a digital marketer for Ford, working totally at home, helping over 3,000 Ford dealerships all across the USA from one place in Florida.

Here they were in the same room, just a generation (maybe two) apart and look at the differences that technology has brought into our productive ability in this long lasting upwards peak!

Look at the change my older friend has had to go through to keep up.

Yet the speed of this change is accelerating!

Here are the last six upwards eras that began somewhere in the late 1700s around the time the aged lady buried on our farm was born.

Era #1: 1785-1845-fueled by water power-60 years. Textiles and iron works were the backbone of growth industries.

Era #2: 1845-1900-fueled by steam-55 years. Railways and steel provided the main growth in this era.

Era #3: 1900-1950-fueled by the internal engine-50 years. Electricity and chemicals provided the major growth.

Era #4: 1950-1990-fueled by electronics-40 years. Petrochemicals and aviation were the innovations which became mainstream in this period.

Era #5: 1990-current-fueled by digital networks- 30 years+ ? Software and new media create the growth elements in this era.

Each era greatly empowered massive new numbers of individuals, an empowerment that led to entire new social and economic classes.  The working middle-class was born.  This empowerment allowed the working class to rise from feudal subservient positions to positions of economic and hence political influence.  Even in the terrible depression of the 1930s, people were far better off materially than a century before.

Much of the world’s population became much richer in each era, but these changes were accompanied by turmoil caused by periods when the old order had not let go and the new order had not taken hold.  Many forces came into play and there were struggles for dominance to establish order.

We are in one of these turbulent periods now where social networking and internet communication has become a dominant force, but has not gained full dominance.

Remember…. communication that leads to cooperation is the big thing that put us humans at the top of the pack.

The tool of the current revolution is information and in our last era information was controlled by institutions such as institutions, like Harvard, media like the Wall Street and New York Times. Their authority came from scarcity because they had exclusive information and secret knowledge. That scarcity and exclusivity has been swept away in a never-ending tsunami of information available to anyone with access to the internet.

Rise above the here and now. Look for bigger patterns.

If one takes a deeper look at 2020, there is little surprise.  History is simply repeating itself.

2020 is likely to mark the acceleration of a decade and a bit of of turbulent transition.

Now that we understand up and down cycles, we should not be quite so surprised by the the changes we are seeing.  This change was coming soon enough. The Covid-19 pandemic just accelerated and accentuated the process.

The world might seem very different from what we have known for the past seventy years or so, but looked at in a framework of longer history… it’s the same old tale.

The last couple of millennia are filled with rising and falling empires. There are basic players in each of these tales. First the idea of debt loses its real meaning and rises to levels that are unsustainable. Interest rates charged for debt fall to extremely low levels so the idea of investing for a known amount stops making sense. Central monetary authorities replace innovation and increased productivity to stimulate the economy. Disparity of wealth widens dramatically and the gap increases. There is increased divisiveness in politics within countries, which leads to increased social and political conflicts. New world powers emerge and overtake overextended existing world power which leads to international conflict.

The last time this happened was between 1930 to 1945.

Consider  the following socio-economic cycle. The USA was the major power in 1945  and the military industrial complex we call the USA, Western Europe and Japan… thrived, brought along by the Marshall Plan and Korean War.  The US supremacy then plateaued from the 1950s through 1970s.

After World War II the United States and Canada were the only major industrial bases that had not been destroyed. They had expanded rapidly during the war and by 1947 had retooled to produce consumer goods, stimulated by a boom in consumer spending.

Exports had been a small factor in the American economy. The global rebuilding called the Marshall Plan changed that fact.  Europeans rebuilt with manufactured goods and raw materials exported from the United States.

Japan was pulled along as well, when in 1950 the Korean War turned Japan into the main staging area for the United Nations.  The Korean War brought Japan even more money than the Marshall Plan sent to any country in Europe.

In the 1970s this entire socio-economic union between the US, Europe and Japan began shifting from a rising into a maintenance phase.  President Nixon sent Henry Kissinger on a secret trip to China and this huge nation (the largest by population) started an upwards trend.

The chart below from an Economist article “Chinese Takeovers, Being Eaten by the Dragon” shows the Foreign Direct Investment as a percent of the global economy.  For example in 1914 Britain was the largest empire ever controlling 1/4th of all nations in the world and 45% of the world’s FDI.

The Economist article explains when it says:  Control of the world’s stock of foreign direct investment (FDI), which includes takeovers and companies’ greenfield investments, tends to reflect a country’s economic muscle. Britain owned 45% of the world’s FDI in 1914; America’s share peaked at 50% in 1967. Today China, including Hong Kong and Macau, has a share of just 6%.

We should not be surprised that the USA is losing market share of FDI and losing it faster than previous empires.  This shift appears by almost any measure as part of our universal pattern and in perfect harmony with history.

We had 70 years of smooth sailing.  Now we are seeing the next wave of turbulence as we  move onto the next upwards transformation.

Fortunately we sent readers a report “Live Anywhere – Earn Everywhere” in 2017 that provided an answer or at least a good set of tools to survive and actually do well in 2020.  Those who read and followed this report have been able to cope better with the pandemic and in many cases have even gained financially from the shifts COVID-19 has wrought.

The world is as we should expect. 

If there is a problem it’s not the economy, the politics or the changes around the world.  It’s our thoughts and beliefs not being in tune with current realities.

Maybe the pandemic has moved things along a little faster and sent the current down cycle a little deeper than than we would expect.  We could be surprised by the severity and speed, but  “Live Anywhere – Earn Everywhere” looked at the risk of how America would respond to a pandemic.  History provides us clues to the fact that current events are well within the long term norm.

The upward waves create such abundance and comfort that people become lazy, complacent and overextended.   They take a rising, peaceful economy for granted and become overextended.  The majority want to have more, but work less.  Debt becomes the norm rather than a tempered tool.

The basic human reaction to pleasure is not satisfaction, but rather craving for more. Hence, no matter what we achieve, it only increases our craving, not our satisfaction.  Yuval Noah Harari

As the upwaves progress, the boost of added productivity that the new inventions created become overwhelmed by excess.

Much of the world’s population became much richer in each era, but these changes were accompanied by turmoil caused by periods when the old order had not let go and the new order had not taken hold.  Many forces came into play and there were struggles for dominance to establish order.

This is the third time in 500 years

From the 1500s to the mid 1750s, the Netherlands was the leading world power. In the mid 1700s the British Empire took the lead and was not passed as the supreme power until around 1900 when the USA surged ahead until about 1950.

In the Dutch era, Amsterdam was the world’s financial center and the Dutch guilder became the world’s reserve currency. London and the British pound took over these roles as Britain rose.  Then New York became the chief financial center as the US dollar became the world’s reserve currency in 1944 and was as good as gold (or silver) until Richard Nixon reneged on the American currency promise.

Each nation rose and has fallen because nature runs in a bell shaped curve and within every success lies the seeds of decline.

There can be decline, but pockets of affluence remain.  The days of Dutch glory are long gone, but I have spent a lot of time in the Netherlands (I maintained an office and worked from there for years).  I promise you, Holland is still a really great place to be.

The UK’s dominance  has been in decline for over a century.  I lived in England for more than a decade and am there often.  English life can be absolutely superb!

The trick to success in downward economic waves is to live in a pocket of affluence and do something that is profitable and fulfilling. 

This report shows how to spot a pocket of affluence, learn from it, use it and let it lead you from one opportunity to another.

We are moving into times that are more uncertain (in the short term) than ever before.  The speed of change is accelerating!  We have to keep up to just stay even.

No problem!

Life naturally moves in cycles and we can stay in balance and benefit from these natural cycles of change.

Global Disaster Plan

Over the years, My wife Merri and I have moved around the world leaping from one opportunity to the next.

These journeys  showed us the wisdom of creating a global disaster plan that prepared us for the COVID-19 pandemic way before it happened. I outlined our plan in 2016, so when the pandemic hit, we gained rather than lost affluence.

Biking by myself is part of a global disaster plan I began in 2016.  4 years later at 74, I’m still going strong and so is the plan.

Part of our global disaster plan is to rely on a good lifestyle, and not the western medical system, for our good health.

When we had all the symptoms of COVID-19 we did not go running to a hospital.

The information we have gained from more than 50 years of global, living, investing, business and travel, has helped thousands of our readers earn more, protect their wealth and improve their natural health because the ideas that have helped our lifestyles evolve have stayed tuned with the times.

Look for your opportunities to evolve.

I began writing about multi currency portfolios over five decades ago when many thought I was crazy.

My first book, published in the 1970s “Passport to International Profit” was about the benefits of international investing and business.

Decades passed before the establishment jumped on the bandwagon.

We were able to capture profit in that unbeaten path because an emergence of the global economy seemed quite certain.  After WWII, the United  States led the way, using capitalistic democracy and the Marshall plan to help Europe and then Japan recover.  A decade or so later China was brought on board.  As more nations rebuilt, middle classes surged and gained prosperity equal to and even beyond the US.

Smart investors simply invested into emerging markets before they emerged.

These evolutions led me first to Hong Kong in the 1960s, then Switzerland, then London, the Isle of Man, Naples Florida, North Carolina, Belize, the Dominican Republic, Ecuador and back to Florida.

This was easy investing until this global expansion went wrong.

What happened?

As is the nature of all things living, the reaction to growing prosperity was not satisfaction, but an increased craving for more.  Instead of adding to success by working longer and increasing productivity, a big segment of the population began to want more for doing less.

Politicians acquiesced to the demands by promising more for less… mostly in ways that payment was pushed into the future.  This led to  swollen bureaucracies, bloated budgets, and massive debts that allowed legal systems, health care organizations and political schemes to divide the haves and have nots.  The middle class, the engine of global prosperity, gained more and more, but it was all in paid for in false promises and faked numbers.  Real standards of living no longer rose but actually fell.  

Huge technological shifts, access to jet powered airlines for all, the TV, telephone, the internet, cell phones and so much more, dramatically increased the human productivity, but the advances could not keep up with the demographic challenges, the pollution of our lands and the divisiveness of national and global politics.  

Too much had gone wrong… increased debt, inflation of money as well as inflation of images and words, loss of the belief in truth, integrity and many of the ideals that had helped the expansion from 1945.

These changes have helped Merri and me spot special opportunities (that worked for us), again and again as we hopped around the world.

In 2016 I wrote this note to promote the report “Live Anywhere – Earn Everywhere”:

How to Gain Extra Freedom – While Almost Everyone Loses Theirs.  Become a Pruppie!

Just in case… the world goes sideways… we will still survive and prosper anyway.  We do not give up anything much.  We can enjoy the good parts of the new economy, as we protect ourselves from what can be bad.

Just like five decades ago many thought I was crazy to return from overseas and settle in Smalltown USA away from America’s crowded cities.  After all, in 2016 the global economy was booming.  The US stock market and others had recovered from the Great Recession and had reached all times highs and were surging ahead.

The puffing continued through 2020 until the COVID-19 pandemic took hold and exposed many of the cracks in our global society.  

Not so many think I am crazy now.

Because we live a Preppie lifestyle, Merri  and I have not had to change much.   We are pretty reclusive to begin with living in agricultural areas with lots of room (acres) between ourselves and our neighbors.   We already avoided crowds, didn’t do many movies, attend clubs or go to restaurants, bars, clubs, etc.

We stay in touch with most of our many friends around the world virtually.

I have to admit, I missed anticipating the shortage of paper towels, toilet paper, yeast and canning lids, but we had a good three month supply of canned food and each trip to the store all we needed to do was simply restock a few extra things.

We had already tripled up on olive oil, oatmeal, flour and almond butter that goes along with the orange, lemon, blackberry and loquat preserves we had already canned from fruit on our farms.

We were already going to the store during down times when the crowds were non existent.  We already cleaned everything with biodegradable WOW25 which lab tests show is a hospital grade disinfectant.   We already washed hands with it, bathed with it, cleaned clothes and dishes, floors etc. with it as part of our pre COVID-19 routine.  So nothing much in the way of lifestyle needed to change when the pandemic came along.

We already washed all fruit and vegetables with it. We began washing very can when we brought them in the house and again before opening.

We still hiked with friends during the pandemic but we skipped breakfast before our hikes and stay six feet apart.

We already take daily food supplements, and my daily exercise, biking, swimming, walking, yoga are all done alone as are my meditations and the daily sits in the infrared sauna.

Plus we have always worked from home, stopped doing seminars years ago  and don’t consult in person with clients.

In other words we were already prepared.

We grow some of our food.

I love my greenhouses.  That’s why a victory type garden can produce more than just food.

Yet our main business and income activity rely on modern technology, especially the internet.

Because Merri and I thought about the flood of risks that currently bombard the world and our society, we took a less beaten long before the COVID-19 pandemic began.  Now it’s helping us do what we love in a way that increased our safety and helped us prepare for opportunity in the recovery.

This Pruppie lifestyle is for those who expect the world to get better and live and earn based on that expectation but enjoy a progressive lifestyle of freedom that also happens to prepare us for bad times as well as good.

The largest economies after the US and China, are the UK, Germany, France and Japan.  All three European economies were boosted by the Marshall Plan in the 1940s right after WWII.

Marshall Plan type support was expanded in the 1950s to include Japan.  China was not included in support from the US economy until after President Nixon thawed East West tensions in the 1970s.   This delayed China’s economic expansion by 20 years.

My belief is that the Chinese economy, the largest nation in the world by population (four times more people than the USA), will continue to rise faster than that of the Western world, for a bit longer.  Due to the huge population its economy is just too large to treat as a secondary market.

So my equity investing is overweighted in China, based on my assumption of the future… an educated guess at best. My investments in China are also based on math.  The Chinese stock market is a good value market.

But though I invest in China, my lifestyle is based in Smalltown USA.  My global disaster plan is based on having land and space.

Most investors run from bad times so the current turmoil creates extra opportunity.

Our motto for decades has been “the sun always shines somewhere”.

How can you find the sunshine?

Merri and I did not just stumble on these places and say… “wow, this looks like a great deal”.

We moved from one place to the next, seeing similarities contrasts, distortions and trends in one area of profit that allowed us to jump to another opportunity.

This is a repeatable process.

I arrived in Hong Kong in 1968 to sell US mutual funds but this was just about the end of a great US market bull cycle.  The Dow was entering a 15 year bear.  However, the Hong Kong market was about to explode upwards.  I can sum up my investment basic investing patterns and the advice I have shared in my newsletters and later my ezine in just a few sentences.

#1: 1970s. Invest in real estate, gold, silver Japan, Germany, Switzerland and Hong Kong.

#2: 1980s. Invest in real estate, the Tigers, Japan, Taiwan, Singapore, Malaysia and South Korea as well.

#3: 1990s. Invest in South America real estate (which led me to Ecuador).

#4: 2000s. Invest in real estate, China, India and emerging markets including Ecuador real estate.

#5: 2010s.  Invest in business and rental real estate in Smalltown USA.

This journey has reaped millions for Merri and me. More important this approach has helped us follow our purpose and feel that we are doing more for the world than just making a buck.

Sometimes this sunshine is hard to see because the press focuses so much on doom and gloom.  Current news often makes the world seem about to end.  We cannot blame the press. Bad news sells.  The majority of the world’s population wants to worry about what’s bad instead of learn about what’s good.  This does not make doom and gloom right. This is why the majority are also not the richest portion of the population.

Despite all the negative headlines, we have lived through the Cold War and MAD, Y2K, GridX II, the Peak Oil Crisis, the recession of the 1970s, 1980s 2007, etc. etc. etc.  Chicken Little is always out there, selling the falling sky.  Don’t buy into this story!

History suggests that there will always be opportunity.   The sun always shines somewhere.

Wealth and economic opportunity is pushed by supply and demand.  We are part of a growing global population.  New technology makes more people as a whole more productive every day.  The world has increasingly larger markets creating more supply in increasingly efficient ways.

Greater prosperity ahead is a solid but mostly hidden fact.  There is a brighter future ahead, for the entire world.

More wealth for all is almost for sure.  The almost is created by a factor of timing and the Prepper part of Pruppies deal with the almost.  The simple laws of supply and demand guarantee that a strong global economy will continue to increase wealth.

Technology is making people more productive.  This fact increases supply.  There is a growing global population. This fact increases demand.

Those are the basics.  We really can’t argue with that.

More supply… more demand… more wealth.

We can see this fact in play in the Wall Street Journal article, “U.S. Household Net Worth Pushes Further Into Record Territory”.

The article says:  Household wealth rose more than $2 trillion in the fourth quarter with help from rising stock and home prices.

Americans’ wealth pushed further into record territory in the final quarter of last year, hitting nearly $100 trillion thanks to rising stock markets and property prices.

Household net worth—the value of all assets such as stocks and real estate minus liabilities like mortgage and credit-card debt—rose more than $2 trillion last quarter to a record $98.746 trillion.

Soaring wealth hitting lofty levels rising property and stock valuations have pushed net worth well above peaks seen before prior recessions.

The sad tragedy is that most people will not share in this growth and prosperity.

According to CNN’s article “America’s wealth gap is getting even bigger” wealth inequality has skyrocketed with the growing prosperity.

The article says:  In 2016, median household net worth improved across all income brackets — up 16% overall since 2013 — but those on the higher end of the income spectrum did the best. The top 10% of earners saw their household net worth increase 40% over the three-year period, according to the Fed.  That has increased the nation’s already large economic divide.

Here’s one way of understanding the difference that makes. The median upper-income family (those who make more than $127,600) now holds 75 times the wealth of the median low-income family (those who make less than $42,500), according to an analysis of the data by the Pew Research Center. In 2007, top earners were worth 40 times as much. In 1989, the multiple was 28.

The richest 1% of families controlled a record-high 38.6% of the country’s wealth in 2016, according to a Federal Reserve report.

There’s a couple of reasons why wealth inequality is growing.

First, the system is (and always has been) “rigged” in favor of the rich.  It takes money to make money and the big growth in wealth since the last recession has been in stocks and real estate.    Stocks have had some banner years and  has continued to rise despite the COVID-19 disruptions in the US economy.

Meanwhile, the value of households’ real estate has increased.

The lower half of earners in America do not have the money to invest in either real estate or shares.  As prices rise, those who are not investors become relatively poorer.

Second, as wealth rises, so too does prices.  The lower end of earners not only cannot invest, they save less.   Though wealth has grown in the last years, Americans overall are saving less.   This is because the lower income earner is saving less while the upper income earners are growing increasingly rich.

Growing wealth disparity is a never ending story.  The likelihood such disparities going away are dim.  There is not much, as individuals,  we can do at a global, national or even regional level.

We can however make sure we are not caught at the lower end of the distribution of wealth.

The wealth gap is so important because it creates pockets of affluence.

Disparity of wealth has been one of the main contributors to revolution since society became organized.

We are now well into an era we can call the Imagination Era and it has been bringing changes that may help resolve the many negative issues our global society faces now.

Here’s some thoughts about the Imagination Era.

Imagination Era Thought #1: The information era has peaked. We can still make money in Microsoft and the .coms. But the really easy big billions have now been made in the Information Era.

The first industrial wave water-textiles-iron, lasted sixty years (1785-1845). The second wave steam-rail-steel, lasted 55 years (1845-1900). The third wave electricity- chemicals-internal combustion engine, lasted 50 years (1900-1950), the fourth wave petrochemicals-electronics-aviation, only 40 years 1950-1990) and the fifth wave which we are now in, digital networks-software-new media, is after a decade already near or nearing its peak. Each wave has been shorter and sharper. Each series of innovations has saturated the market faster than in the previous wave. If this Imagination wave has thirty years of life, it is already through its infancy and well into maturity.

* Imagination Era Thought #2: We can see the Imagination Era every day. Eras do not start and stop in a day. We still have textiles and foundries, railroads, airplanes, etc. New airlines and car manufacturers still begin. The sixth wave has already formed has risen even faster and sharper than all those in the past.

Social networking is less than tow decades old.  Facebook was launched in February 2004.  Look how it and the social networking apps that followed have changed the world.

* Imagination Era Thought #3: Whatever can be automated will.

* Imagination Era Thought #4: Excellence and value will be taken for granted. In the industrialized world (remember investing in emerging nations will be different) the main mode of production will be automated assembly lines turning out low cost, highly usable, dependable products. Innovations in production will take place very quickly within an industry. Whenever someone comes up with a new, better idea for a product, all competitors will upgrade to match the innovation very quickly. The value of patents and proprietary design will fall dramatically (if there are any patents left at all). There will be very little difference in utilitarian value from one competing product to the next. For example, it is understood today that most cars will run without trouble for 40,000, 80,000, even 120,000 miles. Almost any watch you buy will keep accurate, dependable time. Buy a radio or TV and you expect it to work immediately, easily and to keep working without much fuss.

* Imagination Era Thought #5: The story will reign king! People will buy products based on the story behind the product. For example consumers won’t buy the cheapest, best time keeping watch. They will buy a story behind non functional features which they imagine represents values relative to their lives. Those who imagine themselves rugged individualists will buy tough, bulky, shock proof, watches that are water resistant to 300 feet depths, even though they never plan to dive. (Swiss Army watches, for example.) Those who imagine themselves to be active sports types might choose a Rolex Yachtsman, etc.

Car buyers won’t choose value and technological superiority. They will choose a car that has a story which represents the life style they imagine. Consumers will buy on a far more emotional basis than before and the emotions will be based on their imagination, hence the name Imagination Era.The brand will become the story. We can see this clearly by studying the history of Marlboro country. In the 1950s the tobacco firm, Phillip Morris, was an obscure British company with a pitifully small share of the American tobacco market. RJ Reynolds was king and the leading cigarette was Winston. Marlboro was a cigarette targeted for women smokers with the slogan “Mild as May” and was going nowhere. Then under new management this all changed. The new managers created a new image for the cigarette, the rugged image of the Marlboro Man. This image along with the bold red and white, crush proof box helped Phillip Morris become the world’s leading cigarette manufacturer and pushed Marlboro into the top selling cigarette in the world. This happened despite the fact that RJ Reynolds revamped Winston so the two cigarettes were literally identical in chemical composition (with the same additive additives, etc.). Where Winston could not compete was in the story, the spirit of the Marlboro Man was successfully placed in people’s imagination. Today this story is more than smoke! Marlboro country has become a brand that sells clothes, trips and many types of consumer products beyond tobacco.

Take Disney as an example. They’ve used the brand story to move from cartoons to movies to theme parks to an entire development of houses with a certain implied lifestyle. Disney’s story is one of family values and this has appealed to millions of consumers in a multitude of ways.

* Imagination Era Thought #6: Values will be as or even more important than the economic value.. Consumers will base their buying decisions on private internal values that will grow in importance. We can see this trend already developing. For example many businesses have already learned it is good business to now give part of their profits to some type of charity. Some businesses have become their values, such as the ice cream company, Ben & Jerry. Such companies form a new corporate culture each expressing their values through the way they do business. Such firms express a set of values which states how the firm’s convictions differ from the norm. Consumers who imagine these convictions are good will buy from these firms because they feel this firm has the ecologically correct or wholesome values that match how they (the consumer) feels.

We can see the power of social media blending with value investing in the recent explosion of share prices of companies that should be dead.

AMC, (movie theaters) and Gamestop (big box for video games) are businesses that are on their way out.  Technology delivers their products in faster, more efficient ways.

A group of investors however are defying this logic.

The Wall Street Journal article “GameStop Mania Reveals Power Shift on Wall Street—and the Pros Are Reeling” explains it.

The article says: Internet-fueled amateurs are gathering on platforms like Reddit, Discord, Facebook and Twitter, encouraging each other to pile into stocks, bragging about their gains and, at times, intentionally banding together to intensify losses among professional traders. “I didn’t realize it was this cult-like.”

The power dynamics are shifting on Wall Street. Individual investors are winning big—at least for now—and relishing it.

An eye-popping rally in shares of companies that were once left for dead including GameStop Corp. GME -44.29% , AMC Entertainment Holdings Inc. AMC -56.63% and BlackBerry Ltd. has upended the natural order between hedge-fund investors and those trying their hand at trading from their sofas. While the individuals are rejoicing at newfound riches, the pros are reeling from their losses.

Long-held strategies such as evaluating company fundamentals have gone out the window in favor of momentum. War has broken out between professionals losing billions and the individual investors jeering at them on social media.

The price of these shares has skyrocketed simply because a group of investors place a value on a story that the group fabricated.  The story, not the underlying business reality is keeping the share price going.  There is little fundamental reason for the price of the shares other than the story.

In the Imagination Era consumers will perceive these values to be of increasing importance and will increasingly follow their feelings even when their imaginings may be wrong. In the early stages of this era this may lead businesses to profess convictions that are not really felt simply to attract customers.

Following feelings has led to an explosion of conspiracy theories.

Imagination is everything. The products, management and work force of a firm may or may not be as the public perceives. Disney may be a wholesome firm or may be a money grubbing, totally ruthless organization. Perrier may be pure or may come from cesspools. The Marlboro Man may be a rugged individualism or a complete pansy. But what affects consumers is the public image.

The Imagination Era is being highlighted by savage competition.

Soon, consumers will be so informed that no one will be able to compete on price and value. Only stories will sell and successful companies will need successful stories that last.

The Imagination Era made it become increasingly difficult for businesses (as well politicians) to use duplicity in the market place.  So through the power of social networking businesses and politicians simply made their own truth with stories.

The disintegration of truth have make stories become increasingly more valuable than value in the Imagination Era!

Why tension in the Imagination Era – The Story is Everything

History Professor Yuval Harari says in his book ““Sapiens: A Brief History of Humankind,” that gossip is an important asset that helped Sapiens become the dominant species on Earth.

The linguistic skills of Homo Sapiens allows us to gossip often without substantiation.  This gossip helps us have beliefs about who we can trust beyond the small natural size of people we can know.   It’s hard for an individual to intimately know more than 150, people, but we can cooperate with larger numbers of strangers by believing in common myths that are passed along.

Hararri says in his book: Humans think in stories, and we try to make sense of the world by telling stories.  Gossip, based on judgments, began our rule of the planet. Before we began gossiping with other Homo sapiens, we were merely another mammal in the food chain.

Gossiping empowered us to bond with others socially, create friendships and even hierarchies, allowing us to cooperate while gaining an edge on the animal kingdom. Gossip is one of the unheralded foundations of our species and its survival.

The story is everything. The simpler the story the better

Understanding the power in stories has helped Merri and me spot similarities, contrasts, distortions and trends that created special opportunities (that worked for us), again and again as we followed profit potential from place to place.

The thread of success began in Hong Kong by seeing the similarity in the productivity of Hong Kong’s to that of the US’s (and Western Europe’s) work forces.  The distortion was the cost of  that labor.  The trends were the opening of the global economy fueled by better shipping, the growth of jet travel and faster communication by phone and telex.

Another distortion was the low price of Hong Kong shares and inexpensive real estate combined with a  growing income that Hong Kong’s populace could invest in those shares.  As local demand pushed up Hong Kong equity prices, the investing world aught on and jumped in.

As the global economy evolved Hong Kong was one of the first stock markets to erupt upwards, but the similarities in valuations, growing productivity and global commerce led to price jumps in other emerging stock markets as well.

Seeing the similarities from stock market to stock market made it easy to follow rising equity and property prices from one market to the next.

We moved to London to accomplish this as it was still the biggest center of global investing at that time.  There we saw similarities in London real estate to other major financial centers (New York, Tokyo, Paris, etc.).  The contrast was that London real estate prices were very much lower.

While in London, in the 1980s I had an offshore corporate formation business and noticed that Isle of Man overseas companies were as good as Jersey and Guernsey structures, but cost less than half.

Spotting this contrast, led me to believe that the Isle of Man would increase in popularity as a financial center.  Merri and I flew over to take a look and discovered that a long depression had forced over 2,000 properties onto the Island real estate market (population was only 60,000).

That was a huge distortion!

We began taking real estate buying tours to the Isle of Man because rents and house prices were so low.  Some delegates purchased remodeled beach front condos for $12,000.  Prices exploded upwards over the next decade.

Our first reason for heading back to Florida was weather, but we soon saw opportunity in similarities, contrasts and distortions.

While conducting seminars in Florida, we saw that real estate in Naples, Florida was much less expensive than on the East Coast of Florida.

The beaches were as nice in Naples as on Florida’s East coast.  Some would say better. The houses as good, the weather as warm. Those were similarities.

Rents in places like Palm Beach, Miami  and Ft. Lauderdale seemed really high to us, but Naples prices were much lower.

That was the contrast.

Merri found a wonderful old large house just off the beach.  We bought it for a song (compared to the price we sold it for)!

Naples prices skyrocketed while we were living there and in 1995 we visited Ecuador.  Merri and I saw Ecuadorian beach front lots that would cost two million dollars in Naples that were selling for $5,000.   In the late 1990s we could buy a house on Ecuador’s beach for a really low price.  The contrast was too great for us to resist.  Our Naples house sold for well over a million dollars. A beautiful four bedroom house overlooking Ecuador’s Pacific ocean was available for $50,000.   How could we resist?

For a decade and a half we invested heavily in Ecuador real estate, but by 2009 we saw that Ecuador prices had skyrocketed and Florida real estate prices faltered.  We began selling out our Ecuador real estate and buying again in Florida.

In Florida we saw great rental value.

We also wanted to live closer to our children and grandchildren.

We also knew that studies had shown that 80% of adults 45 and older believe it is important to live near their children and grandchildren.  Those 60 million people who are Boomers, who just like us, were thinking differently about where they would buy and/or rent a home.

We selected Mt. Dora as a small town to buy rental real estate for numerous reasons.   The first feature was its proximity to our daughter and grandson.

The second reason was a similarity between Mt. Dora and Naples.

This was when the seeds of the Neapolitan Effect were planted.

In Merri’s and my instance, the movement from one place to the next has involved stock markets, real estate and self publishing, but the process can work for anything, stocks, bonds, businesses, or any type of investment.

This is a repeatable process that uses similarities, contrasts, distortions and trends.

We can call this movement, of following profits from one opportunity to the next, a “Pathway to Profit” (PtP).

The image below shows how we have spotted similarities between Naples Florida and Mt. Dora Florida real estate.

The map below shows “Naple’s Core of Branding”.

When Merri and I arrived in Mt. Dora we saw some remarkable similarities.

X Marks a “Sunshine Spot”.

Naples Map

The red X above shows where Merri and I lived in Old Naples Florida in the 1980s and 1990s.  The Gulf of Mexico is on the left.  Our house X was one block off the beach in Old Naples.

The map below shows the area called old Naples which I will call the “Core of Naples Branding”.   This is a mixed area of retail and residences, far away from any main roadway.  The cute, turn-of-the century bungalows in tropical colors have friendly and often quirky owners and are just a short walk to the Gulf of Mexico beach or coffee shops, cafes and chic boutiques.

Many people became enamored with the whimsical town, a haven, for those from busy cities, especially up in the frozen North.

The first key to profit in this opportunity was simply being there. Naples growth took off in the 1990s and today land and house values have risen into the stratosphere.  Anyone in Naples, with a bit of sense made extra money.

A second key was seeing areas of extra value in Naples.

The map below shows Old Naples.  The white line at the top is 5th avenue, a commercial area and the line dropping below is 3rd street, a road filled with cafes, coffee shops, boutiques and galleries.

Naples Map

The key to gaining extra value was was to recognize the difference between the “Real Old Naples” and the “New Old Naples”.  In the 1980s and 1990s, the residents there understood that  the Old Naples south of 5th Avenue (white line at the top) was the real old Naples.

The area north (above) 5th avenue was called Old Naples as well, but everyone in Naples knew it wasn’t really old.  Therefore houses in the new Old Naples were less expensive than those below 5th Avenue.

As outsiders moved in, the buying pressure helped Naples prices skyrocket.  The price gap between real Old Naples and new Old Naples diminished partly because the new buyers were not so aware.  There was plenty of profit just in the rising prices in Naples, but there was an extra profit boost in that area above 5th Avenue as prices became more (not fully) equal to those south of 5th Avenue.

Downtown Naples

Downtown Mt. Dora

Mount Dora Market

Naples Market

The map below shows “Mt. Dora’s Core of Branding”.

When Merri and I arrived in Mt. Dora we saw some remarkable similarities between this charming town and Naples in the 1980s and 1990s.

The first similarity is that Mt. Dora is a mixed area of retail and residences, far away from any main roadway, just like Naples.  This town is also filled with cute, turn-of-the century bungalows in tropical colors have friendly and often quirky owners and are also just a short walk to the 4,475 acre Lake Dora or coffee shops, cafes and chic boutiques.

The first big contrast and distortion between Naples and Mt. Dora we saw was in the prices!

What might cost a million dollars in Naples might cost $150,000 to $250,000 in Mt. Dora.

The next similarity is how two streets, Donnelly and 5th Avenue (white lines below) create similar price breaks.  Houses west of Donnelly are similar  to “real Old Naples” and houses east of Donnelly similar to “new Old Naples”.  Properties east of Donnelly were (and remain) much less expensive that those on the west.

As Mt. Dora real estate prices are taking off (right now) that east west price divide is equalizing.

Mt. Dora

Merri and I began buying houses on both sides of Donnelly and are seeing excellent profits already. ( I explain later why I believe there is still a lot of room to go).

For over a decade, our strategy has been clear… find distressed properties in Mt. Dora were the seller wanted a quick sale and where the house could be rejuvenated for rental at a minimal cost.

X marks the sunshine spot again.

Our first purchase was in the more exclusive area west of Donnelly (1X).  our second was in the less expensive area (X) and we purchased many more in this area.

Mt Dora

Price to rent relationship was the key to our strategy.

The goal was to generate 5% or higher income (after taxes, maintenance, management and repairs) plus build up long term capital gains.

The Mt. Dora real estate market was well suited for this strategy and we stuck to it.  I have enumerated the reasons why Mt. Dora was a good place to own real estate in my report, “Live Anywhere, Earn Everywhere”.  We’ll look at why it remains a good area in a moment.

Over the past decade this strategy worked very well.  During this time we were not tempted to get involved in high end upgrades for resale.

Circumstances changed in Mt. Dora.

A shift began taking place in Mt. Dora, or rather a trend accelerated.  The trend was driven in part by the beauty of the area and the quaint, small town feel already mentioned.   The accelerating force was the completion of Toll Highway 429 which runs off Interstate I-4 a little west of Orlando.

This made a large segment of Orlando much closer, in travel time to Mt. Dora.  We’ll examine more about the importance of highway construction later.

In the meantime other forces already in effect were pushing up demand for real estate in Mt. Dora.

One force pushing Mt Dora’s property prices is that people love the ocean.

They love to be on the coast but the sea levels are rising and that’s one reason Mt. Dora real estate prices are up.

We can take advantage of this fact!

Naples beach

Merri and I lived in Naples Florida, (two blocks north of Naples pier) for almost 20 years.

In the beginning this was a perfect part of small town USA.  We walked the beach every morning.

We’d be among just a few early birds.  Sometimes I could hike from our street, 11th Ave. South, to Gordon’s Pass and back (about three miles) and not see another soul.

By the time we decided to move, we could no longer stand the crowds that had moved in.   There was a line of walkers… hundreds even thousands packing the sands in the A.M.

Traffic rose until we had to plan our day around being able to make right hand turns.

Merri and I are always trying to get out of the path of progress, but it seems to keep following us.  First from Naples to Ecuador and now from Ecuador to Lake County.

One reason Lake County Florida  is in the path of progress is because it’s not on the ocean.

Today one in six Americans live in a county that borders the Gulf of Mexico or an ocean.

This move to the sea has been one of the greatest migrations in the history of mankind.

Now as sea levels rise, the cost of living, on or near the coast, is rising as well.   Taxes and insurance costs are bound to create a counter migration away from the coast.

Merri’s and my strategy to profit from these facts has been to buy houses that appeal to us which have a reasonable potential to return a decent income (and likely appreciate) in Lake County Florida around the city of Mount Dora.

Warmer rising seas also create greater hurricane risks.

This is a contrast.  Naples Florida is at an elevation of about three feet above sea level.  Mount Dora is among Florida’s highest towns, situated on a plateau that rises to 184 feet above sea level.  The area is considered to be one of Florida’s  safest towns from hurricanes.

Red tide also became an issue on the coast.  As seas waters warmed the tide came more often causing dead fish, wheezing lungs and sniffled noses. The red tide has been popping up on Florida’s Southwest coast, but not on central Florida lakes.

Between 2017 and 2018, one of the worst red tides on record blanketed Gulf shores, finally fading in 2019. Businesses shut down and coastal communities complained bitterly, prompting the Corps to reassess how it manages the lake. The red tide has come back in SW Florida as I write this report in 2021.

The rent price strategy is faltering in Mt. Dora.

Prices started rising so dramatically in Mt. Dora that it has become increasingly difficult to find houses at prices low enough to rent for sufficient return.

This required a strategic rethink.  I ask myself a lot, “Is this a genuine shift in pricing or a temporary bubble?”

A big part of the thinking began with the house below, one we bought, cleaned up, rented and after a number of years resold.

Here’s a story about that house that shares some insights into the strategic importance of evolving and how to follow one opportunity to the next using similarities, contrasts and distortions as a guide.

Buying fixing and renting may or may not be something you like to do… or not.  The thoughts here however are not aimed at investing in real estate, but showing the basics of the “Neapolitan Effect” strategic investing idea in anything you do.

A rental house as seen  when we sold it

This was a great house in a golf course community.  We paid $140,000 and rented it for a number of years at between $1,200 and $1,400 a month.

This was one of the most profitable houses we had, but I hated it.  First I had broken one of my house investing rules… “never buy a house that’s pat of an HOA”.  Dealing with the little Hitlers that run HOAs has never suited my personality. That’s my weakness, I know, but I have it, so try to avoid  HOAs.  My decision to stay away from them was reinforced the minute I bought the place and had to pay $450 for a replacement mailbox.

In addition I found that renters in golf and country club communities to be more demanding, complaining and always finding something, like  $50 mice.

Let me explain the $50 mouse.

I’m a pretty reasonable landlord.  If a renter has a financial problem, I’ll work with them.  I have never evicted a tenant.  I have a property maintinence man who works full time and generally if there is a legitimate complaint, I will have him at the house in hours.

If a tenant spots a mouse in the house, they can do one of three things.  They can set a mouse trap. They can call an exterminator (who will come and set a mouse trap) or they can call our property manager, who will call me and I’ll send our maintenance guy over.  He’ll set a mouse trap.

The difference being that I pay my maintenance guy $25 an hour.  The trip and setting the trap will take about two hours.  That little fuzzy creature became my my $50 mouse.

These $50 mice and similar problems are the type of things that seemed to happen more often in the country club.  This was perhaps our nicest house, yet it continually received the most complaints and they were generally nonsense complaints.

So as the Mt. Dora market started to froth, we happily sold it for $226,000.

That’s seems fair enough profit. But the buyer resold it eight months later for $348,000!

That started me thinking.  Did I sell for too little?

The answer was, “not really.  I had tried higher prices and had left it on the market quite some time.

Look again at that house.

When we sold.

The same house eight months later when my buyer resold.

Our strategy includes sticking to our niche.  That’s what we did so I was not disturbed in the least at the $122,000 we gave away.

Here’s why I was okay, at that time.

This was the living area of the house when we sold it.

Look at the living area of the house after.

Here’s the kitchen at sale.

See the kitchen after.

See the bathroom at sale and…

after.

The buyer who purchased from us upgraded everything, even the back yard.

The backyard at sale.

The backyard eight months later.

The buyer did an incredible job and deserved whatever profit was left after the costs of improvement.

I did not mind giving away that profit because at that time, the ultra rejuvenation was not in our niche.

But that remodel started me thinking, “should this be in our niche”?

Our niche was finding fixer uppers that required cleaning, painting and maybe a bit of standard kitchen and bathroom improvement… nothing more.

Yet I recall that remodelers in Naples made a lot of extra profit back in the day.  Maybe they still do.

Then along came COVID-19 and the  pandemic changed everything about our thinking about Mt. Dora.

My first thought, when the pandemic hit was “how can I help my tenants if they can’t pay their rent”.  I worked through many  scenarios and created plans where I could accept lower payments, let the tenants do improvements on the property for reduced rent and even hire tenants to do work on other property.

Fortunately, not one rent has been missed.  Rental demand has increased instead and real estate prices began to skyrocket even faster.  Inventory (houses for sale) dried up.

This is truly not what I anticipated, until I realized that Mt. Dora is a pocket of affluence and the pandemic was driving many northerners (many who already wintered here) down to live long term or permanently.  The small town element is also attracting residents from big cities such as Jacksonville, Orlando and Tampa.

Many corporate executives who were sent home to work long term realized that they could work as well from a small town in sunny Florida as from a big city in the snowy north.

And of course people are coming from the Florida coast inland.

However the horror stories of tenants all over the country not paying rent and the unknown future led us to decided to cash in… a bit on the current rising price market.

Buying and fixing up to resell is quite different from fixing up to rent.

The lesson learned from the sale of the golf course community mentioned earlier and the realization that Mt. Dora is  a pocket of affluence led me to believe that our most profitable resale strategy would be to bring the properties we were selling to the highest possible level.

This process is happening now.

Our first goal was obtaining inventory to fix.

Our first project was the remodel of a bank owned house, that had sat empty for years.

The house looked at lot worse than this when we obtained it, the interior almost demolished.

The end product turned out great and we sold this unit quickly at our asking price.

The second project was one of our existing rentals.  The lease had expired and we did not extend the lease.

Entrance before

Entrance after

Kitchen before

Kitchen after

We knocked out this wall.

 

The open plan makes the house feel much larger.

We resurfaced all the floors.

There was a fair amount of landscaping… fences and sod.

We fixed up the back deck and of course everything was painted.

We added a firepit.

This project is on the market at a top price now and we are into a third project.

The purpose of explaining this is not to suggest that you should get into the remodeling business in Mt. Dora.

The flow here has been to share how I spotted similarities between Naples and Mt. Dora with price being a distortion.  Then we saw the real estate dynamics shift from a cozy rental opportunity to a dynamic hot market selling opportunity.

The process could have worked if you had a business selling ice cream or coffee, information or anything and I hope this sharing helps you see similarities in opportunity somewhere in your life.

I am not done yet though, because I have to ask “To bubble or not to bubble”.  That is the question.

We held our main Naples Florida property for 15 years and sold it for five times what we paid or about 25% a year appreciation.  20 year later, it’s worth maybe triple, so we got the best of the growth, but had we held it, our appreciation would have been about 15 times in 35 years or about 40% a year.  But the buyer who bought from us has only seen about 15% per annum increase.  Still not bad.

These are the type of th0ughts going around in my mind as I formulate Mt. Dora strategies.

So the question is, will the property prices in Mt Dora continue to rise or is this a bubble.  Mt Dora real estate has seen bubbles before.  The last bubble was in 2005 and once in awhile I view a property for sale that is still selling for less than it was purchased for in 2005.

If prices are in a bubble, I want to sell as much as I can, as fast as I can, before the bubble bursts.

Then I’ll buy back in at lower prices.

However if Mt Dora prices are going to be as Naples prices have been for the past 35 years and they just keep rising, I don’t want to sell everything in Mt. Dora. I want to continue holding and renting (albeit at a lower return as the prices rise faster than rents) unless I can find something that appreciates better.

I do want to hold an inventory of rental property, in Mt. Dora or somewhere.

Because I do not know the answer to this bubble question, I have altered my strategy to include a two step process.

I am remodeling select Mt. Dora houses that we already own to sell for maximum profit, but each time I sell a Mt. Dora house, I buy one in Eustis or Tavares.

The Neapolitan Effect has kicked back in.

When Naples real estate took off 20 plus years ago, it pushed up prices in surrounding towns.

Areas (especially near or on the beach) in North Napes, Bonita, Estero and up to Ft Myers (all marked with red X) saw significant appreciation.

Naples area of special appreciation

I reckon the same effect will apply in towns around Mt. Dora.

Mt Dora areas of special appreciation… I hope

As I write this report,  I am not seeing any decent rental houses for sale in Mt. Dora at a price where the price rent ratio offers the return I desire.  I can still find houses in Eustis or Tavares that do.

My strategy is based on the fact that rising prices in Mt Dora will lead to extra appreciation later in these other areas.  When that happens, we’ll take capital gains again.  Whether luxury updates will make sense in those areas is yet to be seen.

Each time I sell a house in MT Dora, I but one or two one of these nearby towns. I especially like Eustis and Tavares for their proximity to a large lake.

Why Mt. Dora still has steam.

Many indicators suggest that we will continue to see higher than normal growth in Lake county and especially Mt Dora.

Many of the factors we have already reviewed, accelerate the growth of Mt Dora; no state tax, good infrastructure, asset protection, low comparable prices, natural beauty, great weather, low population density, safety from the sea and other natural disasters to name a few.

All of these benefits are in place, but it’s the new highways being built that I think will accelerate the process.

Since we started investing in Mt. Dora a decade ago prices have risen, but we have many reasons to believe the best is yet to come.

One reason for our expectations is that the fastest growing metro area in America (The Villages) is nearby (1).

In addition, Orlando, also nearby, was ninth-fastest growing city in the USA.  Orlando has grown at a rate over 20 percent since 2010, putting the Orlando area at No. 22 in population among U.S. metros.

A recent article “Central Florida Cities Among Fastest Growing in US” (2) points out “Cities along Florida’s Interstate 4 corridor were some of the fastest growing in the United States last year.”

Midway between Tampa and Orlando, the Lakeland-Winter Haven area had the nation’s fourth-largest growth rate at 3.2 percent. All are in the Interstate 4 corridor.

Here’s the secret about Mt. Dora that we have been watching for a decade, the 1.7 billion dollar Wekiva expansion.  The road (literally paved with gold as far as I am concerned) connects Mt. Dora to Interstate 4. The expansion started before the great recession, just kept on going, and has never slowed down since it began.

Now it has reached Mt. Dora.

The completion of an exit at Mt. Dora off the new ring road around Orlando may be one reason Mt. Dora real estate prices are soaring.

X marks Mt. Dora on the Wekiva Parkway.

An article at Floridatrend.com says: Work on the $1.7-billion Wekiva Parkway (SR 429) is under way northwest of Orlando, a milestone in developing the final link of a beltway around the urban core. Designed to take pressure off Interstate 4 through downtown, where commuters, tourists and truckers slow to a crawl during rush hour, the Wekiva portion of the toll road will span 25 miles. The highway also will draw at least some cars and trucks away from State Road 46, U.S. Highway 441 and smaller roads congested with commuter traffic between north Orange, Seminole and Lake.

Sanford, Mount Dora and Apopka will benefit from completion of the Wekiva section of the parkway, which will link the three faster growing cities in Seminole, Lake and Orange counties.

We watched an equivalent highway phenomenon take place three decades ago in Naples Florida.  Naples was a sleepy fishing village and winter resort that turned into an overpriced home for the uber rich when I-75 was completed tying Naples to Tampa, Miami and Dade-Broward.

Our investments in Naples treated us well, and though I doubt that Mt. Dora prices will soar as they did in Naples, I do expect real estate in this area to see significant additional gains.  Prices of housing in the area are still very low compared to the cities around it.

The main exit off the Wekiva Parkway is done and it is at Mt. Dora.

The entire Wekiva Parkway is scheduled to be open to traffic in 2022.  This leaves three to four years of great opportunity.  Already billions of dollars of new housing, shopping centers, stores, hospitals and infrastructure have boomed up along the portions of the parkway that are done.

There is more to come.  The map below shows that three of the four Interstate Highways in Florida (I-4, I-75 and I-95) are involved.

Toll Highways 429 and 417 come off I-4 and form part of the ring road around Orlando.  Once the Wekiva Parkway Highway (46) is complete a huge population will have really fast access to Lake county.

In addition expansion of Highway 44 and 42 has begun and these roads already connect I-95 to I-4 and I-75.  The expansion will eventually form four lane fast travel across most of Central Florida.   This will cause population growth spurts.

Why Ashe County offers Continued Potential Too

The other area recommended in the “Live Anywhere – Earn Everywhere” report is Ashe County North Carolina.

Ashe County has many special features.  Low prices, natural beauty, plenty of space, low population, isolation, but every residence has high speed fiber optic broadband availability.

This connectivity creates a special opportunity for those who truly want to be away from it all, with lots of land but remain totally connected.

The expansion of highways also plays a special role.

West Jefferson is a vibrant growing mountain town in the center of Ashe county.

Over the past decade a number of highways that lead from major cities, Charlotte, Winston-Salem, Greensboro, Raleigh-Durham have been expanded.  The special, important link that is just being finished is a straight four and six lane expansion of Highway 221 off Highway 421.  This connection gives quick access to the country from Interstates I-77, I-85, I-74, and I-40.

You can use the Neapolitan Effect too!

Because I cannot know how the Florida and US economy unfold in 2021, the basic question I asked in my strategy rethink was, “Should I buy more real estate in Mt. Dora, or sell what I have”?

I do not know the correct answer and that’s OK.  The Golden Rule of Investing is “there is always something we do not know”.

These tumultuous times at least have the benefit that we are not lured into thinking we know “what’s next”.

My hedge in real estate is to start selling part of the inventory, but buying more, to replace what we sell, in lower priced fringes of Mt. Dora.  In this way we take advantage of the price increase but lock in the income potential, plus add capital gains potential.  If this is a genuine long term increase, then the fringe areas will see appreciation next.

First, I am turning a part of our rental inventory into ultra rejuvenation inventory.  The increased prices in Mt. Dora may represent a bubble or this may the beginning of a long term upswing.  Prices have been relatively low in Central Florida.

I appreciate that a lot f this report so far is about real estate.  That’s because the Naples Mt. Dora analogy is so clear.

I also appreciate that many who read this report are not and don’t want to be real estate investors.   If you don’t love the process, the seeking, the buying, the fixing and the sale…  you should not be.  An important key in the Neapolitan Effect is to “Do what you love”… but whatever you do, have a strategy that defines your niche and stick to it, letting it evolve as circumstances unfold.

The Neapolitan Effect goes way beyond real estate and can apply type of business or investment.  For example, I am expanding my publishing business using the same principles as I am in real estate.  I’ll focus a bot more on this in a moment, but first let’s look at some basics of the Neapolitan Effect that you can use to find all types of opportunity.

What to look for.

Look around you?

Remember a success.

Then look for a situation that is similar.

Now look at differences, contrasts,

Then think about how changes are coming from new trends.

Look around?  There can be a bit of chicken and egg quandary at the start.  How one starts using the Neapolitan Effect is determined by where, one is and if one wants to move or stay.

For example if one is looking for a success without moving, the first step is to look for local success stories or success stories in similar places.

The idea is to first see similarities.  Then look for distortions and trends.  I once (about 50 years ago) had a client who was co founder of a company (Fotomat) that was a raving success, went public. Fotomat was a franchise based business that developed film from small kiosks in shopping center parking lots.  He made a fortune taking the company public with his partner and selling out (well before film processing machines destroyed the business model)

When he came to me (in Hong Kong) he was trying to raise money for a new franchise venture called Health Tree.  He had spotted a similarity between the photo processing business and health food sales business, mainly that most shopping centers had excess space that could be rented inexpensively.  This was a small similarity, but had great power in the fact that the space represented low rent in a high traffic area.

This venture failed for a variety of reasons, (maybe health stores were much more complicated than simple kiosks that mostly just processed film) so the contrasts were too great, but I hope this shows an example of looking for similarities.

In another (more successful) venture, I used to have a business creating reports that helped readers form offshore Channel Island (Jersey and Guernsey) corporations for asset protection.  I was always looking around for new ideas to expand these reports.  I noticed a similarity between Channel Islands corporations and Isle of Man (Manx) corporations.   Manx corporations were just as good as those from Jersey and Guernsey, but could be formed much more quickly at a much lower price.   In this instance the similarities were very close and the contrasts were in service and price, so I was able to come up with additional (and much more profitable) reports.

These two examples were of people in search mode specifically looking around for similarities to something already known, in use and nearby.

However we should keep this search mode on all the time.

In the instance of Mt. Dora, I was not looking for a new opportunity.  I was looking for a place to live, that I like, that was near my daughter’s home.  Only after finding Mt. Dora, liking it and moving there did I start to see the similarities and the contrasts.

This happened to me in the 1970s in London England as well.

In 1970 I lived in London for a year, then moved back to Hong Kong. During that time I also maintained a home north of San Francisco, in Petaluma, California. I had also purchased a house and some duplexes in Portland.

This was a time of great inflation. My homes in California, Portland and in Hong Kong appreciated mightily. In 1976, when I moved from Hong Kong back to London again, I noticed that London real estate was priced about the same as it had been in 1970. This puzzled me. Why had London property prices remained flat despite inflation?

I saw numerous similarities in the utility of London real estate to California, Portland and Hong Kong real estate.  The contrast was price.  London real estate had not appreciated at all, while these other areas had appreciated a lot!

On investigation, I learned that there had been a huge real estate crash in 1970 continued to distort and dampen real estate prices six years later despite the rampant global inflation.

I could not resist and began property shopping and eventually bought a five bedroom house in Bedford Park in West London. I made a $10,000 down payment and took a $$25,000 loan to meet the $35,000 asking price.

I was right. London property had been seriously under priced. I was able to live in the house for four years and sell it  $176,000.

I have slipped back into real estate examples, but want to assure you, this works in every field.  There is another London story that took place at that time… with hamburgers.  When I arrived in 1970, the British should not have used the word because the product they foisted off as a hamburger was disgusting.  By 1976, the product was reasonable and McDonalds was on its way.  To think that McDonalds could improve the quality of a hamburger helps clarify how bad hamburgers were in London in the 1970s.

However it was not McDonalds that started the change.

When I first moved to London, England in 1970, another American had moved there, Peter Morton.   Peter was only 22, but his family were highly successful in the restaurant business.  He saw the similarity that everyone, British and American liked good hamburgers. The contrast was that English hamburgers were terrible. American hamburgers are good.  He decided to get into the family industry and borrowed $25,000 from his dad to open a hamburger restaurant called the “Great American Disaster” in London.

Peter Morton’s simple idea in 1970 was to import the idea of an American hamburger to England.

Initially, he thought he was just opening a good place for visiting Americans to get a hamburger. What he wound up doing was introducing the various joys of American food to England and Europe. He beat McDonald’s.

He had such success that within a year, he started another London restaurant. You may have heard of it… the first Hard Rock Cafe.

In 1995 a British company acquired the cafes owned by Morton for $410 million, but he  retained the Hard Rock Hotel and Casino in Las Vegas.

In 2006, Morton sold the Las Vegas Hard Rock Hotel for $770 million.

In the 1970s, I spotted a similarity in countries that had been involved in WWII.  America and Canada were big winner of was and saw their middle class explode with baby boomers, from the mid 1940s.  By the 1960s America and Canada’s middle class had accumulated enough wealth that stock market investing really took off.

At the beginning of the 1950s, there were only about 100 mutual funds, but as the middle class increased their wealth, the number of funds too off.  Hundreds of new funds were launched throughout the 1960s.

The same emergence in Europe, England and Japan took 20 years longer due to the rebuilding required after the war.

This meant that from the mid 1960s, a middle class rich enough to buy mutual funds was emerging globally.    This market had not experienced Fuller Brush Men… Encyclopedia sales people… door to door salesmen… car and insurance sales people who had perfected the art of sales.

This created an new huge industry of mutual funds growing around the world and when the middle class in any one country started buying shares via mutual funds, the stock market in that country became smoking hot.   Spotting this similarity between middle classes, their wealth and the emergence of mutual funds allowed me to correctly predict (and cash in on) emerging stock markets again and again.The similarities were of the middle class, the wisdom of investing in mutual funds and the relationship between mutual fund and stock market price growth.  The contrasts were in the income per capita of each country.  As income per capita rise enough to create a financially stable middle class, the contrast diminished.

Get in early before the contrast disappears.

The best results from the Neapolitan Effect come when on gets into a similarity just before the contrast begins to evaporate.

Look for Low Hanging Fruit

When contrasts are greatest, the competition is the least.  If one’s research is correct and the similarity is strong enough for the contrast to reduce or evaporate totally, the initial contrast reduction is a time of great opportunity.

Taking the case of Mt Dora real estate as an example, in 2010 there was a huge inventory of real estate available at really low prices.  Today (2021) I believe there is still a lot of room for prices to rise, but the huge profit of the past ten years is now gone.

I gained the same low hanging fruit boost in Ecuador, not in real estate but in the publishing and tour business. When Merri and I first visited Ecuador in 1985, there were very few expats there.  Economic matters went for dire to disaster and by 2000 the country was in a terrible state.  This created great opportunity for expats who had income outside of Ecuador.  There were many similarities between Ecuador and other expat havens such as Mexico, Costa Rica, Panama, the Dominican Republic and Belize, great weather, gentle friendly population, encouraging government, great food, low cost living..  The contrasts was in price.  Ecuador was really in expensive.

This was low hanging fruit for a publisher because no one else was writing about these benefits.  When I placed pay per click advertisements for my Ecuador reports and real estate tours, there was no competing ads.  For several years we offered the only good source of information to expats.  The first couple of thousand residents we brought in became our competition and after a decade, there were many good competitors.  We could still compete, but we spotted Mt Dora and the next similarity and moved on.

Ecuador is still a great placE, but the low hanging fruit for assisting expats moving to Ecuador had been picked for me.

For family reasons Merri and I chose to return from Ecuador to Smalltown USA, but both Ecuador offers excellent places to enjoy a good life while looking for  new opportunities in change.

Remember a success or look for one.  You have been involved in, or are surrounded by, or have seen some success at some time, somewhere. Learning to start thinking about every success you see.  Ask yourself, “Where is their a similarity and a contrast”?

Look for technology or infrastructure changes.  Usually it is a technology or infrastructure change that eliminates a contrast.

In Mt Dora, the change is in the highways leading into town.

Take Ashe County North Carolina as an example.

Ashe county has been a very isolated place.  The Creek, Cherokee, and Shawnee were the first Native Americans to inhabit present-day Ashe County and ruled this land almost until the 1800s.

This area houses a traditional, mountain community and was only accessible by dirt roads well into the 1800s. The railroad did not reach the county until in the 1900s and Ashe County Airport, didn’t come until nearly the 1980s.

When Merri and I arrived the only access into Jefferson and West Jefferson, the only real towns (2000+ population) was still via many miles of two lane roads.

Now wide four and six lane highways all the way to Boone, Wilksboro and the larger cities of Greensboro, Raleigh, Durham, Winston-Salem and Charlotte provide much faster access.

This big infrastructure shift  is accompanied but an important technology addition of  every residence in the county being connected to fiber optics. Homes and businesses can easily have up to a gigabyte of bandwidth at a very reasonable price.

This connectivity dramatically changes the utility of property in the county.  Now those who work from home and who want to be away from crowded cities and suburbs can live in this remote, low population area.  The pandemic has given this area a special boost.   The extended highway system and high connectivity means that millions who live in cities within a couple hours drive can work at home, but can easily be in the city when required.

Take Huntsville Alabama as a different example.  This is a mountain town with about 200,000 population and a metro area of about half a million.

NASA and related space companies are already there.

In 2019, the FBI started a $1 billion investment to build a second headquarters at the Redstone Arsenal in Huntsville.

Huntsville has also been announced as the preferred location of the U.S. Space Command. This will house a 1,400-person headquarters responsible for the nation’s military operations in outer space.

This is bringing huge additions to both infrastructure and technology in Huntsville.

You don’t have to be special.

One of Merri’s and my secret publishing and real estate investing weapons has been the fact that we are both so common.

Merri’s formative years were in Georgia and mine in Oregon.  There were many differences between these states.  Yet as baby boomers we have much in common.  We saw the same shows on TV, Howdy Doody, the Cisco Kid, Ed Sullivan, Gunsmoke. Roy Rogers, etc.  We read the same books in school such as the Bridge over San Luis Rey, the Red Badge of Courage.  We saw the same movies, heard the same radio, listened to the same Golden Oldies, read the same news, the same magazines, so it is not surprising that our tastes are pretty much the same.

The fact that we are NOT special gives us the ability to understand the desires of 60 million baby boomers who have that same background. This gives us confidence in real estate and our publishing business.  If we like a property, or feel a problem we feel needs to be written about, many others will  feel the same way.  This gives us good judgement (from a writing and investing point of view) when it comes to appeal.

Where do you belong?

We all belong to something or many things.  We are each a part of some cohort.  We all have experiences.  We have all been part of something, military, corporate life, small business, music, art, community.

This is the place where we start and look for change.  It’s our nature to fear and resist change but the single most dependable fact in all of history is that everything changes.  Look for and embrace change.

Here are several tips that can help find your special opportunities that expand the chances of a rich and fulfilling lifestyle.

#1: Expect the next boom even though you can’t imagine it right now.  Chicken Little has been around for  along time yet the sky has not fallen yet.   For centuries… man’s material life has improved through a series of busts and booms.  We could consider busts as opportunities to gain in the next boom.

History professor Yuval Noah Harari, said in his “21 Lessons for the 21st Century”: “The first step is to tone down the prophecies of doom, and switch from panic mode to bewilderment. Panic is a form of hubris. It comes from the smug feeling that I know exactly where the world is heading – down. Bewilderment is more humble, and therefore more clear-sighted. If you feel like running down the street crying ‘The apocalypse is upon us!’, try telling yourself ‘No, it’s not that. Truth is, I just don’t understand what’s going on in the world.”

#2: Expand your horizons.  If you move to a new place you’ll have new sights, smells, tastes, feelings and sounds.  This information will reform you and as a different, more experienced person you’ll have new opportunities to serve the world in new ways.  Expect to be able to have more because you can do more, because you will be more.

#3: Embrace change and  go try things.  All business, all politics, all scientific endeavor eventually comes down to trial and error.  This is perhaps most important of all.  The Western world mindset teaches us to project how we expect the future to be and if it is not… we are disappointed.  Everything really is in perfect order and we all have an important role to fill (and to be fulfilled).  If we follow the steps above and are open to new ideas… new possibilities and watch for opportunity that presents itself, this process we call life gives us extra depth, excitement, beauty, wonder and abundance.   All we have to do is be open, observant and obedient to our inner voice.

One wise man we lived and worked with in the Andes for several years used to take us for walks in the mountains along narrow paths.  As the trails narrowed… the cliffs became steep.

Then he would say… “Look ahead… close your eyes and walk. Trust the path. You know where to go. Your eyes blind your vision.“

So we would wind our way… along the cliffs… not seeing… but feeling where we were headed instead and knowing that the path was correct.

Following paths we cannot see.  That’s what we are all doing.  When we accept this fact and prepare by being Pruppies, our journeys into the unknown are more likely to lead us to happiness, fulfillment and also incredible  financial success.

Gary

(1) www.principles.com/the-changing-world-order/

(1)  www.orlandosentinel.com: Villages fastest growing us metro

(2) www.usnews.com: Central Florida cities among fastest growing in US

(3) www.floridatrend.com: Final link in Orlandos state road beltway