Keppler Value Update Spring 2023

by | Apr 26, 2023 | Archives

What a wonderful time we live in!

Every morning when I wake up on the right side of the grass, I give thanks and gratitude that I have been able to live through such incredible change.  There is so much exciting good news.

One good bit of information that arrived yesterday is that Keppler’s Quarterly analysis suggests that we’ll see an average growth in global stock markets of around 6% per annum for the next four to five years.

For the last 29 years, these projections have only missed the mark five times.  Four of these occasions the inaccuracy has only been for a month or two.   The only significant inaccuracy was from 2009 to 2014.

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Here are links to: Developed Market Quarterly Update

Emerging Market Quarterly Update

The recent crash of several significant banks has provided fuel for doom and gloom merchants and I have noticed an increase of calls from friends and readers asking if they should get their money out of banks etc.

Here is the reply I send:

There’s always been conspiracies and theories about things bad  (Y2K – Peak Oil – COVID introduced in purpose – White House running child sex slaves thru a pizza parlor – chem trails, etc.).  Usually they represent elements of some truth, but generally these stories just personalize and often overstate a general truth.

The reality has been That THERE HAS ALWAYS, for the last 70 years, been an erosion of fiat currency
purchasing power Due to human nature there is never a reversal.  Velocity of
the loss is all that changes.

I think in this case the general truth is that there is always a group in
charge of any hierarchy that will try to use distortions in a system to take
advantage.

Here’s my take on money and the global economic system in general.

Human’s are at the top of the food chain because they have a superior way to
communicate unlike and other species. We have the ability to agree on myths
(fabrics of agreement) to work together.

These myths allow us to create hierarchies so we can use specialization to
increase our productivity.

The ultimate myth in this communication is money.  Money is the lubrication
that greases the wheels of the hierarchies.

The people who rule the hierarchies and the money always take advantage to
take more of their fair share and dilute the purchasing power of those
elsewhere in the hierarchy.

In the past 70 years the dominant economic model has been capitalistic
democracy.  The #1 rule in this model is to GET AND STAY IN OFFICE.  The
typical way this is done is to appear to promise to give voters something for
nothing, ie Social Security, Medicare, food stamps, foreign aid, and all the
various government handouts are a few examples.

These promises are financed by borrowing money.  Over time more money then can
be repaid is borrowed so there must be a way of diminishing this debt other
than adding taxes (because this hampers the ability to stay in office).  The
typical way to eliminate this debt is via inflation.  For example if the
government borrowed 100 million dollars 30 years ago and a house cost $100,000
at that time and its time to pay back the 30 year loan, but it costs $200,000
for a house now, then the loan has really (in terms of purchasing power) been
cut in half.

This has always been and I suspect will always be. The tactics and techniques
will change but the basics will remain.

We are seeing extra strong inflation now because there are 70 years of give-
aways that have accumulated and there were huge government handouts around the
years 2000 and 2010, plus through the COVID pandemic and the breakdown of
economic cooperation between China and the West.  That and the low (or lack
of) interest rates on cash set the stage for what we are seeing now.

The huge polarization of political opinions (the myths) increases this trend as
more something for nothings are being offered to sway voters.

So yes there is a conspiracy of nature. Yes there will be conspiracies of groups of
people to take more than their fair share within the agreements of a
hierarchy.

To me it’s a waste of time trying to figure out exactly who, where, when, what
these conspiracies are.  We have other great and fun things to do!

I just accept that there are always many people above me in the hierarchy trying to rob

the purchasing power of my money.

To compensate for this I:

#1: Stay in business (doing something I love)  so I always ave something to
offer (and earn from)  within the system.

#2: Own inflating assets (in my case income producing real estate and ETFS in
good value stock markets).

#3: Keep adequate cash reserves so I never have to sell inflation assets when
markets are down.

#4: Live within my meas.

#5: Avoid debt!

#6: Meditate and live in healthy ways.

#7: Have an escape from madness (the farm) where maybe a fulfilling existence
can continue without too much interaction with failing hierarchies.

A bigger question should be, “Where to weight equity investments around the world”.

Keppler’s value equations suggest that equities in the Pacific will perform best.

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Keppler’s analysis shows that Good Value Developed Markets are selling for  less than half the price to book of US equities.  The good value developed markets are also paying a 4.01% average dividend yield versus 2.38% for the US index.

keppler 4-23

Good Value Emerging Markets are also selling for less than half of the World Index.

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The Pi value strategy is to hold equally weighted amounts of  country ETFs in good value developed and emerging markets (appx. 70% developed and 30% emerging for me).

We ignore the doom and gloom predictions.

We live in a very positive world.  So many incredibly wonderful events take place every day that they are not worth mentioning in the news.  This leaves a void filled by the worst negative drama enhanced by opinion and conjecture.  Bad news sells papers (and visits to websites) while financial news can be boring.

Take advantage of the fact that as the thundering herd panics and rushes from one potential cliff to another, it is usually wrong.

There is no cliff.  The signs created by panic are simply deviations that eventually lead back to the true path to profit best signposted  by good value.

Remember, “Objects in the Rear View Mirror May Appear Closer Than They Are” (Meatloaf).

I’m enormously grateful for the wonderful past I’ve been given, looking only ahead as there is incredible beauty there too and understanding the illusion of both.  Everything in the here and now is in perfect order.  We just gotta understand it!

Gary