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About Jim Walker

Jim Walker has been a member since November 8th 2010, and has created 594 posts from scratch.

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Why Aren’t You Investing Offshore?

Buy low and sell high is the age old mantra for investing. With all the hype about bringing jobs back home, reducing taxes and spending on infrastructure, the best deals in stocks today are not in the USA but in foreign markets. Why aren’t you investing offshore? USA Today says investors should look outside the U.S.

With U.S. stocks trading in overvalued territory after their long rally, investors are likely to reap better returns going forward in places like the eurozone, and in emerging markets like Brazil, and Central and Eastern Europe. These foreign markets now have characteristics that suggest future gains will outpace U.S. returns. Working in their favor? They’re selling at more affordable prices, and are home to economies on the upswing and companies poised to post stronger profit growth.

The United Nations World Investment Report for 2016 shows which countries investment money is flowing into and in what amounts. In 2015 money flowing into Asia and Europe each exceeded that flowing into North America.

This situation is a turnaround from foreign direct investment in the early days of the Great Recession when the USA was far and away the beneficiary of foreign investment.

Follow the money is age old advice for knowing why something is happening. In this case we would like to follow the money that goes into foreign direct investment. Foreign direct investment is done by folks with lots of money and the intention to stay a course and make a profit. If you are looking for offshore investment ideas, take a look at where foreign direct investment goes year after year after year.

The UN study is updated every year and provides a good picture of where the smart money is going.

You Don’t Need to Speak Japanese, German or Chinese

If you have avoided offshore investments because you don’t know how to communicate with stock brokers in Tokyo, Berlin or Shanghai forget that. The way for American investors to buy foreign stocks is via American Depositary Receipts. Investopedia explains.

An American depositary receipt (ADR) is a negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas, and holders of ADRs realize any dividends and capital gains in U.S. dollars, but dividend payments in euros are converted to U.S. dollars, net of conversion expenses and foreign taxes. ADRs are listed on either the NYSE, AMEX or Nasdaq but they are also sold OTC.

Your best bet is to buy only level 3 ADRs. The companies that sponsor these must adhere to reporting requirements similar to those of American stocks listed on the NASDAQ or NYSE. Thus you can invest offshore with the ability to examine fundamentals and find stocks with high intrinsic value and prospects for long term profits.

Why Aren’t You Investing Offshore? PPT

Watch Out for the Trump Economic Slump

Investors like predictability. Markets may be volatile but so long as they have a means of predicting where the market is going investors are generally happy. Such has been the case with the Trump bump, the stock rally based on the expectation of lower taxes, less regulation, repatriated corporate offshore cash and infrastructure spending. After all the USA has the same party in control of the White House and both houses of congress. Unfortunately, when the same party has all of the control they tend to fight among themselves such as happened in the Carter years when Jimmy Carter referred to congress as an albatross around his neck. The Republican controlled congress was going to repeal the Affordable Care Act, better known as Obama Care but they could not get the votes to do what they have been promising for seven years and what Trump promised to immediately upon assuming office. Now we need to watch out for the Trump economic slump as investors wonder if the Obama Care repeal debacle is a hint of things to come when congress addresses Trump’s economic agenda.

Trump Slump

The stock market rally after Trump election has been referred to as the Trump bump. Now Reuters writes about the Trump slump of the dollar and stock prices.

The dollar and share prices tumbled on Monday, as investors worried that U.S. President Donald Trump’s defeat over healthcare reform foreshadowed difficulties delivering other key campaign promises, in particular fiscal stimulus.

Trump’s failure to rally enough support from his own Republican party – which controls both houses of U.S. Congress – to repeal and replace Obamacare spurred a rush to safe haven assets such as gold XAU=, the Japanese yen JPY= and the Swiss franc CHF=.

Bets that pro-business policies promised by Trump would boost growth and consumer price rises after years of very low inflation, leading to a faster pace of U.S. interest rate rises, took stocks to record highs earlier this year and the dollar to its highest levels in 14 years.

But those “reflation trades” have since come under selling pressure as Trump has concentrated his efforts on areas other than economic reform, and that selling intensified after the healthcare bill’s failure late on Friday.

The markets have suddenly become much more risk adverse and that could intensify the downward trend so watch out for the Trump slump as you consider your portfolio.

What to Sell ASAP

CNBC looks ahead to congress considering a corporate tax cut and expects an impressive market correction if congress and the president do not deliver.

The market is already pricing in a corporate tax cut, which means there could be trouble if those cuts don’t get done, expert Robert Luna told CNBC on Thursday.

President Donald Trump has promised to slash the corporate rate from 35 percent to 15 percent, while the House Republican plan calls for a 20 percent corporate rate.

“If that’s something that doesn’t get passed, I think watch out below. A 10 to 15 percent correction is definitely something we’re preparing our clients for,” the chief investment officer for Surevest Wealth Management said in an interview with “Closing Bell.”

What goes up can certainly come down. Bank stocks have had a nice run up and may suffer as investors anticipate a Trump economic slump. Health care stocks may be able to breathe easier as any further adjustment of the Affordable Care Act will require the sort of due diligence that comes from both parties negotiating seriously for an optimal solution. Gold mining stocks anyone?

Watch Out for the Trump Economic Slump PPT

What Happened to Trump’s Economic Agenda?

The Trump bump stock market rally is fizzling out. The market is asking what happened to Trump’s economic agenda as the new prez and House Speak Ryan promote their version of an Obama Care replacement. CNBC says that there will be a Trump tantrum looms on Wall Street if Trump’s first legislative push fails.

The Trump Trade could start looking more like a Trump Tantrum if the new U.S. administration’s health-care bill stalls in Congress, prompting worries on Wall Street about tax cuts and other measures aimed at promoting economic growth.

Investors are dialing back hopes that U.S. President Donald Trump will swiftly enact his agenda, with a Thursday vote on a health-care bill a litmus test which could give stock investors another reason to sell.

“If the vote doesn’t pass, or is postponed, it will cast a lot of doubt on the Trump trades,” said the influential bond investor Jeffrey Gundlach, chief executive at DoubleLine Capital.

While health care stocks will be affected by how the health care bill turns out investors are more interested in the lack of progress on economic issues. After all the reason for the Trump post-election rally is the promise of tax cuts, repatriated offshore corporate cash and money poured into infrastructure repair. And if Trump and the Republicans who control congress cannot deliver on their first promise to repeal and replace the Affordable Care Act how will they do on the economic issues?

Is the Market Overpriced?

The concern about Trump’s economic agenda is that investors are pricing stocks based on perfect performance of the new prez and his Republicans. If these guys don’t deliver how painful will it be? That depends on how overpriced the market is. Forbes asks is the market expensive? They offer two sides of the argument.

“Frothy.” “Pricey.” “Stretched.” These are among the adjectives used to describe the stock market-and they’re not even the most ominous.

Nobel Laureate Robert Shiller recently told Bloomberg he believes the market is “way overpriced” and that the current elevated CAPE ratio of 29 is a “bad sign.” John Hussman, president of the mutual fund Hussan Investment Trust and a Ph.D. in economics from Stanford University, argues that the market may be due for a hefty correction. In Fortune this month, he was quoted as saying that the current market environment is in “the most broadly overvalued moment in market history” and that investors shouldn’t expect much in the way of equity returns.

Interestingly Warren Buffett disagrees.

Warren Buffett not only believes that the U.S. stock market is a good bet, he declared in a recent CNBC interview, “If there’s a game it’s very good to be in for the rest of your life, the idea to stay out of it because you think you know when to enter it-is a terrible mistake.” Buffett is steadfastly confident in our country’s economy and its ability to overcome adversity.

How is it that Buffett who famously says to buy when everyone else is leaving the market and sell when everyone else is buying is jumping into stocks so heavily right now? It has to do with the time frame. Buffett gets into stocks for the very long haul. Recently we asked how long does it take to make an investment long term. Ten years and longer is the answer. So Buffett trusts American business and the stock market and says that staying out is mistake. Nevertheless he is a firm believer in intrinsic stock value. What will happen if the market corrects on the basis of Trump’s failure to deliver on his economic agenda? Buffett will probably buy more stocks.

What Happened to Trump’s Economic Agenda? PPT

Are Latin American Investments Going to Soar?

Despite continuing economic concerns in Latin America their stocks markets are doing well. Partly this is because of the commodity slump the reduced values in all nations that export raw materials. And, of course, there was the impeachment of Brazil’s president and Venezuela’s Chavez/Maduro meltdown. Nevertheless markets are doing well down south. CNBC offers three reasons why Latin American stocks will continue to soar.

If you just pay attention to the headlines, it looks as if Latin America has taken a turn for the worse. Data revealed last week showed that Brazil GDP contracted by 3.6 percent in 2016, prolonging its worst-ever recession, Mexico’s peso has been sunk by talks of U.S.-built walls and renegotiated trade deals, and Venezuela is nearing a total collapse.

However, stock markets tell a different story. In 2016 several Latin American markets began soaring, reversing years of negative returns. The MSCI Emerging Markets Latin America was up 21 percent, the MSCI Brazil climbed by 61 percent – it was the best-performing emerging market country last year – MSCI Peru rose by 53 percent, and others experienced gains as well.

Why is this happening? Here are the three reasons cited by CNBC.

New governments that are better run and pro-business

The impeachment of Dilma Rousseff was not an isolated event. Neither were the investigations into murder and corruption in Argentina. Many South American countries labored for years under corrupt and badly managed regimes and their removal has shown the light of day on corresponding economies.

Recovery of South American currencies

This is a result of foreign direct investment in these countries. More dollars are used to purchase the currencies of Brazil or Argentina and this drives up the value of those currencies.

Good and cheap deals remain

The markets in Latin America are still underpriced if you apply fundamental analysis and assess intrinsic stock value.

Currently, the S&P 500 is trading at 25 times earnings, while Latin America is trading at 14.3 times earnings, according to data from Credit Suisse. While that’s higher than it has been in the past, there are still plenty of good deals in the region, says Zamorano.

On a country-by-country basis, Peru and Colombia look cheap, trading at 12.3 and 11.9 times 2017 earnings, respectively. Brazil is slightly more expensive, trading at around 13.2 times earnings, but with an expectation of a turnaround – the country’s central bank is predicting 2.8 percent growth in 2018 – multiples will likely expand from here, says BlackRock’s Landers.

If you are not a fluent Spanish or Portuguese speaker you can still invest in Latin American stock by way of American Depositary Receipts. You can find lists of Latin American ADRs by country at Emerging Market Skeptic.

Caribbean ADRs

Bahamas ADRs
Bermuda ADRs
Cayman Islands ADRs
Puerto Rico Stocks

Central America ADRs

Mexico ADRs
Panama ADRs

South America ADRs

Argentina ADRs
Bolivia ADRs
Brazil ADRs
Chile ADRs
Colombia ADRs
Ecuador ADRs
Peru ADRs
Venezuela ADRs

Are Latin American Investments Going to Soar? PPT

How to Profit from Higher Interest Rates

The Federal Reserve is expected to raise interest rates again. The New York Times writes that the question is not why raise rates but why not.

The unemployment rate, one of the gauges the Fed watches most closely, fell to 4.7 percent in February, a healthy level by historical standards. Inflation, the other gauge, finally appears to be reviving. Prices rose 1.9 percent over the 12 months ending in January, close to the Fed’s 2 percent annual target.

The Fed continues to hold its benchmark interest rate at a level intended to stimulate economic growth by encouraging borrowing and taking risks. It sits in a range from 0.5 percent to 0.75 percent.

Everyone wants to expand the economy. The Trump market rally is based on the expectation of lower taxes, fewer regulations, repatriation of offshore corporate cash and infrastructure spending.  But is that what it takes to make the economy hum?

The government estimates that the economy grew just 1.6 percent in 2016, compared with 2.6 percent in 2015. Moreover, private economic forecasters don’t see signs of an acceleration in the first quarter of 2017.

But the most important factor is the slow pace of productivity growth.

There are only two ways to expand an economy: add workers, or get more out of every worker. The domestic work force is growing slowly, and lately, so is productivity. Low interest rates can’t fix either problem.

Thus the Fed will likely deal with inflation by raising rates at a measured pace and leave economic stimulus to the administration and congress. And how do you profit from higher interest rates?

How to Profit As Interest Rates Go Up

The Motley Fool has a few suggestion of how to profit from rising interest rates.

Create a Bond Ladder
This is not a good time to lock money into long-term fixed-income instruments such as Treasury bonds. Build a portfolio of short-term notes that will periodically come due, perhaps a month after each meeting of the Federal Reserve.

Buy Treasury Inflation Protected Securities
These special bonds are backed by the full faith and credit of the U.S. government. They pay a fixed rate of interest twice each year, and the principal in them is also adjusted for on a semiannual basis. The government makes this adjustment based upon changes in the Consumer Price Index (CPI), which is widely considered the best indicator of inflation.

Invest in Banks and Financial Service Companies
The financial industry always profits when interest rates start to rise, as this means they can charge higher interest rates on loans and other financial products.

Take Capital Losses from Bonds and Bond Funds
Bond prices will start to fall in the secondary market when interest rates start to rise. This may offer a good opportunity to realize some capital losses in your fixed-income portfolio. These losses can be netted against any taxable capital gains that you realize during the year and also against other forms of income within certain limits, which will lower your overall tax bill.

To the extent that you expect rates to go up rapidly you will want to sit on cash or cash equivalents as longer term investments like solid dividend stocks come down in price to where they are a good deal.

How to Profit from Higher Interest Rates PPT


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