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International Investments



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international investment philosophy

International Investments - Beat the Lies
By Gary Scott

international investment philosophy

* International Investments – Beat the Lies

* Natural Health Tip – The Ways of Bach

* Ecuador Real Estate – Happiness

Recent messages have looked at how inflation is a lie created by governments. There used to be a saying in Russia that “the people came to their jobs and pretended to work, and then the government pretended to pay them.” Inflation is created when too many take who do not give in return. Inflation is a result of natural order being violated by man-made regulations. Lies are required to cover up the fact that whatever causes inflation is wrong.

As inflation grows so too do the lies. This is why a recent article in the New York Times seems ominous to me.

The article is entitled, “Audit Finds U.S. Hid Actual Cost of Iraq Projects” and says: “The State Department agency in charge of $1.4 billion in reconstruction money in Iraq used an accounting shell game to hide ballooning cost overruns on its projects there and knowingly withheld information on schedule delays from Congress, a federal audit released late Friday has found. The agency hid construction overruns by listing them as overhead or administrative costs, according to the audit, written by the Special Inspector General for Iraq Reconstruction, an independent office that reports to Congress, the Pentagon and the State Department.”

You can read the entire article at nytimes.com/2006/07/30/world/middleeast/

Prices rise and we get less and less from our government. What can we do? Inflation turns everything upside down. Knowing this, we can alter the way we invest. What is usually safe (such as government bonds) becomes high risk. Investments that are normally considered risky (highly leveraged real estate or emerging market equities) become the better bet.

The US is not alone in its economic problems. The rest of the economic world is no bed of roses. A recent article in London’s Telegraph shows that Britons for example are piling up huge amounts of consumer debt.

The article says: “The official inflation rate of 2.5pc is the highest for eight years, but it hardly reflects most people's perception of their rising living costs. In the past year alone, average gas bills are up 35.8pc, electricity 24.7pc, petrol and oil 12pc, water 5.5pc, council tax 4.7pc and rail fares 4pc.”

Industrialized economies are drowning in their abundance. Emerging markets are where the energy and growth exists.

A recent message (See spottingtrends.com/stock_markets/stock_markets_24.htm) showed that the emerging equity markets that offer the value now are Brazil, China , Korea, Malaysia, the Philippines, Taiwan, Thailand and Turkey at equal weights.

It is not surprising to see five of the eight top value emerging markets in the Far East. The Asian Emerging Market Portfolio we track in our MultiCurrency Sandwich service has risen 68% since October despite the fact that the last quarter was one of the worst for emerging markets in the past decade!

Double your profit potential with the MultiCurrency Sandwich. Learn how to Asian leverage investments in top value markets. See http://www.garyscott.com/catalog/bl/index.htm

One way to profit during inflation is to invest in these high value, dynamic emerging markets. We reviewed why Turkish equities can make sense now at spottingtrends.com/investment/powerful_investment_trends_35.htm

Now the potential in Philippine equities may be worth exploring. The Philippine economy has some good, upside news at this time.

A July 29 Bloomberg are article says: “The Philippine peso had a second weekly gain on speculation foreign investors will accelerate purchases of the nation's stocks as the key index had its biggest five-day advance since May.

“Demand for the currency increased on optimism the government's successful overseas bond sales this week will boost investor demand for local assets. The peso also strengthened this week as Filipinos working overseas sent home money, which accounts for about a 10th of the nation's economy.”

You can read the entire article at bloomberg.com/apps/news?pid=20601080&sid=aYA5Q0XvoSBg&refer=asia

How can one invest in this market? US investors may have a hard time. I have not been able to find a single pure Philippine Equity Fund registered with the SEC. There appears to have been one such closed end fund, First Philippine Fund traded on the NYSE code FPF in the early 90s but I cannot find this listing at all now. I did see an article in 1991 when the fund was launched on the Big Board at $10 a share. A 1992 article told about its plunging and showed a price of $2.60 per share. This must be a volatile market! The managers, Clemente Asset Management, make no mention on their website.

One way to deal with this problem is to find Far East or Emerging Market Funds that have a higher than normal percentage of Philippine investments. I have not spotted this yet either.

Another way to invest in the Philippines is to see which Filipino shares that Far East and Emerging Market funds are investing in.

I checked both the Jyske Invest Far East equity and Emerging Equity funds. Neither have any Filipino holdings.

I took a look at the State Street Global Advantage Emerging Markets Fund (which non US investors can buy). This fund currently has 8.4% of its portfolio in the Philippines. One of its top ten holdings is Philippine Long Distance Telephone.

The New York Stock Exchange list ADRs for the common shares and says at their website.

“Philippine Long Distance Telephone Company (PLDT) is a telecommunications service provider in the Philippines. The Company operates through three principal business groups: wireless, fixed line, and information and communications technology (ICT). Through these business groups, PLDT offers a range of telecom services.”

You can read more and see share details at http://www.nyse.com/about/listed/phi.html. The company’s website is http://www.pldt.com.ph/

Since 2003 the ADR price has risen from $5 a share to $39.68. At that prices as of July 28, 2006 these ADRs were up 32.7% in the last year, 11.7% in the last month and 8.1% in the last week. See a chart at http://www.wrightanalytics.com/corpinfo.php?page=718252604

Go to www.NYSE.com - In the search bar at the upper right, type in “Philippines” and you can get tons of data.

Inflation is a terrible thing for those who are caught on fixed income or salaries that cannot rise. For those prepared, though, this is one of the best times to make money, for investors who are willing to turn their portfolios upside down.

Natural Health Tip – The Ways of Bach. Bach is More than Sweet Music. Inflation creates many emergencies. See tomorrow’s message for a natural lifesavings tips and cures.

Ecuador Real Estate – Happiness. See yesterday’s message at successguidelines.com/ecuador_real_estate_97.htm

Until next message, have good international investing!

Gary

P.S. Join Merri, Thomas Fischer of Jyske Bank and me at our next International Business and Investing Made EZ course in North Carolina. Review where to invest and do business now and learn which markets and currencies may be strong in the year ahead. Meet Steve Marchant, our man in Ecuador, and learn about products to export. Go to http://www.garyscott.com/nccourse/index.htm

One way to beat inflation is to live where prices are low. There are some nice houses in Ecuador. Here is one we were offered 4 years ago and are still trying to buy!. Property taxes are low. See why below.

Property taxes in Ecuador are really low as you can see from this reply that Steve Marchant, our man in Ecuador, wrote to Bob in Colorado.

Bob wrote: “Gary, yesterday you gave the price as $27/sq ft for a finished home in Ecuador. I am wondering what property taxes would be. How are they determined? Are there properties for sale in the Otavalo area that you know of? Thank you. Bob in Colorado.”

Steve replied: “Hi Bob, I don't really have a handle on property taxes at this moment but I have just had a conversation with Franklin, one of our workers, who has his own house in Ibarra, a city near to Cotacachi. This is what I have discovered. Taxes vary from one municipality to others. Commercial properties pay more. The material of construction influences the price; properties made from earth pay less than those made of concrete. There is a tax for land and a tax for the property on the land. Notwithstanding all the variables, as Gary suggested, by western terms the taxes are negligible. Franklin has a house of between 900 and 1000 square feet and he pays $3.50 PER YEAR. See what I mean? All the best. Steve Marchant”

Learn more about our August 31-September 4 or our October 12-16 Super Thinking + Spanish courses in Ecuador. These are courses that help you learn how to learn. You find new ways to absorb, retain and recall information much more effectively. You improve your health and add Spanish fluency as bonuses! See details at www.garyscott.com/catalog

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international investment philosophy
August, 2006
international investment philosophy

 

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