Crash Proof 2.0

Stocks – invest in conservative stocks with high dividend yields.


Foreign Stock Portfolio

Step One

Cash account – have it be liquid. Buy a no-load mutual fund invested in foreign money market instruments, such as the Merk Hard Currency Fund. Convertible to cash in a week or so.

Foreign bank account – favorites are Switzerland, the Cayman Islands, Liechtenstein, Panama, Austria, and Luxembourg.

Step Two

Avoid emerging, developing markets and developed markets where there is any question of political risk. In NA Canada is the best.

· Industrial sectors

· Resource Block – Canada, Australia, New Zealand, South Africa, and Scandanavian countries like Norway.

· Producing/saving countries (real growth engines) – Hong Kong and Singapore, followed by Japan. Some money, but not as much in Thailand and Philippines.

Step Three

· Electric, oil, and gas utilities constant demand, can raise prices, and pay high dividends.

· Real Estate is best purchased in a property trust, and mostly commercial, i.e. industrial office buildings and shopping centers. You don’t actually OWN the real estate, but get all the benefits of it and managed professionally (no collecting rent/getting insurance).

· Commodity and natural resources. As dollar collapses and Asians need different products, namely products that are more resource intensive then we’ll see a big increase in raw material prices. Great exposure with ‘exceptional’ dividends being paid by companies in that sector. Many Canadian companies pay dividends of 12-15%. Coal producers are around 11% and companies mining zing, nickel, and lead are paying 7-10% dividends.

Step Four

Having decided sectors to be in, now we aim for individual stocks and we focus on safety and yield, then after this narrows the results we focus on. Don’t/won’t buy companies exposed to US. Those candidates will be good to buy after meltdown due to falling prices due to lost export sales. Key is exposure to foreign currency through companies that generate their revenues in their own local markets (i.e. a Japanese retailer), not by exporting to the United States. This will allow currency profits while avoiding losses, and perhaps even seeing gains, in the underlying share prices.. Then you’d use the appreciated foreign currencies to buy the exporters’ stock when the time is ripe, which would be after they take their lumps from the collapsed American market and their shares are cheap. Plus the exporters will gain lots by asian’s replacing poor american’s in the goods that are purchased.

Ratios to be familiar with:

Ratios that measure Corporate Liquidity

Current Ratio – divides current assets by current liabilities. A conservative ratio of 2.

Quick Ratio – refines the current ratio by excluding inventory. Divides current liabilities into cash and equivalents plus accounts receivable. Ratio should be 1.

Ratios that measure Profitability

Operating profit margin – net operating profits divided by net sales.

Net profit margin – dividing net income by net sales, which measures management’s overall efficiency.

Return on equity – divide net income by stockholder’s equity. The higher the better as long as it doesn’t invite competition.

Ratios that measure Leverage

Debt to total assets – total liabilities are divided by total assets to measure the proportion of assets financed with debt as opposed to equity.

Long-term debt to total capitalization – total long-term debt and divides it by total long-term debt + stockholder’s equity.

Debt to equity (debt ratio) – divides total liabilities by total stockholders’ equity. High is bad, and low is good.

Fixed-charge coverage – earnings before taxes and interest charges divided by interest charges plus lease payments

Ratios that measure stock values:

Price to earnings (p/e) – market price of a share divided by the earnings per share, computed using the previous 12 months or less commonly estimated 12 month earnings.

Price to book value – market price of a share divided by the book value per share, exluding intangible assets. Low ratio might be a sign of value and warrant closer analysis.

Price to sales – market price per share divided by sales and revenues per share.

Dividend payout – dividing dividends per common share by earnings per common share, we learn what percentage of its earnings a company pays out in dividends.

Dividend yield – company’s annual dividend as a percentage of its market price. Take company’s most recently reported quarterly dividend and annualizing it, that is, multiplying it by four, then dividing by the market price per share.

Altogether you should be getting a dividend yield of around 8 percent, with appreciating stock prices, which shouldn’t need to be sold.