The Most Profitable Business
The Most Profitable Business
in Existence
By Tom Dyson
April 7, 2008
The first thing I noticed about the bank was the salsa music. They had set up a guitar amplifier in the corner of the parking lot. The music was so loud, pebbles jumped off the asphalt in front of the speaker.
A waterproof advertising banner hung from the bank’s roof. “WE BUY GOLD,” it proclaimed in thick black letters. A neon sign in the door read “OPEN.” Six cars were parked outside the store. One of them was a police car. Three bicycles leaned neatly against the front wall.
I walked into the bank. It was busy. Three police officers hunched over one of the cabinets. They were studying one of the new handheld videogame consoles. At another counter, an assistant took a gold chain from a display case and handed it to a customer. A couple at the back of the bank browsed stereo systems.
“Can I help you?” said another assistant. He told me he’d lend me money for one month. I asked him how much interest he’d charge me.
“Twenty percent,” he answered…
The standard interest rate charged in a “usury bank,” like this one, is 20% per month. That’s 240% interest per year.
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The dictionary defines “usury” as the act of charging exorbitant interest rates. Usury banks provide financial services to people who have no bank accounts or bad credit histories. They’re like a financial one-stop-shop for people without credit. For the past couple of weeks, I’ve been describing my research on pawnbrokers, which is one kind of usury bank. But I discovered the industry – and the opportunity for investors – is much larger…
Payday Lenders: A payday loan is an advance to cover expenses until the borrower’s next paycheck. To secure the loan, customers must show pay stubs to prove they have a steady income. Then they must write a personal check to the usury bank for the full amount of the loan plus the fees. The usury bank will lend customers anywhere from $100 to $1,000. It will charge 15% interest on a two-week loan. That’s a 390% annualized interest rate. If the customer does not repay the loan, the usury bank cashes the customer’s personal check. Tax-refund loans work the same way.
Check Cashing, Wire Transfers, Bill Pay, Currency Exchange: These businesses generate fees. Charges can reach 17% of total funds.
Buy Here/Pay Here Auto Dealerships: The customer buys a used car with a six-month warranty. He can drive the car off the lot with as little as $400 down. Then he must make a series of weekly payments until he’s paid the debt. The payments include a 16% interest rate. If he defaults on a payment, the BHPH dealership reclaims the car and keeps whatever payments the customer made. J.D. Byrider is the leading buy here/pay here auto dealer.
Rent-To-Own: Rent-to-own stores sell new furniture and household appliances. The customer buys the merchandise with a small down payment and pays the balance with a weekly high-interest finance plan until he owns the merchandise. Rent-A-Center is the leading rent-to-own specialist in America.
Readers of my International Strategist newsletter just learned about a usury bank chain that has 475 locations. Management predicts earnings will rise 20% this year. With these formidable cash flows coming our way, I calculate this stock will rise 80% by the end of the year… and 150% by 2010.
You see, both investors and banks, lending money is the easiest way to get rich. That’s the way it’s been for thousands of years. Just look how much money the big Wall Street banks make. Or the credit-card companies. They have some of the highest profit margins of any business in America.
Usury banks have profit margins 10 times bigger than a credit-card issuer or Wall Street bank. A credit-card company might receive 20% interest on its loan portfolio. Usury banks have products that earn more than 1,000% annual interest. Imagine lending $100 and receiving $1,000 in interest at the end of the year plus your money back.
Not only are usury banks incredibly profitable… the market is growing fast. Usury banks have only been around since 1998, and the concept is still in its growth phase. That’s why most investors haven’t heard of usury banks, and why I think we have a great opportunity right now.
The market has dumped shares of usury banks along with every other bank. Stock prices are down, but business is booming. And the market is turning around on “financials.” I think usury banks are a great bet.
Good investing,
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How to Buy International Stocks
Like a Local
By Tom Dyson
April 28, 2008
I just had a long chat with Howard Goldstein and Dave Sjuggerud. Dave is Steve’s dad. He and his business partner, Howard, are international stockbrokers. They’ve dealt international stocks for more than 17 years.
I called them up because a reader e-mailed me yesterday… He wanted to buy a stock I recommended last month in my income advisory, The 12% Letter. The stock has a large market capitalization, and there’s plenty of liquidity… but it trades in Canada.
The reader told me E*Trade refused to buy shares for him because “the stock is only open to Canadian residents.”
I called Dave and Howard because I wanted to find out the cheapest way to buy international stocks like this one. Today, there are more opportunities to make money outside the U.S. than inside. So to be successful, an investor must know how to buy international stocks.
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The stock my reader wants to buy, for example, pays a 12% dividend, and its business situation makes for a compelling investment opportunity. I want all my readers to buy this stock.
Here’s what I learned:
First of all, E*Trade misinformed my reader. Some Canadian stocks are unavailable to U.S. investors. Limited partnerships are one example. But this stock is not one of those. U.S. investors may buy this stock.
So the problem arose because discount brokers, like E*Trade, are lazy. They don’t want to buy international stocks. It’s hard work for them. And the commissions are lower. I’ve had this problem with Fidelity before, too. Fidelity wouldn’t purchase a Toronto stock for me last year.
Because they are lazy, the discount brokers either tell you the stock is unavailable or they force you to buy the pink sheet listing of the stock instead.
The pink sheets make up a sort of mirror market. It’s like the difference between Sotheby’s and eBay. It’s not an exchange. It’s more like a bulletin board where brokers offer securities for sale. Stockbrokers call this market “over-the-counter.”
If you search for international stocks in Yahoo, it’ll often bring up a pink sheet listing. You can spot them by their symbols, which have five letters and often end in the letter “Y” like SGAPY for SingTel or BAIRY for British Airways. They also have the suffix .PK or .OB.
Pink sheet dealers give bad deals. Take the stock my reader asked about. Howard could buy and sell this stock with a 2-cent bid-ask spread in Toronto. (A bid-ask spread is the difference between the price a seller will accept and the price a buyer will pay. The narrower the bid-ask spread, the closer you’re paying to a fair market price.) We called up a quote from the pink sheet market. They quoted us a 40-cent bid-ask spread.
If you must use the pink sheets to buy a stock, look up your stock’s price in the local market, convert it to dollars, and then place a limit order a couple of pennies above that price in the pink sheet market.
But I just don’t think you should buy pink sheet stocks. And in the future, when I recommend an international stock in one of my reports, I’m going to advise you not to buy the pink sheet, even if your broker won’t get the stock on the true international exchange.
Instead, I recommend you use one of three international stockbrokers our readers have worked with before. I don’t receive any compensation for mentioning these guys, nor does Stansberry Research (DailyWealth’s publisher). I recommend them because I know them and I trust them. They have excellent reputations in the industry. And they’ll give you fantastic service, too… You can’t buy international stocks cheaper anywhere else.
Take an Australian stock for example. The Australian market trades during the night. When the U.S. market is open, the Australian market is closed. But a pink sheet dealer will give you a quote on an Australian stock during normal U.S. market hours. How can he do this? He’ll make you pay a wide spread to cover his risk. His risk is that the Australian stock moves sharply when the market opens the next day.
But when you use Howard and Dave, they’ll keep your order open until the international market opens, and buy the stock direct… even if it means they have to wait until midnight to fill your order.
“Tell your readers to call us after they’ve called all their other brokers,” said Howard. “Why? Because I know we’ll give them the best deal.”
Howard says he pays spreads on shares in Australia, Hong Kong, and China that are so small, you can’t even calculate them.
It’s easy to do business with these guys, too. They can have your account open in about 24 hours… and loaded with your favorite international shares… at the same prices the local brokers in those foreign countries pay.
You can call Howard at 1-877-539-1004 or e-mail Hgoldstein@lasallest.com. Our readers have also done well with Rick Rule, who specializes in commodity stocks (1-800-477-7853, www.gril.net) and Jeff Winn (1-800-432-4402, Jwinn@iaac.com).
The discount brokers have their place… but for the cheapest trades on international stocks, you should work with brokers who know what they’re doing and can provide you with the best prices. Investors who know how to buy international stocks have many more opportunities open to them. Make sure you’re not missing out.
Good investing,
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How to Make More Money in Stocks
Than Anyone You Know
By Dr. Steve Sjuggerud
February 20, 2008
“Didn’t you hear, Steve? Consumer confidence is at its lowest level in 16 years. We’re never gonna get out of this thing…”
I love it! When I heard someone say that this week, I KNEW that we were getting closer to a bottom in stocks.
Now, you may not believe me if you follow the evening news: “Consumer confidence plunged, causing the stock market to fall…” It sounds plausible. But don’t pay any attention to that. Here’s what you need to know…
The worse consumer confidence is now, chances are, the more money you’ll make in the stock market in the coming years. And the higher consumer confidence is, the LESS money you’ll make in stocks in the coming years…
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The stock market has peaked twice in the last two generations… in the late 1960s and the late 1990s. Consumer confidence has also peaked twice in the last two generations. Guess when… The exact same times – the late 1960s and the late 1990s.
Similarly, consumer confidence bottomed out three times: In early 1975, in 1980, and in 1990. The stock market took its cues again… It bottomed around those times in all three cases.
The most recent two times we’ve seen very low consumer confidence – the early 1980s and the early 1990s – were absolutely incredible times to buy stocks… The best two times to buy stocks in our generation!
Take a look:
When People Are Worried, Buy Stocks!
For some reason, people don’t want to believe this. But you can see it in the chart. The relationship is not perfect, of course. Measuring human emotion is hardly an exact science. From my experience, consumer confidence as an indicator works like this:
When consumer confidence gets hot, it’s a warning sign for the markets… It doesn’t mean “Sell now!” It just means “Be wary,” because we’re likely closer to the end than the beginning of a big run higher.
Similarly when consumer confidence is low, as it is now, it doesn’t mean “Buy with all you’ve got.” It means “Get ready,” because we could be getting close to the beginning of a big run higher.
As the chart shows, it’s hard to tell when you’re at the bottom based on consumer confidence data alone. Even worse, the data bounces around a bit.
So I look at consumer confidence numbers in the very big picture… Are we closer to a major peak (like the late 1960s and the late 1990s)? Or are we closer to a major low (like the early 1980s)?
Right now, it looks like we’re closer to a major low in stocks than a major peak. But the thing is, we might not be at that low yet… So don’t go out and rush into stocks based on this data alone.
The bigger point I want you to understand is this: In order to make more money in stocks than anyone you know, and in order to catch the major trends, you’ve got to be willing to buy stocks when nobody else is willing to… and you’ve got to be willing to sell when everyone else thinks nothing can go wrong.
Consumer confidence indexes are a rough way of gauging this. They’re not perfect. But right now, they’re telling us that people are more scared than they’ve been in 16 years…
If you’d bought stocks when people were this scared 16 years ago (as we came out of the last recession), you’d have done very well…
So remember, you might hear on the news that “stocks were down because consumer confidence was down…” Now you know the real story… When consumer confidence is as low as it is now, you’re actually closer to a rally than a plunge.
Good investing,
