Best Emerging Market Currencies


In our last two messages we have looked at the major currencies and potential currency instability. Now let's look at emerging currencies where we can earn up to 26.04% on real short term deposits!

We use the same system to analysis emerging market rates of return. We deduct inflation from current short term rates. You can see from the emerging market chart below that the emerging currencies offering the best potential now are Argentina (offering a real return after inflation of 26.04%), Poland offering 10% real return and Turkey 9.9%

Emerging Market Currencies


Country Yield Inflation Appx. Real Current Foreign
Return Acct Reserves

China NA 1.4% - 20.5 180
Hong Kong 3.70% -1.5% 5.2% 8.8 114
India 7.04% 2.5% 4.5% -5.4 40
Indonesia 17.23% 12.1% 5.1% 25.2 22
Malaysia 3.30% 1.5% 1.8% 15.7 25
Philippine 10.56% 6.6% 4.0% 9.1 12
Singapore 2.31% 1.9% 1.4% 21.8 76
South Korea 5.33% 5.2% 0.1% 14.6 94
Taiwan 3.90% -0.2% 4.1% 12.0 110
Thailand 3.25% 2.3% 1.0% 6.6 31
Argentina 26.01% -0.3% 26.04% -9.0 20
Brazil 18.30% 8.1% 10.1% -27.1 35
Chile 3.57% 3.6% 0 -1.4 14
Colombia 12.77% 7.9% 4.8% -0.7 9
Mexico 9.73% 6.6% 3.1% -17.8 40
Peru 8.26% 2.5% 5.7% -1.7 8
Venezuela 17.23% 12.5% 4.8% 12.5 10
Egypt 9.04% 2.2% 6.8% -0.8 12
Israel 4.68% 0.7% 4.0% -1.4 23
South Africa 9.78% 6.3% 3.5% 0.1 6
Turkey 66.0% 56.1% 9.9% -6.6 19
Czech Rep 5.29% 5.5% -0.03% -2.7 12
Hungary 11.88% 10.5% 1.3% -1.8 11
Poland 16.12% 6.2% 10.0% -9.0 27
Russia 25.00% 23.7% 1.3% 45.9 29

Now don't just go jumping in. All these analyses, major and emerging markets, have enormous potential for inaccuracy. The figures themselves may be inaccurate (especially in emerging markets). There may be political and economic conditions distorting the figures. The figures may quickly change (which often happens).

In fact the best way for good returns is to spot and invest in countries that are in trouble, (such as Argentina and Turkey) and lock in high returns, just before that economy turns around. I have picked up huge earnings this way in Mexico twice, in South Korea and Turkey once.

For example a few years ago the Turkish economy was in such a mess that a British Petroleum AAA rated bond offered 100% yield (based on the expectation of a falling Turkish lira). The economy stabilized and the devaluation was not serious. Those holding that bond picked up incredible yields, especially if they were leveraged the investment with 2% Japanese loans. Returns were as high as 400%!

There were excellent short term returns a couple years ago when the S. Korean won devalued versus the yen. Yen loans were available at 2% and won CDs offered 14% yield. When the won then appreciated versus the yen a 40% + profit was made in months.

Spotting the turning points are trickery though. That is why we are looking at the Argentine position right now at our Inspired Investing course. We have Argentine banker Steve Rosberg here looking at whether or not Argentina bonds now make sense. I'll report our findings to you shortly.

Keep in mind that speculations in currencies involve huge risks. This is why I highly recommend three phase investing to control this risk and I also suggest that you weave your own business into your investing whenever you can.

I explain how to do this at our upcoming course International Business Made EZ August 24-25 and 26. I hope to see you here at the farm! Until next message, good global investing and business!

Gary


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