International Investments in Emerging Currencies – Making Millionaires for Twenty Years


International investments have to do with Friday the 13 than good or bad luck.

Life is change. The number 13, and this day Friday the 13th reminds us of this fact.

However, few people realize that this day is considered an ill omen because of currencies and economics. Friday the 13th became famous for bad luck because of the Knights Templar.

An article in the Scotsman entitled “Knights Templar” by Diane Maclean explains this when it says:

The Knights Templar were a monastic military order formed during the 12th century European crusades to the Holy Land.

They were gifted land by pious aristocrats to finance their rapidly growing order. Their wealth grew as they developed commercial interests in mines, quarries and vineyards. They had a fleet that outshone the largest state. But what the Knights Templar did most was build. The classic round Templar church, founded on octagonal geometry, is still regarded as the most obvious example of their building, but many observers see Templar influence in the vast gothic outpouring that occurred throughout the next hundred years.

They set the gold and silver standard for coin weight, and introduced the “note of hand” – a kind of 12th century credit card. Christians at the time were not allowed to charge interest on money, but the Templars got round this by charging “rent”. The order quickly became the richest bankers in Europe, lending to kings, princes and influential people across Europe.

King Philip IV of France (1268-1314) was one monarch among many who was heavily in debt to the Knights Templar. The death of the Pope gave the King an opportunity to bribe the incoming Catholic leader and initiate enquiries against the order. They were charged with heresy and on a Friday the 13th, in October 1307, Jacques de Molay, the Grand Master of the Knights Templar, and 60 of his senior knights were arrested in Paris. Across Europe thousands of Knights Templar were taken into custody. But when King Philip raided the Templar treasure house he found it empty and the fleet gone from Larochelle. You can read this article at Knight’s Templar.

Economics and stable currencies created the legend of Friday the 13th. The Templars had a sound business and created a stable currency system. The King of France was a spendthrift who wanted to control a currency he could debase for his benefit and at everyone else’s expense. The King won…at least short term. The monarchy is long gone but the Templars still exist. Regretfully stable currencies do not.

Time has not changed how government debase currencies. Today governments everywhere control currencies and most use fractional reserve banking and/or debt financing or the printing machine to debase their currencies.

Spotting trends in international currency investments and change is a money making part of the art of spotting change and adapting…hopefully before everyone else. Few aspects of our lives have changed as much in the past two decades as currencies. Currency parities and interest rates are continually moving. Those who see these shifts with a Bird’s Eye View become rich.

High-interest currencies often follow certain cycles and as promised in yesterday’s message, here is an incredible valuable way to spot and profit from this currency change. To read yesterday’s message see International Investments Make Millionaires – Gary Scott’s World Reports Have Been Making Millionaires for Nearly Twenty Years.

Jyske Bank has identified a currency cycle that can be a powerful tool for profiting from active investing in high-interest currencies.

The cycle consists of 3 phases.

Phase one is when the high interest rates attract capital, which cause the currency to appreciate. This pushes down imported inflation, and the inflationary pressure in the economy diminishes. Let’s follow the Czech Koruna (a currency in phase 2) as an example.

When the Soviet Bloc crumbled, Czechoslovakia was one of the most entrepreneurial of the former Soviet nations. Business thrived and money poured in to help the economy take off. However in the beginning, the interest rate on the currency was high. Then the country peacefully divided into two countries. One half, the Czech Republic, raced ahead economically.

Phase two follows. As a result of the lower inflation, the Central Bank cuts interest rates, boosting domestic demand. This often leads to a demand for foreign products, and exports struggle with a stronger currency. The current account deteriorates, and the interest in the currency cools down. Often rates drop low enough so the currency can be borrowed to reinvest.

So it is now with the Czech koruna. One can borrow Koruna at 3.75% interest and invest it in Euro denominated bonds earning 4.75% or more.

The final Phase 3 comes when fear of interest-rate hikes begins to develop or a local shock triggers risk aversion. Most carry positions are closed.

For example, so much money may flow into the Czech Republic that inflation starts to take off. The government may decide it has to raise interest rates to cool the economy. Or maybe there are political problems, and investors fear that the koruna will cash short term and interest rates will have to rise.

If an investor had borrowed koruna to invest in euro and became afraid that koruna interest rates would rise, they sell the euro and pay off the koruna loan.

Phase 3 causes the local currency to depreciate markedly, which has an adverse effect on inflation and the Central Bank raises interest rates!

At some point, interest rates raise so high the inflation situation improves as well as the external balances and investors return. The cycle begins with Phase 1 again.

This may seem slightly complicated, so study this over the weekend and send me your questions. We’ll answer your questions and share more about the cycle next week.

Until then, I send you good luck on Friday the 13th (it is after all just a myth). May all your cycles be blessed and your weekend full of joy.

Gary

P.S. Learn how to borrow Czech Koruna to invest in a Turkish Lira MultiCurrency Sandwich. Leverage investments in top value markets like Turkey, China, India, and more. See how our Asian model portfolio returned 98% in the last 11 months. See http://www.garyascott.com/catalog/bl/

Better Still, join Merri, Jyske Bank and me at our upcoming November International Business and Investing Course in Ecuador. Learn how to diversify globally. See http://www.garyscott.com/catalog/IBEZec/


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