International AAA Bond Investments with Czech Loans


International AAA bond investments are a sensible way to combat inflation and protect purchasing power when equity markets are at risk. International AAA bond investments can be leveraged with loans with low interest rates.

Yesterday's message looked at international bond investments and how the Czech koruna has all the elements of a good currency to borrow at this time. It has risen to a very high level versus the euro which is the benchmark currency of that region. The interest rate of the koruna is low and there are many economic fundamentals in the Czech Republic that suggest that it will fall versus the euro.

Yesterday's message looked at international investments in a portfolio based on a Czech koruna loan invested into a basket of European currencies. This portfolio had a projected return of 14.27% and had some forex risk because some of the bonds we denominated in higher risk currencies such as the Hungarian florin, Polish zloty and Romanian leu. You can see this international investments portfolio at garyascott.com/international_investments/international_investments_159.html

Today's Czech financed multi-currency portfolio has greater safety but a bit less potential return. This portfolio assumes that we invest $100,000, borrow $400,000 in Czech koruna and invest $125,000 in each of the bonds below. These bonds are considered safer than those in yesterday's message because the borrowers are all major AAA rated financial institutions or AAA rated government bonds denominated in tow of the world's most industrialized currencies, the euro and British pound.

Currency Bond Yield
EUR 17/01/2011 HYPOBK IN ESSEN 4.06%
EUR

20/07/2010 WESTHYP

4.03%
GBP

07/12/2007 BRIT TREASURY

5.15%

GBP

07/03/2012 TREASURY 4.99%

This portfolio has an average return of 4.56% less the 3.875 loan cost. In short this portfolio earns $22,890 a year in interest. The loan cost is $15,500. The income left is $7,300 or 7.30% return on the original return.

This is about half the potential return compared to yesterday's portfolio but is a very high return in short and medium, AA rated or better bonds denominated in two of Europe's major currencies return created by this currency imbalance.

This is a well diversified portfolio with some chance of a forex gain as well. Future messages will look at other types of koruna loan based multi- currency portfolios. There are of course risks even in this quite safe portfolio. The koruna could appreciate even against the British pound and euro no matter what we think will happen. This would create a capital loss. Bond values could also fall or lenders could default so never leverage more than you can afford to lose.

You can gain more details from Thomas Fischer at fischer@JBPB.com

I have written a sixteen page email report about how 13 economic forces now clash to shape investments markets ahead that shows the rewards and the risks. The report also outlines the five new Multi-Currency Portfolios including the Green Portfolio we are tracking in our Borrow Low-Deposit High Multi-Currency Sandwich Educational Service. You get this report FREE when you enroll in our Borrow Low-Deposit High Multi-Currency Sandwich Educational Service. Subscription is $149 for a year. Details are at http://www.garyascott.com/catalog/bldh

Market Warning

We'll look at least three more variations of the Czech koruna financed multi- currency portfolios in upcoming messages, but the reason we have started with safety is that there is considerable risk building in equity markets now.

A recent message on 2007 predictions admitted that this year I am puzzled because history suggests that we should be seeing a bear market on Wall Street about now. Instead the market is nearly at an all time high. One thought on why this is so relates to excessive liquidity created by several reserve banks (US-UK and Japan to name a few). You can read this message at garyscott.com/international_investments/international_investments_150.html

Charles Drace, a long time friend and reader from New Zealand , who provides investments services sent me this graph from his website which further illustrates this fact.

100 YEARS OF INVESTMENT GENERATIONS
Generation

Commodities

Stocks[shares] Years
       
1914 – 1930 -14%

159%

16
1930 – 1947 244% -30%

17

1947 – 1965

-18% 503% 18
1965 – 1981 123% 35% 16
1981 – 1999 -9% 1054% 18
1999 – 2016 +??? -??? 17(?)

You can learn more about Charles and his service from him at his email address charles@cdrace.co.nz

We all know that history is no guarantee of future performance. His is however one valued guide we should not ignore, and the current state of equity affairs globally departs dramatically from history. This means we must exercise caution and take care. Hence we are looking right now at multi-currency portfolios that invest just in bonds.

If stock markets fall, interest rates are likely to drop and the bonds in the portfolio above are likely to rise.

You can continue this message to learn about natural health benefits and Ecuador real estate at http://www.garyascott.com/international_investments/162.html

Until next message we hope your international investments are good.

Gary

P.S. Join us in the Ecuador sun this winter. Here is a schedule of the courses Merri and I will sponsor and or conduct.

Jan. 22 – 26, Mon.- Fri. Self-Fulfilled: How to Be a Writer & Publisher. http://www.garyascott.com/catalog/pc/

Feb. 20 – 25, Tues.-Sun. Import-Export Course. http://www.garyascott.com/catalog/impex/

Mar. 9 – 15, Fri.-Thurs. Expanded Super Thinking + Spanish. http://www.garyascott.com/catalog/sp7/

Mar. 16 -18, Fri.-Sun. International Business and Investing Made EZ. http://www.garyascott.com/catalog/IBEZec/

Mar. 19 – 21, Mon.-Wed. Andes Extension & Real Estate Tour. http://www.garyascott.com/catalog/andeanext/


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