Multi Currency Portfolios Remain in Profit


Multi currency portfolios remain in profit for 2007.  Attached are the five updated 2007 multi currency portfolios.  All the portfolios remain in profit and over the last tend days have again jumped ahead dramatically.  

 

Here is their performance since November 1, 2006, from our last review and now ten  days later.

Portfolio December 22, 2007 December 29, 2007  January 11, 2007 January 22, 2007
Swiss Samba 3.18% 8.10% 5.92% 10.10%
Dollar Neutral 5.09% 7.94% 7.87% 12.38%
Emerging Market 5.91% 15.11% 4.46% 14.90%
Dollar Short 11.74% 12.91% 6.91% 9.71%
Green 27.70% 34.77% 35.95% 50.15%

We wondered aloud two updates ago why the portfolios had popped up so quickly and expressed that it was less a rise in the portfolios than a fall in the US dollar.

 

Last update saw a stronger argument as the dollar strengthened. This suggestion remains fortified by the fact that the dollar neutral portfolio is doing better than the dollar short.  This suggests, as mentioned last update, the US dollar is feeling strong.  

 

But international equities are also surging.

 

The third factor of success in the emerging markets portfolio is that the Japanese yen (the loan currency of that portfolio) is especially falling as well.

 

Jyske bank just wrote:

 

“The dollar edged up towards a four-year high against the yen on Monday as the Japanese currency suffered from the Bank of Japan’s decision to hold interest rates steady last week. The yen took a beating after the BOJ left rates at just 0.25 % last Thursday, raising questions about whether the central bank had bowed to government pressure against a move after many had expected a rate rise just days before.”

 

Since many of the emerging currencies are linked to the US dollar they received a currency boost as well as excellent growth.

 

The lesson to learn here is “watch the loan currency as well as the investments”.

 

Another factor may be pushing emerging equities up.   China has announced that it will diversify its foreign exchange reserves.  This means the Chinese will push a lot of money into overseas securities including emerging markets.   This could also put downwards pressure on the US dollar’s recent strength.  About 70 % of the reserves are believed to be held in USD mostly in treasury bonds.  This means the Chinese may sell dollars and invest in other currencies so watch how the dollar short portfolio reacts.

 

The lesson here is to always watch what is happening with large US reserves.

 

The Green Portfolio continued to skyrocket and gained some big help in the last ten days by a strong jump from Hyflux, the Singapore company that purifies a lot of water in China . One wonders if China has already started to invest in Hyflux shares.  The lesson here is clear. If you make an investment in a trend that is tapped into a true economic transformation (such as cleaning up the world’s environmental mess) it will do well regardless of currency moves.

   

This sudden up and down may lead to another important lesson.  This bouncing up and down could suggest a top. This is an important lesson to remember right now after 16  months of stunning profits in the portfolios.  This is a time to take care.  I mentioned last update that I personally am doing something I rarely do, monitoring all my emerging market mutual fund prices almost every day.  Now I have taken a further step and liquidated all my equity positions except two (Bank of Florida and Jyske Bank) shares.  This is a personal decision, not a recommendation. Stay tuned to my daily EZine as on Tuesday I explain why.

 

Until next message, good global investing.

 

Gary

See attached file.


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