International Investments With an Icelandic Sandwich – Icing on the Cake


International investments gain added potential with low interest rate loans. A recent message showed an international investments portfolio with low rate Czech loans that financed multi-currency portfolio invested in a balance of Romanian leu, Russian ruble and Turkish lira bonds based on an investment of $50,000 and a loan of $100,000. $50,000 was invested in each bond and this international investments portfolio has projected earning of $16,480 a year in interest less the loan cost is $3,875. The international investment income left is $12,615 or 25.33% return on the original investment.

This message looks at what happens when we add Icelandic bonds into the international investments mix. Jyske Bank recently wrote an analysis about these bonds pointing out that AAA rated Icelandic bonds pay as much as 14%. They said:

“The total Eurobond market in ISK is at ISK 290bn at the moment. Bonds worth ISK 200bn mature in 2007, but a mere ISK 50bn in the first half of 2007. Therefore, we do not expect any pressure on ISK caused by maturities over the next period. We maintain our BUY recommendation on ISK denominated bonds. Investors should stick to the short end of the yield curve, i.e. issues from Rabobank, Deutsche Bank or ABN.”

Notice how the potential profit of our bond portfolio changes we increase diversification and add some Icelandic bonds. The portfolio today is based on investing $50,000 and borrowing $150,000 with $50,000 invested in each of the bonds below.

International Investments Portfolio
Currency
Bond
Yield
RON
6.5% 12/09/2009 EKSPORTFINANS
6.37%
RUB
7.25% 25.11.2009 Bank of Moscow
6.93%
TRY
20% 19/11/2007 DEPFA BANK PLC
19.31%
ISK
12.5 18/01/2008 DEUTSCHE BANK AG
13.40%

This international investments portfolio earns $23,000 less $7,700 or $16,300 on the original $50,000 or a total of 32.6%. Diversification is enhanced and profits rise.

This international investments portfolio then may rise or fall versus the US dollar. The risks are forex loss in case the borrowed koruna rises. There is little likelihood of loss on the bonds as they are all quite short term. However no investor should leverage more than they can afford to lose.

You can track our five 2007 multi-currency portfolios with us. Learn why we have chosen these portfolios in a sixteen page email report about how 13 economic forces that may well shape investment markets this year.

Here is how these portfolios have performed so far since November 2006.

TOTAL INTERNATIONAL INVESTMENTS APPRECIATION TO DATE
Portfolio
Dec. 22
Dec. 29
Jan.11
Jan 22
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%

Learn how to get the report free at http://www.garyascott.com/catalog/bldh

You can finish this message and learn about a healthy quinoa quimbolito at http://www.garyascott.com/international_investments/198.html

Until next message, may your international investments go well!

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.

Feb. 20 – 25, Tues.-Sun. Import-Export Course.

Mar. 9 – 15, Fri.-Thurs. Expanded Super Thinking + Spanish.

Mar. 16 -18, Fri.-Sun. International Business and Investing Made EZ.

Mar. 19 – 21, Mon.-Wed. Andes Extension & Real Estate Tour.


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