International Investments that Stretch Northern Values – A Very Safe Multi-Currency Sandwich


International investments in bonds can be safe but rewarding too. Yesterday’s message looked at international investments strength in Scandinavian currencies that comes from the hard working and prudent nature of the people themselves. As above so below! The nature of the northerners creates value.

There is away you can stretch the value of international investments a bit with a multi currency sandwich.

Consider four aspects of the economic value of international investments. One, many international investments equity markets have spurted beyond good value. Two, one of the great currencies to borrow, the Japanese yen, fell dramatically, was at a four year low, which meant that it was undervalued. The fall created really nice profits for yen borrowers but at this low ebb the yen may be ripe for recovery and is showing many signs of strength. This reduces its value as a currency to borrow. Third the Czech koruna has been at an all time high versus the euro. This means it may be of less value, a good time to borrow. The Scandinavian currencies have shown themselves to keep pace with the euro or better.

International Investments Multi Currency Portfolio

This means that international investments in a Czech financed multi-currency portfolio invested in Scandinavian currency denominated bonds may be very safe (all AAA rated) and offer some forex profit potential. This multi currency portfolio consists of $100,000 invested, $300,000 borrowed and the $400,000 invested in the four bonds below. NOK is Norwegian kroner, SEK Swedish kron

Currency
Interest
Issuer
Maturity
Price
Yield
Rating
NOK
5.50
Norway Gvt.
05.05.2009
102.10
4.48% p.a.
AAA
NOK
4.25
Norway Gvt.
19.05.2017
98.40
4.45% p.a.
AAA
SEK
3.25
Sweden Gvt.
16.06.2010
97.70
4.00% p.a.
AAA
NOK
4.62
Toyota Gvt.
22.01.2010
99.45
4.83% p.a.
AAA

The Toyota bond is the only NOK corporate bond with liquidity at this time but Americans (US regulations prohibit overseas banks from selling initial issue bonds to US citizens) cannot buy this until 5th March 2007.

This international investments portfolio earns $17,760 a year in interest. The loan cost at 3.75% is $11,250 so the income is $6,510 or 6.51% return on the original investment. This portfolio then may rise or fall versus the US dollar. The risks are forex loss in case the borrowed koruna rises. There is some risk of capital loss on the bond that matures in 2017 if Norwegian interest rates rise. However there is potential profit if the US dollar falls, if the koruna devalues versus the Scandinavian currencies and if the Norwegian interest rate drops. However no investor should leverage more than they can afford to lose.

The positive carry in this sandwich is quite low, with the average yield of 4.44% versus the loan cost of 3.75%. This means that the fees must be looked at carefully since there is a 1% up front loan fee for five years). In this case that fee $3,000 on the $300,000 borrowed, would reduce the yield in year one to just 3.51%. However if viewed through four years (till the 2010 bonds have matured), the yield averages at 5.75%, a very good return considering the added forex opportunities.

International investments in equities may continue to offer great value but if there is turmoil in emerging markets created by a rising yen, this portfolio shows that there are very safe alternatives in fixed returns that could do very well.

Both the international investments in bonds and equities we are tracking in our Multi-Currency Education service are doing well.

Last year the five international investments portfolios we created and tracked rose:

US Dollar Long
9.04%
US Dollar Short
10.43%
US Dollar Hedge
11.46%
Emerging Market
42.93%
Asia Emerging Market
114.16%

This is really excellent performance but this year our new international investments portfolios are rising even more…much more.

Here are the five updated 2007 multi currency portfolios and their performance since November 1, 2006.

Portfolio
December 29, 2007
January 30, 2007
February 6, 2007
Swiss Samba
8.10%
10.18%
13.83%
Dollar Neutral
7.94%
12.63%
13.62%
Emerging Market
15.11%
14.83%
17.46%
Dollar Short
12.91%
9.71%
12.50%
Green
34.77%
50.08%
63.04%

This is impressive international investments performance in every direction with every portfolio running in the 100% per annum range and the green portfolio running at a clip of nearly 250% per annum growth!

You can learn why these international investments portfolios are rising and track them with us. Learn how at http://www.garyascott.com/catalog/bldh/

You can continue this message and learn how to live longer though the value of sleep at http://www.garyascott.com/international_investments/216.html

Until next message may all your international investments be good!

Gary

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

Mar. 9 – 15, Fri.-Thurs. Ecuador Spanish lessons. 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.

March 23 – 25, Fri. –Sun. Shamanic Mingo Tour.

You can enroll for our March Andean 4 course adventure at www.garyascott.com/catalog/4course/


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