International Investments in a Pound of Multi-Currency Sandwich


International investments perform best when you invest in good value. Seeking value has helped us be delighted that the international investments portfolios we shared with our readers were up 114% last year and up 86% in the first four months of this year. However, helping readers get on the good value international investments bandwagon is the easy part of this job. Knowing when to disembark from the “good news international investments train” can be hard.

Here was yesterday’s Yahoo.com news. “NEW YORK – The Dow Jones industrial average fell more than 500 points today before gaining some of it back. The Dow dropped 546.02, or 4.3 percent, to 12,086.06 before recovering some ground. It was down 360.42, or 2.85 percent, at 12,271.84 with about a half hour of trading left. The U.S. joined a global market plunge sparked by growing concerns that the U.S. and Chinese economies are cooling and that equities prices have become over inflated. A 9 percent slide in Chinese stocks, which came a day after investors sent Shanghai’s benchmark index to a record high close, set the tone for U.S. trading. The Dow began the day falling sharply, and the decline accelerated throughout the course of the session before stocks took a precipitous plunge in late afternoon as computer-driven sell programs kicked in. Investors’ dwindling confidence was knocked down further by data showing the economy was growing slower than expected.”

January 23, 2007 our message at this site looked at the potential of international investments China and I wrote: “based on the thinking above, plus one other vital factor, last week I liquidated all my equity mutual funds and shifted into Swedish and Danish bonds instead.”

We have issued several warnings about reducing positions in these bubbly international investments markets since. Readers who followed these thoughts are happy today.

In trying to find safer international investments, recent messages looked at strength of international investments in Scandinavian currencies that comes from the hard working and prudent nature of the people themselves.

As above so below! The nature of the hardy northerners creates value in international investments.

Then we looked at an international investments multi-currency sandwich that borrowed koruna and invested in Scandinavian bonds.

I like international investments in Europe with borrowed koruna but am not in love with the euro. The fringe European currencies make more sense for international investments to me.

The problem with borrowing the koruna and holding international investments in Swedish, Danish and Norwegian kroner is that the positive carry is quite low. The average yield is about 4.44% versus and the loan cost is 3.75%. This means that the fees must be looked at carefully since there is a 1% up front loan fee for five years). 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 and the excellent safety, but still there is are approaches to this that can add a little more yield.

One way to enhance the return on international investments in this portfolio is to add British pounds.

A Czech financed international investments multi-currency portfolio invested in Scandinavian currency and British pound denominated bonds is still very safe (all AAA rated) and offers some forex profit potential. The pound enhancement increases the yield.

Here is a pound kroner multi-currency international investments portfolio that consists of $100,000 invested, $300,000 borrowed in Czech koruna. The $400,000 is invested in eight bonds (below) at $50,000 per bond. NOK is Norwegian kroner, SEK Swedish kroner, GBP is British pounds.

International Investments Portfolio

Currency Interest Issuer Maturity Yield
NOK 5.50% Norway Gvt. 05.05.2009 4.48% p.a.
NOK 4.25% Norway Gvt. 19.05.2017 4.45% p.a.
SEK 3.25% Sweden Gvt. 16.06.2010 4.00% p.a.
NOK 4.62% Toyota Gvt. 22.01.2010 4.83% p.a.
GBP 6.75% Bombard Cap 14.05.2009 6.19% p.a.
GBP 11.87% Brit Aerospace 29.12.2008 5.75% p.a.
GBP 8.75% British Air 23/08/2016 7.19% p.a.
GBP 7.12% Turanalem Fin. 21.12.2009 7.32% p.a.

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 $22,105 a year in interest. The loan cost at 3.75% is $11,250 so the income is $10,855 or 10.85% return on the original investment.

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 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 invested currencies and if the Norwegian interest rate drops. However, no investor should leverage more than they can afford to lose.

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 bond and equity portfolios we are tracking in our international investments Multi-Currency Education service are doing well.

Last year the five 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 international investments performance but this year our new portfolios are rising even more…much more.

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

Portfolio 2007
Dec 29
Jan 30
Feb 6
Feb 27
Swiss Samba
8.10%
10.18%
13.83%
20.49%
Dollar Neutral
7.94%
12.63%
13.62%
20.48%
Emerging Market
15.11%
14.83%
17.46%
18.17%
Dollar Short
12.91%
9.71%
12.50%
19.61%
Green
34.77%
50.08%
63.04%
86.22%

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

Yet the lessons we learn from these portfolios also allowed us to begin warning of the market overhang. On January 23, 2007 our message at this site looked at the potential of China and I wrote: “BASED ON THE THINKING ABOVE, PLUS ONE OTHER VITAL FACTORS, LAST WEEK I LIQUIDATED ALL MY EQUITY MUTUAL FUNDS AND SHIFTED INTO SWEDISH AND DANISH BONDS INSTEAD.”

Since that time we have repeated this warning numerous times so readers who followed this advice locked in the enormous Chinese profits and missed the 9% drop of two days ago.

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

You can continue this message and see seven import export pictures at http://www.garyascott.com/international_investments/248.html

Until next message, may all your international investments be good and may everything you do be touched by Angels!

Gary

Join us in the winter sun at our upcoming courses and tours.

Mar. 16 -18, Fri.- Sun. International investments & Business Made EZ. Two account executive from Jyske Bank will join with me to update global economics and we’ll share many ways to have an international business. See http://www.garyascott.com/catalog/IBEZec/

Mar. 19 – 21, Mon.- Wed. Andes Extension & Real Estate Tour. Ecuador grass is better and really inexpensive!

Mar. 23 – 25, Fri. – Sun. Shamanic Mingo Tour. See http://www.garyascott.com/catalog/mingo/

Apr. 20 – 25, Fri. – Wed. Import-Export Course with Steve, our man in Ecuador.

May 25 – 27, Fri. – Sun. International Investments and Business Made EZ in North Carolina. Thomas Fischer joins me to update global economics again.


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