Multi Currency Portfolio Update Mid Month May 2007


Multi currency portfolios we track are beating the odds and the best managers.

 

Here is the latest (mid month) review of the five multi currency portfolio’s were have tracked since November 1, 2006 (six months).

 

Portfolios 2007 Dec 29 Jan 30 Feb 26 Mar 27  Apr 30 May 11
Swiss Samba 8.10% 10.18% 20.49% 16.15% 26.60% 32.86%
Emerging Market 15.11% 14.83% 19.61% 12.81% 32.46% 31.13%
Dollar Short 12.91% 9.71% 18.17% 20.12% 30.79% 30.44%
Dollar Neutral 7.94% 12.63% 20.28% 16.58% 25.58% 28.54%
Green 34.77% 50.08% 86.22% 86.86% 135.11% 142.42%

 

Recently one of the personal at Jyske Bank who helps us develop this service shared this thought.

 

“ Gary , I hope you realize that these performances (also those of last year) are beating many of the best known and most reputable money managers in the world. Sometimes buy and hold in a well diversified portfolio offers so much more value than often traded portfolios (the commissions are lower and that is surely a good thing for an investor). The old adage Keep it simple holds true.

 

“Some managers charges a yearly fee of 2%-3% + 15-20% of the profits so our combined services (i.e. you bring the ideas to the table and we structure the portfolio) offers great value to your readers and investors.

 

“You are not writing about what you could have made using hindsight and the opportunity to pick the most opportune investment at the perfect time.

 

“This is an upfront service with all the picks out in the open from day one and then a bi-weekly follow-up. We have also seen some hiccups as happened last summer when 5 months of performance disappeared in 4 weeks but you kept the performance numbers coming even in the time of adversity. It is always easy to boast about returns in good times but being visible, honest and helpful in bad times is the hallmark of a great service.” 

 

It is always nice to read such accolades and we must give full credit to the brilliant people at Jyske bank who selected these shares based on Jyske Invest’s VAMOS (Value-Momentum-Strength) system.   Obviously Jyske Invest’s system works.

 

We should also especially pay attention to the comments about “keeping it simple” and about providing help in the bad times as well as good.

 

This is important right now because I have been warning about a current triple risk that could bring some short term bad times.

 

There is a collision of numerous factors that create special danger now.

 

First the yen is about to revive.  Historically the month of May sees a revival of risk aversion.  Risk aversion is a key to the Japanese yen’s value. If many of the investors who have borrowed yen start buying yen to pay off their loans, the yen value could dramatically jump.  (This creates a special word of caution for the Green Portfolio).

 

Second, spring is automatically a riskier time than autumn for investing in shares. Historically the best months for equity profits are November through April.  

 

Third, these two facts, the stronger yen and spring, now coincide with a huge carry trade (loans to buy shares) in many equity markets.

 

Investors are nervous because of their leveraged positions.  If fear sweeps the market, these investors will quickly dump shares to pay off loans. This will push markets down, especially the thinner emerging markets.

 

So let’s quickly notice that the emerging Market Portfolio has dropped, just a tiny bit in the last two weeks?  A tiny drop of this amount in two weeks is not significant but combined with all the other factors worth taking a look.

 

The question is why did the portfolio drop?

 

A view of the portfolio today and two weeks ago tells us more than we might suspect.

 

25.00% USD JI Chinese Equity Fund 223.90 50,000.00 64,336.76
25.00% EUR JI Eastern European Equity Fund  50,000.00 57,869.88
25.00% USD JI Indian Equity Fund    271.50  50,000.00 53,738.49
15.00% USD JI Far East Equity Fund 383.20 30,000.00 36,568.37
10.00% EUR JI Turkish Equity Fund  89.20    20,000.00  26,104.90
    Loan Pay Back Interest Due
100.00% CZK 3.875%    100,000.00 105,318.71 2,165.25
Total Liabilities       107,483.96
Net Amount        131,134.43

 

Compare the portfolio now to the portfolio of two weeks ago and you can see the loss.

 

USD JI Chinese Equity Fund 223.90 50,000.00 62,014.29
EUR JI Eastern European Equity Fund  50,000.00 58,911.39
USD JI Indian Equity Fund    271.50 50,000.00 56,040.52
USD JI Far East Equity Fund 383.20 30,000.00 35,347.08
EUR JI Turkish Equity Fund  89.20 20,000.00 28,579.54
    200,000.00 240,892.82
  Loan Pay Back Interest Due
100.00% CZK  3.875% 100,000.00 106,392.20 2,187.32
Total Liabilities     108,579.52
Net Amount     132,313.29

 

All the emerging markets are down except China .  This suggests there could be wide spread weakness in emerging markets. 

The investments are down more than would appear because the Czech koruna (as we predicted last update) has dropped in value. The loan pay off today is less than it was two weeks ago.  This means the emerging portfolio is down despite the forex profit.

Turkey has dropped as we would expect due to the political turmoil there. India (as we have been warning) has also dropped.

In short this portfolio is showing signs of overall weakness during a time of potential weakness.  In addition this portfolio is supported only by China right now, which due to the pet food contaminations, is at some added risk.

These are many little warning clues.  Be careful. Protect your profits, especially if you are holding emerging markets!

Until next message, good investing!

Gary

See attached file.

At our upcoming IBEZ in N.C., we will update all the multi-currency portfolios and much more.  Join us May 25 – 27, 2007 at the International Business and Investing Course in North Carolina . Thomas Fischer joins me to update global economics there. http://www.garyascott.com/nccourse


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