Foreign Currency profits


Foreign currency profits continue as we look at the latest update of the five multi currency portfolio’s. Here is a summary of performance:

Portfolio 3 months 6 months June 28 (Eight Months)
Swiss Samba 20.49% 32.86% 44.80%
Emerging Market 19.61% 31.13% 54.31%
Dollar Short 18.17% 30.44% 33.81%
Dollar Neutral 20.28% 28.54% 37.64%
Green 86.22% 142.42% 178.28%

In addition those subscribers received a word of warning. It has become common knowledge that leverage has a dark as well as bright side. USA Today’s article in yesterday’s Money section covered how two Bear Stearns hedge funds have trouble after borrowing to invest in sub prime real estate bonds. The article said: “Leverage, the financial tool that has fueled the private-equity buyout boom and helped hedge funds amplify returns is now being viewed more cautiously by professional investors.”

Then we shared how a small brokerage firm (Brookstreet Securities) specializing in sub prime loans just went out of business because of the devaluation of their leveraged assets.

We then looked at how this sub prime mess could create problems for some but may create more opportunity for others. Sub prime market losses could have a positive affect on green, emerging and non dollar investments. Investors who have had capital in sub prime could switch to these other strong fundamental trends looking for continued high return.

If so our five portfolios could rise even more.

That message also showed a good three-step, risk avoidance procedure to use in nervous times of high profit. You can learn why this performance has taken place in a sixteen page email report about how 13 economic forces now clash to shape investments markets ahead that show the rewards and the risks. The report also outlines the five new Multi-Currency Portfolios we are tracking in our Borrow Low-Deposit High Multi-Currency Sandwich Educational Service. Details are at http://www.garyascott.com/catalog/bldh

Many readers write asking about minimums required to create multi currency portfolios. The minimum is 25,000 euro or about US$34,000. If one wishes a leveraged multi currency portfolio (Multi Currency Sandwich) then the investment should be in the US$50,000 range or more.

However for US investors this is about to change. The rules and regulations the US government places on overseas banks adds extra reporting, paperwork and time to accounts.

Jyske charges very low fees compared to many investment banks. This means they need to increase the minimum for US clients. As of 1 July the new minimum for all types of accounts (Personal, Company, Foundation, or Trust) will be US$100,000. This applies to any account personal or structured where the beneficial owner is a US citizen.

This doubles the minimum Jyske has offered on leveraged accounts before but will allow the bank to provide a much more pro-active investment service for US account holders.

Non US account holders continue with the 25,000 euro and $50,000 for leveraged accounts minimums.

Consider this lucky. Many banks abroad no longer accept accounts from US investors or have very high minimums.

A recent article in the Indian Times told how only a very small number of hedge funds accept investments smaller than $1 million. So the option left is to invest through funds that collect small amounts from a large number of investors and then invest it in hedge funds, also called fund of funds (FoFs) for hedge funds.

Fortunately Jyske Bank allows investors to do much of what a hedge fund does for as little as $100,000 without using FOFs.

Each of our five Multi currency portfolios have always started with a $100,000, so this will not affect this service.

Anyone with questions about the new minimum can contact Thomas Fischer at Jyske Bank. His address is fischer@jbpb.dk

Keep in mind the five portfolios we track for educational purposes have very little leverage compared to the leverage of hedge funds. And we have no sub prime assets! One hedge fund that just shut down had $70 million of debt backed by only $85 million of assets.

Compared to this debt to value ratio, the leverage in our Green Portfolio for example is very low. The debt was $200,000 on $300,000 of assets when it began last November. Now the portfolio has less debt, $191,762.64 and $470,047.67 of assets.

These multi currency portfolios also make great sense without leverage!

Leverage is nice, when it works. We are pleased as punch to see the Green Portfolio up 178%! However this same portfolio without leverage is a well diversified equity portfolio in strong major market shares that has risen over 50% in eight months. That is not bad. In fact it’s quite good.

Until next message, I wish you good global investing.

Gary

We hope to serve you at one of our upcoming courses or correspondence courses.

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