Multi Currency Portfolio Update #16


Multi Currency Portfolio Update #16

Here is the updated performance of the six multi currency investment portfolios that Jyske Bank created with our direction. We have been tracking them for educational purposes beginning November 1, 2007.

All the portfolios continue to rise and there are some good lessons to learn.

2008 Dec 14 Mar 20 April 5 Apr 28 May 14
Infrastructure -20.97 -79.79 -83.22 -61.57 -51.42
Emerg Mkt – 9.82 -53.75 -54.20 -44.32 -38.31
Danish Health -32.51 -79.55 -85.34 -74.26 -71.92
Green -14.31 -58.78 -56.66 -31.54 -27.64
$ Short Non – 9.08 -19.69 -18.31 -14.82 -13.93
Blue Chip – 5.14 -35.06 -47.55 -42.22 -35.77

First note. The dollar short non leveraged portfolio is recovering more slowly. It fell the least but will also rebound at a more leisurely pace because it lacks leverage. What goes down must come up. With leverage it just happens faster and vice versa.

The recovery of this portfolio is also inhibited because the greenback has been recovering a bit at this time.

In this recovery there is a second lesson as well.

This lesson can be seen in current rumor fueled ups and downs of the US dollar versus the euro.

The underlying fundamental is that the euro is so high now it is hard for Europeans to sell their products in the US.

The euro has enjoyed an enormous run up as you can see in this five year chart from finance.yahoo.

Euro-dollar-chart

However note the dollar strengthening in Jan 2005 and 2006. One would expect a similar position now. This has been taking place.

These short term run ups can wipe out high leverage speculators These short term reversals are what create risk and wipe out investors who should not be speculating.

The euro has been falling since March into early May when the euro fell significantly due to a report of softer EU retail sales and German factory orders.

Rumors that US officials told the Financial Times that both the US and Europe desire a stronger dollar added extra zip to the dollar’s uptick.

No doubt Euro zone officials do not like the buck at such low levels for both the US and the Euro zone.

Then a day later the dollar fell back from its two-month high against after the ECB announced that euro interest rates were left unchanged at yesterday’s monetary policy meeting. The head of the European Central Bank, Jean-Claude Trichet stated that inflation was more important than dollar parity. He said that risks to growth and inflation in the Euro Zone must prevail. The Bank must keep a tight rein on inflation and inflation expectations.

This started speculators thinking that the Bank will not follow America’s Federal Reserve and cut interest rates.

The higher interest rate of Euro Zone over the US dollar seems likely to remain which will add strength to the euro.

These euro dollar ups and downs leads us to the lesson.

Trying to out guess short term currency moves is a speculator’s game. Most of us should not do this as there is great risk of loss.
The moral of the lesson is to diversify and play interest differentials instead of forex shifts.

If currencies we multi currency investors hold rise, great! But catching a currency on its way up is not our main goal.

For example in my personal multi currency portfolio I have (currently non leveraged) :

Multi Currency Breakdown

Cash, Stocks & Bonds

US dollar 12.0%
Euro 10.0%
Danish kroner 7.0%
Swedish kroner 3.0%
Canadian dollar 3.0%
British pound 3.0%
Turkish lira 2.0%
Hungarian florin 2.0%
New Zealand dollar 2.0%
Brazilian real 1.0%
Norwegian Kroner 1.0%
Australian dollar Negligible

Cash, Stocks & Bonds Percentage of Portfolio Total 46%

Real Estate
Agricultural Land 37%
Commercial Property 3%
Ecuador Property 14%

Real Estate Total Percentage of Portfolio 54%

Plus I am buying or trying to buy more Ecuador real estate which will drop my dollar position to 4% of my portfolio.

When that is done look again at my currency position:

Euro Zone
euro 10.0%
Danish kroner 7.0%
Swedish kroner 3.0%
British pound 3.0%
Norwegian Kroner 1.0%

Dollar Zone
US dollar 4.0%
Canadian dollar 3.0%
New Zealand dollar 2.0%
Australian dollar Negligible

Emerging Zone

Turkish lira 2.0%
Hungarian florin 2.0%
Brazilian real 1.0%

Now let’s look at the typical yield of short term government backed bonds in the various currencies.

Danish kroner 5.14%
Norwegian kroner 5.34%
Swedish kroner 4.62%
euro 4.18%
Brit. pound 4.21%
US dollar 2.75%

These interest differentials is why I more in the euro zone and am adding Norwegian kroner as I reduce euro.

Another reason the portfolios we track are rising is that each has at least one powerful share that, during the down turn of the last six months, rose.

Here they are.

Samsung Electronics-GDR COM
Novo Nordisk B
Adidas AG
Vestas Wind Systems
Kurita Water Industr.
Hyflux Ltd
ABB Ltd

We will look at them in more detail next update.

Gary

Lean more about eurobond and share investing May 23-25 or October 3-5 at International Investing & Business Made EZ North Carolina

See dates for our Ecuador courses and tours:

Coastal Real Estate tour

Super Thinking + Spanish Course

Imbabura Real Estate Tour

Ecuador Shaman Tour

Ecuador Import Export Course

See discounts for attending more than one course.


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