Multi Currency Investing Primer Lesson One


Multi Currency Investing  Made EZ Towards 2012

Chapter One

* WHAT TO DO NOW: Be a multi currency Investor. This course updates through the year 2012 why all of us are multi currency spenders and should be multi currency investors now. See below.

* MULTI CURRENCY INVESTING SAFETY: Learn who can really protect your wealth. This primer explains important lesson about politics and currencies.

Imagine the room-walnut paneled with carpeting that is deep blue, rich and plush. The table of polished oak is heavy and important, as are the men that sit around it. Tension hangs, thick. A soft hum, steady and calm, perhaps from a heating fan, goes unnoticed in the deathly silence. These men are powerful, but now they are afraid. The fear shows. They fidget, squirm, their faces tight with the tension. Many of them go pale when the man at the head of the table finally speaks. “Gentlemen, the nation is closer to a monetary collapse than we would like to believe.”

This scene sounds like one we would see in a tense melodrama at the movies. Even worse we could imagine that this was real.

Regretfully the statement came from a melodrama that was (and remains) all too real. This scene is not based on fiction but actually took place in the United States of America at the headquarters of one of the most powerful financial institutions in the world, The Federal Reserve Bank. The man speaking was the chairman of the Federal Reserve, Alan Greenspan. The statement that the United States is closer to a monetary collapse than we would like to believe, is his and regretfully was then and is still now very, very real.

To make matters most unfortunate, this meeting did not just happen. The statement was made by Mr. Greenspan just after Black Friday, October 1987 when the U.S. stock market crashed.

At that time, Federal Reserve policy makers met and grimly speculated that a run on the dollar might trigger renewed chaos or that consumer confidence might cause a recession. Despite their reassuring public pronouncements, they confessed privately to an inability to foresee the economy’s future with any certainty. Greenspan underscored the seriousness of the situation saying at one point, “The nation is closer to a monetary collapse than we would like to believe.” So great was his concern that the meeting was kept secret, and this information was only revealed more than a decade later.

What is worse, that secret meeting was instrumental in starting a wave of global government interference in financial markets that has continued to this day. This interference dammed the normal waves of world currency and stock market.  This interference created, like a huge dam, a lake of apparent economic calm that masked the turmoil of true currents beneath the placid surface.

The interference has continued and grown into an international  affair, holding back corrections, again and again, until finally in 2008 the dam of global government interference burst.

That secret meeting and the economic rupture 20 years later can be good news for you!  This course explains why the rapids of global economic and currency correction that we are navigating now can help you enhance your wealth.

If you use the 1987 meeting and the 2008 global economic correction as warnings about the enormous currency dangers that exist right now, then that 1987 meeting will have been of great benefit to you. That warning and the lessons in this course can bring you increased safety and immense financial rewards.

My name is Gary Scott. I have been  investing and doing business and  writing about it  for nearly 41 years (I began May 1968).

Since 1971, I have known about and taken advantage of the currency risks created by the public servants who handle government finances.  As was the case with that meeting in 1987, the public is often intentionally misled and kept in the dark for fear that truth will create a negative political consequence.  This course tries to shed as much light on that darkness as it can.

Reading about that secret 1987 meeting had a profound impact on me. We, as investors all over the world, were misled about dangers that could dramatically affect our wealth! This gave me  two realizations that led to two important and urgent facts of investing.

The first realization was that my belief that the U.S. dollar and U.S. monetary system were at extreme risk and had been for nearly a decade was absolutely correct. The global currency system was being held together with little more than a confidence trick. It was clear to see that this system would eventually crash.

The second fact I learned was that we, as investors, will not be forewarned by the government or the large financial institutions. We are on our own.  We must look beyond what our political and major financial institutions tell us. The political system, big banks and brokers have too much at stake. They all fear that the truth about the world’s currency system will create a self-prophesy of doom….as it did in 2008…bringing down some of the largest financial institutions in the world.

The two realizations  led me to create this course nearly 15 years ago. The 2008 crash has led to this update.

Our currency problem is global. The dollar, though under incredible pressure, remains the reserve currency of the world. What will happen when the dollar collapses further?  What will happen to other currencies when the reserves (in dollars) of thousands of non U.S. governments/banks collapse?

This led me to see the urgent importance that exists for global currency diversification and this course will look at ways to diversify now.

Knowledge You Can Use

This course will give you an indepth understanding of currencies, but also will give you many contacts that can further your knowledge. Contacts that you can easily use!

The course format gives information to you in four different ways:

#1: Educational Text
#2: Case Studies
#3: Glossaries
#4: Contacts.

The Contact Section gives you a way to expand the knowledge you gain from the course and allows you to customize what you learn to meet your own particular needs.

In the Contact Section we introduce ways to actually invest in overseas currencies.

The investments and contacts provided in the contacts sections are not recommendations. These are shown for your review and investigation with your financial adviser.   Our goal in including them is to give you a variety of contacts so you can continue learning directly from contacts that may help you put your knowledge to use.

If you plan to do business with any of these contacts you should exercise normal care and caution.    Take the same precautions you would before choosing to do business with any firm. Check and make sure that any firm you do business with is reliable and can provide the services you need with fees that you find acceptable.

2008 taught us that there are no firms we can trust without careful investigation.

Where to Diversify and How Much

One of the main questions to answer when developing a multi currency portfolio for your needs is what percentage of the portfolio should be in cash, in bonds, in equities, in real estate and in commodities.

We’ll use Jyske Bank as our guide through this course so let’ see how they do it.

The three Jyske main portfolio breakdowns are:

Low Risk Multi Currency Portfolio: This s diversified Fixed Income 70%,  Equities 20%,  Alternatives 5%,  Cash 5%.

Medium Risk Multi Currency Portfolio: Fixed Income, 40%,  Equities 50%,  Alternatives 5%, Cash 5%.

High Risk Multi Currency Portfolio: Fixed Income  10%, Equities 80%,  Alternatives 5%,  Cash 5%.

So part of the difference between low and high risk is how much cash…stocks and bonds are held in a portfolio.  This is only one aspect of safety, but is an important one so here we begin by earning more about how to hold multi currencies in cash.

Another aspect of safety of curse is the institution you use to buy, sell and hold investments.  Let’s address this issue of safety in more detail.

Normally this is a pretty moot point. Most banks and brokers are well funded and safe…except now.

Right now everyone is concerned. Is a bank safe or not?

I like and use Jyske from many points of view.  Bank safety is one.

There are three bank safety points, from the top down…the first the country.

Bank Safety Point #1: A recent Yahoo Canada article shows a survey by the World Economic Forum listed five safest countries in which to bank. Here are the five safest.

Canada
Sweden
Luxembourg
Australia
Denmark

So Denmark is a safe place to bank. Now let’s look at Jyske Bank’s safety rating.

Jyske Bank is Denmark’s second largest bank.  On October 10 2008, Moody’s affirmed Jyske Bank’s long-term Aa2 rating but reduced its stable rating. This decision came due to the deteriorated economic prospects in Denmark, particularly in respect of the property market…not due to Jyske itself.
At about the same time, Friday 10 October 2008, the Danish Parliament passed a bill that secured all deposits and unsecured claims against losses in Danish financial institutions. The rating of the Kingdom of Denmark is Aaa/AAA with Moody’s and Standard & Poor’s respectively.  Jyske signed onto this program so its safety is about equivilent…AAA.

Over tow decades  have found Jyske to be common sense bankers. They had minimal sub prime exposure when that scandal broke. Jyske had zero Madoff exposure.

I began using Jyske (as my bank) over 20 years ago. They are one of the few banks that offers a special multi currency portfolio service for investors from almost anywhere in the world…including US investors through their Jyske Global Asset Management.

However there are plenty of ways to diversify a multi currecy portfolio through Jyske or just about any bank or broker that buys shares for its customers.

In this first contacts section, we look at multi currency ETFs as a way to diversify in cash oriented multi currency investments. Multi currency ETFs  are among the easiest and safest ways to diversify in currencies abroad.

Multi currency ETFs  let investors choose which currencies to hold. They allow complete flexibility getting in and out. These shares also offer a high degree of safety.

In previous years the easiest way to hold cash was to simply open multi currency savings accounts in overseas banks or to invest in multi currency certificates of deposit.

Over the years, global banking regulations have become more complex and more expensive for banks to comply with.  This has forced banks to restrict accounts, raise fees and minimum accounts sizes…making this option difficult or impractical except for larger investors.

Currency ETFs have filled this void.

ETFs are exchange-traded funds. These mutual fund type stocks trade on stock exchanges like a normal stock.

An ETF holds assets such as stocks, bonds or currency deposits. ETFs Are meant to track, rather than beat, their Bellwether  so they trade at about the net asset value of the underlying assets held.

Some ETFs for example track a stock or bond index, such as the Dow Jones Industrial Average.  A Dow Industrial ETF will not try to do better than the Dow. The ETFs role is to equal the movement of the Dow.   A Dow ETF would hold essentially the same shares in the same weighting as the Dow Industrial Index.

The manager of a managed Dow fund would try to do better than the Dow. An ETF manager is simply trying to get the fund’s performance to emulate the Dow.

ETFs are attractive and easy to use as investments because they have low costs, tax efficiency, and stock-like features.

ETFs costs are the brokerage fee to buy and sell them and a management fee.

Each buy and sell is subject to a brokerage commission depending on the broker.

Large investments pay a lower percentage then small.  Investors should compare brokerage firms to see which has the best fee arrangement for the type of investing planned.

Most ETFs also have a low expense ratio. Most charge between 0.1% to 1%.
ETFs are considered no-load investments.

ETFs are also tax efficient.   Investors sell ETFs on the stock market, as they would a stock, so usually realize capital gains when they sell.

Currency exchange-traded funds (ETFs) are quite new and make it simpler to invest in multi currency cash.

Currency ETFs allow even small investors to diversify in multi currencies.

This is a great benefit.  The ETF stock-like feature means that investors can carry out the same types of trade on cash investments as they can with stock investments.   ETFs can be sold short, with limit or stop-loss orders,  bought on margin and invested with as much or as little money as desired.  There is no minimum investment.

Currency ETFs  allow investors to invest in euro, the British pound, the Canadian dollar, the Japanese yen, the Swiss franc, the Australian dollar and more as shown below.

Contacts

Rydex Currency shares.
www.currencyshares.com

Rydex was the first fund manager to introduce currency ETFs in 2005.

Currently they offer nine Rydex currency ETFs

CurrencyShares Australian Dollar Trust
CurrencyShares British Pound Sterling Trust
CurrencyShares Canadian Dollar Trust
CurrencyShares Euro Trust
CurrencyShares Japanese Yen Trust
CurrencyShares Mexican Peso Trust
CurrencyShares Russian Ruble Trust
CurrencyShares Swedish Krona Trust
CurrencyShares Swiss Franc Trust

WisdomTree Dreyfus Currency Income ETFs.
www.wisdomtree.com/home.asp

Wisdom Tree Investment Management and The Dreyfus Corporation, a BNY Mellon Asset Management Company formed these ETFs in May 2008.

WisdomTree Dreyfus Euro Fund
WisdomTree Dreyfus Japanese Yen Fund
WisdomTree Dreyfus Brazilian Real Fund
WisdomTree Dreyfus Chinese Yuan Fund
WisdomTree Dreyfus Indian Rupee Fund
WisdomTree Dreyfus New Zealand Dollar Fund
WisdomTree Dreyfus South African Rand Fund

Each lesson in this course leaves you with home work, more action to take to increase your knowledge of currencies.

In this case, your homework is to check out the websites of the fund managers above. Find out more about the currencies offered.  Look at the types of returns these funds have offered…especially though 2008! Look at the safety factors provided by the managers.

Compare the fees that each fund manager charges and look to see what minimum the managers will accept. Look at the history of each manager and see which appears to be most sound financially….especially after 2008.

Investors can buy ETFs from Jyske bank or just about any bank or broker.

To learn more about ETFs  like those above US investors can  contact Thomas Fischer at Jyske Global Asset Managers. His email is fischer@jgam.com

Non US investors contact Jyske Bank.  Rene Mathys at  mathys@jbpb.dk

Your second homework assignment is to ask me questions!  Your questions and my answers will form a important art of this course update.  Be sure to add MCI in the subject line of your email so I will know that you have sent a question.  I get over 100 emails a day so this helps me be more responsive to you.

I will not answer you directly but will include as many answers as I can in the next portion of this primer update and I will not identify you in the question and answer…so send your questions at me…no question is too minor, silly, politically incorrect  or small.  Fire away and have good global investing!

You can continue this course Lesson One – Part Two here

Gary

Join Merri, me and Peter Laub of Jyske Global Asset Management at OUR INTERNATIONAL INVESTING & BUSINESS COURSE IN ECUADOR. We review economic conditions, Ecuador real estate, my entire portfolio plus investing and business ideas for the months ahead.

Feb. 9-11 Beyond Logic.

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Better still join us all year in Ecuador! See our entire schedule of 27 courses, tours, mingos and expeditions we’ll conduct in 2009 and learn how to attend them FREE.


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