Green Portfolio


October 2007.   This is the last review of our 2007 portfolio. Here is the one year performance of the five portfolios that Jyske Bank created with our direction and that we have tracked for educational purposes though 2007 beginning November 1, 2006.

Portfolios 2007 Aug 17 Aug 31 Sept 9 Sept 28 Oct 5 Oct 31
Swiss Samba 15.19% 26.42% 30.86% 44.40% 47.94% 53.32%
Emerging Market 30.50% 58.18% 67.95% 103.22% 105.22% 122.62%
Dollar Short 9.14% 20.29% 23.16% 42.71% 42.06% 48.19%
Dollar Neutral 13.56% 22.33% 24.22% 34.74% 37.19% 38.67%
Green 110.93% 155.84% 170.22% 220.22% 236.47% 266.30%

What a year. There were some great lessons learned including how ups and downs are magnified by leverage.

The goals of this educational service are threefold.

#1:  Help each subscriber improve their creative skills for developing investment ideas that serve their specific needs.

#2:  Help investors learn how to stick to their good ideas and get out of their bad ones.

#3:  Help investors understand multi currency investing because as you will see below…we may need this ability more than ever now.

The most satisfying performance has been the Green Portfolio. Returns have been breathtaking on the way up and down.

Big problems create big opportunity.

Environmental concerns are one of humanity’s biggest problems and the world is just catching on to that fact.

We saw great volatility in this portfolio.

The July drop of over 100% gives us a moment of pause, but as a percentage of the portfolio this drop was less than that of the other portfolios we tracked.  In short this was simply the top performer during the good times and bad.

Beyond the performance we are pleased that this portfolio has attracted the attention of major institutions with the message… “investing in the environment can be very porfitable.”

I wish I could sing my praises over such performance…or at least sing the praises of Thomas Fischer and the Jyske team that were responsible for the actual portfolio makeup.   I can certainly sing theirs more than mine as they selected the final funds and shares.   But let’s not sing too loudly. Yes a huge amount of work, thought, skill, research and experience went into the buildup of these portfolios. Yet this performance is unusual…not to be expected and most likely not repeatable.

Why?

A portion of this outstanding performance came from skill, research, good judgment etc. yes.  The rest of the performance though came simply because we are riding a wave that would be described by most investment managers in three words…increased risk tolerance.

What most will say is “in recent years, investors have been willing to invest in areas that have greater risk”.

I have a different view.  The perception of investors and business worldwide is changing. The old view was that America and Europe were safe places to invest. Emerging markets had the higher risk.  I believe a new view is that emerging markets and economies are safer than the old.  This is supported by many facts.

The old economies are…old…brittle…slow…all the things that old means. The new economies are young and growing. That is the way things have always seemed to be.

A recent article by the well know investment analyst Jimmie Rogers stated that he was abandoning the US dollar.

My question is “what took him so long”?  The idea we have correctly supported in our reports for decades is “the US dollar is headed down and emerging markets are on the rise”.

History is pretty clear on this now.  Over the last year the emerging markets index (in US dollars) is up 58.99% compared 23.05 for the world index. Over three years the emerging market index is up 37.88% versus 17.27% for the world index.  The emerging market index is up 35.63% compared to the world’s index rise of 18.43% over five years.

Demographics and patterns of business support emerging markets as well.  The global economy grew 5% last year. Emerging economies are catching up because the mature economies are growing only 2.3% each year.  Yet there is huge room for more growth in poor countries. 1 billion people still live on a dollar a day. 2.5 billion people live on two dollars a day.  Western worlds cannot compete with low cost labor like that!

Plus emerging countries tend to be the big exporters now and 20% of all merchandise that is manufactured passes a border. World trade is growing at 10% per annum while world GDP grows at 5%.

This leads to three ideas.

First emerging markets remain a good value.

Second the US dollar may be weak.

Third green investing is in the beginning stages of a mega trend.

Gary

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