Borrow Low Despoit High in Japan


This may once again be the time to borrow low in Japan to invest high elsewhere.

See how this five year chart from www.finance.yahoo.com may mean money in the bank… a fortune actually.

Multi Currency Chart

Excerpts from a recent BBC article entitled “Japan’s economic growth rate revised down” helps explain why a new fortune may be in the making with the Japanese yen…

Here is the excerpt:  Japan’s economy grew by less than first estimated in the final quarter of 2009, revised figures have shown.  The Cabinet Office said the economy expanded by 0.9% between October and December of last year, down from its initial estimate of 1.1%.\

On an annualised basis, economic growth was 3.8% in the quarter, down from the initial estimate of 4.6%.

The downward revision in economic growth is likely to increase pressure on the Bank of Japan to ease monetary policy.

However, with interest rates already down to 0.1%, it does not have much room to move. This is bad for an economy as it tends to make consumers and businesses delay major purchases in the expectation that prices will fall further in the future.

A slowing Japanese economy is just one reason why it may now make sense to borrow Japanese yen to invest elsewhere.  Borrowing low and depositing high is called the Multi Currency Sandwich and this investing technique has been a phenomenal way to invest for over 20 years.

Since the end of the US dollar’s link to gold the fluctuations between currencies have created some of the world’s greatest (such as George Soros’) fortunes.

multi-currency-seminar

See below why at our International Investing and Business Seminars we have delegates come to our house for afternoon tea or lunch.  Here I am arriving at our house with Don Childs (our US Spanish instructor) and delegates during our last Mt. Dora seminar.

This personal touch in part is because one great, very exciting Multi Currency Sandwich that lasted nearly two decades has been to borrow Japanese yen at a very low interest rate and reinvest the loan in higher yielding currencies.

Back at the end of 1988, the yen hit dizzy heights in the 120 Yen per U.S Dollar range. Yen interest rates dropped into the low 4% range. This created a classic sandwich opportunity. The yen was a strong currency at an all time high with a low interest rate. This is the formula that Multi Currency investment sandwich investors always looks for.

Now, twenty years later the yen is again a strong currency and the interest rate has fallen as low as 1.375%!

I have been writing and publishing information about international investing for nearly forty years (since May 1968 to be exact). Fortunately I stumbled across and wrote about the Borrow Low-Deposit High Strategy at an early stage so the original readers of my report “Borrow Low Deposit High–How to Use the Multi Currency Investment Sandwich” have been able to borrow yen at low rates and redeposit the loans in other currencies at much higher rates (without forex loss) for over 20 years!

This is not a fast trading technique and in fact most positions are aimed with a five year horizon…pretty sleepy compared to people who trade currencies (an entirely different approach). Yet for most of us, slow and sleepy mean SAFE! However the Borrow Low Deposit High tactic can be really profitable.

How sleepy and safe?

Imagine this. Over the past 20 years, the cost of a Japanese yen loan has averaged about 2%. The US dollar interest rate has averaged 4% over this same period.  If one invested $100,000 in safe US dollar bonds or CDS held in huge, safe banks for this period and used this loan as collateral to borrow $400,000 worth of yen to reinvest in safe US dollar CDs or bonds, they have earned an average $12,000 a year and turned a safe 4% investment into a safe 12% investment. They added an extra $144,000 of income (on a $100,000 investment) over the 20 years!

Investing for 20 years in US dollar bonds or CDs is about as sleepy and safe as one can get.

Yet many smart Multi Currency Investment Sandwich investors have done much, much better.

How much better?

Take for example one year’s review of three Borrow Low Deposit High model portfolios we created and tracked.

In 2007 these portfolios rose:

Dollar Short +48.19%
Emerging Market +122.62%
Green 266.30%

Is this enough better?

Let me hasten to add that this type of performance is not guaranteed.   Do not ignore the fact that as sleepy and safe as Borrow Low-Deposit High can be that there can also be risks.  Had we invested in these same portfolios above in 2008, they would have lost a lot of money. Here is how they performed in a bad year.

Dollar Short Portfolio -35.21%
Green Portfolio -56.08%
Emerging Market -73.79%

The price for extra performance in leverage is added volatility and risk.

Yet we saw in yesterday’s message that one portfolio in 2009 used Borrow Low tactics to invest mainly in bonds and earned 66% profit in just nine months!

Tracking these portfolios for many years has taught us some valuable lessons.

For example catch areas of likely growth where a borrowed currency is hedged to the invested currency.

For example we watched Eastern European markets enjoy great growth at a time when the Swiss franc was loosely linked to the Eastern European currencies.

In that year, the Jyske Invest Eastern European Equity Fund rose from $51,000 to $76,138, a return of nearly 50%.

Had you leveraged this loan two times with a 2.75% Swiss franc loan, the return on a $50,000 investment would have been over $225,000 in one year.

The Czech koruna was also loosely linked to the other Eastern European currencies.

The Jyske Fund above performed really well over five years, up from 110 euro to 500 euro since 2001. That was an increase of 3.54 times. If you had invested $100,000 and borrowed $200,000 more in Czech koruna at 3.75% and invested in this fund for the past five years the initial $100,000 would now be worth over a million dollars! Your loan costs would be $37,500. Your profit on $100,000 after interest would be $1,024,500 on $100,000 of cash invested.

Plus because of the loose link, your currency risk would have been reduced. How much better can we ask than that?

Now two golden Borrow Low Deposit High opportunities may be on the horizon.  Japanese yen loans invested in China and Swiss franc loans invested in Russia.

Multi Currency Chart

Japanese yen loans have been one of my favorite money making vehicles for over 20 years. I first borrowed yen at 111 around 1988.  Then  the yen strengthened (bad news for a borrower) to 79!    My paper losses looked formidable, yet I held on and watched the yen tumble all the way to 146 yen per dollar (shown in chart above) by 2002.  I exited and my forex profits were huge… plus I had been earning the positive carry (difference between the loan cost and investment return) for all the years I held the loan.

Please let me repeat. The formula that Multi Currency investment sandwich investors always considers is a strong currency at an all time high with a low interest rate.

The yen is almost there… too strong versus the US dollar in the perfect position to borrow!  Plus because the Chinese yuan is likely to rise versus the US dollar, the yuan is likely to rise versus the yen as well… which makes the idea of investments in China financed with yen loans especially strong now.

However before you make these investments, please let me remind you of several important lessons about risk we have learned in the past two decades of making and tracking Multi Currency Sandwich portfolios.  The longer you can hold a position the less likely you are to lose.

One lesson for example is that many portfolios that lost short term became profitable if held for the year. The lesson is that when a properly constructed portfolio is leveraged and diversified, it can be safe and profitable regardless of the underlying idea, if an investor sticks to his beliefs and does not panic during short term drops.

We also learned that past performance is no guarantee of future profits. The profitability of the portfolios changed dramatically based on varying entry and exit points! This reminded us that such high performance may not materialize for all and that we must plan our profit and loss potential.

These and other important lessons, plus the upcoming Japanese yen potential are why I am updating my report Borrow Low Deposit High. This report teaches how to Borrow Low & Deposit High and helps you learn the risk as well as the potential rewards.

This is also why we maintain close contact with Jyske Bank, Denmark’s second largest bank. Denmark is rated by Standard & Poor’s as the safest country in the world to bank in. Jyske Bank is the only bank we know that specializes in the Borrow Low Deposit High strategy. Jyske Bank is also one of the leading currency traders in the world. Unlike most banks (that trade only eight hours a day) Jyske maintains a 24 hour trading service. They have been our bank for over twenty years and help us stay informed about global equity markets, plus global currency parity and interest rate trends so we can learn from portfolios that are real time. What you learn from is actually happening as our service unfolds.

More importantly Jyske Bank provides a stable and safe institution for those who wish to employee a Borrow Low-Deposit High strategy based on what they learn.

Our emailed Borrow Low-Deposit High report can help you learn how to expand your profits with up to 400% loans just as our reports have helped thousands of readers do over the past twenty years.

You can learn why this profit is available in my new updated “Borrow Low-Deposit High–How to Use the Multi Currency Investment Sandwich” emailed report. This email report explains everything you need to know about how to create and invest in the Multi Currency Investment Sandwich.  (See details below.)

Tens of thousands of readers have purchased this report, and several updates, since it was first published in the 1980s. You however can have the most up to date edition at a $30 savings.

I am updating Borrow Low-Deposit High now. When the new update is complete it will be offered at $79.

This report will include ideas on were to invest in China and Russia (both neighbors of Japan)  now.

Finding the right Chinese investment requires care.  Take the WisdomTree Dreyfus Chinese Yuan Fund (Trading symbol CYB) as an example. This fund seeks to achieve total returns reflective of both money market rates in China available to foreign investors and changes in value of the Chinese Yuan relative to the U.S. dollar.

The fund invests in very short-term, investment grade instruments, so has a very low yield. However its yield since inception is 2.26% so this fund might pay the cost of the loan.

However the ideal is to borrow low-invest high, not borrow low-invest low… so we’ll be looking at Chinese investments with higher yield potential in the report.

You do not have to wait and miss this yen opportunity, buy our report “Borrow Low-Deposit High” for $49.  I will email it to you immediately… plus when the new update is complete, I’ll email that to you also… FREE.

The report helps you see why and where to invest and learn why and how currencies and interest rates rise and or fall.

Finally, as always you are protected by our 30 day completely satisfied or your money back guarantee

Borrow Low Deposit High – How to Use the Multi Currency Investment Sandwich… click here to get this emailed report for only $49.

Gary

Save $100 more. There is another important benefit you gain when you order my emailed report “Borrow Low-Deposit High”.  You can save $100 at the next Jyske seminar where I review this tactic.

Share strategies with me in California and Save.

I speak at the Jyske Global Asset Management’s April 30 – May 2 Foreign Exchange Investment Seminar in Laguna Beach, California.

The normal seminar fee is$499 or $750 for two.

However Jyske is providing the same discount to our premium subscribers (including those who order Borrow Low – Deposit High) as to their clients… $399 single and $599 for a couple.  You save $100…even though the emailed report “Borrow Low Deposit High” is only $49.

Order “Borrow Low-Deposit High – How to Use the Multi Currency Investment Sandwich”… click here to get this emailed report for only $49. Save $100 on JGAM’s California seminar.

See more on the JGAM California seminar here.

If you have questions about Jyske’s seminars contact Thomas Fischer of JGAM at fischer@jgam.com

See other ways to fight inflation here.

Read the entire article Japan’s economic growth rate revised down


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