Speculative Swiss


Here is a more speculative approach to the MultiCurrency Sandwich.

In these days of rapid change… government spending and inflation we need to continually look for ways to increase our income just to maintain our purchasing power.    Yet investments such as savings accounts, CDS and government bonds are paying very low returns.

Plus April is the month that begins the season with the lowest traditional stock market returns.

However there are quite safe ways to boost your yields such as the Swiss MultiCurrency Sandwich.  Here is an excerpt from my updated report Borrow Low Deposit High:

Borrow Swiss francs and invest the loan in a portfolio of diversified emerging bonds similar to Jyske Bank’s model bond portfolio.

2010 is the eighth year of Jyske’s model portfolio for emerging-market bonds. This portfolio was designed for long-term investors who want to diversify but be more selective than mutual funds.

Performance since inception is below.

2003 -2.1%
2004  14.7%
2005 27.5%
2006 2.9%
2007 15.1%
2008 -17.6%
2009 24.6%

This is an average return of 9.9% per annum.

The portfolio diversifies into five currencies Mexican peso (MXN), Russian Ruble (RUB),  Hungarian florin (HUF), Brazilian real (BRL) and Turkish try (TRY).

Here is the portfolio

Bond                                               Currency  Yield     Rating
10.00%   Mexican BONO  05.12.2024 MXN  7.87%    Baa1/A
6.25%   EIB                     11.03.2013 RUB    6.06%   Aaa/AAA
6.75%   HGB                   24.02.2017 HUF    7.22%   Baa1/BBB-
8.75%   IBRD                  15.06.2012 BRL     8.16%   Aaa/AAA
8.50%   KFW                  15.01.2013 TRY     9.14%   Aaa/AAA

The average yield 7.69%. The additional profit in the years above comes from the forex gain.

If one borrowed Swiss francs at this time the interest rate (at Jyske) is:

For loan amount $13,000 – $67,000) 2.275%
$67,000 – $134,000 2.125%:
$134,000 – $671,000) 1.875%
$671,000 and above 1.625%

If one invested $100,000 in this portfolio and borrowed $100,000 to invest in the portfolio, the income earned would be.

$200,000 X 7.69%   =                    $15,380

Loan cost $100,000 X 2.125% =      2,125

Income                                              $13,255 or 13.2% on the $100,000 invested.

If one borrowed  $200,000

If one invested $100,000 in this portfolio and borrowed $200,000 to invest in the portfolio, the income earned would be.

$300,000 X 7.69%   =                    $23,070

Loan cost $100,000 X 1.872% =      3,750

Income                                              $19,320 or 19.3% on the $100,000 invested.

19.32% return on a diversified portfolio of investment grade bonds is quite attractive at this time… especially considering that we are entering the season when the stock market is most likely to fall.

Remember never borrow more than you can afford to lose. The update of the report Borrow Low-Deposit High shows the risks… rewards and costs of this and many other MultiCurrency sandwiches.

This is currently offered at the pre-release price of $49, while it is being edited.  In the next week (or two), upon completion of the update edit the price will rise to $79.

Gary

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