Some investors make more money spotting currency distortions rather than finding good value in shares. I do and this is why I want to share two ideas right now for the multi-currency sandwich. I am sending this ideas as a holiday gift because a full circle has turned. In 1994 I recommended borrowing Japanese yen and investing in Mexican pesos. Investors made fortunes. Since that time many sandwich opportunities have come and gone. Each offered amazing returns (for example the Japanese yen-South Korean won sandwich earned up to 85% in one month in 1998). Now the yen-peso sandwich is attractive once more. Here is how the position currently works. You borrow yen at rates as low as 1.75% to 2.00%. Mexican peso three month government bonds yield 18%. US$100,000 worth of CDs, bonds or shares available for speculation provides collateral sufficient to borrow US$400,000 worth of yen converted to peso bonds. Here are the details:
Amount Investment % Earns Amount
US$100,000 Original US$ CD Used as Collateral 7.00% US$7,000
US$400,000 Mexican peso government bonds 18.00% US$76,000
-US$400,000 Yen loan 2.00% -US$ 8,000
The projected return on the US$100,000 is 75% or total earnings of US$75,000
Now there are other attractive multi-currency sandwich speculations such as Swiss franc loans at 4.75% (or Euro loans at 6%) invested in Polish Zloty CDs at 18.25% For details, study “Borrow-Low Deposit High”, You can get more on this by going to www.jbpb.com (website of Jyske Bank a specialist in this type speculation).
If you don't want to invest in pesos or euros or any other currency (because you fear that all currencies might fall) consider borrowing yen and investing in real estate. Take for example the real estate opportunities in Ecuador. I have invested heavily here because Ecuador is less than four hours from the U.S. and a North American presence is growing with the new military base in Manta. Law and order are good. The country has dollarized which will check inflation. Leaving the coast you run into undulating green hills as the ocean view fades into a white haze. Further on, huge green valleys ripe with young bananas flow through craggy mountain scenes. Ecuador has 12 hours of direct sunlight 365 days a year but it is not hot there. Yet prices are so low right now you can buy brand new $21,000 beachfront condos in a coastal village described as being like Puerto Vallarta in the 50s (and just a short distance from the new U.S. military base). You can buy condos in Ecuador's sophisticated cosmopolitan capital for US$20,000 and even less! Here is the interesting twist. You can borrow yen to buy the condo! Current interest costs are such that a $22,500 ocean front condo would cost about $35 per month.
Ecuador is just one country among dozens where you can use low costs loans in this way.
Here is the final thought I hope you will carry into the New Year. In the last three messages we have looked at how our nations may be led into the new millennium by fools. We have seen how Wall Street may crash and The U.S. dollar fall like a rock. Yet here we can see that these events are not problems. They in fact create opportunities. There is no good or bad in this world, just positive and negative and without both there is no motion, no movement, no current. So in 2001 I wish that everything you see is filled with abundance. I hope in every sound you hear a sweet symphony. May every touch for you feel be gentle like a fresh breeze and every taste delicious. Though most of the world may write and talk about their thorns, never, ever for the next 365 days forget to also smell the roses.
Merri and I wish you the happiest of holidays, eternal abundance and never ending wealth.