More Bonds with High Yields

by | Oct 25, 2001 | Archives

Short Term Polish Government Bonds Pay 11.99%

A recent message outlined the strategies of top value investment manager Jeremy Grantham. He suggested that one of the best investing values today is emerging market debt. Thus we have been reviewing bonds abroad. Philippine bonds, Argentine bonds, Dominican bonds, Mexican bonds and SAS Airline bonds. This message continues our review of international bonds by looking at eClub advisors Jyske bank's research on Polish bonds.

One of the interesting features in this market is the inverse yield curve which means that the shorter maturing bonds pay the highest interest. The short term bonds can be useful to balance the maturity relationship of a portfolio where other issues are mostly long term.

These bonds can also be added to a broader portfolio of shares used in a multi currency sandwich to give broader geographical and currency diversification. the biggest risk here is the potential devaluation of the Zloty.

See Jyske Bank's Polish data in this PDF file

Several readers have asked me why I so often refer to Jyske and the letter recently received form one reader explains why.

“Gary,Thanks for recommending Jyske Bank to me. Their multi-currency sandwich is working very well, and I'm staggered at the high level of personal service I get from my account manager. She frequently makes suggestions to improve the portfolio, and to avoid any potential problems. They get full marks from me. While not wanting to broadcast to the world what I'm doing, I am happy withyou using the first paragraph (without my name) when promoting Jyske Bank as I feel they really deserve full credit. Kind regards,”

I personally bank in seven countries with nine banks and refer to all of them from time to time. Yet I have found myself gravitating more and more toward Jyske for several reasons, their sense of service being the first. They also have a much lower fee structure than many of the banks I use. Plus I find the interest rates they offer on CDs and especially their #1 savings account very competitive.

Another letter recently received outlined a major misunderstanding about international banking I would like to clarify.The reader wrote:

“Gary Nothing you offer is any good for anyone withless than $100,000 that they don't need in the foreseeable future. This means most people, including young people starting out. The “offshore industry” — offshore banks, trust and IBC formation services, information purveyors, etc. — has made a huge mistake in catering to only the “carriage trade” instead of building a financial and POLITICAL constituency by also establishing a retail trade catering to “Joe Sixpack” (in the U.S.) or “Johnny Lunchbucket” (in the U.K.), etc. Now that the screws are being tightened, even the “carriage trade” is being squeezed out. Only the VERY WELL POLITICALLY CONNECTED will have remaining any semblance of privacy. YOU will be out of business very soon.”

I replied:

Dear International Friend, Most of the bonds I have been writing about over recent days have aminimum purchase of $1,000.”

To which the readers responded once again:

“Gary:But, what are the requirements ($ and red tape) to OPEN AN ACCOUNT with the vendors of those bonds? And what are the requirements ($) to ESTABLISH AN OFFSHORE STRUCTURE to allow purchase of the bonds (orwhatever) by a U.S. person and to protect the capital and any gains? What are the (exorbitant) fees involved? Now, if you say, as you seem to be, that the asset protection “game” offshore is over, and it's now just about “opportunity”, we might as well keep your money at home and get reamed there rather than put it offshore and get reamed at home, anyway.

My reply is one that I want all of my friends worldwide to read.

“Jyske opens accounts with a minimum of fuss and their minimum is just thousands. You can start a Multi currency sandwich for as little as $16,000. No structure ie trust etc. (I certainly do not use any such structure) is required. Jyske's fees for buying bonds are very low about 1/4 percent and there is very little annual fee for holding the bonds.

The reason for banking abroad is first service. Ask your local bank to fill you in on the latest yields on Polish or SAS bonds or see if they will lend you Japanese yen and Swiss francs! But in addition if one is concerned with asset protection one gains enormous asset protection by simply having wealth held in a country outside one's own. It becomes very difficult for law suit judgements to be enforced and makes seizure of any sort difficult. There are few tax savings left through the use of overseas structures (except in some special instances where overseas life insurance policies and trusts are still excellent-for larger amounts). For the average investor (of which I consider myself) the benefits are substantial and the costs very low. I hold most of my pension and savings in safe banks outside the country where I live and use only a US limited partnership to add asset protection for my assets within the U.S.

Modern communication has made international baking easy and every investor with a few thousand dollars or more to protect should consider diversifying part of their wealth in a second safe country or more.

Until next message, good global investing and business!