There are fundamentals that suggest danger in the U.S. dollar. Here is another place to go.
Yesterday's message reviewed seven fundamentals of U.S. dollar weakness and shared some suggestions of alternatives currencies in which to invest.
At our recent International Business Made EZ course in Quito, Thomas Fischer of Jyske Bank outlined a different non U.S. dollar strategy in the multicurrency sandwich.
His suggestions were to borrow one third yen at 1.5%, one third Swiss francs at 3.2% and one third Singapore dollars at 4.05%. The loan should than be invested one fourth in 208 SAS Airline bonds yielding 7.5%, one fourth Polish zloty CDs paying 9.04%, one fourth Icelandic kroner CDS paying 9.09% and one fourth Mexican peso short term bonds paying 9.50%. The total return on this investment (assuming no foreign exchange fluctuation and before fees) would be 30.99% per annum.
To understand this let's look at an example of having an existing SAS 2008 bond yielding 7.5%. this would be used as collateral to secure an additional $40,000 of loans in the three currencies show. Ere is how the investment looks.
Amount Asset Yield Annual Return
$10,0000 Existing SAS Bond 7.50% $750
$10,000 Added SAS Bond 7.50% $750
$10,000 Polish Zloty CD 9.04% $904
$10,000 Icelandic kroner CD 9.09% $909
$10,000 Mexican peso bond 9.50% $950
Total Annual Earnings $4,263
Less Loan costs
$13,333 Yen loan -1.50% $199
$13,333 SFR loan -3.20% $426
$13,333 Spr$ loan -4.05% $539
Total Interest Cost $1,164
Total Return Before Forex and Fees $3,099
Or 30.99% on the $10,000 at risk
Until next message, good global investing and business.