Recent messages have looked at ways to invest in these times of turmoil. Here is another tip.
One way to invest is in distortions, such as in Argentina. EClub advisor Teddy Christiansen gives us an idea when he writes:
“Today I bought some 8% Argentine bonds denominated in Euro maturing in 2008. I paid 20,000 Euros for 100,000 Euros worth – 20 cents on the dollar. In other words a $1,000 bond costs $200. Last week they were down to 18, but the IMF settled some loans for Brazil and Uruguay, which was considered as a good signal that this could be an upcoming solution for Argentine as well.
“The 8% coupon is now 0, and I am not sure how it works when and if they start payments again. I would be satisfied if I get the nominal value in 2008. “In other words Teddy's $200 Euro investment would return him $1,000 in six years or 400% profit or about 66% per year. Then Teddy said:
“They could prolong the bond repayment for another 8-10 years, but if so what I would receive is the bond's face value of EUR 100,000 plus the accrued interest which would raise another EUR110.000. This creates a nest egg of 210,000 Euros 15 years from now. Even this delay means that my investment of EUR20,000 would not be not bad at all. Perhaps they will have to use another solution paying 50% of the bonds out of IMF funds. Then my Euro20,000 becomes worth EUR50,000 in a short time. This is still 150% return.
“These are my chances – Gary, I remember last year at your farm we were discussing the economic future of Argentina – it is not only their own problems – but a problem that concerns us in the Western World as well. A total default would cause a total catastrophe for all the Emerging countries and their possibilities of doing partly their own finance. IMF would run out of funds/finance if this would happen. So I am confident that somewhere in this I will profit.”
You can reach Teddy at www.garyascott.com/data/teddyintro.pdf (Adobe Acrobat file).
Until next message, good global investing!