Here's why it might be a good idea to consider borrowing Swiss francs. I've recently made two large moves in my portfolio that you should be aware of now. In March of this year I outlined how my portfolio was diversified. https://garyascott.com/archives/2003/03/28/793/
At that time:
36% was in US dollar CDs, bonds and one share.
28% was in real estate (US and Ecuador)
21% was in Euros or European currencies
6% was in Australian and NZ dollars
4% in British pounds
5% gold and silver
A more exact breakdown is shown below.
There are three significant changes. First, I've borrowed about 5% of the value of the portfolio in Swiss francs at an interest rate of 3%. I invested part of this in tax lien property paying me nearly 8%. I make the spread for doing nothing. In the case of the tax lien property I make about 5% extra per annum. You can read more about tax lien property https://garyascott.com/tedthomas/
The second investment I made with the loan was in Euro bonds. This is because I believe that the US dollar and the Swiss franc are too strong short term, but will weaken in the medium term.
The 21% of my portfolio that is in Euro and European currencies performed really well as the euro rocketed from 80 clear up to 118 per US dollar. However the US dollar has strengthened recently. In fact my bankers from Jyske wrote to me:
“An important exchange rate to watch is the Euro versus the USD. It looks like the American stocks have started a positive performance and this will result in an inflow of funds into US and this will also automatically increase the value of the USD against the Euro, so I can only recommend that you buy USD versus CHF at these levels. We have a target in the short/medium term of 140,00.”
However, since I hold so many Euros already, borrowing the Swiss franc protects my existing profits because the Swiss franc is too strong versus the Euro (though not the US dollar). Jyske says this about the Swiss franc:
“The Swiss National Bank is very concerned about the level of the CHF against the Euro and they will do whatever they can in order to weaken the CHF against the Euro. With the current expectations, it is a good idea to be long euro and short CHF. Our target on the cross rate is above 160,00 on the longer term. The Present rate is 153,50.
So borrowing Swiss francs add extra income to my portfolio, but secondly protect my Euro position in US dollar terms. This is a perfect hedge to consider right now if you are holding Euros. You can get an update on my portfolio next month at Jyske's international investing seminar in Copenhagen. Why not join Merri and me there? It's a beautiful country and beautiful weather that time of year. Details are at https://garyascott.com/data/jyskebank2003.pdf
The third significant move Merri and I have made is an investment in Natural Awakenings, a leading publication in the Wellness Revolution. My view is that the stock market is in its short term 18 to 36 month consolidation during a ten to fifteen year bear trend. This means that buying more shares now still entails great risk.
Second, bonds are very expensive right now, but short term yields suck. So where to go? Real estate could be dangerous too (and I already have 28% there). So I have been recommending investing in one's own small business. This is a good time to increase business as high unemployment means you can build with good people right now. Plus I have been suggesting investing in the Wellness Revolution for some time.
Recent message have previewed several small businesses that Merri and I have looked, but we have found an astounding opportunity in this magazine which is the largest circulation publication of its kind in the wellness industry. (More details at https://garyascott.com/archives/2003/07/21/869/).
In summary, my portfolio remains much as it was in March except for the changes SHOWN IN CAPS IN this portfolio outline below.
Approximate percent of portfolio Currency Investment
2% Danish kroner Jyske Bank shares
2% US$ Bank of Florida shares
12% US$ Savings Accts US dollars
12% REDUCED TO 7% - 5% IS INVESTED IN NATURUAL AWAKENINGS
2% US$ Nederlands Gemeenetn bonds
2% US$ Council of Europe Bonds
2% US$ Rabobank bonds
3% Nowegian kroner Norway Gvt Bonds
2% Australian $ LB Rhebland Phalz Bonds
2% Canadian $ Canadian Generic Street bonds
2% British Pounds British Telcom bonds
1% US$ US Treasury Coupon
3% Danish kroner Great Belt bonds
2% New Zealand $ Swedish Export Bank bonds
2% British pounds CD British Pounds
2% Euro CD Euro
6% Euro Dresdner Bank bonds
4% US$ Caterpillar Bonds
4% US$ Deutch Ausgleich bonds
4% US$ European Development bank bonds
4% US$ European Investment bank bonds
3% Mix 12 growth shares
28% Real Estate
2% Mix Current
OTHER PORTFOLIO CHANGES
- 5% SWISS FRANC LOAN AT 3%
4% US$ TAX LIEN LOANS
1% EURO BONDS
(For more details on how to obtain the Swiss franc loans write to Thomas Fischer at Jyske bank at FISCHER@jyskebank.dk)
Tomorrow's message talks about some other benefits of the investment I just made in publishing. Don't miss it. Until then, may you and your investments be inspired.