The Emerging Asian Portfolio is now up from + 84.18% at our last update August 31 to +91.40%.
(All the total performances here are from October 21, 2005 when we initiated this study).
The Emerging Market Portfolio has dropped slightly from +34.60% to +34.13%
The Dollar Hedge and Dollar Short Portfolios remain just barely in the black
The Dollar Short is down from +1.49 to +0.16% and the Dollar Hedge down from +1.43% to +0.79.
The Dollar long dropped slightly further from -0.7% to -1.27%
If we look at all five portfolios as one with equal weightings at this update they have risen to an average of +25.37% per annum, slightly ahead of our projections.
One really important lesson gained from this year’s real time study is that the idea is very important.
The idea of investing in Asia was really a good one. Investing in emerging currencies was good as well.
The idea of basing any investment around the dollar was not so hot.
A second lesson though was that the character of the portfolio matters as well. The dollar short, long and hedged portfolios were speculations too safely constructed by a wide spread diversification in emerging market bonds. The diversification did not protect against the systemic risk of all emerging markets crashing at once. They did.
Then the bonds did not have enough oomph to pull the portfolio back into strong recovery territory. The emerging currency portfolio was able to recover because of the emerging equity funds it holds.
So we are looking at building several new portfolios and tracking them for the next year.
#1: A more deeply short the dollar portfolio. This portfolio will be more aggressive against the greenback with a 100% dollar loan and no US dollar investments.
#2: A more broadly diversified portfolio. Let’s see if we can build safety and have high returns too.
#3: The Swiss Samba. Let’s borrow the dull Swiss franc and put the loan in hot Latin investments. This should be fun!
#4: Czech Mate Portfolio. We’ll borrow the Czech koruna and invest in Eastern Europe . Be sure to watch this week’s messages at Garyscott.com for more thoughts on this.
Until next update may you always borrow low and deposit high!