Here is their performance since November 1, 2006 from last week’s review and now just a week later.
|Portfolio||Two Month Appreciation||One Week Later|
Why, I ask…did some of these portfolios jump so much in only a week? This is the other reason I have sent this report early. When performance erupts upwards at such a rapid pace, without apparent reason, I become nervous. I like to know why I am making better than average profits. If I cannot see some positive reason why, my concerns grow that something may be out of balance.
One reason for the sudden increase is a US dollar bounce. We saw in MCPU update #3 that a falling US dollar was holding the Swiss Samba performance down. A look at the loan cost of each portfolio shows that over 1% of the one week samba increase came from a strengthening of the dollar. The samba investments are in currencies linked to the greenback and thus a rising dollar helped the value of these investments increase.
The Green portfolio gained from the stronger dollar but in a different way. The green loan is in yen which weakened thus effectively reducing the loan (in US dollar terms).
|Loan Costs||Last Week||Now|
|Green||$ 199,683||$ 197,400|
|Samba||$ 154,853||$ 153,947|
|US $ Neutral||$ 204,946||$ 204,149|
|Emerging Market||$ 104,882||$ 105,903|
|US Dollar Short||$ 202,215||$ 202,215|
However the Emerging Market Portfolio rose like a rocket ship despite the fact that its Czech koruna loan actually costs more due to an appreciating currency koruna.
This growth comes from the big appreciation of the Jyske Chinese and Eastern European Equity funds held.
These emerging markets, China . India , Latin America and Eastern Europe continue to sky rocket.
It is nice to see such wonderful profit…but in times of such explosive profit we need to also take care. Let’s not forget the ups and downs of the Asian Emerging Market Port5folio we tracked for 2006.
The portfolio rose + 75.19% from November 2005 to March 2006. Then the second worst emerging market plunge of the decade began. The portfolio dropped – 44.91% from April till August before finally recovering to end with a +114.16% return.
This is why we remind you again and again do not invest more than we can afford to lose.
I wish I could say we are brilliant investment pickers and these rises will go on forever. More likely we have the right idea, are on the right track and were lucky in the timing. We however have enough sense to know that really fast appreciation like this can often be followed by corrections.
The lesson learned here is not to just jump into a portfolio just because it is hot. Choose ideas you believe and stick with them to the limits of lose you can afford and have set.
Merri and I wish you a Happy New Year. We look forward to sharing 2007 with you!
P.S. This unexpected early update also gives me one last chance to renew you annual subscription at $99 a year before it rises to $149. You can lock in the low cost subscription up to five years at this price.
To renew go to https://garyascott.com/catalog/bl_renew/
We have already set the computer to the new $149 per annum rate but we are processing all renewals by hand through January 1st. We will only charge you credit card $99 per annum for each added year if your order reaches us by January 1st. Under “quantity” type in the number of years you wish to renew, one through five. Then click on “check out.