International investments are a sensible way to combat inflation and protect purchasing power. International investments can be leveraged with loans with low interest rates.
This series looks at international investments using Czech koruna as a currency to borrow at this time. It has risen to a very high level versus the euro which is the benchmark currency of that region. The interest rate of the koruna is low and there are many economic fundamentals in the Czech Republic that suggest that it will fall versus the euro.
The first three messages in this international investments series have looked at Czech loans invested in Eastern European bonds. See garyascott.com/international_investments/159.html
International investments in AAA rated British pound and Euro denominated bonds. https://www.garyascott.com/international_investments/161.html
International investments in US dollar bonds. See garyascott.com/international_investments/164.html
This message looks at an international investments portfolio based on a Czech koruna loan invested into a highly diversified basket of medium bonds denominated in mixed currencies.
Today's Czech financed international investments multi-currency portfolio has greater income but increased risk and capital gains opportunity from the potential ups and downs of the long bonds. This portfolio assumes that we invest $100,000, borrow $400,000 in Czech koruna and invest $50,000 in each of the bonds below. These bonds are considered safe but pay a higher yield because they are for longer periods of time. This means that if interest rates rise these bonds will lose value. On the other hand if interest rates fall, this bonds will appreciate in value.
|USD||3.875 15/02/2013 US TREASURY N/B||4.61%|
5.25 17/01/2011 HYPOBK IN ESSEN
|AUD||5.75 18/01/2011 GE CAP AUSTRALIA||6.63%|
|CAD||5.25 18/07/2012 EUROFIMA||4.13%|
|NZD||6.5 18/01/2011 RABO AUST BRANCH||7.24%|
|HUF||6 12/10/2011 HUNGARY GOVT||7.26%|
|5 24/10/2013 POLAND GOVT BOND||5.09%|
|6.5 12/09/2009 EKSPORTFINANS||6.38%|
|TRY||18 09/01/2008 ABN AMRO BANK NV||19.9%|
This international investments portfolio has an average return of 5.69% less the 3.875 loan cost. In short this portfolio earns $29,540 a year in interest. The loan cost is $15,500. The income left is $14,040 or 14.04% return on the original investment.
Each of the international investments portfolios we have reviewed in this series is based on an idea. The idea behind this portfolio is that if the global economy slows now, a number of major governments could reduce interest rates. If, for example, the US dropped the dollar rate and Europe and China follow to maintain currency parity, the falling interest could push up the value of these bonds.
This is a well diversified international investments portfolio with some chance of a forex and capital gain or loss. Future messages will look at other types of koruna loan based multi-currency portfolios. There are risks in every type of portfolio. The koruna could appreciate against a number of these currencies which would create a forex loss.
Bond values could also fall which could create a capital loss if the bonds are liquidated before maturity. Plus lenders could default because this portfolio has some AAA rated bonds but others are of lesser quality. Never leverage more than you can afford to lose.
You can gain more details about international investments from Thomas Fischer at fischer@JBPB.com
Our Borrow Low-Deposit High Multi-Currency Sandwich Educational Service tracks five multi-currency portfolios so we can learn from their rises and falls. The emerging markets portfolio we track is leveraged in Czech koruna. You get a free 16 page report on economic conditions for 2007 when you enroll in our Borrow Low-Deposit High Multi-Currency Sandwich Educational Service. Subscription is $149 for a year. Details are at https://www.garyascott.com/catalog/bldh/
You can finish this message about Chocolate and Ecuador dental savings with five great snapshots at https://www.garyascott.com/international_investments/171.html
May all your international investments with Czech loans make sure your profits are not checked.
P.S. Join us in the Ecuador sun this winter. Here is a schedule of the courses Merri and I will sponsor and or conduct.
Jan. 22 – 26, Mon.- Fri. Self-Fulfilled: How to Be a Writer & Publisher.
Feb. 20 – 25, Tues.-Sun. Import-Export Course.
Mar. 9 – 15, Fri.-Thurs. Expanded Super Thinking + Spanish.
Mar. 16 -18, Fri.-Sun. International Business and Investing Made EZ.
Mar. 19 – 21, Mon.-Wed. Andes Extension & Real Estate Tour.