Multi currency portfolios recover.
Here is the growth of our five multi currency portfolios since last November.
|Portfolio 2007||Dec 29||Jan 30||Feb 6||Feb 26||March 8||March 30|
We can see a sudden recovery in part because markets have recovered and in part due to the US dollar’s fall.
Emerging markets recovered nicely. For example on March 8, the Jyske Invest Chinese Fund rose from $54,488 to $59,289. The Jyske Invest India Fund rose from $46,418 to $48,821. India has not recovered totally however. $50,000 was the original investment so it is still in a loss position. The Jyske Invest Eastern Europe Fund is up strongly also from $51.397 to $56,479.
Though the US dollar had an impact in causing the emerging market values to rise, this weakness also pulled the performance of the portfolio’s valuation down.
Since the portfolios are calculated in US dollars, dollar weakness will make the loans appear to cost more. For example the capital payoff for the mixed currency loan in the US Dollar Neutral Portfolio on March 8 was $203,628. Now it has risen to $205,190. The Czech koruna loan payoff cost on March 8 was $102,796. Now it is $104,770. This shows how fast currency shifts can affect the value of a portfolio.
The dollar’s weakness can especially be seen by comparing the values of the US Dollar Neutral versus the US Dollar Short Portfolios. The investments are identical. The only difference is in the loans. The US Dollar Short Portfolio is leveraged with a US dollar loan. The US Dollar Neutral Portfolio is leveraged with a mixed loan of 20% yen, 50% Swiss franc, 15% Czech koruna and 15% euro.
The US Dollar Neutral Portfolio has a lower interest rate but the performance variation is due to the rising cost (in dollar terms) of the non dollar loans in the US Dollar Neutral Portfolio.
I mentioned in the last update (#10), “This week markets look like they may be recovering. I doubt this will draw me back in. Watch my daily ezine messages today and tomorrow as they review Keppler’s value analysis which will give us better indications.”
Since that statement Keppler has suggested that China and India are currently overvalued but that in the long run emerging markets as a whole still have plenty of upwards potential. However the good value markets are Brazil , Korea , Malaysia , Poland , Taiwan , Thailand and Turkey . China is rated neutral and India is rated as a sell overvalued market.
Thus when I come back into equities I will be looking at more specific markets then what is in the broad based portfolios we are tracking here.