Multi Currency Portfolio Data Good

by | Jul 11, 2007 | Multi Currency Investing

Multi currency portfolio data just came from Thomas Fischer of yske Bank when he sent the latest Multi Currency Portfolio data and wrote:

“Hi Gary , Our latest up-date – the green sandwich is still very tasty. You would have to look long and hard to find a better performing portfolio anywhere in the world. Thomas”

Here is the latest review of the five multi currency portfolio’s we have tracked since November 1, 2006 (eight months).

Portfolios 2007Apr 30May 11 June 1June 15June 28 July 10
Swiss Samba26.60%32.86%41.46% 44.13%44.80%45.225
Emerging Market32.46% 31.13% 40.38%42.72%54.31%62.77%
Dollar Short30.79%30.44%31.84%29.34%33.81%38.85%
Dollar Neutral25.58%28.54% 32.26% 33.29%37.64%38.59%
Green 135.11%142.42%170.33%173.58%178.28%201.14%

The performance of all five portfolios is above average. In fact they are all astoundingly good.

Yet interestingly enough the main reason for multi currency investing is not incredible performance, but safety. Traditional investment theory says that achieving stability and safety comes from the sacrifice of performance. This has certainly not been true with our multi currency portfolios for the past two years.

The five portfolios we created and tracked with Jyske Bank last year also had much better than average performance.

US Dollar Long 9.04%

US Dollar Short 10.43%

US Dollar Hedge 11.46%

Emerging Market 42.93%

Asia Emerging Market 114.16%

Yet financial stability has always been our first goal. We live in a global economy. Every consumer spends money around the world. Everyone is a multi currency spender.

We also live in a world where most governments believe spending and national debt that can ruin or at least weaken a currency. These are also times of huge demographic and industrial shifts. Developed economies face stiffer and increased competition from emerging economies. Trade balances as well as debt are shifting everywhere. The bulwarks of the global economic system, the US , Japan and Germany are all now huge borrowers.

The foundations of the global currency system are built entirely on soupy, shifting sands.

All of this means no one currency can be used as the ultimate form of financial security.

We as multi currency spenders need to be multi currency investors. This belief is a foundation of our portfolios and for the last two years has paid off very well. However we never want to forget the summer dip last year when investors suddenly became concerned with risk. Our best portfolios dipped badly and quickly then. We see conditions that could create a similar scenario now.

Risk aversion puts pressure on the emerging markets and though this may not be a correct sentiment, worries about American sub prime mortgages cause investors to sell equities and invest in US dollar bonds.

I believe this is exactly the wrong thing to do long term, but right now equity markets globally are under pressure and US 10-year bonds are gaining strength. Their yield rose from 5.14% to 5.03%, the largest daily yield decline in six months.

Higher yielding emerging equity bonds suffered the most. Weak economies such as Argentina , Venezuela and Ecuador suffered while more solid emerging markets such as Chile , China and Hungary were hardly affected. Fortunately the Swiss Samba, Dollar Short and Dollar Neutral Portfolios hold solid emerging securities and were not affected. They continued to rise though we cannot ignore the possibility that the current risk aversion sentiment will spill over into higher quality countries.

Watch this momentum over the days ahead. Stay in touch with your portfolios!

The lesson to be learned is that growing risk aversion can actually benefit some emerging market portfolios, our Emerging Market Portfolios being the example. This portfolio holds mainly high end emerging equities (80% is in China , India , Asian and Eastern Europe ) and is leveraged entirely in Czech koruna.

Only 20% of that portfolio ( Turkey equities) is in the weaker segment, so this portfolio is less likely to sag during and short term risk reducing market moves.

Yet the risk aversion could also weaken the koruna and create forex profits in that portfolio.

The most recent minutes of the Czech Republic Central Bank showed that the bank is fighting inflation pressure in the economy. The CZK is weaker than the central bank had expected. The notes of this meeting suggest that if the interest-rate differential to the euro zone does not narrow then CZK will continue to weaken.

Currently the $100,000 loan in this portfolio would cost $104,732.59 to repay. This means that though this portfolio is up a strong 62.77% in eight months and 10 days, it is carrying a 4.7% forex loss on the loan. A shift in the koruna parity could add some quick, extra profit.

Until next update, good global investing to you.


See attached file.

We will analysis these five portfolios, plus introduce the 2008 portfolios at our next two International Investing and Business Made EZ courses.

Join us September 14 – 16, 2007 in North Carolina ,

Or come to Ecuador November 9-11. See