Multi Currency Portfolios Crash

by | Nov 29, 2007 | Archives

Multi Currency Portfolios Crash and here are excerpts sent earlier this week to my Multi Currency Portfolio subscribers.

Here is the one month performance of the six portfolios that Jyske Bank created with our direction and that we are tracking for educational purposes beginning November 1, 2007.

Portfolios 2008 Nov 16 Nov. 27
Infrastructure -16.46% – 35.98%
Emerging Market -13.33% – 29.01%
Danish Health -13.32% – 49.54%
Green – 10.86% – 38.82%
$ Short Non Leveraged – 5.26% – 9.66%
Blue Chip – 2.78% – 10.58%

Thomas Fischer wrote: Hi Gary,Attached is the latest up-date. The portfolios have been hit hard by the market turmoil and the increased risk aversion which has strengthen the carry currencies. The Danish health has dropped 50% increasing the leverage to 4.2. Under normal circumstances (live action) we should either reduce the positions or request further funding. The “best” performing fund is the non leveraged fund. Again we learn something which we all tend to forget in the good times “there is no such thing as a free lunch. Thomas”

Here is my reply to Thomas. “As crazy as this sounds I am happy for this drop now because it will help readers learn that markets do not always just go up. We have had two similar drops in the last two years but they were masked by the phenomenal prior upwards performance. All the reversals did in 2006 and 2007 was slightly diminish, for a short time, really great performance. At best the crashes of 2006 ad 2007 made great performance look slightly less good…for only awhile.

Then each time the markets rebounded before any damage was done to the statistics and investors forgot and perhaps ignored our warnings.

This time because the correction is taking place right from the get go, readers can see the loss potential better. If we had one more year, like the last two, readers would stop believing in the down side and ignore the risk. This visible, sudden identifiable loss is more meaningful as an educational tool.”

My warnings on August 17, 2007 said: “Such historical measures are so inexact that we cannot predict just from them what will happen in the short term. The numbers are close enough that we could be entering the fourth sub cycle down (similar to 1976 to 1978). If so expect a sustained drop in markets for two to three years.”


Our September 21, 2007, message said: “equity markets dropped again violently last month. Now these markets have recovered again. Yet this may be a last gasp party. This drop of interest rates at a time when inflation is beginning to soar could lead to a rapidly falling US dollar. We can see from the chart here that the dollar has done almost nothing but drop for 40 years (that chart is below). Yet much more dollar dropping could be in store.”

The October 14, 2007 message stated: “Periods of high performance are followed by times of low returns. We never know for sure when an upwards cycle will stall. Fundamentals look good for a bright 2008 in emerging and equity markets, but this can change quickly so to give our readers a better perspective, this year we are reducing leverage and adding a sixth portfolio with no leverage to study”.

October 15, 2007 we wrote: “Okay it’s time to turn the burner down. “

We offered a “leverage dwindling” warning on Oct. 26 where I explained to readers that I had eliminated even my modest leverage and wrote: “There is a final reason I liquidated my leverage now…to lead by example. Too many readers are thinking that the dollar short or dollar neutral Portfolios are only up 38% or 48% for the year. When one thinks that way they could be headed for trouble, so I hope investors will follow my lead and take greater care with their leverage.”

The November 8, 2007 Black Friday interim message warned about all the points above and more.

So this drop does not surprise us nor should it. Nor should the expanded loss due to leverage hurt us. Nor should any of this matter at all.

The rest of message to our multi currency courses subscribers shares a valuable lesson you can learn if you subscribe now. Details are at

Multi Currency portfolios for small investors. Many readers let me know that Jyske Bank’s $50,000 minimum is too much for them. Tomorrow’s message shares a great way that even small investors can enjoy good multi currency value. Until then, good global investing.


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Here is the mountain.

Learn how to read about Steve’s entire bike ride down the mountain as an Ecuador Living subscriber at

Join us in Ecuador . Our upcoming 2008 winter courses are:

Jan. 18-23 Spanish Course & RE Tour and Jan. 24-25 2008

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Feb 18-23 Ecuador Import Export Course

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Mar 10-11 Imbabura Real Estate Tour

Mar 12-14 Coastal Real Estate Tour