Multi Currency Portfolios we track in 2008 look better in the 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||Dec. 01|
|Emerging Market||-13.33%||– 29.01%||-19.62%|
|Danish Health||-13.32%||– 49.54%||-38.06%|
|$ Short Non||– 5.26%||– 9.66%||– 6.24%|
|Blue Chip||– 2.78%||– 10.58%||– 2.00%|
Thomas Fischer wrote: “Hi Gary, Attached is the latest up-date. The sandwiches are still losing money but have gained ground since the latest update. If the FED lowers interest rates, markets may calm down. Have a great weekend. Thomas”
When we announced the 2008 portfolios we mentioned our concerns over volatility in the short term ahead. We saw two ways to reduce risk.
One risk avoidance tactic was to maintain leverage but shift to higher quality equities. The other was to eliminate leverage.
We added two portfolios that we felt would perform best if there was an economic downturn or another panic like those seen in 2006 and 2007.
We wrote this about these portfolios:
“Blue Chip Portfolio. One prominent feature we saw in the portfolios we tracked these last two years has been the panics. The world is not convinced yet that emerging markets are the places to go. Plus emerging markets are highly leveraged, especially with Japanese yen loans. One lesson we learned from the panics of the last two years is that equities recovered the best after each panic. There are many scenarios we can imagine that will cause a 2008 panic including further fallout from the sub prime loan disaster, a slowing US economy and over $100 a barrel oil. Last go round investors fled to US dollar bonds. As noted above the flow to US dollars last July could have been the last time in our lives, that we will see a rush for safety into the US dollar. If there is a 2008 panic we are thinking that investors will flee into Blue Chip, mainly non US dollar, equities…and this portfolio will do well.
“Dollar Short Portfolio. Since I have closed all my loans personally, Jyske accepted my suggestion to try one portfolio without leverage. This is the one we chose. We dropped leverage but avoided bonds and invested in a spread of global equities instead. This is not really a dollar short portfolio…rather a portfolio of non US dollar equities that gives a broad distribution around the world that should do well if the greenback weakens more.”
Look above at the first month’s performance again. See how accurate these comments were.
This update looks at the Blue Chip Portfolio in more detail:
|Currency||Investment||Invested Amount||Today’s Value|
|SEK||Hennes & Mauritz B||50,000.00||48,352.46|
|CHF||Roche Holding AG-Genuss||50,000.00||56,444.27|
|JPY||Toyota Motor Co. (7203)||50,000.00||49,126.72|
|USD||Samsung Electronics-GDR CO||50,000.00||50,500.00|
|LOAN||Interest Rate||Borrowed||Cost to Repay &||Interest Now|
Here is what is interesting about this portfolio at this time. The investments are up even though the portfolio is down! $300,000 was invested and the shares after one month are worth $306,372…an appreciation of about 2%…which is darn good growth in a month.
The loss comes from forex changes in the loans. The total loan repayment is $208,363.80…thus creating a loss position at this time. $100,000 was invested, $200,000 borrowed. After the loan pay off the portfolio’s value would be $98,008.30.
Almost all this loss is due to appreciation of the borrowed Japanese yen and Swiss franc since the interest cost for the loan this month has only been $254.92.
This is the first time in over two years that we have been able to see a good example of the risk side of borrowing yen and francs.
We are adding some small investment multi currency portfolios to track.
The first additions are the State Street Global Advantage funds (both major and emerging markets).
State Street is one of the largest fund managers in the world and Keppler is their investment advisor for these funds.
Investors can start with as little as 5,000 euro (about $7,500) in either fund. That’s a pretty small minimum but gives a broad multi currency portfolio. For example the Global Advantage Major Market Fund is diversified in eight countries according to the attached fact sheet, US, Belgium , France , Germany , Italy , the Netherlands , Spain and the Untied Kingdom
Keppler’s good value multi currency equity market recommendations are:
The Emerging Market Global Advantage Fund is invested in Brazil , Korea , Malaysia , Poland , Taiwan , Thailand and Turkey .
Emerging Equity Markets – Brazil , Korea , Malaysia , Poland , Taiwan , Thailand and Turkey
See how it works?
So right now for as little as $15,000 one can have a multi currency portfolio in up to 14 non dollar markets or in other words you would be invested in eight currencies, the euro, pound, and the seven emerging currencies.
One way to buy the Global Advantage Funds is to open an account with State Street Bank Luxembourg (which is free of any charges). This way investors are able to buy the funds without a load (there is a tiny redemption fee of 0.25%, however, which is credited to the Net Asset Value of the funds to protect the existing shareholders from switchers). There is a minimum investment requirement of Euros 5,000 at State Street Bank Luxembourg .
Alternatively, investors can buy the Global Advantage Funds through their local bank (that may be much more expensive – these banks usually charge up to a 5 % Sales load and high custody fees).
Third alternative is to check out local discount banks in the country of the investor’s residence.
One more alternative to save the sales load is to buy the funds on a local stock exchange in Germany . This is treated similarly as a purchase of a stock. There is no sales load, but the price of the fund may deviate from the net asset value. The bank usually charges a commission.
These funds have been going for years and have fulfilled Keppler’s expectations for long term investors. They both beat their benchmarks by 3.2 % annually since inception after deduction of all costs.
I am posting fact sheets that show performance shortly at the Multi Currency Portfolio website. In USD terms, both funds have more than quintupled since inception.
Additional details are available on the attached fact sheets.
There is one downside. US citizens and residents cannot invest. Sorry my brethren Yankees but our government is protecting us. (Please note the sarcasm dripping here). I am working on a small investment, well diversified portfolio for we gringos so hang on fellow Americans. I’ll let you know as soon as the investment multi currency portfolios for small US investors we can study is set.
Not all is lost for Americans by the way. Our Multi Currency Course is educational so we’ll be learning by tracking these funds even if we can invest directly in them.
Never fear! We are also adding a small portfolio that US investors can use as well. Our friend of many years Larry Grossman, a US stock broker, is creating and will track a portfolio for us.
“ Gary , Currently the following ETF’s exist. The good news is you can buy as little as one share of each.
G10 Currency Basket (They are long some of the G10 and short others as
indicated by the current weighting below)
AUD 9/17/2007 34.47% 33.33%
CHF 9/17/2007 -35.50% -33.33%
GBP 9/17/2007 35.19% 33.33%
JPY 9/17/2007 -35.59% -33.33%
NZD 9/17/2007 34.11% 33.33%
SEK 9/17/2007 -35.71% -33.33%
“US Dollar Bearish (100% short the dollar) – US Dollar Bullish (100% long the dollar). These are available through the USDX futures contracts in an ETF.
“We can blend these in any manner you need and most of them allows us to go short if need be.
“I had my staff start to put this into Excel yesterday and I am almost done. Larry”.
I’ll announce the final Small US Investor Portfolio as soon as we have it posted.
Join us for our next International Investing Course.
Mar 7-9 International Investing and Business Made EZ Ecuador.
IBEZ plus the Mar 10 -11 Imbabura Real Estate Tour.
IBEZ plus the March 10 -11 Imbabura and March 12 -14 Coastal Real Estate Tours .