This may be discouraging if you hold the global investment portfolios. Yet this correction in glbal investets was expected. Plus a global investment cleansing like this provides many lessons and creates great global investment value opportunity.
Here is the updated performance of the six global investment portfolios that Jyske Bank created with our direction. We have been tracking them for educational purposes beginning November 1, 2007.
Global Investment Portfolios
2008 Nov 16 Dec 14 Jan 21 Feb 19 March 4
Infrastructure -16.46% -20.97% -68.47% -69.39% -55.94%
Emerging Market -13.33% – 9.80% -36.78% -44.27% -38.25%
Danish Health -13.32% -32.51% -61.62% -78.99% -70.70%
Green -10.86% -14.31% -54.29% -45.23% -46.30%
$ Short Non
Leveraged – 5.26% – 9.08% -15.42% -18.99% -15.25%
Blue Chip – 2.78% – 5.14% -37.68% -24.98% -22.15%
The Global Investment lessons focused on in this update relate to the Danish Health Portfolio, the worst performer.
There are three reasons for this global investment portfolio’s weakness.
The first reason for this global investment portfolio’s drop relates to market value. When this portfolio began in November 2007 the Danish equity equity market was over valued…according to Keppler Asset management.
Here are Keppler’s major market value rankings in November 2007 as shown at http://www.garyascott.com/2007/12/14/1923.html
The Top Value markets were Belgium, France , Germany , Italy , the Netherlands , Spain and the United Kingdom at equal weights.
Neutral markets were Australia , Norway , Sweden .
Low value markets included Austria , Canada , Denmark , Hong Kong , Japan , Singapore, Switzerland , U.S.A.
Market over valuation was strike one!
The second reason for this global investments portfolio’s drop is that medical shares are more speculative than most. In fact I call them “gambling shares.”
One lesson about equity investing that we have reviewed again and again is that equity market trends can always be trusted in the long term because the are driven by the realities of supply and demand.
Yet equity market trends can never be trusted in the short term because they are driven by the exaggeration of unreal, human emotions.
Gambling shares are subject to volatility because they are sensitive to the short term emotions. The Danish Health Portfolio shows a perfect example of this.
One reason the portfolio has fallen so far, so fast is that one holding, Alk-Albello saw its share price drop 35% in one day. The reason for the drop was because a grass allergy medicine called Grazax that Alk-Albello is developing had little effect, according to FDA. This is a strong company but this one concern ignited the human emotion of fear in the market..
This created nervousness in the entire Danish health sector, an already over valued equity market…strike two!
The third reason for this portfolio’s drop is that all major equity markets have been falling. There has been no place to hide in the early months of 2008. Every major market lost ground with thirteen of them suffering double-digit percentage declines.
The portfolio offered a dangerous combination of speculative shares in an over valued market. This combination was then pushed down, hard, when caught in a global equity downturn. Strike three!
Yet there are two more factors that make this worse. This ruinous recipe was leveraged two times! The investment was $100,000. The loan $200,000.
This pushed the value down much faster,
Plus the final negative is that the loan was in Swiss francs. The theory is that the franc is closely linked to the euro and hence the Danish kroner. This theory has not worked in recent months so the loan payoff has increased 10%
In short, everything has gone wrong with the Danish Health Portfolio…all at the same time. The end result? This portfolio was down 80% in four months.
This is probably a good portfolio to acquire now…but with one hitch…the loan should be in US dollars.
Dollar loans have recently been great. We’ll look at them and see why next update.
Until then, good value to you.
You can subscribe to our Global Investment course and reciev these regular updates at www.garyascott.com/catalog/bldh
We in invite you to join us at one of next courses or tours:
May 13-17 Ecuador Import Export tour
May 23-25 International Investing & Business Made EZ North Carolina
See these 3 bedroom houses on the beach for sale at $17,000.
June 7-8 Coastal Real Estate tour
June 11-15, Super Thinking + Spanish
Here is a wonderful new house being built for sale that we’ll see on the Imbaburra tour.
With this view
June 16-17 Imbabura Real Estate Tour
June 19- 21 Ecuador Shaman Tour