Yesterday’s message on multi currency bank safety mentioned that multi currency safety is as important as bank safety. Investors who do not have multi currency diversification can end up holding assets in a safe bank but with a worthless currency.
This is one reason why I have such a large percentage of my portfolio in real estate…carried at cost. All of our real estate has been purchased at prices well below even the current market. We spend a lot of time researching and searching and fixing because I love working with buildings and land. This is the most important investing lesson of all…do what you love…with those you like.
Really…I would much rather play at making land like this worth more than fiddling with stock charts.
I receive many emails like this:
In this current and, I believe, temporary ‘strengthening’ of the US dollar, I am looking for ways to preserve my assets. I have a lot of faith in the Australian $. The 2 obvious benefits in my mind are, no capital gains if/when the US$ weakens, plus I earn interest on the Australian dollar account. I am also looking to buy silver and I am looking at coins and bullion, any suggestions in this arena would also be appreciated. Thank you,
To invest in just one currency is speculation. Nothing wrong with that, if you know and accept the consequences of speculating incorrectly.
To me, real estate is so much more interesting…a puzzle to be worked filled with mystery that beckons like our hidden horse barn tucked away in the woods…just waiting for value to be added.
Gold is nice also…in the leaves here during the leaf change or the yellow metal…a bit for insurance …but more is speculation as well. Property however almost always has utility…like our home.
Holding several currencies for multi currency diversification is better for most.
As it happens I have not felt good about Australia’s currency as you will see in my multi currency breakdown below. In my opinion, too many investors are betting too much on t based as a commodity currency.
Here are three trends I have been aiming my multi currency diversification towards.
#1: A return to value. Value investing has long been our philosophy. No reason to change now but other investors have been chasing the easy, fast bucks in rapid appreciation. Look for a shift towards owning high yielding, solid boring shares and bonds.
#2: Real estate. The real problem investors face is not an economic meltdown. Inflation is the genuine risk because governments have proven that they will flood markets with liquidity to avoid the meltdown. Inflation means that cement will cost more. So too will steel and labor. This means a rise in labor. I salivate when this fundamental meets a global real estate correction and am buying so much real estate I scare myself.
#3: A shift to underlying currency value. Where does an investor go when the euro is no longer trusted and the dollar is fundamentally weak but suddenly flexing muscles it should not have? My guess (and here I am overweighted ) is investors will lean towards currencies of small, economically sane, solid, established, politically sound countries…such as Norway, Sweden and Denmark. If so, these currencies will rise versus the euro and dollar. If I am wrong, they are least likely to fall.
All of this brings us to the point of this lesson. If you travel and visit currency and forex trading rooms of large established, successful trading operations, you’ll note that there are very few, old traders. Young men and young women do this job because experienced investors know that currency trading, rather than diversification requires immense capital, continual diligence, almost unlimited discipline and the ability to absorb many small losses before making a big hit. Plus traders must have the emotional stability to not let the big lead them astray! This is an error that has allowed one trader to break many a bank and major firms’ backs…..Coutts…AIG are two examples.
Here is my currency breakdown:
US & Ecuador Real Estate 50.12%
Europe EUR 16.05%
Denmark DKK 9.03%
United States US$ 8.46%
Britain GBP 4.01%
Sweden SEK 3.16%
Hungary HUF 2.37%
Turkey TRY 2.1%
Brazil BRL 1.28%
Canada CAD 1.18%
Norway NOK 1.15%
New Zealand NZD 1.09%
Australia AUD 0%
I am now readjusting this breakdown and will review why in my Multi Currency Course.
Join Merri, me and Jyske Global Asset Management at one of our courses. We review economic conditions, Ecuador real estate, my entire portfolio and our multi currency breakdown plus investing and business ideas for the months ahead.
International Investing and Business Made EZ Ecuador
Stay on for the real estate tour Cotacachi and surrounding areas. We’ll see real estate for sale on this lake.
Plus we’ll see homes at San Miguel and Prima Vera II.
Primavera II $46,000 condos.
Nov 10-11 Cotacachi-Imbabura Real Estate tour
Then travel to the coast and enjoy this Pacific surf that in November is warm!
Salt or fresh water
November 12-15, 2008 Ecuador Coastal Real Estate Tour; Quito Real Estate Tour