Multi Currency Investing – Outside the Box

by | Aug 11, 2011 | Archives

Times are changing so quickly that we need to keep our multi currency investing outside the box.


Our son, Jake, outside our former Gloucestershire house near Minchinhampton…. such a quiet peaceful place. Isn’t it?

Stock markets crashed again yesterday… one further sign that we can expect turmoil ahead. The global economic upset means we need to think outside the box.

Recent messages have looked at how we are in a dramatic… pivotal social economic time.  The riots in England are evidence of this.  Having three children and two grandchildren living there created concern and I sent the kids this note:  “Needless to say we have read about the lawlessness in England with concern for you three.  You are all smart so its not necessary for me to say “Be careful!” “Don’t do dangerous things”.  These are extraordinary times of transition and old rules do not always apply so be super cautious and alert in your daily routine.”

Our daughter, Eleanor, who lives on the outskirts of London replied:  Dad, Thanks for your email. It is so awful isn’t it? I think and fingers crossed we are far enough away from the areas affected..the nearest area to us is Croydon and that’s about an hour away. Needless to say we are still nesting with Matilda and in the house most of the time..apart from walks to the local park so we won’t be going anywhere near any danger.  However I heard that there has been rioting in Gloucester which is quite incredible how it is spreading across the country to quieter, leafier areas.

Ele is indeed correct with the fact that the rioting has spread beyond the inner cities.  This is indicative of the huge change that the Western world is undergoing.  When I look back at our lives in a quiet Gloucestershire village and imagine such turmoil in these areas now, it clarifies what a huge social, economic shift is taking place right now.

Jake now lives in Bristol and just wrote: There has been some trouble down the road here in Bristol and we had all our lines running into the house cut by rioters (TV, Telephone, Internet etc. which will cost us to repair) and my flat mate has been pretty unsettled about it – so now the house is on lockdown day and night! Shutters locked, lights off after dark and the baseball bat has been brought up from the basement (my good old Louisville Slugger). I am more worried about being mugged by my utility suppliers – energy and water bills all went up here overnight by up to 30%!  Ouch.

Much worse where I was staying in London (as you know) until recently (Clapham Junction/Lavender Hill area). The tea shop I would stop in at Clapham Junction on my way to work is just up from the house where I stayed and was burned down and the whole shopping area was trashed by looters over the last couple of days. Watched it all on BBC news. The only shop left untouched there was Waterstone’s – the book shop!

One of the demographic social economic tensions that is turning the current social order upside down is an aging population that has to stay on the job.  This is increasing the unemployment of the y0ung and adds to the general global risk.  The damage the restless young have created in their English protests over a lack of British government assistance is counter productive. The riots create more security costs that will reduce the government’s ability to help in more socially constructive areas.

The government should not be creating jobs in the first place. This is an industrial task that the private sector can do better.

Such social tension in a society that is traditionally as stable as England shows how close the Western world is to the brink of turmoil.

The problem takes on a global proportion because if the Western economies that represent 62% of the world economy stumble… the emerging nations will suffer as well.   Two of the largest emerging economies, China and India, cannot afford the loss of Western business because they have an even large problem with their youth… the “Bare Branches”.

“Bare Branches” are a permanent subclass from the lowest socioeconomic classes created by cultural preferences of male children.  Once medical technology allowed parents to know the  gender of their unborn children, the percentage of surviving male babies skyrocketed.

It is estimated that in China and India these males who outnumber females will make up 12 to 15 percent of the young adult male population by 2020.

There is a sociological theory that young adult males with no stake in society — of the lower socioeconomic classes and with little chance of forming families are more likely to engage in violent and criminal behavior.

This means that in just nine years there will be about 58 million Bare Branches in just China and India. Pakistan and Taiwan and other Asian countries also have a lopsided gender match.

If this young sector of the emerging population loses  its economic as well as family hopes because of a stalled Western economy… they will form a huge instability that adds fuel to the existing antisocial fires.

In simple terms this means the Industrialized Western AND emerging economies face greater risk.  This fact alone… and regretfully there are many more we’ll examine in future messages… changes the entire risk profile of the world.

Yesterday’s message looked at Ecuador bonds and how they had provided the highest return of any Latin bonds over recent years and a reader wte about this: “Gary, Return is always related to amount of risk and damn man you’re talking one huge amount of risk here, less than a year ago Ecuador had a attempted overthrow of the government.”

Here is my reply.   Thanks for your input but please reread the article.  I did not recommend investing in Ecuador bonds.

The comment on Ecuador bonds was “The current market turmoil is creating some incredible multi currency investment bargains. Whether Ecuador bonds will remain among them is a question mark at this stage.”

On the other hand the chart shows that Ecuador due to previous defaults has a very low external debt now and had you taken the risk last year (when the attempted takeover took place) you would have gained one of the highest returns in the the world.”

However I did not suggest to invest in the Ecuador bonds. The bonds in the article that JGAM recommended are industrials from other nations.

Bombadier for example is a Canadian company.  Regards,  Gary

Here is that chart from yesterday’s Ecuador Living message.


Which is better?  A bond issued by a country where there are no riots and little external debt that paid 15% return last year or… a bond in a country rife with riots… with 450% of GDP external debt that pays 1.8%?

spectator debt chart

This chart from the Spectator website shows the high external debt in the West.  I am not convinced of its accuracy… but it certainly clarifies the point… All the Western nations have much more external debt than Ecuador.

No doubt we must compare Ecuador’s debt freedom to a bankrupt person who has just abandoned all debt… but is still spending more than he or she earns.   However is this borrower worse than one who is deeply in debt and only avoids default by borrowing more… and also is still spending more than he or she earns?

This is not a recommendation to buy Ecuador bonds. I have not myself… yet.

The point is we need to think outside the box.  Old notions of risk will no longer work.  Old biases about what is safe can be thrown out the window.  If peaceful England has riots, what are the risks in New York… Los Angeles… Chicago… Miami… Seattle… Atlanta and most big US cities?

How will this tendency towards disruption affect Western debt?

One way to think outside the box is to look at riskier debt. Stable seemingly low risk debt… i.e. British, US, Euro sovereign pays very low… almost nothing returns at this time. High risk debt can pay high returns… so if low risk debt is actually riskier than it seems… perhaps we should face this fact and embrace some higher risk debt as well.

One way for even small investors to get into seemingly riskier debt is with an emerging market debt ETF.

An example is the SPDR Barclays Capital Emerging Markets Local Bond ETF

Chart From (see link below)

emerging market chart

SPDR Barclays Capital Emerging Markets Local Bond ETF is an exchange-traded fund incorporated in the USA. The Fund’s objective is to replicate as closely as possible the performance of the Barclays Capital EM Local Currency Government Diversified Index.

This ETF is up 8.73% from January 1, 2011 to July 31, 2011.

Barclays Capital is the publisher of leading broad market bond benchmarks and created the Emerging Markets (EM) Local Currency Government Bond Index family in 2010.

The Barclays Capital EM Local Currency Government Index is a broad-based index that measures the total return of 20 different local currency government debt markets spanning Latin America, Europe, the Middle East, Africa and Asia.

Learn more about ETFs from Morgan Hatfiled at Ruggie Wealth Management. Morgan Hatfield’s email address is 

We are in a time of social economic change created by excess developed over the past 60 to 70 years. Old math… the previous ways of organizing and doing business are changing. To embrace this change means thinking out of the old institutional box.  One part of this new logic is our appraisal of risk and England’s riots show that none of the developed world is immune from this change.


See new idea on how to earn with Ecuador agriculture and exports .

See this Manabi farm with organic cashew potential.


Join Merri and me as we look at ways to fight international investment turmoil in the year ahead.

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seminar hall where…


unless the group grows too large, we’ll meet.   We’ll have lunch  on the deck looking over Little Horse Creek.

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Thomas Fischer’s email is

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Read Spectator article on external debt.

Learn more about the SPDR Barclays Capital Emerging Markets Local Bond ETF from

Learn more about the SPDR Barclays Capital Emerging Markets Local Bond ETF from the SPDR website