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By Gary
Scott
International investments can
include shorting the US Dollar with the MultiCurrency
Sandwich
This message looks at a Multicurrency Sandwich portfolio
that is designed to profit from a dull, falling US dollar.
This suits those who believe that the greenback will lose
its value versus other currencies.
US Dollar Short MultiCurrency Sandwich
Starting Date 10/21/05
$100,000 Invested & $200,000 Borrowed
| $ Amount |
Currency |
Investment |
Yield % |
| $12,000 |
BRL |
12.5% Brazil Rep 05-01-16 |
11.82% |
| $30,000 |
AUD |
5.5% Landwirt Rentenbank 16-04-07 |
5.48% |
| $30,000 |
GBP |
7.125% British Tel 07-12-06 |
7.32% |
| $60,000 |
HUF |
6.25% Hungary Gvt. 12-06-07 |
6.20% |
| $30,000 |
ISK |
0% Iceland 09-02-07 |
11.20% |
| $12,000 |
MXN |
8% Mexican Fix Bonos 24-12-08 |
7.89% |
| $30,000 |
NZD |
6.5% NRW Bank 26.08.08 |
6.47% |
| $15,000 |
TRY |
14.5% E.I.B. 21-02-07 |
14.34% |
| $15,000 |
EUR |
6.125% Hornbach Baumarkt 15.11.11 |
6.05% |
| $15,000 |
EUR |
5.75% Bombardier 22.02.08 |
5.69% |
| $15,000 |
EUR |
JI High Yield Corporate Bond Fnd |
5.00% |
| $36,000 |
USD |
JI Emerging Markets Bond Fnd |
7.00% |
Total Invested $300,000
Estimated Gross Income $ 22,406
Loans in UD$ Equivalent
50.00% US$ 5.00% 100,000
50.00% CHF 2.38% 100,000
Total Loan $200,000
Total Estimated Loan Cost $7,380
Net Amount Invested $100,000
Estimated Income After Loan Cost 15,026
You can see numerous changes in this dollar short portfolio
compared to the US dollar long portfolio. Belief in a falling
greenback means an increased weighting in the British pound,
a vastly increased weighting of the Hungarian florin, plus
increases in the Turkish TRY and euro. A longer New Zealand
dollar bond has replaced the NZ$ position. Weightings in
the dollar linked Mexican peso is dramatically reduced (from
20% to 4%) and the US dollar denominated Ford-Global and
Deutsche Telekom bonds are eliminated.
The loans are altered as well with the euro loan dropped
from $160,000 to $100,000. The yen loan is replaced with
a $100,000 US dollar loan.
This portfolio has a reduced income potential because of
the lower euro yields and quite a higher dollar loan cost
(5% for the dollar versus 1.63% for the yen). However earnings
are still projected to return 15.02% per annum on the initial
$100,000 invested.
This profit projection is made before calculating fees.
Income on the Jyske invest bond mutual funds is estimated
plus there are risks. Study Lesson
14 of International Currencies
Made EZ.
This is a free online course that can help you understand
the risks and rewards of the multicurrency sandwich.
In addition to enhanced profit potential investors who
hold this type of portfolio gain security and stability by
having a diversified basket of 12 currencies.
There are those who believe in that the US dollar will
fall. If their beliefs are correct, they might earn 15.02%
and perhaps even some extra forex profit on this speculation.
If you have not enrolled in our MultiCurrency Tracking
Service go to our catalogue.
Until next message, may all your investments be good!
Gary |
