By Gary Scott

Currency markets are in turmoil but we can learn another lesson about systems and markets from this fact.

The sun always shines somewhere.

The three dollar portfolios we track in our multicurrency portfolio tracking service have dropped since we formulated them October 21, 2005.

The Dollar Long Portfolio is down - 0.875%
The Dollar Hedge Portfolio is down - 1.39%
The Dollar Short Portfolio dropped is down - 4.24%

However, the Emerging Market Portfolio is up 47.61% and the Asian MultiCurrency Portfolio has a whopping 90.20% gain as of April 6, 2006.

Thus a portfolio spread equally in these five portfolios is up 26.26% for the 22 weeks we have tracked them. This is a 62.07% annual appreciation rate gained at one of the worst times for currency portfolios in years.

The lesson is to diversify globally in emerging markets. They have outperformed major markets for the past five years and represent the new systems that are emerging as the old systems wane from entropy.

Here are some factors to watch that will affect currencies.

Jyske Bank maintains a neutral recommendation for emerging market bonds and core currencies. But as this correction has grown they are nearing a buy recommendation for emerging market bonds. They have already added a BUY recommendation for Turkish TRY-denominated bonds.

Along with Asia, Latin America offers excellent opportunity now. Here is a brief review.

A US dollar US Treasury Bond due 2015 currently yields about 4.84%. US treasuries due in 2030 pay a bit more, about 4.98%.

Here’s some interesting Latin bonds:

Peru. Peru has been the worst performing Latin country. The credit spread on Peru's benchmark 9.91% US$ bond maturing in May 2015 is now paying 7.96% or 3.02% than US bonds.

There is no currency risk but HKBC Securities USA Inc. recommends reducing holdings of Peruvian bonds before the nation's April 9, 2006 election as chances of a nationalist candidate are high. Look after the election. If the situation appears stable and Peruvian bonds continue to yield 3.0% or more spread over U.S.Treasuries, then take notice.

Mexico. Jyske Bank maintains a positive view on Mexican peso denominated bonds. The 10-year has been widening and right now Mexico's 8 percent bond due in December 2015 yields 8.66%. This is an excellent 3.82% spread over US bonds.

Brazil. March saw a net inflow into Brazil of USD 7.993m. This is the highest inflow since the introduction of the freely floating currency in 1999. And inflows are reported from financial as well as trade-related transactions. This means that investors are jumping into Brazil and its currency.

Jyske Bank has a positive view on BRL denominated bonds.Brazil's currency has gained every day for the last week on expectations of rising dollar inflows from bonds, stocks and exports. Novacao Corretora de Cambio, a currency trading firm in Sao Paulo, says there is still room for the Brazilian real to appreciate. Brazilian exports continue to be very strong and a lot of dollars are coming in.

The yield on Brazil's zero-coupon LTN Treasury bill maturing in January 2007 is 15.84%! The longer dated Brazilian Government 2016 bonds yield about 12.10%. This is a wonderful spread considering that there could be a forex gain instead of a loss. I invested in real bonds myself in March.

Chile. The Chilean economy continues to grow above trend which makes Chile's 8% peso-denominated bond maturing in June 2014 6.34% yield look strong. You gain 1.5% over equivalent and have the potential of a forex gain.

Ecuador. Ecuadorian bonds are strongly linked to oil prices. If oil tanks, as it has in the past, the U.S. economy will benefit, but owners of Ecuador bonds could be hurt. Ecuador bonds previously offered one of the best bargains around but since everyone assumes oil prices can’t go down, the yields are now far lower at 8.6%. However in the overall market this high since even Iraqi bonds pay only 8.7% now. These are dollar denominated so you gain about 4% over US bonds without forex risk.

Latin bonds provide higher yields than US. The question of course is how much added risk is gained, There are no magic carpets in investing! So be sure to consult with your financial advisor on the credit rating of the country when you invest.

Learn more about how to develop investing philosophies and how to invest in emerging stocks and bonds to balance your portfolio. Join Merri, Thomas Fischer of Jyske Bank and me at our next International Business and Investing Made EZ course in North Carolina.

However there may be some magic carpets in business!

Have you ever noticed that wherever you go, there are carpet stores? This is because good tapestries are a valuable commodity. The magic carpet flies on the dealers markup! May I explain.

Living here in Cotacachi we are surrounded by carpet weavers and I have noticed something happening.

Here is one of the really wonderful carpets woven nearby.

Here is what I have seen. Dollarization in Ecuador means that Ecuador can no longer compete at the low end of the market. Now their carpets are getting better and rising in value. They are introducing tighter weaves, richer and greater varieties of patterns.

Otavalo is one of the most important and spectacular textile markets in all of Latin America.

Otavalans have been textile makers for nearly a millennium even before the Incan invasion. Under Incan rule the town grew in importance and after the Spanish conquest, Rodrigo de Salazar set up a large weaving workshop. By the mid-1500's it employed hundreds of workers and was the largest colonial carpet maker in South America.

The textile boom grew in the 1960's, when Otavalo was introduced to weaving techniques introduced from Scotland. New materials were added such as cashmere and alpaca.

Also nearby is Peguche, the village of the weavers. This village is far less prominent and less known but the better carpets now seem to be made there. All the photos at this site are from Peguche.

Here is another carpet woven in Peguche:

This upgrading of quality creates a new business opportunity.

Carpet weaving has a long history that goes to the roots of ancient civilization. Good tapestries have always been considered a luxury item and, in earlier times, were commissioned by the Church, royalty and the very wealthy.

Why Carpets?

* Carpets are art
* Carpets are interior decorations
* Carpets tell a story

Tapestry as art has an inherent value from the uniqueness of its design, the hand-made quality of its workmanship and its permanence in time. It has been valued as investments because rugs can go anywhere. Unlike other forms of art, where weight, size or fragility preclude transport, tapestry is easily moved.

Exporting rugs can be a solid business because unsold inventory can increase in value. Barron's noted the recent trend in increase in the value of Persian Rugs of fine quality. In the last two years, the Wall Street Journal confirmed that there were fewer fine examples of Persian rugs on the market than earlier and Business Week stated that Oriental rug prices has increased 1000% over the previous ten years.

This suggests that alternative supplies (such as good Ecuadorian carpets) will develop.

The article in Barron's went on to observe that several investment syndicates were reported to have started buying rugs in the 1960s. One syndicate, operating in Europe, evaluated its holdings in Oriental rugs at $9 Million in 1986. The net worth of these holdings is estimated to be worth over $200 Million in 1998.

There are many stories about fortunes being made with rugs. One is of a carpet that languished with a $300 price tag in a New Orleans antique shop for many years, before someone recognized its value and sold it for $23,000.

However this is a rare event and carpets should be bought as collectibles only by experienced collectors. This because of the dealers markup!

The most common sources of rugs are dealers. This means that most buyers buy retail and sell wholesale! A fair retail price is typically around twice the wholesale price.

This means that the best way to make money in rugs is as a buyer but as a wholesaler or dealer. To do this buy from the weavers at the source.

As Ecuadorian rugs evolve, new markets can be developed. Weavers can become better known and famous. Exporters can become promoters of these higher quality rugs so this may be a good time to become an expert in buying and exporting Ecuador carpets as a business.

Learn how to earn anywhere you travel. See beautiful sights and carpets. Learn how to have everlasting wealth. Join Merri and me and our Ecuador Import-Export Expedition.

See over a dozen more Peguche carpets

Until next message, may your life float by as if you are on a magic carpet.

Gary

P.S. Here’s a health tip. Chocolate is one of my favorite foods. I have been delighted to learn it can actually good for me!

This is because some mega-potent antioxidant forms of chocolate ever revealed are being processed so it is meticulously kept below 113 degrees Fahrenheit from the tree all the way to the bottle. They have 955 ORAC units per gram!

ORAC is the Oxygen Radical Absorbance Capacity, a measurement of antioxidant activity in food. Of all the healthy fruits and vegetables the USDA has tested, the highest ORAC values were found in prunes. Regular organic chocolate's ORAC value is more than two times higher than prunes! (5,770 ORAC per 100 grams for prunes vs. a whopping 13,120 ORAC per 100 grams for chocolate.)

But you've never been able to get 95,200 ORAC units of Antioxidant power per 100 gram in ANYTHING. Now one manufacturer claims you can get it all and more in one single serving of delicious Raw Organic Cacao Powder!

The shocking difference is between COOKED cocoa powder and RAW cocoa Powder! LEARN MORE

Learn how to enjoy our Andean nutritional program for better health and energy with organic, cocoa quinoa cookies and pie at El Meson. See El Meson

P.P.S. If you cannot make our upcoming Ecuador course in April, our friends at International Living are having an Import Export course in May. You can LEARN MORE