The fall of emerging market currencies has
created real losses in the last several weeks. Some really
excellent opportunities should be forming. However, currency
markets have probably not stabilized yet. The global investing
community seems to be shifting values and risk aversion is
more in focus then positive carry.
Fundamentally, economies have not changed,
just the focus. Emerging markets had been feeding off liquidity
created in Europe (to finance the absorption of Eastern Europe),
Japan (to revise its failing economy) and the US (to keep
the economy buying). Now the US, Japan and Europe are loaded
with debt and investors have become nervous about how long
this inflationary show can go on.
We started writing about the Borrow Low
Multi-Currency Sandwich in the 80s, so our readers have enjoyed
positive carry for decades. Finally when the Wall Street
bubble of 1999 burst, global investors caught on to this
idea and emerging currencies really took off.
Now the bubble is in trouble and the market's
focus on positive carry has all but vanished. Instead investors
appear to be looking at the problems of US debt and the US
current account deficit. The fear is if the US dollar collapses
so too will emerging countries.
Current accounts are in focus, and currencies
in countries with large current account deficits (such as
the US) are weak. The emerging currencies that have depreciated
most in 2006 are those of countries struggling with current-account
deficits. In these terms here is a list of the emerging countries
with the best ability to create current account surpluses
The countries below are less likely to have
a balanced account (worst last):
Big changes of this nature create new fields
of potential profit and here is what Jyske Bank now recommends. “In
general, one should watch one's step in the turbulent market.
It is important to pick your investments carefully - to go
cherry-picking - so as not to end up shipwrecked without
a lifebuoy. We recommend investors to go for countries without
current-account deficits and choose BRL, for instance, rather
than TRY. Also, investors might consider taking positions
in the commodity-related currencies NZD and AUD. Admittedly,
both New Zealand and Australia are running current-account
deficits, but this is outweighed by their being commodity
suppliers, and NZD and AUD are still at historical lows against
Investments in emerging currencies should
be balanced with investments in strong major market currencies.
On the subject of commodity suppliers, I have always liked
small population countries as places to invest. Hong Kong,
Singapore, Switzerland were my favorites for years (not now).
So it is not surprising that Canada, Denmark and Sweden ended
up as being the three strong major currencies in our recent
review in these messages. All have small populations.
It is even less surprising that Norway is
doing well also. The Norwegian economy is booming. This tiny
nation is oil rich. There are no indications that things
will slow down either. Inflation is still modest and far
below the Central Bank’s target of 2.5%. The bad news
is this means interest rates are still at a historically
However because investors are so worried
at the moment, the Norwegian kroner could boom. Due to its
oil and Norway's strong credit rating the kroner could replace
the Swiss franc a safe haven currency, especially because
it has such a strong current-account surplus.
Here are some Norwegian bonds currently
The Canadian dollar, plus Norwegian, Swedish
and Danish kroner are solid currencies to hold especially
as a balance to the higher yielding emerging currencies.
You can get more information about investments in Norwegian
kroner from Thomas Fischer at firstname.lastname@example.org
Learn about investing in emerging
and major currencies, gold, silver, Ecuador, import-export,
overseas markets and more. Join Merri, Thomas Fischer
from Copenhagen and Steve Marchant from Ecuador and me
at our September 15-16-17, 2006 International Business
and Investing Made EZ course in North Carolina. Review
where to invest and do business now and learn which markets
and currencies may be strong in the year ahead. Learn
more about Ecuador import and export from Steve. Our
May course was overbooked and the September session is
filling up fast. Our free accommodations are reserved
on a first come first served basis so do not delay! Go
Our last course was extra personally satisfying
because one delegate had been at one of my very first courses
in the US over 30 years ago. Another had been to our Isle
of Man course about 20 years ago and one delegate was at
her fifth consecutive course in a row! The fact that delegates
come again and again is most fulfilling. Here is what two
more delegates said about this last International Investments
and Business Course.
“Hi, Merri and Gary! Just wanted to
drop you a note to thank you for your hospitality at Merrily
Farms last week. I really enjoyed listening to your philosophy
on investing in other currencies and cultures while identifying
distortions in the marketplace. The mix of other folks with
similar interests was outstanding! I made so many friends
and returned totally relaxed!!! I must admit it has been
very difficult to concentrate on my daily chores these days
because I keep hearing your voices and thinking about your
perspectives as I go through my routines. I feel renewed
in my desire to expand my financial and professional horizons,
and I am grateful for the opportunity to ‘think outside
the box’ with regard to import/export opportunities.
The very best to you both – I hope to return for another
seminar soon! – Pat”
“Hi: Gary & Merri: After a long
drive, a couple of stops and a visit with my daughter, I
have finally arrived back in Michigan. A bit weary, but satisfied.
Enjoyed your seminar and all the beauties of your location.
May I thank you and Merri for the whole experience. We shall
be considering your future offerings. Peace and regards,