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My May of 2008 Investment Pick

Discussion in 'Felix Long Term Investment Pick Archive' started by Felix Homogratus, Apr 24, 2008.

  1. Felix Homogratus

    Felix Homogratus Commander in Chief

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    Hi there :)

    This is Felix writing. Welcome to my monthly "Felix Investment Pick" publication for May of 2008. It is April 21st, 2008 as I am writing this article.

    Few days ago, a friend of mine visited me. Because this article is going out to my list of tens of thousands of forex traders, I do not want to use the guy's real name, so let's just call him Joe. The reason Joe visited me was because he was gravely concerned about the deprecation of US dollar, and he wanted to get my advice on what he should do with his already beat up by depreciation savings.

    Joe and I have common friend that visited me around September of 2007 with the same concern. As far as I remember, Joe's friend had savings of around $15,000 USD, and he wanted to know what he could do to preserve it. At that time I just told him to go to Gold coins, silver bullion, gold bullion, silver coins and PCGS Certified Coins at www.golddealer.com | America's Coin Dealer, and buy some gold coins. He did that, and as far as I remember his cost was around $730 per ounce or so. Long story short, back in the middle of March gold peaked at over $1030. Even though gold has come down a bit in April and is now trading at around $915 per ounce, the guy still has 25% more money than he would've if he kept his savings in US dollars. So Joe came to me, wanting to know my opinion on whether he should buy gold or whether he should buy something else.

    Now, you have to understand something. Joe works at a regular brick & mortar job. He knows very little about investing. He knows nothing about forex. His savings are much less than $50,000. He has regular checking account in popular US bank. So I tried to put myself in Joe's shoes, and by being in his shoes, I understood that I need to tell Joe to buy something that he wouldn't have to think about or worry about for at least 6 months.

    I asked my partner Rob Grespi whether he had any suggestions for Joe. Rob said that if he were Joe, he would call his Swiss banker and tell them to buy gold and settle it in Swiss Francs. The only problem is that Joe does not have a Swiss or European bank account, and US banks are not designed for investing, and their currency conversion rates are basically pure robbery.

    Then Rob Grespi suggested that Joe goes to www.everbank.com and looks into some investment options they offer. EverBank is US bank that caters to small investors, and probably the most reputable FDIC insured bank in the US that allows American customers to buy Certificates of Deposits (CDs) in international currencies.

    So I decided to go to everbank.com and looked into the investment packages they offer. I must say that I was very impressed by this bank, which has been operating since 1961. Obviously, they are many notches down from a major Swiss Bank, but the problem with Swiss Banks is that unless you are ready to transact in multiples of $250,000 per investment, you might as well not even stick your nose there.

    I found in everbank.com a 6-month mixed-currency CD, which I personally would buy if I had very little money like Joe and if I had no time to look at the market for 6 months. Minimum investment for the CD is only $20,000, and I think the currencies that the bank picked for this particular package have good potential for the next 6 months. Let me tell you which CD it is, and the reasons why I am suggesting that Joe puts his US dollars into it for the time being.

    The CD that I am talking about is called New World Energy Index CD. Here is the link for it: EverBank | Foreign Currency - WorldCurrency New World Energy Index CD. It’s basically a CD that combines AUD/CAD/NOK, 33.33% each. AUD is Australian Dollar, CAD is Canadian Dollar, and NOK is Norwegian Krone. Let me now briefly explain why I think combination of these currencies makes a great investment for somebody who does not have the time or expertise to be in the market on weekly basis.

    Before I proceed with discussing these individual currencies, let me first tell you my longer term investing philosophy.

    Step 1. Find a river with strong current

    Step 2. Make sure there are no foreseeable obstacles to the current

    Step 3. Start swimming along the current

    Step 4. While swimming keep looking forward and around

    Step 5. As soon as you find river with stronger current, switch immediately

    Australian Dollar

    Let's talk about the Australian Dollar first. Australian Dollar has been very steadily going up in value against US dollar over the last few years. Since 2006, it has gained 35% against US dollar, and I see many reasons why it will continue to strengthen for the next 6 months and possibly much longer.
    In the last few months we have seen "parity" phenomenon happening with several different currencies. Canadian dollar reached parity with US Dollar. Swiss Frank reached parity with US Dollar. Great British Pound reached equal 2:1 ratio with US dollar. Gold reached $1000 per ounce. USD/JPY hit 100. Current big topic among speculative traders is parity between US Dollar and Australian Dollar. Right now the rate is 0.94, and I think speculative traders can easily push it to 1:1 ratio in the next 6 months, and perhaps even higher.

    In addition to that, Australia has second highest interest rate among major currencies at 7.25%, and obviously it makes it an attractive currency for many investors to keep their money in. That's 5% higher than US interest rate of 2.25%. Not only that, but Australian economy is still doing very well and inflation is rather high, based on which most economists speculate that Australia is not likely to cut their interest rate in 2008 at all.

    Let's also not forget that Australia is among the top 3 producers of gold in the world, along with China and South Africa, and as gold prices keep creeping up, it supports gold mining industry in Australia and more companies are inspired to do more gold explorations, which supports local economy. And of course just based on the fact that Australian dollar has had very close positive correlation with gold, chances are that correlation will continue, and as gold rises in price, Australian dollar may do the same.

    It also helps that Australia has a very well diversified economy with strong services based sector, like many other Western economies, but in addition to that, they also have strong agricultural sector and strong mining sector, which allows them not only feed many sectors of their own country but also it allows them to export food, metals, and energy-producing commodities and since prices for both food and other commodities are steadily going up globally, it sure supports Australian economy and therefore makes investors more confident to buy up Australian dollars and continue creating its climb up. Oh yes, very few people know this, but Australia has one of the largest deposits of Uranium in the world. Currently France gets most of its electricity from nuclear power. Russia has hired French experts to build quite a few nuclear power plants, and China is building nuclear power plants. I think that uranium will soon become as important or more important than oil.

    Canadian Dollar

    Let's now talk about the Canadian dollar. This currency definitely has very strong current going against the US dollar. Since 2002, it gained over 60% against the US dollar. Last year alone, it gained 25%, and I believe there are reasons to believe that Canadian dollar will continue gaining strength against the US dollar for the following reasons.
    Well, first of all, for many decades Canadian economy has heavily depended on US economy, so as US economy started performing badly, investors were afraid to invest into Canadian dollar, because they thought that US economy would drag down Canadian economy as well, but 2007 and 2008 has proved that paradigm wrong. As US economy was rapidly slowing down with GDP and employment readings at historic lows, Canadian GDP and employment were soaring. As US was discussing cutting interest rates in order to give heat to cooling economy, Canada was discussing raising interest rates in order to cool down heating economy. So as we are entering US recession and possibly even depression, Canadian economy is doing well, and possibly for the first time in the history of these two countries, investors are seeing that globalization has made Canadian economy very independent from US economy, and has taken many fears from investing into Canadian stocks and therefore Canadian dollar.

    As world population is growing and Asian countries are becoming more and more civilized and more and more rich, the demand for energy products is soaring and therefore the prices are soaring too. You probably already know that the most "popular" energy product over the last century has been oil. Canada happens to have 2nd biggest oil deposits in the world, after Saudi Arabia. But in addition to that, Canada also has vast natural gas resources and vast uranium resources. As world is becoming more stable, it's becoming more and more difficult for US to conquer other countries and rape them of their natural resources for pennies on a dollar, which by the way is the only reason US still has twice cheaper gasoline than Europe, and since the US is major global consumer for energy products, I can see in very near future US being forced to buy a lot of their energy products for fair market prices, and Canada will probably become #1 provider, which will tremendously boost Canadian economy and continue creating much demand for Canadian dollars as more global investors invest into their economy.

    Norwegian Krone

    Let's now talk about the Norwegian Krone. In the beginning of 2002, you could buy $1 US dollar for 9 Norwegian Krones. In the beginning of 2007, you could buy $1 US dollar for 6 Norwegian Krones. Today, you can buy $1 US dollar for 5 Norwegian Krones. This means that since 2002, the value of Norwegian Krone (NOK) has almost doubled, and just in the last year, NOK has appreciated by over 20% against US dollar. I believe the trend will continue for at least 6 months and probably much longer. Let's talk about it.

    Over the last few years, Norway has proved to have one of the best economic models in the world. From 2001 to 2006, Norway was considered the best country in the world to live in, based on Human Development Index. In 2007, Iceland took 1st place, and Norway got 2nd place. Human Development Index is basically an index that measures life expectancy, GDP per capita, education, literacy, health, and general standard of living of people in any particular country. Based on that, we know that Norwegians got their **** together so to speak. Let's face it, people are what make countries great, and historically countries that have the best human resources have always done well economically.

    But in addition to very strong human capital, Norway has oil and gas. Many people know that Russia exports a lot of oil and gas. Many people know that Saudi Arabia exports a lot of oil, but very few people know that Norway has the 3rd place in the world by exports of oil and gas. Many people have heard of gas and oil from North Sea from which UK has exclusively been living off of. Some people may have heard that North Sea oil output has been dropping every year, but still, Norway currently owns around 54% of all remaining oil in the North Sea, and around 45% of all remaining gas in the North Sea.

    In addition to all of this, Norway puts a lot of emphasis on savings and being well capitalized, which gives a sense of stability to potential investors. In fact, as of today, Norway has 1st place in terms of the largest per capita capital reserve of any nation. Currently Norway's savings exceed the amount of Norway's GDP, and the country has assets that equal to approximately $70,000 US Dollars for every Norwegian resident. US, on the other hand, is 65th in the world by per capita reserve. In fact instead of capital reserve, US has approximately -$32,000 of debt for every US resident.

    That's all I have to say for this month :). I hope you found this article useful. I believe that diversification of your cash between Australian Dollars, Canadian Dollars, and Norwegian Krones is a great move in capital preservation. Having a CD of these three currencies would certainly make me sleep better at night than having US dollars.

    But hey, what do I know, I am just a guy, perhaps you'll be better off listening to your local banker that earns $35,000 per year and has no savings. Perhaps you should follow his advice and buy US government bonds or put it into US CD, that will earn you 2% annual interest, and maybe your dollars will even outperform Mongolian tugriks.
     
  2. yurps

    yurps Private, 1st Class

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    long term news strategy

    Hey felix, good to hear from you.

    On the yacht you promised a website about your strategy of looking at all the news at the end of the news and entering trades. You also said you would put the info about your savings strategy on this site, since you lecture was disorganised and difficult to follow. You said you would do this within 3 months, it is now past 3 months. You advertised that at the yacht event participants would learn a strategy which would make them a million swiss francs in 3 years. Was this just marketing hype, or are you unable to stick to your word on your promises? If you are not, then you are simply a liar.

    Of course alot of us were glad to donate to the fruit farm charity, however many of us flew great distances to attend. Actually this was the biggest investment of all. Please make an effort to stick to what you say and to your word, otherwise you will lose faith among those who have trusted you. Its your karma man.

    Yurpman
     
  3. santana

    santana Recruit

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    Thank's guys for all the valuable information

    Hi Felix, first of all thank you so much to spent your valuable time with us in this search and to share with us, all this acknowlege that is so important. You're rigth about it; with all this information, we can put our saving money in this 3 currencies (cd) and we can sleep better every night. Thanks againg for all your dedication in what you do, the same to Roe. Guys you're unique and god bless you.

    Kings regards,

    Santana
     
  4. da_edster

    da_edster Recruit

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    Ur a gem Felix

    I laughed at your send off to this post. Don't listen to anyone that criticizes you here, I'm sure they don't have the savings to invest that you have! Personally I have $180 bucks to invest today, working on more...... but the NZ reserve bank figures otherwise - I'm a builder and the RB put a break on work here for me, so, I'm off to those mines in Aussie Mays end, building mining villages... perhaps I can save and then have that 'worry' of where to invest huh.:err:
     
  5. george soros

    george soros Private

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    Thanks for the info and the daily news updates. I've always been interested why some people seem to feel under pressure to tell the world and his wife about their thoughts rather than just getting on with their lives. I trade the news reasonably successfully but have never felt the urge to tell others what they should be doing. You're obviously driven in a different way and as we say in the UK, 'different strokes for different folks'.
    However, being the cynic I am I have to wonder what ulterior motives you can have for your pronouncements. Felix, I'm sure you're a lovely bloke, know what you're doing and understand that if you stick your head over the parapet, you're gonna get it shot at but as the ad says, 'just do it'. By that I mean, just get on with your own things and feel under a little less pressure to tell everyone else what you're doing. It's not going to change the world, its not life or death and you're just asking for abuse from the great unwashed. You seem to like philosophic says, so take heed from what Confucius said: " what the superior man seeks is within himself, what the mean man seeks is in others ".
    Have fun....
     
  6. rk302

    rk302 Recruit

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    Great Advice..but am I missing something?

    Hi Felix,

    Thanks for all of your work. I've been following the trading signals for awhile but haven't gotten my feet wet yet.

    Your analysis sounded great and logical, and I immediately checked out the link to Everbank (thinking [wrongly] that I might find a CD rate in the 7% range that, I now see, was your reference to Australia only).

    Was disappointed to see that the current 6 month APY% for the New World Energy Index CD is only 3.23%. Granted I am a newby to forex, but (even though the U.S. bank rates can change at any time [currently downward]) there are still quite a few online direct U.S. savings banks that have better rates for mere savings accounts (which don't require you to tie up your cash for 6 months in a CD.) See: http://www.money-rates.com/savings.htm . I'm currently getting 4.00% with Countrywide Bank.

    Since the New World Energy Index CD is really only a fixed rate of return on a deposit for a fixed period of time, does it really matter that the CD is invested in these stable, growing economies?

    My reply is not to be contrarian...just really seeking enlightenment.
     
    #6 rk302, Apr 25, 2008
    Last edited: Apr 25, 2008
  7. thepipbull

    thepipbull Recruit

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    Rk302 I agree with you locking up a min. of 20000 for 6months for only a return of around $300 does not seem like a great investment. So hopefully I am missing something as well. But if Felix Would like to loan me $20000 for a 300 dollar return in 6months i would be more then willing to take him up on that offer!!!
     
  8. Jason XXX

    Jason XXX Private, 1st Class

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    Hey Felix, this sounds pretty good, but just let me play devil's advocate. For one thing, since the Aussie is up 35% since 2006, and the Canadian is up over 60% since 2002, my major concern is will we be buying at the middle of a bull market, or at the top. The best time to buy would have been at the bottom back in 2002. This happened a lot to my friends back in the late 90s. They would see a fund or stock is up over 90%, and think that it can go up another 90% next year. But there is a limit as to how high it can go.

    For my money I personally think that I would much rather invest in a well managed forex hedge fund. If the fund does 35% this year, is can do another 35% next year just as easily. Why don't you tell people about Rob Grespi's new fund that has just opened? I think Rob can out perform any 'New World Energy Index CD' in his sleep.
     
  9. Hilarius

    Hilarius Private

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    Bull is a bull in forex, even if he is already bull for a long time

    Hi guys,

    Thank you Felix for inspiring, and potentially money-making idea. Being in the forex arena I understood your commentary in following way: AUD, CAD and NOK will grow significantly against USD in next 6 months, so if Imake long term BUY AUD/USD and long term SELL on USD/CAD and USD/NOK, I will earn money. Additionally, USD interest rates being as they are, with prospective decrease, I will also earn on interest. Now, I ask anyone reading this what leverage, (or better to say pip value relative to account size) should I use.

    Just for the matter of play, on Friday April 25th, at around 12:30 PM NY Time I opened a demo account with 1000 EUR, and did the above (long 34 minilot AUD/USD, short 32 minilot USD/CAD & USD/NOK - 1minilot=1000), practically investing USD into these three currencies, with a third of investment into each one. I deliberately used so high leverage in order to see effects more drastically (still looking for rule of the thumb there, guys :).

    Until the end of the trading day (and the end of the week since it was friday) the account went down from 1000 to bellow 700 and then recovered a little bit to 850 where it stood the whole weekend.

    This morning (as I write it is 5:20 AM NY time) the account went above 1000 and currently is 1200 EUR and rising.

    OK, it is only two active trading days, ok I still do not know the answer about the appropriate leverage to survive temporal drops (which are not that likely, since we have 3 currencies, they can happen significantly only when USD gets bullish), BUT:
    apart of my personal affection to many Felix's ideas, if the EverBank is doing this, and pays their clients nickels and dimes out of the profit (but is still courageous enough to promise them a profit), why do not we follow the strategy? Using also Felix's arguments, does it not make sense?

    Leverage guys, think of leverage and money management and post me some answer! All the best and a lot of success to all of you.
     
  10. Hilarius

    Hilarius Private

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    a week after

    My demo account is now at about 1450 EUR, i.e. 45% in ten days. And the good thing is that it went even down to about 700 EUR, i.e. one should wait for the minimum (which occurs roughly every second day) to enter, wait for the top, and repeat.... Similar to technical analysis, but here, due to summation of 3 random variables, the peaks and bottoms reduce their size and the risk. And the interest you pick up every night, before going to sleep:cute: Interest amounts for about 3.6% right now.

    I am close to risk 100 EUR on live. That seems not much, but multiply it by 1.2 (lets be modest) every three day (lets be modest once again). you get factor of 3.58 in 21 working days (roughly a month). In a year, that gives a factor of about 4,47 million ;). Can my 100 EUR make 447 Mio??? Or, was I not that modest??? Anyway, I cannot lose more than 100 EUR.

    I would also really like to be able to get the data of one minute charts for as long as possible for those three pairs. To double check. Data from metatrader are not that good, lots of trimming and processing is needed before use.

    BTW, the bank lists at their web site only the difference betweeen the interest of USD and other three, averaged. So, they seem really to invest your money in those three currencies.
     

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