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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: tradermike_1999 who started this subject	1/27/2003 2:27:57 AM
From: energyplay	Read Replies (1) of 74559

Okay, subject of this post is how to make 10% this year (relative to USD) with some degree of safety. One option is a bond fund which invests in Euro & UK Pound denominate government bonds and high quality corporate debt, mostly intermediate term. A fund I use for this is American Century's BEGBX. Here's how you win - 1) Fun earns about 3.5- 4.5 % interest on bonds.Let's use 3.5%. 2) Euro apprecaites vs. US Dollar about 5 more per cent. Euro is now $1.08, started at $1.14. Purchasing power parity is somewhere $1.10 -$1.25 ? who knows ? This results in 5% gain. 3) European Central Bank ECB cuts interst rates another 0.5% The bonds in this fund have a duration of about 6-7 years, so they go up in value 3% for the 0.5 % rate cuts. This is the riskiest part, since Wim Doodelbug doesn't seem to realize that Europe is in a recession. Add them up - 3.5% + 5% + 3% = 11.5% What can go wrong ? 3) obviously- but htis may result in higher value for Euro, so you might get more gain that way. Or the Euro could crash... When to enter - now is a good time - dollar dropping against Euro. When to exit - when Euro overshoots at > $1.20, or there are more than 1% rate cuts and no more coming from from ECB. Or when you have a much better investment opportunity. My guess is this will be about the end of 2003 or spring of 2004. BEGBX isn't the only European bond fund, you may be able to find beter ones. Invest at your own risk. Seek professional advice - I could be a 16 year old kid in New Jersey for all you know.

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