E Alternative Investments

Today we present a major report about how to invest in global bonds and alternative sectors like global infrastructure and real estate. My interest was piqued because Mohammed El-Arian, the former CEO of Pimco and the former investment chief of the Harvard Endowment is joining specialist alternative investment shop Investcorp's advisory board. Investcorp helps global fat cats and their fund managers, mostly from the Middle East, invest worldwide. El-Arian, an American, will help CEO Mohammed Alardhi, who is from Oman, find alternative investments suitable for the wealth funds, sheikhs and royals of the region as well as other high-net worth individuals.

We can do it too, without the same level of fees and, so far, no man named Mohammed in my team.

But before discussing this technical report, here is news about my favorite central bank, that of Switzerland, which is quoted on the Zurich exchange. Every now and then a newsletter writes up the bank and tells its benighted readers to invest in it. But this is not a good tactic, because the Swiss version of the Fed invests to protect the interests of Switzerland, not its own shareholders. In the June quarter, the Eidgenossische Fed lost 6.7 million francs, about $5.4 million US, because it buys dollars to support Swiss exports of cheese, watches, pharmaceuticals, and other goods. Buying dollars helps keep the franc from rising and hurting business outside the country.

It then rather mindlessly invests these dollars in a home-grown index of US securities, mostly stocks. As we have pointed out already based on reports on institutional shareholders, the Swiss CB just tries to buy the entire US market, rather than selecting individual shares by any criterion used by analysts. And they often wind up owning non-US stocks (notably Israeli ones, but also ones from Euroland) because they are quoted on the NYSE. So the desired impact on the franc is being undermined by the CB.

In Q2 despite the official level of Wall Street having risen across the board, the Swiss managed to lose money because they bought the market rather than trying to buy winners, like the US tech stocks.

They also lost because they loaded up on Israel's leading blue chip.

So, nein, non, no, you don't want to be a shareholder in the Swissie CB. More about what this means for our own portfolio follows for paid subscribers along with news from Israel to Germany to Pakistan, Hong Kong to Mexico, Spain to Italy, and a couple of reports and one trading alert.

The Swiss also can keep their franc cheap by buying gold, one of the key alternative investments we advise owning. It rises when the dollar falls, as it did during the June quarter. But apparently the guys in Berne failed to buy enough gold so far this year. If they gear up to do so the price of the yellow metal should rise in dollars. So this is a pitch for owning alternative investment SPDR Gold, GLD, an ETF.

And of course the Swiss wound up owning too much Teva, which may be a heavenly revenge against the Swiss institutions, banks and insurance companies, which denied access to the accounts of Holocaust heirs or survivors for decades after World War II. More drug news below.

Another alternative investment we pitch is global bonds, covered by several closed-end funds whose different strategies we spell out in our tables. The biggest and best bond fund once again is Pimco's Income Fund, PONDX, which saw a $50 billion inflow in H1 and, according to Morningstar, closed June with $1.6 trillion under management, near the $1.9 trillion peak of AUM under former manager Bill Gross, who walked out. The fund is now run by Dan Ivascyn, one of those who opposed Gross. And of course we own its manager via Allianz SE, the German insurance company which controls Pimco.

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Disclosure: None.

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