The Investment U e-Letter: Issue #146
Thursday, June 13, 2002

Iceland Bonds: Quality Investment Opportunities Are There… You Just Need To Find Them
By Dr. Steve Sjuggerud, Chairman, Investment U

Greetings from Iceland, where stocks and bonds have been on a tear! I’m here right now with nearly 50 subscribers to my newsletter, and we’ve come across nothing but quality investment opportunities, particularly in Iceland bonds, on our journey here so far.

Both the stock index and long-term bonds have earned American investors 30% gains in U.S. dollar terms since the beginning of the year. While the rest of the world is crying, American investors in Iceland have been laughing all the way to the bank.

The Sun Is Always Shining Somewhere… In Iceland and Beyond But the Iceland story is not an isolated case. Investors smart enough to realize that “the sun is always shining somewhere” have done well spreading their assets around the world this year They’re up:

• 33% in Russia so far this year
• 22% in New Zealand
• 60% in Ecuador
• 48% in Thailand and the list goes on.

So when I say, “the sun is always shining somewhere,” what I mean is, there’s always an investment opportunity available somewhere in the world. It just so happens that the quality is there, right now. The sun is shining brighter, longer, in Iceland right now than anywhere else in the world

This is true literally as well as figuratively - the sun literally didn’t go down last night. Sure, they told us it “set” at midnight and rose at 3:00 a.m. But I would call it a beautiful dusk. I couldn’t sleep it was so bright. It’s now 9:00 p.m. as I write to you, and it looks like 3:00 in the afternoon. It’s just beautiful. Barely a cloud in the sky for the last few days, and downright hot today, in the 60s. If you can make it over here in the summer one of these days, you ought to.

Researching the Iceland Bond Market

Even though the stock market here has rallied, investment opportunities in Iceland abound, and their quality make them worth researching. I’ve got 50 people here who visited companies on the stock exchange with me today - and also learned about the bond market here in Iceland. With interest rates in excess of 8%, and inflation forecast to be at only 2.5%, money has been flowing into Iceland bonds. So much so that the currency has strengthened by about 15% versus the dollar in the last six months alone. We’re looking at an impressive 8% interest PLUS a 15% currency gain in treasury bills! And it looks like there’s much more of this to come.

On the Iceland stocks side, there are some ridiculously attractive opportunities for investments if you know where to look. To give you an example, one broadly diversified company has a stake in an English company that trades on the London Stock Exchange. The market value of their stake in that English company alone is worth 25% MORE than the entire value of the Icelandic company. (Their minority ownership in that English company could be sold tomorrow on the LSE for $200 million. Meanwhile, this highly diversified Icelandic company sells for $160 million in Iceland.)

Companies We Visited

• We checked out DeCODE Genetics, which announced when we arrived here a “high-resolution” genetic map of the human genome - the highest “resolution” map of the human genome ever developed. (I believe they said FIVE times the resolution of any previous map of the human genome.) They said their findings are available on www.nature.com as of today. DeCODE is an Icelandic company that trades on the Nasdaq under the symbol DCGN. (It’s a risky stock, though, as they’re years away from actual earnings.)
• We also visited Ossur (www.ossur.com), the world’s number two maker of prosthetic medical devices - the company’s growing like a weed. Artificial knees and feet are big business. And Ossur is working with MIT’s Artificial Intelligence department to make knees with little computer chips in them that “learn” to walk like you want to walk. I tell you, there is no shortage of brainpower here in Iceland.

It’s also just gorgeous out here. Superclean. Supersafe. Like Colorado, or a cold Hawaii (because it’s so volcanic). Good food. Last night we ate one of the best meals I’ve ever had at the Pearl Restaurant, maybe the strangest looking restaurant you’ve ever seen, but with a stunning view of the city - you’ve got to check this place out. Go to www.perlan.is (that address is correct) and click on English, then click on “The View.” That’s exactly what it looked like last night (yes at 10pm).

The Whole World Is Your Oyster

I could go on about Iceland. There are geysers, and waterfalls, and lots of other neat stuff. But that’s not what we’re here for. You’re reading this to become a better investor. To learn what no school will teach you about investing.

And today’s investment lesson is really very simple. There’s a lot more to investing than just U.S. stocks, though you wouldn’t know it watching CNBC or reading “Money Magazine.” The WHOLE WORLD is your oyster. Is all YOUR stock market money in U.S. stocks? Why? That’s just bad diversification. But it’s easy to change this!

The next part of this lesson is that you can’t forget there’s a whole world beyond the stock market too. There are bonds like boring Icelandic government bonds that have made U.S. investors about 30% in the last six months. There’s gold, which has been on a tear. And if there was a recession, then no one bothered to tell the real estate companies they’re up 40%+ in the last two years.

Smart investors are doing the right thing by taking a few of eggs out of their U.S. basket and putting them elsewhere. It actually lowers overall portfolio risk by spreading those eggs around.

So spread some of those eggs around, outside of U.S. stocks. Trust me, you’ll be glad you did.

Good investing,

Steve

TODAY’S Investment U CRIB SHEET

• For those of you with all your “eggs” in the basket of U.S. stocks now is the time to consider other alternatives. Take a look at our Related Articles below to get a better picture.

Related Articles:

• Iceland Stocks: Capitalizing on Iceland’s Booming Financial Markets
• Overseas Investments: Another Fine Mess For U.S. Stocksand the Growing Case For Investing Abroad
• Stock Market Predictions for 2006: A Huge Bull Market in Foreign Stocks!
• Inflation Bonds: Why the I-Bond Is a Better Bet than the New 30-Year Treasury Bond

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