Tags: Advani | Olympic | Brazil | real

Olympic Gold for Your Portfolio

Wednesday, 22 Aug 2012 08:42 AM

By Ashish Advani

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This is a long-term investment, but one that will pay off in droves.

With the end of the Olympics in London, I felt a vacuum in my daily entertainment. It also reminded me of the aftermath of an Olympics.

In the history of modern-day Olympics, it is unclear if the host city makes a profit by the end of the games. The costs of the games keep on escalating as each Olympics comes up. The London games are expected to cost the city about $20 billion. That is not the most expensive games. The Beijing games are reported to have cost $43 billion and apparently made $1 billion in profits.

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The London games were a success as far as the games go. It was a great venue for the athletes and the viewers. The challenge was that most of the spectators were local and they were not spending tons of money on hotels and sightseeing. Meanwhile, visitors who might have gone to London this summer stayed away. So I am not so sure the games were a great success for the retailers in London.

As the dust settles one cannot help but wonder about the next city to hold the summer Olympics, Rio de Janeiro, Brazil. The one thing I am sure of is that the games there will be even bigger and more dazzling than the London games were. The Brazilians are fun loving and entertaining and they have a lot to prove to the world as one of the leading emerging-market economies. The reputation and prestige alone will make them blow out any budget that gets established by organizers. When that happens, the doubt of making money for the city gets even more convoluted.

The capitalist in me wonders how money can be made on this Olympic event.

The easiest way to profit from the games would be to start by making selective investments with a strategic view to making steady gains as the games approach.

The Brazilian real has taken a beating this year. The currency is primed to make a comeback in the next year or so as investors take a look at Brazil and the Brazilian government starts rolling back some of the draconian regulations it imposed to curb the strength of the real last year.

When Dilma Rousseff became president of Brazil in 2011, she swore to reduce the value of the real versus the U.S. dollar. Prior to 2011, the real was a top-performing currency for many years. Rousseff imposed several layers of taxes and restricted flow of overseas investments into Brazil.

I have to admit, I had never seen a government intervention in the currency market work before this. Each time the market had defeated a government’s intention to control the value of the currency.

But in this case, the markets resisted and then eventually gave her what she wanted. The Brazilian real is now about 25 to 30 percent cheaper than it was in January 2011.

As investments start pouring in to Brazil and the government recognizes the need to attract such investments, the real will start its accent again. There are ways you can invest in a Brazilian real certificate of deposit without leaving America, and you can get Federal Deposit Insurance Corp. (FDIC) protection, as well as earn a handsome yield of 4 percent while you wait for the appreciation to kick in.

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Mind you, this is a risky investment and you could wait six months or more to see the appreciation.

Who gives you a fixed 4 percent yield on your investments these days?

So, it may not be the worst deal to get in early on this kind of investment as momentum builds and put your money to work right away.

This is the first step in adding a little Olympic gold to your portfolio for the time to come.

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