More Hungary

John Christy author of the Forbes International Investment Report left some positive comments about Hungary on the post I had yesterday.

He has Magyar Telekom (MTA) in his model portfolio. I would encourage you to read his comment through the link above.

Nicole Elliott from Mizuho had some comments about Hungarian bonds and the forint on CNBC Europe yesterday. She thinks that bond yields could go up another 100 basis points quite quickly and the currency could be in for a 2003-like decline so watch out.

This brings me to an important point. Hungary is a part of the same type of trade that is hurting New Zealand and Iceland. The demand for these high yielding currencies coming from the so-called funding currencies of Japan and Switzerland has been stunted for fear of the high yielders falling in value, thus offsetting the yield advantage.

I took clients out of New Zealand. I have personal exposure to Iceland. Zero for clients (well maybe we should count Australia as part of this) and small Iceland for me (again Australia too?) is not too much for a theme that might not be working. Portfolio exposure of 3% for something that is in the wrong part of the market, if indeed it really is wrong, is far from ruinous.

There is visibility for all these currencies to sink further, at one point last night the kiwi was below $0.60, but they may not, who can know for sure? Owning some MTA with no other exposure will not hurt your portfolio. Owning MTA, NZT and a few other stocks from countries that are exposed to this trade that comprise 10% of your portfolio would be a problem.

Part of trying to manage your own portfolio needs to be a reasonable understanding of what will hurt your various holdings, weigh the likelihood of what negatives might happen now and insulating somewhat against those likely negatives.

For example owning MTA, NZT and a couple of other like these two would have been OK two years ago. Now, it is probably OK to have a lot of exposure to oil or countries with surpluses. This is important top down concept.