Here’s the perfect portfolio for 2012 you failed to create

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It’s that time of year again, when traders tended to square up their positions and await the imminent implosion of the US financial system. We figured it was worth showing you how you could have constructed a world-beating portfolio that would have destroyed the competition in 2012.

Looking back, it seems painfully obvious that one only needed to:

– dive into risky government bonds of countries such as Italy and Greece

– buy European stocks at the peak of the crisis

– carefully select assets denominated in Hungarian forints

– toss some money into risky European asset-backed securities

– go all-in on soybeans and Turkish stocks

It was, let’s face it, a no brainer. Here are some charts that tell the story:

Asset Class Returns 2012 YTD
Emerging market bonds (that’s the EMBIG) and European stocks were, broadly speaking, the big asset class winners this year. (Note: These numbers are about a week old, so there could be some minor tweaks before 2012’s results are in the books.)
FX Year to date Returns
Thank goodness all of my assets are denominated in Hungarian forints.
Image: Lombard Street Research
Commodities YTD returns
And what’s not in forints is obviously in soybeans.
Image: Lombard Street Research
Emerging Market Stock Performance
As well as Turkish stocks, while skillfully ignoring Ukranian stocks. (That’s UAH.)
Image: Societe Generale
European ABS returns
Riskier BBB-rated bonds bonds issued by subsequently nationalized British mortgage lender Northern Rock were a hot trade in Europe this year. And Greek residential mortgage bonds were a decidedly bad wager.
Image: Deutsche Bank