EverBank and foreign currency CDs?

Financial Planning - Financial planning in general. (Moderated) 

  Yahoo!   Google   Windows Live   del.icio.us   digg   Netscape

Subject Author Date EverBank and foreign currency CDs? louise 02-16-2008  Re: EverBank and foreign currency CDs? Don 02-16-2008  Re: EverBank and foreign currency CDs? joetaxpayer 02-16-2008  Re: EverBank and foreign currency CDs? beliavsky 02-16-2008  Re: EverBank and foreign currency CDs? joetaxpayer 02-16-2008  Re: EverBank and foreign currency CDs? Don 02-16-2008  Re: EverBank and foreign currency CDs? dumbstruck 02-17-2008  Re: EverBank and foreign currency CDs? rick++ 02-17-2008
Posted by louise on February 16, 2008, 5:25 am Has anyone had experience purchasing CDs in foreign currencies from EverBank? I'm looking at returns of 7% and above from places like Brazil and Iceland. As I understand it from their website, which is not terribly clear, the principle is FDIC insured although any fluctuation in currency as related to the US dollar is your loss or your gain. Any experience and/or opinions, greatly appreciated. Louise -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by Don on February 16, 2008, 2:52 pm > Has anyone had experience purchasing CDs in foreign currencies from > EverBank? I'm looking at returns of 7% and above from places like > Brazil and Iceland. As I understand it from their website, which is > not terribly clear, the principle is FDIC insured although any > fluctuation in currency as related to the US dollar is your loss or > your gain. High yield and high risk go together, like a hand and glove, like breathing in and breathing out. A lot of people as the years go by are quick to believe they have at last found an exception to this fundamental financial principle, but over and over again reality bites. That doesn't mean that nobody can make a killing in foreign currencies and other risky investments. It means that the chances of doing so are very small and the chances of losing your shirt are very large. -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by joetaxpayer on February 16, 2008, 3:43 pm Don wrote: > High yield and high risk go together, like a hand and glove, like > breathing in and breathing out. > A lot of people as the years go by are quick to believe they have at > last found an exception to this fundamental financial principle, but > over and over again reality bites. That doesn't mean that nobody can > make a killing in foreign currencies and other risky investments. It > means that the chances of doing so are very small and the chances of > losing your shirt are very large. Your observation is right. Risk goes with reward. In this particular case, there is a theory called "interest rate parity" easy to google and find good definitions. It basically claims that if I buy a foreign CD at 10% instead of a US CD at 5%, (one year), that is a sign the market is pricing the foreign currency to drop by 5% against the dollar during that time. You are actually bet against the 'big boys' to buy such a CD thinking exchange rates are doing something else. I was going to counter your 'lose your shirt' remark, until I reread OPs choice of Brazil as one of the countries. The currency risk there may very well be at that level. (I am no expert on annual exchange rate volatility, but that is what OP should study to better understand his risk. JOE www.blog.joetaxpayer.com -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by on February 16, 2008, 5:18 pm > Don wrote: > > High yield and high risk go together, like a hand and glove, like > > breathing in and breathing out. > > A lot of people as the years go by are quick to believe they have at > > last found an exception to this fundamental financial principle, but > > over and over again reality bites. That doesn't mean that nobody can > > make a killing in foreign currencies and other risky investments. It > > means that the chances of doing so are very small and the chances of > > losing your shirt are very large. > > Your observation is right. Risk goes with reward. In this particular > case, there is a theory called "interest rate parity" easy to google and > find good definitions. It basically claims that if I buy a foreign CD at > 10% instead of a US CD at 5%, (one year), that is a sign the market is > pricing the foreign currency to drop by 5% against the dollar during > that time. You are actually bet against the 'big boys' to buy such a CD > thinking exchange rates are doing something else. You could follow your own advice, Google "uncovered interest parity", and learn that empirically most of the evidence is *against* this theory. The second paragraph of my earlier reply summarizes the evidence. I also posted a message earlier in this newsgroup about "emerging market bond funds", citing a paper that found they can play a role in individual investor portfolios. -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Posted by joetaxpayer on February 16, 2008, 9:26 pm beliavsky@aol.com wrote: > You could follow your own advice, Google "uncovered interest parity", > and learn that empirically most of the evidence is *against* this > theory. The second paragraph of my earlier reply summarizes the > evidence. I also posted a message earlier in this newsgroup about > "emerging market bond funds", citing a paper that found they can play > a role in individual investor portfolios. Well, I just learned something. I know theories aren't all 100% such a EMH, or such, but didn't know interest rate parity was canceled as a valid hypothesis. Not a very common topic. This is how I felt when they canceled Pluto..... JOE -------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup. Similar Threads Posted Foreign Funds September 27, 2006, 3:54 pm EAFE and foreign taxes April 11, 2007, 2:39 pm Foreign Stock in IRA: Taxation Issue February 2, 2007, 12:00 pm best currency for future plan June 13, 2007, 5:11 am can an individual protect against currency devaluation? May 1, 2007, 1:57 pm