EverBank and foreign currency CDs?

Financial Planning - Financial planning in general. (Moderated) 

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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 Don on February 16, 2008, 5:53 pm > 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. This scenario is also an excellent example of the fact someone seeking financial advice faces two kinds of risk. The first is the risk of the investment product itself. The second is the risk of buying a product, maybe itself risky, maybe not, from a person or organization that sells the product for too much or skims off a lot of the gain -- in this case 5% of an already questionable 12%! -------------------------------------- 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 dumbstruck on February 17, 2008, 7:49 am > Has anyone had experience purchasing CDs in foreign > currencies from EverBank?  I'm looking at returns of 7% and Last I looked, their website admitted of huge comissions on exchanging your $ into and then back out of the foreign currency - so much that many months of interest would be cancelled out. http://www.currencyshares.com has etfs that appear to do this more cleanly, and many more are in the works according to news. Or invest in a stock or bond fund based in foreign currency. Big irrationalities exist in currencies and interest... that make reward not based on risk over the last few years, but maybe soon the gravytrain will stop. -------------------------------------- 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 rick++ on February 17, 2008, 12:58 pm > Historically, for American investors, the higher yields on emerging > market local-currency bonds have been partially but not entirely > offset by depreciation of the underlying currencies vs. the dollar. One word: "1998". Everyone from individual investors to giant hedge funds was playing emerging markets and international exchange. Many got burned when two currencies went south overnight and the US banking system almost collapsed. (The Fed assembled a consortium to alleviate a hedge fund run by Nobel prize economist that had bad bets nearly the size of th US GDP.) And one hedge fund accused of triggering the currency run (Soros) cleaned up. Dont bet what you cant afford to lose. Kep diverse in this era of uncertainty. -------------------------------------- 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