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8% International CD - anyone doing this?
Old 05-16-2008, 05:16 PM   #1
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8% International CD - anyone doing this?

I am considering taking a portion of my international index fund and moving it to a international CD. No tax's and high yield sounds tempting. Only negative is - you cannot take your $ out early and no FDIC insurance.

Thoughts?

http://www.mlnbank.com/EN/homepage.htm


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Old 05-16-2008, 05:18 PM   #2
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Sounds to good to be true. Walks like a duck..
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Old 05-16-2008, 05:21 PM   #3
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I believe if you are a US tax payer you will have to pay US taxes on the interest earnt.

I am getting 8.10% on money I have invested in Australia in a term deposit. It is possible to get the money out if you need it. Not FDIC insured, but I have absolutely no concern about the bank going under because it is one of the big 4.
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Old 05-16-2008, 05:32 PM   #4
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hold on to your wallet!
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Old 05-16-2008, 05:43 PM   #5
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My CD's (term deposits) here are insured by the Estonian government (Bank of Estonia Guarantee Fund) in similar fashion to the way the FDIC works in the U.S.

I can take my money out at any time before the deposit ends, but I would forfeit all the accrued interest I had up to that point.

Rates are around 5.6% in local currency at the moment. Not stellar, but not shabby either.
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Old 05-16-2008, 05:48 PM   #6
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You can check this place out. Says their World CD is FDIC insured, but I didn't read all the fine print.

EverBank | Foreign Currency - WorldCurrency CDs
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Old 05-16-2008, 08:43 PM   #7
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You can check this place out. Says their World CD is FDIC insured, but I didn't read all the fine print.

EverBank | Foreign Currency - WorldCurrency CDs
EverBank is here in Jax. I was a happy Compubank customer, but they were bought out by Netbank and turned into a bunch of shysters. Everbank have taken over Netbank and I wouldn't touch them with a bargepole, based on my experience with Netbank.
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While Alluring, Foreign Currencies Can Be Elusive
Old 05-16-2008, 08:46 PM   #8
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While Alluring, Foreign Currencies Can Be Elusive

The New York Times ran a story about foreign currencies recently (free registration may be required):
http://www.nytimes.com/2008/04/05/business/05money.html
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Old 05-16-2008, 08:53 PM   #9
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Old 05-16-2008, 09:29 PM   #10
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I am considering taking a portion of my international index fund and moving it to a international CD. No tax's and high yield sounds tempting. Only negative is - you cannot take your $ out early and no FDIC insurance.

Thoughts?

Millennium Bank


Thanks

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Send me your money. I will give you the same terms as that bank plus 1%.
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Old 05-17-2008, 03:52 AM   #11
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Here's the FDIC information on Everbank.

FDIC: Individual Bank Information

Money Magazine rating

Online Banks: Best of the Breed - EverBank (3) - Money Magazine
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Old 05-17-2008, 07:15 PM   #12
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Considering the huge number of high yielding investments available in today;s market, why would you even consider giving your money to a sleazy, offshore pseudo-bank that might well be a ponzi scheme?
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Old 05-18-2008, 06:27 AM   #13
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Thanks all - as always you helped me make a decision.
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Old 05-18-2008, 12:18 PM   #14
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I might suggest that its wise to leave arbing foreign currencies and their associated interest rates to the experts, but they seem to have a heck of a time making money on them either.

While there is FDIC insurance against the bank failing, there is no insurance against variances of the currency itself. AFAIK, if you buy $10,000 dollars worth of cd's in another currency, your dollars are converted to that currency and at the term end of the cd, converted back to dollars.

While its possible you'll get the same exchange rate at the end as the start, its somewhat unlikely.

So you might get 6-10% interest payment, then get your principal back reduced by 10-30%.
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Old 05-18-2008, 01:14 PM   #15
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Here are a couple of recent videos from Morningstar that are related to foreign currencies:

The Dollar Dilemma in Investing:
Morningstar Video

3 Foreign Dividend Stocks Worth the Trip:
Morningstar Video
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Old 05-18-2008, 01:14 PM   #16
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I might suggest that its wise to leave arbing foreign currencies and their associated interest rates to the experts, but they seem to have a heck of a time making money on them either.

While there is FDIC insurance against the bank failing, there is no insurance against variances of the currency itself. AFAIK, if you buy $10,000 dollars worth of cd's in another currency, your dollars are converted to that currency and at the term end of the cd, converted back to dollars.

While its possible you'll get the same exchange rate at the end as the start, its somewhat unlikely.

So you might get 6-10% interest payment, then get your principal back reduced by 10-30%.
Hedging?

If the USD is your operating or base currency, that can be mitigated. Many interesting CD rates in various currencies out there. All with reputable financial organizations.
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Old 05-18-2008, 02:42 PM   #17
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Quote:
Originally Posted by cute fuzzy bunny View Post
I might suggest that its wise to leave arbing foreign currencies and their associated interest rates to the experts, but they seem to have a heck of a time making money on them either.

While there is FDIC insurance against the bank failing, there is no insurance against variances of the currency itself. AFAIK, if you buy $10,000 dollars worth of cd's in another currency, your dollars are converted to that currency and at the term end of the cd, converted back to dollars.

While its possible you'll get the same exchange rate at the end as the start, its somewhat unlikely.

So you might get 6-10% interest payment, then get your principal back reduced by 10-30%.
Or you might get your 5-10% interest and gain 20-30% on the currency, if you correctly gauged the direction of the market. The Brazilian Real has been very, very good to me over the past year, and one did not need to be a genius to see which way the currency would trend. In the end, it is all in your risk/reward calculus. My Everbank CD's are a small portion of my portfolio and I am prepared to take the consequences if I have made a mistake in my analysis.
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