Investing in Local Bank certificate?

Tiff2015

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Mar 3, 2015
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Maybe its hogwash, but just read a site talking about the high interest rates paid on local bank certificates of deposit denominated in pesos...any takes on this?? Thanks :)
 

Tamborista

hasta la tambora
Apr 4, 2005
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They are RD Peso denominated, need I say more?
You buy Pesos with CAD or USD @ 45, the tasa goes to 50 you now have 11% less than you started with.
 

Criss Colon

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Jan 2, 2002
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It's TIME!!!!!!!!!!!!!!!!!

"How do you leave the DR with a million dollars"?????????????????
"Come with TWO"!!!!!!!!!!!!!!!!!!!!!!!


Words to live by!!!!!!!!!!!!!!


Peravia bank jut failed!!!!
Owners left the DR!!!!!!!!!!!!!!!!

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AlterEgo

Administrator
Staff member
Jan 9, 2009
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South Coast
They do offer CD's in US Dollars, for more than you'd get in the US. But it's important to remember that the bank deposits here are not officially insured like they are in the US [and I presume in Canada].

When Peravia Bank folded, the gov't only gave depositors back up to 500,000 pesos - a far cry from the $100,000USD per depositor in USA.

I wouldn't do it.
 

Cdn_Gringo

Gold
Apr 29, 2014
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Do not invest $$$ here or purchase Real Estate until you have lived here for a while. Certificates of deposit and houses are really easy to buy, not so easy to unload when the need arises.

Your level of risk is for you to determine. You need to be here before you can accurately gauge that level.
 
Jan 9, 2004
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They do offer CD's in US Dollars, for more than you'd get in the US. But it's important to remember that the bank deposits here are not officially insured like they are in the US [and I presume in Canada].

When Peravia Bank folded, the gov't only gave depositors back up to 500,000 pesos - a far cry from the $100,000USD per depositor in USA.

FDIC insurance was increased to $250,000 per depositor.

Respectfully,
Playacaribe2
 

yacht chef

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Sep 13, 2009
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A friend of mine and cccc's has one of these and he is doing ok with it so far it pays him a nice bit every 6 mounths.
 
Jan 9, 2004
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A friend of mine and cccc's has one of these and he is doing ok with it so far it pays him a nice bit every 6 mounths.

What is the interest Rate?

If you hold dollars and do nothing, you get approximately 5% more pesos every year....thus a 5% return to do nothing with little risk.

If you hold pesos and get 7% you are of course getting 2% more, but at what risk?

As we just witnessed, the government was forced to defend the peso against a rapidly declining peso....put another way a 2% differential to hold pesos is probably not a good choice for most people looking to "invest."

If you live there full time and are paid in pesos.....then it makes some sense.

But if you live there and are paid in, or receive dollars.....not such a smart idea.....especially if you invest....and then have a need to convert back to dollars...the spread between buy/sell will further erode any gains you think you made.

Now if you hold Euros.....it has been (for the past year) and continues to be a good idea to convert to either dollars or pesos.....as the Euro has taken a plunge.....and still has medium term downside risk to parity (100 to the dollar) and its long term final resting low point at or near 94.


Respectfully,
Playacaribe2
 

Tamborista

hasta la tambora
Apr 4, 2005
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Now if you hold Euros.....it has been (for the past year) and continues to be a good idea to convert to either dollars or pesos.....as the Euro has taken a plunge.....and still has medium term downside risk to parity (100 to the dollar) and its long term final resting low point at or near 94.

Another 747 pips to go, this week?
 
Jan 9, 2004
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Another 747 pips to go, this week?

That would be a scary move.....if it went down to parity....this week.

I will settle for at/near the end of the year......then I will cover my new short position....as I expect a v shaped spring off of parity.....and then a 94 +/- bottom in the next 2 years.

Then its off to see Europe......at least that is the plan......and so far its working.


Respectfully,
Playacaribe2
 

windeguy

Platinum
Jul 10, 2004
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A friend of mine and cccc's has one of these and he is doing ok with it so far it pays him a nice bit every 6 mounths.

A "nice bit", but is that "nice bit" more than he lost on the exchange rate changes since getting a CD?
 

Cdn_Gringo

Gold
Apr 29, 2014
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The purchasing power (value) of all locked in term currency investments is suspect and you generally lose by the end of the term. The cost of living increase, coupled with inflation and conversion fees almost always guarantees a loss over time.

In currency markets, to make money, one needs the ability to buy dollars when they are low and sell them on a day when they are higher, acquire euros when low and sell when higher, buy pesos when low and sell when higher etc, repeated as often as warranted. With today's economic realities and low interest rates, a term deposit although considered safe is usually a recipe for insignificant gains if not an actual loss despite the appearance of coming out a bit further ahead. That's how banks/investment firms make their money - they have floors of traders moving money around several times a day.

The only way to beat the banks is to let them profit and pass on to you compound interest over the long term which allows you to eventually realize increases over and above COL and inflation. This takes decades though.

The rich get richer by making lots of frequent large transactions. The middle class and the less well off have no such ability and are the ones preyed upon by the vultures.

Food is a good investment for the working class.

Eg. In 2013 a 5lb jar of peanut butter is $5.99. In 2015 that same jar of Skippy is $7.99. If one were to invest $5.99 in 2013, the interest earned up to 2015 would be insufficient to buy a jar of peanut butter. If, however, in 2013 one was to buy a lifetimes supply of peanut butter, one would not have to pay $7.99 in 2015 or higher in later years.

Coffee, rice and other staples never get cheaper, but they also don't have an indefinite shelf life so one can't plan on retiring with a warehouse full of peanut butter to be sold to fund other purchases. In the short term, one can come out much further ahead buy buying enough peanut butter (which usually has a shelf life of at least 18 months-two years) to avoid the intervening incremental increases in price than handing the same sum to a bank and hoping to come out further ahead.

Higher gains require a higher degree of risk and one needs to be able to lose it all to beat the curve. A well diversified portfolio of sufficient scale can result in a positive income but one needs to factor in that some of those investments will be losers and counter with a majority that will be winners. The average investor without significant resources to put into play only has compound interest in their corner and that what the market needs to fund all the other winners who are playing the short game while the majority accept the long game as their only real opportunity for actual gains.
 

melphis

Living my Dream
Apr 18, 2013
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This year I got 7.5% on pesos. Tax when you cash out is 10% of the interest. A few years ago you could get as much as 20% interest. Unfortunately those days are long gone.
 
Jan 9, 2004
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This year I got 7.5% on pesos. Tax when you cash out is 10% of the interest. A few years ago you could get as much as 20% interest. Unfortunately those days are long gone.

Thank You for the current rate of return figure.

So you tie up money for 6/12/18? months to earn approximately 7.5% and then pay 10% tax....reducing your actual yield to the 6.75% area with further currency devaluation risk....OR you keep dollars in your pocket, pay no tax and.....can access them at any time and get a yield of 5+/- %.....for doing nothing with little risk.

Seems like a very easy choice......but to each their own.


Respectfully,
Playacaribe2
 
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Criss Colon

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I know who "Yacht Chef" IS TALKING ABOUT!

The same guy who hoarded silver at $40 an ounce!!!!!!!!!!!!!!!!!!!!!!!!!

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