Commercial Paper

kingofdice

Active member
Jan 16, 2002
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I keep hearing about Dominican Commerical Paper as an investment alternative to earning interest in pesos from a Dominican Bank. Can one of our bright board posters, explain exactly what is Dom. Commercial Paper and how one would go about investing in these instruments? Thanks for any replies.
 

Escott

Gold
Jan 14, 2002
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Do a search in "business" and you will find a website. Hope you speak Spanish as that is the language you will see the sight in.

Email me if you want an email address of a finance house you can get 22 percent from in Peso and 14% in dollars

Regards
 

ricktoronto

Grande Pollo en Boca Chica
Jan 9, 2002
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In Simple Terms That would be wrong

shadley000 said:
In simple terms you could call it a short term corporate bond.

Bonds generally have security held in trust for the bond holders. A better term would be an IOU from a commercial firm that has sufficient credit that should permit them to borrwo in the public CP market more cheaply than from Banks.

Still it is an unsecured IOU for 30-60-90 days so you need to understand the creditworthiness and liquidity of the issuer very well. OTOH, Bankers Acceptances (if there are such things in DR) are CP issued by "company A" that are then guaranteed for full payment by a Bank. Thus if the issuer proves to be a deadbeat it is th eBank's problem, and not yours.

If the CP Issuer you are considering is not rated ( by Moody's or S&P etc.) then you had better have a damn good idea how solvent they are beofre investing. I would imagine a rated CP issuer in the DR is highly doubtful entity to find.
 

Jim Hinsch

Bronze
Jan 1, 2002
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Risks of Commercial Paper

I hear frequently about a place where one goes to invest in commercial paper in Santo Domingo.

I think I remember DR1 recommending a specific place also.

Is each investment independent from every other, and dependent solely on 1 company (not the company that sold you the paper), and therefore you can potentially lose the entire investment while the outfit where you bought it remains without any responsibility and in business as usual?

As in two people go there at the same time and want a 15% investment. They both go back next month and one of they guys collects and the other is told "Sorry"?
 

Escott

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Jan 14, 2002
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I don't remember that website but it is in the archives. It is in Spanish.

Jim these are the biggest companies in the DR that that have paper for Short term and in Sto. Do.. Companies like National Car Rental etc..

Not so that 2 people buy and 1 is screwed. Company has to go out of business for you not to get paid I believe.
 

sjh

aka - shadley
Jan 1, 2002
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well the company could default on its debt too... You would then have to spend a lot of time trying to get your money back. You need to read the terms and conditions pretty carefully...
 

kingofdice

Active member
Jan 16, 2002
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Thank you all for your replies. It appears the nice return on commercial paper is in correlation to the risk. I'd like one clarification: The 30, 60, 90 day notes on commerical paper - are they paying a full 15% or more in interest for the term of the note? Doesn't sound as bad as taking a risk over a 6 months or a year, although the return might be higher for a longer note period.
I did buy several hundred shares of Tricom about 18 months ago, that has lost half it's value. As mentioned previously, it is the only DR company listed on the NYSE and is considered a well ran company, although it's debt level is half a billion.
 

Escott

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Jan 14, 2002
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King, all telecoms and especially the wireless have been flushed down the toilet. AT&T Wireless went public not that long ago at 29 a share is now under 10. Dobson communications went public at 22 and is now under 2 bux.

Don't feel like the Lone Ranger pal, anyone that has invested in the Stock Market anytime in the last few years is losing their shirts or they weren't in the market or trading in inside info.

For the last several years I have been buying the max allowable of Ibonds from the US government in both my name and my daughters name. I buy them on the internet with a credit card and even get Freq flyer miles on Delta or American Airlines. It will also pay my daughters college and be 100% tax deductable on the interest. My 6% return is looking mighty good these days:)

You can get upwards of 18 percent in peso CD's from the banks. Pretty safe if you like pesos.

Regards
 

ricktoronto

Grande Pollo en Boca Chica
Jan 9, 2002
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22%, 18% what term?

One year CD at 18% a year ago might have looked good and 33% to 51% devaluation on the peso later ( +/- 23 - 25:1 from 16.5:1) you are out 15% or more.

While 22% today might look wise on the assumption that it can't possibly go down ANOTHER 22% in a year is not much of a hedge, more like a guess.
 

JOHNNY HONDA

Motorcycle MANIAC
Sep 25, 2002
771
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Rick
You are right in your way of thinking,in my way its real simple,Im not trying to get rich and money in cds pays more than money under my matress.I still believe its a safe way to make a little.
J.H.
 

frederic

DR1 Expert
Jan 1, 2002
93
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its up to 28% now....

Guess What...at least three banks I called quoted 28% interest on their peso Commercial Paper....which might not be a bad deal in the short term since the Dollar seems to have overshot its price and is now landing softly.....maybe?
 

sjh

aka - shadley
Jan 1, 2002
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for the individual with big brass pair and some insight, jumping in at the right moment to take advantage of high interest rates and a possible recovery of the peso would be a high risk way to make quick easy money.

Not a game for the feint of heart
 

suarezn

Gold
Feb 3, 2002
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So the question is...which was already asked, but nobody answered...Is it 18%, 22% or whatever per year or over the 90 days period? In other words if I invest a million (I wish) for 90 days, am I going to get 180,000 or 180,000/12*3?
 

mondongo

Bronze
Jan 1, 2002
1,533
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suarezn, the interest rates quoted are annual. A 28% 90-day commercial paper would yield apporximately 28%/4 = 7% over the 90-day period.
 

Golo100

Bronze
Jan 5, 2002
2,138
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Commercial paper

Bolsa de Valores and commercial paper pay higher than straight up bank paper. On $1 million or more 24% and up is the rule today. Some outfits pay on a 360 day period, others use 365 days to establish the true yield. Either way, you would get about $60,000 over the 90 day period($US2600.00).

TW