Investing in the Central Bank

TERRIBLE Idea!

RomyJP said:

This is with the idea of bringing in the region of US$ 150,000 to exchange into pesos to invest in the Central Bank based on our information that this would generate in the region of 50% interest.

Key questions we are looking at are - how easy is it currently to move funds out of the DR if necessary and to convert from pesos to dollars? Is it possible to buy large amounts of dollars immediately? What information sources do you use to follow changes in the exchange rate and to get investment forecasts and analysis of risks?.

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That is about $149,000 too much to convert into pesos and invest regardless of rates. The probablity of the peso devaluing may render the US$ value of the investment less than you began with AND you may find liquidity problems in terms of receipt of your principal and interest in a timely manner and conversion back to US$ may be impossible.

If US$ rates where you live are say 3% and the DR is 50% and rates equate to both risk and the outlook of future value of the underlying currency then you are playing a mug's game if you think you can arbitrage something like this situation.

The peso was 16:1 less than 2 years ago, it is now at nearly 50. So your investment of RD$2,400,000 (150K X 16) if you could have received 50% back then would be worth about RD$5,400,000 after 2 years, back into US$ @50:1 it is US$108,000, a nice $42,000 loss, or 28% over two years. AND they were only paying in the 20% range away back then so your loss would have been closer to 50%.

As for reliable forecasting of future rates with a corrupt old government running the joint until August, billions of US$ in foreign debt, inflation at 43% , who can guess. You can likely keep your US$ in CD's at minimal retruns and enjoy more pesos in your hand anytime you want than by this investment "strategy".

Thus endeth the lesson. Stick to something in the USA.

ricktoronto said:

That is about $149,000 too much to convert into pesos and invest regardless of rates. The probablity of the peso devaluing may render the US$ value of the investment less than you began with AND you may find liquidity problems in terms of receipt of your principal and interest in a timely manner and conversion back to US$ may be impossible.

If US$ rates where you live are say 3% and the DR is 50% and rates equate to both risk and the outlook of future value of the underlying currency then you are playing a mug's game if you think you can arbitrage something like this situation.

The peso was 16:1 less than 2 years ago, it is now at nearly 50. So your investment of RD$2,400,000 (150K X 16) if you could have received 50% back then would be worth about RD$5,400,000 after 2 years, back into US$ @50:1 it is US$108,000, a nice $42,000 loss, or 28% over two years. AND they were only paying in the 20% range away back then so your loss would have been closer to 50%.

As for reliable forecasting of future rates with a corrupt old government running the joint until August, billions of US$ in foreign debt, inflation at 43% , who can guess. You can likely keep your US$ in CD's at minimal retruns and enjoy more pesos in your hand anytime you want than by this investment "strategy".

Thus endeth the lesson. Stick to something in the USA.

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What Rick said... And to be blunt, only a complete fool would invest that amount in RD$ based on the last 12 months. I suggest you keep reading this forum and read some of the problems other people have had recently.

A little abounding

As both Rick and Robert have said it would be foolish.

If you were to go to one of the mega banks, perhaps Popular, and deposit Dollars there at reasonable rates (Popular does not traffic in dollars. They do this to serve customers. Their business is in pesos), you could probably live on the income generated in dollars. I haven't looked into this but I 'think' it may well be.

I would never get out of hard currency. The last Central Bank auction of certificates produced 60.43% interest rates. How can they possibly pay that amount of interest? Simple, just crank up the printing presses. YOu get paid in ever-less valuable pesos. Just to give you an idea: Two years ago the peso was worth 6 1/4 ?, Today it is worth roughly 2?.

Anything else?

HB

In Short....

keep your money in U.S. Dollar accounts. You may open a bank account in the DR (make sure of the credibility of the bank, good choices could be Banco del Progreso, the new Banco Leon from a very prestigious and successful business family in the DR, and Banco Popular Dominicano). Do not change your dollars to pesos, except for whatever you will be using on a daily basis. If you want to play arbitrage, do it with money you are comfortable losing. This does not mean that you are going to lose your money, but there is a chance of losing whatever you gamble. Only change maybe $1K and at its most $2K or $3K, but only if you are comfortable living with out that money. If you fancy more, than do it, but be forewarned. It is expected for the peso to stabilize with Leonel in power, but give it 6 months! After a 6 months period of little volatility, then consider it.

By the way, Welcome to DR1!

If you don't mind me asking, what are your plans (more or less, not exactly) for living in the DR? Retirement? Business opportunity? Job transfers? Maybe we can help you "fit in" as well!

Use your instincts

No one on this thread knows what's going to happen in the future. However, what we do know is that there'll be a new government in August which has demonstrated fiscal responsibility in the past. We do know that there is a tremendous amount of optimism both inside and outside the country for an economic turn around based on new policies expected to be implimented. And, we do know a lot of investment capital has been sitting on the side lines waiting for this very moment - a win for Leonel.

Therefore, contrary to the past, what we may see is a strengthening of the peso and eventually lower inflation. This means that your investment in the Central Bank today could turn out to be a real bonanza down the road. The nay sayers on this thread have their heads in the past. You must make an investment decision with current data and current facts.

50% interest is terrific in an improving economy. However, as the economy improves, expect that rate to drop. Smarter minds than you'll find here believe that the DR has bottomed out and is on its way up. If that's true, your Central Bank investment today may make you look like Warren Buffett tomorrow.

Seachange said:

You must make an investment decision with current data and current facts.

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As has been said, if you make an investment of that amount based on the current data and facts you are a fool!

Any one that tells you that it's safe and to go for it is either looking for others to cry with or learned their investment skills at Enron.

Don't expect the sun to shine out of Leonel's rear just yet. Winning the election was easy in comparison to what needs to be done to fix the economy and bring confidence back to RD$ CD's.

Possible good news for DR!!!!

One of my buddies down at MorganStanley just informed me that investors are taking money out of India!! Apparently, they are going through a transfer of government and the new government has a Hippo style approach to things. The money is starting to flow out of India like a dam that is breaching, soon it might break completely and havoc will wrech India. That is bad for India, but possibly good for DR. You see, we now have a real leader in office (well in August, and he may not be perfect, but he is the best out there right now) and if global investors, with that extra load of cash out of India focus their attention into some less volatile emerging markets (where the DR is expected to be by this time next year), the DR could see a much higher influx of investment dollars than before! People, the light at the end of the Tunnel for the DR is getting brighter and brighter by the day!!

Considering that "insider" information, your plan of investment might prove to be a very wise one. But like I stated before, give it six months to be on the safe side, then depending on the performance of the economy take the risk!

Robert said:

As has been said, if you make an investment of that amount based on the current data and facts you are a fool!

Any one that tells you that it's safe and to go for it is either looking for others to cry with or learned their investment skills at Enron.

Don't expect the sun to shine out of Leonel's rear just yet. Winning the election was easy in comparison to what needs to be done to fix the economy and bring confidence back to RD$ CD's.

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Wow you didn't have to be so hard on the guy ya know!

That being said all I have to say about his post is "WOW". I guess billions of dollars worth of debt is meaningless and just a bs abstraction to him. I can't wait for Leonel to pull that rabbit out of his ***!

The others have said it all really - DON'T invest in RD pesos. Not at 30% PA, not at 40% PA nor at 60% PA!!!

you can get Rd $ easily at a rate today of 44-1. But to change those BACK to U$D in 6 months you might only get 1-66 - a net loss of 50%. So, if you have your money in there for 6 months & only earn 25%, .... you can see you make an unvestment LOSS of 25% minimum, & THAT is if you can GET U$D in 6 months time!!!

The best bet is to just change the amount of U$D you need each week or month to survive, & use the increasing exchange rate to your advantage.

I am glad to see you are talking RENTING property to start with - that puts you 7 rungs up the ladder on my scale for someone relocating here. Normally we get questions about price of BUYING property!!! A 4 bedroomed house would cost between US $500 per month up to US $1,200 p.m. depending on location, amenities, view & greed of landlord etc!! There ARE some nice properties in Puerto Plata (fairly inexpensive) but Sosua & Cabarete are also good areas (a little MORE expensive these days). When you are ready to progress down this line, many of us will be able to recommend you to the honest & reliable Estate Agents (Realtors) & pass on their respective webpages!!

If you have not already done so, go in to the archives using the keywords "renting property", "Relocating to the North Coast","Buying a property in DR", "Investments" etc & you should have enough material to last you a month of reading!!!! Once you have done so, come back with the specific questions you then need answering.

Enjoy the experince & WELCOME TO DR1!!!!! - Grahame.

Robert said:

As has been said, if you make an investment of that amount based on the current data and facts you are a fool!

Any one that tells you that it's safe and to go for it is either looking for others to cry with or learned their investment skills at Enron.

Don't expect the sun to shine out of Leonel's rear just yet. Winning the election was easy in comparison to what needs to be done to fix the economy and bring confidence back to RD$ CD's.

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It's apparent this guy has never made any real money investing in his life. Creating wealth is not about being safe, it's about being smart. Buying, when others are selling. Selling when others are buying. For instance, 18 months ago me and a group of investors started buying all the upscale houses we could afford in the Sosua-Caberate area when everyone seem to be selling. There was chatter of how bad the economy was back then. As many will recall, there was a great German exodus. We subsequently paid ridiculously low prices for some great properties. Now we've sold those properties for profits of 100% to 300% principally Americans and Brits who are coming here in droves.

Robert and those that think like him are flatheads; They can only see one way - backwards. However, one needs a more rounded perspective to anticipate and appreciate the multiple of dynamics which operate in this (and any) market.

Keep in mind that the key is timing. And, the time to invest is BEFORE the recovery begins and the peso appreciates.

The smart money is on a medium term DR recovery and eventual economic boom. Stay tuned! :smoke:

Seachange said:

It's apparent this guy has never made any real money investing in his life.

Robert and those that think like him are flatheads; They can only see one way - backwards.

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You don't know me from a bar of soap.
You have no idea of my net worth or my investments good or bad.

I have just said what all the other posters have said in this thread.
Maybe I was a little more blunt, but the message is the same.

If you want to make it personal, no problem, just do it via email or PM.

Doomed Brain

Seachange said:

It's apparent this guy has never made any real money investing in his life. Creating wealth is not about being safe, it's about being smart. Buying, when others are selling. Selling when others are buying. For instance, 18 months ago me and a group of investors started buying all the upscale houses we could afford in the Sosua-Caberate area when everyone seem to be selling. There was chatter of how bad the economy was back then. As many will recall, there was a great German exodus. We subsequently paid ridiculously low prices for some great properties. Now we've sold those properties for profits of 100% to 300% principally Americans and Brits who are coming here in droves.

Robert and those that think like him are flatheads; They can only see one way - backwards. However, one needs a more rounded perspective to anticipate and appreciate the multiple of dynamics which operate in this (and any) market.

Keep in mind that the key is timing. And, the time to invest is BEFORE the recovery begins and the peso appreciates.

The smart money is on a medium term DR recovery and eventual economic boom. Stay tuned! :smoke:

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Calling Robert a flathead and other insults has caused great mirth amongst the hundreds of thousands of people that post on here. You have already shown great ignorance by your criticism of many learned people that live here. But you have made yourself look very very foolish by assuming you know better than he. You would cringe in your pants if you discovered who he really is and I hope no-one tells you so you can continue to look foolish.
In fact you sound such a wonderful person I'll introduce you to my bank and you can open an account there.... by the way Leonel is a very very good friend of Fidel and they have already talked!!!! Fidel is very close to a friend of mine, and now Im even more cautious, so please if you want to know everything and not just think you do, dont presume! :dead:

Moronic Approach to Investing

Seachange said:

Now we've sold those properties for profits of 100% to 300% principally Americans and Brits who are coming here in droves.

Robert and those that think like him are flatheads; They can only see one way - backwards. However, one needs a more rounded perspective to anticipate and appreciate the multiple of dynamics which operate in this (and any) market.

Keep in mind that the key is timing. And, the time to invest is BEFORE the recovery begins and the peso appreciates.

The smart money is on a medium term DR recovery and eventual economic boom. Stay tuned! :smoke:

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First off to equate buying real estate during a sell off with investing in an inherently unstable currency with really no world market for it is comparing apples and oranges. Secondly, assuming that a recovery can occur , its extent and the effects on the peso and the timing of a recovery calls for a ouija board and is not part of an investment strategy yet , certainly not into illiquid currency.

And fatheads call people flatheads.

I guess we are all flatheads! But you, kind sir, plainly have not done your homework. What is the old saying about a fool and his money? Look this one up. I'm quite happy to belong to the flathead society at this stage in the DR.

If you want to invest in exotic currencies with high nominal yield I have a few hundred millions marks from the Weimar republic...

Yield on BC certificates are higher than mortgage based loans you can get from any bank in DR provided you can provide an asset to secure it. Why?... because, of course, BCCs are junk bonds, and with no secondary market. They will pay them when they want, as they want.

Barnab?

"Calling Robert a flathead and other insults has caused great mirth amongst the hundreds of thousands of people that post on here. You have already shown great ignorance by your criticism of many learned people that live here. But you have made yourself look very very foolish by assuming you know better than he. You would cringe in your pants if you discovered who he really is and I hope no-one tells you so you can continue to look foolish"

By Ladybird

Ladybird, while I agree this poster (Seachange) was a bit harsh, I must say your response is a LOT exaggerated and full of your self. "Hundreds of thousands???????" Cringe in your pants???

You make it sound as though literally hundreds of thousands have posted and Robert is Don Corleone

Sometimes less is more, learn.

I always wondered how people could lose huge amounts,

of money to "Con Men" selling worthless investments.Now I know!!!! Offer them 30,40,and 50% return on their money! Unsecured!!!!
You must have heard the one,"If It Sounds To Good To Be True,It IS!"
Besides,if we "Flat Heads" are so stupid,how come we are living large in the DR?
"Leonel" will be better for the DR than "Hipolito" was! That is a "given"! But he is not ,"The Second Coming Of Christ"!!!!!!!!!!
He will inherit a "Basket Case" economy! It will take years to turn around,and attempt to pay back "Billions" of US Dollars in debt!
We wish him well!
Cris Colon

Just don't invest in pesos right now, wait until you're sure about it...

But of course, there is a high chance that most of us DR1ers will be eating our own words if Leonel manages to make miracles with the economy 3 to 6 months into his term. Things are happening around the world that the DR can benefit from (the current collapse of the Indian stock exchange is one- by the way it collapsed yesterday, Monday May 17, 2004). There might be some trouble paying the debt, but if revenue increases, debt payments could be easily honored. After all, there are still a good number of government agencies and companies that should be sold to the private sector, investors from America and Europe are taking their money load out of India like a dam breaking in the process, and now that the DR has a president that many investors trust, things have a real possibility of turning quite sweet.

In addition to all of that, the global economy is actually turning around already with signs that even Japan, after a decade of hibernation, is waking up with a vengence economically speaking. Even the Dominican economy faired better than predicted at the end of last year! In short, if you are the type that can see an opportunity, the DR could be very tempting right now. I know, trust me. But, give it a bit more time to make sure. If things are more than a hallucination, you'll be glad you didn't got into it way too early. However, if things keep getting brighter, than get in it. By the way, don't wait too long to get in it, the best success economically (I'm talking making millions of American greenbacks here) tend to be when a person gets in when the economy hits rock bottom (that was earlier this year) and/or dips a bit more and then, it takes off. The ROI of some investments will be so phenomenal that your head might go crazy at the cash streaming into your pocket. Don't ask me for more specific info., because if I keep spilling out more info then, I won't be making as much cash as otherwise due to more people taking action! But remember, successful people think alike!

Misguided excitement

Nal0whs said:

However, if things keep getting brighter, than get in it. By the way, don't wait too long to get in it, the best success economically (I'm talking making But remember, successful people think alike!

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Keep getting brighter? An election doesn't change the core issues confronting the RD. The economic model for this country is not viable and lets not forget the crushing debt in hard currency.

The Indian money is not terribly important to the RD since there are at least two dozen better options for investors outside of the RD, and the Indian stock market has already been recovered a chunk of its losses.

As for waiting too long and succesful people think alike sounds very much like a bond salesman or the proverbial used car used salesman. Patience is the watchword and 6 month timeframe is far far too soon to be considered.

However, all this being said your excitment is nice change (if tempered).