- Thread starter BostonMary
- Start date
Dominican Peso
Nice analysis. If I may make one more suggestion it would be called PR.
PR meaning political risk. While that is an intangible and not easily calculated, it certainly should be considered by anyone investing anywhere.
By way of example, Venezuelas bank interest rates are high, but given the potential political risk with Chavez' and his political parties penchant for nationalization and confiscation, I would deem it to be unworthy to consider investing in its currency.
Another reason and not related to the discussion, is that Venezuela currently has negative interest rate return due to inflation....meaning the amount you receive in interest is more than offset by the decline in value of the Bolivar....meaning no one wants to hold onto Bolivars for very long.
The DR is currently not in that unenviable position, but I do see a bit more inflation this year than the 3.5-5.00% per annum of the last couple of years.
Respectfully,
Playacaribe2
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I was here when the peso was 50/1, so I have seen the fluctuations. As a matter of fact when I first came here it was 5/1. I no longer want to be involved in the fucuating peso. I will be writing checks as I need the funds.
I keep seeing everyone talk about 10% on a CD. I was looking at several DR bank websites yesterday and I didn't find any rates listed. What are the real rates DR banks are paying?
Perhaps someone that has that info will chime in. I think the 10% rate would be on a CD for 3-4 years. With 4-5% inflation per annum, that would be enough for me to say thanks...but no thanks.
If you need more info on whether it is a good investment or not....see Pelauts excellent post #67 above.
Respectfully,
Playacaribe2
I'm no economist...far from it. But suppose the peso doesn't go from 40/1 to 50/1. Suppose it stays right around 40 for the next few years. If you live here, work here, eat here, shop here, or are retired here, would it not be advantageous to be collecting 10% a year and living on your interest without touching your principal? US $100,000 will collect DOP $400,000 ($360,000 after taxes) a year, so after two years, you have $800,000 ($760,000 after taxes).
If you have US $100,000 sitting in a US bank, and it is only collecting 2% in those two years--do you have to pay US tax on the interest? If so, what is the point of sitting on it and using it to live off--in effect eating away at your principal. Wouldn't it be better to be living off the interest?
I know, I know...once you convert the money back to US dollars, offset the inflation, have the pesos loose 1 or 2 more against the dollar--you end up exactly where you were at, or below where you were at. But, if you live here, eat here, pay for your groceries here, wouldn't it be advantageous to pay for these things with your DOP $360,000 interest every year, while your principal sits untouched?
I will reiterate this again...buying a 10% CD for the sole reason of trying to make money off the exchange rate, in order to turn around and convert your pesos back to US dollars is not a smart move. Period. I never recommend this. Ever. But, for the few of you living here, eating here, shopping here, $360,000 pesos a year in interest can buy a lot of coffee and bagels. For me, this is a no brainer. I've been living here off of interest for 8 years, my father before me did it for 8 years, but i never plan on converting my pesos back to dollars. period. if the pesos reaches 50/1, i'll just sit on it until it comes back down to earth.
I can't recommend this to everyone...i got into the game a long time ago, and my principal is still sitting untouched. i never plan on touching it. Meanwhile, the interest i make every year is allowing me to live modestly and drink a lot of coffee. For that, i'm thankful. I'm constantly walking around on a caffeine high and with an erection. That's got to be worth something.
Love Frank
If you have US $100,000 sitting in a US bank, and it is only collecting 2% in those two years--do you have to pay US tax on the interest? If so, what is the point of sitting on it and using it to live off--in effect eating away at your principal. Wouldn't it be better to be living off the interest?
I know, I know...once you convert the money back to US dollars, offset the inflation, have the pesos loose 1 or 2 more against the dollar--you end up exactly where you were at, or below where you were at. But, if you live here, eat here, pay for your groceries here, wouldn't it be advantageous to pay for these things with your DOP $360,000 interest every year, while your principal sits untouched?
I will reiterate this again...buying a 10% CD for the sole reason of trying to make money off the exchange rate, in order to turn around and convert your pesos back to US dollars is not a smart move. Period. I never recommend this. Ever. But, for the few of you living here, eating here, shopping here, $360,000 pesos a year in interest can buy a lot of coffee and bagels. For me, this is a no brainer. I've been living here off of interest for 8 years, my father before me did it for 8 years, but i never plan on converting my pesos back to dollars. period. if the pesos reaches 50/1, i'll just sit on it until it comes back down to earth.
I can't recommend this to everyone...i got into the game a long time ago, and my principal is still sitting untouched. i never plan on touching it. Meanwhile, the interest i make every year is allowing me to live modestly and drink a lot of coffee. For that, i'm thankful. I'm constantly walking around on a caffeine high and with an erection. That's got to be worth something.
Love Frank
I'm sorry, i should have mentioned that my interest is "Compounding Monthly," so i have a slight advantage over some people. This kind of compounding monthly interest really goes a long way when i do not use the interest for a few months or when i go away for the summers. when i come back, my monthly interest has increased as a result. This interest is 16 years in the running between my father and I.
Frank
Frank
Frank:
Different strokes for different folks. If it works/worked for you and your father, no need to change anything.
However, I believe, the OP was asking in an investment context....and under that scenario you and I concur that it is probably not a good idea.
Remember, its all good till its not.....in the meantime...enjoy the ride.
Respectfully,
Playacaribe2
"Frank", ..."If, "If's, and "But's,..."Were candy & Nuts",."Every Day Would be "Christmas"!!(Or El Dia De Los Reyes) here in the DR!!!!
Your "If" scenario of the DR peso staying at 40 to 1 vis a vi the US dollar is your "Fantacia"!!
It closed at 40.7 last Friday.
Every economic indicator I can think of, points to a continued decline in the peso.
The US dollar is the worst place to keep your money!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
"UNLESS", you compare it to every other currency, that is!!
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Your "If" scenario of the DR peso staying at 40 to 1 vis a vi the US dollar is your "Fantacia"!!
It closed at 40.7 last Friday.
Every economic indicator I can think of, points to a continued decline in the peso.
The US dollar is the worst place to keep your money!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
"UNLESS", you compare it to every other currency, that is!!
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sr Cristobal..certainly no expert in "all things dominican" I can only tell you what I experienced. I have hundreds of in flights to s.d. with an extended stay in mid 80's I dont go to d.r. that much any more, my extended stay ended about mid 90"s. I did not say d.r never had any taxes, in fact vehicles were more heavily taxed than now, veh were more expensive if you could believed that, taxes coming in and leaving the island (paid hundreds of those)taxes on hotel rooms restaurants etc. but now...wow.
I almost bought a house in Arroyo Hondo (the good part) in 1985. As you know there is a section there that have real fancy houses, That house today is worth much more. Again my dominican experiences are outdated, sorry cc.
"Mas Problemas",.."Mas Deudas....., "Lo De Siempre!!"....
Gladly, I bought one of those "Casas" in Arroyo Hondo, in 1997.....
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Gladly, I bought one of those "Casas" in Arroyo Hondo, in 1997.....
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I am certainly not saying that the peso will not continue its decline against the dollar. It certainly appears that way. However, i'm on the roller coast for the whole ride. I'm not here trying to make money off the exchange rate or fluctuation of the DOP peso. I'm here living day to day off the interest--regardless whether inflation hits or not, and regardless whether the peso takes a dive. I'm not touching my principal under any circumstance. and in the meantime, i'll start stockpiling beaver pelts and chocolate. i'll ride the roller coaster up and down until it comes back around. I'm not going anywhere. my family is here, my roots are here.
What i did say, however, was this: what if it takes a couple of years before the pesos hits 50/1? Whether it takes one year or two years, well, that's another $360,000 pesos annually that i get to enjoy. This way, when the DOP peso does take its dive, i'll have my stockpile of chocolate ready until the peso turns back around one day. I'm not going anywhere, and my principal is not going anywhere. I'm not some fly by night investor, i'm not an economist, i'm not some financier...i'm just a dumb hillbilly buying new motorcycles every year off my interest.
and i got plenty of motorcycles right now.
Love Frank
"Mas Problemas",.."Mas Deudas....., "Lo De Siempre!!"....
Gladly, I bought one of those "Casas" in Arroyo Hondo, in 1997.....
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Yes i regret not doing it..peso was 2 for 1 but still was a great deal.
How do you like your motorcycles??????????????????????????
Baked, fried, stewed in a "San choco"???????????????????????????:cheeky::cheeky:
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Baked, fried, stewed in a "San choco"???????????????????????????
:cheeky::cheeky:CCCCCCCCCCCCCCCCCCC