Dollar, EURO, NTD, Yuan? What currency to invest in?

Business Money
1

I’ve had a very substantial USD CD in a US bank for the past couple of years and its term is going to end next month, so I need to decide whether to let them renew it, switch it to a CD at another US bank with a slightly higher rate (I picked my present bank after researching top CD rates, but it changes every year), cash it in and buy stocks, or put it in a safe investment in some other currency.

I’ve got an equal amount in stocks and they’re mostly gaining nicely now, but I’ve been kindof soured on the stock market in recent years and like the safety of a CD. It’s guaranteed to make it’s tiny little gain. Yes it’s guaranteed not to keep pace with inflation, but at least it won’t drop 20% or whatever stocks might do (and it’s 100% guaranteed by the US govt). So I will almost surely keep it in either a CD or some other extremely safe alternative. Safety is my primary objective, but I’d like the best return I can get that is truly safe.

But my wife tells me to take it out of USD, because the US economy will continue to suck for the foreseeable future and so, she says, will the USD – as compared to some other currencies. Such as the Chinese Yuan, she says.

True, I keep reading of how the Yuan is artificially cheap due to the government’s manipulation and the US, Japan and others are exerting heavy pressure on China to allow their currency to rise, so it does seem plausible that it might gradually rise. So perhaps that may (or maybe not; I look forward to hearing your comments) answer the first question – which currency? The second question is if I put it in Yuan, what do I invest it in.

I’m just starting to research this whole subject and I’ve found the following, which I’m starting to read:

Here’s a great site that shows graphs of all kinds of cool stuff, including nice long-term currency comparisons (USD v. NTD, USD v. Euro, etc)
forecast-chart.com/currency- … harts.html

Here’s a great blog from some apparent Forex expert
forexblog.org/category/chinese-yuan-rmb

And here’s a whole bunch of links to articles on how to invest in Yuan
google.com/search?q=currency … 4141c2111f

I’ll keep reading through the above stuff, and I’m definitely not set on the Yuan yet, though it does sound plausible. But I’m curious to hear what any of you may think about the subject.

2

In terms of U.S.D. I’m up 40% profit over the past year.
Of course I’m up in all major currencies though as I have been harping on about gold for the past three to four years.

3

Try TTM motors on the NYSE. Up about 3 dollars in the last 3 weeks and it looks like it will continue. Fo me, I will wait for a dip and then buy.
Watch it.

4

Also a novice here and looking to get into the FOREX market for the same reasons. It all seems a quite a crap shoot, however having watched it for years as I do business internationally in a few currencies I have some idea.
I still don’t see the USD doing as badly as people say, it’s the worlds defacto currency and in such a globalized world as today there aren’t too many governments in the world prepared to see it go down the toilet, for an economy thats in as much trouble as the US is in it’s holding up very well, I suspect for this very reason - still I plan to stay away form it!The Yuan I think is really a waiting game, I dont see them making any solid moves there, it would have too much of a detrimental effect on their international competitiveness. The Canadian and Australia dollars are very strong, worth watching those and waiting for a dip before getting in. I have a sum in AUD and am looking to change into something while it is peaking as it currently is. The Euro looks like it might be on its way back up, some gains this past week so I am thinking about going AUD to Euro.

5

What is the money for, MT? If it is retirement money,then where do you plan on retiring? Most people save in the currency of the place they will retire. To do otherwise means exposing yourself to uncompensated currency risk.

You have mentioned that you have equities in your portfolio, but what about bonds? If this money is for retirement, then you will do much better with an intermediate-term high grade bond index fund or ETF than with fixed-term deposits.

6

[quote=“Enigma”]Try TTM motors on the NYSE. Up about 3 dollars in the last 3 weeks and it looks like it will continue. Fo me, I will wait for a dip and then buy.
Watch it.[/quote]

Eh, an (ok, “the”) Indian automotive company? Sounds too speculative too me. Besides, the primary intent of this thread is not to engage in stock picking. If I were to pick another stock, which I may end up doing, I might go with alcohol (BUD or DEO), tobacco (PM) or junk food (YUM), since those will always be in demand regardless of the crappy state of the economy. Moreover, TTM may be an Indian company but I would still be investing USD. And THAT was the whole point of this thread – should I convert my USD into some other currency before investing, even if only foreign CD or bond or whatever.

[quote=“Jive Turkey”]What is the money for, MT? If it is retirement money,then where do you plan on retiring? Most people save in the currency of the place they will retire. To do otherwise means exposing yourself to uncompensated currency risk.

You have mentioned that you have equities in your portfolio, but what about bonds? If this money is for retirement, then you will do much better with an intermediate-term high grade bond index fund or ETF than with fixed-term deposits.[/quote]

Good points. I’ve told my wife the same thing – that I should invest in USD because eventually (in 5 yrs, 10 yrs, 15, 20?) we’ll move back to the States and that’s when we’ll finally use these funds (for a house or for retirement, I don’t know for sure). And I figure not even the world’s top experts, much less any of us, can predict what global currency will perform best relative to the others over the next 10, 15 or 20 years, so might as well stick it in USD, since that’s what I’ll eventually want.

No I don’t have any bonds. I researched that subject a few years ago and for some reason didn’t end up buying any. Ok, I’ll google that subject again. Good point, thanks.

It does seem, after the research I did yesterday, that there’s not much point in converting to Yuan. The Chinese aren’t likely to cave in to all the pressure and significantly alter their monetary policies, the Yuan won’t gain that much over the dollar in the foreseeable future, and aside from the currency fluctuation rate it seems the rate of return one can get and security of the investment may be bigger issues.

7

Actually many of them doubt there will be a U.S. dollar that far into the future.
The U.S. dollar is the last currency you should be investing in right now. Its dead man walking at this stage. Down 32% in a year is quite a statement already.

8

Actually, I’ve never heard anyone say that and I don’t believe it. The dollar gone completely? No way.

And down 32% compared to what? If you’re not saying in comparison to the NTD or the Euro, etc, but merely down compared to its relative value in January, how do they make such a measurement? Compared to the average price of a wide range of things one could buy with it (barrel of oil, gallon of milk, pound of beef, quarter ounce of bud)? Just curious.

9

Hi Mother Theresa,

From the little I understand, participating in FOREX markets is speculating, not investing. It’s a zero sum game - for every winning currency there’s a loser of equal amount once you account for commissions. You might as well go to a casino and put your money on black - your expected return is the same (zero minus the house take).

I’d advise avoiding the FOREX markets if you’re looking to invest money.

Where to put your money instead is a more involved question, as it depends on the return you need and the risk you’re willing to take. As for the currency your investments are denominated in, I agree with the idea that you should favor the currency of the country you’re planning to retire in.

My two novice cents,

10

Thanks Chris. I agree. I definitely had no attention of buying and selling, buying and selling, buying and selling currencies. I have neither the time nor knowledge to do that and I just read an article by a MarketWatch author, who appears to be fairly bright and experienced, explaining how he lost US$100K (fortunately not real money) within a month speculating in forex. So, no thanks to that.

I’m not looking for something that requires lots of time and expertise. Nor am I looking to get rich quick. I’m looking for a very safe long term investment with a decent rate of return (ie., better than a savings account). As I said, I had it in a CD and I have no regrets about the paltry gain – at least it gained. But now the disaster of 2007-8 is a little further in the past, I’ve regained a little more confidence and wish to earn a slightly better return on that, conservative portion of my portfolio (there’s another portion invested in equities). And my wife bemoaned the declining USD, so I just wondered if there are very safe, guaranteed investments one can make in foreign currencies that are very likely to outperform the USD over the next few years.

After the little research I’ve done, and further consideration, I’m a little sceptical. Investing in the Chinese Yuan? Eh. Eventually I’ll want dollars. I’m starting to think I’m best off just searching for good strong USD investments.

I’m curious about JiveTurkey’s bond comment, too, because I’ve long thought my portfolio must be deficient in never having had any bonds, but with interest rates so low now it seems they can only go up and it’s my understanding that’s when you DON’T want bonds.

Oh, well back to the research.

11

Hello again Mother Theresa!

First - I’m not an investment professional, and there’s nothing that qualifies me to give investment advice unless you count my having learned a couple lessons the hard way by losing real money in the past through various poor investment decisions. I’d guess others (e.g., Jive Turkey) know more than I do, and there are a lot of great books (e.g. The Four Pillars of Investing, The Bogleheads Guide to Investing) that would give far better advice than I ever could. Chances are you know more than I do!

Second - let me give advice anyway. :slight_smile: The way I’m used to thinking of things is to start by deciding what percent of the portfolio to put into cash, bonds, and stock buckets and only then to allocate each of those buckets to appropriate investments. It sounds like you had this money in the cash bucket and are thinking about moving it to bonds, stocks, or something else entirely, so I think you might be taking a different approach. I’d advise you to think about why you had the money in cash in the first place. Did you want that money to be completely secure? Did you expect to use it in a short period of time (e.g., the next five years)? If so, then perhaps your reasons for having it in cash still hold. Low current interest rates make it painful to hold cash right now, but personally the cash I had during the last big market downturn 2008-2009 helped me feel secure enough to hold my riskier investments (read: stocks) and not sell them. I also feel good knowing I have a certain amount of monthly expenses in cash, so if I switch jobs (or countries!) like I have twice in the past two years, I don’t have to worry about ready funds to help me do so. I look for return from my stock bucket - the cash and bond buckets provide me with the emotional security to sit through the stock bucket’s fluctuations while it’s earning me my big money.

On the other hand, did you put that money into CDs originally because you thought that was the best bet to get a good return on your money? If so, then you might have a reason to reconsider having that money in cash, if you already know of an alternative that you think would give a better return. If not, then keeping the cash in a shorter term instrument (a money market, a short-term CD) can keep it safe while you’re researching, or while you’re waiting for better opportunities to come along. For instance, if you knew that interest rates would be rising sharply soon and didn’t want to put the money in intermediate-term bonds, you could keep the money in cash, benefit from the sharp interest rate increase, and make your move into something else after it happened. Because my track record shows I’m terrible at predicting future market movements, I simply diversify across asset classes in a predetermined way and hope for the best.

Either way, I’d start first with ‘what am I trying to do with this money in relation to my other investments?’ and only then address the question of ‘where should I put this money to accomplish that?’. There’s a yet earlier question you can ask which would help clarify even more, which would be ‘what are my overall financial goals and what allocation across cash, bonds, and stocks could help achieve them?’. Books like the Bogleheads guide I mentioned give good guidelines for how to answer that question, and that might help the rest fall into place.

Best of luck to you!

12

Guaranteed by whom? In a two person household, the FDIC will guarantee a USD CD up to $250,000 per account holder, another $250,000 in a traditional or Roth IRA CD per account holder, and a final $500,000 for a joint savings, MMA, or CD. That’s a total of $1,500,000.

I don’t give investment advice, but personally, I invest in USD. Nobody has ever lost a penny from FDIC guaranteed funds since the organization was formed in 1933. I don’t believe the USD has weathered the Great Depression and multiple recessions since only to cave under a recession that is technically over.

13

[quote=“Mother Theresa”]Actually, I’ve never heard anyone say that and I don’t believe it. The dollar gone completely? No way.

And down 32% compared to what? If you’re not saying in comparison to the NTD or the Euro, etc, but merely down compared to its relative value in January, how do they make such a measurement? Compared to the average price of a wide range of things one could buy with it (barrel of oil, gallon of milk, pound of beef, quarter ounce of bud)? Just curious.[/quote]

Not believing it is your prerogative. Every fiat currency has a shelf life and the U.S.D. is facing its. How much longer will it be in play? Just as long as people are still willing to believe it won’t fail is how long, so you’re helping it along some. If you wish to read about some people who have been commenting on the state of the U.S. dollar and its impending demise, then you might check out Peter Schiff, Ron Paul, Marc Faber, and many other famous economists as well as take a look at some of the many fiat currencies of history which have gone the same way as the dodo.Oh, and don’t forget infamous John Law of history.

And the currency is down compared to both precious metals and the stock market, in case you are wondering what currencies are valued against.

You can also read a little about Gresham’s Law as it happens to describe quite accurately what is happening with stocks and precious metals right now, i.e. going up in value compared with the actual currency itself.

14

Only one of those men, Marc Faber, is an economist and his gloomy ideas are not widely accepted. Neither Peter Schiff or Ron Paul are economists, much less “famous economists”. There isn’t a serious economist on any end of the political spectrum that believes the USD is going extinct.

15

Then you’re obviously referring to the wrong people. Economists judge the economy, they aren’t supposed to be politicians before they are economists. And how are you measuring who is and is not an economist by the way? Am I confused or are all of the people I just mentioned credited world over for accurately predicting the present financial collapse?

I think you’re having a laugh Gai Bohan if you think that the doom and gloom comments from Marc Faber don’t hold water. He’s another who has accurately predicted the collapse when almost no one else did. What are you talking about when you say people don’t widely accept him? How long does one have to be right before people believe they are right? And on one hand you dismiss two accurate economists by practice, because they aren’t qualified enough for you, even though they are extremely accurate, and then you also dismiss another extremely accurate guy who is a paper holding economist. I wonder if anyone who disagrees with your sentiment can be qualified at all in your eyes.

Here’s a nice accepted economist for you:

16

Making one accurate prediction does not mean he’s a prophet.

They aren’t economists by practice. Going on news programs and making predictions does not make them economists.

Yup, he’s an economist. And nowhere in that clip does he predict the extinction of the USD. He says the economy will get worse in the next few years, that’s it.

We’ve weathered worse storms. Our currency isn’t going the way of the dinosaur. I haven’t seen any persuasive arguments or evidence for that dire a future.

17

Exactly. That was my point. And that guy’s been wrong for years.

As I have already understood by now. You seem to prefer Art Laffer who you accept as an economist, albeit one which happens to have been the least accurate economist during this financial disaster from accounts.

Weathered worse storms…in what sense and when? I haven’t ever known the USD to triple in such a short space of time before. If seriously debasing the U.S. currency wasn’t cause for concern to you, then I guess you’d have to first see it completely disappear off the face of the planet, before you begin to get concerned?! Correct me if I’m wrong of course. What would it take for you to see Gao, before you begin to feel any sense of the U.S.D. failing?

18

I’m still very sceptical of sulavaca’s apocalypse scenario. I recall reading some best-selling book in the 1980s (I think) about a stock crash/great depression that didn’t happen (but the author sold a LOT of books). But I am researching the subject and did find this support for his theory.

[quote]The US dollar as the world’s reserve currency, and the unusual period of US prosperity, is an historical artifact of the post World War II era that will not continue indefinitely. When the reversion to the mean occurs, it is likely that the dollar will have to be reissued as ‘the new dollar’ similar to the rouble in the post-Soviet adjustment. I can think of few better examples of what the US faces than the collapse of the former Soviet Union. For the UK, it looks like Argentina, or Iceland writ large, but with the sharp edge of a police state.

This is my fundamental currency thesis that I have been following since 1997, and it appears to be valid so far. I do not see the resolution in hyperinflation per se, but I do think the new dollar will have a value of about 10% of the current dollar. I think a hyperinflation requires a loss of confidence against some external standard. So the object is to weaken any that might appear.

At some point they will merely knock a zero off the current dollar and demand their surrender for new dollars. That should play havoc with those holding large bundles of ‘cash.’ For example, if you have $100,000 in savings, and it will afterwards be worth 10,000 in new dollars.

Eliminating 90% of its foreign debt obligations will certainly help to repair the US Balance Sheet. It is possible that this is accomplished in inflation, rather than a more formal evaluation, and over a long period of time, say twenty years or so.

If this seems impossible to you, then you are not aware perhaps that the same thing was accomplished from 1933 to 2000, or 67 years, and should avoid looking at the last chart. The Fed was merely squandering the nation’s wealth, without the advantages of modern financial engineering and deregulation. The next leg down will probably be about three times more efficient, under the leadership of Zimbabwe Ben.

Wouldn’t it be convenient for the oligarchs if their think tanks could somehow concoct a story, some plausible sounding theory, to persuade a portion of the world’s population to hold dollars, expecting them to GAIN in value, even in the face of significant defaults and credit failures and a deteriorating return in GDP growth per marginal dollar debt? Or even better, getting them to remain fully invested in a series of artificially contrived dollar denominated financial assets that could be selectively ‘pulled down’ while keeping the overall scheme intact and running. Bernays would be proud.

But the trick is to convince the non-sleepwalking portion of the public to ignore the signs of a failing economy and an approaching currency collapse. This is the sort of black is white brainwashing exercise that occupied quite a few of the whiz kids for the latter part of the twentieth century.

It might take a lot of work, and some high level financial engineering, raw determination to play the long game, public relations professionals engaging invoking slogans and prejudices, and a suite of new financial instruments that would have to be protected even when it was suspected they were fraudulent, but it would be a useful tool for the Übermenschen to have in their toolbox. Nothing works better than to convince a free people to willingly enslave themselves.[/quote]
jessescrossroadscafe.blogspot.co … ubble.html

And from the above article. . .

Interesting stuff, but I’m still reading.

One thing I don’t understand is how the dollar can be an overinflated bubble if it’s already depreciated so much, as shown in that last graphic.

Ha, sulavaca, here’s a website for you: dollarcollapse.com/

19

[quote=“Mother Theresa”]
One thing I don’t understand is how the dollar can be an overinflated bubble if it’s already depreciated so much, as shown in that last graphic.[/quote]

Simply because of the ‘bond’ instrument and its ability to still gain favour in a currency which is already bankrupt. If people couldn’t speculate on the future of the dollar and could only face its present worth, then it would be defunct already. This is the main difference between a precious metal and a fiat currency as far as I am concerned.
Bonds are used to coerce, encourage, and pretend that a currency is of value. Bonds recently have to be issued at an alarming rate in order to keep the snowball of debt rolling downhill. In this case, the snowball has already reached the base of the hill and is gently cruising to its inevitable stop.

One analogy I once read, which I thought best described a fiat currency towards its inevitable end went something like this:

Imagine a single bacterium represented a new fiat currency. Imagine it was placed a bottle, rich in nutrients, in which it could thrive. The bottle represents the maximum debt potential of a people or a public, or in other words, the maximum amount of debt they could handle before falling in arrears and become bankrupt. The limit of this debt potential would be reached when the bottle eventually became full to the top. In terms of the bacterium, its nutrients would have been completely exhausted and therefore it would die.
If you have that in your head already…Imagine that its 12:00am; the bacterium is placed into the bottle and multiplies, doubling in numbers at a rate of once every hour. Imagine that the bottle after eleven hours is only half full. Of course in this case, the public would still consider that there was plenty of room for new debt and that things were going along predictably and smoothly. They would carry on spending and borrowing as per usual.
After how much longer would the bottle become full and all the space and nutrients completely exhausted?

This is the theory of exponential expansion. Its what bacteria do, and its what fiat currency does. Both face their ultimate constraints at a given point. Both cultures will predictably fail once their reserves have run out and been exhausted. With a bacterium, if it doesn’t ultimately fail, then its only because it has morphed into a new bacterium, which can survive in a new environment. The same goes for fiat currency.

I think the thing with some people’s take on fiat currency is that the one which they are presently using is often one which has been available throughout their present lifetimes. Its difficult for them to fathom that the thing will most certainly one day be gone. Its very simple to show tens of failed fiat currencies from years gone by, but they are often before their lifetimes, or failed in other countries. Its often the case that economists will refer to any particular failed fiat currency and state the reasons why it failed and these reasons are usually all true. The issue with the mind however is that when it hears the reasons for those failed currencies it seems to simply assume that if this other fiate currency doesn’t follow the same path to failure, then it won’t fail at all. This is where the common thinking is completely and utterly wrong.
Certainly all fiat currencies fail for different reasons, but the main issue is that all fiat currencies fail.

Its much like listening to someone who’s telling you why they scrapped their car. There are too many reasons why cars get scrapped, but the main issue is not with the final failed component which caused the scrapping, but with cars eventually all becoming uneconomical to keep on the road. Its a fact of engineering when it comes to cars, and its a fact of engineering when it comes to fiat currencies. They will all fail!

If people can get over this fact of fiat currencies, then the more important issue of what to do in preparation and in response to the failure can be better discussed.
It doesn’t have to be a doom and gloom scenario. We face doom and gloom every single day. The way to look at it is in a more positive sense of what to do when…

Now of course I say buy gold. Buy silver. Why? It never disappears. You can keep it your whole life and it doesn’t reduce in size and it doesn’t reduce in quantity. It can fluctuate in perceived value, as can everything. The main thing however, especially at a time like this, is that it cannot simply disappear from a company’s balance books, just because they went under. It doesn’t get bought out by such and such and then re-packaged into something or other. You don’t have to be a genius to understand it. Its simple, its valuable, and its been the world’s currency for thousands of years, whether being literally traded as coinage, brick-age, or whether it has been used as a measure of fiat base values as it still is today. Its not going anywhere soon. I know that because of thousands of years of history compared with just a few decades of failed fiat currencies.