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Investing/Strategies / Bonds & Fixed Income Investments
|Subject: Re: Implications of Fed pause||Date: 8/9/2006 11:47 AM|
|Author: imdajunkman||Number: 17776 of 35223|
"Foreign currency CDs are available, at www.everbank.com. What are your thoughts?"
It is EverBank who publishes the free, daily currency newsletter called "The Daily Pfennig". Sign up for a subscription and start reading it as part of your Due Diligence process.
Also, foreign currency CD's aren't the only way to access the currency markets. You can buy a currency pair, or create your own basket of pairs, by setting up an account with a currency desk, one of the best of which is found at www.oanda.com
Also, ask yourself exactly what you are trying to accomplish with buying a currency CD: Diversification? Hedging? Speculative gains? There are dozens of ways to accomplish any of those goals. Currency CD's is simply one path.
What I see as the downside of messing with the currency markets is the huge amount of fundamentalist work required. Do you really want to track and predict all of the global economic facts that have to be dealt with? Yeah, you can trade currencies technically and simply respond to the moves of the traders, but you're likely to get chopped to pieces. For the “average investor” a good understanding of the fundamentals and medium to long time frames are the more sensible approach.
Yes, conventional wisdom –-aka, Modern Portfolio Theory— would argue that things like precious metals, currencies, managed futures, etc., all can have a place in a well-diversified portfolio for their ability to diversify risk and enhance gains. But there is a much more important consideration that needs to be considered: the wisdom of “sticking with one's knitting”, as opposed to the pangs of regret over “missed money”, which is a topic that is well explored by Peter Kaplan in this month's issue of “SFO”.
A currency CD through EverBank will run $10k. Your downside might be return of principal and modest gains. Your upside might be return of principal and healthy gains. So, a worst case scenario might be a loss of opportunity compared to putting the money to work elsewhere. That lost opportunity might buy you some invaluable experience and prove to be a genuine bargain. So, the experiment of buying a currency CD might be well worth running. But that's a question only you can answer for yourself in light of self-knowledge and your own unique circumstances.
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