Out at the peak

Friday, December 09, 2005

Where to stash your money

So you are out of the housing market. Perhaps you sold in time to realize gain and are now renting. You have cash that you are sitting on and want to invest, but you are scared of the stock market and real estate.

Here are some options:
  • 6.73% I Bond from TreasuryDirect (minimum 12mo commitment, maximum $60K)
  • 4.25% Savings Account from HSBC (type in 'start' for $25 promo!)
  • 4.0% Savings Account from Emigrant Direct
And several options from Everbank:
  • Gold MarketSafe 5yr CD (100% protection, 100% upside)
  • S&P 500 MarketSafe 3.5yr CD (100% protection, 100% upside)
  • 8.24% Icelandic Korna 3mo CD
  • 5.88% New Zealand Dollar 3mo CD (Warning: The Daily Pfennig and interview on MarketWatch believe this currency will weaken later on in 2006)
  • 5.88% South African Rand 3mo CD
  • 6.66% Mexican Peso 3mo CD
(Warning: World Currency CDs are subject to exchange rate increases and decreases. If USD goes down, then you benefit.)

These are somewhat low yield investments if you are use to 12%-24% returns. However, it might be time to be cautious and just hope that your nest egg doesn't decrease in nominal value.

Here are some high risk opportunities to consider:
  • PVX, PGH, PTF -- Canadian oil trusts that have about a 10% dividend (taken from another blog comment)
  • FDG (Fording Canadian Coal Trust) -- 15% dividend (taken from another blog comment)

13 Comments:

  • love the concept of your blog - now go for it. focus on the 'what do you do with your cash' aspect

    here's the scenario - now give me your advice

    sold house in August($130,000 profit in 24 months). put cash in 4% savings account.

    have $80,000 in COP options, have $40,000 in fidelity minerals fund. have $5000 in apple, $5000 in SIRI, $4000 in EBAY, and $4000 in SBUX.

    Bought $15000 in EWJ and $5000 in CX today, and have march 2006 puts on FNM.

    Have around $60,000 more cash looking for a home

    Age 38, single. Thinking of moving full time to london and then italy, so worried about the dollar

    advice please - thanks

    Keith (of http://housingpanic.blogspot.com)

    God, I LOVE BEING OUT AT THE PEAK!!!!!!

    By Blogger keith, at 11:02 PM  

  • Congratulations on getting out, Keith! I guess I don't have any more advice than what I already put in the original post.

    Maybe other readers can help you out.
    BTW: Your blog has been on my top 5 for weeks.

    By Blogger Out at the peak, at 3:14 AM  

  • perhaps you could post your top 5 currencies (that will hold their value or appreciate against dollar)

    thanks!

    By Blogger keith, at 7:48 AM  

  • OatP -

    I have a few questions that I can't seem to find answers to:

    If I open an account in a foreign currency in a US bank, who if anyone insures the deposits?

    Are there tax consquences from capital gains/losses when you move money between currencies?

    Why do I-bonds have such good returns?

    I would appreciate any answers or links you can provide.


    Keith - my comment is that you might be a bit heavy in stocks, at least for my tastes and at this time. I am wary of stocks b/c I think the market is overvalued as a whole, and that we will see a recession if housing declines rapidly. I am sure a reasonable argument could be made for any one of those stocks, but I think the market moves as a whole these days, and thus even stocks with good fundamentals will get dragged down.

    FWIW, I have small 401k positions in FSNGX, FSESX, VDMIX, and FDIVX. Most of my money is a MMA. I plan to keep it there until this spring.

    By Blogger Tom DC/VA, at 5:05 PM  

  • Everbank does has FDIC for their foreign CDs if you can believe it. It will protect you from bank deliquency, but it will not protect you from currency exchange rates. (Check out Everbank's world currency CD tour.) I don't know any other bank so far that offers these products, and that could be one of the reasons why it is rated #1 by Forbes.

    BTW: Since I have opened my foreign currency CDs ($65K), I'm netting a $900 gain just on the exchange rate thus far in a month.

    You are subject to income or captain gains tax with these foreign investments just like with regular savings account. It would be nice to be able to write off any loss. I'm honestly not sure about how it will be taxed.

    I Bonds look like they have good returns because the inflation rate is very high now. The base fixed rate is very low. If inflation stops its pace, I Bonds can start to dive.
    http://www.publicdebt.treas.gov/sav/sbirate2.htm

    By Blogger Out at the peak, at 6:50 AM  

  • I get mixed messages about which currencies are the best hedges against the dollar.

    You could say Asian currencies should benefit the most from a USD decline. But since Asian exports rely on the US consumption, the Asian currencies might be pulled down with it. Yen's rate has been 0% for a long time, but next year they might start increasing it to 0.25%. The yields are really bad, but the currency strength might go up.

    And supposively Icelandic krona is historically strong against USD, but as soon as I got in it, it was my only currency that went down. It has recovered half the loss so far.

    Australia and UK are already in their RE down cycle, but my AUS is up. I don't have anything in Euros because the CD yield is too low, so I don't watch that.

    New Zealand is supposively in a bad bubble too, and S&P 500 doesn't like their debt raking (regardless of its peanut size compared to US). They've been cranking their interest rate up to stop inflation. My NZD is still up, but I have to be cautious.

    I hear Peso is stable right now, so I'm going to buy that in 2mo after my Net Checking promo rate of 4.5% is over.

    By Blogger Out at the peak, at 7:05 AM  

  • I'm thinking canadian dollar - #2 trade surplus with US (after China), good economy, good leadership, stable

    thoughts?

    By Blogger keith, at 10:58 AM  

  • The Canadian dollar is not a bad choice. I do own this as well indirectly with Everbank's Commodity CD. It is 1/4th Canadian. If you get a currency CD independently, the interest is only 2% 6mo CD and 2.25% 12mo CD.

    The Commodity is a really good choice as it is 1/4th AUD, 1/4th CAD, 1/4th NZD, and 1/4th ZAR. The over all yield is currently 4.32% on top of the USD fluctuation.

    By Blogger Out at the peak, at 3:09 PM  

  • Just found your blog from your comment at Ben's housing bubble site. I'm trying to educate myself more with the situation going on in the housing industry. I got about $75K USD sitting around money market and CD funds. I guess being burned a bit during the dotbomb times make me bearish on a lot of items.

    By Blogger JT, at 11:17 AM  

  • JT: If your money market and CDs are 4%+, you are in good shape. The options mentioned here are risky, and I find myself checking up on every account more often than I thought I was going to.
    My current estimation is that I'm breaking even. I'm hopeful that 2006 shows a clear trend.

    My biggest winner is an unmentioned stock, GBVS. They make my favorite new product: EON Water (structured bottled water). It is up 45%. My problem is exit strategy.

    By Blogger Out at the peak, at 12:57 AM  

  • Great topic!

    I'm in the same boat, netted 225k in CA RE. I had the peak pegged at Aug 2005 since late 2003 and it looks like
    I got lucky and hit it dead nuts. We'll know for sure come spring.

    I currently have 152k in mostly blue chip high div. stocks through Ameritrade. Added gold (gld) and oil (tsm, cop) before christmas and it's done well. Looking to double my positions in oil & gold on next dip. I do not believe either is in a bubble. My Ameritrade portfolio is up 6.8% since Sept 25. I also have 64k in Oakmark Int'l M/F that is up 6.1% in same time frame. The remaining 20K is in a 4.5% MMA at Superior Bank of NE. (highest in US)

    I really think w're headed towards recession in late 2006 early 2007 and that will destroy stocks. I am strongly thinking of cashing out my gains in equities, except for gold, oil and a couple blue chippers like mo....and putting it into cash. Problem with that scenario is it would not surprise me in the least if the S&P 500 returns 15% in 2006. What to do. It keeps me awake at night and I change my mind at least 4 times a day. I guess it's a good "problem" to have.

    BTW - the ibonds thing sounds good, but I have a feeling when the rate resets in May it could go down to 4 to 5% - which is still decent. Keep in mind you must hold for 1 year, and if you sell in less than 5 years you lose the last 3 months of interest. Conversely, there is no state or local income tax.

    I should also mention I plan on purcahsing my "dream home" in early 2008 in an area with some of the best schools in the nation in No Cal. Hopefully at a 20% discount. As such, I only have a 2 year time frame for my investments, which makes it a little trickier. The foreign CD's sound interesting.

    I'm open to any suggestions or recomendations

    By Blogger thejdog, at 11:10 PM  

  • Great blog. Nice job you've done here.

    Sincerely,
    Daytrader
    forex day trading

    By Blogger Emini Day Trader, at 7:22 AM  

  • I never updated on GBVS. I got out after 50% profit. They've gone down past my entry point since. I really enjoyed their product, but it is so expensive.

    By Blogger Out at the peak, at 7:02 PM  

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