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Should I buy an EverBank foreign currency CD?

Discussion in 'Has anyone heard of?' started by FreeCashFlow, Nov 27, 2007.

  1. FreeCashFlow

    FreeCashFlow Recruit

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    I'm seriously considering an EverBank foreign currency CD ( http://www.everbank.com/001WorldCurrency.aspx?LinkID=Navigation ). I can earn 2.52% APY on a 3-month Hong Kong dollar CD. The reasons:
    1. EverBank foreign currency CDs are protected by FDIC insurance. FOREX brokers have no FDIC or SIPC insurance. (If you know of good FOREX brokers with FDIC/SIPC insurance, please correct me.)
    2. EverBank is a reasonably safe bank according to http://www.bankrate.com/brm/safesound/thrftmm.asp?fedid=1000215115 . While Oanda itself seems to be safe, I'm not sure how confident I can be given that customers' money goes into banks (http://fxtrade.oanda.com/whyfxtrade/ #4)
    3. Most FOREX trading firms do not disclose the interest rates paid on cash balances in any currency. This leads me to believe that the yields are pathetic rip-offs, as a firm that offers a competitive rate would brag about it while a firm that doesn't would prefer not to volunteer such information. I'm now thinking that I won't be able to find a better interest rate than EverBank does.
    4. EverBank seems to be geared towards lazy people like me. FOREX firms seem to be geared for highly leveraged and hyperactive traders.

    What do you think?
     
  2. Pharaoh

    Pharaoh Colonel

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    2.52% APY - There are plenty of safe and secure investments that will do this good or better. You would probably be better off trying to find a bank that has interest bearing savings accounts and that allows sub accounts denominated in different currencies. That would let you do 1:1 leveraged forex and make some interest.
     
  3. FreeCashFlow

    FreeCashFlow Recruit

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    What are my alternatives?

    What are the current yields on short-term Hong Kong government debt (the Hong Kong version of Treasury Bills)? Is there a way I can buy short-term Hong Kong government debt?

    What banks pay me a higher yield on Hong Kong dollars? Name a few of them. How safe are these banks? In the event the bank fails, would I be covered by FDIC insurance?

    I'm VERY concerned about credit safety. The ONLY thing that prevents me from jumping into Oanda with both feet is the fact that deposits are held by one of a variety of banks, some of which might not be that safe (due to derivatives, shaky mortgages, etc.).
     
  4. OzWizard

    OzWizard Corporal Punishment

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    Send your money to KYIV!!

    I can get ya 12% on USD in most banks!

    If ya convert to local currency - GRIVNA ($1 = 5) You can get 17%!!

    For the last 4 years I have seen the GRIVNA rank anywhere from 4.85 to 5.35.....

    OZ ;)
     
  5. Pharaoh

    Pharaoh Colonel

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    I've never investigated HK government backed bond yields, but would guess that it is possible to acquire them. I know my IRA offers Asian stock funds, and it would seem logical that there are also Asian bond funds. (I don't do bonds. Fixed rate investments usually are lucky to keep up with inflation.)

    Assuming you can get HK gov't bonds, I'd probably think of those as being about as safe as FDIC insurance.

    Alternatively, HSBC (Hong Kong-Shanghai Bank Corporation) is really a multinational bank with offices in many countries (including the USA). If I suddenly developed an overwhelming urge to have a savings account with multiple currency sub accounts, I'd start investigating them and/or some of the other multinational banks. I would think that a multinational bank with a US presence should be a pretty secure place to put money.

    Then again, if I had enough money that 2.52% annual interest would be sufficient, that would mean that I'd have enough money to visit Hong Kong in person and look for reasonably secure investment opportunities with a better yield.

    To get back to the actual forex subject, you might consider looking for a forex broker that allows accounts and/or sub accounts to be in different currencies and that also pays interest on your deposit that is not currently being used for trading. I am aware there are some brokers that do pay interest. I know that there are some brokers that allow accounts to be in different currencies. Unfortunately, these were not among my personal selection criteria when I was looking at brokers so I took no notes regarding exactly which brokers offer either or both of these features.
     

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