Currency Recommendation Sought

[bhairava]

Good day. I am interested in capital preservation. ( I have a $100K account--actually, a check yet to be deposited).

I plan to deposit the money in either an international or foreign(i.e. South American
bank), and to convert approx. 70-80% into a foreign currency, whose country holds a minimum in dollar-denominated assets.

Could an esteemed member please recommend such (a) currency(-ies)? Are there currencies which would suffer least if an extreme global economic downtrend occurred?

Which intl./foreign bank is recommended? And since 20-30% is allocated to trading, in which broker do members place their trust ?

I hope any recommendations may help other members who may have similar concerns. Thank you.

 

[grantx]

Bhairava,

If you allocate 20% - 30% to trading, your capital will be $80,000 - $70.000. This is not amount which justifies anything more exotic than a dollar-denominated, local (US-based) bank account.

If you have an account denominated in non-dollars, you will have currency risk; if also in a foreign country, you could also have sovereign risk. So why not avoid any risk and keep things simple?

Grant.

 

[bhairava]

Grant,

Thank you for taking the time to answer my query. You mentioned that the amount did not justify anything more exotic than a dollar-denominated(U.S.) bank account.

Based on your answer, I need to elaborate. First, since it is speculated that many top U.S. banks are facing losses of more than a quadrillion dollars, are certain banks safer than others? (Would you deposit even part of your capital in B. of A.?)
Second, with the dollar hovering @75, and you were certain that it would devalue much further, can you suggest any stategy to perserve capital?

Presently, I am studying basics to trade forex. But I am not averse to another instrument during an economic downturn/dollar-collapse, as well as using $80K to trade.

Can you or another member suggest the best way to short the dollar over a time horizon of 7 months? I assume that long-term positions of [JPY,CAD,etc.]/USD is possible, but what would an experienced currency trader do? Which forex pair would be least affected by total U.S. dollar? Do exotic currenies offer a viable trading alter- native?

Imo, experienced currency traders use other instruments. Any suggestions, as to what a member would do if they held my negative assesssment, would be greatly appreciated. I am a newbie who is trying to analyze the best instruments during an economic oblivion (which will be global). Imo, agri commodities represent the best play.

Please PM me to keep your anonymity. I plan to post research data to support projectin of this scenario.

N.B. In 2005?, Congress passed the Doomsday Act, which would, in a time of economic crisis, freeze bank accounts and allow U.S.government to confiscate goldfrom citizens.
Why?

(Thank you for taking the time to read this.) --Mike

 

[grantx]

Mike,

I'm assuming you are a US citizen. Here in the UK, a person's bank account is protected up to around £50,000 ($95,000). I'm pretty sure such a safeguard is present in the US banking system although the amount of protection may differ. Therefore, as far as you're concerned, your money is safe in a US bank.

You talk of preserving your capital should there be further weakness in the dollar. This would only apply if you are holding US dollars but have liabilities in another currency, eg the Euro. If you haven't,
whether the dollar collapses or rockets will have no effect on you.

OK, so the US is facing a difficult time economically but the dollar still retains its status as a reserve currency. This may be eroding ever so slowly by the strengthening economies of Russia, China and India, for example, but it will be years - if ever - before it loses this status. I reckon the worse will be an equal status with the Euro but again, I question this. The European Union and European Central Bank is new, is still finding its way, groping in the dark with regard to strengthening and expanding economic cohesion of economies lacking cohesion; it is still very much experimental. Perhaps the best analogy is that of the US trying to force "democracy" where previously it didn't exist, onto people who don't want it. I can't see a future for the EU.

As regards to shorting the dollar over a 7-month period, look at buying dollar put options. Regarding your willingness to consider investing £80k in fx trading. Don't - $20,000-$30,000 is enough to speculate. If you can't make a profit out of $20,000, you won't make a profit out of $80,000.

I don't know your financial status but assuming it's average, I would put the $80,000 into a mixture of US treasury notes, bills and bonds, and an index tracking fund. This should see you Ok for when you may really need it.

Grant.

 

[bhairava]

Grant, Thank you for your answer.

Please consider the scenario of Congress putting into effect the provisions of the Doomsday Act. If the government freezes bank accounts, will one be able to trade with money in a brokerage account? (i.e., are brokerages considered banks?) Also, does freezing of bank accounts applly to foreign bank accounts as well?

Would you please recommend a brokerage which has the higher interest rates?

(Perhaps, all trading may be suspended during activation of Doomsday Act).

 

[grantx]

Bhairava,

If the government freezes bank accounts, the country will cease to function - how will people buy the necessities like food, petrol or pay the bills? If this happened, you can reckon the riots seen in LA after the Rodney King affair will become nationwide. Then they'll send the troops in, and people will obviously defend themselves or retaliate; you'll have a civil war in the making. I think trading the fx market will be the least of your worries. But this is not going to happen.

It's good to be cautious but I think it's equally important to remember that generally, return is proportionate to risk. You could be a low, medium or high risk investor or divide your assets accordingly: majority in low risk, minority in speculative/high risk. if the worse happens and you lose all your high risk investments, at least you still have the majority of your funds safe.

I don't know the rates at brokerages; they won't be much - 2%-3% probably.

Grant

 

[bhairava]

Bank Recommendation Sought

Grant,

Thanks alot for your post.

However, could you please recommend a bank(U.S.) with little or no exposure to the retail housing market debacle.

Thank you for your patience. (I don't have 24 hour computer access as of yet).

Respectfully,
Mike

 

[grantx]

Mike,

I have abosutely no idea. Just ask your bank about the protection of customer accounts.

Grant.