High Yields Offshore Investments

For some investors, a perfectly reasonable response to this uncertainty would be to sit tight and do nothing. If you’re permanently resident in the Eurozone, with every intention of retiring in southern Spain when you stop work, then it’ll probably suit you well enough to get all your investment income in euros, and never mind the exchange rate. If the US, or any part of the dollar universe, is going to be your playground for the next thirty years, then you’ve probably got a strong incentive to stay put with the currency you already hold.

In both cases, the only thing that could harm you would be if your resident country’s inflation rate rose very fast - a prospect which seems unlikely in either case.

High Yield Offshore Investments - Currency Concerns

But the temptation to play the moving escalator game (jump off the downward currency escalator and onto the upward one) at regular intervals is too much for some investors to resist. Everyone knows that national economies tend to move in cyclical patterns of strength and weakness, surplus and shortage, and that it’s normal to find currencies moving up and down in sympathy over a cycle of maybe eight to ten years.

High Yield Offshore Investments - The Economy

So all we have to do is identify an economy that’s just coming up from the bottom of its cycle, buy into its shares (or maybe its bank deposits), and wait for the updraft from the currency markets to lift our investments so that they bring us a timely boost for our portfolio. Anybody who’d bought into Indonesian stocks two years ago would have cleared a 150 per cent profit even if his shares had stagnated in domestic terms.

If he’d then had the foresight to move his money back into dollars in mid-1999, he’d have made a second killing. But what foresight he’d have needed. And if he was buying domestic stocks in Indonesia, rather than internationally-traded things like bonds, he’d also have had to take into account the complex backwash that can come from any steep movement in currency prices.

High Yield Offshore Investments & Indonesia

When Indonesia’s rupiah surged in 1998 it suddenly became much harder for Indonesian producers to export their products into the world market. You might have made a killing on the currency side of your transaction, but you’d have needed some pretty slick timing to get out of your companies before a wall of other problems hit them. Indonesian stocks have dropped by 40 per cent since January.