High Yiels 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
Currency concerns will be much more important if you’re only
working abroad for a short period, or if you move from country to
country at regular intervals. Almost certainly there’ll be times
when a move will come at a completely disastrous time, fiscally speaking
(just ask anyone who had to bail out of South-East Asia in 1997),
and common sense will normally dictate that the only sensible thing
to do is to peg your investments to one of the fixed points of the
currency spectrum - the dollar, the euro or the pound. If you have
a particular country in mind for your long-term future, then that’s
the obvious place to pick for your currency base. 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.
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