Money Money Money Money and Mo Money

Times are tough for investors and savers. Back in the Good Old USA you’ll get a whopping 2% on a savings account. Strangely enough, at the moment, certificates of deposit (CDs) pay less than a standard savings account. You’re lucky to get one approaching 1.5% for a year.

Of course you have lots of other investment options. You can invest in the stock market, for example. Investing in the S and P 500 index for the last year would have been pretty profitable. But of course timing is everything. If you invested exactly one year ago, you would have had a gain of around 8%. If you invested at the yearly low, you would have made even more, maybe 13% or so. And… if you had bought at the bottom and sold at the top… well hell, you would have gained around 19%!!!! Yeah, that’s more like it!

Timing is everything of course.

What WILL I do?

You could have bought at the high and sold at the low, in which case you would have lost 19%. Bummer, man. I feel your pain.

But I’d like to draw your attention to an option you may not have considered. With perfect hindsight, a really great investment you COULD HAVE made was a certificate of deposit in Costa Rican Colones. The rate of return for a 6 month CD was 6.26%. Pretty good in and of itself, I’d say. But wait! There’s more! The Colon has actually APPRECIATED against the dollar! And the amount of that appreciation was… wait for it… 12%!!! Well what do you think of that.
When it comes to mathematics I am just functional, but with the help of my trusty spreadsheet I figure that your combined return in six months would have been…

24%!!!

Time Machine

So there you go. If you had a time machine you could go back to last March and you would have made the equivalent of 24% APR.

Now, as they are so fond of saying, past performance is no indication of future results. Well, not a sure thing at least. But it makes you think, and it makes you wonder what the hell is going on. The world’s reserve currency is losing ground to the currency of a badly managed banana republic, THE banana republic (apologies to Nicaragua).

Think about it. I’m going to.

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Comments

  1. For those of us who are retired and drawing monthly U.S. Social Security, U.S. dollars which are directly deposited into our U.S. banking account, the effect of the past year has been depressing. Between the ATM fees, the international transfer fees and whatever, we're not even getting 500 colones for our buck. Add to this the fact that services and supplies (food, utilities and whatnot) have increased about 10 percent and it's easy to see that our buying power has decreased by about 25 percent since my wife Carol and I arrived in Heredia two years ago. That and several other factors have prompted our decision to move to Granada, Nicaragua, this month. Nicaragua's cordoba (currency) has been a steady 21:1 for the past year while costs of supplies and services are a fraction of what they are here. For example, a loaf of whole wheat bread last week at our local Hipermas store was 1,100 colones, or about $2.20. That same loaf of bread at the Colonial store (really nice, upscale grocery) in Granada four weeks ago was 11 cordobas, or about $.55. It doesn't take a J. Paul Getty to figure that one out. We have yet to hear an explanation that makes any sense as to why the dollar has collapsed as it has, other than "manipulation" by the local banks. Whatever.
    Sooooo, Carol and I are gonna "manipulate" ourselves right on down the road …. it's been real.