Wealth Protection

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Wealth Protection: How To Protect Your Wealth & Get 10%+ Returns On Your Super Safe Money

By Dr. Steve Sjuggerud, President, Investment U
Thursday, February 13, 2003: Issue #213

Right now, the bank is paying you nothing and that’s not the worst of it. You’re actually losing a great deal of money at this very moment. That’s right, the U.S. dollar has lost 9% of its value in the last six months, as I’ll show

In today’s e-Letter, though, I’ll explain wealth protectionand how simple it can be to protect your wealth from being cut in half. And more specifically, I’ll explain how to use the dollar’s fall to your advantage, to even make 10-15% returns (or more) on your SuperSafe money

The Urgency of Wealth Protection: Why We Must Pay Attention To The Dollar’s Decline

Your wealth is being seriously threatened right now. The threat is just like it was back in March 1984 when the wealth of every American was cut in half in three years’ time.

I’m not talking about your wealth in the stock market being cut in half (though it would have been cut in half too). I’m talking about your actual, spendable, wealth. You see, to give an example, in March of 1985, you and I could have bought 28,000 Swiss francs with $10,000. Just three years later, we could only have bought 14,000. Yes, in just three years’ time, the dollar lost half its value against the Swiss franc, just sitting in your bank. We lost half of our world purchasing power – which means half our wealth.

We haven’t thought much about the dollar crashing like this in recent years. The truth is, we haven’t had to – the dollar had been on an upward march for the last seven years. As it gets stronger, we don’t pay any attention. But when it’s falling, we MUST pay attention. It is our wealth, after all, and it’s up to us to protect it.

Money Flows To Where It Is Treated Best

What causes the dollar to lose value in the world? In my Ph.D. work, I found only two things affect the value of currencies. Let’s call ‘em CHEAP BURGERS and HIGH INTEREST RATES. (I first explained this concept several weeks ago in IUEL #201 – “Imminent Wealth Destruction.” To re-visit that message, simply click here. What follows is a quick summary of that lesson)

Money is smart. It flows to where it is treated best. If the U.S. banks are paying 1% interest and Australian banks are paying 5% interest, all things being equal, money will flow to Australia. 5% is better than 1%. So that answers the high interest rates part. But what about those burgers

The “CHEAP BURGERS” idea is a simple way to understand the concept called purchasing power parity. It’s the idea that the ingredients in a McDonald’s Big Mac are cheap, widely available, and homogenous. So the price of a Big Mac should be roughly the same around the world. Strangely it’s not

Visit Niagara Falls from the U.S. side. But make sure you eat your burgers (and do everything else) on the Canadian side. This is because a Big Mac in Canada is an astounding 57 cents cheaper than a Big Mac in the U.S. Everything else in Canada is cheaper by roughly the same factor. When you see it in this light, you see there is no good reason for this – it’s simply the Canadian dollar is cheap/undervalued/a good buy/whatever you want to call it, and likewise the U.S. dollar is expensive.

For the best performance over the long run on your safe money, you want to have it in places with CHEAP BURGERS and HIGH INTEREST RATES.

Beyond Wealth Protection… How You Can Earn 15%+ A Year – The Easy Way – On Your Supersafe Money

There are many places that meet these qualifications right now places where we can find high interest rates AND see the value of the currency appreciate versus the U.S. dollar. If we earn 5% interest, AND see those cheap currencies appreciate against the expensive U.S. dollar by 10% or more, that would be a 15%+ return in a year – on our SuperSafe money.

Places like New Zealand, which pays 5% interest and Big Macs are 53 cents cheaper places like Canada, 57 cents cheaper Australia, where a Big Mac is a whopping 89 cents cheaper. Or if you’re willing to take on some risk, consider South Africa, where a Big Mac is $1.06 cheaper than in the U.S., and you’ll get paid 12%+ on your money in the bank (figures based on the January 18th, 2003 Big Mac Index survey from The Economist magazine).

Instead of having to send your money off to far away places like this, there’s a much better way to do it. There’s a bank here in the U.S. called Everbank that does foreign currency CDs. They do them in any of the currencies that I’ve mentioned above. You basically earn the same interest rates on your foreign currency CDs that locals would earn in those countries.

But Everbank goes even further, and this is the plan I recommend It has a CD that has all four of these currencies in one (Can, Aus, NZ, S.Afr). All of these countries have cheap burgers and high interest rates. A 6-month Index CD of these “commodity” currencies is currently paying 5%.

I recommend contacting Chuck Butler at Everbank World Markets right now by calling 800.926.4922 or www.everbank.com) and moving some of your SuperSafe money over to Everbank’s currency CDs. My top recommendation is the commodity currency CD, where you are diversified among four countries with cheap burgers and high interest rates.

Everbank is a U.S. bank. It offers FDIC-Insured deposit accounts and CDs. The minimum for a deposit account is only $2,500, and for CDs it’s only $10,000. The currency-basket CDs, like the commodity currency CD I’m recommending, have a minimum of $20,000. While the CD is FDIC insured, that doesn’t mean you can’t lose money. If the U.S. dollar strengthens by more than the 5% interest you earn, your principal will start to decline by the amount in excess of 5% that the dollar strengthens.

Don’t risk having some of your wealth disappear. Use wealth protection measures such as diversifying some of it outside the U.S. dollar. You’ll earn higher rates of interest, and you may even make much more on the currency appreciation too.

And don’t wait any longer. In the last six months alone, the New Zealand dollar is up 17%, the Aussie dollar is up 8%, the Canadian dollar is up 2%, and the South African rand is up 26% versus the U.S. dollar. All those gains, PLUS a high rate of interest, would have been yours in the last six months with an Everbank commodity currency CD. Diversify for maximum wealth protection, and also to earn higher income. Do it.

Good investing,

Steve

Today’s IU Crib Sheet

For a detailed explanation of wealth protection and purchasing power parity – as well as why you should pay close attention to the value of the dollar – please be sure to visit the Investment U E-Letter archives and check out IUEL #201. And to learn more about Everbank, simply click here www.everbank.com or call Chuck Butler at 800.926.4922.