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When is a good time to withdraw savings and move them to EU?

 
 
Reply Mon 28 Jul, 2008 09:15 am
My mother and I have a bit of a disagreement. I have savings in a CD account here in the States, and the value of the savings has depreciated by more than half compared to the original sum... I converted it from Slovak Crowns into USD and there it sat. Now the crown grew stronger and dollar weaker, so now it's less than 50% of the original value...if I was to convert it back into crowns.

My mother is pushing me to withdraw the money now, before 'it gets worse', I prefer to wait it out until dollar gets at least somewhat stronger. I know we are facing the largest deficit ever, but I also know these things are cyclical. The dollar will go up eventually. It may take a year or two, but it will ...(I think). In fact, financial experts on NPR (yes, Rolling Eyes , but I know no better, world of finance could not be further from mine) said that now is the time to buy stocks and invest, since most people are fleeing the markets.

I'm moving at the end of august to Netherlands, but will keep my bank accounts in the U.S. open to pay off a loan and, well, to decide what to do with the CD. The CD will be maturing sometime in January (though it's a no risk CD and I can take money out at no penalty anytime). What would you suggest I do? Wait? Bite the bullet, take it out and make the best out of my diminished sum someplace else? (uh, where?)

Please speak slowly and patiently. Assume i know nothing, I probably don't.
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Type: Discussion • Score: 9 • Views: 6,370 • Replies: 87
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Setanta
 
  2  
Reply Mon 28 Jul, 2008 09:21 am
I agree that you should wait until it recovers its relative value--that could, however, take years. You will want to consider the term on the certificates of deposit--are they fixed, or will the cds just continue to roll over? Currency fluctuations are not cyclical, they only appear to be. As long as petroleum continues to be priced in dollars, there is good hope that the dollar will recover nicely, but only after years, and certainly not if the current fiscal irresponsibility of the American government continues.
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dagmaraka
 
  1  
Reply Mon 28 Jul, 2008 09:38 am
Yes, I thought so. I don't expect it to be quick. But I'm in no hurry to take the money out -not buying an apartment or anything, so I'm willing to give it a few years.

it's a "risk-free" CD (whatever that means) - bound for 9 months and then it renews unless I tell them otherwise.... I could, I suppose, move it to an account that yields more savings (this one is only something like 2.5%), but I prefer to keep all in the same bank... Maybe I should talk to them about options within the bank though. Sigh.
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Thomas
 
  1  
Reply Mon 28 Jul, 2008 04:41 pm
Dagmaraka --

You say the CD matures in January. What are the penalties for withdrawing before it matures? (EDIT: you already answered that -- sorry for my lack of reading comprehension.)

The trouble with talking heads on TV and the radio is that they always tell you now is a good time to buy. No shame in listening to NPR -- actually their talking heads are comparatively decent. But still, when was the last time one of them told you to sell your stocks? When was the last time you heard one of them say, "the housing market is so overheated that homeowners are better off cashing out?"

Personally, I base my financial decisions on the opinions of academic economists I trust, partly because they predicted, more or less correctly, the bust of the the dotcom bubble, the bust of the housing market, and the likely plunge of the dollar due to unsustainable deficits. They're not perfect, nobody is, but I trust them to be better than talking heads and financial advisors on the payroll of banks.

All these economists are currently saying that the dollar is low, but still way higher than the level consistent with fiscal and trade deficits that can be sustained. It has several ten percent to fall before it reaches that level. The hard part is to predict whether that will happen in three months or three years. But no academic economist currently says the dollar will rise anytime soon -- unless the ones who are paid to say otherwise.

I would take the money out and put it back into Euros/Slovak crowns. No strong opinions whether I'd let it mature or not, but I'd take it out.

It's never popular to side against someone and with their mother. But in this case, I think your mother has it right.
0 Replies
 
Thomas
 
  1  
Reply Mon 28 Jul, 2008 05:18 pm
dagmaraka wrote:
it's a "risk-free" CD (whatever that means).

"Risk free" means you are at no risk of losing the money you originally put in. By contrast, investments in stocks and bonds can lose some or all of their original value when the market goes bad. That's one important risk that your CD is free of. Another is that your investment is safe even when your bank goes bankrupt, because the Federal Deposit insurance covers checking accounts, saving accounts, and CD up to $100,000.

The main risk for you is the value of the dollar against other currencies. Any investment in US dollars will be exposed to this risk, whether it's labelled "risk free" or not. So the "risk free" label on your CD is irrelevant to your decision.
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Setanta
 
  2  
Reply Mon 28 Jul, 2008 06:24 pm
I cannot agree with Thomas here, unless he is betting that the dollar will never recover its value against the Euro or the Slovak Crown. As long as the cd automatically rolls over, she is continuing to earn interest and increase her capital (which is preserved) relative to the currency in which it was purchased. She only loses if the dollar never recovers against the Euro or the Slovak Crown the value it had at the time she purchased the certificate of deposit.
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Setanta
 
  2  
Reply Mon 28 Jul, 2008 06:33 pm
I should point out here that preservation of capital is my guiding principle. When i set up my Roth IRA, the agent (who was a nice guy, and with a reputable and trustworthy firm) was trying to interest me in some investments he thought would yield a good return in the short term. At a point when he stopped to catch his breath, i told him my object is always the preservation of capital. He desisted at that point, and my money goes into state and municipal bonds, and when sufficient interest accrues to allow the purchase of more shares, it is plowed back in ($50 per unit, i believe). Since Roth IRAs are after-tax investments, i am able to invest in tax-free bonds with that money, and under the terms of the enabling legislation, i can draw funds free of penalty and free of tax after age 59 so long as five years have elapsed on the investment.
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Thomas
 
  1  
Reply Mon 28 Jul, 2008 06:36 pm
Good. Now Dagmaraka knows exactly what she's supposed to do.
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Setanta
 
  1  
Reply Mon 28 Jul, 2008 06:38 pm
I'm sure that with just a little more effort, we can confuse the issue hopelessly.
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Thomas
 
  1  
Reply Mon 28 Jul, 2008 06:41 pm
Maybe we can make her change her mind back and forth, and take a commission every time she moves her money across the Atlantic. Whatcha think?
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Setanta
 
  1  
Reply Mon 28 Jul, 2008 06:46 pm
Is there any way we can get in on the action?

As you would surmise, commissions and fees are anathema to me, being a preservation of capital kind of guy, i don't want my money moved around at all if it can be helped.

Dashenka, Thomas is saying cash in and convert to Euros or Crowns. I'm saying not to. I doubt that he and i will agree on this.
0 Replies
 
CalamityJane
 
  2  
Reply Mon 28 Jul, 2008 07:59 pm
If you don't need the money, keep it in the US for now - 2,5 % is not much though, BofA offers 3.8 % as a special CD rate, for a short while at least.

On the other hand, in Europe you might get a better interest rate for your
money, I think it's closer to 4 - 4.5 %

You'll do the math and decide what's best for you!
0 Replies
 
jespah
 
  1  
Reply Tue 29 Jul, 2008 04:00 am
The rule of thumb (which means you can do whatever you please) is to go with a percent of safe investments more or less equivalent to your current age. Hence if you're 30 then about 30% should be tucked into something where you'll preserve capital and then the remainder you go for higher risks (need not be super-high risk stuff like junk bonds, of course). I realize that's not exactly the question being asked here but that might explain a bit where people are coming from. Being closer to or farther away from retirement means you have different tolerances for risk, and different goals.

Same is true in your case; the question is: which is the higher risk investment, to keep the $$ here in the US and hope the dollar improves, or withdraw it and roll it elsewhere and see how that goes?

Since you can take the $$ out without penalty at any time, that's probably got something to do with why the yield rate (the 2.5%) is so low -- you're paying, in part, for the privilege of liquidity -- the freedom to move it around or take it out as you desire.

What are the interest rates in Slovakia? Interest at least is where you can compare apples to apples -- if you get 3% there and only 2.5% here then unless the crown really tanks, you'd get a better deal there. It can take quite a while for interest rates to rise here. The Federal Reserve does more lowering than raising these days, due to fears of inflation.
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dadpad
 
  1  
Reply Tue 29 Jul, 2008 04:23 am
what stake does your mother have in the investment? Apart from the usual "mothers know everything". and the "inevitable I told you so" when it all goes pear shaped.

If she has a stake then her opinion needs to be taken into consideration. If not

The significant thing i see is that you are comparing your investment in a way that does not make sense.

1. You transferred slovak crowns.

2. You invested US dollars in CDs.

3. How much has the investment lost or gained in US dollars.

This is your profit/loss in US dollars and there the story is ended.

As long as you do not transfer US dollars to slovack crowns there is no loss.

When are you likely to need this money? months? a year? some years?

What rules apply to non US residents holding investments in USD? will it complicate matters if you are resident in Netherlands solvakia or other country?
0 Replies
 
dagmaraka
 
  1  
Reply Tue 29 Jul, 2008 07:42 am
haha. Thomas, the 'specialists' on NPR that I referred to are also academic economists, they have that one hour when they take people's calls and give them advise on what to do... they do indeed tell them to cash out when that is the best option, as they don't really work for The Man...

dadpad, my mother gave me the money, so of course she will care that its relative value fell by half. If the money stayed in Slovakia, I'd have let's say, 900,000 SK (too lazy to do real math). But if I were to convert it now to SK, it would be 450,000 SK.... With the first sum, I can nearly buy an apartment. With the second, I can not. So, of course she cares, and saying that I made some profit in the dollars account will not quite slice the fact that if the money wasn't transferred in the first place I'd have twice as much. It happened, it had to, nothing we can do about thtat, but that doesn't mean we can erase this little tidbit from our consciousness.

I had to have savings here for visa purposes, you have to be able to show several thousands of dollars in a bank account so that you are deemed able to survive independently, which is why my parents transferred the money (my 'dowry') to me. When I say disagreement with my mom, it's not like we fight about it, she does have my best interest in mind and we simply don't agree on what that best thing is right now, and ultimately both know little to argue, which is why I want to learn more.

Slovakia is going to Euros in 2009, so I will not convert it to crowns no matter what, as the transition is bound to be at least a bit shaky and i have no idea what that would do.

CJane, my CD (I kept it for over 5 years now, well, different CDs, same money) ALWAYS starts at around 4% and then the bastards lower it when I don't look, in a few months, or when it rolls over. So maybe i can take the money out (no penalty) and open a new CD,but knowing them I'm sure it would be back to 2.5% or so within months, always is.

Jespah, it's not risky for me to keep the money here, I think it's more risky to move to Euro (i would not move it to slovakia right now no matter what, not before the conversion happens), because I would do so on an assumption that dollar will not get stronger anytime soon (and i mean within next 3-5 years),so I would be giving up the chance that the value, compared to euro, may rise.... which is also a risky assumption, i reckon, but i think it's more likely than dollar falling and falling for 3-5 years. if it even stays the same, i'm not losing.i don't know.

when will i need the money? I don't know. If my job in The Hague does not go to my liking, I will likely move to Slovakia and i'll need it then and there (so, January). I don't know if I'm ready to settle for good in Slovakia (scary thought!) but it might be a good time to buy property and see what happens. I can always rent it out or sell it later, because the property value in Slovakia will continue to rise for awhile, especially as we get more and more integrated with EU. So, that's definitely something to consider.

Gah.
0 Replies
 
Thomas
 
  1  
Reply Tue 29 Jul, 2008 10:23 am
dagmaraka wrote:
haha. Thomas, the 'specialists' on NPR that I referred to are also academic economists, they have that one hour when they take people's calls and give them advise on what to do... they do indeed tell them to cash out when that is the best option, as they don't really work for The Man...

Well, I /did/ say the NPR talking heads are better than average. (You're talking about Marketplace, right?) If the economists who're telling you that now is the time to invest also told you between 2002 and 2006 to sell your house, then I concede that staying in is not a completely crazy option. I still disagree, but disagreement with my opinions can be consistent with intelligence and prudence. No matter how hard I find this to accept.

dagmaraka wrote:
I don't know if I'm ready to settle for good in Slovakia (scary thought!) but it might be a good time to buy property and see what happens. I can always rent it out or sell it later, because the property value in Slovakia will continue to rise for awhile, especially as we get more and more integrated with EU. So, that's definitely something to consider.

That part sounds good to me.
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dagmaraka
 
  1  
Reply Tue 29 Jul, 2008 11:42 am
sigh, i know.... but now i don't have enough money to buy an apartment without a heavy loan... thank you falling dollar.
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Thomas
 
  1  
Reply Tue 29 Jul, 2008 12:59 pm
If it's any consolation, you're not alone. I, too, was foolish enough to transfer a large chunk of my savings to a US money market account -- when the Dollar stood at 1.33. Confused
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OCCOM BILL
 
  0  
Reply Tue 29 Jul, 2008 01:51 pm
I studied the For-ex Markets for a spell, looking for an angle. My conclusion is that there isn't one. Subsequently; the only advice I feel comfortable offering is to split it up and spread it around. Diversification will not recoup what you've already lost, but should shield you from further losses. Any basket you choose to put all of your eggs in is risky business, so the question is really where should you gamble your savings... unless you don't want to gamble at all. If the latter is the case; diversify.
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hamburger
 
  2  
Reply Tue 29 Jul, 2008 01:55 pm
dag wrote :

Quote:
dadpad, my mother gave me the money, so of course she will care that its relative value fell by half. If the money stayed in Slovakia, I'd have let's say, 900,000 SK (too lazy to do real math). But if I were to convert it now to SK, it would be 450,000 SK.... With the first sum, I can nearly buy an apartment. With the second, I can not. So, of course she cares, and saying that I made some profit in the dollars account will not quite slice the fact that if the money wasn't transferred in the first place I'd have twice as much. It happened, it had to, nothing we can do about thtat, but that doesn't mean we can erase this little tidbit from our consciousness.


you simply waste your time (and emotions) if you pay much attention to the past ... "would could i have done ? " ... "what should i have done ? ....

far better to look at your current AND FUTURE situations , and make a decision based on that (and NOT the past - because you simply cannot do anything about it ) .

if you are involved in an accident , your first concern must be the present and furture : get the wound bandaged , find out what the physician suggests to speed up healing and follow up .
(later you may want to think about how to avoid a similar accident - but not now ! ) .

the same should apply to your money . if your first concern is to avoid any further immediate reduction of your capital (in slovak crowns) , you should convert back to SC now (or whatever other currency you will need) and swallow the loss - be done with it - but please DO NOT LOOK BACK or you might drive yourself around the bend .

if you feel that you CANNOT now swallow the loss of the conversion : keep the U.S. dollar account - particularly if you owe some money in the U.S. now or expect further expenditures , use your U.S. dollars for that .
are you ever planning to come back to the U.S. and might need the U.S. dollar account ?

if you really can't make up your mind : SPLIT THE DIFFERENCE !
it is likely :wink: that one of the two currencies will come out ahead in a few years and you can tell yourself how smart you were to have made the decision - you'll come out a winner no matter what (as long as you can forget about the other half Shocked ) .

it's like looking at my investments : i can go crazy telling myself "if only" from here to doomsday - it's not going to change a thing !
but i can use "the wisdom aquired" ( Rolling Eyes ) when making future decisions .

see how easy it is (when it's not my own money !) .
do make sure you and your mother don't get into a tizzy over this -
ain't worth it (far better to admit you made a mistake , will do better next time ... whatever needs to be said ) .
take care and good luck !
hbg
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