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Everbank Icelandic 3 month CD, 13% APY

Link: Iceland CD Rate

Everbank Info

Here's some background info on why Iceland pays so much interest for its CDs: http://www.dailywealth.com/archive/2006/feb/2006_feb_02.html


Has anyone here done this? As far as I can tell, the main risk comes from currency fluctuations since you will have to convert from dollars to korna and then back to dollars to realize your gains.


Member Summary
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I'd be interested to see what kind of options are available for investing in foreign bonds - aside from the bond funds t... (more)

cryptopunk (Feb. 11, 2007 @ 8:52a) |

Bump, hoping for an answer on the NY Icelandic bank info....<br><br><br>JudyJFLA

JudyJFLA (Feb. 19, 2007 @ 1:43a) |

<br>Apparently the NY office does not do individual accounts.<br><br>I think that a good US broker should be able to buy... (more)

Seculus (Feb. 19, 2007 @ 2:03a) |

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search the archives here for everbank'


yes the currency risk wipes out most any gain above what you get in a US account

I did an "iceland" and "icelandic" search and came up empty.

thats why i said to search the archive for "everbank"

these foreign currency cds have been discussed multiple times in the past

thanks.. i was doing conventional searches, but I see that's only good for 90 days.


This is not really a repost, since the icelandic interest rate has increased quite a bit since the last post on this subject, from ~9% to ~13%.

In my opinion, buying krona and collecting 13% is a pretty solid investment. Just know that you are taking a significant exchange rate risk. Do not treat this like an ordinary CD ... you could very well end up losing money if the dollar strengthens or the krona weakens significantly.

Green for OP for pointing this out.


[Q]If you request funds in this account to be denominated in a currency other than the currency sent to us to fund the account, EverBank will convert your funds using a then current conversion rate set by EverBank. Your currency conversion rate will be within 1% of the wholesale spot price EverBank pays for your currency. Exceptions may occur when a specific conversion rate is agreed upon between you and EverBank.

So if I'm reading that correctly if you want to start with USD and end with USD you'll lose 2%.

13/4-2=1.25%....So after three months you aren't really any better off than a 5% US MMA?

asdf9876 said: [Q]So after three months you aren't really any better off than a 5% US MMA?thats what i tried to say

SUCKISSTAPLES said: [Q]asdf9876 said: [Q]So after three months you aren't really any better off than a 5% US MMA?thats what i tried to say

Sorry SIS, I thought you were talking about currency devaluation, not conversion fees.

I'm saying even if you could magically know that there would be no devaluation, the conversion fees would wipe out any gains.

I agree that charging 1% each way is pretty outrageous.

However, the rates are not about to go down significantly in the next 3 months. So even though the 13% rate is for a 3 month CD, surely you can keep the money invested in krona for say a year.

Let's say the interest rate will stay at 12% on average over the next 12 months. Then with Everbank the total return should be 10%, assuming the exchange rate stays constant.

It would be better to find another bank that will let you invest in ISK (icelandic krona) and that charges a lower fee than 1% to exchange your money. One way is to contact an icelandic bank directly and set up an icelandic bank account. Some icelandic banks:

glitnir.is
landsbanki.is
kaupthing.is

Incidentally, this trade has been employed quite a bit by the big investment banks with good returns. They call it the icelandic carry trade.



I'd better invest in Bjork. Too bad she already danced in the dark. (oh, the final hanging scene is sooooo... actual...)

Dollar rose 1% this week. I think its up like 5% since its bottom.

g10ny said: [Q]I'd better invest in Bjork. Too bad she already danced in the dark. (oh, the final hanging scene is sooooo... actual...)
g10ny Frivolous, but never trivial.

Tytie

TYTBUDGET said: [Q]Frivolous, but never trivial.

Tytie
I'm struggling really hard, given all these hottie screen names right on my screen ...

Article says that the minimum investment is $10,000.00

My thoughts:

1) Investing in foreign-currency denominated CD's is certainly a better idea than outright currency speculation. At the very least, you get some interest on your investment.

2) There are some good reasons to invest in foreign currency - IF you have some sort of business or other interest in the other country. If you have no such interest then there really isn't any good reason to invest in foreign currency CD's. One very BAD reason to invest is because you believe the US dollar is falling, that it is only a fiat currency, not backed by anything other than the full faith and credit of the US Government. . Guess what...every currency of the world is fiat money, not backed by anything solid. Pay little heed to the doom and gloom folks.

3) If you really, really want to invest in an Everbank foreign currency CD, then I'd suggest buying a Chinese Renminbi one over Icelandic Kroner.

Kanosh said: [Q]
2) There are some good reasons to invest in foreign currency - IF you have some sort of business or other interest in the other country. If you have no such interest then there really isn't any good reason to invest in foreign currency CD's. One very BAD reason to invest is because you believe the US dollar is falling, that it is only a fiat currency, not backed by anything other than the full faith and credit of the US Government. . Guess what...every currency of the world is fiat money, not backed by anything solid. Pay little heed to the doom and gloom folks.


Here's a good reason: 13%.

why only 3 month cd?

Kanosh said: [Q]Investing in foreign-currency denominated CD's is certainly a better idea than outright currency speculation. At the very least, you get some interest on your investment.In exchange for that interest, you end up giving up the flexibility to monitor the markets and to purchase and sell your instruments at the potentially more advantageous time.

This link shows historical exchange rates between the Iceland Krona (ISK) and the US Dollar (USD) between 7/14/06 and 1/9/07. According to this graph, between 7/14/2006 and 11/10/2006 (a roughly 3 month period) ISK dropped almost 10%.

Here's a table showing historical exchange rates between the US Dollar (USD) and the Iceland Krona (ISK) between 12/11/06 and 1/5/07.

From what I can see, during the first half of 2006, the Icelandic krona has ranged from just about 50 per US dollar to just about 80 cents per US dollar.


If the currency conversion fees are the killer, perhaps not using Everbank will make the CD a good idea ?
I'll have to check to be sure, but I think interactive brokers has much cheaper fees.

Addendum: 0.2 basis points
Chat with IB regarding fees and withdrawls/transfers:

Sharon L: Hello, this is Sharon. How may I assist you?
eric: hello,
eric: If I have a Euro currency in my account...
eric: can I transfer it out to a local bank ?
eric: I am in the US
Sharon L: thank you..one moment
Sharon L: ok are you asking if you can transfer EURO"S to a US Bank?
eric: Icelandic currency actually, but the answer is probably the same. The receiving bank deals with this currency.
Sharon L: If your US bank can accept Euro's..Then yes you can send Euros
eric: Are they fees from IB's side ?
Sharon L: You get 1 free withdrawal per month...any withdrawal in addition would be $10
eric: TY. Now in the opposite direction: can I transfer Euros from my local bank into IB ?
Sharon L: yes..you can complete a wire transfer notification from our website. after you complete the dollar amount and bank name you will then be provided with our wire instructions for EURO's
eric: Great. Thanks much for the info

geo123 said: [Q]
From what I can see, during the first half of 2006, the Icelandic krona has ranged from just about 50 per US dollar to just about 80 cents per US dollar.

During the last year, the range has been from about 62 ISK to the dollar to approximately 79 ISK to the dollar. You can find a good graph here:

http://www.kaupthing.net/default.aspx?PageID=2149&FlokkurID=USD

(change the period to get the last 1 year, say)

You will also notice that the range for the last 3 years is essentially the same. If you go back five years, you will see some more interesting historical evolution.

geo123 said: [Q]Kanosh said: [Q]
This link shows historical exchange rates between the Iceland Krona (ISK) and the US Dollar (USD) between 7/14/06 and 1/9/07. According to this graph, between 7/14/2006 and 11/10/2006 (a roughly 3 month period) ISK dropped almost 10%.

From what I can see, during the first half of 2006, the Icelandic krona has ranged from just about 50 per US dollar to just about 80 cents per US dollar.There is a typo in this table.</blockquote>

EricGo, which US bank allows Euro transfers without charging you a currency conversion fee?

EugeneV,

I gave a call to Everbank, since that is the subject of this thread, and the bank offering high yield CD's from Iceland.

Per the WorldSavings CSR:
Foreign currencies are only accepted by 'swift' (?spelling) ACH. Most currencies are accepted, although at this time Thai, Indian and Iceland are not.
There are no fees for accepting the wire.
No currency conversion fees would accrue in buying foreign CD's with the foreign money wired in.
A $50 fee to wire foreign money out is charged.


---
Regarding conversion fees: Currently 0.75% each way for less than 100k, and 0.5% for more than 100K US equivalent.

All in all, I think this CD is worth a bit more thought, and certainly the general idea of buying foreign CD's deserves keeping an eye on, if the higher rates are expected to last closer to a year. Slashing the conversion fees from the 2% posted earlier is pretty easy: Pay 0.5% on 100k to buy the CD, and then $50 to transfer out to e.g. IB where the fee is .2 basis points. This would add up to a bit over 0.55%

Heck, even a 3 month CD at 13% is attractive: About 3% for the quarter, minus 0.55% fees leaves an APR over 10% in the worse case that a renewal is 3 months is declined. Note that I am not including the risks/benefits of currency fluctuations.

I wonder if the conversion fee is tax deductible as an investment expense ?

I'd like to hear comments ..

From Everbanks site FAQ:

Are there any fees?
There is no monthly maintenance fee for a World Market account. EverBank World Markets does not charge fees for your WorldCurrencydeposit; the full U.S dollar amount deposited funds your chosen investment. EverBank charges no fee for domestic drafts or incoming foreign wires. Other fees may apply. Please see our Fee Schedule for details. Finally, it is EverBank's pledge that the exchange rate you receive when converting your U.S dollars to foreign currency will be among the best in the nation.

In the event you elect to transmit an in or outbound foreign wire, you may be assessed fees by third party financial institutions involved with the delivery of your wire. We cannot quote or predict the routing or fee assessments by third party financial institutions.


Now am I correct in that you could open say a checking account and fund it with a large amount (I am looking at a large legal settlement) then call and transfer that into the Icelandic CD by calling their desk?
The part I am fuzzy on is at the end of 3 months the following:

What are my options once my CD has reached maturity?
Prior to the maturity date of the outstanding CD, you may do one of the following by providing instructions to the trading desk at least one week prior to maturity:
liquidate your account upon maturity,
remove the interest and reinvest the principal, or
roll over the CD proceeds (principal plus interest). If you choose to roll over the CD, it will be reinvested in the same currency for the same maturity, at the current prevailing interest rate.
For either option 2 or 3 above, you may elect to invest the funds in another currency product or with a different maturity.
If we do not receive maturity instructions from you by one week prior to maturity, your CD will automatically be reinvested, including principal and interest, to a CD of the same currency and maturity at the current prevailing interest rate


Now if I elect to roll the amount ovr to another term it is ok, but I am looking to time these out for each month so that there would be one maturing each month. If I take out the interest portion is there a fee to get this back into my US Account that I would have with them, or is it wiser to just lump sum it all in and out? I am not sure if there is a $50 fee to get the funds back to the US Everbank account, or is that $50 fee only to wire to an outside account?
This is so tempting, as US rates are so much lower; how I miss those Carter days of 13% and higher US!!

Thoughts?
JudyJFLA

Not to get off topic, but as of recently there other ways to get access to the carry trade - in particular there is one ETF set up to do this.

cryptopunk said: [Q]Not to get off topic, but as of recently there other ways to get access to the carry trade - in particular there is one ETF set up to do this.

really? which etf? and are there other ways to do carry trades on a retail level?

Everbank is cool for allowing foreign currency deposits at a US bank BUT...

Their fees are high...
The minimum deposit is high...
The risk is high...
The interest rate is low...(compared to accounts in the target country)

Everbank is OK if you really, truly feel the need to invest in foreign currency (and have no access otherwise to a foreign-country bank). But if you are just looking for a 10%+ return on your money...try the stock market.

DBV is a long short basket of currencies
fxs is long swedish krona/short dollar
fxa is long aussie dollar...
fxb is long brit pound
fxm is long mexican peso
fxe is long euro
fxf is long swiss franc
fxc is long canadian dollar


I am not aware of an icelandic currency ETF. My forex account does not offer the Icelandic krona. I would not want any part on an Icelandic currency ETF - If I wanted to speculate there, I would want the relative tighter spreads in a forex account with granular stop loss controls. Another whipsaw/crash in krona is probably - look at what has happened to the price of oil. If someone needs to pull their money out of Iceland, it could cause another July style crash

Anyone have an idea of the interest rate offered from a bank directly in Iceland and what the tax implications are (do you have to file a return in Iceland or report it to the IRS?) Iceland Air runs some pretty good fares from the east coast and wondered if it might be worthwhile for a vacation to the Blue Lagoon if the rates are worth it!!
JudyJFLA


Kanosh said: [Q]Everbank is cool for allowing foreign currency deposits at a US bank BUT...

Their fees are high...
The minimum deposit is high...
The risk is high...
The interest rate is low...(compared to accounts in the target country)

Everbank is OK if you really, truly feel the need to invest in foreign currency (and have no access otherwise to a foreign-country bank). But if you are just looking for a 10%+ return on your money...try the stock market.

JudyJFLA said: [Q]Anyone have an idea of the interest rate offered from a bank directly in Iceland and what the tax implications are (do you have to file a return in Iceland or report it to the IRS?) Iceland Air runs some pretty good fares from the east coast and wondered if it might be worthwhile for a vacation to the Blue Lagoon if the rates are worth it!!

I'd be interested in getting answers on this as well, although I'd certainly assume you'd have to report profits to the IRS. Perhaps if you rolled it over three times (ie, invested for a full year) the profits would be taxed under the LTCG rate? Also, if you went with an account like this, wouldn't the exchange fees be automatically deducted from the profits (ie, your profits would be calculated as USD put in - USD taken out)? I think you can deduct up to $3000 of investment losses you incur for the year so you may want to put this in your strategy (if you think the Krona could drop up to 30% vs. USD, don't plan on taking out more than $7k ($10k before investment) in a tax year).

Another, somewhat crazier strategy I thought of: if another "crash" occurred I'd imagine many Icelandic markets, particularly those that are service based, will adjust slowly to the devalued currency. You could have a great month-long family vacation with what was $10k a year before (but is now $7k etc). Granted, anyone could similarly take advantage of this after a "crash" but you'd be in a better position because:

A) You would closely be following exchange rates between the two countries already
B) You would avoid exchange fees in one direction (either for the vacation or the investment, depending on how you look at it)
C) If you travel there to set up an account or exchange your USD, you can scope out where you'd like to vacation, plan ahead, and record prices you can compare later.

If the krona appreciates, the vacation just got more expensive (in USD) so you'd be better off to exchange it back to USD and spend/use the money elsewhere.

Note: I'm not saying it's financially prudent to justify an expensive vacation, especially after taking large losses on an investment. Perhaps someone with knowledge of Iceland could suggest other products or services that would be better purchases in terms of investment. Or explain why I'm crazy.

[Q]
--------------------------------------------------------------------------------
Anyone have an idea of the interest rate offered from a bank directly in Iceland and what the tax implications are (do you have to file a return in Iceland or report it to the IRS?) Iceland Air runs some pretty good fares from the east coast and wondered if it might be worthwhile for a vacation to the Blue Lagoon if the rates are worth it!!

--------------------------------------------------------------------------------

I'd be interested in getting answers on this as well, although I'd certainly assume you'd have to report profits to the IRS. Perhaps if you rolled it over three times (ie, invested for a full year) the profits would be taxed under the LTCG rate? Also, if you went with an account like this, wouldn't the exchange fees be automatically deducted from the profits (ie, your profits would be calculated as USD put in - USD taken out)? I think you can deduct up to $3000 of investment losses you incur for the year so you may want to put this in your strategy (if you think the Krona could drop up to 30% vs. USD, don't plan on taking out more than $7k ($10k before investment) in a tax year).

Another, somewhat crazier strategy I thought of: if another "crash" occurred I'd imagine many Icelandic markets, particularly those that are service based, will adjust slowly to the devalued currency. You could have a great month-long family vacation with what was $10k a year before (but is now $7k etc). Granted, anyone could similarly take advantage of this after a "crash" but you'd be in a better position because:

A) You would closely be following exchange rates between the two countries already
B) You would avoid exchange fees in one direction (either for the vacation or the investment, depending on how you look at it)
C) If you travel there to set up an account or exchange your USD, you can scope out where you'd like to vacation, plan ahead, and record prices you can compare later.

If the krona appreciates, the vacation just got more expensive (in USD) so you'd be better off to exchange it back to USD and spend/use the money elsewhere.

Note: I'm not saying it's financially prudent to justify an expensive vacation, especially after taking large losses on an investment. Perhaps someone with knowledge of Iceland could suggest other products or services that would be better purchases in terms of investment. Or explain why I'm crazy.

I've opened bank accounts in other countries. In most cases it's very simple --- just bring your passport and some money to the bank and they'll take care of the rest. I suggest sticking to the largest banks in any given country - they are more accustomed to dealing with foreigners in their country and have options like telephone transfer, money exchange, etc.

As for taxes, the US Government requires that you report all your income, regardless of the country of origin. The local bank could explain local taxes and withholding, if any. You can get generally take credit on your US taxes for foreign taxes paid.

The "crazy" idea of travelling to a country after a currency crash to enjoy low cost travel is not crazy at all. Happens all the time, but mostly in those countries with perenial currency/political crises. Think Latin America, Southeast Asian and African countries. Right now, the US dollar is weak and offhand I don't know any ideal destination for this -- certainly not Iceland. But imagine if you had gone to Thailand after the 1997 crises, Mexico during the 1980's peso crises, any of the Latin countries in decade before they switched to the dollar ... could have had some fun, cheap vacations.

Many people in this thread were interested in another US bank offering foreign currency CDs

I found one.

They seem pretty open to allowing investment in other currencies. Contact them if you are considering the Krona to see how they compare to everbank

Just a note,
Everbank is now up to 13.38% on the icelandic 3 month cd.
I just can't seem to get a total net figure if doing say $10K for 3 mo.

JudyJFLA


I've done some inquiries about access to the icelandic banking system.

To open a bank account in icelandic, you need to have an icelandic social security number (called kennitala). This is probably impossible to get if you are not living in the country. So opening an account does not work.

However, it should be quite possible to buy icelandic treasury bonds. See bonds.is for the latest yields --- the bond with expiry on April 2nd currently has a yield of 15.49. One should be able to buy these bonds through an american subsidiary of an icelandic bank. See for example

http://www.kaupthing.com/About/Organization/Offices/United-States

I emailed them to ask about this. We'll see.

That sounds interesting, and would be great if you could just go to a branch in NYC and open an account and buy a short term bond. Better yet is that there might not be a conversion fee on the money if done directly through them, but we will see. Funny that none of the mutual funds such as Janus has not picked up on this for an international play. One of my janus accounts has only bonds up to 11% in their fund. I am hopefully looking at a large legal settlement and would like to produce an income stream that beats the stock markets.

JudyJFLA

An expert in the Stock Markets, My secret of how to make a Million in stocks?
Start with 2 Million!!


I'd be interested to see what kind of options are available for investing in foreign bonds - aside from the bond funds that are available from the usual sources. Let us know what Kaupthing Bank has to say.

Bump, hoping for an answer on the NY Icelandic bank info....


JudyJFLA


Apparently the NY office does not do individual accounts.

I think that a good US broker should be able to buy these bonds. Have not checked on this.



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