Windfall of cash... but it's in a terrible currency

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I recently came into some cash but its in a terrible currency that has lost half its value over the last year! This cash is in Egypt which uses the Egyptian pound or EGP. I want to covert to USD but if I had gotten that cash last year it would have been about double the amount once converted to USD.

My question is does anyone have any ideas how I can best handle this? ShouldnI wait it out and hope the EGP increases in relation to the USD? I'm just worried the EGP will keep decreasing in value even more. My knowledge in currency trading is very limited.

I don't need the cash right away, so I'm considering investing that cash over there so that I don't actually "realize" any losses (and I use that word very loosely here since im not actually realizing any losses either way).

Pros/cons of investing the money over there? Ive heard there are some banks over there that offer 20% interest on CDs of just 1.5 years! My concern is that the EGP will fall even more than that 20% annual interest will offset. Another alternative would be to purchase property over there which always seem to appreciate.

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Definitely for tourism or to depart on a cheap business or first class ticket ex-CAI.

TravelerMSY (Dec. 23, 2016 @ 12:28p) |

They went up to 100 trillion. I bought several of those when they were issued. I'm a Zillionaire.

burgerwars (Dec. 23, 2016 @ 1:58p) |

I visited Cairo and Alexandria in October. So long as you stay out of the sketchy areas (Sinai peninsula, the Libyan bor... (more)

novocane (Jan. 10, 2017 @ 5:17p) |

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convert to $ ASAP

http://www.xe.com/currencycharts/?from=USD&to=EGP&view=10Y

As you can see EGP took a nose dive beginning in 2014 and accelerating over past year. Several reasons, largely related to the political (and corresponding economic) upheaval in the region. They unpegged themselves from the USD, moving from the decade or so of trading around 5-6 EGP to the USD to 18 EGP to the USD.

You get to decide if you think the currency will stabilize and how much you need the money. Then either keep it there or transfer to USD. If you need help thinking about another way, just imagine if you had the money in USD today if you'd invest it in EGP (likely not). Much safer investments out there. The 20% interest the banks give is to offset the huge currency risks that depositors are taking. If you want to buy property, decide if that's the region you want to buy in and evaluate if the real estate there took a dive with the devaluation or not. Again, if you're a novice and have limited ties to wanting to keep the money in Egypt...I'd get it out myself.

The International Monetary Fund demanded they unpeg from the USD to help them devalue it as part of the financial reforms needed to help turn their economy around. If successful there is potential upside to a currency rebound. It has also likely seen the bulk of its devaluation in the near-term, though if the USD continues to strengthen the EGP will continue to weaken relative to it.

I'm not sure if there are any currency restrictions or significant fees to moving EGP abroad, but it seems to be relatively freely traded so should be able to sort out without too much hassle.

Egypt has been around 5,000 years. With a track record like that, why worry?

My gut says convert everything right now.  But you could always hedge, converting half now and going with "wait and see" on the other half.  However, a bird in the hand is worth two in the bush.  Convert and take your money in US$ and run like hell.

Kind of contrarian here....the damage has likely already been done when the EGP was unpegegged earlier this year.

Long term this move will likely be a positive for Egypt and the EGP. The dollar is very strong right now....you'd basically be selling after the crash.

Cue loss aversion conversation.

jaytrader said:   Cue loss aversion conversation.
Bingo.

This is basically a sunk cost fallacy. The only question you should ask yourself is: would I take my own money and invest it in EGP today? If yes, then fine, keep this currency. But if you wouldn't make that decision today, then convert to USD and put the money where it does belong.

Convert it all now.

  • I wouldn't want to split it into 2 groups, that seems like 2 potential headaches with conversion; you might get lower rates, not sure what reporting/tax requirements there are.
  • The dollar is strong right now, but there is no reason to think that the EGP will outperform.
  • The very fact that you can get 20% interest rate tells you how little faith anyone has in the currency.
  • Stop thinking about how more you could have sold it for last year, that is gone but is causing you to set an anchor for "how much it is worth". Would you purchase EGP right now as an investment? Didn't think so.

If you're a US taxpayer, and depending on how you acquired it, and if you have a higher basis in it---there may be a tax savings possible if you sell the investment at a loss. Just an idea.

Agree it makes no difference what the exchange rate was 1, 10, 100, or 1,000 years ago.

The current exchange rate is the best market-based valuation of what it's worth. Unless you think you have some special knowledge of Egyptian currency greater than the sum total of all the world's currency traders, and that you have good reason to believe the EGP is undervalued compared to every other currency in the world, AND you have enough money to risk losing these funds... then convert it to USD today and choose how to invest it. As others have said, if it were in USD now, would part of your asset allocation be to purchase EGP? If so, then what a lucky coincidence, leave it where it is!

what's the exchange rate between Egyptian Pounds and the Venezuelan $100 Bolivars?  I think they've bottomed and it's time to go all in .  

My magic 8 ball says sell now.

Some very good insight folks. Really liked the "if you had the cash in USD would you convert to to EGP" way of thinking about it.

Your losses are already realized. If you weren't holding Egyptian currency right now, would you be buying it?

JaayOkay said:   Some very good insight folks. Really liked the "if you had the cash in USD would you convert to to EGP" way of thinking about it.
  Read "The Intelligent Investor" by Benjamin Graham. I think you will find the Mr. Market chapter really interesting.

I would recommend converting out of EGP as soon as you can. In Egypt, there's the official exchange rate for USD/EGP and the black market exchange rate, which is significantly higher. I was in Egypt in October, at the time, the official rate was 1USD/8.8EGP, but the black market rate was around 1USD/12EGP or 1USD/13EGP. The thing is, the state banks have limits on how much you can change at the official rates, and all the foreign money changers would offer a rate approaching the black market rate in Egypt. I think Dubai was 1USD/11EGP at the same, though there was a huge spread between buy/sell. All of this is evidence of the real rate being somewhere near the black market rate and the government trying to pretend the EGP was worth more than it was for political or perhaps financial reasons. Anyways, since that time, Egypt did a big devaluation, but I understand the black market rate is again worse than the official rate. This again implies a further devaluation is on the horizon. So, convert out as fast as you can.

I suspect US money changers also won't give you a good rate, so I would recommend looking around a lot to find a suitable money changer. Look at Dubai/Abu Dhabi money changers to get a baseline (they deal much more in EGP than the typical US bank).

Also, a really big amount of cash is probably suspect, and in EGP seems even more suspect. If you don't have a very clear money trail and the amount is large, I would recommend getting an attorney involved.

novocane said:   I would recommend converting out of EGP as soon as you can. In Egypt, there's the official exchange rate for USD/EGP and the black market exchange rate, which is significantly higher. I was in Egypt in October, at the time, the official rate was 1USD/8.8EGP, but the black market rate was around 1USD/12EGP or 1USD/13EGP. The thing is, the state banks have limits on how much you can change at the official rates, and all the foreign money changers would offer a rate approaching the black market rate in Egypt. I think Dubai was 1USD/11EGP at the same, though there was a huge spread between buy/sell. All of this is evidence of the real rate being somewhere near the black market rate and the government trying to pretend the EGP was worth more than it was for political or perhaps financial reasons. Anyways, since that time, Egypt did a big devaluation, but I understand the black market rate is again worse than the official rate. This again implies a further devaluation is on the horizon. So, convert out as fast as you can.

I suspect US money changers also won't give you a good rate, so I would recommend looking around a lot to find a suitable money changer. Look at Dubai/Abu Dhabi money changers to get a baseline (they deal much more in EGP than the typical US bank).

Also, a really big amount of cash is probably suspect, and in EGP seems even more suspect. If you don't have a very clear money trail and the amount is large, I would recommend getting an attorney involved.

  If they free floated the rate, would there still be a black market rate? http://www.wsj.com/articles/egypt-free-floats-its-currency-deval...

Stock Market?

novocane said:   I would recommend converting out of EGP as soon as you can. In Egypt, there's the official exchange rate for USD/EGP and the black market exchange rate, which is significantly higher. I was in Egypt in October, at the time, the official rate was 1USD/8.8EGP, but the black market rate was around 1USD/12EGP or 1USD/13EGP. The thing is, the state banks have limits on how much you can change at the official rates, and all the foreign money changers would offer a rate approaching the black market rate in Egypt. I think Dubai was 1USD/11EGP at the same, though there was a huge spread between buy/sell. All of this is evidence of the real rate being somewhere near the black market rate and the government trying to pretend the EGP was worth more than it was for political or perhaps financial reasons. Anyways, since that time, Egypt did a big devaluation, but I understand the black market rate is again worse than the official rate. This again implies a further devaluation is on the horizon. So, convert out as fast as you can.

I suspect US money changers also won't give you a good rate, so I would recommend looking around a lot to find a suitable money changer. Look at Dubai/Abu Dhabi money changers to get a baseline (they deal much more in EGP than the typical US bank).

Also, a really big amount of cash is probably suspect, and in EGP seems even more suspect. If you don't have a very clear money trail and the amount is large, I would recommend getting an attorney involved.
 

  
Yes that's the other headache. 

rascott said:   Kind of contrarian here....the damage has likely already been done when the EGP was unpegegged earlier this year.

Long term this move will likely be a positive for Egypt and the EGP. The dollar is very strong right now....you'd basically be selling after the crash.

  So are you investing in the EGP?

I AM ORIGINALLY FROM EGYPT, I AM TELLING YOU TAKE YOUR MONEY AND RUN AWAY BECAUSE THE EGP WILL SINK EVEN MORE. FYI, I BOUGHT AN APARTMENT 2 YEARS AGO FOR 100,000 USD NOW I IT IS 50% DOWN.
GOOD LUCK,

I only read OP, but an amount wasn't specified. Depending on the amount, why not goto Egypt with the currency, and buy precious metals while there?

OP: Get in your time machine, go back a year and convert the EGP to USD. If yours is broken, forget about what it WAS worth and accept that you can get what its trading for or possibly lose more value holding out hoping for an increase.

jarfykk said:   http://www.xe.com/currencycharts/?from=USD&to=EGP&view=10Y 

As you can see EGP took a nose dive beginning in 2014 and accelerating over past year. Several reasons, largely related to the political (and corresponding economic) upheaval in the region. They unpegged themselves from the USD, moving from the decade or so of trading around 5-6 EGP to the USD to 18 EGP to the USD.

You get to decide if you think the currency will stabilize and how much you need the money. Then either keep it there or transfer to USD. If you need help thinking about another way, just imagine if you had the money in USD today if you'd invest it in EGP (likely not). Much safer investments out there. The 20% interest the banks give is to offset the huge currency risks that depositors are taking. If you want to buy property, decide if that's the region you want to buy in and evaluate if the real estate there took a dive with the devaluation or not. Again, if you're a novice and have limited ties to wanting to keep the money in Egypt...I'd get it out myself.

The International Monetary Fund demanded they unpeg from the USD to help them devalue it as part of the financial reforms needed to help turn their economy around. If successful there is potential upside to a currency rebound. It has also likely seen the bulk of its devaluation in the near-term, though if the USD continues to strengthen the EGP will continue to weaken relative to it.

I'm not sure if there are any currency restrictions or significant fees to moving EGP abroad, but it seems to be relatively freely traded so should be able to sort out without too much hassle.

  
Think how much the INSIDERS made knowing the unpeg was coming - you KNOW they hoarded US and EU currency waiting for the bottom to fall to convert back and invest locally.

You don't have to convert to US$, you can use a less strong currency that you expect to perform better in the near term as a middle step.  (UK or EU the most obvious -- both are near lows in trading to US)

My suggestion is also to lower your exposure to Egyptian pounds. The problem is predicting the future. There's no guarantee the US$ will remain strong. It has been weak in the past and there's no telling what mess the new administration could get us in.

There are "experts" making predictions all the time. They're all over the map. I've got tired of the line of idiots making predictions on CNBC that I don't watch it anymore. Since we all can't predict the future, to manage risk think of spreading your money in several currencies, including the US$. There are multi-currency bank accounts and mutual funds.

BingBlangBlaow said:   rascott said:   Kind of contrarian here....the damage has likely already been done when the EGP was unpegegged earlier this year.

Long term this move will likely be a positive for Egypt and the EGP. The dollar is very strong right now....you'd basically be selling after the crash.

  So are you investing in the EGP?


Haven't yet....but may consider it now after doing some research. As I said....the damage has likely been done, and markets usually overshoot.


Allowing it to float should certainly be a big boost to the Egyptian economy. May take some time, however.

RedWolfe01 said:   jarfykk said:   http://www.xe.com/currencycharts/?from=USD&to=EGP&view=10Y 

As you can see EGP took a nose dive beginning in 2014 and accelerating over past year. Several reasons, largely related to the political (and corresponding economic) upheaval in the region. They unpegged themselves from the USD, moving from the decade or so of trading around 5-6 EGP to the USD to 18 EGP to the USD.

You get to decide if you think the currency will stabilize and how much you need the money. Then either keep it there or transfer to USD. If you need help thinking about another way, just imagine if you had the money in USD today if you'd invest it in EGP (likely not). Much safer investments out there. The 20% interest the banks give is to offset the huge currency risks that depositors are taking. If you want to buy property, decide if that's the region you want to buy in and evaluate if the real estate there took a dive with the devaluation or not. Again, if you're a novice and have limited ties to wanting to keep the money in Egypt...I'd get it out myself.

The International Monetary Fund demanded they unpeg from the USD to help them devalue it as part of the financial reforms needed to help turn their economy around. If successful there is potential upside to a currency rebound. It has also likely seen the bulk of its devaluation in the near-term, though if the USD continues to strengthen the EGP will continue to weaken relative to it.

I'm not sure if there are any currency restrictions or significant fees to moving EGP abroad, but it seems to be relatively freely traded so should be able to sort out without too much hassle.

  
Think how much the INSIDERS made knowing the unpeg was coming - you KNOW they hoarded US and EU currency waiting for the bottom to fall to convert back and invest locally.

You don't have to convert to US$, you can use a less strong currency that you expect to perform better in the near term as a middle step.  (UK or EU the most obvious -- both are near lows in trading to US)


It wasn't exactly insider knowledge.....it's been widely discussed for a long while....and is part of an IMF support package.

If the central bank keeps raising rates then the dollar will rise against other currencies. So the question is what will Egypt do?

I'm going against the popular opinion here - I do not know much about Egypt's economic conditions, but I would say, if you don't need the money today, instead of it sitting around in a bank account, see if you can buy property of some kind - auto, real estate, boat, gold, anything other than leaving it in cash. I'm guessing RE prices did not proportionally increase when the currency fell. There will always be some demand for good property in a relatively stable city / neighborhood. Of course, I'm overlooking a lot of factors here - remotely managing the property, will the government unfairly snatch the property from a non-local owner, etc. If the currency recovers, great, sell and transfer to USD. If the currency stays in the tank, think that your relative left you the property instead of the cash.

That's what you do to it. People do it to currency of Zimbabwe and it is working OK for them
http://www.ebay.com/itm/25-x-Zimbabwe-500-Million-Dollar-banknot...

saferisk said:   I'm going against the popular opinion here - I do not know much about Egypt's economic conditions, but I would say, if you don't need the money today, instead of it sitting around in a bank account, see if you can buy property of some kind - auto, real estate, boat, gold, anything other than leaving it in cash. I'm guessing RE prices did not proportionally increase when the currency fell. There will always be some demand for good property in a relatively stable city / neighborhood. Of course, I'm overlooking a lot of factors here - remotely managing the property, will the government unfairly snatch the property from a non-local owner, etc. If the currency recovers, great, sell and transfer to USD. If the currency stays in the tank, think that your relative left you the property instead of the cash.
  It's safe to say you worked or lived in a 3rd world nation.  OP already lost 50% by letting it sit there and if he bought RE it would have lost 60%.

1% of something is .. something.  100% of nothing is ... 

If you exchange for USD, never look up the exchange rate, ever again.

ahmedafifi said:   I AM ORIGINALLY FROM EGYPT, I AM TELLING YOU TAKE YOUR MONEY AND RUN AWAY BECAUSE THE EGP WILL SINK EVEN MORE. FYI, I BOUGHT AN APARTMENT 2 YEARS AGO FOR 100,000 USD NOW I IT IS 50% DOWN.
GOOD LUCK,


Interesting. Most other properties over there have appreciated. Where in Egypt is your apt if you don't mind me asking?

I bought it in Alexandria in a decent neighborhood for 700,000 EGP (91000$), when 1$ was 7.7 EGP now the dollar is equal to 19.5$. Although it is very hard to sell now because everybody is waiting to see where the country is going to if i want to sell it now i should sell it for 1,775,000 EGP which will be around 250% appreciation just to get what i paid for it, There is no way i can ask for that number, at most i would say 800,000. Here is how they do it in EGYPT, they give you 20% interest, amazing right? but what is the inflation rate, according to the egyptian government it is 22.2%, but the real numbers is between 60 to 70% and with all those corrupted military generals running the country everything is going down because all they do is asking for loans from the IMF or other countries to cover the deficit but the money goes into a drain (their pockets). The big problem will be that no body will invest in a country like this because it is way better to put your money in a bank and get the 20% every year even with the inflation which many people did because you will never get that return on your money if you running a business after paying expenses and corruption. You don't want to invest in a 3rd world country unless you see a change to the upside not the downside.
   

Mickie3 said:   OP: Get in your time machine, go back a year and convert the EGP to USD. If yours is broken, forget about what it WAS worth and accept that you can get what its trading for or possibly lose more value holding out hoping for an increase.
  If the OP could go back in time as you suggest... why wouldn't they just sell the entire amount of EGP for $3 USD? Use that $3 to buy the winning numbers of the 1.5 Billion Powerball last year?

Better yet, why not the OP sell everything they own, go back to 1986 with these funds and buy every available Microsoft stock?

Want something more recent? Go back to July 19th, 2010.... with $100 USD you could have bought 1,428 Bitcoin stocks at $0.07/ea, than went to November 26th, 2013 and sold those for $979.45/ea... That would have turned $100USD into almost $1.4 million. Even if you sold those 1,428 stocks at todays market price, you would still have just over $1.2 million.

The list goes on and on. Point is I'm sure if the OP could go back in time, they would choose something better to do it with, than this EGP to USD conversion. In fact, they would be better off going as far back as they could when FOREX first started with you guessed it, gold.

good time to visit Egypt with US$?

needhelpplease said:   good time to visit Egypt with US$?
  
Life insurance <check>
Body armor <check>
Automatic rifle <not allowed per law>
Ammunition <not allowed per law>

Nope!
 

Skipping 3 Messages...
RedWolfe01 said:   
needhelpplease said:   good time to visit Egypt with US$?
  
Life insurance <check>
Body armor <check>
Automatic rifle <not allowed per law>
Ammunition <not allowed per law>

Nope!

  I visited Cairo and Alexandria in October. So long as you stay out of the sketchy areas (Sinai peninsula, the Libyan border), it's pretty safe in the big cities. Visiting the pyramids is great as there are very light crowds and the USD goes far.



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