禁漫天堂

Oi Alan,

"Hot money strategy"?聽 I think that I missed some previous posts.聽 What is it?

@chefjim Moving money to Brazil for the high interest rate.

In my opinion, interest rates in Brazil have historically always been higher than the US, Canada or Europe, and almost certainly this will continue. Of far greater importance is the exchange rate. The BRL is very low at the moment, so a great time to send money here...

Hi Peter The exchange rate GB 拢 / BRL was around聽 拢1 / BRL 8 in 2021and now stands at around GB 拢1 / BRL 6.20 not very favourable unless you have BRLs and want to exchange these into GB 拢 sterling.聽 Not sure whether or not but probably not, the high interest rate in Brazil will make up for any loss in the conversion from GB 拢 into BR at the present interest rate.

Sorry -Correction Should read: ....... from GB拢 into BRL at the present exchange rate.

聽 聽 Is a hot money strategy viable today with the BRL? Asking for a friend.
聽 聽

聽 聽 -@alan279

My late grand uncle, Reynaldo d'Oliveira, used to to this, after he left the US. Back on his days, he used to sell bootlegged cigarettes bought from the Mafia.聽 His storefront and above apartment were on a dead end street that lead to the Estuary.聽 聽That was an unloading point for hooch, during the Volstead Act year.聽 聽He owned a grocery store back then.聽

Coming to Brazil, out of the fear the Tax Man would be on his coattails for the cigarette business ( left son back with a decent degree ), he settled inintially on Jardins, and then bought an Estate with house in Itaquera, on the Citiy's Far East Side.

He used to be a local shister with no muscle, mostly lending to working stiffs and local businessmen.聽 A few people took advantage of him. On occasion his "muscle" was a former associate of my deceased father. A 38 gun point to make sure people paid up.聽

The alternative way to lend money here is to run a factoring operation. They are a dime a dozen. Every now and then, one goes belly up.聽

The days my grand uncle run this racket, there were no credit reports or anything of that sort.

You will need to use good judgement, which means, knowing how to read Brazilians, which, at this point, I doubt you can pass muster.聽 聽And then get an beck in call attorney, a competent and ambitious one, and some hired muscle.聽

The Collection & Recovering business is a thriving one in Sao Paulo. Around the Republica neighborhood ( Downtown ), what once was a domain of call centers for the travel industry, became telemarketing bureaus for debt collection ( not many people use muscle around here, at least on urban sprawls ).聽

Every two bit law firm runs a practice for debt collection.聽 聽Which translates into, a lot of delinquencies.聽 Heck, even the French went into consumer loans, to bail out a few years later ( Credit Generale ).

Your money, your risk.,

@chefjim I think the聽 "friend" is one of @alan279's聽 ex's

Roddie in Retirement

聽 聽 @chefjim Moving money to Brazil for the high interest rate.
聽 聽

聽 聽 -@alan279

Now, it sounds to me as if you were to facilitate a friend of yours to make deposits on Certiticate of Deposit accounts tied to the SELIC interest rate.

In that case, the risk is way lower. There are tax shelters in Brazil as well . And Money Market, CDB聽 type of accounts.

Best way to go is to get the boutique version of commercial banks. Itau, Bradesco, and Santander have these outlets scattered through cities, usually on more affluent neighbohroods.聽

And Banco聽 Safra definetively is on this as well.聽 It's no quite custodian banking, but it is pretty close.聽

On these branches, there is an entry level amount to qualify. So, your acquaintance needs to have enough funds to allocate for these deposits.聽

The Selic ( Our prime rate ) has been lowered聽 recently.聽

聽 聽 Hi Peter The exchange rate GB 拢 / BRL was around聽 拢1 / BRL 8 in 2021and now stands at around GB 拢1 / BRL 6.20 not very favourable unless you have BRLs and want to exchange these into GB 拢 sterling.聽 Not sure whether or not but probably not, the high interest rate in Brazil will make up for any loss in the conversion from GB 拢 into BR at the present interest rate.
聽 聽

聽 聽 -@FR267

Sorry, I should have made it clear I was referring to USD, but the GBP never actually hit 8 in 2021 I think, but peaked around 7.8+ for a short period. However you are correct that when compared to then the GBP/BRL rate is lower now. Compared to 2007 when I moved here, and the rate was close to 3, it is much higher now!

I have US friends who invested here in about 2009, when the rate was 1.6 USD:BRL, and now it is about 4.85. Their house has actually tripled in value over that time, but so has the exchange rate, so if they sold and repatriated their funds today they would not have made a penny in USD terms. That is why the exchange rates are so important when thinking about currency exchanges...

聽 01/12/24聽 Is a hot money strategy viable today with the BRL? Asking for a friend.
聽 聽

聽 聽 -@alan279

If I had the kind of money that would tempt me to play by placing bets for and against the BRL, I'd do it with a forex trading firm in my home country, and save myself the additional money I'd lose on the way in聽 on taxes and exchange costs, and again on the way out when I tried to convert my profits back into the original currency and repatriate them.聽 If I had any profits.聽 And if I could repatriate them.

Forex or Las Vegas are betting. But CDs in Brazil have a fixed rate of return, right? Cost to move the money to Brazil is known. Government transaction tax is known. Income tax on profit? Repatriation costs? At a high level it seems to pencil out. What am I missing?

@alan279 I think that this currency arbitrage would make sense if you are investing from a weaker currency to the Real because the conversion back to the original currency would not suffer much from potential weakening of the Real.

However, if you start with a strong currency (Euro, Pounds, Swiss francs, USD etc.), the risk here is that the Real will weaken in 2024 because of risks of inflation and recession.聽 Any weakening of the Real will effectively eat into the potential investments gains. The ROI to invest in cash vehicles in Brazil will have to be at least 2 times the rate of inflation (1x in Brazil and 1x in original country) in order to break even.

It's all about risks of the weakening of the Real - and the return from the investment.

Assuming neglible transfer costs, then it's just a matter of timing the transfers to maximize your profit on the exchange rate volatility, no? And factor in penalties for early withdrawal from a CD, if necessary.

聽 聽 Assuming neglible transfer costs, then it's just a matter of timing the transfers to maximize your profit on the exchange rate volatility, no? And factor in penalties for early withdrawal from a CD, if necessary.
聽 聽

聽 聽 -@alan279

Sure.聽 If you factor out all the expenses from the profit and still come out on top, then you should be positive.

However, any economist will tell you that you are missing out on the opportunity costs.聽 You could have invested this amount on some other ventures - like XOM which is currently low in its up or down cycle.

But if you consider that this investment is a sunk cost for your friend, then he / she will have to depend on timing to make money.聽 Remember currency fluctuations can move in one direction only - which means that you may have to be very persistent.

@Pablo888 XOM?

Remember currency fluctuations can move in one direction only - which means that you may have to be very persistent.
聽 聽

聽 聽 -@Pablo888

Really, one direction only?

But if you consider that this investment is a sunk cost for your friend, then he / she will have to depend on timing to make money.聽 Remember currency fluctuations can move in one direction only - which means that you may have to be very persistent.

聽 聽 -@Pablo888

Is a friend in the US necessary for this money making scheme?

Also, 鈥滺ot Money鈥� assumes rapid transfers, does it not, not long term investment?

聽 聽 Assuming neglible transfer costs, then it's just a matter of timing the transfers to maximize your profit on the exchange rate volatility, no? And factor in penalties for early withdrawal from a CD, if necessary.
聽 聽

聽 聽 -@alan279

Correct.聽 You need to understand that some tax shelters and Government Backed Bonds, not quite on CDs, have maturity dates pegged to them. Your friend pulls out early, then he/she pays the withdrawl penalty and loses out on dividends or interest paid.聽

Again, it goes back to sitting down with these bankers, doing the math on your own, figuring out costs.

Arbitrage has its own built in risk, always, here and abroad.聽 聽

Here the outlets you can sit down with branch personnel, sort out options, figure out costs, penalties...

Banking | Ita煤 Private Bank

Banco Safra

Prime - Banco Bradesco

Santander Private Banking

Also, Sicredi

Banco do Brasil BB Private Banking

聽 聽 Remember currency fluctuations can move in one direction only - which means that you may have to be very persistent.聽 聽 聽 聽 -@Pablo888

Really, one direction only?
聽 聽

聽 聽 -@alan279

I mentioned "can".聽 For instance, I used to want to do the same type of investment in CNY - which seemed to be a sure bet but at that time the USD - CNY was around 6.聽 It's now around 7.

It's hard to predict what the exchange ratio is going to be as it depends on the timescale that you are looking at.

You will have to crunch the numbers and figure out the timeframe too.

聽 聽 @chefjim Moving money to Brazil for the high interest rate.聽 聽 聽 聽 -@alan279

Oh yeah......been at it since 2001.......government debt was yielding in the 14% + range for years a while back.

When the return are that good, as they were over a decade ago, you can afford to live with exchange rate differentials.

Today it is at 10.50%.......

Been at Safra since 2009 and just started up with Banco Santander a week ago. Both banks treat you well IMHO compared to the impersonal treatment you get in Canadian ones.

@Gasparzinho 777 Wise will transfer from the U.S to Brazil for 1.3%. Brazil to the U.S. is 2%. 10.5% before taxes and you're maybe making more than a U.S. CD?

I don't watch US deposit rates. But, they've always been much worse here in Canada than Brasil. I buy and hold until maturity, averaging my yield out.

This is a legitimate trading strategy. At the investment bank level its called a carry trade, and it usually done with money borrowed in one currency at a low interest rate, then lent in another currency offering a higher interest rate.聽 The risk is exchange rate fluctuations, as others have pointed out, so it's definitely not risk free.聽 Having said that, if your using your own money there's nothing compelling you to convert the currency back.聽 If you eventually intend to use the BRL then the exchange rate risk may be a non issue, and one may argue, why not take advantage of the high 'real' interest rates currently available in BRL.

聽 聽 This is a legitimate trading strategy. At the investment bank level its called a carry trade, and it usually done with money borrowed in one currency at a low interest rate, then lent in another currency offering a higher interest rate.聽 The risk is exchange rate fluctuations, as others have pointed out, so it's definitely not risk free.聽 Having said that, if your using your own money there's nothing compelling you to convert the currency back.聽 If you eventually intend to use the BRL then the exchange rate risk may be a non issue, and one may argue, why not take advantage of the high 'real' interest rates currently available in BRL.
聽 聽

聽 聽 -@BRBC

Thanks for the succinct explanation.

Projections are the Brazilian Central Bank will lower rates by 0.5% every other month.聽 US Fed is not going to lower rates until at least mid year.聽 I would lock in a US or Brazilian CD.

Besides political pressures to lower rates, the Brazilian central bank has to know there is a bubble brewing when they held the selic rate above 12% for over 2 years. Post covid Businesses, mortgages, car loans etc will be under water in 5 years.

I went to talk to Itau private banking they told me it's better to invest in the US stock market if I can get same return in USD which I thought why get into a market I dont fully understand and take on that risk.聽

@alan279:聽 It is a great strategy depending on the bank you are transferring money to.聽 I have set up an account at Itau and transfer directly into a savings account.聽 Just be prepared to present documentation of the money trail before it is put into your account.聽 Anything over a $10,000 transfer is likely to stop at the central bank or at the money transfer business partner.聽 I have had several large transfers go successfully only after providing all the documentation.聽 The interest rates are great and with the current exchange rate it is a no brainer.

聽 聽 @Pablo888 XOM?聽 聽 聽 聽 -@alan279

Sorry - missed this thread.聽 XOM - Exxon Mobil.聽 If you look at historical data, all US Oil companies (CVX,...) stock prices go lower when the US$ is strong.聽 This is because oil prices are typically in USD.聽 Since the USD is currently strong, the demand for XOM oil is lower - hence the lower stock prices.

In the US, the demand is cyclical - higher in the summer (esp. with the required summer blend in CA) and it is almost predictable that there will be shortage in the spring / summer.

You can check it out but this is a common stock play that considers currency markets with more or less predictable demand curve.

But of course, keeping your strategy and gain in BRL would maximize your cash investment - as everyone has said.