Heads we win. Tails, the government loses.
Hey, if the government is willing to create investment guarantees for us (through virtual banks, for example), we’d be foolish not to take advantage of ’em. If we can get the full upside potential of the investment… and we can legally hand off all the risks to the government… then let’s do it!
Of course, we’ll never invest just because of a government guarantee. The investment idea has to be great in its own right… The guarantee is just the icing on the cake.
In the case of today’s idea, it’s a great way to profit on what might be a risky bet against shaky currencies… without risking a penny.
This investment has nothing to do with bonds, gold, real estate, or stocks.
[ad#Google Adsense]When the stock market was nose-diving in 2000, 2001, and 2002, this investment returned about 2%, 5%, and 7%, respectively. In 2008, when every investment on the planet lost money (stocks, commodities, real estate, etc.), this one still managed to make you a profit.
This investment isn’t something obscure either… I assure you, it is as legitimate as any investment out there. Trillions of dollars change hands in this investment every day. But nobody is trading it like this.
It’s a simple way to invest in currencies.
Look, I did my Ph.D. dissertation on currencies. I’ve studied currencies closely. Back then, I tested every possible factor to see what “works” when it comes to currencies.
You’d be surprised… Just about nothing you hear on TV about currencies actually ends up moving a currency. For example, in the financial news, you might hear something like, “The U.S. dollar will crash because of the national debt / the budget deficit / the trade deficit / the you-name-it deficit… ”
Hey, it sounds smart… And it’s what they write in the economics textbooks. But the thing is, in the real world, it doesn’t work that way. There are no statistical gymnastics you can do to use deficits or debts to determine how much or when a currency will fall. I tried to find a legitimate mathematical relationship. It doesn’t exist.
I tested everything. And in my testing, I found only three things reliably matter… 1) value (this is similar to the “Big Mac Index” I’ve written about before), 2) interest rates relative to other countries, and 3) the existing trend.
You never know which one of the three factors is going to be “the one” at any given time. Taken individually, all three of these things work OK. The returns are fine, but they’re somewhat volatile. Now, when you combine all three of these into one little system… Voila! You have a real winner.
Deutsche Bank (who does the best currency research, in my opinion) recently came out with an index that does exactly this… It’s a currency index made up of the three strategies that actually work.
Deutsche Bank calls it the DBCR Index (for Deutsche Bank Currency Return Index). For all three strategies, the DBCR Index simply buys the best three currencies and sells short the worst three.
DBCR sticks with just the 10 most traded currencies. So that’s 10 possible currencies and three simple strategies, equally weighted. Each strategy buys the three best and sells the three worst. Then it rebalances.
From my Ph.D. work, I knew down in my toes this was right as soon as I saw it. But you can’t just go online and buy shares in the DBCR Index Fund. There isn’t one. And even though the strategy is simple, it’s too much for most investors to keep up on their own.
[ad#Google Adsense]I wanted to find a way for you to piggyback on the DBCR without too much trouble. So I called up Frank Trotter, the ever-creative founder of EverBank…
Frank came through with a creative way, as he usually does. (Thanks, Frank!)
EverBank is now offering a “MarketSafe” CD where you can invest in this index. It’s issued by his bank, so like other bank CDs, it’s FDIC insured – your principal is guaranteed.
In short, if the DBCR Index goes up, you get all those gains. And if it goes down? You get none of those losses if you hold the CD to maturity. You’re guaranteed to get no losses at all, thanks to the FDIC.
Over the last three years, the DBCR Index has returned about 1.5% (in the meltdown year of 2008), 6% (in 2009), and 2% through April of this year.
That’s more than you can make in most CDs or other super-safe investment right now.
Good investing,
— Steve Sjuggerud
P.S. To get in on this, contact EverBank’s World Markets department at 800-926-4922 or worldmarkets@everbank.com. Let them know you want to get in on the new MarketSafe CD. EverBank is pooling money now, but you have to get in before November 4, so don’t wait.
Also, if you didn’t already know it… As always, I don’t receive any commission or any other compensation from EverBank for this investment idea (or any other investment idea with any other company) and neither does my publisher (Stansberry Research).
[ad#jack p.s.]