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Financial Literacy

The Max-Yield Strategy

 

The Max-Yield Strategy: Double Digit Returns In Safe Investments

By Dr. Steve Sjuggerud, Advisory Panelist, Investment U
Monday, August 25, 2003: Issue #268

$10,000 invested in these safe and boring yield strategies would have turned into over $300,000. And it’s so simple, I’m ashamed I hadn’t thought of it and tested it myself.

Chris Weber, the inventor of it, calls it the “Max-Yield Strategy.” He’s been doing it since 1970, and has averaged double-digit returns per year in safe and boring investments. Here’s all you do

Once a year (say January 1), you simply move your safe money into the safe country paying the highest rates of interest. One year later, you change to the new high-yielding safe country.

When you do this you make money two ways The first is obvious; the second is not so obvious. I’ll explain why, and then I’ll explain how you can get in on what is basically a safe way to earn double-digit gains over time, without touching stocks

How the Max-Yield Strategy Works: Double Dipping for Increased Profits

The first way you make money is through INTEREST. You simply buy a boring, income-earning investment in the safe country’s currency-whether it’s a CD or a government T-bill. (Don’t worry: This is easy to do. I’ll show you how in a minute.)

The second way you make money is through CURRENCY APPRECIATION. All things being equal, money flows to where it’s treated best. For example, the U.S. and New Zealand are both stable countries. But short-term interest rates in the States are 1% or less. Meanwhile, short-term interest rates in New Zealand are near 5%.

Smart money flows into New Zealand to earn the higher rate of interest. This, in turn, pushes the value of the New Zealand dollar up. In 2003 alone, the New Zealand dollar is up about 12% versus the U.S. dollar.The New Zealand dollar is the “Max-Yield” currency this year. If things don’t change between now and the end of the year, you’ll have made 5% in interest AND over 12% in currency appreciationf-or a total return of over 17%!? And all you did was hold cash as your yield strategy. That’s great.

Max-Yield: Not Only Safe, But Simple, Too

It’s so simple, too Just once a year (say, the first of the year) make your change to the new “Max-Yield” safe country.

It doesn’t work every year. Since 1970, following this strategy, you would have lost money in 7 out of the 33 years. The worst one-year loss was just under 10%.

But the overall record has been good. It’s a way to collect high interest, and earn some capital gains to boot. Double-digit returns are what it’s averaged over the last 33 years. I wish I’d thought of it myself

A Little About Chris Weber…

I’ve known Chris for years, and I think he is one of the best investors on the planet. We spent last Saturday together, driving from San Francisco to Carmel. Along the way Chris pointed out where the Wall Street Journal used to be printed on the West Coast. He told me that, years ago (before the Internet), he’d drive out there every night to buy the Journal, hot off the presses.

He was buying tomorrow’s Journal at 11 p.m., and making his investment decisions before the rest of the crowd got into the office. At the time he was in his twenties. He said he was making thousands of dollars a day on his investments, while his San Francisco apartment was only costing him about a $1,000 a month.

Chris has actually never had a “real” job, outside of a paper route when he was a teenager. Way back then, he was interested in investing, and loaded his savings into gold coins. He turned the investments from his paper route into over a million dollars, while in his early twenties. His success hasn’t stopped. He recently moved from a house on the beach in Palm Beach, FL, to Monaco. But he spends much of the year traveling, reading and looking for investments.

I remember asking him how he had time to have seen so much and read so much (as I’ve never met someone so well traveled AND well read), and he said, “That’s what you do when you don’t have a job.”

How to Implement Max-Yield Strategies

You can implement The Max-Yield Strategy yourself, if your broker can buy these types of investments. If not, the easy way would be to let a U.S. firm that specializes in foreign-currency CDs or foreign income-paying investments handle it. Here are a few options:

  • Chuck Butler at Everbank: www.everbank.com, 800.926.4922
  • Jeff Winn at International Assets: jwinn@iaac.com, 800.432.0000
  • Howard Goldstein at Peregrine: hgoldstein@pfmail.com, 877.539.1004

I’ve known Jeff and Howard for a decade or more, and trust them to do a great job. I don’t know Chuck, but I am familiar with the folks behind Everbank (I had lunch with their CEO, Frank Trotter, earlier this year) and trust them, as well. Contact them all, and go with the person you like the best and feel the most comfortable with.

The bottom line is the Max-Yield strategy has produced double-digit annual gains in safe and boring investments since 1970. A record like that is appealing to me. Thanks, Chris Weber, for the good idea.

Good Investing,

Steve


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