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FAQ
1. How can I invest in the SCI?
3. What about foreign-currency Certificates of Deposit drawn on a US bank?
5. I am a fund manager. How can I use the SCI?
6. When might EWI change components in the Stable Currency Index?
7. For traders, might the SCI replace standard methods of hedging against currency risks?
1. How can I invest in the SCI?
The SCI is an investment index. Currently there are no exchange-traded funds utilizing the SCI but we expect to see their development in the near future. You may invest in the index using the following methods:
(1) If you are wealth-preservation oriented, you can, through Safe Wealth Consultants Ltd., establish a relationship with a Swiss institution under which you can buy currencies in a mix that tracks the SCI: clientservices@safewealthconsultants.com or (011 from the U.S.) + 41-21-966-7200. Minimum investment: 200,000 USD or counter equivalent.
(2) Open an account at a safe bank that will obtain short-term government debt instruments in the four SCI currencies for your account.
(3) Buy bonds, bills or certificates of deposit in equal portions in each SCI country.
(4) Set up a bank account in each SCI country and fund it.
2. Can I buy SCI futures?
Not currently. One day soon an exchange may offer a futures contract on the dollar/SCI or similar vehicles. Be aware that when you deal with futures and options, you inevitably take on third party/custodial risks.
3. What about foreign-currency Certificates of Deposit drawn on a US bank?
As with any deposit account, the main issue is bank safety. As far as we know, no bank that offers foreign-currency CDs has a strong safety rating from TheStreet.com Ratings. (For more information on TheStreet.com services, visit http://www.thestreetratings.com/. Pay particular attention to the "Liquidity" category.)
4. Would you recommend buying Traveler's Checks in the proportions suggested by your SCI Composition Chart?
With any demand note, there is always a risk of default on the part of the issuer. This includes Traveler's Checks. In addition there are redemption risks, which any crisis would likely make worse.
5. I am a fund manager. How can I use the SCI?
Any person or firm that is internationally oriented benefits from having a global, stable index for storing assets. For example, if you're a hedge fund manager, it allows you to park your idle money in a stable basket of currencies, thereby using the basket as a currency-neutral "sweep" account.
6. When might EWI change components in the Stable Currency Index?
To create the SCI, we chose currencies that had the best long-term situations—from many points of view—in their respective global quadrants. Nevertheless, we can envision a shift in the conditions that would cause us to rethink one or more of the currencies -- such as a military coup, a communist takeover, or a radical change in policy by a monetary authority. Any such event would cause EWI to consider changing the composition of the SCI.
Having said that, good fundamentals typically attend tops and bad ones attend bottoms. Frequent changes to the SCI might mean the index would repeatedly take on new components at tops and unload them at bottoms, which is how most people lose money in their portfolios.
7. For traders, might the SCI replace standard methods of hedging against currency risks?
Yes. It's better for many traders because the SCI is not a currency play. You could call it an anti-currency play. It plays a role similar to a money market fund for stock market traders. When they want to neutralize their exposure to equities, they move out of them. The SCI gives currency traders the opportunity, for the first time, to "move out" of currencies and be truly neutral.
