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Leaving dollars on the mattress: Economists answer if you lose money or if it is a good decision - La Nacion Propiedades
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Dejar los dólares en el colchón: los economistas responden si se pierde plata o es una buena decisión
Quien planea comprar una propiedad y analiza la posibilidad de sacar un crédito hipotecario se debate cómo ahorrar para llegar al 20 por ciento que exigen los bancos para acceder a una línea
www.lanacion.com.ar
June 26, 2024
Anyone planning to buy a property and analyzing the possibility of taking out a mortgage loan is debating how to save to reach the 20 percent that banks require to access a line.
By Fernando Torres Ullmer
Photo of a one-dollar bill, taken in Marple Township, Pennsylvania, on March 13, 2023. (AP Photo/Matt Slocum)
The old dilemma of having dollars under the mattress is still valid in Argentina and even more so when the idea of buying a property through mortgage loans is considered. Is it convenient or not convenient to leave the dollars in the mattress ?
If you leave the dollars under the mattress you lose purchasing power , because although inflation in the United States compared to that of Argentina is “minimal”, it has skyrocketed and is around 3% annually , according to economic analyst Darío Rubinsztein.
“If you keep $100,000 under your mattress, after seven years you have lost just over 20% of your purchasing power ,” says Rubinsztein. “Money under the mattress is not a business, it is never a business , the thing is that it gives you security to have it ‘in your hands’,” he adds.
In seven years, the dollars under the mattress lose 20% of purchasing power
In comparison, economist Camilo Tiscornia believes that “the dollar was always a refuge of value in Argentina . Even people are reluctant to part with the savings that one has for something important.” This reflects distrust in the peso.
The dollar as a “haven of value”
If the North American currency has inflation, has the dollar stopped being a refuge of value for savings when buying a property?The economist Tiscornia considers that “there are short-term moments in which many times one (who saves in dollars) is losing. But, in recent weeks the dollar has risen and the one that switched to pesos for a fixed term would have been better if it had stayed in dollars.”
Therefore, Tiscornia affirms that “ when you see the horizon the conclusion changes , in the long term the dollars have saved many and in the short term the game is different.”
Finding the cause of inflation in the core countries is difficult; Because there are those who say that inflation is due to the monetary issue in the pandemic and others who say that it is a consequence of the Ukraine-Russia war and the increase in the price of oil , reports the economist.
So, is it a good idea to take them out of the mattress?
If you leave dollars under the mattress, you lose purchasing power due to North American inflation. That is why one of the incentives to take dollars out of the mattress is that the price per square meter is still “low . ” Therefore, investing in property is a viable direct investment option.
One of the incentives to remove them from the mattress is the properties
The director of the Strategy and Innovation Consulting Firm, Rubinsztein, states: “ Properties are going to go up in dollar terms, a little, I don't know how much, it is still a good time to buy.”
In line with this, Camilo Tiscornia says that “there is a possibility that in a stable macroeconomic environment” the laundered dollars (if approved within the fiscal package) will be used for construction . So Tiscornia believes that “there may be more real estate movement . ” However, unlike other major crises, there has now been no drop in the cost of construction, but rather it continues to rise.
How to make dollars go further to acquire a property
The first point to keep in mind is that the dollar, even though it is affected by inflation, is a “hard currency” and to capitalize on it, you always have to think about that type of currency. So, what you have to keep in mind, according to Darío Rubinsztein, as a small investor is:- In what period can you put the dollars to invest?
- How liquid do you need the silver?
If you need to have money available on hand, you cannot make an investment that beats inflation, unless you trade . Now, if you leave it on the mattress it loses value, if you convert it to pesos you lose against inflation and the risk of a possible exchange rate jump that makes the hard currency worth less.
So, according to the economic analyst, what is almost at hand is investing in CEDEARs (investing from Argentina in companies listed in the United States), which have risk. There are two issues: exchange rate coverage, if you invest in pesos and the official exchange rate goes up you have coverage. The other issue is the fluctuation of such a stock, if that stock goes down and the dollar does not rise, money is lost. But if the stock rises a lot and the official dollar rises on top of that, you are “recontra” covered in terms of Argentine inflation.
Investing dollars in indices as an option to avoid losing against North American inflation
Another option is to invest in indices . When you invest in Standard & Poor's , you have a historical return of 10% annually. So, you put in US$100,000 at a time and by the seventh year you have around US$200,000 , the capital doubles. But that is for an investor who does not need the capital and can leave it there growing.
Hypothetical investment case, according to Darío Rubinsztein
Suppose that in January 2017 we receive an inheritance of US$100,000 in cash. The dilemma of spending, saving or investing that money arises. Let's consider the following alternatives for a period of seven years, until January 2024 :
- Keep the US$100,000 under the mattress : By January 2024, we would have the same physical bills, but their purchasing power would be equivalent to US$78,000 due to US inflation.
- Rent a safe deposit box : After paying US$2,800 for maintenance, there would be US$97,200 left with a purchasing power equivalent to US$75,000.
- Sell the US$100,000 and invest in local currency : In January 2017, this would be equivalent to $1,699,000 (blue dollar value: $16.99). Assuming a return equal to inflation (CPI 3,432.57%), $60,000,000 would be obtained, equivalent to US$59,113 (free dollar value $1,015 in January 2024).
- Invest the US$100,000 in the S&P500 Index : With a historical annual return of 10% and without withdrawing funds, the capital would double, resulting in approximately US$200,000 .
In this context, economists also answer whether the return of mortgage loans is encouraging people to take dollars out of their mattress. “The few people who had something saved had already begun to help out to cover their current expenses . It is an endogenous dollarization of the economy. On the other hand, people who had savings in dollars to buy a property recognize that in the current context it is a possibility to get into credit ,” concludes Rubinsztein.
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