Treasury Yield Curve - June 3 2019

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jhogue
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Re: Treasury Yield Curve - June 3 2019

Post by jhogue » Fri Aug 16, 2019 10:43 am

moda0306 wrote:
Wed Jun 05, 2019 6:43 pm
Tortoise wrote:
Wed Jun 05, 2019 4:40 pm
Are the banks that currently offer 5-year CDs at 3% basically taking a loss on the CDs in order to hopefully attract new customers who will also sign up for lines of credit (from which the bank actually makes its money)?
My example was Ally, which doesn’t require a new account to get that rate. But you could still be right, though I thought banks usually used savings account and 1-2 year cd rates for that kind of stuff.
Bankers don’t have to lose money to tempt you with a higher-rate CDs. That “hot” 5 year CD rate at 3% is doubtlessly covered when that same banker originates a mortgage loan at 4% or a maybe a HELOC at 5%.

I had the same question when my local banker recently dangled an 11 month CD @ 2.25% with the option to add or withdraw any amount up to the FDIC limit. When I asked him how he could beat the yield on a one year T-bill by 50 basis points, he replied succinctly: “It’s all about risk management.”
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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jhogue
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Re: Treasury Yield Curve - June 3 2019

Post by jhogue » Fri Aug 16, 2019 2:03 pm

jhogue wrote:
Fri Aug 16, 2019 10:43 am
moda0306 wrote:
Wed Jun 05, 2019 6:43 pm
Tortoise wrote:
Wed Jun 05, 2019 4:40 pm
Are the banks that currently offer 5-year CDs at 3% basically taking a loss on the CDs in order to hopefully attract new customers who will also sign up for lines of credit (from which the bank actually makes its money)?
My example was Ally, which doesn’t require a new account to get that rate. But you could still be right, though I thought banks usually used savings account and 1-2 year cd rates for that kind of stuff.
Bankers don’t have to lose money to tempt you with higher-rate CDs. That “hot” 5 year CD rate at 3% is doubtlessly covered when that same banker originates a mortgage loan at 4% or maybe a HELOC at 5%.

I had the same question when my local banker recently dangled an 11 month CD @ 2.25% with the option to add or withdraw any amount up to the FDIC limit. When I asked him how he could beat the yield on a one year T-bill by 50 basis points, he replied succinctly: “It’s all about risk management.”
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
Datura
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Re: Treasury Yield Curve - June 3 2019

Post by Datura » Mon Sep 16, 2019 3:19 pm

Smith1776 wrote:
Thu Aug 15, 2019 8:27 pm
I hate to be "that guy" that starts making market/economic predictions of any kind. The PP is about conceding that we can't accurately predict the future.

Nonetheless, just for fun, I'd opine that the next few years in the global economy will likely be incredibly tumultuous and really test the mettle of traditional portfolios. Crazy things happening with interest rates, even in nominal terms. More global debt than ever before. A crazy President. A trade war. A tired economic expansion. Cyber warfare going on in both open and clandestine ways. Russian influence in the White House.

I'm actually kind of... how shall I say it... excited to see the PP have a chance to see what it can do.
Long time lurker - I couldn't help but register just to say, yes, I agree.

I thought I was a coolguy who could laugh at risk and volatility for max CAGR, but with geopolitics, bond markets and cyberwarfare, I feel like we're getting beyond some traditional wisdom. I can't feel good about riding into the storm unless my portfolio is antifragile. I guess I'm not that cool.
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Xan
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Re: Treasury Yield Curve - June 3 2019

Post by Xan » Mon Sep 16, 2019 3:47 pm

Datura wrote:
Mon Sep 16, 2019 3:19 pm
Smith1776 wrote:
Thu Aug 15, 2019 8:27 pm
I hate to be "that guy" that starts making market/economic predictions of any kind. The PP is about conceding that we can't accurately predict the future.

Nonetheless, just for fun, I'd opine that the next few years in the global economy will likely be incredibly tumultuous and really test the mettle of traditional portfolios. Crazy things happening with interest rates, even in nominal terms. More global debt than ever before. A crazy President. A trade war. A tired economic expansion. Cyber warfare going on in both open and clandestine ways. Russian influence in the White House.

I'm actually kind of... how shall I say it... excited to see the PP have a chance to see what it can do.
Long time lurker - I couldn't help but register just to say, yes, I agree.

I thought I was a coolguy who could laugh at risk and volatility for max CAGR, but with geopolitics, bond markets and cyberwarfare, I feel like we're getting beyond some traditional wisdom. I can't feel good about riding into the storm unless my portfolio is antifragile. I guess I'm not that cool.
Antifragility is the new cool. At least around here...
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Smith1776
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Re: Treasury Yield Curve - June 3 2019

Post by Smith1776 » Tue Sep 17, 2019 5:20 am

Datura wrote:
Mon Sep 16, 2019 3:19 pm
Smith1776 wrote:
Thu Aug 15, 2019 8:27 pm
I hate to be "that guy" that starts making market/economic predictions of any kind. The PP is about conceding that we can't accurately predict the future.

Nonetheless, just for fun, I'd opine that the next few years in the global economy will likely be incredibly tumultuous and really test the mettle of traditional portfolios. Crazy things happening with interest rates, even in nominal terms. More global debt than ever before. A crazy President. A trade war. A tired economic expansion. Cyber warfare going on in both open and clandestine ways. Russian influence in the White House.

I'm actually kind of... how shall I say it... excited to see the PP have a chance to see what it can do.
Long time lurker - I couldn't help but register just to say, yes, I agree.

I thought I was a coolguy who could laugh at risk and volatility for max CAGR, but with geopolitics, bond markets and cyberwarfare, I feel like we're getting beyond some traditional wisdom. I can't feel good about riding into the storm unless my portfolio is antifragile. I guess I'm not that cool.
We're on the same wavelength. I am, and always have been, an unusual fellow. I don't mean to say that I'm special, but I am definitely unusual.

As an example, I point out to many of my friends (at least those that work in finance), that the reason why diversification away from digital assets isn't preached, is simply because a major digital bomb on our wealth hasn't happened yet. There is a human tendency to reason by analogy rather than by first principles. When you reason by analogy you take something familiar and either transpose or extrapolate. In this case people extrapolate into the future, and don't realize that the fundamentals of wealth have changed.

Digitization is a common denominator. All of the risk "eggs" are in the digital basket. You are taking a massive risk by holding all of your wealth in this one form. When I try to point this out, people give me funny looks.

With the PP you get protection with having at least some of your gold holdings in physical form. It's the ultimate in anti-fragility. And that's why I like it.
V = E * (8.5 + 2G)
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