All America Bank 1.5%

Discussion of the Cash portion of the Permanent Portfolio

Moderator: Global Moderator

User avatar
sophie
Executive Member
Executive Member
Posts: 2479
Joined: Mon Apr 23, 2012 7:15 pm

Re: All America Bank 1.5%

Postby sophie » Sat Jul 15, 2017 8:55 am

Not sure why the confusion about I Bonds? Yes, you can sell them after holding for one year (or 11 months 1 day if you buy at the end of a month). If you sell before 5 years you forfeit 3 months interest, which is exactly the same penalty that virtually all CDs carry.

If you look at short term interest rates vs. inflation, they tend to remain in the same ballpark - cf Tyler's article about cash investments. In any case it's highly unlikely that interest rates will get much higher than inflation, so there's very little risk that I Bonds will lag CD rates by much. If they do, you could probably win big by scoring some I Bonds with a high fixed rate.

I also look forward to a thread about Illinois! New York is not too different, just with deeper pockets so they are able to balance the budget. It's the same problem though, a city/state that loves to spend money and could care less about high taxes. To some degree I agree with that philosophy, if it translates to city services that save me money and increase quality of life e.g. good parks & working subway system, but mostly it's going to pensions for people who spend 20 years running a subway elevator and then retire at 45. That's just plain insulting. I'm amazed there isn't more of a backlash going on.
User avatar
dualstow
Executive Member
Executive Member
Posts: 6903
Joined: Wed Oct 27, 2010 10:18 am
Location: Rand Paul's grass clippings
Contact:

Re: All America Bank 1.5%

Postby dualstow » Sat Jul 15, 2017 9:01 am

sophie wrote:Not sure why the confusion about I Bonds?

Just to be clear, I was making a joke after seeing pug's green font. I think everyone is in agreement on the I bond holding period. O0
Happy Thanksgiving, to those who celebrate it
User avatar
Kriegsspiel
Executive Member
Executive Member
Posts: 808
Joined: Sun Sep 16, 2012 5:28 pm

Re: All America Bank 1.5%

Postby Kriegsspiel » Sat Jul 15, 2017 9:06 am

sophie wrote:I also look forward to a thread about Illinois! New York is not too different, just with deeper pockets so they are able to balance the budget. It's the same problem though, a city/state that loves to spend money and could care less about high taxes. To some degree I agree with that philosophy, if it translates to city services that save me money and increase quality of life e.g. good parks & working subway system, but mostly it's going to pensions for people who spend 20 years running a subway elevator and then retire at 45. That's just plain insulting. I'm amazed there isn't more of a backlash going on.


There is a good deal of smoldering resentment among the young. A ladyfriend and I have been having a running malevolence about these stupid promises. Especially in Illinois, where she lives.
User avatar
jhogue
Senior Member
Senior Member
Posts: 105
Joined: Wed Jun 28, 2017 10:47 am

Re: All America Bank 1.5%

Postby jhogue » Sat Jul 15, 2017 9:23 am

dualstow wrote:
pugchief wrote:
jhogue wrote:The current I bond rate is 1.96%. Max. $10,000 per SSN.

Yield of I bond currently beats money market funds, 4 year CD, and 5 year Treasury.

Less principal risk than FDIC - insured CDs or bank accounts.

Yes, but you must hold I-bonds for 5 years minimum or face a penalty. So a more realistic comparison would be to a 5-year CD.

In any case, if short term interest rates rise, 1.9% will not seem like a good deal 2 years from now.


No Pugsley,

As you can clearly see from the red text, you said nothing about a penalty (in red), and brazenly stated that you must hold I-bonds for 5 years in any case.


dualstow,

To be fair to pugchief, I recognize that my comparison of the current I bond yield (1.96%) to the OP’s money market fund “great rate” (1.50%) was inexact. It had to be because I bonds are unique and don’t compare-- apples-to-apples-- to any other financial instrument. I wanted to demonstrate that you don’t need to abandon the safety of Treasury-backed securities just to stay competitive with yields for cash in the PP.

Short term rates have been crushed so low for so long that investors have grown schizophrenic about their cash. On the one hand, prudence has been displaced by yield chasing of the sort exhibited by the OP: Who cares about arcane stuff like credit risk, when I can get my hot little hands on an additional 0.22% by locking up my $35,000 for the next 12 months (net a whopping $77/year!!!) [compared to a 1 year Treasury bill @ 1.28% (7/9/17)].

On the other hand, legions of savers and investors have gone without meaningful returns for so long that they have simply thrown in the towel, thrown out their monthly statements, and let their TBTF mega-banks pretend that they did not hear that Janet Yellen has been raising interest rates. The article you cited on the front page of Thursday’s Wall Street Journal (“Bank Deposits Don’t Pay,” 7/13/17) is eye-opening evidence of just how extensively that despair has penetrated into our financial culture.
“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!"
User avatar
dualstow
Executive Member
Executive Member
Posts: 6903
Joined: Wed Oct 27, 2010 10:18 am
Location: Rand Paul's grass clippings
Contact:

Re: All America Bank 1.5%

Postby dualstow » Sat Jul 15, 2017 9:29 am

Absolutely agree. I should have added that I really appreciate your posts in this thread. I do.
I hope that 6-month treasury bills and, say, Vanguard's prime money market will catch up with inflation, which is what- 1.6-2% ?
Not a lot of hope for banks.
Happy Thanksgiving, to those who celebrate it
User avatar
jhogue
Senior Member
Senior Member
Posts: 105
Joined: Wed Jun 28, 2017 10:47 am

Re: All America Bank 1.5%

Postby jhogue » Sun Jul 16, 2017 2:09 pm

dualstow wrote:Absolutely agree. I should have added that I really appreciate your posts in this thread. I do.
I hope that 6-month treasury bills and, say, Vanguard's prime money market will catch up with inflation, which is what- 1.6-2% ?
Not a lot of hope for banks.


Thanks, dualstow. I guess I am using this forum to vent about the perils of neglecting cash, the busiest asset in the PP.

I trust that the TBTF mega-banks will not ask what is good for savers and investors—any more than my grandmother would think of asking the chickens on her farm if they would like to come to dinner on Sunday afternoon.

Your concern about the threat of inflation to cash reminds me of when I got my very first money market account way back in 1981. Federal Reserve chairman Paul Volcker had just declared war on inflation and jacked up short term rates to unprecedented levels. I think the rate of my brand-new Dreyfus MMA topped out at a still-astounding 20%! (very temporary, of course) My conventional bank savings account never came close to catching up and eventually—I can’t even remember when-- I stopped using a bank savings account altogether.

Financial innovations like money market accounts, index funds, brokerage accounts offering free trades of Treasury bonds, ETFs, and, yes, I bonds, have given the small saver and investor many more financial tools to deal with the fluctuations in economic cycles. Maybe the most valuable innovation of all is the creation of forums like this one that encourage the growth of the free exchange of ideas.

Tyler’s recent research in another thread also provides good evidence and gives me hope that that cash can keep up—if we pay attention.
“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!"
User avatar
dualstow
Executive Member
Executive Member
Posts: 6903
Joined: Wed Oct 27, 2010 10:18 am
Location: Rand Paul's grass clippings
Contact:

Re: All America Bank 1.5%

Postby dualstow » Sun Jul 16, 2017 3:17 pm

Of course the chickens are invited to Sunday dinner!
Fine print: they'll be seated on a plate, not a chair. O0

Your concern about the threat of inflation to cash reminds me of when I got my very first money market account way back in 1981...

I'm just watching; not overly concerned. We had a regular poster here, MachineGhost (a.k.a. MG) who, between very bombastic and entertaining posts about other things, had info like "treasury bills have kept up with inflation except for such and such period, when they trailed by a mere 1%." I looked it up, and he was right. That along with the cash article at portfoliocharts dot com, made me feel a whole lot better about the cash portion.

In general, I'm fine with low yield and low inflation. I'll let the Fed worry about what % inflation is good for us.
Happy Thanksgiving, to those who celebrate it
User avatar
jhogue
Senior Member
Senior Member
Posts: 105
Joined: Wed Jun 28, 2017 10:47 am

Re: All America Bank 1.5%

Postby jhogue » Mon Jul 17, 2017 9:13 am

dualstow,

What happened to Machine Ghost? For a while he was a prolific poster on this forum, and lately seems to have vanished – like a ghost?

I enjoyed his posts, but also sometimes found them a bit cryptic, as though I needed an explanatory preamble before diving into his more technical missals.

He also seemed to exhibit an obsessive compulsive disorder at times, especially when it came to the subject of Maximum Drawdowns in back testing the PP. Personally, I thought I had pretty much found out everything I need to know about maximum drawdowns by living through the 2008 crash and watching my 90/10 portfolio drop by 41%.
“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!"
User avatar
dualstow
Executive Member
Executive Member
Posts: 6903
Joined: Wed Oct 27, 2010 10:18 am
Location: Rand Paul's grass clippings
Contact:

Re: All America Bank 1.5%

Postby dualstow » Mon Jul 17, 2017 9:16 am

jhogue wrote:dualstow,

What happened to Machine Ghost?

I think TennPaGa said he's active on another forum. Where is he, Tenn?
Happy Thanksgiving, to those who celebrate it
User avatar
pugchief
Executive Member
Executive Member
Posts: 2127
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: All America Bank 1.5%

Postby pugchief » Mon Jul 17, 2017 10:03 pm

dualstow wrote:
pugchief wrote:
jhogue wrote:The current I bond rate is 1.96%. Max. $10,000 per SSN.

Yield of I bond currently beats money market funds, 4 year CD, and 5 year Treasury.

Less principal risk than FDIC - insured CDs or bank accounts.

Yes, but you must hold I-bonds for 5 years minimum or face a penalty. So a more realistic comparison would be to a 5-year CD.

In any case, if short term interest rates rise, 1.9% will not seem like a good deal 2 years from now.


No Pugsley,

As you can clearly see from the red text, you said nothing about a penalty (in red), and brazenly stated that you must hold I-bonds for 5 years in any case.

Actually Doublestow, I did mention the penalty. You must have missed it with all the color changing. O0
User avatar
dualstow
Executive Member
Executive Member
Posts: 6903
Joined: Wed Oct 27, 2010 10:18 am
Location: Rand Paul's grass clippings
Contact:

Re: All America Bank 1.5%

Postby dualstow » Mon Jul 17, 2017 10:07 pm

Yes, read my explanation above, between Sophie's and Kriegspiel's posts.
Happy Thanksgiving, to those who celebrate it
User avatar
pugchief
Executive Member
Executive Member
Posts: 2127
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: All America Bank 1.5%

Postby pugchief » Mon Jul 17, 2017 10:09 pm

dualstow wrote:Yes, read my explanation above, between Sophie's and Kriegspiel's posts.

Ah, yes, I zoned thru that post apparently.

Return to “Cash”

Who is online

Users browsing this forum: No registered users and 2 guests