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Re: Best current options for cash and STT's?

Posted: Wed Sep 09, 2020 7:16 am
by mathjak107
fund families have cut expenses on money markets to keep the value at 1 dollar ... i don't think the t-bill etf's are doing any expense cutting

Re: Best current options for cash and STT's?

Posted: Wed Sep 09, 2020 7:36 am
by sophie
I had that same experience with Treasury ETFs. They're not pegged to the dollar like money market funds, so yes you can lose money even in short-term funds. I got out of the ones I had a couple years ago for that very reason - you don't want to be taking even small risks with your cash!

I know my money is not going anywhere in those 0% Treasury MM's, but that works both ways and I'll take it. The PP is doing fine without those interest earnings, so you don't need them. Meanwhile...I might end up buying my first EE bonds later this year. I already got my I-bonds in January, luckily (0.1% fixed rate, hooray!).

Re: Best current options for cash and STT's?

Posted: Wed Sep 09, 2020 9:48 am
by PrimalToker
What happens when SHV yields less than the ER? Do the fees start eating away at your cash? I have been looking to see if ETF's do the same as MM and cut or waive their expenses but I haven't found any info saying they do...

Re: Best current options for cash and STT's?

Posted: Wed Sep 09, 2020 10:37 am
by Kevin K.
PrimalToker wrote:
Wed Sep 09, 2020 9:48 am
What happens when SHV yields less than the ER? Do the fees start eating away at your cash? I have been looking to see if ETF's do the same as MM and cut or waive their expenses but I haven't found any info saying they do...
SHV has an ER of .15% - so yes, higher than the yield of its component bonds at this point and no they don't waive their expenses.

I have a large chunk of my "cash" allocation in Schwab's Short-Term Treasury Bond fund SCHO and the Vanguard equivalent VGSH. Both have rock-bottom .05% ER's but I'm in the read for the year on both due to recent upticks in interest rates. Just goes to show the stock advice (in the PP book and often on these forums) that holding much of one's cash in STT's rather than a Treasury MM account generating higher returns doesn't hold up in this unprecedented interest rate environment.

My personal take on best (or at least less bad) options at the moment is:

1. Buy your max $10,000 per SSN in iBonds every year (best deal going on cash by far).
2. Buy 6-12 month CDs paying .60-.80% up to the FDIC/NCUA limit of 250K if you have access to them through Navy Federal Credit Union, Ally Bank or other online options (not worth the hassle of opening an account unless you have huge amounts of cash to invest).
3. Buy 3 and 6 month T-bills at auction in your brokerage account and roll them over, or if you can't be bothered and have a Vanguard account buy their Treasury MM account (VUSXX - 50K minimum) and earn a secure 0% interest while we ride this out.

I don't blame folks who are putting 10-25% of their cash into short-term corporate bond funds figuring that the Fed's backstopping of their constituent securities is a free ride but that's a very un-PP thing to do and has no appeal to me personally.

I do think though that we have entered a phase where it makes sense to heed the cliché "take your risk on the equity side" (obviously this means equities plus gold for PP/GB fans). No yields on safe cash and little upside and infinite downside for LTT's.

Re: Best current options for cash and STT's?

Posted: Wed Sep 09, 2020 11:16 am
by jhogue
I think it is more than a cliché to advise PP investors to take their risk in equities, not Cash. With three out of the four assets in positive territory year to date, it is practically a given that Cash is the worst yielding asset.

As a matter of fact, I wonder if there has ever been a period where all four assets were simultaneously up?

Re: Best current options for cash and STT's?

Posted: Wed Sep 09, 2020 1:31 pm
by sophie
A note on Treasury-only money markets: they are all closed to new investors, so if you don't already have it set up, you'll have to wait a few years to jump in. Also, VUSXX (Vanguard's Treasury MM) had a $50K minimum initial investment. Fidelity (FDLXX) dropped its $25K minimum a year or two ago, but I imagine they will reinstate it when the fund reopens.

If Treasury MM's are not an option, I would do 4 week T bills on autoroll. 6-12 month bank CDs or 1 year T bills are not a bad idea but the extra amount you get, after taxes, probably isn't worth the bother. I would sooner max out I and EE bonds.

Re: Best current options for cash and STT's?

Posted: Wed Sep 09, 2020 2:48 pm
by Kevin K.
sophie wrote:
Wed Sep 09, 2020 1:31 pm
A note on Treasury-only money markets: they are all closed to new investors, so if you don't already have it set up, you'll have to wait a few years to jump in. Also, VUSXX (Vanguard's Treasury MM) had a $50K minimum initial investment. Fidelity (FDLXX) dropped its $25K minimum a year or two ago, but I imagine they will reinstate it when the fund reopens.

If Treasury MM's are not an option, I would do 4 week T bills on autoroll. 6-12 month bank CDs or 1 year T bills are not a bad idea but the extra amount you get, after taxes, probably isn't worth the bother. I would sooner max out I and EE bonds.
Hi Sophie!

You must not have seen the latest MM fund news from Vanguard:

https://investornews.vanguard/changes-t ... nd-lineup/

IMHO their decision to switch what used to be Prime MM fund just underlines how much turmoil and instability they see in the financial system. It's almost like their fixed income guys started reading Harry Browne.

And the Treasury MM fund is open again to new investors, albeit with the 50K minimum still intact.

I don't know about other brokerages but Vanguard and Schwab don't do autoroll on Treasuries anymore. But your suggestion of just doing 6-12 month ones and or CDs is a great one and it's not much work to just put the due dates in one's calendar.

Re: Best current options for cash and STT's?

Posted: Thu Sep 10, 2020 7:13 am
by sophie
Wow that is news I missed. Thanks Kevin. And Fidelity’s treasury MM is open too!! With no minimum to open.

I’m sticking with this instead of the CD or 6 month T bill option. I want dry powder to pounce on stocks or bonds if they drop. And the measly 0.6% interest after taxes isn’t worth the bother for me. Maybe for someone in a low tax bracket with no state tax.

Re: Best current options for cash and STT's?

Posted: Thu Sep 10, 2020 9:19 am
by jhogue
EE Bonds look like a terrific current buy at 3.53% yield, but it requires holding them for 20 years. For that reason, I would only consider them after I had bought my full quota of I Bonds for the year-- and in conjunction with an explicit liability matching strategy.

I bonds really are uniquely positioned right now. They are the only Treasury-issued security that provide protection against both inflation and deflation. I normally think of them as Deep Cash, but right now, with a 1.06% yield, they can work as a short term investment too.

For safe and liquid Cash, I think the current best of a bad lot is FDLXX. It does not fluctuate in principal value, unlike short term Treasury ETFs, it has recently re-opened to new investors, and it has no minimum (currently). On the other hand, I still think that Fidelity is acting like a gang of pirates by failing to reduce its ridiculous expense ratio of 0.42%.

Re: Best current options for cash and STT's?

Posted: Thu Sep 10, 2020 9:44 am
by Kevin K.
I agree 100% about the iBonds.

Vanguard's VUSXX has an ER of .09%, and while I haven't tried my luck with this a bunch of Bogleheads report that while you have to invest 50K to buy it you can take substantial amounts out after doing so without being booted out of the fund. Schwab's pure Treasury MM fund SNSXX has an ER of .35%. Of course this is part of a much broader issue that really separates Vanguard (with all its flaws) from other brokerages that make much of their money by steering investors into portfolios with too much cash and gouging them on sweep account money. Vanguard as the only truly mutual mutual fund company doesn't have to earn a return for anyone but the mutual fund investors who own it. That said I appreciate the superior customer service and website at Schwab, and I understand Fido is as good or better.

I'm going to go with 6 and 12 month T-bills myself and exit my short term treasury ETF positions when I can do so at or near breakeven.

Re: Best current options for cash and STT's?

Posted: Fri Sep 11, 2020 5:18 pm
by jhogue
I think your VUSXX/ STTs/ I-bonds formula will work out well for you.

My target Cash position, consisting of equal parts FDLXX/ 1 yr. T-bills/ I-Bonds, is very similar. Over the past year I have stopped buying T-bills and shifted toward FDLXX/ 0 / I-bonds as T-bill yields have fallen to close to 0%.

Whenever I get the itch to reach for more yield, I remind myself that my overall portfolio has, year to date, gained a very healthy 16% return (nominal). Safety and Liquidity should always come before Yield. It does seem that the rest of the portfolio has made up for our current brush with negative interest rates in Cash.

Re: Best current options for cash and STT's?

Posted: Wed Oct 14, 2020 8:28 am
by barrett
jhogue wrote:
Fri Sep 11, 2020 5:18 pm
My target Cash position, consisting of equal parts FDLXX/ 1 yr. T-bills/ I-Bonds, is very similar. Over the past year I have stopped buying T-bills and shifted toward FDLXX/ 0 / I-bonds as T-bill yields have fallen to close to 0%.
Has Fidelity waived the .42% expense ratio on FDLXX? If so, that fund would make a lot of sense for my Fido cash position.

Re: Best current options for cash and STT's?

Posted: Wed Oct 14, 2020 10:00 am
by jhogue
barrett wrote:
Wed Oct 14, 2020 8:28 am
jhogue wrote:
Fri Sep 11, 2020 5:18 pm
My target Cash position, consisting of equal parts FDLXX/ 1 yr. T-bills/ I-Bonds, is very similar. Over the past year I have stopped buying T-bills and shifted toward FDLXX/ 0 / I-bonds as T-bill yields have fallen to close to 0%.
Has Fidelity waived the .42% expense ratio on FDLXX? If so, that fund would make a lot of sense for my Fido cash position.
Barrett,

Fidelity responded to the Treasury yield curve collapse earlier this year by closing FDLXX to new investors and informing its investors that it would begin reimbursing expenses or waiving fees to keep FDLXX and some of its other money market funds from having a negative yield. It has since reopened to new investors, but has not reduced its expense ratio of 0.42%, among the highest of the industry.

To paraphrase Winston Churchill, I consider FDLXX to be the worst possible Treasury Money Market Fund—except for all others. Other candidates (SPAXX or VUSXX, for instance) have loaded up on unsuitable derivative securities like bank repos (supposedly collaterlized by T-bills) or agency debt ( a step down in terms of credit risk). The bottom line for me is that I use FDLXX—but I am watching them closely.

Re: Best current options for cash and STT's?

Posted: Wed Oct 14, 2020 10:51 am
by barrett
jhogue wrote:
Wed Oct 14, 2020 10:00 am
barrett wrote:
Wed Oct 14, 2020 8:28 am
jhogue wrote:
Fri Sep 11, 2020 5:18 pm
My target Cash position, consisting of equal parts FDLXX/ 1 yr. T-bills/ I-Bonds, is very similar. Over the past year I have stopped buying T-bills and shifted toward FDLXX/ 0 / I-bonds as T-bill yields have fallen to close to 0%.
Has Fidelity waived the .42% expense ratio on FDLXX? If so, that fund would make a lot of sense for my Fido cash position.
Barrett,

Fidelity responded to the Treasury yield curve collapse earlier this year by closing FDLXX to new investors and informing its investors that it would begin reimbursing expenses or waiving fees to keep FDLXX and some of its other money market funds from having a negative yield. It has since reopened to new investors, but has not reduced its expense ratio of 0.42%, among the highest of the industry.

To paraphrase Winston Churchill, I consider FDLXX to be the worst possible Treasury Money Market Fund—except for all others. Other candidates (SPAXX or VUSXX, for instance) have loaded up on unsuitable derivative securities like bank repos (supposedly collaterlized by T-bills) or agency debt ( a step down in terms of credit risk). The bottom line for me is that I use FDLXX—but I am watching them closely.
Thanks for that, jhogue. I am curious as to why you wouldn't just buy 1-3 month T-Bills instead of FDLXX. I mean, they earn next to nothing but at least one does not lose money with that option (at least not so far).

Re: Best current options for cash and STT's?

Posted: Wed Oct 14, 2020 3:46 pm
by jhogue
Good question, barrett. From an HBPP technical standpoint, I don’t think there is anything wrong with using 1-3 month T-bills for Cash as you have described. The only problem is that doing so is practically guaranteed to earn a negative real rate of interest over the coming year, given the Fed’s announced policy to create an inflation rate of 2%.

So, this is how I have decided to deal with the Fed’s crushing ZIRP and its effect on Cash:

1. FDLXX’s yield is terrible right now—even worse that 1 year T-bills—but it may be slightly more safe and liquid than a roll-your-own personal pile of 1 year T-bills because a TMMF undoubtedly holds a broader distribution of securities and certainly has access to more cash via Fidelity’s $1 trillion in money market funds under management.

2. My target Cash distribution was equal parts FDLXX/1 year T-bills/ I-bonds last year. This year I shut off the auto-roll T-bills as the 1 year T-bill rate declined from 1.00% to 0.10%. I have gradually shifted my Cash toward equal parts FDLXX/ I-bonds. I rely on FDLXX for safety and liquidity and I-bonds for Deep Cash/ higher yield, which I think will earn a positive real rate of return over the next year, and probably longer . The bulk of my laddered I-bonds are now mature enough that if I had to I could redeem some of them to meet a rebalance, though I think that is very unlikely.

If 1 year T-bills go back above 1.00% I could re-start the auto-roll. I have no idea when that might happen.

Re: Best current options for cash and STT's?

Posted: Sat Oct 24, 2020 6:31 pm
by johnnywitt
jhogue wrote:
Wed Oct 14, 2020 3:46 pm
Good question, barrett. From an HBPP technical standpoint, I don’t think there is anything wrong with using 1-3 month T-bills for Cash as you have described. The only problem is that doing so is practically guaranteed to earn a negative real rate of interest over the coming year, given the Fed’s announced policy to create an inflation rate of 2%.

The FED has about as much chance of creating inflation as the Easter Bunny. The FED is probably the biggest Bunch of bullshitters in history.
If anything, the FED is designed more as an inflation killing machine.
Don't believe me, then own GOLD... oh wait, you already do ;D

Re: Best current options for cash and STT's?

Posted: Sat Oct 24, 2020 10:17 pm
by boglerdude
Porte Bank 3% APY On Balances Up To $15,000

https://www.doctorofcredit.com/porte-ba ... ral-bonus/

Re: Best current options for cash and STT's?

Posted: Sun Oct 25, 2020 8:53 am
by sophie
The only problem with using T bills as a cash substitute is that selling them could be harder than you think. I found that there are a lot of barriers to selling bonds at Fidelity that are not described anywhere on their website. And, to cancel an Autoroll you have to either call Fidelity (1-2 hours on the phone) or wait for the new purchase order to pop up online. It has a window of a few hours where you can cancel.

That's why I switched to zero-yielding FDLXX. All that hassle is just not worth a few dollars a year. Look to I Bonds if you want yield.

Re: Best current options for cash and STT's?

Posted: Sun Oct 25, 2020 12:07 pm
by vnatale
sophie wrote:
Sun Oct 25, 2020 8:53 am
The only problem with using T bills as a cash substitute is that selling them could be harder than you think. I found that there are a lot of barriers to selling bonds at Fidelity that are not described anywhere on their website. And, to cancel an Autoroll you have to either call Fidelity (1-2 hours on the phone) or wait for the new purchase order to pop up online. It has a window of a few hours where you can cancel.

That's why I switched to zero-yielding FDLXX. All that hassle is just not worth a few dollars a year. Look to I Bonds if you want yield.
Can you explain why this amount of time?

Vinny

Re: Best current options for cash and STT's?

Posted: Sun Oct 25, 2020 1:03 pm
by pp4me
vnatale wrote:
Sun Oct 25, 2020 12:07 pm
sophie wrote:
Sun Oct 25, 2020 8:53 am
The only problem with using T bills as a cash substitute is that selling them could be harder than you think. I found that there are a lot of barriers to selling bonds at Fidelity that are not described anywhere on their website. And, to cancel an Autoroll you have to either call Fidelity (1-2 hours on the phone) or wait for the new purchase order to pop up online. It has a window of a few hours where you can cancel.

That's why I switched to zero-yielding FDLXX. All that hassle is just not worth a few dollars a year. Look to I Bonds if you want yield.
Can you explain why this amount of time?

Vinny
I've been holding T-Bills in a taxable account at Fidelity for a long time and have never had any problem.

Now that I think of it however, I've probably held them all to maturity and never sold any prematurely so maybe that's why I haven't seen anything like this. I have sold LT's before maturity in an IRA however and never had any issues. Just did that a couple of months ago.

Re: Best current options for cash and STT's?

Posted: Sun Oct 25, 2020 5:10 pm
by sophie
You probably got lucky, pp4me. I have tried to sell bills/bonds several times. In one case I ran into a problem where I had bought a lot in an amount less than $10K, but the software insisted I needed to sell an amount of at least $10K. A few months later I was finally (after multiple attempts) able to sell it. In another case, I kept getting a message that the bond market was closed (even though it wasn't at the time).

Vinny, since I'm not in charge of Fidelity's customer service I can't tell you why phone calls take hours. Perhaps you should call them and ask.

Re: Best current options for cash and STT's?

Posted: Sun Oct 25, 2020 5:25 pm
by vnatale
sophie wrote:
Sun Oct 25, 2020 5:10 pm
You probably got lucky, pp4me. I have tried to sell bills/bonds several times. In one case I ran into a problem where I had bought a lot in an amount less than $10K, but the software insisted I needed to sell an amount of at least $10K. A few months later I was finally (after multiple attempts) able to sell it. In another case, I kept getting a message that the bond market was closed (even though it wasn't at the time).

Vinny, since I'm not in charge of Fidelity's customer service I can't tell you why phone calls take hours. Perhaps you should call them and ask.
I was more interested in an answer along the lines of this is common to my experience with them or it was because I was doing something special that required this amount of time.

I'd always prior read that Fidelity's customer service is superior to Vanguard's so reading what you wrote is of concern to me.

I've been with Vanguard (extensively) for over 30 years and only opened an account with Fidelity last year without yet funding it with anything. Therefore, I have no experience with Fidelity's customer service other than that one night I called to open the account. During the call had a nice discussion with a fellow baseball fan who was lamenting that my New York Yankees had got three of his Colorado Rockies players.

Vinny

Re: Best current options for cash and STT's?

Posted: Mon Oct 26, 2020 5:35 am
by mathjak107
vnatale wrote:
Sun Oct 25, 2020 5:25 pm
sophie wrote:
Sun Oct 25, 2020 5:10 pm
You probably got lucky, pp4me. I have tried to sell bills/bonds several times. In one case I ran into a problem where I had bought a lot in an amount less than $10K, but the software insisted I needed to sell an amount of at least $10K. A few months later I was finally (after multiple attempts) able to sell it. In another case, I kept getting a message that the bond market was closed (even though it wasn't at the time).

Vinny, since I'm not in charge of Fidelity's customer service I can't tell you why phone calls take hours. Perhaps you should call them and ask.
I was more interested in an answer along the lines of this is common to my experience with them or it was because I was doing something special that required this amount of time.

I'd always prior read that Fidelity's customer service is superior to Vanguard's so reading what you wrote is of concern to me.

I've been with Vanguard (extensively) for over 30 years and only opened an account with Fidelity last year without yet funding it with anything. Therefore, I have no experience with Fidelity's customer service other than that one night I called to open the account. During the call had a nice discussion with a fellow baseball fan who was lamenting that my New York Yankees had got three of his Colorado Rockies players.

Vinny
my worst customer service experience was those clowns at vanguard .. 33 years at fidelity and no issues ever .

Re: Best current options for cash and STT's?

Posted: Mon Oct 26, 2020 11:09 am
by flyingpylon
sophie wrote:
Sun Oct 25, 2020 5:10 pm
You probably got lucky, pp4me. I have tried to sell bills/bonds several times. In one case I ran into a problem where I had bought a lot in an amount less than $10K, but the software insisted I needed to sell an amount of at least $10K. A few months later I was finally (after multiple attempts) able to sell it. In another case, I kept getting a message that the bond market was closed (even though it wasn't at the time).

Vinny, since I'm not in charge of Fidelity's customer service I can't tell you why phone calls take hours. Perhaps you should call them and ask.
I haven't had this type of experience at all. Last year I had some T-Bills on auto-roll and needed to sell part of the position. I logged on to fidelity.com, placed the order, and was warned that the sale would automatically cancel the auto-roll. The transaction was completed immediately, the auto-roll was canceled, and I transferred the funds to my bank two days later. However, the amount of the sale was greater than $10k. I don't recall seeing anything saying that there was a minimum transaction size but it's possible that there was and I dismissed it.

Re: Best current options for cash and STT's?

Posted: Wed Oct 28, 2020 10:47 am
by jhogue
Investors in online Ally bank CDs ( 5 year CD currently 1.00%) should take note of a thread over on bogleheads:

Ally has apparently ended its online early withdrawal option. Holders of CDs who want an early redemption must now call the bank and speak in person to a customer service rep. There are also complaints that the bank has effectively granted itself a float of investors’ cash by taking 1-2 business days to deliver proceeds of redeemed CDs to an checking accounts.

https://www.bogleheads.org/forum/viewto ... 0&t=328172