Ally CD

Discussion of the Cash portion of the Permanent Portfolio

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Don
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Ally CD

Post by Don » Sun Jan 17, 2021 11:24 am

Is Ally Bank the way to go with our cash investments?
0.6% for 12 months is about the best that we can hope for right now.
FDIC insured.
A no penalty 11 month CD is paying 0.5% with Ally as well.
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vnatale
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Re: Ally CD

Post by vnatale » Sun Jan 17, 2021 11:28 am

Don wrote:
Sun Jan 17, 2021 11:24 am

Is Ally Bank the way to go with our cash investments?
0.6% for 12 months is about the best that we can hope for right now.
FDIC insured.
A no penalty 11 month CD is paying 0.5% with Ally as well.


I'm fairly certain that if you did a search on Ally Bank in this forum you'd find a lot regarding it. Obviously not addressing it having the best return for now but some other factors to consider regarding Ally Bank.

Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: Ally CD

Post by pugchief » Sun Jan 17, 2021 11:35 am

T-Mobile Money is offering 1.0% plus a bonus if you are a T-Mobile customer, but it's open to everyone. The only limitation is a $3000/day transfer limit in/out. You can bypass that by setting up the transfers at your other bank.
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Re: Ally CD

Post by tomfoolery » Mon Jan 18, 2021 1:31 am

1 month t Bill is paying 0.08% so for 0.5% increased yield which is likely 0.35% difference after taxes, and if you’re using the permanent portfolio, would only be 1/4 of your total portfolio and thus juice your after-tax gains by 0.09% per year, you’re willing to give up the benefits of a t-Bill for a CD with a potential penalty, issued by a bank, during the largest housing bubble of all time?
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Re: Ally CD

Post by pugchief » Mon Jan 18, 2021 6:44 am

tomfoolery wrote:
Mon Jan 18, 2021 1:31 am
1 month t Bill is paying 0.08% so for 0.5% increased yield which is likely 0.35% difference after taxes, and if you’re using the permanent portfolio, would only be 1/4 of your total portfolio and thus juice your after-tax gains by 0.09% per year, you’re willing to give up the benefits of a t-Bill for a CD with a potential penalty, issued by a bank, during the largest housing bubble of all time?
That's one way of looking at it. The other is that 0.6 is 750% more yield than 0.08 and that the account is FDIC insured. This has been discussed elsewhere here, but I doubt the govt would default on the FDIC but not also Treasuries.
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Re: Ally CD

Post by vnatale » Mon Jan 18, 2021 7:30 am

pugchief wrote:
Mon Jan 18, 2021 6:44 am

tomfoolery wrote:
Mon Jan 18, 2021 1:31 am

1 month t Bill is paying 0.08% so for 0.5% increased yield which is likely 0.35% difference after taxes, and if you’re using the permanent portfolio, would only be 1/4 of your total portfolio and thus juice your after-tax gains by 0.09% per year, you’re willing to give up the benefits of a t-Bill for a CD with a potential penalty, issued by a bank, during the largest housing bubble of all time?


That's one way of looking at it. The other is that 0.6 is 750% more yield than 0.08 and that the account is FDIC insured. This has been discussed elsewhere here, but I doubt the govt would default on the FDIC but not also Treasuries.


When it comes to anything regarding numbers it is always good to look at both the percentages and the absolute numbers.

If we accept tomfoolery's 0.35% difference after taxes....that difference comes out to $350 for $100,000, $1,750 for $500,000.

Obviously that difference can be looked upon as the annual insurance paid for the safety of a Treasury purchase over an FDIC insured investment.

For the last financial crisis the government did essentially put an FDIC insured investment at the same level as a Treasury purchase. No guarantees the next time.

China is a huge purchaser of our Treasury products. Therefore they definitely care about the safety of our Treasury products. Do they care about FDIC insured investments? Is it in our government's interest to keep China interested in purchasing our Treasury products?

Finally, there is the liquidity of both. The Treasury products will always have a much higher liquidity. If the government has to step in to insure your investment in an FDIC insured product....be prepared to wait in line until the month arrives when you can have access to it.

Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: Ally CD

Post by dualstow » Mon Jan 18, 2021 8:16 am

i’m getting an abysmal return from VUSXX (treasury money market), but i like to keep core cash in there. It’s barely two years of expenses, but I don’t touch it. I take the rest of my cash and chase higher yield.
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Re: Ally CD

Post by vnatale » Mon Jan 18, 2021 10:05 am

dualstow wrote:
Mon Jan 18, 2021 8:16 am

i’m getting an abysmal return from VUSXX (treasury money market), but i like to keep core cash in there. It’s barely two years of expenses, but I don’t touch it. I take the rest of my cash and chase higher yield.


Which is a variant from Permanent Portfolio doctrine.

Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: Ally CD

Post by dualstow » Mon Jan 18, 2021 10:59 am

vnatale wrote:
Mon Jan 18, 2021 10:05 am
dualstow wrote:
Mon Jan 18, 2021 8:16 am
i’m getting an abysmal return from VUSXX (treasury money market), but i like to keep core cash in there. It’s barely two years of expenses, but I don’t touch it. I take the rest of my cash and chase higher yield.
Which is a variant from Permanent Portfolio doctrine.
Non-treasuries are in the vp. As always, I keep the pp pure. Treasury mm, long treasuries, physical gold, stocks.
Hopefully, the pp+vp cash yield averages out to somethign better than abysmal.
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Re: Ally CD

Post by vnatale » Mon Jan 18, 2021 11:10 am

dualstow wrote:
Mon Jan 18, 2021 10:59 am

vnatale wrote:
Mon Jan 18, 2021 10:05 am

dualstow wrote:
Mon Jan 18, 2021 8:16 am

i’m getting an abysmal return from VUSXX (treasury money market), but i like to keep core cash in there. It’s barely two years of expenses, but I don’t touch it. I take the rest of my cash and chase higher yield.


Which is a variant from Permanent Portfolio doctrine.


Non-treasuries are in the vp. As always, I keep the pp pure. Treasury mm, long treasuries, physical gold, stocks.
Hopefully, the pp+vp cash yield averages out to somethign better than abysmal.


I had not prior known that. I will try to remember that. I highly respect the Permanent Portfolio purists.

Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: Ally CD

Post by dualstow » Mon Jan 18, 2021 12:00 pm

The trick is to have a really big vp O0 Then you can look for Ally CDs, corporate bonds, etc.
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Re: Ally CD

Post by tomfoolery » Mon Jan 18, 2021 8:47 pm

pugchief wrote:
Mon Jan 18, 2021 6:44 am
tomfoolery wrote:
Mon Jan 18, 2021 1:31 am
1 month t Bill is paying 0.08% so for 0.5% increased yield which is likely 0.35% difference after taxes, and if you’re using the permanent portfolio, would only be 1/4 of your total portfolio and thus juice your after-tax gains by 0.09% per year, you’re willing to give up the benefits of a t-Bill for a CD with a potential penalty, issued by a bank, during the largest housing bubble of all time?
That's one way of looking at it. The other is that 0.6 is 750% more yield than 0.08 and that the account is FDIC insured. This has been discussed elsewhere here, but I doubt the govt would default on the FDIC but not also Treasuries.
I agree that it's highly likely the US government will make good on FDIC insurance. However, I think it's highly likely that in a massive crisis, that insurance could take weeks or months to make good.

I also think that during the time frame it's made good, the value of the dollar may be significantly devalued. Because perhaps the US Government has to print another few trillion dollars to pay out the FDIC insurances.

As we saw in 2020, there are short bursts of liquidity crisis where assets may drop hugely over a one or two day period, due to systemic liquidity issues.

It's very likely, in my opinion that during future crisises, we may have bank failures, with concomitant huge drops in the stock market or gold, and over the few weeks in time it takes for FDIC to kick in, the market may recover. Whereas if you had treasuries you would have the liquidity to buy stocks/gold at their lows. But instead you're out of the market. And by the time FDIC makes good on people's money, whoever can access cash first will have bought into stocks/gold at their lows and you'll have missed it.
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Re: Ally CD

Post by vnatale » Mon Jan 18, 2021 9:01 pm

tomfoolery wrote:
Mon Jan 18, 2021 8:47 pm

pugchief wrote:
Mon Jan 18, 2021 6:44 am

tomfoolery wrote:
Mon Jan 18, 2021 1:31 am

1 month t Bill is paying 0.08% so for 0.5% increased yield which is likely 0.35% difference after taxes, and if you’re using the permanent portfolio, would only be 1/4 of your total portfolio and thus juice your after-tax gains by 0.09% per year, you’re willing to give up the benefits of a t-Bill for a CD with a potential penalty, issued by a bank, during the largest housing bubble of all time?


That's one way of looking at it. The other is that 0.6 is 750% more yield than 0.08 and that the account is FDIC insured. This has been discussed elsewhere here, but I doubt the govt would default on the FDIC but not also Treasuries.


I agree that it's highly likely the US government will make good on FDIC insurance. However, I think it's highly likely that in a massive crisis, that insurance could take weeks or months to make good.

I also think that during the time frame it's made good, the value of the dollar may be significantly devalued. Because perhaps the US Government has to print another few trillion dollars to pay out the FDIC insurances.

As we saw in 2020, there are short bursts of liquidity crisis where assets may drop hugely over a one or two day period, due to systemic liquidity issues.

It's very likely, in my opinion that during future crisises, we may have bank failures, with concomitant huge drops in the stock market or gold, and over the few weeks in time it takes for FDIC to kick in, the market may recover. Whereas if you had treasuries you would have the liquidity to buy stocks/gold at their lows. But instead you're out of the market. And by the time FDIC makes good on people's money, whoever can access cash first will have bought into stocks/gold at their lows and you'll have missed it.


If Tex and Craig's book was to ever be revised....the above should go into it verbatim!

Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: Ally CD

Post by pugchief » Tue Jan 19, 2021 11:35 am

tomfoolery wrote:
Mon Jan 18, 2021 8:47 pm
pugchief wrote:
Mon Jan 18, 2021 6:44 am
tomfoolery wrote:
Mon Jan 18, 2021 1:31 am
1 month t Bill is paying 0.08% so for 0.5% increased yield which is likely 0.35% difference after taxes, and if you’re using the permanent portfolio, would only be 1/4 of your total portfolio and thus juice your after-tax gains by 0.09% per year, you’re willing to give up the benefits of a t-Bill for a CD with a potential penalty, issued by a bank, during the largest housing bubble of all time?
That's one way of looking at it. The other is that 0.6 is 750% more yield than 0.08 and that the account is FDIC insured. This has been discussed elsewhere here, but I doubt the govt would default on the FDIC but not also Treasuries.
I agree that it's highly likely the US government will make good on FDIC insurance. However, I think it's highly likely that in a massive crisis, that insurance could take weeks or months to make good.

I also think that during the time frame it's made good, the value of the dollar may be significantly devalued. Because perhaps the US Government has to print another few trillion dollars to pay out the FDIC insurances.

As we saw in 2020, there are short bursts of liquidity crisis where assets may drop hugely over a one or two day period, due to systemic liquidity issues.

It's very likely, in my opinion that during future crisises, we may have bank failures, with concomitant huge drops in the stock market or gold, and over the few weeks in time it takes for FDIC to kick in, the market may recover. Whereas if you had treasuries you would have the liquidity to buy stocks/gold at their lows. But instead you're out of the market. And by the time FDIC makes good on people's money, whoever can access cash first will have bought into stocks/gold at their lows and you'll have missed it.
What's to say the US govt freezes Treasury bill redemptions on a 'short term basis' until things stabilize?
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Re: Ally CD

Post by tomfoolery » Tue Jan 19, 2021 1:09 pm

pugchief wrote:
Tue Jan 19, 2021 11:35 am

What's to say the US govt freezes Treasury bill redemptions on a 'short term basis' until things stabilize?
I hadn't thought about that and it's a valid point. I think it's far less likely than FDIC insurance being a delayed payout.
I'm under the impression that soverign governments, much like corporations, never actually pay off their debts. They just roll them forward.

Thus, if the US Government has $1 Trillion in 1-month T-bills coming due today, they'll just issue another $1T in new 1-Month T-Bills to pay off the debt maturing today.

And if they delayed redemptions, even on a short-term basis, it would result in a massive interest rate spike, which would domino into collapse of the entire US's soveriegn debt.

Think about it: POTUS goes on TV in the middle of a 70% stock market crash and multi-bank collapse and says "Okay, no need to panic, we'll make good on our T-Bills maturing this month, but we'll be delayed a few weeks"

Well shit dude, many people would be willing to sell their T-Bills for 80 cents on the dollar because they have no idea if POTUS is telling the truth or not, and better to get 80 cents now than 0 cents later. Or roll the dice and hope to get 100 cents in a few weeks. Just because the US government isn't redeeming them doesnt mean you can't trade them on your brokerage to other people willing to buy them for below face value.

It could be a great deal to sell them at 80 cents on the dollar depending on what you using the money for. Maybe you need the liquidity and 80 cents today is worth more than 100 cents in a month. For example, maybe the stock market is down 70% now but will double over the next month as liquidity floods in. So your 80 cents on the dollar from the frozen T-Bills today can buy the SP500 at 1500 today whereas if you waited a month for the full redemption, the SP500 is back to 3000.

And if enough people are selling their "paused redemption" T-Bills on the market for 80 cents on the dollar, the interest rate spikes on them. Which means the next T-Bills the US Government issues will have a higher rate, which will cause a massive debt spiral.

So, while anything is possible, including scientists figuring out how to synethize gold in a lab, I personally find it highly unlikely the US Government would pause T-Bill redemptions temporarily, due to the potential for systemic collapse of trust in US Debt.

Also, POTUS would want these T-Bills redeemed, because he knows the cash will go into buying up stocks that just dropped 70%.

Especially since I'm pretty sure redeeming T-Bills just means generating digital 0s and 1s in a spreadsheet. They don't actually have to even print physical currency.

So, I hadn't thought about your possibility, Pugchief, and it's interesting and worthwhile to keep in mind, but I find it very unlikely.
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Re: Ally CD

Post by vnatale » Tue Jan 19, 2021 1:18 pm

tomfoolery wrote:
Tue Jan 19, 2021 1:09 pm

pugchief wrote:
Tue Jan 19, 2021 11:35 am


What's to say the US govt freezes Treasury bill redemptions on a 'short term basis' until things stabilize?


I hadn't thought about that and it's a valid point. I think it's far less likely than FDIC insurance being a delayed payout.
I'm under the impression that soverign governments, much like corporations, never actually pay off their debts. They just roll them forward.

Thus, if the US Government has $1 Trillion in 1-month T-bills coming due today, they'll just issue another $1T in new 1-Month T-Bills to pay off the debt maturing today.

And if they delayed redemptions, even on a short-term basis, it would result in a massive interest rate spike, which would domino into collapse of the entire US's soveriegn debt.

Think about it: POTUS goes on TV in the middle of a 70% stock market crash and multi-bank collapse and says "Okay, no need to panic, we'll make good on our T-Bills maturing this month, but we'll be delayed a few weeks"

Well shit dude, many people would be willing to sell their T-Bills for 80 cents on the dollar because they have no idea if POTUS is telling the truth or not, and better to get 80 cents now than 0 cents later. Or roll the dice and hope to get 100 cents in a few weeks. Just because the US government isn't redeeming them doesnt mean you can't trade them on your brokerage to other people willing to buy them for below face value.

It could be a great deal to sell them at 80 cents on the dollar depending on what you using the money for. Maybe you need the liquidity and 80 cents today is worth more than 100 cents in a month. For example, maybe the stock market is down 70% now but will double over the next month as liquidity floods in. So your 80 cents on the dollar from the frozen T-Bills today can buy the SP500 at 1500 today whereas if you waited a month for the full redemption, the SP500 is back to 3000.

And if enough people are selling their "paused redemption" T-Bills on the market for 80 cents on the dollar, the interest rate spikes on them. Which means the next T-Bills the US Government issues will have a higher rate, which will cause a massive debt spiral.

So, while anything is possible, including scientists figuring out how to synethize gold in a lab, I personally find it highly unlikely the US Government would pause T-Bill redemptions temporarily, due to the potential for systemic collapse of trust in US Debt.

Also, POTUS would want these T-Bills redeemed, because he knows the cash will go into buying up stocks that just dropped 70%.

Especially since I'm pretty sure redeeming T-Bills just means generating digital 0s and 1s in a spreadsheet. They don't actually have to even print physical currency.

So, I hadn't thought about your possibility, Pugchief, and it's interesting and worthwhile to keep in mind, but I find it very unlikely.


Your highlighted first paragraph was exactly what my response would have been but I held off, waiting for you to give your usual excellent elaboration.

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Re: Ally CD

Post by jhogue » Tue Jan 19, 2021 1:28 pm

There is a very large, highly liquid, and globalized secondary market in US Treasury securities that operates 24/7/365 and beyond the reach of the US government. Saudi Arabia demands that Japan pay for oil priced in dollars, not yen. China and Japan each hold more that $1 trillion in Treasurys. Etc.

It would be practically impossible for the US Treasury to shut down this market. That is why Uncle Harry mandated US Treasurys only for STTs and LTTs.
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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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Re: Ally CD

Post by whatchamacallit » Wed Jan 20, 2021 8:22 pm

I am sure jhogue would agree to make sure you max out ee and I bonds each year.

Both I bonds and ee bonds are looking better than retirement accounts for cash to me.
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Re: Ally CD

Post by jhogue » Fri Jan 22, 2021 2:04 pm

1. I remain a perennial buyer of both paper and electronic I bonds as part of a long term strategy to accumulate more "Deep Cash" over time. They currently account for about 10% of my total portfolio. The longer I hold them, the more I realize they are a great hedge against inflation and taxes-- a couple of things that Joe Biden is sure to do his best to promote over the next four years.

2. I think that EE bonds can be a useful part of focused long term savings strategies, especially for higher education or early retirement. I redeemed all of them we had previously accumulated about ten years ago to help fund my daughter's undergraduate degree. Since I fully retired, I am not personally buying any more EE bonds right now, but investors who are in the accumulation phase should consider them.
“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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