How do you invest the Cash portion?

Discussion of the Cash portion of the Permanent Portfolio

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vnatale
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Re: How do you invest the Cash portion?

Post by vnatale » Sat Dec 07, 2019 6:44 pm

jhogue wrote:
Fri Dec 06, 2019 3:27 pm
Vinny,

Financial safety is reinforced through diversity and liquidity. T-bills held in a brokerage account at Vanguard are safe enough for “normal” times because Vanguard is a big active player in the enormous world-wide secondary market for Treasurys. Unless there is a terrific disruption in this market your money will always be completely liquid. Nevertheless, you might eventually consider diversifying your holdings of Treasury –issued securities as follows:

1. Federal Reserve notes (ie., greenbacks yielding 0% interest) kept in a safe place in your home.

2. A TreasuryDirect account in your name.

3. Paper I-bonds with registered serial numbers purchased with your annual tax refund.

Any of these will diversify your holdings away from a 100% T-bill position in a brokerage account. But understand that each of these methods poses different risks from T-bills held in a brokerage account. That is the way risk works.
If I did think there was not a possibility of there being NOT "normal" times I would never invest in Treasury Bills as there are higher paying options that also have risk during "normal" times. I want the Treasury Bills for protection in those times which are not "normal" and, therefore, expect them to be ultra safe.

The risk / downsides to the other three options you listed:

1. Subject to theft or fire. I do have a little safe but have never used it as isn't that advertising to someone where the "valuables" are?
2. Cannot do that for retirement investments.
3. Also cannot do for retirement investments plus the amounts are tiny for a single person.

Vinny
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Kbg
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Re: How do you invest the Cash portion?

Post by Kbg » Sat Dec 07, 2019 9:03 pm

I bonds are basically the same tax wise as a tax deferred account, Regular IRA/401K etc. The only difference is taxes are due on maturity vs RMDs. If are say 50 then I Bonds would be tax free until 80 vs 70.5. As you noted, size is limited.
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Re: How do you invest the Cash portion?

Post by mathjak107 » Sun Dec 08, 2019 1:24 pm

You have to be careful with anything that has to be sold and then gets sweeper in to a money market ..shy ,bil, shv , etc all get sold then sweeper .

But like I had happen when my money market broke the buck it was locked and nothing could come out for a few months
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Re: How do you invest the Cash portion?

Post by ochotona » Mon Dec 09, 2019 9:16 am

I have bunch of T-Bills maturing, so now my Emergency Fund is going to slosh back over to Ally, because they pay more than the T-Bill I'd be buying to replace the maturing one. This is a game that happens from time-to-time. My Fidelity "bank substitute is going to get emptied out.
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Re: How do you invest the Cash portion?

Post by jhogue » Mon Dec 09, 2019 11:08 am

(Sigh)
1. Does anyone examine the creditworthiness of the banks that are peddling these supposedly “red hot” CD rates?
Ally Bank, its predecessor , and its subsidiaries were up to their eyeballs in subprime mortgages. It had to be bailed out with $17 billion in TARP funds or it would have failed.
Why would anybody want to give their hard-earned money to this outfit?
(Source: https://en.wikipedia.org/wiki/Ally_Financial)


2. I just checked with bankrate.com. Ally bank’s current 5 year CD rate is 2.15%-- which is LOWER than the current US Treasury-issued I bond at 2.20%!
Last edited by jhogue on Mon Dec 09, 2019 12:09 pm, edited 1 time in total.
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Re: How do you invest the Cash portion?

Post by dualstow » Mon Dec 09, 2019 11:49 am

O0 Poor J Hogue. If Hank Hill ('King of the Hill') is a good man in a world gone bad, than J Hogue is definitely the Hank Hill of cash. (My highest compliment).
Is anyone successfully using Veracrypt in MacOS Catalina?
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ochotona
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Re: How do you invest the Cash portion?

Post by ochotona » Mon Dec 09, 2019 12:47 pm

I'm not getting Ally CDs, using their Savings. Pays more than 30-day T-Bill. Yeah, I know about Ally... it use to be GMAC.
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Re: How do you invest the Cash portion?

Post by pugchief » Mon Dec 09, 2019 1:05 pm

And it is FDIC insured. Do you really think the Feds are going to renege on FDIC promises differently than Tbill promises?
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Re: How do you invest the Cash portion?

Post by mathjak107 » Mon Dec 09, 2019 1:07 pm

It all gets paid by the same people in the end ...
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Re: How do you invest the Cash portion?

Post by vnatale » Mon Dec 09, 2019 6:13 pm

pugchief wrote:
Mon Dec 09, 2019 1:05 pm
And it is FDIC insured. Do you really think the Feds are going to renege on FDIC promises differently than Tbill promises?
In 2008-2009 it did end up backing up everything, including going past FDIC limits and money market funds.

But NEXT time CAN be different!

Vinny
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Re: How do you invest the Cash portion?

Post by jhogue » Tue Dec 10, 2019 8:38 am

ochotona wrote:
Mon Dec 09, 2019 12:47 pm
I'm not getting Ally CDs, using their Savings. Pays more than 30-day T-Bill. Yeah, I know about Ally... it use to be GMAC.
Ally savings account interest rate is currently 1.70%.
3 month T-bill interest rate is currently 1.59%. Simple to ladder and put on auto-roll.
The difference is 0.11% ( further reduced by state and local taxes).

So why pick FDIC insurance coverage (which had to be bailed out by Congress in 2008) on a bank that effectively defaulted and had to be bailed out by TARP funds, instead of US Treasury bills, which were then and remain today the global reserve currency?

In the next banking crisis in the US (and there will be one) you want to hold Cash in the highest quality assets you can get. Every FDIC-insured account holder will be standing in line behind every US Treasury holder.
Last edited by jhogue on Tue Dec 10, 2019 2:23 pm, edited 1 time in total.
“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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Re: How do you invest the Cash portion?

Post by Kbg » Tue Dec 10, 2019 4:34 pm

Don’t forget, the govt can print money. So getting your money back is not really the issue. Far more likely problems are legal delays and in the ZA (new acronym for Zombie Apocalypse) inflationary devaluation.

To me for the first and most likely problem, treasury direct is a no brainer. Just you and your government, no middlemen of any kind.
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