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Interest Rates: Naturally Negative?

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Re: Interest Rates: Naturally Negative?

#21

Post by wcoenen »

opportune wrote: post #7
toomuchtodo wrote: post #3

Earlier quoted context omitted.

> but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? There are no effective ways besides these bonds to hold tens or hundreds of millions of dollars as cash, even if you hire a warehouse, security, and store pallets of fiat (which has been attempted). You are paying a premium for principal safety. You either make this choice voluntarily as…

I'm clearly no expert but banks seem to be able to do this somehow, no?

Banks are special because they can deposit money with the central bank. The central bank won't disappear, and like most money it's just numbers in a database (nothing "backing" them) so there's no risk associated with these deposits.

But in the EU, the deposit rate set by the ECB is -0.40%. So that would explain why EU banks would be willing to buy negative yielding bonds instead to hold in reserve, as long as the yields on those are less negative.

But then the yield on German bunds is actually even lower, hitting -0.60% recently, so it's not just that.

Re: Interest Rates: Naturally Negative?

#22

Post by shshehe »

all_blue_chucks wrote: post #16
xchaotic wrote: post #12

Obviously this article shows up when the negative rates are already here, with the benefit of hindsight. What I am more interested in at this point is what is a good, safe alternative for a small time investor who’s already overweight on equities and housing. Bonds used to be the sensible pillar that worked at times when stock market crashed and now it doesn’t really make sense to use them for a small guy.

It's only government bonds that go negative. Corporate bonds will always provide a positive yield.

If you can look into the future w that certainty you should trade stuff.

Re: Interest Rates: Naturally Negative?

#23

Post by seiferteric »

perfunctory wrote: post #19
xchaotic wrote: post #12

Obviously this article shows up when the negative rates are already here, with the benefit of hindsight. What I am more interested in at this point is what is a good, safe alternative for a small time investor who’s already overweight on equities and housing. Bonds used to be the sensible pillar that worked at times when stock market crashed and now it doesn’t really make sense to use them for a small guy.

Invest in reducing your energy bill if you haven't done so yet. solar plus storage plus house isolation. Should also raise the value of the house. In theory.

Can you or anyone recommend a unbiased solar ROI calculator? I have been looking for something, bu every site that I find is trying to sell me solar, so it's not too unbiased. I already have a couple quotes, and I know roughly what my rates will be, so I should be able to plug all the numbers into something to find out what % ROI I will get.

Re: Interest Rates: Naturally Negative?

#24

Post by koverda »

seiferteric wrote: post #23
perfunctory wrote: post #19

Earlier quoted context omitted.

Invest in reducing your energy bill if you haven't done so yet. solar plus storage plus house isolation. Should also raise the value of the house. In theory.

Can you or anyone recommend a unbiased solar ROI calculator? I have been looking for something, bu every site that I find is trying to sell me solar, so it's not too unbiased. I already have a couple quotes, and I know roughly what my rates will be, so I should be able to plug all the numbers into something to find out what % ROI I will get.

Just make one? Calculate how much the install costs per kw, and how much your electric costs...

Re: Interest Rates: Naturally Negative?

#25

Post by shados »

seiferteric wrote: post #23
perfunctory wrote: post #19

Earlier quoted context omitted.

Invest in reducing your energy bill if you haven't done so yet. solar plus storage plus house isolation. Should also raise the value of the house. In theory.

Can you or anyone recommend a unbiased solar ROI calculator? I have been looking for something, bu every site that I find is trying to sell me solar, so it's not too unbiased. I already have a couple quotes, and I know roughly what my rates will be, so I should be able to plug all the numbers into something to find out what % ROI I will get.

I don't have a good calculator, but step 1 is to make sure you BUY the panels, and not rent them or fall into any kind of weird plans where you resell some energy for free panels or whatever.

So your ROI is pretty much calculated with: How much do the panels cost (installed) How long do they last, whats expected maintenance, etc How much energy are they expected to produce Whats your electricity bill.

From there its pretty simple math. The hardest part is how much energy they are expected to produce, and no online calculator will help figuring out how much sun hits your roof.

Re: Interest Rates: Naturally Negative?

#26

Post by refurb »

wefarrell wrote: post #6
opportune wrote: post #2

I understand why you would want to set interest rates negative if your central bank is going to buy up all that debt, but as an individual or institutional investor why would you ever want to hold something with negative interest instead of cash? Why is there even a market for a bond with negative interest rates at all, since compared to a $X bond with negative interest, $X in currency seemingly carries less risk, mo…

It makes no sense for an individual, since you can keep your money in an FDIC insured account and earn a positive interest rate. Institutions don't have that luxury - the government doesn't insure large amounts of cash. If they keep it in a bank and the bank goes under, they lose their money. So they keep their money in national governments, which are far safer than banks.

If you’re an individual with a lot of cash that would be a pain to split up into accounts with less than the FDIC insured limit, then a negative interest rate might be attractive.

Re: Interest Rates: Naturally Negative?

#27

Post by kgwgk »

all_blue_chucks wrote: post #16
xchaotic wrote: post #12

Obviously this article shows up when the negative rates are already here, with the benefit of hindsight. What I am more interested in at this point is what is a good, safe alternative for a small time investor who’s already overweight on equities and housing. Bonds used to be the sensible pillar that worked at times when stock market crashed and now it doesn’t really make sense to use them for a small guy.

It's only government bonds that go negative. Corporate bonds will always provide a positive yield.

Except they don’t already in many cases.

https://www.barrons.com/articles/yields-go-negative-on-corpo...

Re: Interest Rates: Naturally Negative?

#28

Post by toomuchtodo »

seiferteric wrote: post #23
perfunctory wrote: post #19

Earlier quoted context omitted.

Invest in reducing your energy bill if you haven't done so yet. solar plus storage plus house isolation. Should also raise the value of the house. In theory.

Can you or anyone recommend a unbiased solar ROI calculator? I have been looking for something, bu every site that I find is trying to sell me solar, so it's not too unbiased. I already have a couple quotes, and I know roughly what my rates will be, so I should be able to plug all the numbers into something to find out what % ROI I will get.

Rough numbers: https://www.solarpowerrocks.com/wp-content/uploads/2016/12/s...

Google Sunroof: https://www.google.com/get/sunroof

Always buy the panels (no PPA), don't buy storage unless your net metering agreement with the utility is terrible (likely kills the ROI, storage isn't cheap enough yet). Ensure your tax liability is enough to capture the full 30% federal tax credit. Check for state, utility, and SREC benefits in your area. Panels are 25 year warranty, stay away from SolarEdge inverters; their mortality rate has skyrocketed over the last 12-18 months. Paying cash is best, otherwise find the cheapest debt you can find to finance whatever remains after incentives.

Re: Interest Rates: Naturally Negative?

#29

Post by nawitus »

quantguy11959 wrote: post #9
wefarrell wrote: post #6

Earlier quoted context omitted.

It makes no sense for an individual, since you can keep your money in an FDIC insured account and earn a positive interest rate. Institutions don't have that luxury - the government doesn't insure large amounts of cash. If they keep it in a bank and the bank goes under, they lose their money. So they keep their money in national governments, which are far safer than banks.

It’s positive for now, in Europe the deposit accounts are negative as well for the most part.

They're positive for regular customers, but negative for large organizations.

Re: Interest Rates: Naturally Negative?

#30

Post by christophilus »

all_blue_chucks wrote: post #16
xchaotic wrote: post #12

Obviously this article shows up when the negative rates are already here, with the benefit of hindsight. What I am more interested in at this point is what is a good, safe alternative for a small time investor who’s already overweight on equities and housing. Bonds used to be the sensible pillar that worked at times when stock market crashed and now it doesn’t really make sense to use them for a small guy.

It's only government bonds that go negative. Corporate bonds will always provide a positive yield.

Apple issued negative bonds in some European country recently, if I understand this[0] correctly. Anyway, I don't think there's anything preventing a company from issuing negative bonds. Whether or not anyone would buy them is another question.

[0] https://markets.businessinsider.com/bonds/apple_incsf-notes_...

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