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U.S. interest rates have soared everywhere but savings accounts

bloomberg.com

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Re: U.S. interest rates have soared everywhere but savings accounts

#61

Post by aaomidi »

gruez wrote: post #32
mooreds wrote: post #3

Earlier quoted context omitted.

For now. Hopefully competition will come to savings accounts eventually. Wouldn't expect the rate to ever beat inflation, though, since it is risk free (thanks FDIC!).

>For now. Hopefully competition will come to savings accounts eventually. Looks like it's already here? According to one site[1], there are several banks offering above 0.6% interest. [1] https://www.bankrate.com/banking/savings/best-high-yield-int...

Sofi is 1.25 if you do DD with them.

If this comment helped you here's my referral link:

https://www.sofi.com/invite/money?gcp=0eff9a6a-1cc3-4073-b8f...

Re: U.S. interest rates have soared everywhere but savings accounts

#62

Post by kobalsky »

azth wrote: post #40

Serious question: inflation seems to only be getting higher (is it 8%+ now?) the Fed's increasing of the interest rate is causing a stock market crash. So if one puts their money into assets, those are decreasing in price due to the fed, and if someone is holding cash that's also going down in value due to inflation. What's the solution?

Bumping because I'm really interested in this answer.

For me the obvious answer is, if the fed actions means it's more expensive to borrow now, then lend your money. The question is how and where. Bonds? Which bonds? TIPS don't seem to have a rate that would protect me from inflation.

Gold? There's enough volatility there to lose more than 2 years worth of inflation with a badly timed entry, and I if I have to time my entry I'm trading, and I'm not a trader so I don't like it.

I know mentioning cryptos is sometimes taboo on HN, but if I lived in the US/EU I would convert a some portion of my savings into stablecoins and spread them out into some interest accounts to try to minimize counterparty risk. Their APY is running along inflation for the time being. At least until the dust settles and it's clear where to put your money.

Re: U.S. interest rates have soared everywhere but savings accounts

#63

Post by toomuchtodo »

gruez wrote: post #26
PopAlongKid wrote: post #24

Earlier quoted context omitted.

For most of the last decade, IRS statutory rate for underpayment/overpayment of tax was 3%, an historically low number. It briefly spiked up to 6% in 2019, then fell back to 3% for a while, but last quarter went back up to 4%, with more increases expected.[0] This rate applies to anyone who takes "too long" to claim a refund or pay a tax liability, so it is basically a zero-risk rate that applies to everyone regardle…

>This rate applies to anyone who takes "too long" to claim a refund or pay a tax liability, so it is basically a zero-risk rate that applies to everyone regardless of their credit status. Yeah but you're severely limited in how much money you can "save" in this account. Similarly, it's like arguing that rates are super high because you can get I-bonds at 7.12%, but neglecting to mention the most you can buy per year…

The fixed rate of those bonds is zero [1], that’s important to remember. The inflation adjustment they pay means your cash invested won’t lose value, not that you’re generating real return.

[1] https://www.treasurydirect.gov/indiv/research/indepth/ibonds...

Re: U.S. interest rates have soared everywhere but savings accounts

#65

Post by ilammy »

PopAlongKid wrote: post #9
incomingpain wrote: post #5

Real yields matter. It's an inflation tax. If inflation is high and the interest rates are low. This tax is on you for holding currency or currency likes. Bonds for example are literally dumb to buy. Why are people buying them? They are legally required to buy them in some cases. What happens is that those 'savings accounts' are paying the inflation tax. Whereas someone with a mortgage at say 2% and inflation is 8%.…

>Whereas someone with a mortgage at say 2% and inflation is 8%. You are earning 6%. Only if your income goes up 8% a year due to inflation.

Nominal value of the mortgaged property is likely going up at at least around 8%, give or take.

Re: U.S. interest rates have soared everywhere but savings accounts

#66

Post by lijogdfljk »

tppiotrowski wrote: post #46
flatiron wrote: post #43

Earlier quoted context omitted.

Based on the market a lot of people believe “buy some real estate” is the solution. But that bubble IMHO is about to pop. Maybe look into interest protected bonds? https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl... Personally I have been just spending what I make assuming saving is moot right now (besides 401k and espp)

I think rising interest rates should depress the value of housing. With a higher interest rate you can't afford as much principal so you start bidding on cheaper houses.

I had this debate last night. Where i'm undecided is if this works when a housing market is propped up by cash.

Eg both houses and land purchases (something i'm trying to do) are quite a difficult market due to cash offers being consistently present. Ie a new family won't have 500k in cash and their loan offer isn't as good as a cash offer. It happened to me several times when i was buying my home ~6 years ago, 250k cash offers, 300k cash offers, etc. And ironically it just happened to me 2 weeks ago on a land offer. A 310k land offer (loan) beaten out by a higher value and pure cash offer.

So my question is if prices will really dip that much when seemingly so much of the house and land market are propped up by cash rich buyers. Hypothetically they don't care about high interest rates right?

Perhaps high interest rates will mean the cash rich people can offer less due to less competition, but if cash rich people are also competing against other cash rich people then.. i'm not so sure.

Thoughts?

Re: U.S. interest rates have soared everywhere but savings accounts

#67

Post by NovemberWhiskey »

frontman1988 wrote: post #44

Is this a US problem? In India you can easily get 5% interest in savings account. Maybe an opportunity to move money to Indian banks through crypto and then get it back after getting that sweet interest.

The idea is common in countries with low domestic interest rates, but you get unwanted exposure to FX rates as well: i.e. you can end up richer in INR but poorer in USD.

Japan is the classic example of this - lots of consumers who bought structured products like power-reverse dual coupon notes to get exposure to higher foreign interest rates got annihilated when JPY appreciated vs USD in the 2005-2010 time period.

Re: U.S. interest rates have soared everywhere but savings accounts

#68

Post by throw0101a »

azth wrote: post #40

Serious question: inflation seems to only be getting higher (is it 8%+ now?) the Fed's increasing of the interest rate is causing a stock market crash. So if one puts their money into assets, those are decreasing in price due to the fed, and if someone is holding cash that's also going down in value due to inflation. What's the solution?

Have a diversified portfolio. Rational Reminder went over the data in "The Ultimate Inflation Hedge":

> Is it possible to hedge your investments against different levels of inflation? This is the question we ask in today's episode, as we run through a variety of different investment approaches and commodities. While the answer may not come as a huge surprise, it is definitely worth the walk-through and getting to grips with what the literature can tell us in each scenario. After rounding up some news and a few reviews relevant to our usual subject matter, we dive straight into this topic, tackling the performance of stocks and bonds, gold, international stocks, value stocks, and more! We also share some general thoughts and questions to ask during periods where inflation is high, before positing our view that there is no single successful hedge against inflation, but rather our usual position of an adjusted and diversified portfolio will serve you as well in this regard as in others. We finish off this episode with a few of our usual quick cards, and this week's disturbing bad advice! So tune in to hear all about what you should know about expected and unexpected inflation and a whole lot more!

* https://rationalreminder.ca/podcast/150

Stocks generally bounce back, them going down isn't a big deal given the idea of 'buying low'.

Re: U.S. interest rates have soared everywhere but savings accounts

#69

Post by JumpCrisscross »

jzig wrote: post #38
JumpCrisscross wrote: post #14

Earlier quoted context omitted.

> go for I-Bonds instead Series I bonds promise a 0% real yield. TIPs [1] are currently offering between 0.5% and 1.6% of real yield [2]. Plus, no cap. [1] https://www.treasurydirect.gov/indiv/products/prod_tipsvsibo... [2] https://www.treasurydirect.gov/instit/annceresult/annceresul...

So better to park money in TIPs or in Bills from your other comment?

> So better to park money in TIPs or in Bills from your other comment?

The shortest term TIPs are sold in is 5 years. They can be sold earlier, but the price will depend on market conditions.

Series I bonds have a 30 year term, but they're redeemable with a penalty after 12 months and without a penalty after 5 years.

Bills have no inflation protection, but they're sold in terms as short as 4 weeks. They currently yield 50 bps, in line with Goldman Sachs' savings account, but lower than others in the market. (Savings accounts can change their rates on a whim; bills do not.)

Re: U.S. interest rates have soared everywhere but savings accounts

#70

Post by bezospen15 »

lijogdfljk wrote: post #66
tppiotrowski wrote: post #46

Earlier quoted context omitted.

I think rising interest rates should depress the value of housing. With a higher interest rate you can't afford as much principal so you start bidding on cheaper houses.

I had this debate last night. Where i'm undecided is if this works when a housing market is propped up by cash. Eg both houses and land purchases (something i'm trying to do) are quite a difficult market due to cash offers being consistently present. Ie a new family won't have 500k in cash and their loan offer isn't as good as a cash offer. It happened to me several times when i was buying my home ~6 years ago, 250k…

That's only one piece of the puzzle. Economic hardship means investments stale or fail. All those real estate investors have fire sales, people lose jobs because of economic downturn and foreclosure, etc. It's all a domino effect, cash buyers are just another input to consider
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