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

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

#111

Post by piotrkaminski »

ericd wrote: post #90
JumpCrisscross wrote: post #74

Earlier quoted context omitted.

> TIPS don't seem to have a rate that would protect me from inflation The TIP yield is a real yield. It's indexed to CPI-U, same as Series I bonds. (TIPs adjust monthly; Series I bonds semiannually.) > would convert a some portion of my savings into stablecoins This is probably the worst choice one can make. It's accepting a 0% nominal yield against an unregulated counterparty. A Bank of America savings account is li…

This. Also, max put your Series I allocation ($10k/yr/SSN iirc, must be purchased from TreasuryDirect) before bothering with TIPs. If you have kids, the inflation adjustments can be used tax free for educational expenses, which would already make them the best inflation adjusted bond, but on top of that, you can cash it in whenever you want for nominal value rather than selling them on the secondary market, which mak…

Note that the tax-free educational expenses apply only to higher education and have an AGI cut-off, though. Read the fine print!

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

#112

Post by closeparen »

beowulfey wrote: post #98
lijogdfljk wrote: post #66

Earlier quoted context omitted.

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…

Does anyone know the numbers on whether the high cash offers are from corporate investors vs. exceptionally rich individuals? Given the sheer number of cash offers I'm inclined to think it's the former, but I honestly have no idea. But yes, you're absolutely right that cash buyers should have way fewer concerns about interest rates.

I would guess they are from otherwise-normal families whose current houses have appreciated in the same way. This makes them exceptionally rich in a sense, but also not, since homeowners are a majority in most metro areas and all homes are worth close to that much.

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

#113

Post by halotrope »

hakfoo wrote: post #89

I always wondered why there was seemingly no (marketed) business in foreign savings accounts. If I'm willing to ride the exchange rate risks, surely there's some bank in Honduras paying a higher rate on Lempira-denominated accounts. Compared to half the derivative products on the market, it's a straightforward offering, and it also feels an ideal product for flim-flam direct-to-consumer marketing-- backed by "governm…

You can do that with some brokers. e.g Interactive Brokers passes through a slightly adjusted base rate on both credit and debit balances. So you could technically do a carry trade borrowing USD on a 1.5 margin and exchange that for e.g rubles with a 20% interest rate. If you can stomach the market fluctuations and as a consequence the margin requirements. FX markets are often calmly trending for years with some sudden and sensational shocks. Like Deutschmark/Gbp EUR/CHF or recently the Lira or Ruble implosions.

Overall very interesting but way over the risk tolerance of people who deposit their money in CDs

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

#114

Post by HWR_14 »

jeffbee wrote: post #21
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%.…

How does this track? Are you saying that boomers aren't benefiting from mortgage interest rates? Boomers were still the dominant generation of mortgage purchasers as recently as 10 years ago.

Plus, the mostly own houses, so they can pull money out with home equity credit lines

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

#115

Post by imtringued »

kobalsky wrote: post #91
JumpCrisscross wrote: post #74

Earlier quoted context omitted.

> TIPS don't seem to have a rate that would protect me from inflation The TIP yield is a real yield. It's indexed to CPI-U, same as Series I bonds. (TIPs adjust monthly; Series I bonds semiannually.) > would convert a some portion of my savings into stablecoins This is probably the worst choice one can make. It's accepting a 0% nominal yield against an unregulated counterparty. A Bank of America savings account is li…

I was clearly misunderstanding how TIP yields worked, I'll read more about it. Thanks!

The money illusion got you.

With demurrage currencies, everything works like TIPS. Yields may be negative but they are free from inflation and deflation.

It's kind of weird that people are choosing the money illusion over a negative yield/interest rate. I would rather have no inflation and see that the yield is negative than unpredictable inflation where the yield could be absolutely anything and I simply won't know.

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

#116

Post by _wldu »

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?

Consider buying stock in companies that produce real products that everyone needs. Food, cleaning supplies, toilet paper, hygiene, etc. It's hard to go wrong doing that.

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

#117

Post by cwalv »

PheonixPharts wrote: post #60
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?

> Fed's increasing of the interest rate is causing a stock market crash. Citation needed. Rate hikes were announced mid-march and I don't think you can even find that info on this chart https://finance.yahoo.com/quote/%5EDJI/ If we do see a crash soon I think it will likely be more related to major tech stocks failing to perform as expected. Of the original FAANG, F and N have both had days where there value dropped…

The valuation of growth stocks (of any sort, not just tech stocks) is very heavily influenced by interest rates

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

#118

Post by imtringued »

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…

> Hypothetically they don't care about high interest rates right?

They care, because when interest rates go up, rich savers buy the dip.

That's one of the biggest ironies when it comes to people shouting that low interest rates make housing expensive. Yeah they make it expensive for those who already have enough money to buy a house outright. The amount of money you are paying on your mortgage in an area with a housing shortage is determined by your salary, not the interest rate.

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

#119

Post by gkuan »

CameronNemo wrote: post #20
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...

Actually Series I bonds are negative real yield because the interest is taxed federally.

And if one happens eventually come under the IRS Form 8815 MAGI cutoff, it has a federal income tax exclusion for education [1]. Consistent with what you say, it is exempt from state income taxes, which savings accounts typically aren't.

[1] https://treasurydirect.gov/indiv/planning/plan_education.htm

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

#120

Post by ericd »

piotrkaminski wrote: post #111
ericd wrote: post #90

Earlier quoted context omitted.

This. Also, max put your Series I allocation ($10k/yr/SSN iirc, must be purchased from TreasuryDirect) before bothering with TIPs. If you have kids, the inflation adjustments can be used tax free for educational expenses, which would already make them the best inflation adjusted bond, but on top of that, you can cash it in whenever you want for nominal value rather than selling them on the secondary market, which mak…

Note that the tax-free educational expenses apply only to higher education and have an AGI cut-off, though. Read the fine print!

Ah thanks for the clarification! Have a link to a good explanation of the limitations?
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