Ask HN: How to prosper under negative interest rates? • Hacker News Board

Re: Ask HN: How to prosper under negative interest rates?

#31

Post by al_chemist » Tue, Mar 31, 2020, 3:39 PM UTC

chvid wrote: post #25

You don't build wealth by saving. You do it by investing using leverage. The system subsidises debt and risk-taking (within limits) by inflation and the structure of the tax system. You need to let go of the idea that it is immoral. Buy a house and when you can buy a bigger house. Put your money in the growth part of the stock market (technology ... big names like Apple and Amazon is good). Use your income to take on…

> You don't build wealth by saving. You do it by investing using leverage.

For some reason, this sounds like "you don't build wealth by saving. You do it by lottery and scratchcards!"

Re: Ask HN: How to prosper under negative interest rates?

#32

Post by whycombagator » Tue, Mar 31, 2020, 3:46 PM UTC

dtnewman wrote: post #16

chadash wrote: post #10

I'm not a financial planner or financial services professional of any kind, so take anything I say with a grain of salt. 1) should I stop saving? No. negative interest rates won't go that negative. Even if your bank is earning -1% interest, it still makes sense to be saving. 2) Should I put my savings elsewhere? Probably. ETFs or index funds with wide stock market exposure are a good idea (good examples are SPY, VOO,…

> No. negative interest rates won't go that negative. Even if your bank is earning -1% interest, it still makes sense to be saving. A great way to lock in decent rates and still have the safety of a bank account is with CDs. See https://www.ally.com/bank/cd-rates/ for example, where you can get 1.45-1.55% guaranteed interest on an 18 month CD where you can pull your money out at any time without penalty. A month ago,…

The Ally no penalty CD offerings are 11 months only. Side note: Last year, at one point, they were 2.3%

Re: Ask HN: How to prosper under negative interest rates?

#33

Post by mindslight » Tue, Mar 31, 2020, 3:48 PM UTC

qeternity wrote: post #8

You have to look at real rates, not nominal rates. The only markets that have negative nominal rates are battling deflation (which the US is not) or have serious liquidity concerns at the moment. The Fed is unlikely to go negative as they face a very different beast. Here's a quick example. Let's say you're in a deflationary environment: in 1 year, your money actually buys you more than it did last year, let's say fo…

> in 1 year, your money actually buys you more than it did last year, let's say for instance, 2% more. Under this weird environment

It's worth pointing out that this is not "weird", but rather the natural state of things! The effect is so strong in computing that we still see it, but technological progress means everything in general gets easier to produce.

This policy that "prices must always go up" is itself the aberration, instituted to keep the plebs working "full time" and to undermine their ability to save.

Re: Ask HN: How to prosper under negative interest rates?

#34

Post by hinkley » Tue, Mar 31, 2020, 3:48 PM UTC

I’m a fan of investing in myself when inflation is high or rates are low. Education, or opportunities.

Also a good time to shop for a credit card with a better rate.

Re: Ask HN: How to prosper under negative interest rates?

#35

Post by dgacmu » Tue, Mar 31, 2020, 3:48 PM UTC

al_chemist wrote: post #31

chvid wrote: post #25

You don't build wealth by saving. You do it by investing using leverage. The system subsidises debt and risk-taking (within limits) by inflation and the structure of the tax system. You need to let go of the idea that it is immoral. Buy a house and when you can buy a bigger house. Put your money in the growth part of the stock market (technology ... big names like Apple and Amazon is good). Use your income to take on…

> You don't build wealth by saving. You do it by investing using leverage. For some reason, this sounds like "you don't build wealth by saving. You do it by lottery and scratchcards!"

Agreed, the GP phrased this poorly. You build wealth by saving and investing the savings in a way that has an appropriate balance of risk and returns for your life circumstances. That may or may not involve leverage.

Re: Ask HN: How to prosper under negative interest rates?

#36

Post by ping_pong » Tue, Mar 31, 2020, 3:51 PM UTC

al_chemist wrote: post #31

chvid wrote: post #25

You don't build wealth by saving. You do it by investing using leverage. The system subsidises debt and risk-taking (within limits) by inflation and the structure of the tax system. You need to let go of the idea that it is immoral. Buy a house and when you can buy a bigger house. Put your money in the growth part of the stock market (technology ... big names like Apple and Amazon is good). Use your income to take on…

> You don't build wealth by saving. You do it by investing using leverage. For some reason, this sounds like "you don't build wealth by saving. You do it by lottery and scratchcards!"

That's because you don't understand finance.

Leverage is the easiest way to make a larger percentage on your money, as long as it's used prudently.

Borrowing money to buy real estate and then collect income is a very common way to leverage your money. Over time that builds real wealth. My friend has bought 5 properties and is renting them all out. When he retires, the properties will have been paid for, and the rental money will act like his pension until he dies.

Re: Ask HN: How to prosper under negative interest rates?

#37

Post by ilikerashers » Tue, Mar 31, 2020, 3:52 PM UTC

al_chemist wrote: post #31

chvid wrote: post #25

You don't build wealth by saving. You do it by investing using leverage. The system subsidises debt and risk-taking (within limits) by inflation and the structure of the tax system. You need to let go of the idea that it is immoral. Buy a house and when you can buy a bigger house. Put your money in the growth part of the stock market (technology ... big names like Apple and Amazon is good). Use your income to take on…

> You don't build wealth by saving. You do it by investing using leverage. For some reason, this sounds like "you don't build wealth by saving. You do it by lottery and scratchcards!"

You're equating buying a house to buying a lottery ticket. These are opposite ends of the risk scale.

These are not alike in any way.

Re: Ask HN: How to prosper under negative interest rates?

#38

Post by sigstoat » Tue, Mar 31, 2020, 3:55 PM UTC

al_chemist wrote: post #31

chvid wrote: post #25

You don't build wealth by saving. You do it by investing using leverage. The system subsidises debt and risk-taking (within limits) by inflation and the structure of the tax system. You need to let go of the idea that it is immoral. Buy a house and when you can buy a bigger house. Put your money in the growth part of the stock market (technology ... big names like Apple and Amazon is good). Use your income to take on…

> You don't build wealth by saving. You do it by investing using leverage. For some reason, this sounds like "you don't build wealth by saving. You do it by lottery and scratchcards!"

> For some reason

unfamiliarity with the term "leverage", probably

Re: Ask HN: How to prosper under negative interest rates?

#39

Post by RivieraKid » Tue, Mar 31, 2020, 3:55 PM UTC

Why does 0% interest rate mean that it's hard to prosper?

Re: Ask HN: How to prosper under negative interest rates?

#40

Post by adaisadais » Tue, Mar 31, 2020, 3:57 PM UTC

al_chemist wrote: post #31

chvid wrote: post #25

You don't build wealth by saving. You do it by investing using leverage. The system subsidises debt and risk-taking (within limits) by inflation and the structure of the tax system. You need to let go of the idea that it is immoral. Buy a house and when you can buy a bigger house. Put your money in the growth part of the stock market (technology ... big names like Apple and Amazon is good). Use your income to take on…

> You don't build wealth by saving. You do it by investing using leverage. For some reason, this sounds like "you don't build wealth by saving. You do it by lottery and scratchcards!"

Warren Buffett talks about how cash is a bad thing to have over time as it can’t keep up inflation (1). He does advocating having enough on hand to “sleep at night”. But you really can’t build wealth by stocking money away in a savings account.

Trump and his administration could have really done something awesome. He essentially got given the golden ticket for presidents: create a legacy. T. Roosevelt had parka, FDR had the new deal. Eisenhower built highways (which he copied from Hitler’s autobahn). JFK said we would put a man on the moon (and ultimately did).

Trump could have said hey, let’s build high speed rail across our country! Let’s reinforce our highways. Let’s dump a bunch of money into building new schools or paying teachers more. When the virus is gone the economy will be humming! The markets would have soared. The U.S. would have had something qualitative to show for the $2T line of debt we just took out on ourselves.

(1) https://www.cheatsheet.com/uncategorized/history-and-warren-...