1% return on commercial paper...what affect on the metals?.
MGLICKER
Posts: 7,995 ✭✭✭
Opened an account with a new bank last week. All went well.
The manager half proudly offered me a 1% money market account if I was interested.
My first reaction was that 1% was pretty good today on any short term "safe" investment.
Thinking about it some more, this is insanity.
6 years of gifting operating capital to the corporate goliaths that are operating at record margins.
Why...to try to get that last million jobs back?
Those jobs are gone, kaput, finished.
Time to check the gold stack.
The manager half proudly offered me a 1% money market account if I was interested.
My first reaction was that 1% was pretty good today on any short term "safe" investment.
Thinking about it some more, this is insanity.
6 years of gifting operating capital to the corporate goliaths that are operating at record margins.
Why...to try to get that last million jobs back?
Those jobs are gone, kaput, finished.
Time to check the gold stack.
0
Comments
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Opened an account with a new bank last week. All went well.
The manager half proudly offered me a 1% money market account if I was interested.
My first reaction was that 1% was pretty good today on any short term "safe" investment.
Thinking about it some more, this is insanity.
6 years of gifting operating capital to the corporate goliaths that are operating at record margins.
Why...to try to get that last million jobs back?
Those jobs are gone, kaput, finished. 6 million new welfare, ah, disability recipients in the last 6 years have morphed out of the workforce.
Wonder why Bernanke is picking up a quarter million $ check for schmoozing with his admirers, wonder no more. >>
Did they offer free toasters for opening new accounts?
The small business owner is also able to tap into these "gifts". Sorry to hear that your investments are not doing well of late. Perhaps the promise will eventually be fulfilled.
Knowledge is the enemy of fear
<< <i>6 years of gifting operating capital to the corporate goliaths
The small business owner is also able to tap into these "gifts". Sorry to hear that your investments are not doing well of late. Perhaps the promise will eventually be fulfilled. >>
So it is ok to manipulate markets if you are on the profitable side of the ledger?
Federal Reserve weighs options on how to raise US rates
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Did they offer free toasters for opening new accounts? >>
A few weeks ago my neighborhood suffered a high number of burglaries. I thought it appropriate to add another SDB and keep the home inventory at an absolute minimum.
Called my bank of 19 years and asked the manager if he could waive the set up charge on a new box. He said no, as I was not a Premier customer. Premier customer needs to keep $25k in a checking account at 0% return.
Went to a new bank, no set up fee and annual cost was a bit less. Also a number of additional perks, geeks and bennies.
Pays to shop.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Largest SDB at my local CU is $70 yearly no fees. >>
But the drive will kill me!
<< <i>
<< <i>Did they offer free toasters for opening new accounts? >>
A few weeks ago my neighborhood suffered a high number of burglaries. I thought it appropriate to add another SDB and keep the home inventory at an absolute minimum.
Called my bank of 19 years and asked the manager if he could waive the set up charge on a new box. He said no, as I was not a Premier customer. Premier customer needs to keep $25k in a checking account at 0% return.
Went to a new bank, no set up fee and annual cost was a bit less. Also a number of additional perks, geeks and bennies.
Pays to shop. >>
My bank also offers those high roller accounts. Free money orders, free wire transfers, etc. One free wire transfer more than offsets $0 interest on $25K.
<< <i>You'd make out much better if you bought another freezer and filled it with beef, pork and chicken. >>
You reckon the cost to keep it cold all summer in Tucson will be less than the difference in cost in buying it every week or two?
Liberty: Parent of Science & Industry
<< <i>
<< <i>You'd make out much better if you bought another freezer and filled it with beef, pork and chicken. >>
You reckon the cost to keep it cold all summer in Tucson will be less than the difference in cost in buying it every week or two? >>
Good question. We have pretty low electricity costs here. Probably worthwhile to load up on sale items and store them in the deep freeze.
Problem though is that I eat a vegan diet. About all I freeze is ice.
These kinds of posts are better off on the Occupy Wall Street forum.
Btw, you should take that 1% insured money market fund account.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>You should have been invested in stocks the last 6 years.
These kinds of posts are better off on the Occupy Wall Street forum.
Btw, you should take that 1% insured money market fund account. >>
1. Why not the last 7 years? Did your crystal ball magically get you out at the 2008 top.....and back in at the 2008 bottom?
2. I believe that pre PM forum , this was listed as the economic forum. Either way, monetary policy is certainly relevant to precious metals performance.
3. I stay away from MM accounts, especially ones at a 6% discount to inflation. I hold enough FRN's to conduct my small coin business. The rest of the assets remain in inventory which has performed quite well since I entered the business in 2002.
<< <i>
<< <i>You should have been invested in stocks the last 6 years.
These kinds of posts are better off on the Occupy Wall Street forum.
Btw, you should take that 1% insured money market fund account. >>
1. Why not the last 7 years? Did your crystal ball magically get you out at the 2008 top.....and back in at the 2008 bottom?
2. I believe that pre PM forum , this was listed as the economic forum. Either way, monetary policy is certainly relevant to precious metals performance.
3. I stay away from MM accounts, especially ones at a 6% discount to inflation. I hold enough FRN's to conduct my small coin business. The rest of the assets remain in inventory which has performed quite well since I entered the business in 2002. >>
I was in 2008, 2001-2002, 1990-1991, and 1987. And throughout all that I'm dramatically up !
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>I was in 2008, 2001-2002, 1990-1991, and 1987. And throughout all that I'm dramatically up ! >>
Good job.
I am 57 , living in the desert and 80% retired. Flip enough coins and punch enough keys to keep busy.
Guess we have both succeeded in the prosperity that America has offered.
Fortunately we can stick our grandkids with the bill.
In the presence of free market conditions, there is a relationship between rates and precious metals prices, distilled from historical data from Deutsche Bank and reported by Bloomberg in 2010. This relationship has been studied before and has been reported in The WSJ previously as well.
Example 1 - If the 90-day T-Bill Rate is 0.15% (as it is right now) and inflation is a nominal 2% rate, the Real Interest Rate is -1.85%.
Whenever the Real Interest Rate is < 3%, gold and silver historically put in a 20% annual increase.
Example 2 - If the 90-day T-Bill Rate is 0.15% and the inflation rate is closer to 5% or 6%, which is what John William's unadulterated data indicates, the Real Interest Rate is -5.85%.
Whenever the Real Interest Rate is < -3.0%, gold and silver historically put in a 40% to 50% annual increase.
Interest Rates and Metals Prices historically react to money flows. That's what caused the above historical data to repeat consistently until about 2009.
When both are manipulated, as they have been and when politics are involved, as they are - I can only assume that the pressure is building for the money flows to find an equilibrium.
That's about all I need to say.
I knew it would happen.
<< <i>When both are manipulated, as they have been and when politics are involved, as they are - I can only assume that the pressure is building for the money flows to find an equilibrium. >>
Interest rates can remain suppressed for only so long.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Japan has shown it to be over 20 years now and still going.
All the boomers retiring keeps constant demand for Treasuries. Wars and other conflict keeps constant demand for Treasuries. Our insatiable desire for foreign made crap keeps constant demand for Treasuries.
It could be another generation before the 30 year bond seen 6% again. Thats a long time for those folks in their 60's.
Knowledge is the enemy of fear
You think when Apple or Microsoft or Intel or Disney issue debt that its the US Govt buying it or giving them the money?
Knowledge is the enemy of fear
If I were to post something like that everyone would criticize the sources---A german bank, a politician run company and a biased newspaper. Blah!!!
Knowledge is the enemy of fear
"A strange game.The only winning move is not to play. How about a nice game of chess?"
I knew it would happen.
Ditto employment. We got no jobs for Americans and know that they'll work for peanuts just to have SOMETHING.
Ditto seniors. The few that have something more than Social Security usually have very ...little... more, but have no means of repaying debt so they don't borrow.
The TARP giveaway to save the banks just capped off what was happening anyway.
And no one dare mention tariffs or minimum wages or the stock market and all the IRAs and 401-Ks go poo poo.
Soooooo... aint no one gonna get much more than they already got unless they're in the lending bizz and shafting everyone with guaranteed gov't backed emergency funds.
Here we is.
Bad news?
The worst.
And no relief on the horizon.
Hell, we can't even have any more wars.
<< <i>The few that have something more than Social Security usually have very ...little... more, but have no means of repaying debt so they don't borrow. >>
Truly the forgotten group in this mayhem. Under 1% for 6 years running does not make for a very pleasant retirement.
If that were the market rate, fine, but it is not, it is a fed manipulated number. Who here is willing to argue with that?
Wealth distribution never seems to go as planned I suppose.
They should have listened to their financial advisors instead of the doom and gloomers in the media and internet blogs and chatrooms.
Knowledge is the enemy of fear
<< <i>Text Under 1% for 6 years running does not make for a very pleasant retirement.
They should have listened to their financial advisors instead of the doom and gloomers in the media and internet blogs and chatrooms. >>
Kind of like telling my 70 year old neighbor that got burglarized 2 weeks ago that he should have bought a Rottweiler.
He didn't and just like with the corrupt fed, he got fleeced.
<< <i>Not sue what $ amount you are talking about , but a 1% money market is pretty good. >>
Talking about $0 as I will not loan anything to corporate America at less than free market rates which on short term paper, would be 3-4% today.
<< <i>Okay, but even the taxable equivalent money market municipal debt (at .60%) is really good, depending on size. >>
With all due respect, are we are now accepting 500 basis points (or more) under the inflation rate as acceptable.
The banking industry or corporate America do not owe us anything. The fed, as a quasi US agency (look it up) does.
By competing with our investment dollars (with our own tax dollars as well as made up dollars) the fed is doing a great injustice to savers in a Robin Hood goes mad version of hand it to the borrowers.
Some thought that ratcheting down interest rates after the 2008 collapse was wise. I disagreed then and even more so now.
<< <i>
<< <i>Text Under 1% for 6 years running does not make for a very pleasant retirement.
They should have listened to their financial advisors instead of the doom and gloomers in the media and internet blogs and chatrooms. >>
Kind of like telling my 70 year old neighbor that got burglarized 2 weeks ago that he should have bought a Rottweiler.
He didn't and just like with the corrupt fed, he got fleeced. >>
No. Its only the same if you had been telling the neighbor to buy the dog for the last 30 years.
Knowledge is the enemy of fear
<< <i>
<< <i>Okay, but even the taxable equivalent money market municipal debt (at .60%) is really good, depending on size. >>
With all due respect, are we are now accepting 500 basis points (or more) under the inflation rate as acceptable.
The banking industry or corporate America do not owe us anything. The fed, as a quasi US agency (look it up) does.
By competing with our investment dollars (with our own tax dollars as well as made up dollars) the fed is doing a great injustice to savers in a Robin Hood goes mad version of hand it to the borrowers.
Some thought that ratcheting down interest rates after the 2008 collapse was wise. I disagreed then and even more so now. >>
I'm not trying to be combative. Just pointing out that the rate you were quoted was very good in the current market, even on a tax adjusted municipal rate.
I'm not sure what you consider the acceptable inflation rate, so I can't speak to that, nor do I know if I would want to, but fair to say, 5% above is a lot.
I know what the Fed is. I know what a quasi US agency is/does. My wife has worked for two of them.
You can get fired up about your actual agenda, or you can stay to the course of your original inquiry. (edited to add for clarity) The Subject of your post.
I don't think a 1% commercial paper rate is going to affect metals.
BTW, rates where they are do help municipalities. We can dive into the corruption of said municipalities, and all their many layers, but a 3.37% 30 year treasury and at 90% or so for a 30 year muni, it is good for municipalities.
This may be a product of me looking at what is in front of me, not where I'm used to it being or where I feel it should be.
Just my thoughts.
E
This would have been another good option for the older of the retirees!
<< <i>
<< <i>This may be a product of me looking at what is in front of me, not where I'm used to it being or where I feel it should be. >>
Amazing what we will accept when we are told that it is good for us. >>
This was not told to me by anyone. My opinion was derived on my own from my own observations.
So another bailout? 50% in taxes are not good enough for you. We need to subsidize the Muni market further.
Again,
Amazing what we will accept when we are told that it is good for us.
<< <i>"""BTW, rates where they are do help municipalities. We can dive into the corruption of said municipalities, and all their many layers, but a 3.37% 30 year treasury and at 90% or so for a 30 year muni, it is good for municipalities."""
So another bailout. 50% in taxes are not good enough for you. We need to subsidies the Muni market further.
Again,
Amazing what we will accept when we are told that it is good for us. >>
I don't think we are discussing the same thing, but that's fine. It happens. *shrug*
They should have listened to their financial advisors instead of the doom and gloomers in the media and internet blogs and chatrooms.
Help me understand.
Hasn't the conventional wisdom of financial advisors been to diversify with stocks & bonds, and to weight bonds more heavily as you age? Isn't that what bidask just recommended in another thread, stating that he thought a 1% return on bonds would turn out to be good?
Isn't it true that the only way a current return of 1% on bonds would turn out to be good is if rates continue lower? Isn't it true that for rates to continue lower, the Fed will have to ramp up QE again? The malinvestments will continue and the markets will remain broken because a natural correction in virtually all of the markets is being prevented by government and Fed intervention.
The interventions always involves more money creation, because taxes are much harder to increase. That's not to say that taxes won't increase, they will - but it simply points to more of the same.
None of these developments are good for savers or retirees who depend on fixed incomes from bond rollovers.
The trend will continue until it reverses.
I knew it would happen.
You always have choices.
Your either going to be on the right side of the trade or the wrong side of the trade.
Hopefully you are more often on the right side of the trade.
And if you can admit you have been more often on the wrong side then get some professional advice.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i><<Text Under 1% for 6 years running does not make for a very pleasant retirement.>>
They should have listened to their financial advisors instead of the doom and gloomers in the media and internet blogs and chatrooms.
Help me understand.
Hasn't the conventional wisdom of financial advisors been to diversify with stocks & bonds, and to weight bonds more heavily as you age? Isn't that what bidask just recommended in another thread, stating that he thought a 1% return on bonds would turn out to be good?
Isn't it true that the only way a current return of 1% on bonds would turn out to be good is if rates continue lower? Isn't it true that for rates to continue lower, the Fed will have to ramp up QE again? The malinvestments will continue and the markets will remain broken because a natural correction in virtually all of the markets is being prevented by government and Fed intervention.
The interventions always involves more money creation, because taxes are much harder to increase. That's not to say that taxes won't increase, they will - but it simply points to more of the same.
None of these developments are good for savers or retirees who depend on fixed incomes from bond rollovers.
The trend will continue until it reverses. >>
Jimski52, MGlicker was offered a 1% money market account.....he should take that. A money market implies liquidity at par.
I never said anything that a 1% return on bonds is good.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
For the most part, yes. But instead of using the word "bonds" how about "income producing" investment. In 2010, after stocks had already increased 70% off the lows, one could still have bought ATT or Pfizer and locked in 6% dividend yields. Investors also have the choice of MLPs, closed end funds, preferred stocks, convertible bonds, ect. CDs and Treasuries are not the only game in town.
But lets just say you followed the "conventional wisdom". You are 70 years old so you put 70% into CDs or Treasuries at 1% and the other 30% into the SP-500. For numbers sake lets say you have $100,000. Since 2010 70% ($70,000) would have grown to $73,000 and the 30% ($30,000) would be worth $50,000 today, for a total of $123,000 for an overall return of 5.3% per year. Certainly this is keeping up with inflation (even if one uses MGlickers numbers)
If one had invested in other fixed income investments the returns would be exceeding 10% per year.
To add...I am not endorsing an investment of any asset class right now. But isnt an argument that stocks are not a good buy right now after having tripled in 5 years the same as saying gold in not a good investment after having tripled in 3 years or increasing 6 fold in 10 years? How many condoned the purchase of PMs in 2011, yet now belittle equities?
Knowledge is the enemy of fear
<< <i>Since 2010 70% ($70,000) would have grown to $73,000 and the 30% ($30,000) would be worth $50,000 today, for a total of $123,000 for an overall return of 5.3% per year. >>
Would you give the same advice today?
We could all be multimillionaires if we knew the race results before the race.
<< <i>
<< <i>Since 2010 70% ($70,000) would have grown to $73,000 and the 30% ($30,000) would be worth $50,000 today, for a total of $123,000 for an overall return of 5.3% per year. >>
Would you give the same advice today?
>>
There are many strategies that one can implement to achieve above market average returns with below market average risk. Ask your financial advisor.
We could all be multimillionaires if we knew the race results before the race
Many thought they knew the results in 2010 and bought gold. Those same people still think they know/knew the results.
Knowledge is the enemy of fear
Everything I could scrape together went into the stock market in the late 70's. I rode the bull through the better part of the 90's. and did quite well. As I mentioned before, most of my assets went into rare coins in the early part of this millennium and though rotated often remain the major part of what I own today. The 1794 Halfs though have been part of the set and are not for sale.
Congratulations to those that have ridden the last bull market in stocks. I mean that. It takes some nerve to stay in during the rough spells and certainly may go higher, much higher.
I rarely hear much talk on the forum about valuation. Stocks seem to be priced for perfection at a real PE on the SP500 in the 27 range and dividend yield under 2%. If investors continue to buy government notes at under 2.5% and ignore rising inflation, you may be fine. If earning remain strong in the face of lagging sales, you may be fine.
Seems to be a complacency that rates will remain low forever and the fed can stimulate profits with a click of a mouse.
That has more or less worked for the last 6 years, but what about the next three years?
Lets eliminate the last part of your sentence to remain unbiased and pragmatic. If rates do increase, what does that mean? To me it means the economy is doing better and corporate profits increase. It also means investors are selling bonds and buying stocks (or other assets). In each case the stock market goes higher. Some think a rise in rates means lack of confidence in the USA. My counter would be to look at yields in Spain and Italy. Rates are not much higher than here and both countries are in MUCH WORSE fiscal shape than us. Or we can look at Egypt which is a total disaster and where rates are only 800 basis points higher than here. So how high might rates actually go in the US---5%? If so, there would be so much demand due to demographic reasons that rates would be capped. Rates could and probably will remain low 3-5% for a very long time.
Knowledge is the enemy of fear
<< <i> If rates do increase, what does that mean? To me it means the economy is doing better and corporate profits increase. >>
Or do they? If the economy tanks (my crystal ball does not know) and the deficit surges, we continue the cycle of large scale borrowing and its ugly uncle, monetization. At some point, though we have defied normal market movements so far by doing this on a global basis, the currency tanks and results in massive inflation, even by the Cohodk scale.
We have fallen into an uncomfortable trance which reassures us that a slow economy means low interest rates. Those that lived through the late 70's/early eighties know that that is not always the case. May I suggest that we are witnessing the aberration.
Getting back to corporate profits, let us say that the economy does pick up, retail sales increase and producers have the ability to raise prices.
In a higher interest environment, the free and easy 1% money is gone and will perhaps triple to 3%, lopping a bit off the bottom line. Assuming that commodities and god forbid labor costs ratchet up, another hit to the bottom line.
Most importantly though is the vice squeeze on the multiples. The dow 30 is throwing off 3% in dividends today. Quite tasty in a 1% money market worlds. All else being equal and the Blue Chips have to compete with say a 4% 10 year yield, we could see a 25% retraction in stock prices just to meet that number.
the same as corporate debt, no FDIC guarantee. Capital One Bank pays .9% on FDIC insured deposits.
Stocks go up almost every day along with medium and long term US Treasury Notes and Bonds.
The 10 YR yields 2.46% now after being above 3% earlier this year.
S&P 500 made a new all time high today which makes perfect sense with large blue chips like
JNJ, XOM, and PG yielding more than the 10 year Treasury and increasing dividends.
Precious metals are dead with little inflation now or on the horizon and no price momentum.
Anyone starting now is arriving late at the party. The buffet is picked over. The shrimp are gone.
You are getting cheese cubes and carrots.
Japan has done this for 20 years and rates there are still LOWER than here.
All else being equal and the Blue Chips have to compete with say a 4% 10 year yield, we could see a 25% retraction in stock prices just to meet that number.
Only if profits go lower. And profits wont go lower if the economy is stronger, they never have. Yes, wages may rise and inflation may tick up, but all is relative. Minimum wage might be $10, your organic potatoes might be $7, gold might be $1500 and the DOW is 20,000.
Many people would argue that 3% is still free money. The 16yr average yield on the 1-yr treasury is 2.5%, so 3% would be no big deal and actually gets us back to early 1990's rates.
Knowledge is the enemy of fear
<< <i>your organic potatoes might be $7 >>
I would have to switch back to Prime Rib.
Concerning stock ownership, the stock market is a tax-generating churning machine for the government.
Theoretically, stock ownership parcels up the company's assets and earnings amongst the stockholders, as it should in a good capitalistic environment. What we have right now is a Fed-dominated trading environment, not an investing environment. Any compelling company fundamentals can get washed out by a mis-step or change in direction on the Fed's part. This renders all stocks the same, to one degree or another.
All assets are being pumped up in order to generate higher tax proceeds for gov.com - especially stocks. Low bond rates are intended to drive money into risk assets, (in addition to lowering the government's liability payments.) Since liabilities will virtually explode when rates go up because of the structural changes to the debt due to Twist, it is almost certain that gov.com will attempt to keep rates as low as possible for as long as possible. This does destroy capital and keeps investors from making commitments to the economy. The problem (for everyone) is that the interest rate market will eventually overcome whatever the gov.com can do artificially.
In the meantime, it's really not about investing - it's about guessing which favored crony is getting the next handout. If you don't have that info or at least some juicy inside company info, you're only gambling. I suppose you could just go with heavily-unionized industries and hope for the best. If you really don't think that it's a house of cards, then have at it - there's nothing I can say that'll convince you that you aren't an investing wiz kid while your booking trading profits on the Fed's coattails.
At 1% return, considering the risk - there's no compelling reason not to be in cash and metals. None. You can chase the market and pay the taxes, but the risk is gonna getcha. It's inevitable. The market climbs a wall of worry. Anyone here worried?
I knew it would happen.
<< <i>Correct me if I'm wrong, but money market funds are no longer insured or guaranteed, by anyone. That 1% is not "risk-free". Any major unwinding and that money is gone.
Concerning stock ownership, the stock market is a tax-generating churning machine for the government.
Theoretically, stock ownership parcels up the company's assets and earnings amongst the stockholders, as it should in a good capitalistic environment. What we have right now is a Fed-dominated trading environment, not an investing environment. Any compelling company fundamentals can get washed out by a mis-step or change in direction on the Fed's part. This renders all stocks the same, to one degree or another.
All assets are being pumped up in order to generate higher tax proceeds for gov.com - especially stocks. Low bond rates are intended to drive money into risk assets, (in addition to lowering the government's liability payments.) Since liabilities will virtually explode when rates go up because of the structural changes to the debt due to Twist, it is almost certain that gov.com will attempt to keep rates as low as possible for as long as possible. This does destroy capital and keeps investors from making commitments to the economy. The problem (for everyone) is that the interest rate market will eventually overcome whatever the gov.com can do artificially.
In the meantime, it's really not about investing - it's about guessing which favored crony is getting the next handout. If you don't have that info or at least some juicy inside company info, you're only gambling. I suppose you could just go with heavily-unionized industries and hope for the best. If you really don't think that it's a house of cards, then have at it - there's nothing I can say that'll convince you that you aren't an investing wiz kid while your booking trading profits on the Fed's coattails.
At 1% return, considering the risk - there's no compelling reason not to be in cash and metals. None. You can chase the market and pay the taxes, but the risk is gonna getcha. It's inevitable. The market climbs a wall of worry. Anyone here worried? >>
Not worried at all. I have an allocation to stocks. At this level I'm rebalancing and taking some money off the table.
If the market falls I will put money back in.
You missed a huge bull market !
I give away money. I collect money.
I don’t love money . I do love the Lord God.