Officially Here: Negative U.S. Interest Rates

FireFoley

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Streetshares is not FDIC insured. However, I did serious background on them before I invested. Around the time I invested w/ them they partnered w/ USAA - USAA, if you don't know, is one of the most legit companies in the country, w/ the best customer service in the business. Jokingly, USAA & Chick-fil-a are known as having the best customer service in the industry. Anyhow, USAA put Streetshares through a thorough vetting because USAA does not do small business loans - Streetshares specializes in small business loans, and targets veteran owned businesses (although you do not have to be a veteran owned business to borrow from them). I have been very happy w/ the platform and made around $3K last year.


Thanks @BMF for the explanation. 5% sure does sound good and glad it has worked out well, but is there any concern in this environment? USAA is certainly reputable, so in essence it is a bank meaning you loan them money (depositor) in exchange for a fixed rate of return. They in turn loan out that money at a higher rate to those they deem are viable borrowers As long as you trust their methods and decision makers it is just like giving your money to a bank, minus FDIC.
 

GatorInGeorgia

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I am not saying you are predicting it, but will someone wake me up when that happens? I have been hearing this for going on 10 years now from many on the blower who are so called experts. Well all I can say is that one of the few things I did right was predict low rates for almost ever and thankfully bought different types of bonds years ago and have not been tempted to sell. The only ones I do not have were those that had call features and got called. When I can get an 8-10% return on a savings account or CD, let me know and I will ride off into the sunset. Even if that means a loaf of bread cost 6 bux, I will make it work! Japan has been waiting for that rise in inflation for 30+ years now and last time I checked that clock was still ticking.

Let me add a little more color, which I should have done the first time. I think hyper-inflation is possible, just like I feel low/negative rates (already here) are definitely possible. What I don’t see happening is the middle ground-“normalized” rates where, let’s say where the 10 year is between 4-8%. I say “normalized” in the sense that the 10 year has been in that range for a big chunk of the past 60 years.

I think we’d go to hyperinflation rather than settling in that range.
 

BMF

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Thanks @BMF for the explanation. 5% sure does sound good and glad it has worked out well, but is there any concern in this environment? USAA is certainly reputable, so in essence it is a bank meaning you loan them money (depositor) in exchange for a fixed rate of return. They in turn loan out that money at a higher rate to those they deem are viable borrowers As long as you trust their methods and decision makers it is just like giving your money to a bank, minus FDIC.

Motley Fool Ventures (a company of Motley Fool) just invested $5 million on March 18th w/ Streetshares. Streetshares has a proprietary software that they use...and are trying to sell. I actually put some money in their Angel shares (in addition to the money earning 5%) - hoping that pays off down the road. I did have some concern about 'this environment', but small businesses will very likely be in the need of loans (unless they get it from the bailout that was just passed). The software they use is specifically designed to underwrite loans.

New StreetShares Initiative Provides Free Technology To Make Small Business Loans, Relieve Coronavirus Impact: - StreetShares Platform
 

78

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The goal is to stave off deflation. Japan has been entrenched in low-to-no rates for some time. We’ll likely have no issues with runaway inflation. What we’re at risk of is a zombie economy.
 

Concrete Helmet

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Ever heard of the words "Mortgage Deed" also known as a private mortgage.....8,9 and even 10% is what I see quite a bit....just get 20-25% down....if they default just write off the losses, and rinse and repeat..... Real Estate the gift that keeps on giving....

There are also a lot of companies who will pool Ira's and other investments to lend at higher rates but that can be risky as most are in 2nd position....
 

Detroitgator

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I can't tell anyone what to do because when I talked about this 8 years ago, I got ridiculed. What the Fed is doing now is unprecedented in our history and they are dollarizing the WORLD right now and are going to literally own the world as a result, and the other major CBs of the world, including Russia, are on board. China is the odd man out, by design.

I don't know how it will be treated tax wise, but it's not a "loss" to carry forward like with stocks unless they change tax code.

It's going to fuk small business like me that have a large cash balance in business checking if they apply it to checking accounts as well. Not sure if it goes there, I'd have to look at what happened in EU countries when they wen negative interest rates there a few years ago.

I like Larry Kudlow as a guy, but you have to wonder when the guy that was telling everyone just a few months ago to buy when the market was at its TOP is also the guy saying buy when it was at the bottom less than a week ago, especially when the entire financial sector is saying publicly, "uh, we're not so sure." That's an odd disconnect from 2009.

Wanna know what else got ridiculed but is now in non-conspiracy headlines? "Digital Dollars."

Coronavirus Stimulus Offered By House Financial Services Committee Creates New Digital Dollar

If the Fed is buying the world, and we're floating the idea of a digital dollar, that will NOT be a one for one swap with your paper dollar, it would mean a revaluation of the dollar.

Are we going there? I don't know. But it's clearly being floated, the Fed is clearly dollarizing the world and buying ALL forms of debt, and the idea isn't being floated by kooks anymore. Too much for most to ponder... so take your check and be happy! ;)

And for the record, the Fed has NO power when it's balance sheet is empty of debt... zero. It has near infinite power when it owns debt, let alone all forms of debt, and it's buying like never before.

This is one of the best lines EVER, not just in a movie, but for reality... in the movie, it's based on a true story and just about one bank... but think Fed and the globe. CBs have chosen a side, and they've chosen the US over China, and again, that includes Russia. When watching this clip, think the Fed and debt in general, not one bank and arms sales.


PS I love The International as a movie. And in this scene, the guy in the white shirt is one of the good guys... no further spoilers! ;)

Russian plane with coronavirus medical gear lands in U.S. after Trump-Putin call
 

GatorCatsi

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U.S. stocks have never gone into a crash with lower rates than we had this year. And, as with most bear markets, the flight to safety has pushed those yields even lower (currently less than 0.7%).

To get a better sense of the difference between market crashes over the past 50+ years and the current iteration, here’s a comparison of the rates at prior peaks along with the annual income being paid out on a $100,000 investment for 10-year treasuries:

Annotation-2020-04-28-084420.jpg


I’m stating the obvious here but maybe people are overcomplicating things when it comes to looking for reasons the market has been so resilient during this crisis. What if interest rates are the Occam’s razor here?

Occam's Razor on Interest Rates and the Stock Market - A Wealth of Common Sense
 

FireFoley

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TINA (There Is No Alternative). This has been the narrative for over 10 year now @Taco Gratis. You are not wrong and starting in 2008 on, that was the Fed's entire goal; Inflate Asset Prices. But this particular situation where the world has been shut down has added a thorn that has not been there for the past 10 years. Many companies have not only suspended their dividends (with good reason), but many have been forced to cease their buybacks. Most every major company buys their own stock back in the open market every single day. There is a limit to how much they can buy in a day and a week, but they are usually the biggest purchaser of their stock. If you do any reading, buybacks are numero uno reason for most stocks price increases the past 10 years. There has been little to no organic growth. Fewer outstanding shares lead to higher EPS. These next however many quarters will be quite interesting especially if some of these companies continue not to purchase their own stock,
 

Detroitgator

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TINA (There Is No Alternative). This has been the narrative for over 10 year now @Taco Gratis. You are not wrong and starting in 2008 on, that was the Fed's entire goal; Inflate Asset Prices. But this particular situation where the world has been shut down has added a thorn that has not been there for the past 10 years. Many companies have not only suspended their dividends (with good reason), but many have been forced to cease their buybacks. Most every major company buys their own stock back in the open market every single day. There is a limit to how much they can buy in a day and a week, but they are usually the biggest purchaser of their stock. If you do any reading, buybacks are numero uno reason for most stocks price increases the past 10 years. There has been little to no organic growth. Fewer outstanding shares lead to higher EPS. These next however many quarters will be quite interesting especially if some of these companies continue not to purchase their own stock,
Mnuchin said today that it is not the fault of banks for making loans that are going bad...
 

GatorCatsi

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TINA (There Is No Alternative). This has been the narrative for over 10 year now @Taco Gratis. You are not wrong and starting in 2008 on, that was the Fed's entire goal; Inflate Asset Prices. But this particular situation where the world has been shut down has added a thorn that has not been there for the past 10 years. Many companies have not only suspended their dividends (with good reason), but many have been forced to cease their buybacks. Most every major company buys their own stock back in the open market every single day. There is a limit to how much they can buy in a day and a week, but they are usually the biggest purchaser of their stock. If you do any reading, buybacks are numero uno reason for most stocks price increases the past 10 years. There has been little to no organic growth. Fewer outstanding shares lead to higher EPS. These next however many quarters will be quite interesting especially if some of these companies continue not to purchase their own stock,
This captures a lot of what's been happening. It also matches what I've been reading and parroting on this board and elsewhere...

...that the actions of the Fed, its co-conspirator Central Banks, and their political enablers have rendered the markets nothing more than a political utility. Which is why Trump spent so much time and energy pre-pandemic goading the Fed to drop interest rates even further in the midst of the longest bull market in history.

Detroit has raised the alarm about where this ends, starting 10 years ago.

By dropping rates to near and in some cases below zero, and stoking moral hazard, the CBs have completely gutted the markets prime function -- one of price discovery -- and created the asset bubble you mention.

The result? An environment where corporate managers are no longer measured on corporate fundamentals and performance. They're measured on one thing. Share prices.

So of course, their actions are no longer about taking real-world business risks like introducing new products, or expanding into new markets. Who the hell is going to take the risk of opening a new plant when it's easier -- not to mention more personally lucrative -- to simply do a buyback?

The CBs and their political enablers have created a system of zombie companies, completely dependent on financialization and leverage and ripe for a fall

That's how we get the record buybacks we've seen over the last 10 years.

But it gets better. If you're a CEO, or a board member, you're not only evaluated almost solely on what your stock is doing at any given time -- fundamentals be damned.

You also make damn sure that those buybacks directly benefit you.

For example, management teams at the Big 4 airlines have increased debt and directed their free cash-flow towards anything they thought would prop up their stock price.

In times past, they would have used that money to grow their core business or protect it against leaner times.

The airlines aren't alone. They're just the current poster child.

Instead of those real-world business risks, they take increasingly reckless financial risks.

And why wouldn't they? If for the last 10 years, you know you'll be bailed out by the Fed every time the market hiccups, AND your compensation is almost exclusively tied to share prices, what makes the most sense?

Buying back stock and shifting your focus from operational, long-term core business activities to financial, short-term market moves.

Activity that is incentivized grows. In this case, it's rent-seeking by corporate managers. With the result that many of our most important businesses were so levered up they couldn't weather a garden variety downturn, much less a global pandemic.

The boards and C-suite were incentivized to take the biggest possible rake. We shouldn't be surprised that that's exactly what they did.

Or that they object when we suggest maybe they shouldn't be bailed out.

Mnuchin said today that it is not the fault of banks for making loans that are going bad...
With a straight face, no doubt.
 
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GatorCatsi

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The champions of markets and enterprise need to recapture their radicalism, to reassert the right to be a disruptive, even subversive, not a reactionary, force in the world.

They need to distinguish between free markets serving consumers, on the one hand, and crony capitalism addicted to corporate welfare on the other, because it is the corporatism that people dislike, but it leads them to distrust free markets because they do not perceive the difference.

“Capitalism” and “markets” mean the same thing to most people. And that is very misleading. Commerce, enterprise and markets are – to me – the very opposite of corporatism and even of “capitalism”, if by that word you mean capital-intensive organisations with monopolistic ambitions.

Markets and innovation are the creative-destructive forces that undermine, challenge and reshape corporations and public bureaucracies on behalf of consumers. So big business is just as much the enemy as big government, and big business in hock to big government is sometimes the worst of all.

https://capx.co/the-case-for-free-market-anticapitalism/
 

Detroitgator

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This captures a lot of what's been happening. It also matches what I've been reading and parroting on this board and elsewhere...

...that the actions of the Fed, its co-conspirator Central Banks, and their political enablers have rendered the markets nothing more than a political utility. Which is why Trump spent so much time and energy pre-pandemic goading the Fed to drop interest rates even further in the midst of the longest bull market in history.

Detroit has raised the alarm about where this ends, starting 10 years ago.

By dropping rates to near and in some cases below zero, and stoking moral hazard, the CBs have completely gutted the markets prime function -- one of price discovery -- and created the asset bubble you mention.

The result? An environment where corporate managers are no longer measured on corporate fundamentals and performance. They're measured on one thing. Share prices.

So of course, their actions are no longer about taking real-world business risks like introducing new products, or expanding into new markets. Who the hell is going to take the risk of opening a new plant when it's easier -- not to mention more personally lucrative -- to simply do a buyback?

The CBs and their political enablers have created a system of zombie companies, completely dependent on financialization and leverage and ripe for a fall

That's how we get the record buybacks we've seen over the last 10 years.

But it gets better. If you're a CEO, or a board member, you're not only evaluated almost solely on what your stock is doing at any given time -- fundamentals be damned.

You also make damn sure that those buybacks directly benefit you.

For example, management teams at the Big 4 airlines have increased debt and directed their free cash-flow towards anything they thought would prop up their stock price.

In times past, they would have used that money to grow their core business or protect it against leaner times.

The airlines aren't alone. They're just the current poster child.

Instead of those real-world business risks, they take increasingly reckless financial risks.

And why wouldn't they? If for the last 10 years, you know you'll be bailed out by the Fed every time the market hiccups, AND your compensation is almost exclusively tied to share prices, what makes the most sense?

Buying back stock and shifting your focus from operational, long-term core business activities to financial, short-term market moves.

Activity that is incentivized grows. In this case, it's rent-seeking by corporate managers. With the result that many of our most important businesses were so levered up they couldn't weather a garden variety downturn, much less a global pandemic.

The boards and C-suite were incentivized to take the biggest possible rake. We shouldn't be surprised that that's exactly what they did.

Or that they object when we suggest maybe they shouldn't be bailed out.


With a straight face, no doubt.
This also ties directly the the "US vs China" issue in terms of national security tied with economic security as a nation.
 

FireFoley

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Well the Fed Funds rate went negative today, so it can't be too far down the road that the FED actually sees what the market is saying, listens to Ken Rogoff, and takes the rate to -50 basis points if not farther. Meanwhile the Treasury is about to have its largest amount of a weekly auction (96 Billion) ever and they must be rubbing themselves silly seeing how low these rates are all going. Knowing those ASS CLOWNS they may add a few more billion to the menu.
 
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FireFoley

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Bitcoin and Gold FTW.

Gold, Yes. Bitcoin, I will leave to the younger crowd. If I take a bar of gold somewhere, I can sell it. If I walk into the same place, I may or may not be able to sell Bitcoin, right? yes I know they both have Futures contracts, but I am talking about the ease of converting. Gold has a known value. But doesn't Bitcoin have value just b/c others think it has value? Isn't it just air? Why Bitcoin, why not Etheryum (sp) or Ripple? And I can sleep with my bar of gold vs. waking up and my cyber shyt having gone poof into thin air, right b/c it got stolen etc?
 

Detroitgator

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Well the Fed Funds rate went negative today, so it can't be too far down the road that the FED actually sees what the market is saying, listens to Ken Rogoff, and takes the rate to -50 basis points if not farther. Meanwhile the Treasury is about to have its largest amount of a weekly auction (96 Billion) ever and they must be rubbing themselves silly seeing how low these rates are all going. Knowing those ASS CLOWNS they may add a few more billion to the menu.
10 yr gave back today, and oil, after being up 9%+, ended up in the negative... will be interesting to watch tomorrow.

FWIW, I too am a fan of physical metal (not paper metal), but did buy some more bitcoin at $3700. Be your own bank...
 

FireFoley

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10 yr gave back today, and oil, after being up 9%+, ended up in the negative... will be interesting to watch tomorrow.

FWIW, I too am a fan of physical metal (not paper metal), but did buy some more bitcoin at $3700. Be your own bank...

With the announcement of that huge Treasury Auction, the 10 and 30 yr both backed up pretty good. I saw the 10 yr. at like 74 basis points and over 70 was the highest settlement in quite a while. I think that made a few technicians bearing on Treasurys and BOOM they get caught off guard and 15 basis points later the other way they are covering.

Will be curious to see how Treasurys trade after these employment numbers in an hour or so. Hate to say the numbers are meaningless but we all know they will be large, but I still contend they are not accurate. Unemployed and drawing money from the Government vs. Not Working and getting paid from your employer thru the Government loan program. What is really the difference? Both getting paid from a Government source but yet placed in two different columns?
 

FireFoley

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The largest auction of 10 year Treasury Notes took place today. $32 Billion was met with almost insatiable demand and went off at an average of right at .70 or 70 basis points. To which it is now trading at 67 basis points after the close. Needless to say the thought has been that b/c the Treasury is having to auction a substantially larger amount of debt to fund the deficits, that demand would wane and rates would rise. Au contraire Mon Fraere. It appears that dealers and non dealers can;t get enough of US Debt, perhaps b/c the chatter to take rates negative is picking up steam. In fact I have read a few people saying the FED should take the overnite rate to as low as THREE (3) %. I can;t believe this in anyway would be good in real time. Sure on the surface some of the lower cost of debt arguments seem okay, but all I know is that any sovereign nation that has tried negative rates for a period of time, has discovered that is has not benefited them and have taken measures to extricate themselves from this policy. Regardless of how milquetoast the FED heads say they are opposed to negative rates, none of them say it with any conviction. I am quickly moving into the camp that negative rates are coming not only in the markets but also from the FED on purpose.
 

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