Officially Here: Negative U.S. Interest Rates

Discussion in 'Business, Investing & Finance' started by FireFoley, Mar 26, 2020 at 11:36 AM.

  1. FireFoley

    FireFoley Senior Member
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    So I know a 3 day rally in stocks has brought a small reprieve to many who have lost good money recently but maybe some were fortunate to be buying and had some fortunate timing. Just to change the subject, although 'real" interest rates (Rate minus inflation) has been negative for some time, for the first time in my life (I believe), nominal rates are officially negative. The 1 month T-Bill and the 3 month T-Bill are both negative. Is this a passing fad or will each successive duration approach and/or breach ZERO?
     
    • Detroitgator

      Detroitgator General Factotum
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      Yes, I was going to update my previous post last night... look at my "triangle" now. The ZEROs are moving to the right. ;)
       
      • Taco Gratis

        Taco Gratis Clear eyes. Full hearts.

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      • FireFoley

        FireFoley Senior Member
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        I am not overly political, but I believe that there are already plenty of ZEROS' on the right, the far right. :lmao2::lmao::lmao:
         
        • bradgator2

          bradgator2 Internet Bully
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          So what does that mean?
           
          • Detroitgator

            Detroitgator General Factotum
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            OK, bare with my tin foil hat...

            1. All the yields moving to zero is "apocalyptic."
            2. Some are already zeros.
            3. Fed will prop up the two that everyone watches like you've never seen before.
            4. Here's the tin foil hat: we are definitely going to negative interest rates from your bank. This means they will CHARGE YOU for any cash that is in an interest bearing account. So, if you have $100 in a savings account that was at 1% and that goes to -1%, they will charge you every month that rate like a bank fee and your $100 will decline every month you let it sit there.
            5. This is designed to make you move your dollars out of savings/CDs... and put it somewhere else. They hope that you will either spend it on schit or put it all in the one place providing a return, the stock market.
            Bottom Line: it means "NOT GOOD"
             
            • bradgator2

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              Oh damn. I dont like the sound of that.
               
            • bradgator2

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              So, you have to... or I guess I should say *should*.... have some cash sitting there. Even if it's a few grand. Where would be the best place to put it? Under the mattress?

              Would it count as a loss on your taxes opposite of having to add f'ing interest on your checking account currently does?
               
              • Detroitgator

                Detroitgator General Factotum
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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! ;)
                 
                #9 Detroitgator, Mar 26, 2020 at 1:15 PM
                Last edited: Mar 26, 2020 at 1:22 PM
              • FireFoley

                FireFoley Senior Member
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                LOL @Detroitgator did a good job of explaining it. I was going to say that if you chose to participate in one of the weekly auctions of T_Bills (which you can do) and for instance the rate went off at ZERO and you bought $1,000 worth, at maturity you would get your $1,000 back. who would do that, why not just shove it under the mattress? Other than the GOV guarantee what is the point? Well as an individual you don;t have to play But certain entities are mandated to hold a certain amount of Treaury securities or equivalents, perhaps Insurance companies, etc. It is quite the conundrum and one that does not appear to be abating in the rest of many of our lifetimes.
                 
              • FireFoley

                FireFoley Senior Member
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                Larry is the eternal optimist. Perhaps it happened when Larry found JC or some other deity when he recovered from his drug induced and drunken stupor. Guy has been sober a quite a while (and I applaud him for that), but I have a hard time that any administration would trot a guy like that out to represent the country and its views at a time like this, especially given his past. Perhaps it is his optimism they seek, but his markets knowledge left him many years ago. Just b/c he was in the Reagan administration and things worked then does not automatically translate to 40 years later.
                 
              • Detroitgator

                Detroitgator General Factotum
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                Agreed... when I say I like him, I mean as a personality. I loved watching him on CNBC back in the day when Squawk Box was balanced and they had a lot of great personailities... then it slowly (then quickly) went "full NBC retard" and I just couldn't watch anymore!
                 
                #12 Detroitgator, Mar 26, 2020 at 2:02 PM
                Last edited: Mar 26, 2020 at 2:11 PM
              • BMF

                BMF Bad Mother....
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                This is interesting...and way over my head.

                So, let me ask: if a bank will start charging us a fee to keep our money there, will they let us know before this happens? (i.e. give us a chance to move our money?)

                I told you all in another thread about a company called Streetshares. I have over $100K invested w/ this company. It earns 5%. I might move some more cash over there for the time being (I have two accounts, spaced about six months apart - the maturity date - so I generally move the money over when the account matures).
                 
              • Detroitgator

                Detroitgator General Factotum
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                Does the bank tell you now, other than on your monthly statement, when interest on your savings went from 1.037% to 0.986%? Why would they feel the need, other than out of the goodness in their hearts, to give you special notice if it goes to -0.1%?

                As for Streetshares, is it an FDIC protected account? Usually things like that are not... like my formerly GMAC now Ally Bank "demand note" account. Typically they are invested in all kinds of things with those funds that they offer to you in the form of a high interest bearing savings/checking account. You feel safe, and it's great interest when the world is good, but know your potential risk, because some of these things can go "poof!".

                I suspect Streetshares is just a vehicle for other securities and what you are talking about doing is exactly what negative interest rates are designed to do... drive you out of cash and into what they prefer, securities/risk.
                 
              • FireFoley

                FireFoley Senior Member
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                @Detroitgator thanx for asking @BMF if Streetshares is FDIC insured. I was going to ask the same thing. also it appears it is some type of CD or note as he mentioned duration. CD's are FDIC insured, notes and bonds are not. Sounds like too high of a rate to be a savings or money market account. Perhaps it is a money fund that can "break the buck" and thus it is invested in some high dividend investments (mortgages, high yield, junk, etc). I want FDIC first for my cash if not is goes under the mattress.
                 
                • BMF

                  BMF Bad Mother....
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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.
                   
                  • TLB

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                    So this thread explains in terms the rest of us can understand wtf is going on and what it means.

                    Thanks!
                     
                  • Detroitgator

                    Detroitgator General Factotum
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                    It means, that while the "reach around" you are getting feels pretty good, you are getting fukked in the ass and made a slave and you don't realize it.

                    How's that? ;)
                     
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                    • GatorInGeorgia

                      GatorInGeorgia Senior Member
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                      I'm not surprised. I actually referenced this a few weeks ago in the Taking Advantage of Coronavirus thread. Something like 20% of all worldwide gov. debt issued over the past few years was at negative yields. So now it's here in the good old USofA. Will it hit the longer dated durations? I don't know but I wouldn't be surprised. I also wouldn't be surprised if we got hit with hyper-inflation in the next 3-5 years.
                       
                    • FireFoley

                      FireFoley Senior Member
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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.
                       

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