Negative Interest Rates...What to do?

In reply to RossD:

I wouldn't do business with Ally bank no matter how much interest they paid me. They were GMAC and we were forced to bail them out. They changed their name and now do the same dumb E36 M3 all over again. I suppose they figure we will be forced to bail them out again when it all goes tits up.

Yes, negative interest rates are headed our way. I suspect they will also take all or some of our 401k account balances (and other similar retirement vehicles like IRA, SIMPLE, etc.) at some point to try to keep social security limping along a bit longer. Math is not that hard.

The strange part about the negative interest rates, is that in the places they have already been put in place, they have had the opposite of the stated effect. Instead of people responding by reducing savings and spending more which somehow is supposed to boost the economy, people have been responding by saving even more to try to make up the difference and account for the extra haircut they are taking. Central bankers either are idiots or masters of saying one thing while meaning the opposite. Everything they do seems to have the opposite effect of what they say it will.

NOHOME wrote: I am starting to consider micro-loans as a possible source of income.

If you're at this point, you might start looking into becoming the silent partner in businesses. In general the people borrowing money for legitimate business startups are a bit less sketchy than micro loan people. Being a silent partner is risky, but it also keeps you from having the stress of being an active part of the business.
You're looking at investing, you just need to choose your scale.

T.J. wrote: The strange part about the negative interest rates, is that in the places they have already been put in place, they have had the opposite of the stated effect. Instead of people responding by reducing savings and spending more which somehow is supposed to boost the economy, people have been responding by saving even more to try to make up the difference and account for the extra haircut they are taking. Central bankers either are idiots or masters of saying one thing while meaning the opposite. Everything they do seems to have the opposite effect of what they say it will.

[flounder] But, centrally-planned Keynesian economies are the only humane form of civilized government! After all, everybody in Europe is doing it! [/flounder]

GameboyRMH wrote:

Nick (LUCAS) Comstock wrote: These are the types of problems that I don't have to worry about. Ah, the benefits of not having money. It's a simpler way of living really.

Same here. The only reason I have a bank account at all instead of a fireproof safe is the convenience of the ATM system. There are those transaction fees for using the ATM though, don't know how to avoid them, apparently I'm doing something wrong...

Here in the US if you a member of a federal credit union, you pay zero ATM fees for transactions made at other FCU ATMs.

1988RedT2 wrote: Vote! Look for candidates that do stuff like "smaller government" and "financial responsibility" regardless of party affiliation.

Most people that say that, do the exact opposite.

WOW Really Paul? wrote:

GameboyRMH wrote:

Nick (LUCAS) Comstock wrote: These are the types of problems that I don't have to worry about. Ah, the benefits of not having money. It's a simpler way of living really.

Same here. The only reason I have a bank account at all instead of a fireproof safe is the convenience of the ATM system. There are those transaction fees for using the ATM though, don't know how to avoid them, apparently I'm doing something wrong...

Here in the US if you a member of a federal credit union, you pay zero ATM fees for transactions made at other FCU ATMs.

Meh, my bank doesn't charge me ATM fees ANYWHERE with ANY ATM. If the ATM charges me a fee, they credit it back to my account.

I don't buy that negative interests rates are coming says the dude who is in a zooming part of the economy. Actually I still don't buy it in the US.

Dr. Hess wrote: apmex.com has products you all should have. I'm not saying dump everything you have in it, but having some in it is a good idea. You know what? The price of gasoline, bread, a bushel of wheat, bullets, a suit is virtually unchanged when priced in gold or silver. A couple thousand years ago, a bushel of wheat was worth about $5 today when price in silver. A nice suite (toga) was about $1200 (1 oz) in gold. In the 60's, 22LR ammo was about .18 oz of silver per box of 50. Today, it is .20-.25 oz of silver per box. In paper or electron bit terms? You do teh maths.

Gold and silver are terrible investments. So you bought some gold in 1966 and it's worth just as much now in real dollar terms? Well, what would have happened if you bought stocks instead? You would have way more money. That's how it works. Commodities have you sitting on your hands getting nothing for your money. The money is not at work and it's not growing. And it costs money to turn it into a currency you can spend.

And if the economy collapses to the point that dollars aren't usable and stocks are gone - who is going to want your worthless metal? Nobody. They will want food and water.

Falling down the prepper rabbit hole results in a lot of wasted money and no wealth growth. Do it if you want but advising others to do the same like it's some sort of sane investment vehicle is bad advice.

Since we're talking finance, does anyone else feel like this IRL?

http://tvtropes.org/pmwiki/pmwiki.php/Main/AdamSmithHatesYourGuts

This seems like as good a place as any to mention that Tim and I watched "The Big Short" the other night, and cannot recommend it highly enough.

Turns out bankers, regulators, consumers... pretty much all of these people (and most others) are so stupid, greedy, self-involved, shortsighted and criminally selfish–but mostly stupid–that it's a wonder the economy functions at all. Who knew?

Seriously good movie. Makes economics and banking feel suspenseful, and the people who understand it a lil bit rock and roll.

Bottom line? This stuff ain't hard. People just leave it completely hands-off because they believe it is. Look at what your bank is [probably not] giving you, shop your money hard, move it often, and avoid as much as possible the David/Goliath interaction that is you and any financial institution.

Margie

In reply to dculberson:

Agree.... Why does Gold have any more intrinsic value than say a dollar bill? Sure you can make things out of it.. Let's see.. what can you make out of it. Monster cable end connectors.. umm jewlery.. um... you know useful things in the event of an economic collapse.

Marjorie Suddard wrote: Seriously good movie. Makes economics and banking feel suspenseful, and the people who understand it a lil bit rock and roll.

That's because the guys who are really good at it ARE a little bit rock and roll. The best in any high risk/skill profession are. Doctors, lawyers, race car drivers, bankers, and even rock and rollers.
Successful finance people are very interesting people to know.

I'm'a say guns. I've never lost money on guns. In fact I've made money on just about every transaction.

Marjorie Suddard wrote: ... avoid as much as possible the David/Goliath interaction that is you and any financial institution. Margie

So another vote for the bank of Sealey Posturpedic?

"Negative interest" is what what I get from my coworkers when I try and talk about racing.

In reply to dculberson:

I didn't say put it all in PM's, DC. It is not an investment, you are correct. It is insurance against stupidity. It has also always been worth something. And, it's actually always been worth about the same, versus, say, a dollar which is worth about 3 cents today, compared to only 100 years ago, and about 10 cents or so compared to 50 years ago.

Why do the bankers try to get their hands on it? It's worth something to them.

I've got that movie cue'd up, Margie.

You won't be disappointed, doc. And NoHome, not a vote for the mattress. More a vote for, wherever possible, putting your money to work for you without the need for an intermediary. For example, whenever possible, hold the paper on a property you sell and make that interest yourself. Pay attention to what your credit cards pay you in cash back, and walk as soon as you get a better deal. Take early pay discounts. That kind of stuff.

Most people walk by 1-2% all the time, thinking it's not much. But you won't find a bank that pays it. So yeah, behave as low interest rates dictate: Get your money out there working for you.

Margie

Dr. Hess wrote: In reply to dculberson: I didn't say put it all in PM's, DC. It is not an investment, you are correct. It is insurance against stupidity. It has also always been worth something. And, it's actually always been worth about the same, versus, say, a dollar which is worth about 3 cents today, compared to only 100 years ago, and about 10 cents or so compared to 50 years ago. Why do the bankers try to get their hands on it? It's worth something to them. I've got that movie cue'd up, Margie.

I can agree with that. But at the same time the Dow Jones has gone up 1311% (with dividends reinvested) in 50 years. So sitting on $1 cash for 50 years you're down to $.1. Sitting on commodities you've stayed roughly the same, but invested you've got $13.

Bankers try to get ahold of your money because they make money lending it out. Which is why you shouldn't leave it in the bank - make money off it!

I need to see the big short, but it might stress me out. ;-)

Grassroots Motorsports: Doom, Gloom and Zoom.

dculberson wrote: I can agree with that. But at the same time the Dow Jones has gone up 1311% (with dividends reinvested) in 50 years. So sitting on $1 cash for 50 years you're down to $.1. Sitting on commodities you've stayed roughly the same, but invested you've got $13. Bankers try to get ahold of your money because they make money lending it out. Which is why you shouldn't leave it in the bank - make money off it! I need to see the big short, but it might stress me out. ;-)

Yes, invested that dollar got you $13, maybe today (but not in 2009, and not next year, but maybe today). In PM's, that dollar gets you, say, $10. OK, actually 12.78 (1 silver dollar.71 oz/dollar 18 dollars /actual physical oz), so with zero risk (besides loss from theft), it is a wash there.

And banks today do not need your money to loan out. That's so 80's thinking. Now they get it for free from the Fed, that conjures it up from electron bits floating around the office.

Hey, I'd invest in something that I thought was stable, or had a chance to go up. And I do. There just isn't a lot to look at right now. P/E's are sky high. Oh, but non-GAAP they're great. Yeah, there's a reason the bean counters came up with GAAP, and that's to prevent the lying from non-GAAP.

Dr. Hess wrote: apmex.com has products you all should have. I'm not saying dump everything you have in it, but having some in it is a good idea. You know what? The price of gasoline, bread, a bushel of wheat, bullets, a suit is virtually unchanged when priced in gold or silver. A couple thousand years ago, a bushel of wheat was worth about $5 today when price in silver. A nice suite (toga) was about $1200 (1 oz) in gold. In the 60's, 22LR ammo was about .18 oz of silver per box of 50. Today, it is .20-.25 oz of silver per box. In paper or electron bit terms? You do teh maths.

I started accumulating 10 oz. silver bars many years ago…you have to buy $1,500+ (at least in California) to avoid paying sales tax and even then, you still take a significant hit on the Bid-Ask spread.

Q: How do you know a recession is coming?

A: You start seeing a bunch of old guys on TV standing in the rain (or some other metaphor) rambling on about “GOLD!”

dculberson wrote:

Dr. Hess wrote: In reply to dculberson: I didn't say put it all in PM's, DC. It is not an investment, you are correct. It is insurance against stupidity. It has also always been worth something. And, it's actually always been worth about the same, versus, say, a dollar which is worth about 3 cents today, compared to only 100 years ago, and about 10 cents or so compared to 50 years ago. Why do the bankers try to get their hands on it? It's worth something to them. I've got that movie cue'd up, Margie.

I can agree with that. But at the same time the Dow Jones has gone up 1311% (with dividends reinvested) in 50 years. So sitting on $1 cash for 50 years you're down to $.1. Sitting on commodities you've stayed roughly the same, but invested you've got $13. Bankers try to get ahold of your money because they make money lending it out. Which is why you shouldn't leave it in the bank - make money off it! I need to see the big short, but it might stress me out. ;-)

Spent 20 years in the market. Never really netted anything. My mutual fund managers get to make 3.75% regardless. If I do make any returns, the gov gets 25%. I get the risk.

In reply to NOHOME:

But that's like complaint about gold being expensive because you're paying a guy to guard it instead of burying it.

Vanguard is getting 0.05% of the overwhelming majority of my money. I do accept risk, but I'm comfortable with that.

mazdeuce wrote: In reply to NOHOME: But that's like complaint about gold being expensive because you're paying a guy to guard it instead of burying it. Vanguard is getting 0.05% of the overwhelming majority of my money. I do accept risk, but I'm comfortable with that.

Canadian government had to make Vanguard accounts illegal for Canadians to own, else there would be no Canadian mutual fund industry.