All America Bank 1.5%

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jhogue
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Re: All America Bank 1.5%

Post by jhogue » Wed Aug 02, 2017 9:38 am

Jeffreyalan wrote:-Inflation-protection for 30 years/ rate resets 60 times (no CD has that)


Why the assumption that a rate reset is always in your favor? Inflation has only ticked up .47% in the last 3 months. If that continues the the ibond rate reset coming up may be half of my cd rate. And if deflation hits you could be looking at a 0% rate for a period.
Jeffreyalan,

1. All you want from the I bond semi-annual rate reset is to track the current inflation rate as closely as possible. If you buy a 5 year CD from FDIC-insured Desert Friendly Bank in an era of flat 2% inflation, your CD is guaranteed to lose 10% of its value at maturity to inflation. Buy an I bond and you will lose 0% to inflation in 5 years.

2. If deflation should suddenly hit, I bonds are guaranteed not to go negative in value. That downside protection from deflation is one of the reasons why I bonds are a better deal than TIPS. If we should enter a longer period of deflation with ultra-low or even negative interest rates (like Japan, Switzerland, or Denmark), US investors will be kicking themselves for not scooping up EE bonds, which are guaranteed to double in value in 20 years (3.53%).
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Desert
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Re: All America Bank 1.5%

Post by Desert » Wed Aug 02, 2017 1:39 pm

jhogue wrote:
Jeffreyalan wrote:-Inflation-protection for 30 years/ rate resets 60 times (no CD has that)


Why the assumption that a rate reset is always in your favor? Inflation has only ticked up .47% in the last 3 months. If that continues the the ibond rate reset coming up may be half of my cd rate. And if deflation hits you could be looking at a 0% rate for a period.
Jeffreyalan,

1. All you want from the I bond semi-annual rate reset is to track the current inflation rate as closely as possible. If you buy a 5 year CD from FDIC-insured Desert Friendly Bank in an era of flat 2% inflation, your CD is guaranteed to lose 10% of its value at maturity to inflation. Buy an I bond and you will lose 0% to inflation in 5 years.

2. If deflation should suddenly hit, I bonds are guaranteed not to go negative in value. That downside protection from deflation is one of the reasons why I bonds are a better deal than TIPS. If we should enter a longer period of deflation with ultra-low or even negative interest rates (like Japan, Switzerland, or Denmark), US investors will be kicking themselves for not scooping up EE bonds, which are guaranteed to double in value in 20 years (3.53%).
Ok, now you're just being dishonest. I was temporarily under the impression that you were bringing some value to the conversation, but obviously you are not.
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jhogue
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Re: All America Bank 1.5%

Post by jhogue » Thu Aug 03, 2017 8:18 am

Desert wrote:
jhogue wrote:
Jeffreyalan wrote:-Inflation-protection for 30 years/ rate resets 60 times (no CD has that)


Why the assumption that a rate reset is always in your favor? Inflation has only ticked up .47% in the last 3 months. If that continues the the ibond rate reset coming up may be half of my cd rate. And if deflation hits you could be looking at a 0% rate for a period.
Jeffreyalan,

1. All you want from the I bond semi-annual rate reset is to track the current inflation rate as closely as possible. If you buy a 5 year CD from FDIC-insured Desert Friendly Bank in an era of flat 2% inflation, your CD is guaranteed to lose 10% of its value at maturity to inflation. Buy an I bond and you will lose 0% to inflation in 5 years.

2. If deflation should suddenly hit, I bonds are guaranteed not to go negative in value. That downside protection from deflation is one of the reasons why I bonds are a better deal than TIPS. If we should enter a longer period of deflation with ultra-low or even negative interest rates (like Japan, Switzerland, or Denmark), US investors will be kicking themselves for not scooping up EE bonds, which are guaranteed to double in value in 20 years (3.53%).
Ok, now you're just being dishonest. I was temporarily under the impression that you were bringing some value to the conversation, but obviously you are not.
Oh horsefeathers!

Reread my post. I take it for granted that most people on this forum understand the insidious effects of inflation that can drag down a 3% advertized CD rate to a mere 1% annualized real rate of return over 5 years.

Is something else bothering you in our discussion of the relative merits of CDs vs. I bonds? You did not respond to my example of the inferior tax treatment of CDs in an IRA at age 70 ½ versus a 30 year tax deferred I bond.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Desert
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Re: All America Bank 1.5%

Post by Desert » Thu Aug 03, 2017 9:44 am

jhogue wrote:
Desert wrote:
jhogue wrote:
Jeffreyalan,

1. All you want from the I bond semi-annual rate reset is to track the current inflation rate as closely as possible. If you buy a 5 year CD from FDIC-insured Desert Friendly Bank in an era of flat 2% inflation, your CD is guaranteed to lose 10% of its value at maturity to inflation. Buy an I bond and you will lose 0% to inflation in 5 years.

2. If deflation should suddenly hit, I bonds are guaranteed not to go negative in value. That downside protection from deflation is one of the reasons why I bonds are a better deal than TIPS. If we should enter a longer period of deflation with ultra-low or even negative interest rates (like Japan, Switzerland, or Denmark), US investors will be kicking themselves for not scooping up EE bonds, which are guaranteed to double in value in 20 years (3.53%).
Ok, now you're just being dishonest. I was temporarily under the impression that you were bringing some value to the conversation, but obviously you are not.
Oh horsefeathers!

Reread my post. I take it for granted that most people on this forum understand the insidious effects of inflation that can drag down a 3% advertized CD rate to a mere 1% annualized real rate of return over 5 years.

Is something else bothering you in our discussion of the relative merits of CDs vs. I bonds? You did not respond to my example of the inferior tax treatment of CDs in an IRA at age 70 ½ versus a 30 year tax deferred I bond.
Maybe you could reread your own post. In bold, above, you claim that a 5 year CD will lose 10% of its value to inflation. In your latest post, you correctly acknowledge a real return of 1%.
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Xan
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Re: All America Bank 1.5%

Post by Xan » Thu Aug 03, 2017 10:44 am

Desert, I believe he was looking only at the inflation losses, not the interest gains. He's trying to say that at the end of a 5-year CD, regardless of what you've gained, take out 10% of the total value of the CD for inflation.
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Desert
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Re: All America Bank 1.5%

Post by Desert » Thu Aug 03, 2017 1:35 pm

Xan wrote:Desert, I believe he was looking only at the inflation losses, not the interest gains. He's trying to say that at the end of a 5-year CD, regardless of what you've gained, take out 10% of the total value of the CD for inflation.
Maybe ... but then the next sentence claimed I bonds lose nothing to inflation. At best, it's a confusing, inconsistent argument.

This is pretty simple stuff: The 3 percent CD gives a 1 percent real annual yield in a 2 percent inflation environment. The I-bond gives zero percent real.
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