vnatale wrote: ↑
Wed Jun 30, 2021 11:06 pm
D1984 wrote: ↑
Wed Jun 30, 2021 10:53 pm
vnatale wrote: ↑
Wed Jun 30, 2021 10:27 pm
D1984 wrote: ↑
Wed Jun 30, 2021 10:11 pm
vnatale wrote: ↑
Wed Jun 30, 2021 10:03 pm
D1984 wrote: ↑
Wed Jun 30, 2021 9:55 pm
One good bank account bonus and you've made that $180 up and then some.....come to think of it, most banks only make you wait either 180 or 365 days since you last closed the account until you can do it over and get the cash bonus of anywhere from $100 to $800 again.
And assuming you have, say, $100K sitting around in T-Bills (or even in a savings account earning 0.5% which right now beats what T-Bills are paying) you'd be better off by some $3K a year if HM Bradley pays 3.5%; even if you only had $50K you'd be better of by $1,500 a year; that would more than pay for the $180 even if you didn't use your new simulated DD setup to nab yourself some account opening bonuses on top of that.
Now that I'm working so much less...I could easily accomplish what you describe. However, it goes greatly counter to why I'm investing all my cash in T-bills. Lowest risk.
OK....but if things ever get to the point where banks are failing left and right and the government can't
take them over and guarantee all insured deposits via FDIC and then reopen the bank a day or two later at most I think this country will be so screwed that even money in T-bills might end up either frozen, seized, involuntarily converted to longer-term bonds, or otherwise not easily accessible (and/or inflated away). As long as you keep bank account funds well under the FDIC limit you should be fine. AFAIK no one has EVER
lost money in an FDIC/NCUA insured institution if their funds were under the insured amount limit.
1) There could be selected bank failures. And, it seems like the ones who are paying more than others would be prime candidates for a future failure. Plus, when a bank is in that state....aren't they now exempt from honoring all these things that they promised to you plus tying up your money for months until things get settled?
2) I know TIPS are generally reviled here..but they would offer some inflation protection.
1. When banks are offering higher rates it can
mean they are desperate for funds and are in an economically dicey situation and/or need to pay higher rates because they are a riskier proposition for depositors....but typically it means they are doing well and have found plenty of opportunities to make loans and thus are having to offer higher rates to get said deposits in order to have more money to lend out; they figure having to pay a higher rate on borrowed capital to lend out is a small price to pay to actually have
more money to lend....and money to lend is what they need most when business is booming. Alternately, the whole thing could just be a promo rate (the bank trying to get new money....presumably hoping that some of it will "stick" even if/when they lower the rate) but if that's the case neither of the above applies and your money is still at no more risk than it would be in an average FDIC-insured bank.
When/if a bank fails the high interest rate would apply to the day the FDIC took them over if it was on a checking or savings account; if it was on a CD you they can reset the rate once the new bank the FDIC sold the failed bank to takes over but they have to notify you and give you a period of time to let you break the CD without penalty if they do that. Also, I've had one bank I've had an account with fail and one get taken over on a Friday afternoon and get sold by the FDIC right before it would've failed (kind of a forced merger with a stronger bank; the shareholders and preferred stockholders lost everything; the unsecured debenture holders took a haircut; the secured bondholders simply had their bonds converted to obligations of the new stronger bank at the same maturity and rate as before, and depositors like me who had money that was under the insured limit lost nothing; in neither case did it take months or even weeks; in the first case it took a day; in the second one when the bank reopened on Monday I just had an account with the exact same account number at the new bank (and I would've had access to the account immediately on Saturday had I needed it since the new bank was open from Saturday morning until 2 PM so I wouldn't really have eve had to wait until Monday); the new bank even replaced any paper checks we had unused from the old bank free of charge and issued us debit cards within a few days (sent by second day mail); I haven't written a check since maybe 2002 so I didn't have any old checks but I could've gotten cash from the new bank with no problem had I needed/wanted it.
Theoretically FDIC can
(i.e. is legally allowed to) wait as long as need be until they allow you access to your money when a bank fails but they aren't exactly disposed to do this simply because doing so could help lead to a repeat of the banking crises of 1931 and 1933 (i.e. if people think their money will be lost/locked up/inaccessible when and if a bank fails they may start a bank run and thus in a "self-fulfilling prophecy" manner precipitate the very bank failure they were worried about) if it happened at even one or two failed banks over a short period of time; also, the FDIC has a line of credit directly from the Treasury and Fed in order to forestall liquidity issues like this; finally, if a new stronger bank takes over the failed bank then it is in the stronger bank's economic self-interest (i.e. providing good customer service in order to retain depositors) to NOT delay you one bit in accessing your own money in your bank account.
2. Which would be fine if short-term TIPS weren't paying -2.6% (or even worse!) right now. Got I-Bonds? If you want to buy more than $10K a year Arizona and Wyoming LLCs are cheap and trusts set up with those $45 DIY trust kits are cheaper still.....
1. Are you familiar with this: https://en.wikipedia.org/wiki/Rhode_Isl ... ing_crisis
Since it happened in Rhode Island it's not completely unlikely to happen in another state at some point in our lives.
"Though the state persisted in taking measures to ensure people recouped their losses, progress was slow. The Governor announced a plan to allow depositors to withdraw up to half of the funds in their accounts up to a certain amount, but repayments to clients of still-closed banks did not begin until six months after the initial closure. Eight months in, 200,000 customers at 13 institutions still could not access their deposits worth about $1.2 billion. After a year, only 36 of the 45 institutions had reopened, and most of the biggest remained closed, including Rhode Island Central, the state's second largest credit union. By that time, depositors with small accounts of $2,500 or less had been repaid in full, but others with money at the nine still-closed institutions had only received about 10% of their funds. Two and a half years after the closure, a small number of depositors still did not have access to their money."
I believe that one of Harry Browne's tenets is to not chase yield with that type of risk...and to confine your risk to the three volatile components of the Permanent Portfolio.
2. Are you referring to actual TIPS or TIPS funds with those yields?
What are the annual costs in Arizona and Wyoming for their LLCs? It has been awhile but I believe a Massachusetts LLC requires a $500 annual fee plus other associated annual costs.
1. Yes, but how many of those institutions that failed were privately (or quasi-privately and/or only at the state government lever) insured by RISDIC vs how many were FDIC insured from the get-go? You couldn't pay me enough to put money in a privately insured bank or credit union; back in 2007 there were a few credit unions offering 6.75, 7, and 7.25% CDs but when I saw that they were insured through ASI (American Share Insurance) rather than NCUA I was like "yep, that's a nice tall glass of hell no". Private share insurance doesn't really work if more than a few banks fail at a time unless the insurer is so large as to have tens or hundreds of billions in reserves and/or reinsurance....which RISDIC clearly did not. Also, from what the article says RISDIC had problems with conflicts of interest and was thus kind of a "self-regulation" situation...and it also suffered from adverse selection (by the time of the failures almost of all the CUs insured by RISDIC were the weak or unsound ones since the good ones had already switched to FDIC/NCUA coverage and only the crappy ones were unable to obtain this coverage). None of this happens with the FDIC; how many insured shareholders had their money locked up for months or years in 2008/2009?
2. Arizona LLCs cost $50 one time to the state to set up; agent fees and fees for publication of the registration cost anywhere from $39 to upwards of $250; a few counties charge an additional (one-time) fee of $30 or more as well if the LLC is located/registered there. Missouri is $50 one time to file; I'm not sure about agent fees in MO. Wyoming LLCs cost a $100 one time to file and their state annual fee system is sort of weird; it's based on the amount of assets actually in Wyoming (so keep your paper I-bonds in Massachusetts and your electronic ones at TreasuryDirect) but even if you have no assets with an actual situ in or nexus with Wyoming the bare minimum fee to the state of Wyoming annually is still $50.
That Massachusetts LLC fee sounds like a rip-off....Tennessee, New York, DC, and North Carolina have high filing and annual fees but Massachusetts takes the cake with a $500 one time filing fee and a $500 annual fee IIRC (and that's not even counting agent fees). Theoretically you could come out worse using a Tennesse LLC (they have a maximum one-time registration fee of $3K for LLCs with 60 members or more and they also levy a franchise tax and excise tax on LLCs and not just corporations) but for a small single-member LLC that holds non-state taxable stuff like Treasury securities Massachusetts claims the dubious honor for being pretty much the most expensive. IIRC I do believe you can file a foreign registration for an LLC in another state if you don't want to pay Massachusetts fees, though; I think I mentioned the details of that in my PM from a year or two ago.
3. Actual TIPS yields taken from WSJ and Barron's for anywhere from six-month TIPS (or rather, ones with less than six months to maturity), 1 year TIPS, and 2 year TIPS. TIPS ETFs/mutual funds may not show a negative yield but there is no free lunch; any short-term TIPS fund will experience either: A. A decline in NAV at maturity and/or B. A negative yield on its TIPS; bond funds can't just wish away negative nominal yields. Now, if inflation does spike then that negative 2.6% yield might not be so bad....but even if it hits 10% (which isn't very likely at all) and you get a 7.4% return you've still earned a negative 2.6% real
return just because that was the starting yield. I-Bonds never have this issue; this worst you'll get is a slight penalty for turning them in before five years (and if you have a nice ladder set up you're good to go once you have a decent chunk of them maturing every year and they are all mostly older than five years). Plus.....TIPS also have real interest rate risk (if rates rise enough they can still lose money if not held until maturity...and if bought in the secondary market they can lose money even if they are
held to maturity presuming you bought them at a high enough price and low enough yield); I-Bonds do not.