All America Bank 1.5%

Discussion of the Cash portion of the Permanent Portfolio

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LC475
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Re: All America Bank 1.5%

Post by LC475 » Thu Jul 20, 2017 10:06 am

Desert wrote:You may be right, or you may be wrong. When it comes to end-of-republic promises, I won't put much value in FDIC or treasury promises. The most likely scenario would be inflating away the obligations, in which case both would suffer more or less equally.
OK, let's break this down. There is a scenario in which everything denominated in the dollar collapses, because the dollar is being destroyed. That is the scenario you are focusing on in the above post. And you're right, of course: in that scenario both dollar accounts in banks and dollar-denominated Treasury Notes would be wiped out. As a side note, that would be OK and hunky-dory, of course, for us as Permanent Portfolians, because our gold would do well.

But there are other scenarios.

Many of them.

I can envision a scenario wherein there's some bad banking problems, or a crisis or war, and in the end the decision is made that account holders will get 80 cents on the dollar. We've got to pull together as a nation and share the load, doncha know. Everybody's hurting, and it's only fair to share the pain.

Were this to happen, it would not cause any big long-term ramifications for the government. (At least not inevitably, in and of itself I mean -- it could make people mad and trigger a revolution or something, but anything could trigger a revolution). Things would go on; no big deal.

Defaulting on Treasury Notes would be a much more serious decision, with much more serious consequences. The aftermath of a Treasury default would see major changes in the government's finances. Anyone looking at the government's current finances can see that issuing Treasury Notes is a major, crucially important part of how they are funded and are able to operate. This is in contrast to the FDIC, which is a relatively small, minor cabinet agency that does not play a direct critical role in the government's financial structure.

Issuing notes and bonds is an essential tool for the gov't. Getting rid of that tool would be akin to, oh, let's say repealing the income tax. It could be done, things could be rearranged to accommodate it (for example maybe just conjure more money more quickly, as you suggest), in theory it's possible, but it would be a massively consequential decision.

So that's the logic of it. If there were a Venn Diagram called Government Crises, the circle labeled "Wherein the Gov't Defaults on its Own Treasury Notes" is a small one, entirely subsumed in the much larger circle labeled "Scenarios In Which the FDIC Fails to Bail Out Banks, Either in Whole or In Part." It's very small, and up in the far extreme corner of the bigger circle. Things would have to get awfully dire for the government to choose to default. It would be a desperate act, like cutting off one's leg to try to save one's life while in a disease-infected jungle far from any sterilization.

More solidly, I guess I feel that I am more likely to be able to see a default scenario coming than a bank failure/seizure/something-less-than-perfect-wherein-depositors-lose-money scenario. So, with Treasuries I will be able to get out in time and save my wealth, whereas with banks the bank can quite suddenly just lock its doors, shut down its website, and thus lock me out and, well, what could I do? As you say, I could be right, or I could be wrong.
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Re: All America Bank 1.5%

Post by jhogue » Sat Jul 22, 2017 7:15 am

dear pugnacious,

I understand that you were one of the injured parties in the 2008 comedy of errors. That is why I found your story so compelling.

What I don’t understand is why you keep recommending FDIC-insured bank accounts for PP cash on this forum. Are you some kind of financial masochist? You of all people should be poster boy, spokesman, and evangelist for Treasury-backed securities!

Just because you have to keep a finite portion of operating cash for business convenience’s sake in a local bank doesn’t mean you have to have to declare unconditional surrender and get fitted for a financial milking machine by Jamie Dimon and his gang of thieves at TBTF (but FDIC-insured) JP Morgan Chase. People like you who lived through the 2008 FDIC bailouts not only have a story to tell, they have been forewarned and ought to be planning a different future for their cash. Be creative! There are real alternatives. Let me suggest a few and perhaps others on the forum will chime in.

1. First of all, start thinking of the conversion of your cash from FDIC-backed to Treasury-backed as a longer term project, not a single event. About a year after I converted my investments to the Permanent Portfolio, I started a simple one page spreadsheet for PP cash showing all of my accounts, what types of cash funds they have, and what percentage of the entire portfolio is Treasury-backed. Now I watch that percentage rise over time while the percentage of FDIC-backed cash falls. I should also add that when I did this it began to dawn on me that I had not really been treating cash as an investment—partly because it has paid so little interest since the Fed decided to artificially crush interest rates.

2. Tax-deferred accounts (IRAs, Roth IRAs, SEP-IRAs, etc.) are prime candidates for rapidly increasing Treasury-backed securities in the form of ETFs like BIL and SHY that you can buy for under $1,000. If you have over $1,000 you can buy your own short term Treasury bills through most brokerage houses for the lovely expense ratio of 0%! These may provide the most immediate shift in your cash portfolio composition, especially if you are keeping a good chunk of cash in them for PP rebalancing.

3. For longer term holdings, I recommend beginning an I bond ladder, or what Medium Tex described as “deep cash” for cash in the PP that you don’t need in the next year. I bonds expand the tax deferred space outside retirement accounts described above. Laddering means that in ten years’ time you could have a stash of over $100,00 in Treasury Direct that is 90% liquid and 100% tax deferred. I bonds also offer a unique kind of institutional diversification because you can buy them both in electronic form from Treasury Direct and also in paper form with your annual tax return refund.

4. Because their tax deferral lasts for 30 years and they have a tangible form, paper I bonds represent a unique opportunity to co-own US savings bonds with your children, grandchildren, nieces, nephews, etc. As gifts, they become a teachable moment to pass on valuable stories of saving and investing—like how Grandpa Pugchief survived the FDIC-sponsored bailouts way back in 2008 and saved his dental practice by refusing to hand over his hard-earned money to the bad old wolf, a.k.a. JP Morgan Chase.
“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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Re: All America Bank 1.5%

Post by Hal » Sat Jul 22, 2017 2:49 pm

[align=][/align]Another cautionary tale on why to hold treasuries and not to chase returns....

https://en.wikipedia.org/wiki/Pyramid_Building_Society

Many friends were financially ruined because of this.

PS. Check out the interest rates on the flyer. Sounds too good not to invest!
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Re: All America Bank 1.5%

Post by dualstow » Sat Jul 22, 2017 2:55 pm

Hal wrote:[align=][/align]Another cautionary tale on why to hold treasuries and not to chase returns....

https://en.wikipedia.org/wiki/Pyramid_Building_Society
...
Wow!
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Re: All America Bank 1.5%

Post by Hal » Sun Jul 23, 2017 6:33 am

However, you may wish to check how your particular country's insurance scheme is funded.....

Have a look at Table 1 on page 52 of the link. https://www.rba.gov.au/publications/bul ... 1211-5.pdf

For example, no funds have been put aside in Australia to fund the scheme.
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Re: All America Bank 1.5%

Post by dualstow » Sun Jul 23, 2017 2:17 pm

I'm using Vanguard's Prime money market fund for *some* cash now.
Living on the edge. O0
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Re: All America Bank 1.5%

Post by Jeffreyalan » Sun Jul 23, 2017 2:27 pm

I use a small mutual savings bank in Mass. It gives me the illusion of safety!
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Re: All America Bank 1.5%

Post by dualstow » Sun Jul 23, 2017 9:14 pm

Desert wrote:
dualstow wrote:I'm using Vanguard's Prime money market fund for *some* cash now.
Living on the edge. O0
Dude, that's insanity. I hate to do interventions, but I'm thinking about one now ... you are completely off the reservation. O0
And I don't care who knows it. Whoo hoo I feel so free!
RIP Marcello Gandini
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Re: All America Bank 1.5%

Post by jhogue » Mon Jul 24, 2017 7:16 am

Desert wrote:Only on this forum would FDIC-insured accounts be thought of as high risk. I think it's being overplayed just a tiny bit. I feel like I'm reading about private REITs and junk bonds here. Yes, there is a liquidity risk with CD's and savings accounts. If the bank fails, you may not get the money the next day. And that's a serious consideration for some people, for some of their funds. But bonds also have interest rate risk, and CD's have the clear advantage here. In the event of rapidly rising rates, you can't exit a medium or long term treasury with only a loss of 6 months of interest. Also the risk of lower yields and the erosion of inflation are greater with treasuries, when compared with the best CD's. There's a place for both. I don't hold the PP any longer, so I look at all fixed income as a single allocation that I'd like to at least keep up with inflation, while the smaller slice of higher risk equities provide the growth. The best risk-adjusted fixed income returns I can find are CD's. The CD market is less efficient than the treasury market, so it comes with higher liquidity risk and greater return. I don't want to talk anyone into using FDIC insured products, but to paint them as anything but very low risk just isn't accurate.
dear Desert,
Thanks for reading my post and responding.

1. Just to be clear, I did not say and do not think that FDIC-insured accounts are “high risk.” I stated that Treasury-backed I bonds have “less principal risk than FDIC-insured CDs or bank accounts.” In reciting the perils of Pugchief’s adventure with WaMu and the milking crew at FDIC-insured JP Morgan Chase, I thought I advanced an empirical case for preferring Treasury-issued over FDIC-insured debt, even under less than catastrophic conditions. But 2008 DID happen in our living memory, not in some far off past or imagined future. Perhaps that case was not particularly compelling. Or, perhaps you believe Janet Yellen’s pronouncements last week before Congress on the state of the banking system. Or, perhaps people are exhibiting crowd behavior, chasing yield, and covering it up with a collective case of cognitive dissonance. Or, I dunno… Which do you think it is?

2. I take very seriously the concern you expressed about inflation’s effect on Treasurys. We will all be crossing our fingers that stocks and gold in the PP will once again take up the slack when LTTs are getting crushed in the next turn of the cycle.

But for the cash or STT portion of fixed income accounts, I regard the creation of Treasury-backed I bonds as a significant financial innovation that deserves more attention from savers and investors, whether they hold a PP or not. Consider this: which has more inflation protection, a 5 year CD, or an I bond held for 5 years? During that 5 year period, an I bond is guaranteed to reset 10 times (tax deferred) according to changes in the CPI-U. I am not aware of any CD that does that. With CDs, I guess you would have to keep selling and buying when rates change, paying taxes on the income each time you decide to sell. Not only that, if you are really worried about long term inflation, you can buy and hold an I bond for 30 years, tax deferred. During that period of time, your I bond gets reset for inflation 60 times but is guaranteed to never drop below zero. Is the risk-adjusted return of a 30 year CD better than that?

(Last time I checked at Fidelity, you can’t even buy a 30 year CD. Ever wonder why?)
“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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Re: All America Bank 1.5%

Post by sophie » Mon Jul 24, 2017 8:02 am

Desert's right in that most people don't think of FDIC-backed savings accounts as "high risk". But I agree with jhogue: they are highER risk than Treasuries, and a few recent events (2008 and Cyprus come to mind) proved that point nicely. The problem is that such a crisis is exactly when you're most likely to want access to your cash.

It depends what the goal of your cash is. Cash in the Permanent Portfolio can include your emergency fund, but it performs several functions: 1) a source of investment income, 2) "dry powder" for rebalancing into assets that have dropped sharply in value, like stocks do on occasion, and 3) a safe and absolutely reliable parking place for funds. Savings bonds don't work for dry powder but they are ideal for #3. Treasury bills work for all three functions. I don't consider CDs to be an ideal vehicle for job #3, nor for job #2 because when the stock market & economy crashes, the bank isn't going to be happy when you ask to liquidate a CD. The fine print says they don't have to honor your request, nor is there a set amount of time for them to do so.

I don't have a set proportion for those different tasks and it will certainly be different for everybody, but I figure about 1/3 my cash allocation for dry powder and another 1/3 in the absolute safety category.
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Re: All America Bank 1.5%

Post by dualstow » Mon Jul 24, 2017 8:15 am

fine print says they don't have to honor your request, nor is there a set amount of time for them to do so.
Good to know! I was weakening, thinking about joining my friends who buy CDs. (they're non-pp people). I'll stick to bills and notes for the majority, and Prime mm & i-Bonds for the icing.
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Re: All America Bank 1.5%

Post by dualstow » Mon Jul 24, 2017 11:26 am

MangoMan wrote:You guys crack me up. What makes you think Vanguard Prime is safer than a CD?
I don't. I wouldn't put 80% of my pp cash in CDs, and I wouldn't put it in Prime. Now, is it more probable that the bank would cause trouble than Vanguard would if I tried to redeem a CD/ transfer out of Prime during a crisis? I have no idea. When it comes to safety, I think of them both as simply inferior to Treasuries and "pretty safe." Beyond that, I don't know and I don't care, because 20% or less is in them.

I do find the money market convenient. Easy to transfer funds. Don't need to keep repurchasing new instruments.
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Re: All America Bank 1.5%

Post by jhogue » Mon Jul 24, 2017 12:02 pm

Dear Pugchief,

Eureka!

You said,

”As you noted however, this wasn't an investment account but small business checking, and last I checked, Treasury Direct does not offer a T-bill secured account for said purposes. So I really didn't have too many options.” (7/20/17)

and ,

“Also will again point out that a small business checking is not an 'investment account', but used for operating funds only. “ (7/23/17)


Great news!
Fidelity now offers a small business account with the option of a core Treasury money market fund (FZFXX). They also have half a dozen brick-and-mortar offices in the greater Chicago area for your convenience.

https://www.fidelity.com/customer-servi ... s-complete

Armed with this information, you need never again have to worry about being mistaken for a Holstein and milked by TBTF (but FDIC-insured) megabanks! I am so happy for you!!
“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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Re: All America Bank 1.5%

Post by dualstow » Mon Jul 24, 2017 1:29 pm

During this thread, my participation in a t-bill auction executed.
Hope I got an OK rate.
RIP Marcello Gandini
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Re: All America Bank 1.5%

Post by thisisallen » Mon Jul 24, 2017 5:48 pm

Did I lose the plot here? This is a discussion in the Cash sub forum. Are people suggesting to use I bonds and CDs as cash in the PP?
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Re: All America Bank 1.5%

Post by Jeffreyalan » Mon Jul 24, 2017 7:58 pm

While we are on the topic of I Bonds, I have a general question. It seems most posters here are of the opinion that the Treasury will never outright default on their bonds, but will instead opt to pseudo-default by inflation. If one believes that then part of that scheme would have to be the under reporting of the inflation numbers. It seems to me that there would be no use to inflate the debt away if you reported the exact correct inflation numbers and therefore govt salaries, social security, TIPS, Ibonds etc all grew at the rate of inflation. I sure would feel like a sucker holding a bond with a zero fixed rate that was earning the "official" rate of inflation while "real" inflation was twice that amount. Thoughts?
Last edited by Jeffreyalan on Mon Jul 24, 2017 8:24 pm, edited 1 time in total.
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Re: All America Bank 1.5%

Post by jhogue » Tue Jul 25, 2017 5:40 pm

Jeffreyalan wrote:While we are on the topic of I Bonds, I have a general question. It seems most posters here are of the opinion that the Treasury will never outright default on their bonds, but will instead opt to pseudo-default by inflation. If one believes that then part of that scheme would have to be the under reporting of the inflation numbers. It seems to me that there would be no use to inflate the debt away if you reported the exact correct inflation numbers and therefore govt salaries, social security, TIPS, Ibonds etc all grew at the rate of inflation. I sure would feel like a sucker holding a bond with a zero fixed rate that was earning the "official" rate of inflation while "real" inflation was twice that amount. Thoughts?
Dear Jeffreyalan,
1. I am one of those who is of the opinion that the Treasury will not “outright default on their bonds.” Why? Because I am a historian. I can’t know it for certain—no one can—but I do have two centuries of consistent data that includes the dislocations of two world wars, the biggest depression in world history, bouts of high inflation, decades on and off the gold standard, a number of real estate bubbles, frequent stock market crashes, and a civil war that almost tore the nation in two and killed upwards of one million of its citizens. The U.S. Treasury is not perfect by any means, but Alexander Hamilton’s creation remains, to paraphrase Winston Churchill, the worst financial system in the world—except for all others.

2. I am also of the opinion that the Federal Reserve Open Market Committee (FOMC), which sets short term interest rates, has an inflationary bias. Why? Take Janet Yellen’s word for it, not mine. She regularly proclaims it from the mountain tops for all to hear. It is an article of faith for those of her academic stripe and her actions as Fed chair consistently match her words.

3. I do not believe that there is a “scheme” to underreport inflation. Why? See 2. above. The “inflationistas”—from Paul Krugman to Janet Yellen don’t hide their views because they believe inflation is good for the economy. Why should they mis-report inflation? Besides that, millions of Americans with Social Security, military, and federal pensions get annual inflation adjustments based on the Consumer Price Index (CPI). They also have powerful lobby groups in Washington who you can bet your bottom dollar would raise a ruckus from here to kingdom come if somebody tried to cook the books on the compilation of CPI.

4. On the subject of I bonds, I was a sceptic too until I began reading and thinking about Medium Tex’s posts about I bonds on this forum. MT pointed out that THE ONLY THING that I bonds have to do to make them attractive for PP Cash is to beat the yield of a 1 year Treasury. A 1 year Treasury is a simple gauge of no-risk, guaranteed minimum return for PP Cash (Tyler, for instance, uses 1 year Treasurys for STT numbers in his wonderful graphics). One year is also, coincidentally the minimum time you must hold an I bond before you can redeem it. At that point, you can either keep your I bond (if you like the new rate) or sell your I bond (if you think the new rate stinks).

So how have I bonds done in practice, you may ask? Consider a concrete example:

If I bought an I bond purchased in November 2016, from Nov. 16 to April 17 the 6 month yield was 2.76%. From May 2017 to October 2017 the re-set 6 month yield was 1.96%, for an annualized yield of 2.36%, redeemable on 1 November 2017. That was the variable yield only; the additional fixed yield set at the time of purchase was a disappointing 0%. (The I bond yield is composed of both a fixed rate and a variable rate that automatically reset each 6 months based on the CPI-U inflation figures).

In comparison, a 1 year Treasury, sold on 11/02/2016 with a maturity of 11/02/17, has a yield when held to maturity of 1.08%. The best 1 year CD available (from Fidelity brokerage) in November 2016 had a coupon of 1.50%. That means my I bond handily outperformed my PP standard STT by 1.28 % and the “best deal” FDIC-insured brokerage CD by 0.86%!

THIS IS FREE LUNCH FOR THE MIDDLE CLASS, PEOPLE! GET YOURS NOW!!

So, Jeffreyalan, the first error in your post was your assumption that if there is an inflationary bias among economic officials, then there must be some kind of “scheme” to under report inflation. The Department of Labor bureaucrats who compile CPI-U figures would have a good laugh at that one. There is a lot of argument among professional and academic economists over tweaks in the formula used to compute the real rate of inflation (just as there is in the unemployment figures), but it is pretty much all out there in the open.

The second error in your post was misunderstanding how the I bond rate is computed. The I bond yield is composed of BOTH a fixed component and a variable component. It’s nice to have a fixed component that is higher than 0%, but the variable rate alone can still make I bonds attractive compared with a 1 year Treasury bill or a 1 year CD. I bonds have other attractive features for savers and investors, but those are just the icing on the cake.

You do eat cake, don’t you?
Last edited by jhogue on Tue Jul 25, 2017 7:26 pm, edited 2 times in total.
“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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Re: All America Bank 1.5%

Post by jhogue » Tue Jul 25, 2017 6:34 pm

MangoMan wrote:
Jeffreyalan wrote:While we are on the topic of I Bonds, I have a general question. It seems most posters here are of the opinion that the Treasury will never outright default on their bonds, but will instead opt to pseudo-default by inflation. If one believes that then part of that scheme would have to be the under reporting of the inflation numbers. It seems to me that there would be no use to inflate the debt away if you reported the exact correct inflation numbers and therefore govt salaries, social security, TIPS, Ibonds etc all grew at the rate of inflation. I should would feel like a sucker holding a bond with a zero fixed rate that was earning the "official" rate of inflation while "real" inflation was twice that amount. Thoughts?
As CraigR was fond of saying, "Don't buy fire insurance from the arsonist."
CraigR was referring to the mistaken use of TIPS as a substitute for gold, not for the use of I bonds in PP Cash.
“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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Re: All America Bank 1.5%

Post by jhogue » Tue Jul 25, 2017 8:29 pm

Dearest Pugchief:

Of course I bonds are for sale right now! You can buy them 24/7/365 at Treasury
Direct.

You used to be able to buy I bonds over the counter at FDIC-insured banks like WaMu and TBTF mega bank JP Morgan Chase, both of which I gather you have some passing familiarity. WaMu also offered some really hot rates on CDs too, just before they went into receivership. Did you get any of those?

Jamie Dimon and his gang of thieves never did make much money on US savings bonds, however, since they carry a 0% expense ratio. Perhaps that is why Mr. Dimon ordered his minions to dump the bank’s advertising for the savings bonds program and focus on more lucrative ventures, such as milking small business accounts they acquired in the fire sale of WaMu assets. I believe I have heard, however, that some of the more pugnacious clients objected to this scheme and bolted for greener pastures, rather than being treated like one of Grandpa’s Holsteins.
“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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Re: All America Bank 1.5%

Post by sophie » Wed Jul 26, 2017 7:22 am

Pugchief, be nice!

Of course these things (I bonds, CDs, T bills) are not similar and jhogue knows that perfectly well. He's just saying that if you're buying CDs purely for the higher yield, you should consider an I bond instead. That's a reasonable suggestion.

Jhogue, an I Bond isn't automatically more appropriate for a given situation than a CD or T bill. There is a higher bar to selling one especially as time goes on, because the deferred taxes would all be due at the time of sale and you give up future tax deferment on that bond. There is also the little matter of not being able to sell an I Bond at all for the first year.
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Re: All America Bank 1.5%

Post by jhogue » Wed Jul 26, 2017 9:46 am

I don’t quite understand why Desert (and you Pugchief) seem to regard a comparison of an I bond to a 1 year CD for PP cash to be “not relevant” or “ridiculous.” Why is that?

So, here are my calculations for a contest between a 5 year CD (“typically the sweet spot” according to Desert’s post) and a standard-issue I bond. Both securities sold/issued 5 years ago in July 2012. Sources are shown, By all means check my math and data:

5 year CD : July 2012 to July 2017
5 year CD rate at purchase: 1.1% (compounded annually)
Sale price: $1,000.00
Interest: $56.22
Value: $1,056.22 (matures 7/2017)
Source: bankrate.com website: (chart of 6 mo., 1yr., and 5yr. CD rates)
http://www.bankrate.com/banking/cds/his ... 6/#slide=1

I bond : July 2012 to July 2017
I bond rate issue: 07/2012 – final maturity 07/2042 (30 years)
Issue price: $1,000.00
Interest: $72.80
Current interest rate: 1.96% (No early withdrawal penalty. Next reset 1 Nov. 2017)
Value: $1,072.80 (as of 7/2017).
Source: Treasury Direct website:
https://www.treasurydirect.gov/BC/SBCPrice


- Over the last five years inflation has been low. If inflation should ramp up over the next five years, the inflation-protection of I bonds’ resets will really kick in. When that happens I imagine that some CD investors may start kicking themselves for not scooping up I bonds instead.

-I bonds are such a good deal for the middle class that the Treasury has a limit on how many you can buy: $10,000 per SSN + $5,000 with your annual tax return. You can however get an additional $10,000 in a trust. That’s $35,000 per year, MFJ. If you can afford more than that for your annual cash contribution to your PP, you ought to think about adding some EE bonds to your savings bond ladder. EE bonds are limited to $10,000 per SSN, for a total of $55,000 per year in US savings bonds. I bonds won’t make you rich, but they do let you sleep at night and avoid the many temptations and pitfalls that come with buying muni bonds or lower quality short term fixed instruments available from government-insured agencies.

If you can afford more than that for the next 30 years, you are definitely into Groucho Marx club territory!
“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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Re: All America Bank 1.5%

Post by grapesofwrath » Wed Jul 26, 2017 1:02 pm

Treasury has a limit on how many you can buy: $10,000 per SSN + $5,000 with your annual tax return. You can however get an additional $10,000 in a trust.
Sorry, for hijacking this conversation off at a tangent, but the above caught my eye. My wife and I each have personal TD account sand buy I-bonds into each account. Additionally, we also have a trust account at TD, the current trustees of which are both of us. Does this indeed qualify for an additional purchase given we are the trustees ? Wouldn't the limit be 10k per SSN ?
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Re: All America Bank 1.5%

Post by jhogue » Wed Jul 26, 2017 9:29 pm

grapesofwrath wrote:
Treasury has a limit on how many you can buy: $10,000 per SSN + $5,000 with your annual tax return. You can however get an additional $10,000 in a trust.
Sorry, for hijacking this conversation off at a tangent, but the above caught my eye. My wife and I each have personal TD account sand buy I-bonds into each account. Additionally, we also have a trust account at TD, the current trustees of which are both of us. Does this indeed qualify for an additional purchase given we are the trustees ? Wouldn't the limit be 10k per SSN ?
I do not have a trust, so I must caution you that I have no personal experience in this area.

Treasury Direct FAQ says:

What is the annual purchase limit for U.S. Savings Bonds?
“Effective January 4, 2012, the annual (calendar year) purchase limit applying to electronic Series EE and Series I savings bonds is $10,000 for each series. The limit is applied per Social Security Number (SSN) or Taxpayer Identification Number (TIN). For paper Series I Savings Bonds purchased through IRS tax refunds, the purchase limit is $5,000 per SSN.”

So, if your trust has its own TIN, that means that your trust can purchase $10,000 worth of I bonds per year.

There was a discussion of this point and other legal questions concerning titling of US savings bonds that you might find useful on bogleheads. I regard Mel Lindauer, who participated in the thread to be the best authority on US savings bonds. He also wrote a series of columns for Forbes that every investor in savings bonds should read. See:
https://www.bogleheads.org/forum/viewtopic.php?t=78341

Hope that helps.
“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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Re: All America Bank 1.5%

Post by jhogue » Thu Jul 27, 2017 7:09 am

MangoMan wrote:Sophie & jhogue,
Sorry if my last post came off as snarky or snotty; that was not my intention. I love and respect most everyone here! Was just looking for an answer / trying to make my point.
Pugchief,

No offense taken.

In fact, I welcome your sharp questioning of my argument. If I can convince you to buy I bonds, I think I could convince anybody. If I can't, there is probably some weakness in my argument.
“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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Re: All America Bank 1.5%

Post by Jeffreyalan » Thu Jul 27, 2017 8:19 am

when comparing cds vs treasury bills, should we put any emphasis on cds giving you the ability for compounding interest? When opening a cd I can just let the interest stay in the cd and compound whereas with a treasury bill I buy it at a discount and then have leftover interest that I have to then figure out something to do with. Over time the compounding interest could really add up.
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