ken-do-nim's Watch List

[fenders53]

(08-10-2021, 01:37 PM)ken-do-nim Wrote:

(08-10-2021, 10:29 AM)fenders53 Wrote: Somewhat off topic but this zero interest rate thing is a double edged sword.  It's probably responsible for the last 10-20% gain in our equity holdings.  Imagine yourself a 70yr old retired woman.  Your spouse just passed away and you have your SS, maybe half his pension, and that $100K you had in a CD that gave you a few hundred extra a month now gives you $20.  It forces risk taking if you even know how to do it.  You can buy the SPY at clearly high historical valuations just to get back half your former CD yield.

Excellent point.  I really, really wanted to put my Emergency Fund into a CD Ladder* because they are so cool, but alas the interest rates just make it not worth it.



* If you don't know what a CD Ladder is, it is when presumably the longer the CD term, the better the rates are, and you put 1/5th of your money into a 1 year CD, 1/5th into a 2 year, 1/5th into a 3 year, 1/5th into a 4 year, and the remaining 1/5th into a 5 year.  One year later, the 1 year CD comes due.  If you need the money, great, it's there for you.  If you don't, reinvest as a 5 year CD.  Now every year, you have 1/5th of your money becoming available should you need it, but all of your money is eventually locked into the 5 year best rates.


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On the biotech front, I have to admit I made a terrible mistake in selling LLY earlier this year, and I need to reacquire it asap.  They have the only treatment for Alzheimer's Disease available, and the market is huge.  It has already started to get very high, but I think there is tons of room to grow.  And unlike Moderna, Eli Lilly is a DGI stock

Sometime well before you retire it is likely interest rates will rise enough for a ladder to work.  Low rates put a stick in my wheel just before retirement.  I had this plan where my retirement port would be simplified and all of it would provide a reasonable yield.  I'll get to my destination but for now I just have to keep some bonds (ETFs) in short maturity or I'll get killed when rates rise a couple points.  Maybe they won't rise but I'm not going to lose 10% on something that only yields 2%.

On a side note it's possible banks may be pressured to pay reasonable interest rates at some point.  Paying 0.1% and loaning it out at 50 times that might be OK if the FED wasn't facilitating the game with monetary policy, but they are big time.