Halls of Shrewd'm / US Policy
No. of Recommendations: 1
Schwab stores your money in their bank and pays .04% interest. There are two options. Money market funds and short term treasury funds. short term treasury funds pay a little more, but with all the US debt, I wonder if there is some risk.
Thoughts?
Thanks in advance.
No. of Recommendations: 5
with all the US debt, I wonder if there is some risk.
I think there is some risk in anything outside an insured bank account (for which you are, in effect, paying an insurance premium in the form of a real negative interest rate). I think the risk of the United States actually defaulting on its debts is not worth considering. Interest rate risk (are perhaps inflation) are higher now than one might like, but not so high that short-terms bonds can't keep up, which is all I look for in storing money.
Baltassar
No. of Recommendations: 1
I move it to SWVXX.
It is an annoyance.
Someone else said they use Schwab for holding equities and Fidelity for short term investments/treasuries/etc. stuff that generates cash an also use Fidelity for bill paying. I prefer Schwab for that stuff but the cash issue is a headache. I feel like I'm always moving money into SWVXX otherwise I'm losing out on interest.
No. of Recommendations: 2
with all the US debt, I wonder if there is some risk.
Not really.
Ever heard the expression "When the US sneezes, the world catches a cold"?
Google AI:
Reasons for US Influence:
* Size of the US Economy: The US has the largest economy in the world, and its economic performance has a significant impact on global trade and investment.
* Dominance of the US Dollar: The US dollar is the world's primary reserve currency and the most widely used currency in international trade and financial transactions.
* Global Trading Partner: The US is a crucial trading partner for many countries worldwide, and changes in US import demand can affect their economies.
And if you are a US citizen, there is absolutely nothing that you could do to avoid any such risk.
If there comes a time in the foreseeable future where US Treasury debt becomes a risk, any loss you get in the cash will be minuscule compared to the totality of what's going on. Like worrying about a paper cut in the midst of a tornado.
No. of Recommendations: 2
For temporary cash holdings, Fidelity is the place to be. Their default for your cash balance is SPAXX Treasury Money Market fund. The money get moved in and out of it automatically.
If I didn't have stock-only accounts at Etrade and Schwab I would move everything to Fido. The amount of cash I carry in those accounts is rarely over $100, so who cares how little interest they pay.
For longer cash holdings I like FLRN, Bloomberg Investment Grade Floating Rate ETF
No. of Recommendations: 0
Thank you very much Ray.
No. of Recommendations: 1
richinmd:I prefer Schwab for that stuff but the cash issue is a headache.
I had my largest account at TD Ameritrade which was acquired by Schwab. Soon after I added up what it was costing me in lost interest and the trouble it was taking moving cash I decided to move to Fidelity. Schwab offered me $$ to remain but not as much as I would have lost by staying.
No. of Recommendations: 0
I had my largest account at TD Ameritrade which was acquired by Schwab. Soon after I added up what it was costing me in lost interest and the trouble it was taking moving cash I decided to move to Fidelity. Schwab offered me $$ to remain but not as much as I would have lost by staying.<i/>
Couldn't you just take the money at Schwab's bank and move it to vgsh, or something like that?
No. of Recommendations: 21
Ever heard the expression "When the US sneezes, the world catches a cold"?
One might add
"When the US sneezes, the world catches a cold, and the US dollar loses 40% of its global purchasing power"
That was the drop in the dollar from tech bubble peak (everyone outside the US piling into the US stock bubble) to trough (around the credit crunch). The US dollar index dropped from about 121 to about 71. i.e., if you'd held a drawer full of cash in a typical other major currency during that time, you'd have made a profit of 70% measured in US dollars.
Lately there has been what looks a lot like a US large cap tech bubble with non-US investors piling in for several years, driving a strong US dollar as a result. The rest of the story this time is as yet unwritten.
And if you are a US citizen, there is absolutely nothing that you could do to avoid any such risk.
One can hold assets other than US dollar cash or cash equivalents.
For someone with confidence that neither the global financial system nor the US fund industry will melt down, I imagine the safest single-purchase asset is WIP. A collection of non-US inflation protected government bonds. Perhaps its introduction was a contrarian sign, as it launched almost precisely the moment of the long-cycle bottoming of the US dollar in 2008, yet has still managed a profit since then even as the US dollar has risen about 37% (not what you might have expected). To whatever extent one thinks the US dollar will hold up, mix in some TIPS.
A side note: I trust everybody knows that money market funds are NOT risk free--nowhere near it. They often don't even hold what the name implies, not to mention the sponsor and systemic risks. If you want the yield on T-bills, for heaven's sake buy T-bills. Conversely if you want a higher yield (which money market funds typically do not even offer), buy something with a higher yield and live with the increased risk.
Jim
No. of Recommendations: 1
One might add
"When the US sneezes, the world catches a cold, and the US dollar loses 40% of its global purchasing power"
For a US citizen, there is nothing you can do about that. Like a fish going up and down with the tide. That's the water you are in, and that's that.
One can hold assets other than US dollar cash or cash equivalents.
Well, yeah, sure. Theoretically. Not practical for almost all US people. Not many of us have the situation where we can float between Canada/France/Monaco. We are stuck where we are.
If you want the yield on T-bills, for heaven's sake buy T-bills. Conversely if you want a higher yield (which money market funds typically do not even offer), buy something with a higher yield and live with the increased risk.
Yes, this is a conundrum I run into every time I think about what to do with cash. That allocation is supposed to be held in a very safe asset.
But "safe" means low yield.
To get decent yield you have to go with higher risk.
But avoiding higher risk is the whole reason you embarked on that journey to begin with.
FWIW, FLRN pays 5.32%.
Top 10 MM accounts (yahoo) pay about 4.30%
VMFXX (Fed MM) is 4.21%
FDLXX (Treas-only MM) is 3.93%. For me, that's tax-equivalent 4.12%.
110 BPs might be worth the higher risk. 10 BPs is certainly not.
No. of Recommendations: 20
One can hold assets other than US dollar cash or cash equivalents.
Well, yeah, sure. Theoretically. Not practical for almost all US people. Not many of us have the situation where we can float between Canada/France/Monaco. We are stuck where we are.
I would assume most on the board have a brokerage account?
Even if you don't have one that allows holding non-US cash directly like IB, presumably you could just put in a buy order for WIP or FXB or FXE or FXC or a non-US short term government bond fund or ETF? Seems practical for almost anybody, except maybe those with all their savings in a company retirement plan with very limited choices.
If the US dollar falls (far from a certainty but let's continue...) then your salary and many local expenses and US cash deposits fall...lose global purchasing power... but your holdings of other currencies hold up, meaning they appear to go up in value if you continue to think in dollars.
The total market value of the S&P 500 companies is down quite a bit year to date, not up. It just doesn't look that way if you do your accounting in the one major currency that has shrunk in this stretch. One share of SPY buys less general global "stuff" than it did in January. This is true no matter where you live.
Jim
No. of Recommendations: 1
I had my largest account at TD Ameritrade which was acquired by Schwab. Soon after I added up what it was costing me in lost interest and the trouble it was taking moving cash I decided to move to Fidelity. Schwab offered me $$ to remain but not as much as I would have lost by staying.
I've yet to do that although I'm careful with not keeping a lot of cash lying around but it wouldn't surprise me if it added up to a larger sum than I think it does.
I closed my one bank account a few years ago but recently opened another credit union that is local to me so the bill paying isn't a necessity any longer since I could always move money into my bank monthly.
Over the years I just find that Schwab and Fidelity work best for me. Vanguard I've had issues with and have no interest in ever going back to them. Fidelity concerns me a bit with some issues people have had with them.
Unfortunately there is rarely a perfect one solution to everything.
No. of Recommendations: 3
FXB or FXE or FXC
Jim, just as soon as I might put some cash into these, the dollar will strengthen. Given my track record. 😩
For conceptualization purposes, holding the above (as opposed to t-bills / short term US gov’t bonds, say) would essentially be a bet that the dollar will continue to weaken. Is that fair, or too reductive a way of looking at it?
No. of Recommendations: 1
any thoughts on tbf as a hedge? (despite 'for day-use only warnings)
https://www.proshares.com/our-etfs/leveraged-and-i...fees are pricier than a well managed foreign bond fund, and correlation not static. but it is immune to most things trump\gop. (except an equity mkt crash causing flight to safety)
No. of Recommendations: 1
any thoughts on tbf as a hedge? (despite 'for day-use only warnings)
Anything similar that might also pay interest? Might as well ask, someone may know. I don't. I think something's coming and I have little idea how to prepare for it. Everything is shots in the dark, but I like the idea of part of the portfolio being in a stabler currency and getting some interest too. :)
No. of Recommendations: 0
I move it to SWVXX.
It is an annoyance.
I can't agree more.
I was a TD Waterhouse/Ameritrade account holder for over 30 years before the Schwab acquisition. The change in the sweep vehicle
is a HUGE annoyance to me. I would also move everything to Fidelity if it wasn't for the mobile ThinkOrSwim platform. I'm just too entrenched in the visual look of the platform and can't get my self to switch fully to Fidelity. It would not take much of a change in the Fidelity mobile platform to get me to move there completely.
Jeff
No. of Recommendations: 1
I'm just too entrenched in the visual look of the platform and can't get my self to switch fully to Fidelity
When ThinkOrSwim was acquired by TDAmeritrade I recall needing to call in for something and was chatting to a person at TD and they mentioned how the TOS platform is viewed as a huge asset and it was not going away.
I'm guessing Schwab views it the same way.
No. of Recommendations: 1
lambo,
recent dalio+rubenstein interview had many related questions.
https://www.youtube.com/watch?v=eGtGKk0E_qksummary from dalio : gold+tips.
having studied a bit on muni\taxfree bonds, i made them my largest asset once trump abandoned any related grift angle in the budget.
short duration revenue linked can have several good risk protection aspects, but i just leave it to an active manager.
No. of Recommendations: 8
FXB or FXE or FXC
just as soon as I might put some cash into these, the dollar will strengthen. Given my track record.
For conceptualization purposes, holding the above (as opposed to t-bills / short term US gov’t bonds, say) would essentially be a bet that the dollar will continue to weaken. Is that fair, or too reductive a way of looking at it?
Putting all your money into those (or a similar broad mix) would be the stance that you don't trust the US dollar. It isn't a bet *against* the US dollar, since a rising dollar wouldn't hurt you. You'd merely be expressing the view that you don't wish to be bullish on the dollar so you abstain.
I think the best way to think of it is that a person with cash that they want to preserve, but without a strongly held forecast, should have a broad mix of major currencies. Anything other than a broad mix is a wager on the rising or falling of some of them, and who is that smart? So, sticking all your money in US dollars as a habit is subconsciously making a high confidence wager. Putting some other currencies in your portfolio isn't making a new bet, it's cutting back a bit on the one you're already making. Personally I'm holding a mix of British pounds, euros, Canadian dollars, and relatively few US dollars largely related to my derivative positions. (no particular order)
The safest thing I can think of is a broad mix of government issued inflation protected bonds in a mix of major currencies. This corresponds to the position that isn't making any call on the trajectory of inflation or FX rates, and takes no counterparty risk.
Jim
