The Stock/Investment Thread

[wiggin]

I have not seen substantial negative yields on corporate blue chip bonds.

[Being]

I have not seen substantial negative yields on corporate blue chip bonds.

Look here, https://fixedincome.fidelity.com/ftgw/fi/FILanding

If that doesn't get you there it is fidelity's fixed income page.

[wiggin]

You're talking about very short term paper, which has also dipped into negative territory for 1 and 3 month T-bills on and off again in recent years. Very short term and high quality paper is very very liquid so people will pay a premium for it. Doesn't make sense vs. e.g. cash for retail investors, but you don't have that luxury if you run a trillion dollar pension fund.

[Being]

You're talking about very short term paper, which has also dipped into negative territory for 1 and 3 month T-bills on and off again in recent years. Very short term and high quality paper is very very liquid so people will pay a premium for it. Doesn't make sense vs. e.g. cash for retail investors, but you don't have that luxury if you run a trillion dollar pension fund.

Does that mean these pension funds are not allowed to do an FDIC spread with their trillions instead of taking a known loss to preserve liquidity.

[wiggin]

I don't know what you mean by 'FDIC spread'. Generally it's actually quite hard to park large quantities of cash, holding some sort of asset has advantages.

There's a lot of weird consequences in markets when you get downward pressure on long term yields coupled with rules about how certain types of money may be deployed. I am not an expert on it, but I would assume that the very well paid people who *are* purchasing short term paper at a loss have a better understanding than I do. Frankly, pretty much all high quality debt is trading a losing yields right now just because of inflation, even if there is a nominal positive yield. Negative yields just look more dramatic.

I personally have a large sum (to me) of money invested in an instrument (a savings account) that loses money wrt inflation just because I expect to need it in the nearish future for a home. I know it's losing money, slowly, but having ready access to it is much better than not.

(edit: of course I forgot about more frequent traders who buy low/neg yielding debt because they think prices will push higher and want to sell at a profit. They're not holding to maturity, so what do they care?)

[Being]

FDIC spread just means putting the money, in chunks of $250,000, into different banks so as to meet FDIC requirements. But having said that I see how that would be difficult with trillions. But now I wonder why they don't just put it in banks and forgo the insurance.

[wiggin]

FDIC spread just means putting the money, in chunks of $250,000, into different banks so as to meet FDIC requirements. But having said that I see how that would be difficult with trillions. But now I wonder why they don't just put it in banks and forgo the insurance.

Yeah, you're not thinking the right scale. Banks often will impose penalties on large balances (I'm talking tens of millions of dollars; the biggest have cash or near cash positions in the billions) of cash in low interest rate environments, because they're being squeezed by the zero bound on savings deposits for retail savers and the fed rate is too low for them to make much money on the spread. Furthermore, banks are risky places to put uninsured money compared to high quality corporate or government debt. Lastly, there are some rules that (I believe) mean that certain asset managers (e.g. insurers, pensions) need to carry X amount of their investments in AAA rated securities, and they need to hit that number or run into regulatory problems. I'm not sure how cash is treated in those conditions.

Theoretically, these folks could just get the money in actual cash and stick it in a vault somewhere. But storage has a cost, and it's much easier to pay the cost of storage to the market than to take on that cost and complexity yourself (see: why gold trading is a headache).

[Loki]

When you're dealing with a billion dollars, surely the cost of storage would be far less than 2% of the total balance each year.

[wiggin]

When you're dealing with a billion dollars, surely the cost of storage would be far less than 2% of the total balance each year.

Including insurance on a billion dollars? Probably not.

And if you need to have X amount of AAA securities to meet capital requirements? Definitely not.

Look, I don't fully understand how short term paper markets work, but the only people who really trade this kind of stuff regularly aren't going to throw away money if there isn't a damned good reason to hold the asset. It's cash-like without being cash, which has advantages.

[Loki]

Including insurance on a billion dollars? Probably not.

And if you need to have X amount of AAA securities to meet capital requirements? Definitely not.

Look, I don't fully understand how short term paper markets work, but the only people who really trade this kind of stuff regularly aren't going to throw away money if there isn't a damned good reason to hold the asset. It's cash-like without being cash, which has advantages.

The meeting capital reqs. rule makes sense to me, though it's obviously really inefficient. But I still think you could get some damn good security for $10 million. I do wonder how much it would cost to simply insure the money.

[GGT]

The meeting capital reqs. rule makes sense to me, though it's obviously really inefficient. But I still think you could get some damn good security for $10 million. I do wonder how much it would cost to simply insure the money.

And I wonder why people invest in RE or the stock market, supposedly "for their heirs", when they could simply buy Life Insurance policies instead?

[Being]

This is not a dip. -3.01% for AAA corporate bonds. Whoever is buying these please just send your unwanted cash to me!

[GGT]

Ever heard of "Bond Vigilantes" that routinely manipulate freeee markets?

[GGT]

Also, "credit ratings" in the US is basically a legal ponzi scheme, created mostly for the benefit of RE developers and Big Banks, but paid for by anyone with any type of debt. Making Debt dependency--and borrowing, with strings attached--a huge economic driver.

I'm not aware of any other nation that uses "credit scores" for employment or rental applications like we do. Talk about vigilante capitalism posing as Freeee Market capitalism....haha

[Being]

Reverse Repo is now a problem?? How can banks have too much collateral? (invisible inflation???)

[GGT]

Wanna talk about reverse mortgages as "financial tools" that are also exploiting debt as wealth?

Or would you rather discuss "manufactured spending" that comes from credit card companies promising "cash back benefits" and higher credit scores for people who download their app?

[Lewkowski]

I'm not aware of any other nation that uses "credit scores" for employment or rental applications like we do. Talk about vigilante capitalism posing as Freeee Market capitalism....haha

You aren't aware of a lot of things.

https://www.businessinsider.com/cred...8-8#6-brazil-6

[Loki]

And I wonder why people invest in RE or the stock market, supposedly "for their heirs", when they could simply buy Life Insurance policies instead?

Because the stock market has a far higher rate of return. How do you think life insurance companies make money?

[Being]

Something fishy going on with corporate AAA bonds this morning. -3.18% (3month) yesterday now none listed. Trading hasn't opened yet. I look at this everyday and have not seen this before.

[wiggin]

I think the better question is why you're bothering to look at super short term corporate paper?

[Being]

I think the better question is why you're bothering to look at super short term corporate paper?

I think a better better question is why don't you. But to answer your question, I don't need good or even average returns to make it to EOL so why risk any of it? But, if I was to ever spot a no brainer great investment opportunity I want access to my cash now. I pretty much stick with 3 month CDs or, as is the case now, FDIC insured bank accounts. I am already living the future you are trying to secure for yourself. I don't need risk to make it happen.

[wiggin]

Just buy T-bills. High grade short term corporate paper is more headache than it's worth.

[Being]

Just buy T-bills. High grade short term corporate paper is more headache than it's worth.

Oh, I didn't mean to indicate I had any interest in buying the AAA corporate bonds, I just find this current phenomenon interesting and thought it was worth pointing out.

[wiggin]

Most high grade short term debt or cash positions have been losing against inflation for years; negative yields are just more dramatic.

I don't pay attention to debt markets and probably never will. Then again I don't pay much attention to other equities either.

[Being]

Preposterous,

Meaningless calcs in these times

Is this based on back orders of goods? Because you can't get anything you want like cars, ranges, AC, etc without waiting in line.

[GGT]

I don't pay attention to debt markets and probably never will. Then again I don't pay much attention to other equities either.

Well, you should pay attention to debt markets, because most of the modern financial services industry is designed to make profit from debt.

That's probably why you're worried about getting a mortgage for a house, as the cost of home-ownership (and mortgage loans) escalates.

[wiggin]

GGT, mortgages are incredibly cheap right now. My issue is one of supply, not financing. And knowing small day to day fluctuations in any market is pretty much irrelevant for anyone not working in finance.

[Being]

Short term AAA corporate bonds back in positive territory, long term CDs not being offered as of today. What does this mean? Anticipation of hyper inflation along with stagnation. Welcome back to the eighties everyone. Enjoy all the fake money rained down upon you!

[GGT]

GGT, mortgages are incredibly cheap right now. My issue is one of supply, not financing. And knowing small day to day fluctuations in any market is pretty much irrelevant for anyone not working in finance.

I get your supply/demand predicament. Residential mortgages are historically cheap, which puts added pressure on an already tight housing market. Still, you can pre-qualify for a home mortgage now, and lock in at a low fixed interest rate, or get a short term floating higher rate and convert later, once you find your house.

All things will (or at least should) change after the economy begins to "recover" and the Fed/Treasury tightens monetary policy, so you should pay as much attention to the debt markets (and the rising costs of homeownership) as you do the housing supply. It sucks that you can't find the house you want, and that the price probably escalates every day you wait....but hey, that was my point about banks profiteering from debt in a borked RE market.

[wiggin]

Tesla's market cap is... Very hard to justify.