# Interest Rates Probably Will Not Rise Any Time Soon



## fmdog44 (Jan 28, 2020)

Read that last week. I have several CDs maturing this year and at the low rates I think I'll hold off rolling them over at much lower rates. I can equal or better most rates with a couple banks I have. Either way 2% stinks.


----------



## mathjak107 (Jan 29, 2020)

in the mean time bonds have been great .  my long treasury bond fund TLT  has produced 23% over the 1 year and and 7% ytd as well as averaged 9% the last  3 years .

  my fidelity corporate  bond fund is up 16% over the 1 year .

fidelity total bond up 10.20% over the one year .

fidelity floating rate bond fund up 6.80% over the one year .
short term bond funds also up over 5%

this is why cash instruments should be kept to a minimum ...  usually over any given time frame bond funds of matching duration will perform better than the equivelent cd's ...

the problem is when rates rise people have no idea how to compare a bond fund return so they think the cd did better ... nope , rarely the case.

most amateur investors have no idea how to match fund duration's to their money needs .they buy a total bond fund because someone told them to do it with no regard for the funds almost 6 year duration .

if you were not going to buy a 5 year cd  because you needed the money , don't buy a total bond fund with a duration of between 5-6 years ...

you ladder bond funds the way you would ladder cd's to match your needs .

those turned their backs on bond funds and went to cash instruments  when rates spiked missed a very lucrative low risk return .

rates could go lower but the low hanging fruit was already picked  if you missed the harvest by avoiding bond funds and opting for cash instruments instead .


----------



## fmdog44 (Jan 29, 2020)

Yea, I saw the 2019 data on some bond funds recently.


----------



## mathjak107 (Jan 29, 2020)

Most have no clue how bond funds work or even how to judge performance .

You need to look at the duration value of the fund ....so looking at a total bond fund it has a duration of years ....no matter what rates do , you will see the interest rate you bought in at  if you hold that long , just as if you bought an individual bond  and had to hold until maturity because rates went up.

So looking at the  return on a total bond fund would have to be compared to a 5 year cd bought five years ago over the same period


----------



## TravelinMan (Jan 29, 2020)

_What I think mathjak is trying to say is get a well qualified financial adviser, meet with him/her and tell them what you need you money to do for you.  Not all of us can be as astute with investments at mathjak.

..._


----------



## mathjak107 (Jan 29, 2020)

I learned in forums....


----------



## oldman (Jan 30, 2020)

mathjak107 said:


> in the mean time bonds have been great .  my long treasury bond fund TLT  has produced 23% over the 1 year and and 7% ytd as well as averaged 9% the last  3 years .
> 
> my fidelity corporate  bond fund is up 16% over the 1 year .
> 
> ...


I have some shares of Fidelity Corporate Bond Fund (FCBFX). It shows that it is up 14.46% for 1 year.


----------



## oldman (Jan 30, 2020)

I have a very mixed portfolio between bonds and equities. Fidelity is showing that my account with them is up 32.23% from last year at this same time. The market has outperformed anyone's expectations. Is it sustainable? We'll have to wait and see. 

Today, CNBC is reporting that our trade deficit with China has cost the U.S. a loss of some 3.7 million jobs this century. And, although they believe that Trump is doing the right thing by going after China to put us both on an even playing field, the EPI believes that he hasn't done enough.


----------



## mathjak107 (Jan 30, 2020)

oldman said:


> I have some shares of Fidelity Corporate Bond Fund (FCBFX). It shows that it is up 14.46% for 1 year.


we all buy and add money at different times so returns will differ in actual use


----------



## oldmontana (Jan 30, 2020)

fmdog44 said:


> Read that last week. I have several CDs maturing this year and at the low rates I think I'll hold off rolling them over at much lower rates. I can equal or better most rates with a couple banks I have. Either way 2% stinks.


If you are in for the long term, like 5 years there are many high quality stocks that pay 4% or more with not only a good dividend but a chance of appreciation.  

CD's were paying around 10% in the 1980's.  That day is gone.


----------



## mathjak107 (Jan 30, 2020)

oldmontana said:


> If you are in for the long term, like 5 years there are many high quality stocks that pay 4% or more with not only a good dividend but a chance of appreciation.
> 
> CD's were paying around 10% in the 1980's.  That day is gone.


I don’t want to go through this Again but a 4% dividend is not interest not even close ...it is merely a 4% return off the value of your share price ....it is still a stock that needs at least 4% appreciation in share price every year to equate to a 4% interest payment .

never ever confuse how a dividend works compared to how interest works..interest is on top of your balance when paid  ,a dividend is  subtracted off the balance when the stock goes ex div ...You must have at cleast the same amount in appreciation to see the payment as an actual roi...


----------



## oldmontana (Jan 30, 2020)

mathjak107 said:


> I don’t want to go through this Again but a 4% dividend is not interest not even close ...it is merely a 4% return off the value of your share price ....it is still a stock that needs at least 4% appreciation in share price every year to equate to a 4% interest payment .
> 
> never ever confuse how a dividend works compared to how interest works..interest is on top of your balance when paid  ,a dividend is  subtracted off the balance when the stock goes ex div ...You must have at cleast the same amount in appreciation to see the payment as an actual roi...



",a dividend is  subtracted off the balance when the stock goes ex div"  That is true but a good dividend paying stock will go up (stock price)  over time...that was my point and it is a fact!

"I don’t want to go through this Again"  I hope so.


----------



## mathjak107 (Jan 30, 2020)

oldmontana said:


> ",a dividend is  subtracted off the balance when the stock goes ex div"  That is true but a good dividend paying stock will go up (stock price)  over time...that was my point and it is a fact!
> 
> "I don’t want to go through this Again"  I hope so.


I would never advise  people to buy a stock to replace a fixed income investment. And tell them it is paying 4% ..... you can pull the same 4% out of any portfolio ....you get the same subtraction if there is no growth that year......  it is like telling someone who wants a cd to buy stocks instead ...that is a poor analogy and poor advice for those who may not understand the difference.

There is no comparison between a 4% dividend being paid and 4% interest


----------



## oldmontana (Jan 30, 2020)

mathjak107 said:


> I would never advise  people to buy a stock to replace a fixed income investment. And tell them it is paying 4% ..... you can pull the same 4% out of any portfolio ....you get the same subtraction if there is no growth that year.
> 
> ==================================================================
> I see you for some reason did not understand my post.
> ...


----------



## mathjak107 (Jan 30, 2020)

I understood it ..put telling people they can get a 4% dividend from a stock plus appreciation in a discussion about fixed income is not applicable and very dangerous to someone who now thinks the 4% dividend is the same as 4% interest so why not go buy stocks instead of the fixed income they wanted....very dangerous information ,especially here where many seem to have a very weak understanding of investing in the first place


----------



## Packerjohn (Jan 30, 2020)

According to what I have been reading over the last 2 years, interest rates will continue to stay very low.  This is due to massive debt of this country.  Everyone seems to be living in homes with 3 car garages, driving brand new cars, buying those "toys for boys" (ATVs, snowmobiles, personnel water craft) & going on those cruises & one week all inclusives in Mexico or Cuba.  Well, most of the middle class is anyway.  The present debt load is about $1.76 for every dollar earned.  Another problem is that our government is terribly in debt & that debt is growing too.  I feel sorry for 2 groups:  1. most senior get peanuts for their savings,  2. The young generation will inherit a huge debt that can never be paid off.  The people here who are laughing out loud are the banks but then think about this.  Who is at fault?  The banks who borrow to lenders or the lenders who want everything NOW!  Me thinks it's the latter.  The problem is easy credit.  I'm old enough to remember a time when there were no credit cards & people usually paid cash or didn't buy at all.  Good luck explaining this concept to a millennial.  Thanks to advertising, our society has become one of "I WANT IT ALL & I WANT IT NOW!"


----------



## mathjak107 (Jan 30, 2020)

Interest rates are impossible to predict ....while the fed controls short term rates , the worlds bond investors control bond rates .

Bonds are driven by fear , greed , and the perception of future inflation ...

none of that is predictable .....we have rates reversing course in a heartbeat


----------



## oldmontana (Jan 30, 2020)

mathjak107 said:


> I understood it ..put telling people they can get a 4% dividend from a stock plus appreciation in a discussion about fixed income is not applicable and very dangerous to someone who now thinks the 4% dividend is the same as 4% interest so why not go buy stocks instead of the fixed income they wanted....very dangerous information ,especially here where many seem to have a very weak understanding of investing in the first place



Again...If you are in for the long term, like 5 years there are many high quality stocks that pay 4% or more with not only a good dividend but a chance of appreciation. 

You can call that "...very dangerous information"  I call it sound advise... the... 5 years... high quality stocks that pay 4% is NOT very dangerous information.  Its sound and reasonable advise that has history to back it up.


----------



## Aunt Bea (Jan 30, 2020)

There is a big difference between holding actual bonds and bond funds of various durations.

To me saying buy a bond fund or buy a dividend producing stock is just a starting point for an investigation or a discussion on how to invest for a reasonable return.

I remember years ago when many widows & orphans got burned by investing in long term bond funds during a quickly rising interest rate environment.  The mutual funds were forced to sell bonds at a deep discount in order to handle redemptions and some funds were on the brink of collapse.

We all need to do our own research and decide what is best for our particular situation.


----------



## mathjak107 (Jan 30, 2020)

Well readers here hopefully understand if you want fixed income you don’t buy stocks and you never look at a dividend as a return by itself like interest Is ....that dividend return is zero unless the stock appreciates as much as is paid .....appreciation is not optional


----------



## mathjak107 (Jan 30, 2020)

Aunt Bea said:


> There is a big difference between holding actual bonds and bond funds of various durations.
> 
> To me saying buy a bond fund or buy a dividend producing stock is just a starting point for an investigation or a discussion on how to invest for a reasonable return.
> 
> ...


Actually that is not true ....a bond fund has a duration value which is like the maturity date on a bond ...whether you buy a bond or a fund you must stay in it as long as that duration figure to see the rate you got the day you bought .

Just like a bond , if you sell before the duration value and rates went up you will lose money ...if you hold the fund for the duration you will see the rate the day you bought .

So as an example ,let’s take a intermediate term treasury bond fund with a duration of 5 years .

if you paid 10 bucks and it was hypothetically paying 5%  , if rates went up 1% the fund would fall to 9.50 a share ..however the fund would be paying 6% instead of 5% ....the extra 1% over 5 years offsets the drop in share price and you get your original 5% .

it is just as if you bought a 5 year bond .

investment grade bond funds all have duration values in their information about the fund .

The problem is people do not understand what they are buying when the buy bond funds or how they work ....that is not a problem with bond funds , that is financial ignorance and people making investment decisions who shouldn’t be


----------



## fmdog44 (Jan 30, 2020)

Never invest in something you do not understand. I don't understand bonds. I have never invested in bonds.


----------



## Don M. (Jan 30, 2020)

I doubt that interest rates on bank accounts and US bonds, etc., will rise about current paltry levels anytime in the foreseeable future.  If interest rates were anywhere near what they were back in the 1980's, our entire Federal Budget would be going to paying interest on the National Debt.  There have even been reports, in recent months, about some nations having Negative interest rates....basically people are probably being charged a fee to keep any money in the bank.  With all this global fiscal irresponsibility in governments, the next recession is probably going to look like a repeat of the 1920's.


----------



## mathjak107 (Jan 31, 2020)

Don M. said:


> I doubt that interest rates on bank accounts and US bonds, etc., will rise about current paltry levels anytime in the foreseeable future.  If interest rates were anywhere near what they were back in the 1980's, our entire Federal Budget would be going to paying interest on the National Debt.  There have even been reports, in recent months, about some nations having Negative interest rates....basically people are probably being charged a fee to keep any money in the bank.  With all this global fiscal irresponsibility in governments, the next recession is probably going to look like a repeat of the 1920's.


the problem is that  the fed is not in control of bond  rates , investors all over the world are and they dont care about our deficit  ..  if they feel inflation rising is a threat they demand more interest  and bond rates go up .

personally i think we are under estimating inflation expectations .  i think bond investors are going to get a surprise as inflation goes up .. the fed already said they would  not try to hold inflation at less than 2% .....


----------



## mathjak107 (Jan 31, 2020)

fmdog44 said:


> Never invest in something you do not understand. I don't understand bonds. I have never invested in bonds.


bonds and bond funds have done bettter than cash instruments over just about all time frames .

the only thing you need to know is what the bond fund holds so you know how it reacts and to what , and the duration value of the fund so you can ladder them like a cd so you don't sell before  its time .

it really is easy .


----------



## Don M. (Jan 31, 2020)

Events over the past few days...primarily the fear over global implications concerning this Contravirus....show just how "shaky" investing can be.  The markets are in another nose dive today.  Couple this virus fear with Brexit, and the near future looks very volatile.  It seems to me that about all a person can do is compile a diversified and fairly conservative portfolio, and mentally ride out the wild swings.


----------



## mathjak107 (Jan 31, 2020)

or choose from a number of all weather portfolios that do well in up or down markets


----------



## fmdog44 (Jan 31, 2020)

mathjak107 said:


> bonds and bond funds have done bettter than cash instruments over just about all time frames .
> 
> the only thing you need to know is what the bond fund holds so you know how it reacts and to what , and the duration value of the fund so you can ladder them like a cd so you don't sell before  its time .
> 
> it really is easy .


I remain a stock investor because for me it is more interesting to investigate and follow companies of all sizes and business areas. If you don't love your work then it is work!


----------



## mathjak107 (Jan 31, 2020)

personally i have much more interesting things to do than monitor stocks .... i use a diversified portfolio that works well  and it generates a nice income for us with reduced volatility


----------



## oldmontana (Jan 31, 2020)

fmdog44 said:


> Never invest in something you do not understand. I don't understand bonds. I have never invested in bonds.


Good thinking.  Same with stocks, if I do not understand what a stock does I would not buy it.

Talking about bonds, I do not like they.  I do not like mutual funds either as I like to pick my stocks.  But to each their own.

Over the long term, stocks do better. Since 1926, large stocks have returned an average of 10 % per year; long-term government bonds have returned between 5% and 6%, according to investment researcher Morningstar.


----------



## fmdog44 (Jan 31, 2020)

mathjak107 said:


> personally i have much more interesting things to do than monitor stocks .... i use a diversified portfolio that works well  and it generates a nice income for us with reduced volatility


So you are saying you monitor your portfolio which is what I am saying I do.


----------



## mathjak107 (Jan 31, 2020)

fmdog44 said:


> So you are saying you monitor your portfolio which is what I am saying I do.


If I wanted to just ignore things I could rebalance one a year and call it a day .but I am a looker at heart


----------



## mathjak107 (Feb 1, 2020)

oldmontana said:


> Good thinking.  Same with stocks, if I do not understand what a stock does I would not buy it.
> 
> Talking about bonds, I do not like they.  I do not like mutual funds either as I like to pick my stocks.  But to each their own.
> 
> Over the long term, stocks do better. Since 1926, large stocks have returned an average of 10 % per year; long-term government bonds have returned between 5% and 6%, according to investment researcher Morningstar.


i am not sure why you would even attempt a comparison .. bonds are not a growth vehicle . they are no different than laddering cd''s .. would you compare cd's to stocks ?   

you ladder bond funds by duration value  with the time frame you want the money just like you would the maturity dates on  a  bond or cd ..  bonds have just provided better returns than cd's and money markets over the equivalent periods of time .

stocks are never a proxy for fixed income and fixed income is never a proxy for stocks with one exception .

high yield is kind of hybrid bond or bond fund  since they act more like stocks and are effected by what effects stocks only they provide income from interest .


----------



## mikermeals (Feb 2, 2020)

For cash I would recommend Vanguard Money Market...it is yielding 1.65% but you are not locked in for any period of time and the yield changes as short term rates change.  It was yielding in the mid 2% range last year but came down as rates came down.  I use Vanguard for most of my mutual funds also.


----------



## mathjak107 (Feb 2, 2020)

fidelity has their premium money market paying about the same .  i prefer fidelity fzdxx since i wont do business with vanguard


----------



## oldmontana (Feb 2, 2020)

mathjak107 said:


> i am not sure why you would even attempt a comparison .. bonds are not a growth vehicle . they are no different than laddering cd''s .. would you compare cd's to stocks ?
> 
> you ladder bond funds by duration value  with the time frame you want the money just like you would the maturity dates on  a  bond or cd ..  bonds have just provided better returns than cd's and money markets over the equivalent periods of time .
> 
> ...





mathjak107 said:


> i am not sure why you would even attempt a comparison .. bonds are not a growth vehicle . they are no different than laddering cd''s .. would you compare cd's to stocks ?
> 
> you ladder bond funds by duration value  with the time frame you want the money just like you would the maturity dates on  a  bond or cd ..  bonds have just provided better returns than cd's and money markets over the equivalent periods of time .
> 
> ...


I was showing what stocks return vs bonds of a period of time.....its called information.

"would you compare cd's to stocks ? "  Yes I would...why not if you are looking for the best return over a, say a 5 year period?

Your posts indicate you think bonds are a better why to invest than stocks.  I do not...so be it.


----------



## mathjak107 (Feb 2, 2020)

oldmontana said:


> I was showing what stocks return vs bonds of a period of time.....its called information.
> 
> "would you compare cd's to stocks ? "  Yes I would...why not if you are looking for the best return over a, say a 5 year period?
> 
> Your posts indicate you think bonds are a better why to invest than stocks.  I do not...so be it.


Your whole premise here is flawed .

You are so wrong with your interpretation here. No where was it ever said  bonds outperform stocks in any consistent manner ....ever .

But stocks are stocks and they should be long term investments ,short term they can plunge so this five year outlook is ridiculous

But that is still not the point ..those here interested in fixed income are doing so because they don’t want this money in stocks , or we wouldn’t be having this discussion about rates on fixed income  .they either want fixed income only or are discussing the fixed income side of a balanced portfolio..

So are you trying to tell us retirees should be 100% equities because they have better returns ?  I hope not ...

Stocks are NEVER A PROXY for any fixed income component. It has zero to do with which has better returns


----------



## fmdog44 (Feb 2, 2020)

mathjak107 said:


> If I wanted to just ignore things I could rebalance one a year and call it a day .but I am a looker at heart


Who is ignoring what?


----------



## fmdog44 (Feb 2, 2020)

mathjak107 said:


> fidelity has their premium money market paying about the same .  i prefer fidelity fzdxx since i wont do business with vanguard


Love my Vanguard!!


----------



## mathjak107 (Feb 3, 2020)

fmdog44 said:


> Who is ignoring what?


the nice thing about a lot of the all weather portfolio's is they  need little attention . you can rebalance once a year and do nothing else


----------



## mathjak107 (Feb 3, 2020)

fmdog44 said:


> Love my Vanguard!!



we all like something until they give us reason not to . vanguard has given me quite a few reasons to dislike their company policies , they way they go to market and their customer service which for me was an awful experience.

i had to call them and it ended up being my first and last call to them . i stopped doing business . absolutely the worst customer experience i had with any financial company


----------



## oldmontana (Feb 3, 2020)

mathjak107 said:


> i am not sure why you would even attempt a comparison .. bonds are not a growth vehicle . they are no different than laddering cd''s .. would you compare cd's to stocks ?
> 
> you ladder bond funds by duration value  with the time frame you want the money just like you would the maturity dates on  a  bond or cd ..  bonds have just provided better returns than cd's and money markets over the equivalent periods of time .
> 
> ...





mathjak107 said:


> Your whole premise here is flawed .
> 
> You are so wrong with your interpretation here. No where was it ever said  bonds outperform stocks in any consistent manner ....ever .
> 
> ...


----------



## mathjak107 (Feb 3, 2020)

and this post means?


----------



## oldmontana (Feb 3, 2020)

Sorry, I had problems posting. 

 I was going to say that you seem do not understand the difference between fixed income and return on a investment.

Again FYI..

I was showing what stocks return vs bonds of a period of time.....its called information.

"would you compare cd's to stocks ? " Yes I would...why not if you are looking for the best return over a, say a 5 year period?

Your posts indicate you think bonds are a better why to invest than stocks. I do not...so be it.


----------



## mathjak107 (Feb 3, 2020)

yeah , thats it , i don't understand the difference ....this conversation is going no where.

the only thing not understood is no where in this conversation is it about which has the biggest gains . nor  should anyone  ever  be using a dividend paying stock as a substitute for fixed income . stocks regardless of type belong on the equity side of a portfolio , not the fixed income side of things . if a retiree is using a balanced portfolio it is exactly that .


----------

