AAII Sentiment Survey, 12/25/24
BULLISH remained the top sentiment (37.8%, average) & neutral remained the bottom sentiment (28.0%, below average); bearish remained the middle sentiment (34.1%, above average); Bull-Bear Spread was +3.7% (below average). Investor concerns: Budget, debt, inflation, the Fed, dollar, geopolitical, Russia-Ukraine (148+ weeks), Israel-Hamas (63+ weeks). For the Survey week (Th-Wed), stocks up, bonds down, oil up, gold down, dollar up. NYSE %Above 50-dMA 32.72% (negative). DC budget fight(s) shift to 2025. SSA WEP & GPO repealed. #AAII #Sentiment #Markets
https://ybbpersonalfinance.proboards.com/post/1794/thread

Good idea... then charge Greenlanders any time they move from one part of the park to another. Or maybe even put up tall metal fences to keep them from moving around at all.

And we can make Greenland pay for the fence....just we did with Mexic...uh...wait a sec...
@Art, excellent idea, would you like to start the 2025 thread?
Maybe a little late in the cycle, but kicking off positions in SHYG and CLOZ.
Weighing INPFX vs. WBALX, will add to one or both.

How about a new thread for buy/sell for 2025?

msf said:

People may not have noticed that muni MMFs have been soaring of late, especially NY. Schwab's $1M min version, SNYXX, has a 7 day yield of 3.49% (APY 3.56%), its retail version, SWYXX has a 3.34% yield (APY 3.40%), and Fidelity's $25K min version FSNXX is at 3.28% (3.33% APY). That 3.3% is worth about 4.8% APY in a CD for someone in NYC in the 22% tax bracket. And its yield is rising.

I follow the SIFMA Municipal Swap Index Yield, which is calculated and published Wednesday afternoons. Because of the holiday, that did not occur today, but will tomorrow. The yield on muni money market funds follow this yield. Here is the past 5 weeks and as you can see, the yield is all over the place. For reasons that I do not understand, the line on the chart has been serpentine for as long as I have been watching it, which has been a few years.
11-20 3.18
11-27 2.86
12-4 2.15
12-11 2.91
12-18 3.60
Below are recent yields for VMSXX and SWOXX and again, they follow the weekly SIFMA Municipal Swap Index Yield. We will see what tomorrow brings.
11-19 3.38% 3.29%
11-20 3.41% 3.30%
11-21 3.33% 3.22%
11-22 3.14% 3.07%
11-25 3.09% 3.03%
11-26 3.03% 2.99%
11-27 3.00% 2.97%
11-29 2.90% 2.91%
12-2 2.85% 2.87%
12-3 2.79% 2.81%
12-4 2.70% 2.72%
12-5 2.55% 2.59%
12-6 2.17% 2.23%
12-9 2.07% 2.11%
12-10 1.99% 2.07%
12-11 1.99% 2.08%
12-12 2.13% 2.20%
12-13 2.58% 2.61%
12-16 2.72% 2.74%
12-17 2.83% 2.84%
12-18 2.95% 2.94%
12-19 3.05% 3.03%
12-20 3.32% 3.25%
12-21 3.42% 3.33%
12-24 3.59% 3.49%

Thanks msf! I have a CD in my IRA account maturing in a few days. I am tempted to reinvest it in 2 year callable CD, treating it like a 6 month noncallable CD. If it is called, I think I will still be able to get a 4% replacement callable CD, and if it is not called then I am fine with that callable rate for the length of the CD.
Regarding MMs, I am expecting all categories of MMs to fall below 4% in 2025--I will continue holding MMs but may reduce the amount I will keep in them.

Purchased 4 and 5-yr treasuries on the secondary market (~4.4x%) in taxable account on Tuesday.

I made a lengthy post this morning regarding callable CDs. If anyone is interested in responding to that, I would appreciate it.
Hey, it takes time to compose :-) Done.

At Schwab, major banks are offering long term callable CDs (18 month, 2 year, 3 year) of 4.4 and 4.5%, with the first callable date in July of 25. That tells me, I can get the equivalent of .3 to .4% more than a noncallable 6 month CD at Schwab. If the Bank does NOT call it in July of 25, you will continue to receive the 4.4 to 4.5% interest rate until they do call it.
For callable CDs at Schwab, major banks are offering 4% long term rates, so the Banks appear somewhat confident that interest rates will not drop below 4% for the next few years? I don't understand Banks offering callable CDs at these rates, if CD rates were expected to continue their rapid decline of the past year, as some posters are projecting?

One way to think of callable CDs is not as 2 year loans with a call option exercisable in 6 months but as 6 month loans (to the bank) with a put option held by the bank (on a 1.5 year loan) exercisable in 6 months. IOW, the bank is paying you about 1/4% extra interest over six months in order to have the option to "force" you to loan them money at a predetermined rate (say, 4.5%).
The bank is betting that mid-to-long term interest rates will go up, and it is willing to pay you a sweetener on a 6 month CD in order to lock in that 4.5% rate. Banks aren't always right, though one should look carefully before betting against them.
Regarding 10 year rates, Schwab writes:

With the potential for fewer Fed rate cuts and a higher deficit to fund, investors could reasonably demand more yield to compensate for those risks. A return to the average of the historical range could add as much as another 50 basis points to 10-year Treasury yields, all else being equal. That would mean an estimate for 10-year yields of near 5%. Hence, we are cautious about duration because the risks for long-term yields appear skewed to the upside.

https://www.schwab.com/learn/story/fixed-income-outlook (Dec 4)
Everyone expects "cash" (fed funds rate) to drop 25-50 basis points. What happens with rates for periods between 0-years and 10-years may be up for grabs. If they drop, buying a callable CD may leave you with the added "sweetener" and a reinvestment task in six months. (The CD gets called.) If these rates rise, there will be an opportunity cost (you're "stuck" at 4.5%). But that's okay if you're satisfied with the rate.
Here's an interesting way to hedge your bets at a cost of course. You can lock in a 4.21% APY for a year where you (not the bank) control what happens - you can add money (no limit) if rates decline, or withdraw money (up to two withdrawals).
Credit Human (an NCUA insured credit union) is offering a Liquid Share Certificate with those terms.
Does any of this matter? Not a lot, not really. One can slice and dice the risk between lender and bank in a variety of ways and with a range of costs ("sweeteners"). But in the next year or so, it may not make a whole lot of difference. That is, the variations are endless, but the risks and rewards being moved around may turn out to be relatively small.
(Credit Human also offers 19-23 month CDs with APY of 4.4% without call risk.)
Personally, I'm content leaving cash in MMFs (or very short T-bills) for a couple of months to see how the markets shake out after Jan 20th.
People may not have noticed that muni MMFs have been soaring of late, especially NY. Schwab's $1M min version, SNYXX, has a 7 day yield of 3.49% (APY 3.56%), its retail version, SWYXX has a 3.34% yield (APY 3.40%), and Fidelity's $25K min version FSNXX is at 3.28% (3.33% APY). That 3.3% is worth about 4.8% APY in a CD for someone in NYC in the 22% tax bracket. And its yield is rising.
Play the game, add a small amount of return and more stress. Settle on a fixed rate for a few months or a couple of years, and relax more. If you're not into the hunt, the latter may be the better path.

The biggest problem with CDs and annuities is that most hold them while giving up good opportunities in bondland. I can trade my funds any day.
Vanguard 10 years estimates (https://advisors.vanguard.com/insights/article/series/market-perspectives)
If the above is correct, I prefer to be in bonds and make just 6%.
Someone in 20/80 (stocks/bonds), can have similar performance to 50/50, but with much lower volatility.

One definitely needs to balance performance with opportunity costs. When I made that calculation, it was worthwhile for me to invest in MYGAs (Multi-Year Guaranteed Annuities) with guaranteed annual returns of 6%, 6.35%, and 6.5% for three, seven, and five years, respectively. Unless I withdraw funds from them, the returns are also tax-deferred which allows me to plan withdrawals or let them ride to maturity as suits my situation.

The biggest problem with CDs and annuities is that most hold them while giving up good opportunities in bondland. I can trade my funds any day.
Vanguard 10 years estimates (https://advisors.vanguard.com/insights/article/series/market-perspectives)
If the above is correct, I prefer to be in bonds and make just 6%.
Someone in 20/80 (stocks/bonds), can have similar performance to 50/50, but with much lower volatility.

FD, I get your position. You are not a CD investor, you will never be a CD investor, and you will continue your trading approach that does not include CDs, which requires liquidity in your holdings. My original post was directed toward existing CD investors, deciding what those particular investors will do with their maturing CDs, not directed toward investors who will never hold CDs. If you want to "convert" the rest of us CD sinners, you will do it without restraint on this thread.

The biggest problem with CDs and annuities is that most hold them while giving up good opportunities in bondland. I can trade my funds any day.
Vanguard 10 years estimates (https://advisors.vanguard.com/insights/article/series/market-perspectives)
If the above is correct, I prefer to be in bonds and make just 6%.
Someone in 20/80 (stocks/bonds), can have similar performance to 50/50, but with much lower volatility.

I thought I would revisit the option of Callable CDs, what Banks are communicating about CD rates, and the merits of including them in your CD investment selections. At Schwab, major banks are offering long term callable CDs (18 month, 2 year, 3 year) of 4.4 and 4.5%, with the first callable date in July of 25. That tells me, I can get the equivalent of .3 to .4% more than a noncallable 6 month CD at Schwab. If the Bank does NOT call it in July of 25, you will continue to receive the 4.4 to 4.5% interest rate until they do call it.
For noncallable CDs at Schwab, major banks are offering 4% long term rates, so the Banks appear somewhat confident that interest rates will not drop below 4% for the next few years? I don't understand Banks offering callable CDs at these rates, if CD rates were expected to continue their rapid decline of the past year, as some posters are projecting?
So I am revisiting my position of "only" using noncallable CDs, and the risk/rewards of investing in higher rate Callable CDs, at a rate that you can only depend on for the next 6 months, but you may end up getting that higher rate for a longer period of time at the higher rate. I am taking the Feds statements that the rapid reduction of interest rates that we have seen in 2024, will likely not continue in 2025, and we may not see any interest rate declines in 2025.

An insurer can "fail" without ever being insolvent.
Never underestimate the ignorance of the investing public.

In 1991, Executive Life Insurance Company of New York (ELNY), the stressed but solvent subsidiary of its insolvent parent, Executive Life Insurance Company of California, was placed in rehabilitation in New York to protect it from cash surrenders becoming “a run on the bank.”
...
When ELNY’s parent was placed in receivership in California, the New York Insurance Department determined that an “increase in surrenders had caused a material erosion of ELNY’s assets to the detriment of policyholders with nonsurrenderable policies, primarily structured settlement annuities.” As a result, New York’s Superintendent of Insurance sought and obtained an order of rehabilitation in April 1991

https://www.pbnylaw.com/articles/THE TROUBLE WITH ELNY.pdf
It may not have been a "run", perhaps more of a fast walk, but investors spooked by problems with the parent company created a problem with ELNY that otherwise wouldn't have existed.
New York State regulates insurers more stringently than does the rest of the country. Insurers' investments can't be as risky, capital requirements are higher, and so on. This is the reason why you often see insurers operate in 49 states with a separate subsidiary in New York. Insurance companies don't want to be held to New York's higher safety standards in the rest of the country.
https://www.jstor.org/stable/253661 (Login via library/school required)
As far as the deferred annuities were concerned,

A year later, in March 1992, ... ELNY’s traditional whole life, term life and deferred annuity books of business were transferred to Metropolitan Life Insurance Company with substantially all the supporting statutory reserve assets. ... Neither the 1991 rehabilitation order or the 1992 order approving the rehabilitation plan declared ELNY to be insolvent.

@rforno : 500+ down and 100+ up for $45 - Are you talking $ concerning 500+ ,100+

500 MB / 100 MB (internet speed, not $$$)

@rforno : 500+ down and 100+ up for $45 - Are you talking $ concerning 500+ ,100+

Bond rating and insurer ratings have very different criteria. And different things happen in cases of failures.
If a company issuing bond goes under, bond investors are in line with other creditors depending on where the bond is in the capital structure. They can get something or nothing.
If an insurer goes under, its state regulator works as the lead regulator with the other state regulators to come up with a rescue/rehabilitation plan.
State regulators don't have ready reserves to pay out like the (underfunded) FDIC does for banks.
So, a failed bank may be shut on Friday and account access may resume on Monday. Forget about anything like that for failed insurers.
When my 403b plan insurance MBL-NJ went under (I think with AAA rating & 150 years of existence), all of our 403b annuity accounts were frozen. We could immediately withdraw/shift at 40% haircut (i.e receive 60c for $1), or wait for things to settle. While waiting, the frozen funds earned m-mkt rates that were about half of what MBL was paying. The money was unfrozen after 4-5 years. Technically, there was no loss, but only the lost opportunity. In my asset allocation at the time, I treated this frozen money as forced-cash.

"Any guarantees are from the insurance company, so stick with highly rated companies."
If the guarantee we are relying on is the insurance company's credit rating, why not look at their or other corporate bonds as well or do annuity products come with some other credit enhancement features that make them safer than bonds (say, unsecured bonds)?
Recently, before the recent climb in 10 yr rates, a few MFO posters bought 2-year call protected 10 yr bonds from DB (A rated) for a 5.7+% yield. They are not CDs but I thought as corporate bonds, they were good.
If I were the OP, I would also consider Agencies, in addition to Treasuries. Unfortunately, most of them are call protected only for six months or so but I will not complain a near 6% yield for a 10 yr Agency when available - none this minute. Just look out for them. I buy them at Fidelity where it is easy to find them to buy.
Edit: I saw and read msf's post after I posted the above.

Fixed rate deferred annuities, if used as savings vehicles (and not annuitized) are very much like CDs. Like CDs, and unlike funds, stocks, etc., their value cannot go down.
https://www.blueprintincome.com/fixed-annuities-cd-comparison
There is the risk of the insurer issuing the annuity going under, just as there is the risk of a bank failing. In the case of a bank failure, a government agency (FDIC) steps in, tries to get another bank to assume your bank's liabilities. If it succeeds (almost all the time), you may be forced to choose between taking you money (including interest to date) and running, or accepting a lower return for the remainder of the time on your CD.
In the case of an insurer (the issuer of your annuity) failing, it is a state government agency that steps in. As with banks, states first try to "rehabilitate" insurers - either get them back on their feet or have another insurer take over their liabilities. Should they not succeed, the insurer is liquidated.
Here's Pennsylvania's general description (not state-specific) on how that proceeds. A state-created guaranty association pays for losses not to exceed state limits. Again, similar to what the FDIC does for banks. A key difference is that state guaranty associations are typically underfunded. So it is important to stick with better rated insurers. (Rehabilitation/liquidation is to be avoided in any case.)
Pennsylvania FAQ on insurance company liquidations
Single Premium Deferred (fixed) Annuities are rather simple vehicles if one does not annuitize (i.e. one uses them like CDs). The key numbers are:
- guarantee rate,
- number of years rate is guaranteed,
- floor for annual renewal rate after that (insurer might offer more depending on market),
- penalty each year for early withdrawal (e.g. 7% in year 1, 6% in year 2);
- amount/percentage that can be withdrawn annually without penalty
There should not be a penalty for withdrawing everything once the multiyear guarantee period is past.
Something that has been added in the past decade or two is MVA - market value adjustments. Suppose interest rates have gone up since you purchased your annuity. Then, like a bond, the value of your annuity has dropped. If you close out your annuity early (effectively "putting" your policy), you are forcing the insurer to overpay (i.e. pay 100% of face value minus any early redemption charges). MVA lets the insurer adjust the payout accordingly, so that it doesn't overpay.
Conversely, if interest rates drop, your annuity is worth more than face value (plus interest). MVA adjusts the payout upward, so you "win". Many annuities but not all these days come with MVA.
https://smartasset.com/financial-advisor/market-value-adjustment
MVA seems to enable insurers to issue policies that pay a bit more. But they're shifting market risk onto you, in case you redeem early.
Here are Mass Mutual's rate sheets for its 3-5 year Stable Voyage Policies (no MVA) and for its Premier Voyage Policies (with MVA). The latter have higher rates, e.g. 4.25% or 4.35% on policies under $100K, while the Stable Voyage Policies (no MVA) pay 4.2%.
Stable Voyage rate sheet (Dec 30th)
Premier Voyage rate sheet (Dec 30th)
Important: These rates are dated Dec 30th. They are less than the rates I found quoted today. So rates on these annuities are about to drop.

Kanopy, a streaming service through many libraries across the nation, is free with limitations. I never use up the 15 or 20 movie limit per month. It isn't a suggestion to replace any of the choices mentioned above but rather to function as a decent adjunct.

I have followed this thread, but had only 2 short posts on T-Note quotes & FRN USFR.
IMO, good CD alternatives are T-Bills/Notes (noncallable). All these can be held to maturity without incurring losses. The CD & Treasuries investors are quite different from fund investors because funds have duration and they never mature, so there may be gains or losses at sale.
As for annuities, there are basic fixed-term and lifetime SPIA that have low-costs and may be fine for many. Any guarantees are from the insurance company, so stick with highly rated companies.
TIAA offers many low-cost annuities - for retirement or taxable accounts.
A big issue with annuities is that one is stuck with annuity rules - while tax-deferral is good, withdrawal penalties apply before 59.5. Taxes also apply on withdrawals.
Insurers know that & can offer attractive rates to captive clients. They also publicize those offers aggressively along with luring initial incentives.
One can do 1035 exchanges between annuities, but it isn’t a simple online process.
IMO, first exhaust all other tax-deferral options - IRAs, 401k/403b, 529, etc. When these options weren’t available, annuities were very popular.

Great stuff by @msf on annuities. I agree they are a viable option at this time. Guessing they were even more so about 6-12 months ago when rates were at/near their peaks.
That said, annuities have always been a 4-letter word to us. Too high fees, loss of control over your money, difficult if not impossible to understand terms, etc.
Not saying all of the drawbacks can't be overcome, but any prospective buyer MUST identify and understand all of the many mistakes they can (and others often do) make when buying them. Or things may not go as planned/expected.
Here's some primer links in the event anyone here is so inclined. If it's our money, I wouldn't stop with reading just these:
https://annuityguys.org/five-annuity-mistakes-you-should-avoid/
https://www.investopedia.com/articles/investing/022316/5-mistakes-avoid-when-shopping-annuities.asp
https://www.neamb.com/retirement-planning/7-common-annuity-mistakes-and-how-to-avoid-them
EDIT: Barron's does an annual review and report by annuity type that I consider the best on the planet and would absolutely use as our primary guide if ever seriously considering an annuity.
(Note: A few years ago we did consider one and passed.)
https://www.barrons.com/topics/best-annuities