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The Death of Cash – Welcome to Less Than Zero

davfordavfor
in Fund Discussions
Europe is at the epicenter of the global experiment with negative interest rates. Bonds trading with negative yields are commonplace there. But, even in the US, JP Morgan Chase will soon begin to charge certain customers a 1% per year fee on deposits. Is my idea that cash sets a floor on interest rates becoming outdated? How unstable are things becoming that I am even asking this question?

This topic is impacting my thinking about my portfolio. (Maybe my next annual portfolio review will find me adding more to my defensive allocation to “cash”.) If anyone has a properly functioning crystal ball I would appreciate some guidance concerning what the next couple of years holds for us!

Anyway, here is a fairly short BloomburgBusiness article about this topic:

bloomberg.com/news/articles/2015-04-23/negative-interest-rates-may-spark-existential-crisis-for-cash

Comments

  • Dex
    i think we have at least 5 more years of this low interest rate environment. It could be more. The debt, aging population, unemployment, wage stagnation will help to keep it down.
  • JunksterJunkster
    Dex said:

    i think we have at least 5 more years of this low interest rate environment. It could be more. The debt, aging population, unemployment, wage stagnation will help to keep it down.

    I hope you prove prescient. I would be thrilled with just a year or two more of these low yields. But I sure haven't liked the action in TLT (20 year bond) since the bottom in yields around the beginning of February. I worry (I always worry) 2015 will be the reverse of 2014 the former being everyone was shocked how low rates fell with the latter everyone being shocked how quickly rates move back up. Time for the bank loan/floating rate funds?
  • JohnChisum
    edited April 2015
    "Time for the bank loan/floating rate funds? "

    I have had DLFRX on the watch list for some time now. Maybe it's time?
  • JunksterJunkster
    JohnChisum said:

    "Time for the bank loan/floating rate funds? "

    I have had DLFRX on the watch list for some time now. Maybe it's time?

    Not bad at all and you may want to check out EIFAX or HFHIX too. I may go into SPFRX if I can figure out how they are performing their magic of no down days.
  • JohnChisum
    edited April 2015
    @Junkster, Thanks for those recommendations. I'll add them to the watch list. These funds have been popular as investors felt rates were going up but we have been waiting for a long time and maybe a while longer. They are looking good as of late.
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