CDs and Money Markets

Comments

• WABAC

  March 22

  Yeah, I'm too old to stockpile gold, ammo, and freeze-dried food.
  
  I put some money in BUBIX. Other options I'm considering are FCNVX, ICSH, SGOV, and so on. Higher rated bonds, short durations, low prices, and for the ETF's large AUM.
• racqueteer

  March 22

  FWIW, I've been carrying a lot of USFR for probably a year as my 'bond' component; so I never really made that changeover. I also sold all equities more than a week ago. So, yeah, I would say that we have been maintaining a low profile and have that in common at present.
• msf

  March 22

  ISTM that if the FDIC were to be wound down in an orderly manner (hah!), only new deposits would be at risk. So this possibility doesn't strike me as a reason to avoid CDs or other insured bank accounts.
  
  OTOH, if the FDIC were to implode due to attrition, lack of official support, etc., then we could see a full blown banking crisis as poorly supervised banks collapsed and bank runs ensued. In that case, loss of one's bank deposit might be chickenfeed compared with other consequences.
  
  Either way, my attitude for the moment is "don't worry, be happy" - well, calm at least.
  
  You could also look at T-bills. They're backed by the full faith and credit of the US, just like the FDIC The latest auction (last Thurs) sold 1 and 2 month T-bills with yields of 4.30% and 4.29%, state tax-free. Along the same lines if you don't like managing individual securities, something like SGOV is a possibility (current SEC yield of 4.2%).
  
  Ultimately cash is cash, and you're not going to eek out more than a quarter percent one way or the other without taking on more risk.
• hank

  March 22 edited March 22

  Just bought a new replacement window with solid wood frame identical to one purchased from same dealer in February 2018 - just over 7 years ago.
  
  Price in February 2018 with 3-day promised delivery $400
  
  Price today with 6-week estimated delivery $675
  
  Increase $275
  
  Percent of increase about 65%
  
  Divided by 7 (years) = about 9.25% per year
  
  Bottom line - 4.5% on mm accounts probably isn’t going to protect your savings against inflation - at least in the housing / construction / materials sectors.
  
  Not trying to steal your thread @dtconroe. But I think any discussion of “return” needs to consider the impact of inflation.
  
  Thanks for the ”cheery” commentary @msf / One wonders what current or former Fox News host may end up running the FDIC and “protecting” our savings - - Bartiromo?
• larryB

  March 22

  @Dt. I am with you 100%. I am way more interested in return of my capital than return on capital. I watch the market with a sense of detachment I haven’t had since the sixties,,, when I cheered for the markets to crash. I too worry about the FDIC. My biggest concern is social security. If it were up to Dodick it would already be shut down. But the intent is pretty clear.
• dtconroe

  March 23

  Hank, you are not stealing my thread, and your perspective on investments is appreciated.
  
• Old_Joe

  March 23 edited March 23

  Re "stealing" threads: As you all know, for better or worse I do start a fair number of threads. I don't think of them as "my" threads- they're MFO community threads. And if they sometimes take off in unexpected directions, that's great- all of this stuff is interesting.
• Sven

  March 23

  Agree with @Old_Joe,
  The way I look at it is the direction of the tread continued to evolve, and that is okay for the purpose of discussion.
• fred495

  March 25 edited March 25

  I am a little older than you, dt, and also don't have much appetite for risk. However, I do want to beat inflation and aim to have my portfolio earn an annual total return of around 5-7%.
  
  Currently, about 25% of my portfolio is invested in CDs from large national banks, and if they go under then the FDIC will not be of much help anyway. About 50% is in bond funds like CBLDX, ICMUX, RCTIX, etc., and the remaining 25% is in a MM fund for the time being.
  
  Once the Trump tariff induced market turbulence subsides, my thoughts are to invest the MM funds in low SD alternative funds such as QDSNX, QQMNX, etc., and perhaps a balanced fund like PRCFX. But, for this segment of my portfolio I will always be dancing near the exit.
  
  Good luck.
  
• Crash

  March 25

  I note SWVXX is down to 4.15% yield. Still attractive to me. I'm still adding in dribs and drabs. The savings account at the credit union is used simply as a sleeve to tuck money into for a particular purpose; it will be spent in a matter of months.
• dtconroe

  March 25

  Crash said:

  I note SWVXX is down to 4.15% yield. Still attractive to me. I'm still adding in dribs and drabs. The savings account at the credit union is used simply as a sleeve to tuck money into for a particular purpose; it will be spent in a matter of months.

  Yes, in one of my Schwab accounts, I put 2 CDs that matured, into SWVXX that pays 4.15%. In a different Schwab account, I put 1 CD that matured, into SNAXX that pays 4.30%. I can't find a nonCallable CD that pays more than that.
• dtconroe

  March 25

  fred495 said:

  I am a little older than you, dt, and also don't have much appetite for risk. However, I do want to beat inflation and aim to have my portfolio earn an annual total return of around 5-7%.
  
  Currently, about 25% of my portfolio is invested in CDs from large national banks, and if they go under then the FDIC will not be of much help anyway. About 50% is in bond funds like CBLDX, ICMUX, RCTIX, etc., and the remaining 25% is in a MM fund for the time being.
  Once the Trump tariff induced market turbulence subsides, my thoughts are to invest the MM funds in low SD alternative funds such as QDSNX, QQMNX, etc., and perhaps a balanced fund like PRCFX. But, for this segment of my portfolio I will always be dancing near the exit.
  
  Good luck.
  

  Thanks Fred, I still maintain M* Watchlists and look at several bond oef categories. I have some interest in wading back into Muni funds, like NVHAX for my taxable account at Schwab, so I will maintain money in my MM funds with that in mind.
• fred495

  March 25

  FYI from Barron's: "Heads up, municipal bond investors: Amid all the Trump 2.0 policy proposals, there is one you should be aware of: The potential for munis to lose their tax-exempt status. “Eliminate Exclusion of Interest on State and Local Bonds” is listed on page 9 of a 50-page House Budget Committee document prepared in January that lists some 200 ways the government could raise extra funds to offset the impact of extending the 2017 Trump tax cuts."
  
• Crash

  March 26

  The snakes will stay quiet about it, then pounce. Despicable.
• FD1000

  March 26

  I'm still hanging to NRDCX.
  
  https://schrts.co/TJnxhABu
  
• Tarwheel

  March 26

  I got out of all my muni funds a couple of years ago. In my tax bracket, they just don’t make sense anymore. Even with taxes, most taxable bond funds have higher equivalent yields than comparable muni funds.
• dtconroe

  March 26 edited March 26

  fred495 said:

  FYI from Barron's: "Heads up, municipal bond investors: Amid all the Trump 2.0 policy proposals, there is one you should be aware of: The potential for munis to lose their tax-exempt status. “Eliminate Exclusion of Interest on State and Local Bonds” is listed on page 9 of a 50-page House Budget Committee document prepared in January that lists some 200 ways the government could raise extra funds to offset the impact of extending the 2017 Trump tax cuts."
  

  With all the Trump stuff going on, it is virtually impossible for me to predict what changes will occur, and what will not. About the only category of Munis I would be "interested" in, are HY Munis, probably with some seasonal momentum investing. Any adverse Trump decisions would of course be important to me, but once you get away from personnel cuts, downsizing, etc. it will be more complicated with more changes having to go through a legislative process. I have my doubts that the public would be supportive of eliminating tax exempt status for Munis, but I guess anything is possible.
  
  Currently Munis are poor performers, most losing 1% or so in the last month, so I am not inclined to put money into that category for now. I will keep watching the category, and if I see any momentum improvement, I will then consider if I want to move any of my MM funds into that category. Trump chaos may dampen normal seasonal momentum patterns, so nothing is a given anymore.
• BaluBalu

  March 29

  @fred495, anyone,
  
  Could please share a link to the House budget committee document mentioned above? Thanks
• msf

  March 30 edited March 30

  The House's January "Menu of Options" is just that - a laundry list of "some 200 ways the government could raise extra funds to offset the impact of extending the 2017 Trump tax cuts." It's a bunch of bullet item talking points with no detail. Why not also ask about the possible treatment of private activity bonds? That's listed separately in the 200 bullet point memo.
  
  Lots of spaghetti (with no sauce) being thrown up against a wall. Further, a month later the House passed (engrossed) H.Con.Res.14.
  
  For anyone who really wants to follow what's going on, the National Association of Bond Lawyers (NABL) maintains a useful page, "Tracking Tax Reform in 2025". Last update was March 28th.
  https://www.nabl.org/blogs/tax-reform-2025/

  What [the February House Resolution] Means for the Municipal Market: At this time, Republicans are still aiming to use this budget reconciliation process to address the debt ceiling. In theory, the process would need to conclude before the approach of the debt ceiling x-date, which is likely some time in or around May. This week’s vote represents a significant advance in the Republican effort to address the expirations of the TCJA in the first half of this year. While this plan is ambitious, municipal market participants should prepare for developments to occur along this timeline. Despite inclusion on the House Budget Committee’s “Menu of Options,” the tax exemption continues to enjoy broad bipartisan support, and we have heard minimal threats to the tax-exempt status of municipal bonds from congressional offices. It is worth noting, however, that details surrounding offsets and revenue raisers will likely only manifest after both chambers pass identical budget resolutions and the elimination or reduction of the tax exemption for municipal bonds remains a potential option for negotiators.

  Removing tax exempt status for muni bonds would blow a huge hole in state budgets. Red and blue states, both.

  The states with the most state and local government debt per capita are spread across the country, including both very populous states such as California and Texas as well as sparsely populated Alaska.
  ...
  As a percentage of state GDP, state and local government debt ranges from a low of 4.9 percent in Wyoming to a high of 24.7 percent in Kentucky.

  https://www.governing.com/finance/state-and-local-governments-with-the-most-debt-per-capita
  
  Then there's market distortion. If current bonds keep their tax exempt status, then they will command a large premium. Republicans typically oppose tax laws that create distortions. (So do many economists.) OTOH, imagine the howling from holders of existing bonds if their income suddenly becomes taxable - causing their bonds to lose significant value overnight.
  
  
• BaluBalu

  March 30 edited March 30

  @msf,
  
  I was (am) not interested in the Muni bond tax exempt matter. I want to read what you called “Menu of Options” which I presume is the same as what @fred495 called House Budget Committee document. May I get a link to it please? (I normally go to the House Ways And Means website for tax stuff but this document likely will not be there.)
  
  Just an FYI - In the second half of 2024, I made a post asking members to weigh in about the possibility of a future (in the current or next Congress) loss of tax- exempt status for Muni (State and Local) bonds. I do not think I received any guesses but within a day or two I contemplated the matter and asked to ignore my request. With my inept search skills, I was not able to find those posts but be assured I am not interested in that matter.
  
  Thanks.
• Mona

  March 30

  @BaluBalu, I am very interested in the matter.
• BaluBalu

  March 30 edited March 30

  Mona said:

  @BaluBalu, I am very interested in the matter.

  I was only asking not to spend time and energy on it for my sake. I understand and know there would be genuine interest in the matter.
  
  
• msf

  March 30

  Some people are better at search queries than others. So let me offer a little tip: if one is looking for a page containing an exact phrase (preferably of more than a couple of words), one can try executing a search for that precise phrase. Here, we know that the document of interest contains the phrase: Eliminate Exclusion of Interest on State and Local Bonds
  
  Many search engines use double quotes ("") to denote phrases. Unfortunately, Duckduckgo isn't one of them. Several of the top results it returns are not particularly helpful. But Google still seems to do a decent job of respecting quotes. Here is what a Google search returns.
  
  In my previous post I gave its top search result, a page that is replete with links to various documents including the doc you're looking for.
  
  The second result is the Barron's article that fred495 quoted. The sixth result, Cato, starts off by stating that "a copy of House Budget Committee Republicans’ draft menu of reconciliation options leaked to the press."
  
  That would explain why you couldn't find it under official memos. It was for internal Republican use. Also, FWIW, the House Budget Committee is not the same thing as the House Ways and Means Committee (though you won't find this GOP draft memo in either place).

  The rules of the House require that the Budget Committee’s membership be composed of five members from the Committee on Ways and Means, five members from the Committee on Appropriations, and one member from the Committee on Rules.

  https://budget.house.gov/about/committee
• Crash

  March 30

  Checking on Sunday morning, 30 March, '25:
  yield on SWVXX = 4.17%. Still attractive. Growing it for short-term use.