My husband and I have a real estate investment that is selling in about a month. The net to us after taxes is about $170,000. My husband is currently adverse to putting money into most anything because of high valuations. Anyone have any ideas on things I could suggest to him to investigate as possible places to park this money? We already have too much in cash and cash equivalents. We also don't have any real estate deals on the horizon.
investments a bear would love
- Thread starter Martha
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cute fuzzy bunny
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
You and I are in exactly the same position. I've got about a $200-225k house sale happening in the next few months and cant see anywhere good to put the money.
I looked at ibonds and tips. I dont like the returns on either. I'd rather a 3% 11 month cd than an ibond, both paying about the same but the CD feels a little more liquid to me even though I dont think it is. I'm not buying any long term tips at 2.5%...I'll wait for the rates to go up. I considered the approach mentioned (Bob Smith?) to buy secondary market 4% tips and take the higher yield even though I'm paying a huge premium up front to get it. Still not sold on that being a good plan. While rates have risen, bonds have staved off taking the NAV hit that I think has just been delayed. Stocks are almost universally too expensive for my tastes.
I'll probably just park it in a 5 year high rate CD, wait for the next year or two of events to unfold. According to ECRI's leading economic indicators we're going to have a huge drop in the economy in a few months to a near recessionary position. That should paste stocks pretty good and cause the fed to stop raising rates. Bonds might finally do a solid adjust. Some folks might start paying a more reasonable 4-5% interest rate on shorter term cd's. TIPS might break 3% or ibonds 2%, at which point I'd start considering them.
I know that once one starts waiting, one may wait forever, and I just said "maybe" a lot of times, but I've built my portfolio up to ER early by engaging some common sense with regards to investment valuations and getting the heck out when they looked stupid. By the same token, getting in when they look stupid doesnt seem like a good idea either.
I'll take the 5% for a year or two, take the six month hit when things look better, and hopefully come out on top.
TH, the dirty market timer...
I looked at ibonds and tips. I dont like the returns on either. I'd rather a 3% 11 month cd than an ibond, both paying about the same but the CD feels a little more liquid to me even though I dont think it is. I'm not buying any long term tips at 2.5%...I'll wait for the rates to go up. I considered the approach mentioned (Bob Smith?) to buy secondary market 4% tips and take the higher yield even though I'm paying a huge premium up front to get it. Still not sold on that being a good plan. While rates have risen, bonds have staved off taking the NAV hit that I think has just been delayed. Stocks are almost universally too expensive for my tastes.
I'll probably just park it in a 5 year high rate CD, wait for the next year or two of events to unfold. According to ECRI's leading economic indicators we're going to have a huge drop in the economy in a few months to a near recessionary position. That should paste stocks pretty good and cause the fed to stop raising rates. Bonds might finally do a solid adjust. Some folks might start paying a more reasonable 4-5% interest rate on shorter term cd's. TIPS might break 3% or ibonds 2%, at which point I'd start considering them.
I know that once one starts waiting, one may wait forever, and I just said "maybe" a lot of times, but I've built my portfolio up to ER early by engaging some common sense with regards to investment valuations and getting the heck out when they looked stupid. By the same token, getting in when they look stupid doesnt seem like a good idea either.
I'll take the 5% for a year or two, take the six month hit when things look better, and hopefully come out on top.
TH, the dirty market timer...
brewer12345
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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I can think of two things that look good to me right now that have little or nothing to do with the equity markets or the economy in general:
- PFCU CDs, which are hard to beat, and
- STON, which I have mentioned before. Not a ton of volatility, lots of yield (which will be partially free of taxes), and shouldn't be correlated with the equity market. Plus mutual funds can now have up to 25% of their income coming from MLPs, so I expectthat the yield hog funds will be steady bidders for most MLPs.
- PFCU CDs, which are hard to beat, and
- STON, which I have mentioned before. Not a ton of volatility, lots of yield (which will be partially free of taxes), and shouldn't be correlated with the equity market. Plus mutual funds can now have up to 25% of their income coming from MLPs, so I expectthat the yield hog funds will be steady bidders for most MLPs.
wabmester
Thinks s/he gets paid by the post
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STON is a cemetery stock (you know, headSTONes). I'd watch out for brewer's stock picks, though. They have a morbid habit of going belly up. Real portfolio killers. Although, sometimes he's dead-on.
cute fuzzy bunny
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I'm waiting for that MLP to hit a coffin corner.
Anyone watch "six feet under"?
Anyone watch "six feet under"?
brewer12345
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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I was prepared to be offended until I caght the awful puns. (groan...)
Anyway, I have bought a chunk of STON for my taxable account (gotta keep MLPs out of IRAs). Time will tell, but this thing was a steal under 20 and is a good value where it currently stands. Their business has almost nothing to do with the economy (you drop dead regardless of whether its a recession or expansion), and in each local area they operate, they don't have a lot of competition. They are also set up to feed off the Boomers as they do their estate planning.
I think year over year CPI is about 3.5% right now.
Thus it seems likely to me that I-bonds will yield
at least 4.5% at the next adjustment. Real rates
have been creeping up a little the past week also
so there is a chance that the real rate of 1% could
go up a tad.
It seems to me that you could buy I-bonds, hold
them until the increase in real rates makes it
worthwhile to upgrade. You would only forfeit
3 months of interest if held for 1 to 5 years and
nothing if held more than 5 years. Three months
interest on a base of the current 3.67% would be
about 0.92% giving you a yield of about 2.75%.
for 1 year. That's what ING is paying for a 1 year
CD last time I looked. IMHO, TIPS might beat
PFCU 5.25% over the next 5 years and could do
significantly better if inflation takes off.
Of course TH and Martha are talking about investing
more than the $120k max per couple in 1 year so
this might not solve their problem.
Let me know if this does not compute.
Cheers,
Charlie
Thus it seems likely to me that I-bonds will yield
at least 4.5% at the next adjustment. Real rates
have been creeping up a little the past week also
so there is a chance that the real rate of 1% could
go up a tad.
It seems to me that you could buy I-bonds, hold
them until the increase in real rates makes it
worthwhile to upgrade. You would only forfeit
3 months of interest if held for 1 to 5 years and
nothing if held more than 5 years. Three months
interest on a base of the current 3.67% would be
about 0.92% giving you a yield of about 2.75%.
for 1 year. That's what ING is paying for a 1 year
CD last time I looked. IMHO, TIPS might beat
PFCU 5.25% over the next 5 years and could do
significantly better if inflation takes off.
Of course TH and Martha are talking about investing
more than the $120k max per couple in 1 year so
this might not solve their problem.
Let me know if this does not compute.
Cheers,
Charlie
I just closed out some positions and have a similar pile. I am still pondering the potential of just dumping it into the VG High Yield Corp fund VWEHX - (actually high grade junk bonds) - Already have some and they pay 7.5%+... don't have the problem of devaluing when interest rates go up - also, as rates go up they are unlikely to be called in - and they are actively traded.
Just a thought when other fund valuations are sooo high.
JohnP
Just a thought when other fund valuations are sooo high.
JohnP
You couldn't if you wanted to. The best you can get now is 1.9% - 2%.
I have considered selling and pocketing the profit on the TIPS I bought (12-13% gain in just a few months) and buying in again when/if the price declines. But then I look at historical real returns on T-Bonds. In modern times the real return has averaged about 2.2%, and there have been decades long stretches when real returns have been negative. So I don't think I can count on real rates going to 3%. Maybe they will, but I think the odds are better we won't see 3% for awhile. But even if we do see 3%, it won't hurt me because I plan to hold to maturity. I'm not suggesting anyone buy TIPS, but for me they're ideal for a portion of my bond allocation. I wouldn't buy them at 1.9% though.
J
John Galt
Guest
Hi Charlie. I am an eternal optimist, but a confirmed
cynic. Some junk works for me just fine. If
circumstances lock me in, that's okay too. I'll just
cash my monthly interest checks and press on. Honestly,
defaults are the least of my worries.
JG
cynic. Some junk works for me just fine. If
circumstances lock me in, that's okay too. I'll just
cash my monthly interest checks and press on. Honestly,
defaults are the least of my worries.
JG
haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Worries and risks are not the same.
Risks don't care whether you worry about them or not- they just go on affecting your life.
Mikey
J
John Galt
Guest
Hi Mikey! That's true! Not real profound, but true
JG
JG
Hey folks,
I just checked the following link and found an
inflation indexed security that pays 7.5% for
the first year, then 1.5 x CPI until 2020.
The security is rated AA- by S&P. The issuer
is ABN-AMRO Bank N.V.
http://www.fisn.com/CDalternatives.htm
Is there a gotcha?
Charlie
I just checked the following link and found an
inflation indexed security that pays 7.5% for
the first year, then 1.5 x CPI until 2020.
The security is rated AA- by S&P. The issuer
is ABN-AMRO Bank N.V.
http://www.fisn.com/CDalternatives.htm
Is there a gotcha?
Charlie
C
Cut-Throat
Guest
The security closing date of the one I was looking at was 1/08/05. :-/
haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Not sure if would rank as a gotcha, but based only on what you have written, the arithmetic of this security is odd. At low rates of CPI inflation, it pays a small real return. If CPI inflation should get very high, then the real return will be substantial.
For example, if CPI inflation is 1%, this security would pay 1.5%, or a real return of 0.5%. OTOH, if CPI inflation were to reach 10%, it would pay 15%, or a real 5%.
Sounds like a great way to play hyperinflation, not so good for low or moderate inflation rates.
Mikey
cute fuzzy bunny
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I've got a small lump of the vanguard high yield, and I sure like the dividend checks it throws off. From what i've gathered, the experts dont feel like the 'spread' between investment grade and high yields warrants the risk of high yields, but the vanguard fund isnt anywhere near as risky as many high yield funds.
Its tempting, but I have this queasy feeling about bond navs right now. Just read some stuff from bill gross and company that said navs have been surprisingly steady in the face of the rate increases, but that the fat lady hasnt sung yet (nor can you drink her thin).
On STON it seems like I've heard the story about it being a slam dunk that everyones gonna die. Its kind of a cut-throat (sorry) business though, and the 'market leaders' seem to change up every now and then. I do hear that people are dying to own the stock though
Chuck - ibonds are tempting, and if I thought inflation was going to pop I'd buy them. Looks like I can get an extra 1.4-1.5% on a CD with roughly the same penalty to back out (3 months of 3.6% vs 6 months of 5-5.25%) if rates improve.
Bob - I wasnt aware that tips were yielding so poorly. I thought they were iffy at 2.5%. I couldnt be any less interested in owning them now. If the rates topped 3%, I'd think about it. At 4% I'd buy a truckload. I just really hate the idea of having to pay taxes for the inflation adjustments every year and not seeing it for 20. On tips I think Bob has the right idea in buying the old high coupon ones. My bargain shopping nature keeps me from biting on that one though.
It really, really sucks that CD's might be the best thing for the next 1-3 years.
Anyone looking at EE bonds? Supposedly in a rising rate, tame inflation environment they're the thing to have.
Sorry for those on a long investment string, but I'd love to see everything just go to hell in a handbasket pretty soon and make at least 2-3 options look good.
Its tempting, but I have this queasy feeling about bond navs right now. Just read some stuff from bill gross and company that said navs have been surprisingly steady in the face of the rate increases, but that the fat lady hasnt sung yet (nor can you drink her thin).
On STON it seems like I've heard the story about it being a slam dunk that everyones gonna die. Its kind of a cut-throat (sorry) business though, and the 'market leaders' seem to change up every now and then. I do hear that people are dying to own the stock though
Chuck - ibonds are tempting, and if I thought inflation was going to pop I'd buy them. Looks like I can get an extra 1.4-1.5% on a CD with roughly the same penalty to back out (3 months of 3.6% vs 6 months of 5-5.25%) if rates improve.
Bob - I wasnt aware that tips were yielding so poorly. I thought they were iffy at 2.5%. I couldnt be any less interested in owning them now. If the rates topped 3%, I'd think about it. At 4% I'd buy a truckload. I just really hate the idea of having to pay taxes for the inflation adjustments every year and not seeing it for 20. On tips I think Bob has the right idea in buying the old high coupon ones. My bargain shopping nature keeps me from biting on that one though.
It really, really sucks that CD's might be the best thing for the next 1-3 years.
Anyone looking at EE bonds? Supposedly in a rising rate, tame inflation environment they're the thing to have.
Sorry for those on a long investment string, but I'd love to see everything just go to hell in a handbasket pretty soon and make at least 2-3 options look good.
J
John Galt
Guest
Everything will go "to hell in a handbasket". Just be
patient.
Interesting how the rates have stayed so low. I thought maybe once the fed started to move back up
everything would turn. Didn't happen. I read today
that mortgage rates have even dropped.
Tomorrow I am buying a 20K CD at a local bank.
2.75% for 9 months on money I borrowed at -0- %.
That's easy money.
JG
patient.
Interesting how the rates have stayed so low. I thought maybe once the fed started to move back up
everything would turn. Didn't happen. I read today
that mortgage rates have even dropped.
Tomorrow I am buying a 20K CD at a local bank.
2.75% for 9 months on money I borrowed at -0- %.
That's easy money.
JG
Mikey,
Thanks for commenting. I just finished reading
the prospectus ........ yes the return could be 0%
if year over year inflation is 0 or negative.
Right now inflation is 3.52% so this security
would be paying 5.28%. The first year interest
rate of 7.5% is tempting.
I guess the big risk would be a long period of
depression with 0% return.
OTOH does anybody really think we will have a
long period of no inflation? I don't think gov
policy would permit that. I think the long term
average inflation has been around 3% ..... but
this says noting about the future.
Like you said, it would be a good hyper inflation
hedge.
Cut, I don't know if it is too late on this. The
settlement date is Jan 13th on the prospectus.
Maybe they didn't sell out?
Well, good night all zzzzzzzzzzzzz
Charlie
Thanks for commenting. I just finished reading
the prospectus ........ yes the return could be 0%
if year over year inflation is 0 or negative.
Right now inflation is 3.52% so this security
would be paying 5.28%. The first year interest
rate of 7.5% is tempting.
I guess the big risk would be a long period of
depression with 0% return.
OTOH does anybody really think we will have a
long period of no inflation? I don't think gov
policy would permit that. I think the long term
average inflation has been around 3% ..... but
this says noting about the future.
Like you said, it would be a good hyper inflation
hedge.
Cut, I don't know if it is too late on this. The
settlement date is Jan 13th on the prospectus.
Maybe they didn't sell out?
Well, good night all zzzzzzzzzzzzz
Charlie
