Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 03-11-2018, 08:05 AM   #81
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 12,727
I noticed the CDs go up and down in value a bit. Is this normal?
__________________
The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-11-2018, 08:18 AM   #82
Thinks s/he gets paid by the post
 
Join Date: Mar 2012
Posts: 2,387
Quote:
Originally Posted by Chuckanut View Post
I noticed the CDs go up and down in value a bit. Is this normal?
Technically, all CDs go up and down in value. A CD is just a specific type of bond, and day to day its value will fluctuate based on interest rates and market conditions.

Anyone who holds CDs in a brokerage account is aware of this. Like any bond holdings, at the end of every day they are marked to market. For the investor who will hold the CD to maturity it is little more than noise. It's really only of interest if you are looking to sell, as it gives you an idea of what the value is likely to be in the market at that time.
njhowie is offline   Reply With Quote
Old 03-11-2018, 09:09 AM   #83
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 12,727
Yes, that should have been obvious to me since they are bought and sold in a market place. Maybe I need another cup of morning coffee to get the brain working.
__________________
The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Old 03-11-2018, 10:01 AM   #84
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 30,521
Quote:
Originally Posted by Chuckanut View Post
I noticed the CDs go up and down in value a bit. Is this normal?
If you hold them at a brokerage, you are at a place that can sell them on a secondary market, so yes, you'll see the "mark to market" value. And indeed, that is the only way you can "withdraw early" at the brokerage.

At a bank you have an option of early withdrawal from the CD, sacrificing hopefully only a meager amount of your earned interest, so it's not really an issue.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 03-11-2018, 10:26 AM   #85
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 7,111
A more basic observation: If there is significant probability of an early withdrawal, a CD is probably not a good choice in the first place. I buy T-bills; I have never needed to sell one, but they are much more liquid than bank CDs hence there should be less of a haircut if I sell before maturity.
OldShooter is offline   Reply With Quote
Old 03-11-2018, 11:05 AM   #86
Recycles dryer sheets
 
Join Date: Jul 2017
Location: Seattle
Posts: 81
Quote:
Originally Posted by Newventurer View Post
Just found out tonight that Schwab sells other companies CD's through their website. They hold the paper, all institutions are FDIC insured. Got a 13 month CD from Wells Fargo at 2% (can't get anything close to this on Wells website). At the end of the term the proceeds are put back into your Schwab account along with the interest. Very Convenient, and competitive.
Thanks, this is awesome as it looks like the rates are even higher than Ally Bank and this will let me keep more of my money in one place!

I do like the Ally 11 month no-penalty still but once my current regular CDs mature over there, I'm going to move them over to Schwab!
limeyx is offline   Reply With Quote
Old 03-11-2018, 11:08 AM   #87
Recycles dryer sheets
 
Join Date: Jul 2017
Location: Seattle
Posts: 81
Quote:
Originally Posted by audreyh1 View Post
Yeah a concern for me too.





Thanks.
The ones I just browsed on Schwab seem to be callable on death only (but I only looked at 3 or 4)
limeyx is offline   Reply With Quote
Old 03-11-2018, 11:32 AM   #88
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 7,111
Quote:
Originally Posted by limeyx View Post
... I'm going to move them over to Schwab!
I am happy at Schwab, but would not consider buying off the web site. You can talk to a real bond specialist for free and discuss your needs and what is available with him (it's always been a "him" for me). Just for grins one time I brokerchecked the bond desk guy I was talking to and he had been in the business for 15 years. So these are not clerks or newbies IMO.
OldShooter is offline   Reply With Quote
Old 03-11-2018, 12:58 PM   #89
Recycles dryer sheets
 
Join Date: Feb 2013
Location: San Jose
Posts: 231
Quote:
Originally Posted by Newventurer View Post
Just found out tonight that Schwab sells other companies CD's through their website. They hold the paper, all institutions are FDIC insured. Got a 13 month CD from Wells Fargo at 2% (can't get anything close to this on Wells website). At the end of the term the proceeds are put back into your Schwab account along with the interest. Very Convenient, and competitive.
From the FDIC (five years ago): https://www.fdic.gov/consumers/consu...ombrokers.html
Be skeptical if the interest rate on a brokered CD is significantly higher than other advertised rates... “If a broker is offering you a CD rate significantly higher than the general market rates, that broker is probably trying to lure you in to sell you another financial product that may not be FDIC-insured.”

This seems suspicious: your (949763PA8) Wells Fargo NA 2.1% maturing 04/15/2019 on Schwab.com compared to standard fixed rate 12-month CD 0.15% (regardless of principal) listed on
https://www.wellsfargo.com/savings-c...te-of-deposit/

So is the CD offered by Schwab a certificate of deposit -- or maybe collateralized debt of some kind?
dunkelblau is offline   Reply With Quote
Old 03-11-2018, 01:28 PM   #90
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 7,111
Quote:
Originally Posted by dunkelblau View Post
From the FDIC (five years ago): https://www.fdic.gov/consumers/consu...ombrokers.html
Be skeptical if the interest rate on a brokered CD is significantly higher than other advertised rates... “If a broker is offering you a CD rate significantly higher than the general market rates, that broker is probably trying to lure you in to sell you another financial product that may not be FDIC-insured.”

This seems suspicious: your (949763PA8) Wells Fargo NA 2.1% maturing 04/15/2019 on Schwab.com compared to standard fixed rate 12-month CD 0.15% (regardless of principal) listed on
https://www.wellsfargo.com/savings-c...te-of-deposit/

So is the CD offered by Schwab a certificate of deposit -- or maybe collateralized debt of some kind?
I am not much for paranoia, conspiracy theories, or tinfoil hats. The Schwab bond desk telephone number is 800-626-4600. Call them tomorrow. I'd sure they will calm your fears and answer any questions.
OldShooter is offline   Reply With Quote
Old 03-11-2018, 01:37 PM   #91
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 12,727
Quote:
Originally Posted by dunkelblau View Post
From the FDIC (five years ago): https://www.fdic.gov/consumers/consu...ombrokers.html
Be skeptical if the interest rate on a brokered CD is significantly higher than other advertised rates... “If a broker is offering you a CD rate significantly higher than the general market rates, that broker is probably trying to lure you in to sell you another financial product that may not be FDIC-insured.”

This seems suspicious: your (949763PA8) Wells Fargo NA 2.1% maturing 04/15/2019 on Schwab.com compared to standard fixed rate 12-month CD 0.15% (regardless of principal) listed on
https://www.wellsfargo.com/savings-c...te-of-deposit/

So is the CD offered by Schwab a certificate of deposit -- or maybe collateralized debt of some kind?
FWIW, when I bought a few CDs from Schwab nobody tried to sell me anything else. In fact, even when I have talked to them in their office, there is no pressure, though they do let me know about their Robo Investing service and their relatively cheap advising service (.28%) which the rep told me is 'for those who feel they need and advisor".

That said, it's always wise to question a much higher than normal return. In this case the Schwab WF CD rate is about the same as banks such as Ally and Capital One. WF's advertised rate at the bank branches is suspect to me as it makes me think they want to take me for a complete idiot.

I bank with BofA and when I checked their rate for a 1 Year CD I just about gagged it was so small. Schwab will continue to get my business.
__________________
The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Old 03-11-2018, 02:35 PM   #92
Recycles dryer sheets
 
Join Date: Feb 2013
Location: San Jose
Posts: 231
OldShooter, Chuckanut, thanks, I've been a loyal Schwab customer for 30 years and never had any problem, this is just my way of due diligence for something that seems like an incredibly good deal. I'm still curious about why this large yield discrepancy exists.

One explanation I read this morning suggested product moved through brokerages responds much more quickly to changing market expectations than bricks and mortar offerings, so this might be a hedge against an abrupt large jump in interest rates? If so this maybe why I remember how the Schwab CD offers looked unappealing back when this was new over a decade ago. We were better off shopping laggards in a falling rate environment.
dunkelblau is offline   Reply With Quote
Old 03-11-2018, 04:04 PM   #93
Thinks s/he gets paid by the post
 
Join Date: Mar 2012
Posts: 2,387
Quote:
Originally Posted by dunkelblau View Post
From the FDIC (five years ago): https://www.fdic.gov/consumers/consu...ombrokers.html
Be skeptical if the interest rate on a brokered CD is significantly higher than other advertised rates... “If a broker is offering you a CD rate significantly higher than the general market rates, that broker is probably trying to lure you in to sell you another financial product that may not be FDIC-insured.”
All CDs sold on Fidelity, Schwab, and Etrade websites are FDIC insured unless specifically indicated that they do not carry FDIC insurance. I saw one or two on Etrade over the past year that were not FDIC insured, but that is out of thousands and thousands.

Quote:
Originally Posted by dunkelblau View Post
This seems suspicious: your (949763PA8) Wells Fargo NA 2.1% maturing 04/15/2019 on Schwab.com compared to standard fixed rate 12-month CD 0.15% (regardless of principal) listed on
https://www.wellsfargo.com/savings-c...te-of-deposit/

So is the CD offered by Schwab a certificate of deposit -- or maybe collateralized debt of some kind?
You are clearly unfamiliar with how these work. The Wells 2.1% 13-month CD on the Schwab site is not suspicous at all. Fidelity is also offering it at this time. All March 2019 new issues are currently going for 1.85%-2.05%. Wells is always offering 13-months at a yield 0.1% above what everyone else is offering 12-month at. They've been doing this for a long time.

Please review this yield table at Fidelity and note the top line for CDs. The Wells Fargo 2.1% CD is normal, the CDs offered on the Wells site are abnormally low.

https://fixedincome.fidelity.com/ftgw/fi/FILanding

Ask yourself, who would take a 12-month 0.15% CD when online FDIC insured savings accounts are yielding 1.5% to 1.8%?
njhowie is offline   Reply With Quote
Old 03-11-2018, 07:00 PM   #94
Recycles dryer sheets
 
Join Date: Feb 2013
Location: San Jose
Posts: 231
njhowie, thanks, from their websites I see 12-month CDs yield 0.25% at Citi, 0.07% at BofA, and a whopping 0.02% at Chase (0.05% for 100K+), so the 0.15% at Wells isn't "abnormally low" in comparison.

But that Wells 2.1% 13-month on Schwab was at the top of the 12-mon list when I checked, and I didn't notice anything from the other megabanks. Most of the offerings in the 1.5-2% range are from banks I've never heard of, so in the overall distribution I'd call these outliers. I'd guess the median 1-year CD rate is ~0.5% around where I live.

Maybe it's best to just take the gift horse without understanding it. I was lucky to sidestep the ARS and YieldPlus debacles from many years ago; I never bought into those because I hadn't heard of them until afer they made the news. What worries me now is that the 'free lunch' part (i.e. reward >> risk) sounds familiar.

Or maybe I'll go with the notion that the bank website offerings are "old inventory" while the brokered CDs are the latest and greatest-- so it's all reasonable. And savers who have neither internet nor a brokerage account are hosed.
dunkelblau is offline   Reply With Quote
Old 03-11-2018, 07:29 PM   #95
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 12,727
Quote:
Originally Posted by njhowie View Post

Ask yourself, who would take a 12-month 0.15% CD when online FDIC insured savings accounts are yielding 1.5% to 1.8%?
I have. And the only answer I can come up with is that they are either ignorant of current interest rates, or they are very nice people who want to subsidize the higher rate we are getting.
__________________
The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Old 03-11-2018, 07:44 PM   #96
Thinks s/he gets paid by the post
 
Join Date: Mar 2012
Posts: 2,387
dunkelblau - you are looking for the catch, when there is none. Those megabanks you point to are looking to rip off folks who do not know any better.

https://www.bankrate.com/cd.aspx

Use the Term dropdown to see what the rates are for different maturities.
njhowie is offline   Reply With Quote
Old 03-11-2018, 07:45 PM   #97
Thinks s/he gets paid by the post
 
Join Date: Mar 2012
Posts: 2,387
Quote:
Originally Posted by Chuckanut View Post
I have. And the only answer I can come up with is that they are either ignorant of current interest rates, or they are very nice people who want to subsidize the higher rate we are getting.
Exactly correct.
njhowie is offline   Reply With Quote
Old 03-11-2018, 07:48 PM   #98
Thinks s/he gets paid by the post
GravitySucks's Avatar
 
Join Date: Feb 2014
Location: Syracuse
Posts: 3,043
Dunkelblau,
That 2.1 Wells CD NJhowie linked to is a new issue, not a brokered cd. Plenty of mega banks listed under there like Mellon and Goldman.
I used brokered CDs for part of my bond ladder as the yield was higher. Not sure why the yield was a little higher as they're all FDIC insured.
__________________
“No, not rich. I am a poor man with money, which is not the same thing"
GravitySucks is offline   Reply With Quote
Old 03-11-2018, 08:03 PM   #99
Thinks s/he gets paid by the post
 
Join Date: Mar 2012
Posts: 2,387
Quote:
Originally Posted by GravitySucks View Post
Dunkelblau,
That 2.1 Wells CD NJhowie linked to is a new issue, not a brokered cd. Plenty of mega banks listed under there like Mellon and Goldman.
I used brokered CDs for part of my bond ladder as the yield was higher. Not sure why the yield was a little higher as they're all FDIC insured.
A new issue, sold through a brokerage, is a brokered CD.

https://www.investopedia.com/terms/b/brokered-cd.asp

You may be thinking of purchasing CDs through your brokerage on the secondary market - previously issued CDs which others are selling before maturity. Their prices/yields can be all over the place.
njhowie is offline   Reply With Quote
Old 03-11-2018, 10:27 PM   #100
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 6,089
Quote:
Originally Posted by Chuckanut View Post
I have. And the only answer I can come up with is that they are either ignorant of current interest rates, or they are very nice people who want to subsidize the higher rate we are getting.


Or they are like DW who ignores the maturity notices and lets them roll over into whatever the bank chooses. I gave up trying to change this behavior. BofA regular savings is .05 compared to ~1.5 at the online banks. Any suspicion of those?
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
3rd party hotel booking - won't repeat that mistake lwp2017 Travel Information 40 01-15-2018 06:08 PM
3rd Inning of MBS crisis..Hussman RockOn FIRE and Money 28 04-15-2008 04:31 PM
photogram: my 3rd post retirement roadtrip lazygood4nothinbum Travel Information 7 09-18-2007 08:50 AM
Yes!! RE this Friday, Aug 3rd settam Hi, I am... 4 07-29-2007 05:59 PM
Retirement in a 3rd World USA Hydroman Other topics 14 08-04-2006 07:55 AM

» Quick Links

 
All times are GMT -6. The time now is 07:50 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.