... the interest income post-tax is still not enough to keep up with inflation, so overall I'm still losing money. The high interest rate is just a feel-good-illusion IMO.
Not for me. The extra yield from higher interest rate for my cash position is nowhere near enough to offset losses from my equity position, not to mention that the interest income post-tax is still not enough to keep up with inflation, so overall I'm still losing money. The high interest rate is just a feel-good-illusion IMO.
+1
I think its called "Money Illusion", where you think in nominal terms rather than real.
For example, more people would get excited about 8% interest even if inflation was 10%, than 1% when inflation was 0.
I know I tend to suffer from this affliction myself, as I feel good that my overall portfolio is close to all time highs, when in reality my purchasing power has declined significantly.
+1
I think its called "Money Illusion", where you think in nominal terms rather than real.
For example, more people would get excited about 8% interest even if inflation was 10%, than 1% when inflation was 0.
I know I tend to suffer from this affliction myself, as I feel good that my overall portfolio is close to all time highs, when in reality my purchasing power has declined significantly.
The issue is that inflation is a backward measure rather than forward interest rate. So yes, last year when inflation was at 8% and 0% for savings, it was pretty bad but that's now history. We can't change it. I would surmise that the go forward interest rates will be lower than the current interest rates on CD/treasuries.
Also there is no one inflation rate, and it impact different people at different rates. So if you aren't buying a used car or others that have had significant increases, it doesn't impact you. For our situation, rents on our properties are rising faster than overall inflation, so we've actually benefited from it.
So Ally high yield savings is still stuck at 3.75%! Good thing I moved all my funds there to CDs, including no-penalty CDs, paying 4.65%-4.75%It's nice to see that my cash stash is now cooking. My notes indicate that on 8/6/23 my VG CRFMMF was yielding 1.25% compared to my Ally savings act. yielding 1.85%'
Jump ahead to now... my CRFMMF is yielding 5.03% and Ally 3.75%. I do not see it climbing much higher, but it has been a fun ride, my friends.
I would think that high inflation and high interest would be a good thing for the wealthy. Wealthy consumers will only consume a little more than middle income consumers but the interest made by the wealthy will far exceed the interest made by the middle income folks..
One of the big factors in the fed’s inflation rate is rent. If you own a home, you’re making money. If you have a mortgage, your “rent” is going down.
I prefer low inflation and low interest rates. My private pensions are fixed, and have been since I retired 13 years ago. Very pleased to have had such low inflation for the first 10 years though, to carry us through to the start of UK and US SS benefits.
Well, you have to look at the entire picture. Interest rate hikes make stocks and bonds less valuable, as we have all seen.I would think that high inflation and high interest would be a good thing for the wealthy. Wealthy consumers will only consume a little more than middle income consumers but the interest made by the wealthy will far exceed the interest made by the middle income folks..
Well, you have to look at the entire picture. Interest rate hikes make stocks and bonds less valuable, as we have all seen.
So buying securities after a decline is great, but your net worth declined.
We can manage spending and personal inflation rates are likely lower than reported figures since housing cost is static for many of us yet it is 30% of the CPI.
Does anybody feel good about their finances now that fixed interest rates are around ~5%? I've had huge cash positions over the last several years, in anticipation of rising interest rates, that paid so little. Now that they are all in treasuries, CDs, and MM, annual passive income has shot up almost 20%!
Synchrony and Marcus high Yield Savings 4.15%
Ally 3.75%
I have a large chunk of cash in Ally and contacted them and asked why they lag so far behind Synchrony and Marcus interest rates. They basically gaffed me off. Then I told them I was thinking about moving my hard-earned money to Synchrony or Marcus and they gaffed me off once again.
Mike
You can at least buy several of their no-penalty 11 month CDs at 4.25%, the number depending on the liquidity you need as they don’t allow partial withdrawals. That’s a lot higher than the 3.85% high yield savings.
But less than the 4.9% or so that MM funds are paying.You can at least buy several of their no-penalty 11 month CDs at 4.25%, the number depending on the liquidity you need as they don’t allow partial withdrawals. That’s a lot higher than the 3.85% high yield savings.