Chasing yield again: PenFed CDs

[Nords]

Do you have any theories on why this is? Do you think they've gotten too big and "corporate?"
...
So, in my case, no reason to make any big moves, but I don't get the warm and fuzzy sense with NFCU that I once did. That said, I'm sure it's a lot warmer and fuzzier than a mega-bank.

After several years of more mortgage business than they could realistically handle, I think NFCU is reacting to the credit crisis by getting much more conservative in their lending & CDs. In 2005, after one of our refi's, they actually sent a notary to our house to sign the closing documents for a no-costs HELOC. After our 2009 refi they didn't even want to give us a HELOC, let alone a freebie.

I think that PenFed has typically stayed a bit higher on fixed mortgages, and perhaps that's how they pay a little more on CDs. Their website is the best CD-application process I've ever seen, too, so maybe they share their cost savings.

But, yeah, I get the impression of NFCU Megacorp being hassled by scrappy little underdog PenFed.

Frankly I'm terrified to mess with my pension's direct deposit. DFAS had enough trouble figuring out my retirement account (I got three different W-2s the year after I ER'd) and I'd rather funnel everything through NFCU than have to start over again somewhere else.

 

[Nords]

Got an e-mail from a Wall Street Journal writer who's working on "chasing yield".

We spoke for about 20 minutes today. This thread, plus the subject of writing covered-call options contracts, might end up in an article. I don't know when it would go to press.

 

[brewer12345]

Got an e-mail from a Wall Street Journal writer who's working on "chasing yield".

We spoke for about 20 minutes today. This thread, plus the subject of writing covered-call options contracts, might end up in an article. I don't know when it would go to press.

I got a similar email. However, as a private citizen I learned lonh ago that it is never to my advantage to talk to the press.

 

[Nords]

However, as a private citizen I learned lonh ago that it is never to my advantage to talk to the press.

I see it as not much different than posting to Internet discussion boards. It was much more dangerous in uniform, but as an ER I haven't been burned... yet.

A few years ago during a college tour with our kid we visited the Notre Dame NROTC office. One of the officers was a submariner and we started playing the where-were-you-stationed who-do-you-know game. He wasn't very interested in swapping sea stories with yet another geezer parent until he realized that he'd read one of my ER interviews-- and then he came alive. Lots of questions about ER, and then he opened up about gaming the NROTC application process. Learned a lot that day, and it all got put to good use.

Earned a few parental respect points from our kid, too.

Looks like a few of us posters have been contacted by the media on here at one time or another. PM me if you have a story to share...

 

[brewer12345]

Once I hang up my spurs, I will talk. Until then, way more risk than reward.

 

[Nords]

Once I hang up my spurs, I will talk. Until then, way more risk than reward.

I think journalists want to talk to us ERs because of our avocation, even when they just don't get it.

Unfortunately many journalists want to talk to workers because of their occupations, and those situations are filled with minefields for performance reviews & workplace politics. Or political workplaces.

One of my COs (at a training command) was widely known and respected, even revered, but he's a John-Wayne personality with politics slightly to the right of Attila the Hun. When I knew him he'd reached his final rank and didn't sugar-coat anything. He was extremely popular with the local TV reporters for always coming through with a pithy sound bite on military current events for the evening news. They had to take what they could get, though, and sometimes it just couldn't be aired without bleeping or fear of mightily annoying local flag officers.

 

[Nords]

Here's the article, which appears to be open access without subscription:
Make More on Your Cash - WSJ.com

Here's the other thread:
http://www.early-retirement.org/forums/f27/nords-is-famous-again-49638.html

 

[clifp]

Back on topic....
PenFed dropped their rates at the beginning of the month. 5 year CD are now down to 3%
This is second time when I acted too slow and the rates dropped right before I was going to get a PenFed CD.

Anybody have a good crystal ball and make a prediction when CD rates will rise

 

[Alan]

Anybody have a good crystal ball and make a prediction when CD rates will rise

April 22 - 24

I know this as I'll be on the road without internet access, so will miss out.

 

[Nords]

This is second time when I acted too slow and the rates dropped right before I was going to get a PenFed CD.
Anybody have a good crystal ball and make a prediction when CD rates will rise

Usually they raise their rates the week after I lock in a bunch of CDs. They should've been at 3.75% or even 4% by now...

BTW I'm surprised no one has taken William Bernstein to task yet for his comments:

William Bernstein, who co-manages $156 million at Efficient Frontier Advisors, advises people to spread their bets far and wide, even into downright risky assets. For investors in taxable accounts, he suggests a portfolio that places 35% in Treasurys, 30% in municipal bonds, 25% in a short-term corporate bond fund and— here is the kicker—10% in stocks. For investors in tax-exempt vehicles, he suggests 45% Treasurys, 30% in a short-term corporate bond fund, 15% Treasury Inflation-Protected Securities and, again, 10% in stocks.
It might sound crazy, but the numbers bear out this approach, according to an analysis by Morningstar for The Wall Street Journal. Using return data and delving deeply into financial arcana like standard deviation and asset correlations, the study found some surprising results: On average, this asset strategy would have resulted in annualized returns, including reinvested dividends and interest, of about 4.8% and 4.9% for taxable and tax-exempt portfolios, respectively, since March 1997. That compares with average annual returns of 3.14% for one-year CDs, according to Bankrate.com, and 3.2% for 30-day Treasury bills during that period.

Uh, thanks Bill, but even I'm not that hankerin' for a higher yield.

 

[brewer12345]

BTW I'm surprised no one has taken William Bernstein to task yet for his comments:

Uh, thanks Bill, but even I'm not that hankerin' for a higher yield.

Meh, its just worth remembering that the Bernstei recommended portfolio is substantially riskier than CDs. His allocations resemble that of the vast majority of life insurers and they generally succed in avoiding blowing themselves up from asset problems as long as they do not drift too far away from what works.

 

[deserat]

Nords - I saw the WSJ article and your name - pretty cool. As for Bernstein's advice - well, I was a bit surprised myself, although it was from a gut feeling and not analysis. Plus, it seemed like a bit of work

In any case, was great to see your name

 

[floatingdoc]

ALLY CANNOT APPLY NEW TERMS TO OLD CD'S. I have verified this multiple times, I have a printed conversation with one of their reps to this effect. If they change it, it will apply to NEW cd's

 

[ziggy29]

Meh, its just worth remembering that the Bernstei recommended portfolio is substantially riskier than CDs. His allocations resemble that of the vast majority of life insurers and they generally succed in avoiding blowing themselves up from asset problems as long as they do not drift too far away from what works.

Right. If you have multiple "risky" asset classes that tend to have negative correlation with each other, the overall portfolio volatility isn't all that high in many market scenarios. Of course, almost all "noncorrelating asset classes" (except Treasuries) pretty much melted down in lockstep in 2008-09, so there are no guarantees.

On the other hand, non-correlating "risky" asset classes like emerging markets, gold and real estate made the 2000-02 bear market a lot less painful for folks who held those asset classes in their AA.