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Old 03-23-2023, 09:19 AM   #1
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“My Mama Told Me, You Better Shop Around…”

About the time I was entering college, an R&B group called “The Miracles” (Smokey Robinson) recorded a hit single, “Shop Around.” One of the lyrics from that song, the title of this post, is “...You better shop around.”

What I’m alluding to, in light of yesterday’s Fed announcement, that raised interest-rates 25 basis-points (Some had thought it might be zero, i.e., "stand pat.”), is that rates will remain high, quite possibly throughout the rest of this year. That can be a "two-edged" sword. If you’re a “borrower,” that's not particularly good news, e.g., mortgage rates, credit cards, car installment-payment charges, etc. But if you have money in the bank, you’re getting, and I believe will continue to get, some of the best returns on your investment, as far as percentages are concerned, that we haven't seen in years.

In that vein, here’s where those “shop around” lyrics come into play. Unlike Europe, where each country has a paucity of banks, here in America, we have thousands of banks. For example, where I live in MA there are, within a radius of two or three miles, close to ten different banks to choose from.

Moreover, when it comes to CDs/IRAs where, heretofore, you were lucky to get 1% (you had to go out 2 years or more to get it), you can now find brick & mortar banks that are offering close to 5%; you can "lock up" those rates for much shorter intervals of time, if that's your choice.

Further, I’ll speak for myself, this is a godsend. Those current rates allow my wife and I to stay afloat. As a retired teacher, my pension (annuity) is decent; yet it doesn’t keep up with inflation. In MA, teachers' COLAs are miniscule. They’ve been that way for years. Our legislators don’t take into account, unlike the federal government, the ravages of inflation. So, as cited, any little I can get from increased returns from both my CDs and IRAs help immensely.

In addition, there are government “instruments” that are paying solid return- rates, e.g., Series "I" savings bonds, TIPS, T-Bills, T-Bonds, etc.

As for the market, I’m still "bullish" on gold. Personally I don’t think it's too late to invest in that precious metal. I would not be surprised that in the not too distant future that gold surpasses $2,000 per ounce.

As I continue, I did not construe yesterday's Chairman Powell's post-announcement, press-conference remarks to be anywhere near approaching "dovish," at least when it came to fighting inflation.

In a nutshell, despite banking concerns, it appears that “fighting inflation” is the Fed's "job #1." Anyone who thought there were going to be rate “cuts” by the end of this year appears, at least from Chairman Powell’s remarks, to be sadly mistaken.

Finally, as for interest rates, as I gleaned from Chair Powell's comments, they’re going to remain high (What is that Polonius said to his son in "Hamlet": “Neither lender nor borrower be.” In that light, if you are going to "borrow" or "lend," as Smokey Robinson and "The Miracles" sang, "You better 'shop around.'”
Walt (Teach)

"Walt, make a 'mental bet' and lose your mind." R.N.S.

"The important thing is what I think of myself."
"David and Lisa" (1962)

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Old 03-23-2023, 09:22 PM   #2
Rex Phinney
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Join Date: Nov 2012
Location: Bakersfield, CA
Posts: 1,791
Rates will remain high as long as the economy allows, how long that ends up being is anyone's guess. My guess is not long.

For that reason I've locked up 3, 4 and even some 5 year CD's at around 5%. If you get an awesome rate for 6 months but things fall apart before the CD renews then what have you really accomplished.

I've also been buying bond funds for close to year now. If you like it bombed out and depleted, with a good yield and have the nuts to stick with it even when shit gets rocky, then this is the trade for you.
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