Down goes the Dow

Pointing Out the Obvious wrote:

Bigfoot Investments wrote:

Ah, I see that Mr. Fake is back in business. Well done, lad. So frustrated by your inability to delete my posts now that you have to go back to some trivial error that was already acknowledged.

Well, perhaps we should just add Dr. Lame to your numerous titles, huh Mr. Fake?

As far as actual substance, well let's just hope that you can bring a bit more in that regard than you bring in the integrity department. So far I have not been impressed.

You may call me what you want, sir. That does not change the fact that you have repeated a mistake on a simple calculation even after it was pointed out to you. Though I can understand how your obvious embarrassment has led you to try to change the subject.

Hi Mr. Fake. That's your substance? Wow, you really are desperate. A simple error was made. It was openly acknowledged by one who knows the meaning of the word integrity. And one who has zero integrity is so frustrated by his inability to delete my posts that he grips to a triviality as if his life depends on it.

Keep trying to get my post deleted. Just keep trying. You're doing great!

Let's move away from Agip's usual fitting and twisting of the facts to meet his desired end and get some real facts on this.

From money rates.com, September 2011:

The relationship between CD rates and inflation is certainly unusual right now, but is it uncharted territory? A look at the history of this relationship can help put today's conditions in perspective, and help you make decisions about your next CD.

The basic deal is this: interest rates on CDs aren't supposed to give you spectacular returns, but they are supposed to beat inflation. That's not always the case, though--for example, today's CD rates are clearly trailing inflation. While this is unusual, it has happened before, and looking at that history can help answer two questions:

•How bad can it get?

•How long will it last?

CD rates and the inflation gap

To start with the question of how bad it can get, historically even one-month CD rates have beaten inflation on average, but they have gone through several periods where they have fallen behind.

To put this in perspective, historically one-month CD rates have beaten the prevailing 12-month inflation rate by an average of 1.68 percent. As of April, one-month CD rates trailed the prevailing inflation rate by 3.02 percent. That means that the relationship between one-month CD rates and inflation is out of whack by 4.7 percent.

So can it get any worse than this? Well, just because something hasn't happened before doesn't mean that it won't happen in the future. Still, history gives us some sense of what's possible. That history tells us that yes, the relationship between CD rates and inflation can get worse than this, but it is rare.

Looking at CD rate history from the Federal Reserve that goes back to 1965, and at inflation history from the Bureau of Labor Statistics, one would find that since 1965 there have been only 13 months (an appropriately unlucky number) before this past April when one-month CD rates have trailed inflation by 3 percent or more. That amounts to just 2.4 percent of the time. The worst inflation gap was reached in June 1980, when one-month CD rates fell behind the prevailing inflation rate by 5.87 percent.

So it's very rare for conditions to be this bad, but it could get a couple of percentage points worse.

How long will it last?

Turning to the question of how long interest rates on CDs can trail inflation, the same history tells us that there have been 16 periods when one-month CD rates have been lower than inflation. These periods have averaged just over eight months in length, and only two of them have been longer than the current streak of 18 months.

This is the good news. While history tells us that things could get worse, it also suggests that these conditions won't last for long.

In the meantime, recognize that locking into CD rates under these conditions means not only accepting unusually low rates, but also taking on the clear and present danger of inflation risk. That might just influence you to make your next CD a little shorter, until conditions for CD rates and inflation get a little better.

In other words, we are getting historically screwed by the FED

Bigfoot Investments wrote:

Pointing Out the Obvious wrote:

You may call me what you want, sir. That does not change the fact that you have repeated a mistake on a simple calculation even after it was pointed out to you. Though I can understand how your obvious embarrassment has led you to try to change the subject.

Hi Mr. Fake. That's your substance? Wow, you really are desperate. A simple error was made. It was openly acknowledged by one who knows the meaning of the word integrity. And one who has zero integrity is so frustrated by his inability to delete my posts that he grips to a triviality as if his life depends on it.

Keep trying to get my post deleted. Just keep trying. You're doing great!

You miscalculated a simple percentage problem, I pointed it out to you, and you tell me I am obviously mistaken. Thats integrity? Then you incredibly repeat the same error after trying to blame a calculator instead of accepting responsibility. That's integrity?

As if you don't already look foolish enough, now you accuse me of deleting your posts? Seriously? You give me much more credit than I deserve.

I give you credit for sucking me into your attempt to divert attention away from your blunder. Bravo! I've learned my lesson and I will no longer engage in your trolling. Good day.l

How funny. How cute. You have learned that you can no longer delete inconvenient messages so it is time to take your ball and go home.

Well done, Mr. Fake. Well done!

Now, back to your game of hiding behind stolen handles. That one still works!

K5 wrote:

To put this in perspective, historically one-month CD rates have beaten the prevailing 12-month inflation rate by an average of 1.68 percent.

One-month CDs? Is that where you put your money, K5?

1.68%? That's less than the 2% dividend rate you labeled as inconsequential. So even though the 1.68% is a historical number, it's now that the Fed is suddenly "screwing" us?

Pointing Out the Obvious wrote:

K5 wrote:

To put this in perspective, historically one-month CD rates have beaten the prevailing 12-month inflation rate by an average of 1.68 percent.

One-month CDs? Is that where you put your money, K5?

1.68%? That's less than the 2% dividend rate you labeled as inconsequential. So even though the 1.68% is a historical number, it's now that the Fed is suddenly "screwing" us?

1. R u an idiot.

2. that was a quote from an article; not my investment strategy

3. You are comparing the rate by which CDs exceed inflation with the total dividend rate and ignoring the risk in equities.

My God. I am surrounded by morons.

Pointing Out the Obvious wrote:

K5 wrote:

To put this in perspective, historically one-month CD rates have beaten the prevailing 12-month inflation rate by an average of 1.68 percent.

One-month CDs? Is that where you put your money, K5?

1.68%? That's less than the 2% dividend rate you labeled as inconsequential. So even though the 1.68% is a historical number, it's now that the Fed is suddenly "screwing" us?

Here is what K5 actually said:

"To put this in perspective, historically one-month CD rates have beaten the prevailing 12-month inflation rate by an average of 1.68 percent. As of April, one-month CD rates trailed the prevailing inflation rate by 3.02 percent. That means that the relationship between one-month CD rates and inflation is out of whack by 4.7 percent."

It appears that he is making a comparison between rates currently available and historical rates on similar investments.

Elsewhere, of course, he mentioned that 1% or 2% in foregone dividends was not significant in comparison to the 20% and 30% losses that he has avoided in the past and was looking to avoid in the future. Whether or not he has actually avoided such losses or will be able to avoid them in the future is information that I do not have.

However, the comparisons that he was making are as I stated them here.

So, Mr. Fake, are you saying that a change in the relationship between CD rates and inflation of 4+% is not significant?

Or perhaps you are saying that the 1% or 2% foregone dividends is quite significant compared to the avoided losses of 20% and 30%?

More importantly, are you claiming that you lack the intelligence to see that the comparison that you are trying to make is absurd and entirely beside the point. Or is it just the integrity that you lack?

So, which is it? Lack of intelligence (as K5 seems to believe judging from his previous posts) or lack of integrity (which seems more likely to me)?

K5 wrote:

Pointing Out the Obvious wrote:

One-month CDs? Is that where you put your money, K5?

1.68%? That's less than the 2% dividend rate you labeled as inconsequential. So even though the 1.68% is a historical number, it's now that the Fed is suddenly "screwing" us?

1. R u an idiot.

2. that was a quote from an article; not my investment strategy

3. You are comparing the rate by which CDs exceed inflation with the total dividend rate and ignoring the risk in equities.

My God. I am surrounded by morons.

1. Sometimes my wife thinks so. :-)

2. That's why I asked.

3. I haven't ignored the risks at all. Look back at my earlier posts and you'll see how I tried to get you to understand their relevance.

I cannot comment on your family as I don't know them.

does anyone else believe what k5's article claims - that historically 1 month CD rates beat inflation by 1.68%?

I wish we had some data on that other than some marketing website. It doesn't seem true to me, but I'm not sure.

In any case, I don't like talking about CDs anyway - the current best savigns account you can get is 0.90%, compared to the inflation rate of 1.2% (CPI)

That just doesn't sound terrible to me. You can almost keep up with inflation in a totally liquid, FDIC insured account. That's probably at the low end of returns historically, but not atrocious.

http://research.stlouisfed.org/fred2/graph/?id=CD1M Series goes from 12/22/1965 to 6/28/2013 (discontinued series) adjusting for CPI http://research.stlouisfed.org/fred2/series/CPIAUCSL?cid=9 I have 1.50% average and 1.61% median for the whole series; 12/1965 - 12/1969 average is 2.03%; 1/1970- 12/1979 average is -.01%; 1/1980-12/1989 average is 4.24%; 1/1990-12/1999 average is 2.24%; 1/2000-6-2013 the average is -.11%. In the 1970s the nominal average was 7.08%.

la gente está muy loca wrote:

http://research.stlouisfed.org/fred2/graph/?id=CD1M

Series goes from 12/22/1965 to 6/28/2013 (discontinued series) adjusting for CPI

http://research.stlouisfed.org/fred2/series/CPIAUCSL?cid=9

I have 1.50% average and 1.61% median for the whole series; 12/1965 - 12/1969 average is 2.03%; 1/1970- 12/1979 average is -.01%; 1/1980-12/1989 average is 4.24%; 1/1990-12/1999 average is 2.24%; 1/2000-6-2013 the average is -.11%. In the 1970s the nominal average was 7.08%.

holy cow you are are good

not sure where you are getting the 1.5% average real return for the whole series.

But that is probably an average of all banks - we all know the big banks will have terrible rates but if you search around you can get much better rates.

Like with savings accounts now - chase pays 0.1%, but online banks pay 0.9%. So the 'average' rate doesn't mean much.

hard to prove much in this argument.

still, awesome research there. If we go by median 1 month CDs, now is indeed a bad time.

Pay attention wrote:

Hey, K5, I haven't checked out this thread in awhile, so I don't know if you've already addressed this (if so, apologies). But I'm curious as to your plan for getting back in. Are you serious about the Dow going below 13,000 and do you plan to wait for that? Or are you looking at some other number, like perhaps a return to 15,000? And how long are you willing to wait...6 months, a year, longer? Thanks for any enlightenment you are willing to share.

Bumping for a response by K5, hopefully.

Like with savings accounts now - chase pays 0.1%, but online banks pay 0.9%. So the 'average' rate doesn't mean much.

Of course it does. It is the average of all investments. Which would seem like a fact.

Pay attention wrote:

Pay attention wrote:

Hey, K5, I haven't checked out this thread in awhile, so I don't know if you've already addressed this (if so, apologies). But I'm curious as to your plan for getting back in. Are you serious about the Dow going below 13,000 and do you plan to wait for that? Or are you looking at some other number, like perhaps a return to 15,000? And how long are you willing to wait...6 months, a year, longer? Thanks for any enlightenment you are willing to share.

Bumping for a response by K5, hopefully.

Asked and answered. More than once.

K5 wrote:

[quote]agip wrote:

does anyone else believe what k5's article claims - that historically 1 month CD rates beat inflation by 1.68%?

Not my claim. Copied and pasted from a named source.

I wish we had some data on that other than some marketing website. It doesn't seem true to me, but I'm not sure.

reading comprehension is a necessary piece of the success puzzle, grandwizard. Now I understand why you are angry at the world.

See, I said 'does anyone else believe what k5's article claims.' That would imply that it isn't in fact your claim, but is in an article you cited.

Now go back to ironing your sheets or shaving your head or whatever it is you do with your spare time.

K5 wrote:

Pay attention wrote:

Bumping for a response by K5, hopefully.

Asked and answered. More than once.

My apologies, but I can find no reply. My question is on page 96 of the thread and I see no reply on that page or the following ones. If you answered the question prior to my query, could you provide a link or point me to the correct page? Thanks.

From one week ago:

What's your next move?

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Bumping for K5's reply. We know you're reading the thread, so tell us about your next move.

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Staying out for now

...exactly what do the views of a brooklyn cult have to do with, say, the federal reserve?

It's like taking a member of the crips and saying Obama must think the same way.

in other words your internal logic is absurd.

K5 wrote:

he is clearly ruled by emotion and not facts and rationality.

Oh, the irony!