Investment showdown -- beyond the Roth, SDP, & TSP

[nsplayr]

37 minutes ago, HeloDude said:

If the economy was so great then we wouldn’t be running a $1.8 TRILLION annual deficit…

Did you consider the economy good Jan 2017 - Jan 2021?

[HeloDude]

14 minutes ago, nsplayr said:

Did you consider the economy good Jan 2017 - Jan 2021?

Was 2020 good?  Is that a serious question?  It was dog crap!  I would say it was somewhat decent (not great) the few years before…still way too much government spending and regulations.  Then with Covid, and later, the politicians were like “hold my beer!”.  

[ViperMan]

5 hours ago, nsplayr said:

I mean if inflation is around 3.5% YOY and my investments are up 26% over that same time, my purchasing power increased about 22.5%, which is incredibly good! I will take years like the last 12 months economically every day and twice on Sunday.

The “one weird trick” of investing is DCA into a broad index of equities, and literally do nothing else.

Yes, the hill we're climbing right now isn't as steep as it recently was.

Cumulative inflation since 2019 (or March 2020) has been approximately 21-22%. This is an extreme historical anomaly. That's 5%+ per year, and it doesn't include certain sectors like housing. Which has undergone even more extreme inflation. The worst part is that we're not addressing the root cause - which is an out of control spending habit.

Furthermore, even though the end product is the same, when you have higher inflation earlier in an inflationary period, the later inflation, even if it is lower, has a worse effect because the intermediate products are greater for a longer period of time. Recent years' inflation was over 9%. That's going to have a downstream affect.

https://www.usinflationcalculator.com/

https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1%2C000.00&year1=202003&year2=202403

[ViperMan]

2 hours ago, nsplayr said:

Inflation in particular punishes people who stupidly overspend and richly rewards those who save.

The truth is the exact opposite of this. I actually can't tell if you're serious, or seriously trolling. But inflation crushes those who save, and richly rewards those who spend every cent.

Think about it this way - inflation makes your money worthless. Does it make sense to hold on to something whose value is decreasing?

2 hours ago, nsplayr said:

What's the price of braided belts like these days?

.No idea. However, the price of braided belt futures is way down from its previous highs in the late 90s and early 2000s.

[Inertia17]

10 hours ago, nsplayr said:

If stocks are up 7% for the year and inflation was 3% that year, your real return is 4%. My purchasing power for the same basket of goods is 4% higher.

What if actual price inflation was what is reported...

[nsplayr]

14 hours ago, ViperMan said:

The truth is the exact opposite of this. I actually can't tell if you're serious, or seriously trolling. But inflation crushes those who save, and richly rewards those who spend every cent.

Think about it this way - inflation makes your money worthless. Does it make sense to hold on to something whose value is decreasing?

We're both right; I'm not trolling you.

Textbook answer, yes, inflation hurts savers. However IRL who is doing better in today's economic environment?

• A worker who spends every last dollar and prays his raises keep up with inflation, or
• Someone who saves (and invests, I should have added that before) in a broadly diversified portfolio heavily weighted toward equities, and also puts their savings in a high-yield savings account that more or less preserves the purchasing power of their saved dollars by offering rates at or slightly above inflation?

The second guy is way better, and everyone on this board has the capability to be the second guy. Furthermore inflation helps borrowers who have locked in loans for big-ticket items at lower rates, which also likely applies to lots of people on BO.net, myself included.

South American-style hyperinflation, yea you're hosed if you have saved, but that's not what we're seeing here today.

[HeloDude]

1 hour ago, nsplayr said:

We're both right; I'm not trolling you.

Textbook answer, yes, inflation hurts savers. However IRL who is doing better in today's economic environment?

• A worker who spends every last dollar and prays his raises keep up with inflation, or
• Someone who saves (and invests, I should have added that before) in a broadly diversified portfolio heavily weighted toward equities, and also puts their savings in a high-yield savings account that more or less preserves the purchasing power of their saved dollars by offering rates at or slightly above inflation?

The second guy is way better, and everyone on this board has the capability to be the second guy. Furthermore inflation helps borrowers who have locked in loans for big-ticket items at lower rates, which also likely applies to lots of people on BO.net, myself included.

South American-style hyperinflation, yea you're hosed if you have saved, but that's not what we're seeing here today.

So what you’re saying is that inflation we see today and have been seeing the last few years is a good thing?

[Milton]

6 hours ago, HeloDude said:

So what you’re saying is that inflation we see today and have been seeing the last few years is a good thing?

Of course! Just like the bread lines and literacy programs in Cuba were A GOOD THING (in my best Bernie Sanders accent).

On 4/10/2024 at 8:36 PM, nsplayr said:

Did you know that inflation today is lower than at any point during the Reagan Administration?

Sure. After various economic factors in the 1970s like oil shortages and the Carter administration we had an uphill battle. Reagan also accumulated  ~$1T in debt (if I remember my numbers correctly). But you know what else he did? Spent that money to win the Cold War. A pretty good bargain if you ask me.

I love the arbitrary standards we use to judge the economy. Remember when we used to call two consecutive quarters of negative growth a recession but then changed the definition of a recession so we didn't have one? Or when the cost of a 4th of July cookout was down $0.69 from the previous year?

The economy *looks good* depending on how you look at The Numbers. My 401K, TSP, brokerage account, IRAs, and college savings did very well the last year or so (14-17% range for most of them). That's great. But I don't buy groceries, pay my utility bills, or my insurance premiums with that money. My family does well, my investments have done well, but I'll be damned if I don't see the difference in the amount of money I have left at the end of the month after I pay all the bills. And for your average American who lives just above the paycheck-to-paycheck threshold, its much worse. But again, The Numbers look good. If you're a wealthy family, The Numbers look even better, especially when inflation, scarcity, and real estate are less of a concern. But for Joe Blow who doesn't have the flexibility to invest when The Numbers look good, well, things aren't so good. 

That's not to mention the 35T national debt, Social Security going insolvent in a few years (according to its own Board of Trustees and the CBO), record credit card debt, and about 10 million illegals who will need education, housing, and healthcare while simultaneously driving down wages for working class Americans.

I never bought too hard into the "party switch" of pre/post 1960s, but it certainly seems like we're in the midst of one now.

 

 

Edited April 12 by Milton

[Stoker]

27 minutes ago, Milton said:

Reagan also accumulated  ~$1T in debt (if I remember my numbers correctly). But you know what else he did? Spent that money to win the Cold War. A pretty good bargain if you ask me.

The idea that Reagan doing a bunch of deficit spending somehow won the Cold War implies that the Communist model was sound but for the US issuing a ton of bonds. That gives far too much credit to their economic model - the Cold War was always going to be lost by Russia, the only question was whether it would be lost due to internal collapse or lost due to nuclear annihilation.

[nunya]

Back on the personal finance front... Fidelity will allow SPAXX as your sweep account in Cash Management Accounts (CMA) starting around June 15. IMO this makes CMAs a no brainer. No need to mess with separate online savings accounts to get higher rates on your cash.

I know this took me a while to wrap my head around and I wish somebody had broken it down for me earlier, so for those that don't habla CMA, here's the skinny...

• CMAs are brokerage accounts that operate "like" checking accounts. Debit cards, ATMs, fee reimbursement, checks, online bill pay, direct deposit, etc.
• Your cash balances by default are kept at various banks around the country. You can see which banks, but there's no reason to care. You get FDIC protection, ~2.7%* interest, and manage your cash centrally via Fidelity.
• If you elect to keep your cash in SPAXX, you give up FDIC coverage, but you can get ~5%* on your cash balances.
• Vanguard just started "Cash Plus" accounts to compete. I'm sure they'll be great accounts, but I moved from Vanguard because (IMO) their service starting slipping around 2020 and became untenable.
• Bottom line, especially for the young dudes: Look beyond USAA for your banking needs. With some work, you'll be very wealthy one day - learn to manage it well now.

*all rates are as of 4/15/24

Edited April 15 by nunya

[Khruangbin33]

19 minutes ago, nunya said:

Vanguard...service starting slipping around 2020 and became untenable.

Genuinely curious...in what ways?  I've just been auto-buying a target date fund and ignoring it, plus a few brokered CDs for the hermit hut fund, so I don't have many interactions with the institution/platform.

[nunya]

24 minutes ago, Khruangbin33 said:

Genuinely curious...in what ways?  I've just been auto-buying a target date fund and ignoring it, plus a few brokered CDs for the hermit hut fund, so I don't have many interactions with the institution/platform.

Vanguard was outstanding, as long as I didn't need anything from a human. I was happy with them for many years, until...

My specific experience was needing to move 6 figures out of my brokerage account. It was too much to move online so I had to call. I waited on hold for cumulative hours over several days. I was completely unable to move the money before a deadline. Luckily another party covered for me while I moved the money out in several installments, staying under the online maximums.

I talked to others with similar experiences. I already had a good chunk at Fidelity and had never waited more than a couple minutes for a rep, so I bailed on Vanguard. I was probably hasty, but I don't regret it one bit.

Edited April 15 by nunya

[Lord Ratner]

On 4/15/2024 at 2:41 AM, nunya said:

Back on the personal finance front... Fidelity will allow SPAXX as your sweep account in Cash Management Accounts (CMA) starting around June 15. IMO this makes CMAs a no brainer. No need to mess with separate online savings accounts to get higher rates on your cash.

I know this took me a while to wrap my head around and I wish somebody had broken it down for me earlier, so for those that don't habla CMA, here's the skinny...

• CMAs are brokerage accounts that operate "like" checking accounts. Debit cards, ATMs, fee reimbursement, checks, online bill pay, direct deposit, etc.
• Your cash balances by default are kept at various banks around the country. You can see which banks, but there's no reason to care. You get FDIC protection, ~2.7%* interest, and manage your cash centrally via Fidelity.
• If you elect to keep your cash in SPAXX, you give up FDIC coverage, but you can get ~5%* on your cash balances.
• Vanguard just started "Cash Plus" accounts to compete. I'm sure they'll be great accounts, but I moved from Vanguard because (IMO) their service starting slipping around 2020 and became untenable.
• Bottom line, especially for the young dudes: Look beyond USAA for your banking needs. With some work, you'll be very wealthy one day - learn to manage it well now.

*all rates are as of 4/15/24

Got a link to the jun 15 change on the sweep? Thanks for the heads up, I'm going to get this set up

[nunya]

2 hours ago, Lord Ratner said:

Got a link to the jun 15 change on the sweep? Thanks for the heads up, I'm going to get this set up

I first saw it in the official Fidelity reddit from their customer service people. It's also on your March CMA statement in the Additional Information and Endnotes:

Quote

Please note that on or around June 15, 2024, you'll have the option to elect Fidelity(R) Government Money Market Fund (SPAXX) as your core sweep investment vehicle. You will not need to take any action if you wish to retain the Bank Sweep as your core position...

 

[Lord Ratner]

3 minutes ago, nunya said:

I first saw it in the official Fidelity reddit from their customer service people. It's also on your March CMA statement in the Additional Information and Endnotes:

 

Awesome, thanks. This will simplify my life

 

It's a shame USAA is "just another back" now.

Edited April 23 by Lord Ratner

[nunya]

Just now, Lord Ratner said:

Awesome, thanks. This will simplify my life

Yep. I've been buying SPRXX every pay day and had various auto transactions set up. No more need for those extra brain cells in a few weeks! 

[uhhello]

Wow.  Nice.  Finally getting rid of USAA totally 

[Springer]

5 hours ago, uhhello said:

Wow.  Nice.  Finally getting rid of USAA totally 

Wasn't USAA Bank fined $140 million a couple of years ago?

[Day Man]

1 hour ago, Springer said:

Wasn't USAA Bank fined $140 million a couple of years ago?

where else you gonna go?

https://www.reuters.com/business/finance/vanguard-fined-providing-misleading-account-statements-its-customers-2023-06-01/

https://www.barrons.com/advisor/articles/massachusetts-fines-fidelity-750-000-for-rubber-stamping-options-applications-d1e1c9c6

[SurelySerious]

Right, at this point it would be harder to find one that hadn’t been fined.

[uhhello]

I'm not worried about the fines.  Its a general decay in the company since I started with them back in 2003.  It was nice to have overseas for insurance and a military 'friendly' company.  Since then the products and customer service has plummeted.  If I can have my money in one location it makes it easier.  

[SurelySerious]

Its a general decay in the company since I started with them back in 2003. 

Definitely.

[Khruangbin33]

On 4/15/2024 at 11:11 AM, nunya said:

Words.

Thanks for explaining; I'm going to keep this in mind when it comes time to deploy a 6 figure sum.

[BashiChuni]

in other news from this shit show of a White House:

 

Our economic estimates likely understate the effects of the budget since they exclude two novel and highly uncertain yet large tax increases on high earners and multinational corporations, namely a new minimum tax on unrealized capital gains and an undertaxed profits rule (UTPR) consistent with the OECD/G20 global minimum tax model rules. Nor do we include the budget’s unspecified research and development (R&D) incentives that would replace the lower tax rate on foreign-derived intangible income (FDII).

 

Increase top individual income tax rate to 39.6 percent on income above $400,000 for single filers and $450,000 for joint filers (effective 2024)

 

https://taxfoundation.org/research/all/federal/biden-budget-2025-tax-proposals/

Edited April 25 by BashiChuni

[Smokin]

Here's to hoping that Moore v US properly rules taxing unrealized gains as unconstitutional.  If this door gets opened, Pandora's box would be almost unlimited.  Your house value rose 5% last year?  That's gains, so you now owe income tax on it on top of the property taxes you already pay.  Not entirely unreasonable that the IRS could require declarations of any personal property of value (except classic Corvettes that double as classified storage) so they can assess if it has appreciated, even if that appreciation is just due to government caused inflation.