I forgot to check my quotations but I see now the markets are predicting a negative short-term interest rate from the US Federal Reserve (a projected -0.06% fed funds rate for 2021):
I note that Interactive Brokers charges you -0.808% to hold CASH Euro balances over 100,000 Euro. Conversely they charge you 1.5% to borrow up to 100,000 Euro (and 1% for the next 900,000 Euro, and 0.5% for the next 149 million).
Notably, at this point, the Bank of Canada is still projected to be steady for the next two years.
However, as economic conditions deteriorate and monetary policy continues on quantitative easing forever, this might not be sustainable.
As we already have some history on European institutions (in addition to Japanese ones) in negative rate environments, there are some general guidelines as far as investment is concerned.
Although the government risk-free rate is going to be suppressed by central bank actions, the ripple effect in the non-government markets will be huge. This is playing out in asset prices right now. It’s not going to end up well for most other than the most financially nimble participants. I’d suggest throwing out the conventional playbook. While COVID-19 is not the cause of this, it definitely accelerated matters.
“Interactive Brokers charges -.808% to hold…”
You mean “Interactive Brokers charges .808% to hold…” right?
Yes. As in, hold cash over 100k EUR and you’ll see the balance go lower over time.
Hope the call went well last night. I still think an audio file upload to the blog isn’t too much to ask. You can record it on your phone. Point in hand. Earlier today you said. “ It’s not going to end up well for most other than the most financially nimble participants. I’d suggest throwing out the conventional playbook.“ While not cryptic, it does leave room for interpretation. Not being as financially astute as you or some of your followers, and not being known for my ability to read between the lines I was wondering if you might provide some examples to your observations. For example sell in may and go away. Or what your current cash position is (is it in the 50% ball park a la pre 2008)
Thank you,
“I still think an audio file upload to the blog isn’t too much to ask.”
He writes this incredible blog, for free. He starts doing extra calls to provide even more info, for free. He answers every comment on this blog, for free. Asking literally anything more is asking too much. You’re asking him-sort of rudely IMO-to spend even more of his free time providing you value for nothing in return.
I dont like missing the calls either because they are too late for me as well, but I can’t imagine insisting a blogger do more for me that already does so much
Reg, your comments are well noted, apologies all round. I will refrain from making any further onerous requests of our favorite blogger.