Friday Reading: Low Interest Rates Are Here to Stay

By Harry Sit

The most significant event this week was the election. It didn’t live up to the hype. For the most part nothing changed. Only the media got richer for running all the ads. Why don’t we have shorter elections like the other countries? I heard Canadians only take a few weeks from start to finish.

Anyway, we move on with interesting money articles I read this week.

Questions Answered About Pension Plans by Mary Williams Walsh at New York Times

Private pensions are basically forced savings. Other things being equal, those who have a pension had higher income than those who don’t. Everybody can have a pension even if their employer doesn’t offer one. See 401k vs Pension: How To Make Your 401k Pay As Much As a Pension.

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Joshua Rauh on Public Pensions by Russ Roberts at EconTalk

This very detailed podcast talks about public pensions. The scariest part to me is that there hasn’t been forced savings. People who received the public service didn’t pay. Some other people are now asked to pay the bill.

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CDs Instead Of Bond Funds by Mike at Long-Term Returns

I agree with Mike. CDs are a better deal than bond funds these days, except muni bond funds.

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Bank Offers Higher Rates For "No Early Withdrawal" CDs – Worthwhile Benefit? by Ken Tumin at DepositAccounts.com

People tend to way overvalue the early withdrawal option. If you can trade it away for a higher rate, it’s definitely worth it.

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Lacy Hunt: The End of the Yield Famine Is Far Away by Scott Burns at AssetBuilder

And this is why. Unless interest rates go up fast, paying for the early withdrawal option is wasting money.

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Future of the Fed and Interest Rates in President Obama’s Second Term by Ken Tumin at DepositAccounts.com

If you think Bernanke is holding interest rates too low, wait until you see who’s likely to succeed him.

Low interest rates are here to stay, but it doesn’t mean you have to stand there taking it on the chin. By doing a few things proactively outside my normal routine, I’m almost halfway toward my goal of doubling the bond yield for a hypothetical couple with a $1 million portfolio. If I can do it for someone with $1 million, it sure would be easier to do it for a smaller portfolio.

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Posted on November 9, 2012 under News. Keywords: , .

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4 Comments on Friday Reading: Low Interest Rates Are Here to Stay

  1. J on November 9, 2012
     

    Canada probably enjoys shorter elections because the Canadian Prime Minister and the Canadian Senators are appointed positions and not elected directly by the Canadian people. Canadians only directly elect the lower House of Commons. I don’t know about you, but down here in the States I saw far less advertising for my House representative than I did for the Presidential candidates.

  2. Harry on November 9, 2012
     

    J – Whatever the reason is, I haven’t heard anyone argue that Canada is any less democratic than the US. If Canada is able to exercise the same level of democracy in a few weeks, Americans are way too inefficient in dragging it over two years. We should put the energy and money to more productive use.

  3. J on November 9, 2012
     

    True. I guess we could start by reducing the inefficiency of voting systems in certain states. Americans shouldn’t have to wait hours in line just to cast their votes.

    Here in California we have the option of Permanent Vote-By-Mail status. I’ve enjoyed using this option for over two years. I never miss an election, I get at least three weeks to research my choices and fill out my ballot, I leave a paper trail, and I can check online to confirm that my ballot was received.

    More states should offer a convenient option like this.

  4. David C on November 11, 2012
     

    Well… many of those other nations have Parliamentary systems with the possibility of the Parliament calling for early elections which can happen if the ruling party either loses power or conversely is extremely confident they would win reelection. I think that factor alone requires that the parties involve be prepared to campaign with no more than a month before the election… contrast that with the US where there is an unmovable election day known by everyone years in advance. So I think that partly explains why our election process takes a large amount of *time*…

    As for the large amounts of *money* spent I suspect that is partly due to the “winner take all” nature of our elections, partly due to the presence of only two strong political parties (increasing the necessity to securing either the Democratic or Republican nomination), and partly of course due to the long length of time issue discussed earlier.

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