Folks, negative rates are here... in the U.S... today.
No kidding.
The Federal Reserve is rewriting the definition of "saving." And you must understand this change... that is, if you have any interest in preserving your wealth.
Now, I'm sure you're thinking, "Vic, rates aren't negative. What in the world are you talking about?"
That's true... but not really. The biggest banks and money managers have done everything they can to keep this under wraps. They know that seeing negative rates scares people.
That hasn't stopped the humble money market account from effectively turning negative. Money managers have simply done the unthinkable to hide it from you.
I know, this sounds like a lot. But with just a little explanation, I'll make it clear.
Your savings are at risk. And to preserve them, you need to understand the new definition of saving.
Let's get into it...
BlackRock. Fidelity Investments. J.P. Morgan Asset Management.
These are some of the biggest names in finance. And they all share one thing in common now.
These investment managers are all slashing the fees on their money market accounts. But don't be fooled. They're not doing this as a kind gesture.
They're cutting fees because if they don't... their money market accounts would show negative yields.
Simply put, the most basic form of cash savings in the U.S. has effectively turned negative... only to be saved by a cut in fees. That means U.S. rates have, in a practical sense, entered negative territory.
Now, the big money managers sure as heck don't want you to see this. That's why they're cutting fees.
The goal is to make it look like your account isn't losing money. But outside of this fee reduction, it is. And fees can only be cut so far. So given the current trend in rates, actual losses are likely just around the corner.
All of this is to the detriment of savers.
The message is as clear as it gets. If you're sitting on a pile of cash, trying to be a "good saver," Uncle Sam is going to chew you up.
The craziest part of this is that most mom-and-pop investors have no idea this is happening. And most folks believe that keeping a large chunk of their savings in cash is prudent.
That's how it's supposed to work. You save money, and it pays off in the future. But the Fed has changed the rules of the game.
The new rules say, "sitting on cash guarantees you lose money." And you can't fight the Fed. You'll never beat it at its own game.
Now, more than ever, you need to be invested. Investing is the new saving.
How you navigate these changes will determine whether or not you preserve your wealth. And thanks to the Fed, your hand is forced. So please, act now.
Good investing,
Vic Lederman
Further Reading
"When it comes to today's market," Steve writes, "interest rates are what matter." For bonds and real estate, this metric is critical to investors' returns. And with rates at record lows, it also means big upside ahead for this asset class... Read more here.
We don't see interest rates making a major rebound anytime soon. And that means we could be in for another massive run-up in stocks. To learn more, check out Steve's two-part series here and here.
If you want to grow your wealth starting now, you need to be invested in stocks today. And buying into a company with strong demand and a quality business is a great place to start...
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Today's company shows why we love strong brands...
Not every brand can earn a strong reputation. But once it's there, that strength protects it against competition. A competing product might be cheaper, or might even be better... But many customers will stay loyal to proven, trusted, prestigious names. That's the strength we're seeing in this shoemaker...
Nike (NKE) is a $175 billion maker of athletic shoes, clothes, and accessories. And to many athletes, it's got the best stuff out there. Even runners sponsored by rival companies want Nike Vaporfly shoes – according to Business Insider, the athletes use markers to color over the Nike logos and other identifying details. Sales slumped 38% in the most recent quarter due to coronavirus-related shutdowns at most clothing stores... But online sales surged 75% as many loyal customers found new ways to buy their Nikes.
NKE shares have more than doubled in the past three years, and after a COVID-related blip, they're back at new all-time highs. That's the power of investing in companies with strong brands...
