GIC Term: Go Short or Long? | Page 2 | GIC discussions | Discussion forum

Dean said
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But then ... at the same time, I'll be consulting my C-Ball . . .

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I should have the final results by tomorrow morning.

Stay tuned ...

Dean

  

Sorry Folks . . .

In spite of pulling an all-nighter on this, the results are still 'Inconclusive'.

Go with your Gut ... and enjoy the Ride.

Dean

All this effort is surely wasted on tiny gains that an accurate guess could possibly provide over a relatively short duration of a typical gic vs a standard, non-timed ladder. Particularly if you account for taxes and losses due to keeping funds in cash while trying to time it right.

I used to have a five yr ladder, religiously maintained. On average , it missed all the highs and lows, as it ought.

In late 2021 and throughout 2022, I didn't buy ANY GICs. I just couldn't convince myself that there was much chance that rates were going anywhere but up, and HISA rates were attractive.

I now have nothing longer than 3 yrs, and weighted towards shorter terms within those 3.
I have two reasons:
First, I am getting kind of old to make 5+ yr plans, at 76+ and I have no heirs to worry about. I may not live that long, and prefer to think more short term as cash needs may change.
Second, not unrelated, I see the world as extremely fragile right now - economically, politically and environmentally - the worst I've seen, and a deadly mix. These trends seem to be moving increasingly quickly and on a collision course. I don't know what exactly is coming next, but I don't want my money to be locked away for up to five years when I decide I need to change course. I can afford the risk of losing interest by avoiding long commitments but I can't afford the loss of flexibility.

That's my "process"; and my conclusion is "short is best". I expect most will disagree, but I am not really interested in arguing about it and this is not the forum for the wider issues. I do recommend that everyone pay close attention to them before making financial decisions though.

If u are willing to use GIC brokers, the 5y 5.8%+ they offer is the best ‘low risk’ bet in my mind.
However even tho I have some money with them, I don’t like long term thru a GIC broker, which are mostly small operations. I prefer a slightly lower rate and deal direct with the issuing FIs. However right now best direct rate out there are like 50bps lower than GIC brokers. That justify their existence…

savemoresaveoften:

My 2 cents worth is if one is worried about ultra low interest rate again, that is a very low probability. CB have done it for the last 20 years since 2009, and they now witnessed how ugly that can make inflation out of control.

I wouldn't say that low interest rates led to ugly inflation. Rates were pretty low along with inflation until the COVID-19 collapse, when high government borrowing to support businesses and individuals started to drive inflation up.

One wonders how Pierre Poilievre's crowing about debt creating inflation and how he'd reduce taxation would collide. Politicians who say they'll "save it by cutting waste" never seem to find any waste to cut once they come to power! Tax cut strategies have often increased business activity by increased debt, and those like Bush and Trump have followed stimulating cuts with further cuts, so the debts created never get paid back.

And then we are told they'll kick it all down the road to when increased population will pay it back without us (the borrowers) having to foot the bill.

Well - first, the wealthiest benefit most from tax cuts and pay back the least; and second, population expansion destroys the planet and drives housing prices to the stratosphere.

RetirEd said

One wonders how Pierre Poilievre's crowing about debt creating inflation and how he'd reduce taxation would collide. Politicians who say they'll "save it by cutting waste" never seem to find any waste to cut once they come to power!

Pierre Poilievre's is the best of all federal leaders at misrepresentation and exaggeration. And since he's by far the best communicator, he's become the most believable to those less familiar with the topics he speaks to.

As for waste elimination, most politicians move the garbage cans around, or get new ones, hoping we won't notice ...

I agree, dougjp, I think a lot of us have taken up 1-year or so GICs, if we've no need for the money, out of HISAs and the rate differential, unless you're on a promo rate, is not insignificant, e.g. Motive tops HISA chart here with 4.1% while offering top 1-year GIC rate of pretty much 50% more.

The thread veered into politics due to post #29, gratuitous politicking belongs elsewhere.

RetirEd said
Sorry. I was just following the topic of post #15, but so many other posts intervened it seemed like a new direction.  

Central banks politics

🙂

Lodown said

The difference between then and now is:

a. Back then, countries were not so deeply in debt as they are now.
b. There is way more asset value in the world today - 454.4 Trillion in USD - Dec 2022 and set to increase by 38% to 629 Trillion by 2027, according to the Global Wealth Report.
c. The law of supply and demand says a high supply of money chasing few investment opportunities equals low interest rates.
d. Back then, central banks were afraid or did not know what to do to kill inflation...until Volker implemented the magic formula - "raise interest rates sky high ...to whatever it takes".
e. These days, Central Banks will act faster - like they just did - to squash inflation.
f. Given the debt pile in the G7 countries and beyond, these governments have a massive incentive to bring down interest rates...and they now have the playbook to use on a moments notice.

The takeaway is that high interest rates for long periods is over. Low rates, at the expense of those with money to loan, will be the norm going forward. So grab these 'high' rates while you can.

  

This is why history is such a good teacher, it shows us the unthinkable can and will happen. Even the most educated opinions are just that, opinions. You could be right, you could be wrong and while I find your opinions based on facts interesting to read, they are your formulated opinion which you have confidence in enough to call laws and facts.

The fact right now is that we're in a period of instability and less certainty as to what comes next. My opinion is that it will play out somewhat like you think, but who knows. All I know is that I am no longer confident enough in my assumptions to take bets on where things are going.

phrank said

All I know is that I am no longer confident enough in my assumptions to take bets on where things are going.  

By default, whatever one does with one's investments means a position...a bet if you will, was taken. However, many investors are simply frozen and act in a reactionary manner - never a good idea. Best to put our thinking caps on, make a plan and follow it.