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Comment by ab_testing | Hacker News Reader

So, where are they putting in the money. Reading the article, it is not very clear, but it looks like there a slight shift from Savings Accounts to Money Market Accounts. In the end, I think it is just shuffling money between banks. Nobody is stuffing their money in the mattress anymore.

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Stocks dividends are now in 5-10% range, e.g. Verizon is at 7%.

Obviously, markets are volatile and are in "search of direction", but quite a few dividend-paying stocks are trading at near 5-10 year low, so picking them up is not that much of a gamble if your investment horizon is long.

Stocks, even blue chip ones, have a very different risk profile from money in the bank.

Probably not going to keep up with inflation vs definitely not going to keep up with inflation?

I would say stocks (index funds) probably will keep up with inflation (due to implicit government bailout guarantees) and “money in the bank” (or even government debt) will not keep up with inflation due to explicit government promise to continuously reduce purchasing power of the currency.

3 Month US T-bills are above 5% and much closer to money in the bank than picking random stocks.

Don't many EU countries have a similar vehicle to I-bonds too? That might yield more.

Euro bonds are barely 3%.

Not euro bonds, but bonds specific to a country.

There are no Euro bonds in the sense of debt issued by the EU, to my knowledge (although it's been discussed). All EU government debt is still issued by national governments of the EU constituent states.

For people who conduct their transactions in $'s, sure. But Europeans buying US Treasuries would be subject to currency risk, which could easily wipe out that 5% APR

Europeans have their pick of yields for Euro-Area 3 month sovereign bonds https://www.investing.com/rates-bonds/european-government-bo...

How as a German could I buy or sell islandic or Hungarian bonds then? Do you need a bank account in those countries?

If I take short term 3M bonds and they become due, then I pay taxes where?

Individual corporate and government bonds are traded on the German stock exchanges. A regular brokerage account is sufficient to purchase these (e.g. Flatex). Tax statements are typically handled by the broker.

- DE: https://www.boerse-stuttgart.de/de-de/tools/produktsuche/anl...

- HU: https://www.boerse-stuttgart.de/de-de/tools/produktsuche/anl... (investment in tranches of 1k, 2k, 10k, or 100k)

- IS: https://www.boerse-stuttgart.de/de-de/tools/produktsuche/anl... (investment in tranches of 100k)

> But Europeans buying US Treasuries would be subject to currency risk,

So would Europeans buying Verizon which was the example that your parent replied to.

Yes definitely, I didn't mean to imply therefore US stocks are the better choice, only that US fixed income isn't some straightforward escape hatch for Europeans.

Agreed. But EU fixed income is becoming very attractive and 3% risk-free short-term government debt (that can be easily bought directly from the government with minimal fees at least in some countries) is much better than a bank account paying 0% (or maybe more but probably in a less solid bank).

Yes, that's what I would suggest and do myself if I was European, not buy US treasuries.

Only if the Euro appreciates, which is unlikely in case of a recession.

"Only if"..well yea. And why wouldn't it? I don't know what you're basing your thesis on, it is very common to have currency moves in either direction that massively exceed the differential in US vs Euro rates. Making bets on how it plays out is also a big market, but in that case you're a currency trader...is that the type of risk profile of a non-trader looking for short term fixed income/savings? I doubt it.

One should probably default to making returns in the currency they buy things and pay taxes in unless there's an obvious reason not to. Trying to make an extra ~2% on short term rates seems like picking up nickels in front of a steam roller. Euro is up like 16% from the bottom last summer, and when it trends it can go for a while. Sounds risky.

Or if the USD depreciates, which is much more likely in case of a recession

Careful, dividends yields are going up because the price is going down.

Or are prices going down because in a high-interest scenario dividend yields have to go up? ;)

Causality in econ is hard.

Useless to most Europeans though. I have to pay 15%-30% of the value of any US stock I buy in tax when i sell (to the US government), no matter the initial investment. I own about 10K euros of TSLA stock, and when I sell (as a EU citizen) the US government will take %30.

Stock dividend of 5-10% is pretty much unheard of here.

Can't you fill W-8BEN form to reduce taxes on the US side?

I’m pretty sure my UK broker refused to allow me trade US stocks until I filled out the W8-BEN.

Utter nonsense.

US withholding taxes only apply on dividends and other fixed income.

You need some actual tax advice. I deduct EU tax from my tax liabilities in US so my US tax exposure is exactly 0. Still have to file US taxes, so my accountant fee exposure is non-zero but it isn't too hard to do yourself once you have a few examples to copy from.

This is only relevant in EU countries without a capital gains tax, though (or with one lower than 15%), right?

If you are a non-resident & non-US citizen, I think long term capital gains taxes will apply. If you hold TSLA for at least one year, your tax rate will be reduced to 15%. This tax can be offset by capital gains taxes paid in your own country.

yeah, I always DCA into a bunch of ETF's but this was the first month i ever 'picked my stocks'. Most mining companys are in distressed range because alot of metals and materials are at all time lows. They also have great P/E ratios because of the slump.

For instance, Albemarle has a revenue jump of 119% YOY% with a 33% Profit margin. but it's trading four time book value. That's insane to me. It has tech company growth, but since the price of lith is at all time lows investors are scared. Even with lith at this price, they are making a huge margin and are scaling up production. But if you beleive Lith will be in short supply in the future, it's a great opportunity.

In my case, equities. It makes zero sense for me to have money sat in a bank account earning 0.75% (3.5% below base - it’s the best savings account my bank in the U.K. offers) when I’m paying 6.5% on my mortgage with the same bank. Rather than pay off the mortgage with a stiff penalty based on current rates, I’ve stuck it in equities and funds, where at least the yield will be better than a kick in the goolies, which is the best most banks offer.

>I’ve stuck it in equities and funds, where at least the yield will be better than a kick in the goolies, which is the best most banks offer.

Highly liquid money market ETFs[0] are paying ~5%, that's hard to beat with minimal risk. Individual equities are..not doing so well.

[0] https://www.purposeinvest.com/funds/purpose-high-interest-sa...

> It makes zero sense for me to have money sat in a bank account earning 0.75% (3.5% below base - it’s the best savings account my bank in the U.K. offers)

this is more of a lazyman tax than anything else

there are instant access savings accounts offering 3.5%

and if you lock it up for a year you can get 5%

Not in Europe. I live in Ireland, the longer the term the lower the return. Counterintuitive but it's the case.

https://personalbanking.bankofireland.com/app/uploads/Custom...

should more or less follow the yield curve minus a bit

if not they're just ripping you off

(t-bills exist though!)

Just a note that you can usually overpay the mortgage each year up to a certain percentage of the balance (mine’s 10%) without incurring any penalty.

You can get over 3.5% easily in the UK: https://www.moneysavingexpert.com/savings/savings-accounts-b...

Paragraphs 6-10 of the article are entirely about the new popularity of money market accounts and the reasons for it.

ECB monetary policy was a huge factor in this.

When they started QE, the effectiveness was heavily limited by the small size of the securities market relative to the broader banking sector (this is why they did TRLTOs and things you didn't see elsewhere). So international borrowers started issuing in EUR realising that the ECB would buy their debt, and this has only accelerated now that US rates are rising (it has also led to massive growth in private credit and other extremely inadvisable products).

The problem with this is that it isn't possible for the EU to suddenly have US-style, open financial markets where savers get paid a fair amount. It undermines the system of pensions, undermines the heavy corporatism, it undermines the whole economic model of most of Europe (even countries like Italy that have larger financial markets, it is largely due to the needs of govt finance...their govt debt cannot be financed without extraction from domestic savers...this becomes impossible if they have options).

Seems like a decent deal trading stable pensions and government services for losing the ability for a few percent of your population to use financial markets to expand their wealth constantly.

>So, where are they putting in the money.

Mostly real estate that can be bought in cash without a mortgage. Everything that's under 300k seems to be bought instantly in cash and put on the market for rent.

In case you wonder why real estate prices haven't dropped significantly in Europe that's why.

The demands is still high and many people with inherited wealth are still liquid enough.

>Mostly real estate that can be bought in cash without a mortgage.

So then where are the sellers putting their cash? This is a closed system.

Seller probably keeps some cash but also probably takes a substantial portion of the money and pays off debt with it. At least for a lot of sales, this would happen.

Depends why they're selling the property. Every seller has a different motivation.

Probably paying the bank back for money borrowed for the mortgage, bigger house, elderly/senior care service, being distributed as part of an inheritance, used to pay off debts or as part of a divorce settlement.

Or something else - people sell houses for lots of reasons.

> In case you wonder why real estate prices haven't dropped significantly in Europe that's why.

For sure there is a slowdown and some markets are dropping (Sweden, Luxembourg).

It's not like Luxembourg is full of houses below 300k tho

As the article explains, MMFs in the EU are very small relative to deposits. Competition in the EU is limited because of the important political role that banks play (if people do move their money en masse out of banks, it will have political consequences as well as economic...there would be no option but to bail everyone out).

Basically it's why bother with a money market fund earning 0.5% when your capital up to €100k is guaranteed at 0% interest. 0.5% is simply not worth the risk.

The mmf offering of my bank is covered by the public depositors insurance. It's also more like 1% interest, and other (similarly covered) banks have better rates. Still not a lot, obviously.

If you're getting 0% on a (significant amount) bank deposit in the EU today, you need to urgently switch banks.

>Nobody is stuffing their money in the mattress anymore.

If you have the floor space, getting a high-quality fireproof safe and bolting it into concrete is a very wise investment. Keeping a stash of cash in it is far from stupid.

Until you forget the combination.

Call LPL

What if the cash loses its value?

It's safer in the bank. At least you defer dealing with thieves to someone else.

Indian communities around me were getting hit hard by home invasions and robbery some years ago once it became known that they hold and trade large amounts of gold in their homes.

Money attracts thieves like food attracts bears. Store it somewhere away from yourself.

Besides, no safe is fireproof. At best they are fire-resistant. Good luck getting to your money while your house is burning (lol) or after it collapses.

But some safes are Reddit proof when discovered during remodels.

The reason they don’t want AI open to the internet (and public) is how easily one can identify money laundering and stock/real estate fraud.

> The reason they don’t want AI open to the internet (and public) is how easily one can identify money laundering and stock/real estate fraud.

What do you mean?

Using gpt I came been able to recreate some aspects of market research and due diligence which previously took me weeks, in seconds.

And this was with some sample data (meaning history gpt already had)

But I’ve been doing a bunch of tests on combining checks and tables and data from sources and it’s astonishing

The reason they are afraid of AI is because of it had actual access to online data - the world economy would be upended and we would be killing billionaires, companies, politicians in the streets given how blatantly obvious all their actions are and the colluding and corruption which is fingertips away.

All their actions have been blatantly obvious for decades. I'm pretty sure the threat of retaliation is what's stopping people from killing billionaires, not the lack of AI.

"have been blatantly obvious for decades"

YES

But *NOW* they are MINEABLE via AI to show any and all aspects.

DUH

Who would be mining this data in practice?

Who would publish these results to a wide audience?

Who would actually pursue the perpetrators of these abuses?

Everyone.

NOBODY.

NO-ONE WHO PROFITS.

I retract "DUH" because that was rude, and I wasnt thinking.

That was pointed at myself as I typed as I was thinking to myself. Please take no offense.

connect

Don't keep all your money in your home. That is stupid. 1-10% of your take home pay is reasonable for an emergency. Is it safer in your home? No. Is it 24/7 available? Yes. And it will be 100% confidential if you keep your mouth shut.

2/3 > 1/3

> Besides, no safe is fireproof

lots of high-quality safes are more than capable of surviving a home fire

that doesn't mean paper stored inside is necessarily retrievable, but metal objects like gold or firearms would definitely be fine

some examples

https://www.sturdysafe.com/pages/gun-safes-survive-house-fir...

I don't think so. We had fire sweep through; I never heard of one safe protecting contents, out of thousands of structures. In every case I'm aware of, the contents were heated to the point of melting most metals, and reducing all papers to ash. Maybe not melting firearms, but definitely rendering them useless. In many cases, the safes failed to the degree you could kick them apart.

Regardless of insulation, when you put a container in a 1,500 degree environment, the stuff inside is going to be wrecked.

Maybe there are some models that would have worked, but I wouldn't trust any of them.

What's a threat scenario where cash in a fireproof safe would be a better choice than an (insured) deposit in an EU bank account or government debt money market funds?

Christmas Eve, hour 4 of widespread ATM outage, and you have plans to be on a plane in 2 hours.

Not sure why I‘d need significant savings on short notice in that scenario?

Keeping some money at home for emergencies is a completely different thing from keeping the majority of your savings in cash.

Here are real scenarios:

https://www.nakedcapitalism.com/2021/10/more-and-more-banks-...

The most practical reason for most people in the US to have some cash on hand are scenarios like:

1. A storm rolls through and a tree fell down in your driveway. The power is still out. A guy with a chainsaw shows up and offers to move it if you can pay on the spot.

2. Same situation, but a blizzard and a guy with a snowblower.

3. Small contractors often offer a significant cash discount for home improvements / repairs.

Well, I decided that having saving accounts that have interest of 1.2%-8% (GBP, EUR, PLN) isn't really worth it with such inflation 11-18%, so decided to fuck up years of savings and put all money into mortgage overpayments.

Huh? What’s your mortgage rate? 20%?

I did the same. My mortgage rate is low, but putting in £20k just reduced my monthly payment from £910 to £720. I see the benefit straight away on the next payment. I would put in another £20k but I would be charged a fee so I’ll wait until next year.

It will allow me to pay more into my pension and claim 20% higher rate tax relief back on that too.

yeah its not clear but that seems to be the case. Meanwhile in the US I am getting 4.5% of a few high interest savings accounts I have open, I am not sure if these options are available to Europeans but if they are there are banks that are paying really good interest rates. That being said the major US banks are offering absurdly low interest rates and I just use them for a checking account and nothing else.

Europeans can get exposure to dollar interest rates but that brings along currency risk between USD and EUR.

>Meanwhile in the US I am getting 4.5% of a few high interest savings accounts I have open, I am not sure if these options are available to Europeans

They aren't. In my Euro area the highest interests on savings accounts I can find at banks is 2,5% and that's as a special offer for new customers.

We in Europe are being fleeced from all sides, while banks, energy, real estate, food companies are having their most profitable quarters ever. Something's gotta change.

I concur : my bank currently offers 1.95% deposit interest's rate for a year (Apr '23)

2.5% in Europe when 6m German bills yield 3% is actually comparable to 4.5% in the US with 6m Treasury bills yielding 5%.

My European savings account has 6% interest. Not EUR though.

Let me guess. zloty?

Just a little bit to the south.

That's insane. Where?

Czech Koruna. Every bank there offers it now. But the currency is losing against EUR right now (after it gained a lot in the past year).

It’s not insane since it’s not in Euro.

In Romania I’m getting 7% in the local currency, but inflation is much larger than in the Eurozone so it doesn’t really mean anything.

What actually matters to an Eurozone resident is the currency movement against EUR, not the local consumer price inflation - you don't need to be a local consumer at all. These indicators don't move in lockstep, in case of CZK they actually moved in the opposite direction than expected.

>but inflation is much larger than in the Eurozone

I doubt it. The RON has been stably held to the Euro. It's still 5 RON = 1 Euro like before. So the RON inflation should be tracking exactly the same Euro inflation.

The new trend in Europe is to talk about consumer price inflation (increase) when they say "inflation". What they mean is that usual stuff (food, building materials, etc) costs more. There's no reason the local prices should track EUR "inflation", and it's true that they don't.

How much that matters to you is another thing - it matters a lot to a poor/average wage person, I think it doesn't mean much when you're making a SWE salary.

Sure, but on HN we can only talk about CPI, as that's what every government reports and it's something we can easily compare. We can't compare each other's own inflation because we live in different countries and have different jobs, expenses, lifestyles, etc.

We all know "the real inflation I'm feeling is higher than the one reported by the government" trope but there's nothing we can do about it here and now.

The RON has not moved against the EURO.

Yeah, RON hasn't moved against EUR - but the price of bread, butter, eggs, ham, cheese etc in RON (as well as EUR) has moved up. That's not pegged to prices anywhere.

On >15% inflation. :)

Your savings are still vanishing at a highest rate in the last 30 years even with this savings rate subtracted.

Not really, my savings converted to EUR gained thanks to the currency movement and then the interest - which is bigger than anywhere in the Eurozone. I am mostly interested in that since I buy property in Eurozone countries. What I spend in CZ is peanuts. Yeah I can buy less bread and butter but I don't really care, it's not like I'm going to buy food for 5M CZK, I spend less than 15k/month on that. And Czech property prices are currently going down anyways.

"people moving money to higher interest accounts now that those have returned" is not a clickworthy headline.

> In the end, I think it is just shuffling money between banks.

I don't think so. As I understand it moving into a Money Market Fund means a bank can't loan out your deposit anymore. Think investing in a Vanguard Money Market Mutual Fund like VMFXX. Vanguard can't loan those funds out.

But what's the Mutual fund doing with the money? Presumably chasing yield in CDs and the like. Isn't that putting money back into a bank?

Most money market funds will only invest in very safe and short term debt - ie. government debt. So the money ends up again in a bank - but usually that's one of the big commercial banks or the central bank.

> Vanguard can't loan those funds out.

Yes it can, and that's the point of a money market fund. Money market funds invest in short-term debt securities. That's a mechanism for lending money.

I think the point is they aren't loaning it out to random people or companies, they are instead only loaning it out to the government to get something approximating the risk-free rate. You then use your quasi-riskless money market fund as a way to balance the risk of your investment portfolio.

Yea. The point I was trying to make is the bank is losing that liquidity. It doesn't have your deposits to loan out since you directly loaned them out in the form of things like Treasuries. That is a problem for the banks and why the article says Europeans are "draining billions from banks."

I see what you mean. Yes, for VMFXX specifically:

  The fund invests at least 99.5% of its total assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash (collectively, government securities).

Ah, yes, this is the classic crowding in effect.

Okay, let's be serious. This matches Keynes' liquidity trap. Unlike time preference theory which predicts that people will simply consume once the interest rate is below their time preference. According to liquidity preference people actually keep cash or short term assets, because interest doesn't compensate for delaying consumption, it compensates for going from a more certain and liquid asset to a less certain and less liquid asset near zero interest. So what happens instead is that there is a crowding out effect at the zero lower bound. You could think of it as if the private economy stops and the only thing left to do is for the government to micromanage things.

The only private market solution would be to get rid of cash and just let interest rates be negative. That way the crowding in effect that e.g. Austrian Economists predict when the government spends less money actually happens.

So yeah we are stuck in this situation where the private sector isn't credit worthy anymore and everything has to be threaded through the government. People rightfully complain but what exactly is supposed to happen? There are no answers left. Economists don't do money so they simply assume this situation never happens or resolves itself automatically.

Banks don't need deposits to loan out, as loans create deposits.

There are much higher rates available for brokered deposits via Raisin or Zinspilot. These are also with banks. They're just less well-known banks and not typically in the countries which have the most and richest savers.

A lot of it is going in real estate, as if it is not expensive enough already

Speaking of “shuffling money btwn banks”

The most important banking scandal was LIBOR.

They killed that scandal quicker than OWS

Gold, ideally. It's the best store of value and has been for centuries.

Bitcoin is similar to stuffing money in a mattress. It doesn't pay an interest rate and you're funding the multibillion mining industry, so in many ways its worse than a mattress.

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