When to lock in a longer term like 5yrs? | Page 2 | Hubert Financial | Discussion forum

savemoresaveoften said
His target today is still 2%. There is always the opportunity he will change his mind, or someone may take over the helm.
Central banks also did not think inflation would be an issue 18 months ago.

Too many unknown. I certainly wont bet the farm that they will have the strong hand to keep hiking until inflation goes down to 2%. That will be too painful a recession that no politicians nor central bankers can afford from their career stand point.  

I agree. Think of your worst case scenario i.e. nuclear war or super-ebola outbreak

How long do you think that 2% goal will matter? The thinking will revert to, "Do whatever we need to survive the short-term or else the long-term will be irrelevant."

Loonie said
I have yet to be convinced that rate hikes can be relied upon to tame inflation.

It is rumoured that inflation for November will be down, but it is largely due to oil prices which are related to world situation, not BoC.
If there are major droughts in California, the price of produce will be sky high no matter what BoC does.
And so on.  

IMO higher rates make people more hesitant to carry debt. Higher rates can't protect against individual items like your California scenario, but they can take away peoples ability to spend in general by eating away more of their income or preventing them from qualifying for more debt etc.

I think a major problem with human societies is we like to focus on one culprit as the sole reason for an issue and never actually address the entire issue. For example, eating fat is bad.

So I think that higher rates can tame inflation, but they alone cannot fix all of the underlying issues causing it.

OK We will NOT listen to Tiff Macklem, Jerome Powell, Christine Lagarde or Andrew Bailey some are considered one of the most powerful positions in the entire world and have more economic influence than anyone, anywhere

lifeonanisland said
One more question, Doug. Are CUs considered to be D-SIFIs? Does the OSFI announcement include them? If so, would this explain why some deposit brokers are offering pretty sweet longer term GIC rates from CUs, such as the 5.6% offerings from Windsor Family Credit Union...CUs don't issue shares, and can only increase their buffer via deposits?  

OSFI doesn't regulate provincial credit unions; that's handled by the provincial credit union regulatory agencies. They have a coordinating association, the Credit Union Prudential Supervisors Association, in which members' representatives meet infrequently to discuss and, ideally, harmonize, to the extent possible, regulatory frameworks for credit unions in each province. You can get a list of provincial regulators on their Members page.

OSFI used to have some regulatory oversight over certain provincial credit union centrals, but I see the financial data reported by them on the OSFI site ends in 2015. If I had to guess, it was likely in advance of the lead up to the opening up of federal credit unions, meaning the provincial centrals are likely exclusively provincially regulated now. Each provincial regulator does have something similar to D-SIFI designations, if I recall correctly, and it's likely that, of those, Central 1 Credit Union and Desjardins may have a similar designation.

Credit unions can and do issue preferred and common shares. The difference, though, is there's no liquid secondary market (i.e., a stock exchange) for the shares, and redemptions typically require board of directors approval. That would be the main way they raise capital, but they may also issue debt or raise capital through third-party wholesale banking intermediaries, such as Central 1 and Concentra.

Hope that helps,
Doug

Footnote: Concentra Bank was previously a federally-regulated cooperative financial services association (like a credit union central) and provides certain wholesale banking and registered plan trustee and custodianship services to provincial credit unions. They're smaller than Central 1 and Desjardins in that business, but still the third largest service provider to provincial and federal credit unions. They are now wholly-owned by Equitable Group and likely to be legally amalgamated into Equitable Bank and Equitable Trust at some point.

I don't perceive any souffles on the horizon - just sniffles.

I read one biography of Putin recently and will be reading another in a little while. My impression is that he doesn't give a damn about anybody except himself and perhaps his daughters, whom he has carefully hidden from view. His psychopathology is almost as severe as that of his admirer, former US president and wannabe. I don't foresee any negotiation for peace. He can't even leave the country now or else he might be picked up and trotted off to The Hague. This just increases his isolation and craziness, but he is not without foreign allies.

But you're right about the link to inflation and thus to the problem with interest.

Just my opinion, of course. I'm no expert.

It's my view that it's facile to say Putin is crazy, regurgitation of simplistic western media narrative, e.g. no-one has explained why he would have waited all these decades until he's old to launch his all-out war of expansion? In my opinion, like all of us he's lots of things but no crazy, plus today's negotiations methods mean he has no need to leave Russia. Thus if he's allowed a route out that preserves his power and position (anybody who's ever been in a fight learns to leave your their with an exit option) he'll take it, thus my point is I'm more hopeful that Russian-caused inflation can subside sooner than later. Maybe, but that depends more on Biden, etc than Putin, in my analysis.

Personally I'm more concerned with China using supply chain shortages as a permanent economic weapon as a long-term factor in inflation, China seems to be in things for the long haul so I see inflation remaining around for that reason alone.

The economic conditions that followed the 2008 financial crisis ended.

The era of cheap money and low interest rate ended

Markets are beginning of a fundamental shift after a nearly 15-year period defined by low interest rates and cheap corporate debt.

Everything else is just a noise out there from Stock & Real Estate brokerage.

->All the credit unions I work with issue shares, by the way, and yes they are not tradeable. Only one, though, requires board approval for redemption. VanCity once did a redemption for me on the spot at the branch, though that was back in 2000.

->I can't see Putin backing down on anything. And he's just launched a military production boost, promising to start using more supersonic missiles and always threatening nuclear ones. There's really nothing the west can offer him other than capitulation. He is still getting rich and consolidating power during this war.

->Having excessively low interest rates increases personal credit buildup, especially consumer credit-card and new-car loan credit. That helps the banks and the businesses selling consumer goods, but bleeds the economy that feeds goods and often leads to credit crunches.

Too many people believe that if they get themselves into a big enough hole, someone will take pity on them and bail them out.

We need to produce more goods to bring inflation down without an economic crash. Too much money was let loose during the pandemic while production crashed.

I'm holding my long-term notes and expecting (with no guarantees and careful hedging) rates to continue to decline through 2023 - though the war and disease wild cards are still out there, most of my cash is tied up for the next year, so I'm not stressing.
RetirEd

Winnie said
Prediction from RBC, that in 2024 interest rate will be declining again. Late 2023 or early 2024 just before rate declining would be the best time to lock in a longer term, if RBC prediction is correct.  

if that forecast is true, longer rate esp 5y will start declining within next 6 months

gicjunkie said

And, no offence intended, if you could tell us all when exactly that occurs, we'd surely appreciate it.
  

That will take away all the fun 🙂