
Ask HN: How to prosper under negative interest rates? - gatleon
The US Fed is at 0% interest rates and there is increasing speculation they might go to negative interest rates. There are already other central banks around the world in negative interest rate territory.<p>How do you prosper under a situation like that? What would you do or plan to do?<p>For example, should I stop saving? Should I put my savings elsewhere? Should I take out loans to buy up assets? Should I build businesses and raise venture capital for them?<p>I was brought up to work diligently, not take on debt, and save - a simple approach to building wealth - but I&#x27;m concerned that will put me at a disadvantage under an economic system with negative rates.
======
qeternity
You have to look at real rates, not nominal rates. The only markets that have
negative nominal rates are battling deflation (which the US is not) or have
serious liquidity concerns at the moment. The Fed is unlikely to go negative
as they face a very different beast.

Here's a quick example. Let's say you're in a deflationary environment: in 1
year, your money actually buys you _more_ than it did last year, let's say for
instance, 2% more. Under this weird environment, you would actually be willing
to pay someone to hold your money for a year, because you know in a years
time, it will buy you 2% more (effectively a 2% return). So, since you don't
want to store that money under your mattress, how much will you pay someone?
Let's say you pay your bank 0.5% for holding your money (i.e. negative rate).
So in a years time, you get 99.5% of your money back from the bank, but it
buys you 2% more "stuff" so really, compared to today, you're getting 101.5%
(roughly) of your money back, which is the same as a 1.5% interest rate. This
is called the "real" interest rate, and it's the only one that matters.

~~~
thorwasdfasdf
but we're not having deflation. With fewer and fewer people working, there's
less and less supply with even larger demand, now that they're printing money
like never before. As a result, we're going to get really really serious
inflation of over 2%, 3%, maybe even more than 3%.

It doesn't sound like much because we've become innured to it. But, it's
really bad. Just think, you earned 100K in 1 year and 1 year later it's only
worth 97K. That's a tax of 3K just for holding on to your money, on top of all
the taxes that already exist (Govt spending is 40% of GDP ~ and that's just
nationwide.)

After just 20 years of 3% inflation, your money is worth half of what it was
when you earned it. What's the point of government if they can't even provide
a stable currency? Is the expectation that everyone must now buy equities and
real estate? Are we to go back to bartering?

~~~
mdorazio
1) Once again, inflation does not work that way. If it did, it would have been
out of control in 2009. Instead, it was near zero. The same thing is happening
right now.

2) The idea that 2-3% inflation is "really really serious" is completely
absurd. I'm guessing you're young because historical US inflation prior to the
ridiculous post-2009 financial situation had long periods of being well above
3% and the sky didn't fall. Inflation above what we've seen in the last decade
is not necessarily a bad thing.

~~~
voisin
Anyone else have a hard time believing the official inflation numbers?
Housing, food, restaurants, electricity, hotels,... anything I can think of
that I buy regularly all seems significantly more expensive than it did 10
years ago - much higher than the official numbers would lead me to expect.

~~~
meseeks555
This is my experience as well ... and healthcare and education costs have also
gone up much faster than the stated rate of inflation. There are a few areas
--- like consumer electronics and maybe food --- where this isn't the case or
prices have actually gone down, but only a very few.

------
mrfredward
So the time value of money is more or less zero now and loan rates depend much
more on default risk than any opportunity cost in loaning the money. To an
economist, the implications of that might be big, but to a regular person,
it's really a small shift in possibilities.

A savings account at 0% doesn't build wealth, but it didn't really do that 3
months ago at 1.5%. Personal loans at 9% aren't much better than loans at 11%.

If you're not planning on making a career out of doing something finance-
related, I'd say there isn't much to do differently.

My one recommendation would be to hedge a little against the possibility of
asset bubbles. I'm not saying bet on them (I don't know if they'll happen, nor
can I predict the future and time them). Rather, I'm saying try not to be in a
bad spot if they happen, because easy money definitely increases the chance we
could see one. As an example, everyone in this life needs a roof over their
head, so if you don't own anything real estate related, a bubble in real
estate prices is a risk. A homeowner who plans to stay in their house 20 more
years doesn't have to care about annual changes in the real estate
market...but a renter does. So own your home if it makes sense for your
situation, or consider having money in REITs, or own a rental property. Don't
over-extend yourself, but try to avoid needing a tulip and not having one in
1636.

Likewise, if you are relying on investments to retire, and are many years away
from doing so, make sure a significant portion is in boring sp500/total stock
market etfs. If your time horizon is long enough, not being able to buy stocks
at a decent price is a bigger threat to your retirement than a short term
drop, so make sure you have some amount of money in the market while the
market isn't at all time highs.

As always, it depends on your situation and I'm not qualified to tell you what
to do with your finances.

~~~
mancerayder
I just sold a home days before the pandemic hit, and consider myself very
lucky.

But now I have cash and I'm nervous inflation might start becoming a real
problem.

I'm also worried that dense American cities are going to have a huge drop in
property values, desirability, and an increase in crime. I am seeing this
right now, and a lot of sentiment from people with money is to never come
back.

It's a tough call. Is this a good time to buy property if there's a crash in
six months?

Will there really be asset inflation of properties if there's a commercial
default explosion about to happen (hurting banks), if a lot of people are
unemployed, and if cities become a little less popular? Crime is spiking in
NYC right now and it's not really a priority to report it.

~~~
bwanab
As a regular critic of many things and ideas American, I have to point out
that in the long run, you’ve never been better off betting against America.

~~~
rayuela
I would love to see you take this and short the SP500, really put your money
where your mouth is. Value is relative, and relative to the rest of the world
the US is going to fare quite well. So good luck to you!

~~~
ls612
I think you are misunderstanding what he said. He's saying you have never
gotten better off by betting against the United States in the long run, not
that now is the time to bet against the United States.

~~~
tradertef
I read the sentence two time to get what he was saying. Figured it out based
on his first part of the sentence.

------
mntmoss
In all markets, and generally as a life strategy, there is a "winner" method
and a "survivor" method.

If you play to win, you are most likely following accepted best practices to
maximize gains - in your career, socially, economically, and so on. You
optimize to "cut the fat" regularly, stay with the trends and try to be the
front-runner in everything. In this market, playing only as a winner amounts
to taking on huge amounts of risk, because there's high volatility and little
accepted wisdom or trends to follow. Any move that uses leverage could be the
one that makes you wash out - and in the same way, being gregariously social
to keep up appearances during a pandemic may kill you.

The "survivor" method is what it sounds like: playing to not lose. They are
not just aiming for low numeric risk factors, though; the point is to have
second, third etc. lines of defenses against black swans. Survivors will tend
to look for overlooked niches and early diversification. They amass unlikely
hoards while keeping their heads down, which leaves them isolated a lot of the
time.

In general the optimal position for every market is where winner strategies
intersect with survivor strategies: Find something that is relatively stable
that nobody is talking about and move your money closer to it. Then when the
business cycle picks up your portfolio magically turns into something
positioned to capitalize.

Of course, the essential problem is that if nobody is talking about it, how
are you going to discover it? If you wait until it hits the news, that's
probably too late.

But business formation or repurposing presents another option. Down cycles are
opportunities to start the next trend yourself, because the air is clear and
you don't have heavy competition. When a market is competitive, everyone
spends on sales and marketing to be the loudest voice. When it's quiet, "build
it and they will come" becomes a great deal more plausible and you can really
focus on product.

------
chvid
You don't build wealth by saving. You do it by investing using leverage. The
system subsidises debt and risk-taking (within limits) by inflation and the
structure of the tax system. You need to let go of the idea that it is
immoral.

Buy a house and when you can buy a bigger house. Put your money in the growth
part of the stock market (technology ... big names like Apple and Amazon is
good).

Use your income to take on more debt; do not save cash as it will be taken
from your via inflation, tax or now negative interest.

~~~
al_chemist
> You don't build wealth by saving. You do it by investing using leverage.

For some reason, this sounds like "you don't build wealth by saving. You do it
by lottery and scratchcards!"

~~~
ping_pong
That's because you don't understand finance.

Leverage is the easiest way to make a larger percentage on your money, as long
as it's used prudently.

Borrowing money to buy real estate and then collect income is a very common
way to leverage your money. Over time that builds real wealth. My friend has
bought 5 properties and is renting them all out. When he retires, the
properties will have been paid for, and the rental money will act like his
pension until he dies.

~~~
marcus_holmes
Which is great in a rising market, but will ruin him when the market falls
(which it looks like it's about to do).

Leverage works both ways, it will amplify both gains and losses.

~~~
gnopgnip
Leverage does not work the same way for real estate. There is no margin call
like there is with stock. Even if you are upside down on the mortgage in many
cases you are still cashflow positive and can ride it out. And if you are not,
even in recourse states in practice the losses are not amplified and a
strategic default, deed in lieu, or short sale are still possible.

~~~
marcus_holmes
Utterly not true outside the US. I've seen lots of people in negative equity,
unable to afford the mortgage and unable to sell (the mortgage liability
doesn't go away if you sell the property. If the mortgage is bigger than the
current house price, selling doesn't help). People with multiple properties
and multiple mortgages are in worse trouble. It's very easy to go bankrupt in
this situation, I've seen it happen.

------
thorwasdfasdf
>> I was brought up to work diligently, not take on debt, and save

It absolutely will put you at a huge disadvantage, through no fault of your
own. The whole point is to transfer money from savers to debtors.

And, there's no getting away from it, unless you take on large risks. The govt
is pushing for more and more inflation. We've already had high inflation for
the last couple of years of over 2%, and they're still pushing for more
inflation. The only way to protect your money is to get into real assets like
real estate and equities. Yes, that entails a lot of risk.

~~~
buboard
That makes a case for non-centrally-manipulated assets like gold or crypto

~~~
Nacraile
Because neither of those have a history of volatility or risk.

------
pjc50
> I was brought up to work diligently, not take on debt, and save - a simple
> approach to building wealth

This basically doesn't build wealth, it builds a pile of money which you can
draw down in the future. Not nothing and good to have at the base of a
pension, but once you've gone beyond the basics it doesn't do much. It's mere
deferred consumption, it's not _making_ anything.

Now you have to face three problems:

\- there are people out there with many orders of magnitude more money than
you. They don't know what to do with it either. This is why rates are so low.

\- the risk/reward tradeoff is real. Real estate and equities are popular but
both can fall off a cliff suddenly. To successfully invest in either you need
to be able to wait out the bad years without cashflow problems.

\- we're in a period of massive uncertainty. It's a pretty bad time to start a
business .. unless you have a clever plan for the pandemic.

If you can buy distressed property or businesses at the "end" of the pandemic,
and the pandemic ends and the economy returns to the old normal, you could do
very well. If.

~~~
marcus_holmes
This is a really good time to start a business. Established competition will
be struggling because their spending is based on "normal" business but their
revenues got hit. When the lockdown stops there's going to be a spending surge
(because everyone has been forced to save for months).

~~~
buboard
Yeah , plus what else is there to do? This is a once in lifetime opportunity
to risk your time

------
gwbas1c
Disclaimer: There are plenty of people who know more than I do about
economics... There are also plenty of people who know significantly less.

My understanding is that situations like this are solved by printing money.
(Yup, good ol' inflation.) We (the US) will probably have to; the value of the
dollar is skyrocketing compared to other currencies, which makes it hard for
us (the US) to conduct business internationally.

What does this mean? Now is a great time to take on debt, or to shift debts to
pay off debts more slowly. (For example, pay off your car loan with a home
equity line of credit.) Why? In periods of high inflation, the real value of
your loan's monthly payment goes down very quickly.

Why do I think we're going to have high inflation? A lesson from the
depression is that forcing people to pay their debts during deflation kills an
economy: Wages go down, so a higher percentage of a paycheck goes to debts,
which then cuts demand for services, which further lowers wages.

------
benjohnson
My opinion: Creating value is still worthwhile - no matter what is going on
with the currency, it's still used for exchange. So if you're creating value
you'll be fine. A friendly reminder: value is determined by the customer.

For myself, I am betting that tangible assets that provide value would be
preferable to assets that just sit there. Value investing and prudent real-
estate are where I'll be concentrating my efforts if I have spare money.

~~~
throw51319
Yup that is the key. Don't spend too much mental energy on the markets unless
you think you found your niche. Invest and do some swing trading and spend
most of your mental energy on learning how to create value.

The most immediate value creation for most of us is to just become better
developers and better understanders of the requirements of whatever we're
developing.

------
chadash
I'm not a financial planner or financial services professional of any kind, so
take anything I say with a grain of salt.

1) should I stop saving?

No. negative interest rates won't go _that_ negative. Even if your bank is
earning -1% interest, it still makes sense to be saving.

2) Should I put my savings elsewhere?

Probably. ETFs or index funds with wide stock market exposure are a good idea
(good examples are SPY, VOO, VO, VFINX... and many others). You make money by
buying stocks when the market is low and selling when the market is high. Long
term, it will _probably_ go up as it always has. That said, it's very hard to
time the market, so the best strategy is to put your money in over time. One
good way to do this is to take a set amount of money from each paycheck and
invest it every pay period, regardless of what the market is at. If you have a
bunch of money sitting in savings right now, maybe divide it into 52 parts (or
104 or 156 or even 208 depending on your risk tolerance and/or thoughts on how
long this market decline will last) and invest that amount each week.

3) Should I take out loans to buy up assets?

Probably not. No one is gonna give you an unsecured loan at a good enough rate
that will make this worthwhile. And a secured loan will be against something
like a house, which you probably don't want to risk losing. This is almost
never a good idea.

One big exception might be buying a home. When the dust settles, the real
estate market might take a big hit in which case taking out a loan (i.e. a
mortgage) to buy a home might be a good idea.

4) Should I build businesses and raise venture capital for them?

Depends on the business. Venture capital money is going to tighten up a lot.
People just aren't going to be throwing around money during a recession in the
way that they did 6 months ago. But if you can stomach it, this is probably as
good a time as ever to build a business that can get to profitability quickly.
The only caveat is that it might be a risky time to quit a job with a stable
income. Typically, it's easy to take for granted that if your business fails
you can just get a job. Right now, that seems less certain.

~~~
shawnz
> That said, it's very hard to time the market, so the best strategy is to put
> your money in over time. One good way to do this is to take a set amount of
> money from each paycheck and invest it every pay period, regardless of what
> the market is at. If you have a bunch of money sitting in savings right now,
> maybe divide it into 52 parts (or 104 or 156 or even 208 depending on your
> risk tolerance and/or thoughts on how long this market decline will last)
> and invest that amount each week.

It seems counterintuitive but dollar-cost averaging is really just another way
of timing the market. The only way to avoid the downfalls of market timing is
to invest everything you want to invest, as soon as you can. Dollar-cost
averaging typically loses compared to that strategy.

See:
[http://valueaveraging.ca/research/Analysis_Dollar_Cost_Avera...](http://valueaveraging.ca/research/Analysis_Dollar_Cost_Averaging.pdf)

~~~
tarsinge
Is timing the market always wrong though? I don't feel like I made a bad deal
selling one month ago and now re-entering DCA. It was obvious that the US
market was not correctly pricing this pandemic. I think there is a middle
ground between day trading and never touching anything.

~~~
shawnz
It's always wrong if you take luck out of the equation. With DCA, the problem
is all the cash you have sitting around NOT invested while in the process of
executing the strategy is really just money that you are betting against the
market with.

For example, maybe there will be a downturn for the next 2 months but what
about the 7 months following that? They could all be green for all we know,
and all that money would be sitting around being lost to inflation. Also
consider this: on average, missing just the best 10 trading days of each year
would cut your returns in half, historically. We have already had several huge
single-day rallies even in this downturn, and people who divested for that
period may have made their losses even worse by doing that.

------
jokull
A negative interest rate is a penalty for not putting liquid capital to
productive investment, regardless of wether such opportunities are at hand. To
some extent, so is inflation.

Negative rates don’t mean alternatives become better investment strategies. It
just moves goal posts to encourage more risk taking in the economy.

Housing looks like the best alternative investment strategy. There are funds
that focus on solid rental markets, owning their housing complexes for
example.

~~~
qeternity
> A negative interest rate is a penalty for not putting liquid capital to
> productive investment

This is not true, and is massively dependent on many other prevailing economic
forces.

------
dot1x
CTRL+F and nobody mentioned Austrian Economics, the Mises Institute, gold,
bitcoin, sound/hard money... wow. People are really delusional and still
completely under the thumb of Keynes' wrong economic "policies".

Wake up people. Coronavirus or not, the world has been in a state of decay
since after WWI and it snowballed in the 70's when the last of the gold
standard was severed.

People advising that 2/3 % inflation is "not only not bad, but a sign that the
economy is doing great" have absolutely no idea what they are talking about.

For those who are a minimum curious, I really advise you to read two fenomenal
books

\- What has government done to our money? - Rothbard, Murray N.

\- Democracy: The God that failed - Hans-Hermann Hoppe

To the OP: government's great plan is to eliminate cash or render cash
useless. Everything will more to digital cash where they can effectively do
negative interest rates. What can you do to protect yourself? Put most of your
money in Bitcoin and Gold. These are the only hard money in existence.

------
jfengel
Prospering and risk-aversion don't go well together. At best, diligent work
will get you ordinary prosperity of a system which generally rises over time.
Diligent work is not as rare as people often imagine, and diligent workers
fare averagely well. Unfortunately, the variance from that average seems
increasingly precarious, as a few do exceptionally well and many slip below
it.

Doing better than average comes with risk. If you're even asking this
question, you can afford risk. Few would even think to "build [multiple]
businesses", much less start with the assumption of access to venture capital.

So if you want risk aversion, you can do the same thing you've always done:
put your money in a broad index fund and trust that the markets will recover
well before you retire. The fact that they've always done so eventually is not
proof that they will this time, but nobody can give you advice for the black
swan event of markets failing perfectly. In that case you'll have worse things
to worry about than your 401k.

If you want to take a risk from the Fed giving out free money... well, those
negative interest rates aren't available to consumers. For example, mortgage
rates are actually going up because so many see this as a signal to refinance.
That money is mostly going to the bond market, because it's the last line of
defense for the government. From there it goes to the stock market, where it's
going to sustain an unsustainable boom. (Despite what I said earlier, the
market as a whole is almost certainly overpriced, and even the earlier fall
didn't fully correct it.)

Basically, the Fed free money isn't for you. It's about the government and a
few financial firms, and your 401k's tiny piece of that. All you can do is
muddle along the same way you always did. Go ahead and start a business or buy
somebody else's, if you've got the free cash -- and it sounds like you do.
You'll probably lose it, because most fail. But that's how one does better
than average.

------
pgroves
It's blowing my mind that I just did a ctrl-F for "compound interest" in this
thread and got zero hits. It's not even part of the discussion any more.

~~~
pjc50
Why? Perhaps we're just assuming we all know how it works. Or, at 2% to -0.5%,
it really doesn't make a big difference.

~~~
xchaotic
If you have 200k and add 20k for 30 years plus compounded interest at 2%
you’ll have 1,189,861.13 at the end.

~~~
pjc50
And (to return to the original post), how much do you have at compounding of
0% or -0.5%?

------
rurabe
Lot of concepts here.

1) 0% may feel like a threshold, but it's not that quantitatively different
from the sub 2% interest rate environment we've been living in for many years
from a wealth generation standpoint.

2) Should you stop saving? If you mean should you be generating more cash that
you spend, the answer is that's probably a good idea unless you have a
pressing cash need now. If by saving you mean putting your money in a Savings
Account, then yeah there are probably better uses of your capital since most
pay effectively 0% interest.

3) So where should you put it? This depends a lot on your tolerance for risk,
and your forecast for how quickly you might need the cash. If you need it soon
and/or have a low appetite for risk, then go for safer, less volatile assets
like treasuries or CDs. If you have a bit of time and risk tolerance, stocks
have pulled back considerably so buying in at depressed prices and waiting for
the recovery might be a good idea. Real estate is probably similar depending
on where you live. If you really want to swing for the fences, go ahead and
start a business, although ultimately there are a million factors that will
determine your success before the interest rate environment will.

4) Should you take out debt to buy even more assets than you could with my own
cash? Maybe, this all depends on your risk tolerance. If your investment
decisions are good, you will reap even more returns. But if they are are bad,
you will have to pay back the debt after incurring losses. So it just pushes
your outcomes towards the extremes. You probably should not do this solely
because interest rates are low.

A final note-- your approach to wealth generation shouldn't change based on
interest rates. I think your upbringing is mostly correct, if you work
diligently and spend less than you make, you will be on a road to building
wealth.

The question is what to invest your free cash flow in, and the answer is
almost always: all of these options. Diversifying is the best way to minimize
unsystemic investment risk.

The question is then: how do you allocate your capital between risky and safe
assets? That depends on the interest rates, your near to medium term cash
requirements, your risk tolerance, and your age. That said, a rule of thumb is
to do (100 - age)% in riskier investments, and your age% in safer investments.

------
kpmcc
Maybe donate to charity to help people who have lost a lot more than their
investment returns...

------
ramshorns
> Should I put my savings elsewhere?

Sure. Consider donating to a food bank, or an effort to provide medical
equipment, or some other charity you care about.

~~~
ornornor
Is that what you’re doing?

------
NickM
If you live in the US you could buy Series I Savings Bonds from the
government. They have a fixed rate which is set when you buy them (currently
very low) but they also return an additional rate that varies over time based
on inflation. (There are also mutual funds out there like e.g. the Vanguard
Inflation Protected Securities fund that are supposed to guard against
inflation too.)

In the long term, I would assume these will not give you anywhere near as good
returns as other higher-risk investment options, but they might work for you
depending on what you're looking for.

------
Eric_WVGG
for a science fiction take: the economy is in negative inflation in Frederik
Pohl’s _The Other End of Time_. There is a scene where some astronauts are on
their way home from a day of preparation, and as part of their routine convert
their paychecks into cash and browse various sidewalk tables full of
collectibles and antiques on the way home, converting their cash into
miscellaneous items that would cling to or appreciate in value.

this book was pre-web, and the scene a very minor scene of one relevance to
the larger plot, but I still think about it a lot

~~~
erehweb
Wait, if there's negative inflation, wouldn't you want to hang onto your cash?
Sounds more like hyperinflation.

~~~
Eric_WVGG
ugh. I think you're right. Sorry, it's been about fifteen years since I read
it.

------
airstrike
There's a whole spectrum of risk from buying U.S. Treasurys to trading on
margin. You don't have to go to either extreme. And you can buy multiple
things and come up with a portfolio that has the right risk profile for your
risk appetite and this current environment.

Once the dust settles, you can invest in all sorts of safe-ish type vehicles
that aren't Treasurys and still clip a coupon. High-dividend stocks such as
utilities are one example, but a financial advisor can help you pick the right
investment for your portfolio.

------
sesuximo
Remember that regardless of positive or negative, it's only a fraction of a
percentage and not likely to last very long. A transient -0.0025 is very
different from a long term -2.5

------
dntbnmpls
> I was brought up to work diligently, not take on debt, and save - a simple
> approach to building wealth

This is a lie told to the lower class to have them work like slaves. That's
not how wealth is generated anywhere on earth. Wealth is created by "luck" (
finding oil, discoveries, stealing/confiscating, etc ) or using capital (
inherit it, borrow it, steal it, whatever ) to hire others to generate value
and give those "others" as small a piece of the generated value as possible (
without the others turning on you ) and keeping the rest for yourself ( aka
wealth ).

Imagine you and your 3 brothers make 10 pizza pies. If you can get them to
take 1 pie each and you keep 7 pies, you just generated wealth.
Congratulations.

> but I'm concerned that will put me at a disadvantage under an economic
> system with negative rates.

If you have to ask "How to prosper under negative interest rates?", then you
are already disadvantaged and nothing is likely to change that. Negative
interest rates, positive interest rates, it really doesn't matter for the
average joe. Why not just live your life instead of worrying about things
outside of your control? Ultimately, it all balances out. Sure, your savings
account might not pay decent interest, but your mortgage or student loan
interests will be lower.

------
twomoretime
Somewhat of a tangent but negative interest rates are associated with currency
deflation.

Does anyone know of any prominent economists who argue that deflation may be a
good thing? I know the overwhelming consensus is that you want something like
2% or 3% inflation to ensure market growth but I'm always interested in
alternative perspectives, particularly because personally I'm not convinced
that you necessarily want (or need) perpetual growth.

------
bonestamp2
Here's what I'm looking at...

Since interest rates will be low, it could be a good buying opportunity for
investment property. There is always risk here and with a rent strike looming
there is potential for even more. I was already in the market for investment
property so I've been following various markets (zillow lets you export a ton
of data about historic property values and projections). Prices haven't fallen
yet, but back in 2008 there were a number of years where it was a buyer's
market. The stimulus bill that just passed also drops the limit on real estate
depreciation, which is a potentially massive windfall for real estate
investors.

Not that it takes advantage of negative interest rates, but stocks are "on
sale" right now and with today being the last day of Q1 and the viral apex on
the horizon, more bad news is likely on the way... so there might be an even
better opportunity to buy some previously top performing stocks in the coming
months. I made about 60% between October and February and plan to buy back in
soon with much better positions.

I'm very interested to hear what others are thinking about doing or if they
have feedback about what I'm thinking.

~~~
1-more
> I was already in the market for investment property

I talked about buying a condo with my brother and renting it out but at the
end of the day I'm just not comfortable just taking someone else's income
because I happen to have the money on hand to make a down payment. It seems so
predatory.

~~~
orky56
How is it predatory? The person who is renting likely does not have the
ability to purchase and you adding another rental to the market drives rental
prices down and provides another rental option (albeit insignificantly)
thereby helping said renter.

~~~
1-more
At the end I get a condo and the renter gets nothing, that's just so backwards
to me.

~~~
thehappypm
They get shelter.

~~~
1-more
Even taking as given that they should have to pay for shelter beyond the cost
of maintenance, all that could all exist without me getting to skim in the
middle.

------
6gvONxR4sf7o
> I was brought up to work diligently, not take on debt, and save

Just keep doing that. Let's talk a worst case. Say coronavirus lasts 18 months
and negative interest rates last that long afterwards too. That's three years
of negative rates. If it's in the 1-2% range, That's about 3-6% lost by
keeping it in cash. So your worst case is 3-6% lost.

Compare that to not working diligently, taking on too much debt, or not saving
enough, your worst case of 3-6% is a drop in the bucket. We're likely to do
much better than that worst case.

I would, however add an item to your list which might be implicit. Invest your
long term savings once you have more than a solid emergency buffer. Find a
robo-advisor if you want to keep it simple. In 30 years it'll have grown a
ton.

------
m4b0
Great question. Probably it's a good moment to think about what we are doing
and how to improve it or change it. We are traversing an historical moment in
several fronts and we need to learn and go forward. Not only one answer, not
only one recommendation.

General advise, don't stop saving. If you already have a regular habit to save
part of your income and you can afford that, continue as far you can. Look for
the long term.

Take time to analyze your current status and organize your decisions based in
your goals and try to take advantage of the current configuration, but don't
do the contrary and don't take decisions only based in current situation.

------
sureklix
Thinking about the same and doing a deep dive in real estate actually (not
thinking of investing through funds but rather doing buy-to-let). Any solid
resources / strategies recommended for a complete beginner?

------
ohiovr
The easiest and least exciting answer is to buy treasuries now as rates have
not hit rock bottom and if the crystal ball said interest rates were lower in
the future, bonds bought now would raise in value just like in normal times.
Someone bought a 50 year government bond in Austria I think and the interest
rate moved a smidge and the value of his bond went up a whopping 50%

I was laughing when greek debt was issued with sky high interest rates. Since
it was back stopped by the ECB some saw it as a no lose scenario. I wonder
what happened to those bonds. They aren't in default afaik.

~~~
dtnewman
> _" Someone bought a 50 year government bond in Austria I think and the
> interest rate moved a smidge and the value of his bond went up a whopping
> 50%"_

This can go the other way too. If interest rates rise a smidge, the value of
these bonds can plummet.

------
wsetchell
For the most part, the standard strategy still works fine; spend less than you
earn, keep an emergency fund, invest in low-fee stock/bond funds like the ones
recommended here [https://www.bogleheads.org/wiki/Three-
fund_portfolio](https://www.bogleheads.org/wiki/Three-fund_portfolio).

As real interest rates go lower, the cost of capital goes down. That would
make some capital intensive businesses possible/profitable that wouldn't be
otherwise.

------
chosenbreed37
> I was brought up to work diligently, not take on debt, and save - a simple
> approach to building wealth - but I'm concerned that will put me at a
> disadvantage under an economic system with negative rates.

Interesting take. Why would you be at a disadvantage and to whom would this be
in relation to? I think it's fair to say that in the very long term inflation,
etc will erode the value of your cash, but I imagine that there is still value
in saving. I'm not sure these rates will last forever anyway.

~~~
calderarrow
I'm going to oversimplify here, but negative interest rates effectively mean
you pay the bank to store your money. So on top of inflation, you're losing
real money. For someone who saves, negative interest rates mean savers end up
with less money at the end of each year, and since OP indicated their
preference to saving, that puts them at a disadvantage.

Negative interest rates also that you get paid for taking out debt, which is a
tremendous opportunity to buy something that costs $100 for less than $100,
but because OP indicated their aversion to taking on debt, this puts them at a
disadvantage.

------
cascom
Curious to hear other people’s thoughts but don’t think you can look at
negative rates in a vacuum, but rather also have a view on inflation as well
as asset prices (housing, equities, etc)

E.g. in a world of negative interest rates and 0% inflation just holding
physical cash solves most of your problem - however that does not solve your
problem in a world of positive inflation and negative rates - then you need to
be able to make up the difference on asset price gains...

------
resiros
Low interest rates mean that you need more risks for the same return. It means
investing a portion of your savings in emerging market bounds, corporate
bounds, stocks, real estate.

This of course is not as straightforward as putting your money in a saving
account. But it is also not as complicated as you might expect. You need to
decide what risks you are comfortable with. How do you view the world and the
markets in 5-10-20 years and do your research.

------
rglullis
I would never advise anyone to do that yet with a substantial amount of their
wealth, but: take a look at MakerDAO's DAI. It is a stable crypto token that
uses a basket of ethereum-based tokens to keep its value locked to the US
Dollar.

It also provides a system where DAI holders can lock their assets and receive
2%/year. So, if your concern is just to get a positive savings rate, you could
take a look at it.

------
poom3d
I recommend you to read the book `intelligent investor` by Ben Graham.

If you don't have the time, read chapter 8 and 20, as Warren Buffett has
recommended it. It might not teach you how to prosper [under negative interest
rate] but I think it will give you something to work on and provide you with a
good framework in investing.

I'm not a financial advisor so I cannot give you advice but I think investing
in yourself is a sound advice.

~~~
Der_Einzige
Much as I like that book and want it to be true - some argue that Value
investing is as useful as Technical Analysis - which puts it at just a bit
more reliable than Chicken Bone divination.

------
chewz
If you have a deflation and negative rates then you should hold to your money
because year after year everything around you is getting cheaper. So delay
consumption. Hold the cash. You will get better deal next year.

If you have and inflation and negative rates then this is just a temporary
anomaly in monetary policy. Don't hold the cash. Borrow at fixed rate and
invest risk free.

------
nknealk
This is one take —- 0% or negative interest rates are a signal that future
consumption is more expensive than current consumption.

For example, all my furniture is ~10 years old from Ikea. I’ve always wanted
nicer things. The fence in the back needs some repairs. Maybe I should finally
hire a contractor to fix it.

------
KerryJones
Looking into "averaging down" or "tranching in" and go into SPX. Unless you
know how to thoroughly invest in companies, you're betting on the US economy
recovering at some point. Statistically significantly higher returns than any
other option out there.

------
hinkley
I’m a fan of investing in myself when inflation is high or rates are low.
Education, or opportunities.

Also a good time to shop for a credit card with a better rate.

------
baybal2
Chinese bonds? Yields were not bad as of late

------
complianceowl
The thing about prospering under negative interest rates is that Epstein
didn't kill himself.

------
RivieraKid
Why does 0% interest rate mean that it's hard to prosper?

------
pontifier
Create value.

------
matt_the_bass
Good question. I’d like to hear people’s thoughts too.

