What are you all planning to do when interest rates turn negative?

Thrugelmir

edgex wrote: »

Though Basel impacts upon the amount they can create, due to the increased capital requirements

Still highly leveraged despite the tighter regulation. In the early 70's UK banks sat at around 1.6x. At the time of the GFC Barclays was around 72x. Still over 30x despite the changes.

Carrieanne

Surprised no-one has mentioned the G-word thus far.

Kendall80

Carrieanne wrote: »

Surprised no-one has mentioned the G-word thus far.

I sold my small gold allocation just before its recent gains. Very good at 'not' timing the market! Still, it was 12% up at the time so wont complain. People buying now may be concerned about getting in on a possible peak.

jsinc

That Danish mortgage rate isn't yet really negative after higher offsetting costs and taxes: https://www.jyskebank.dk/bolig/nyheder/realkredit-med-negativ-rente

But your question is one that everybody should be thinking about. Meaningful and prolonged negative rates could impact money supply and credit, prices and yields, financials vs. real economy, financial assets/property wealth and passive income vs. ongoing and active working income. Potentially means an overhaul of assessing risk vs return. The interplay between negative nominal rates, inflation expectations and asset prices implies not necessarily borrower-positive either in terms of real debt.

Could get interesting.

aldershot

jsinc wrote: »

That Danish mortgage rate isn't yet really negative after higher offsetting costs and taxes: https://www.jyskebank.dk/bolig/nyheder/realkredit-med-negativ-rente

But your question is one that everybody should be thinking about. Meaningful and prolonged negative rates could impact money supply and credit, prices and yields, financials vs. real economy, financial assets/property wealth and passive income vs. ongoing and active working income. Potentially means an overhaul of assessing risk vs return. The interplay between negative nominal rates, inflation expectations and asset prices implies not necessarily borrower-positive either in terms of real debt.

Could get interesting.

To me, relying on long term real returns delivering 4%, as many seem to do on the pension forum is folly. I’m assuming zero and hoping that’s not optimistic.

Thrugelmir

aldershot wrote: »

To me, relying on long term real returns delivering 4%, as many seem to do on the pension forum is folly. I’m assuming zero and hoping that’s not optimistic.

At least then any gain is a bonus.

jsinc

aldershot wrote: »

To me, relying on long term real returns delivering 4%, as many seem to do on the pension forum is folly. I’m assuming zero and hoping that’s not optimistic.

Don't know about folly, but I also use base of 0% real for long-term planning. Prefer pleasant to unpleasant surprises. On the negativity I think much depends on whether you think it's a policy response to economic risks and expectations, or a market reflection of economic and demographic expectations. Most seem to think the former. I think the latter and this would make it a much bigger deal for a lot longer.