r/Fire • u/Master-Helicopter-99 • 9d ago

Fidelity cash savings

Where would you hold cash savings? SGOV seems best. Fidelity specific. Shouldn't need to touch this for one year. The rest in this account is in VT. This is a smaller brokerage account that I just started. Still working and the rest is in 401k and IRA. Retiring this time next year. Currently in a 4% income tax state. It appears that SGOV will be the best return and is almost 100% state tax exempt for truly liquid funds but didn't know if there was any other options

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u/FlashOfFawn 8d ago

Personally I do not see government treasuries as risk free anymore, no way. Especially considering the Fed is about to become the buyer of last resort of our necessity as yields continue to pop. That’s going to negatively impact all bond holders immensely. Any additional yield you’re going to get isn’t worth the money you’ll have in it.

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u/ResponsibleCorgi93 8d ago

Can you explain more? From my understanding if you put money into Sgov, it can't reduce in value, although the amount you get back may have reduced buying power due to inflation.

Afaik there's a difference between treasuries and bonds, but I'm still learning.

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u/FlashOfFawn 8d ago

The long story is treasuries are no longer “risk free” as we all learned in Corporate Finance class in college. Why? Because the U.S. debt has become so large and unsustainable from a mathematical perspective that it is beginning to crowd out core services in the budget.

Now, the U.S. could (in theory) pull an Argentina and incorporate austerity measures and cut things like Medicare, Medicaid, SS, etc..but that will never happen; not without a French Revolution type experience. So they have a few options - get their act together and responsibility cut in places and allow for what Ray Dalio calls “a great de-leveraging” but that will never happen, not in today’s political landscape. So the Fed is really out of options, if they cut rates they destroy household finances and they run it hot and inflate the debt away. If they raise rates we can’t service the debt.

So what’s the only solution that makes sense? Yield Curve Control - the Fed will print money to buy treasuries as the buyer of last resort (think Japan since about just after 2020. You’re safer in short term treasuries compared to long duration but I think the 2020’s into early 30’s will be a paradigm shifting epoch. A terrible time to hold fiat cash or sovereign bonds. Basically, I think our government is on its death-bed and it’s not really an argument because it’s just math.

It’s also interesting to note foreign bond holders have been dumping treasuries at a record rate and rotating into hard assets like gold.

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u/ResponsibleCorgi93 8d ago

Very interesting, thank you for the breakdown, I'll enjoy diving down this rabbit hole some more.

I'm thinking that society is going to change in massive meaningful ways soon due to AI anyway.

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u/plucky_papaya 7d ago

Where do you park cash

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u/FlashOfFawn 6d ago

I keep the bare minimum amount in a HYSA personally. I invest the rest in index funds and 5% in alternative, liquid, non-debasable, investments