Category Archives: Negative Interest Rates

The 6 Secrets To Getting People To Say Yes

the-secrets-to-getting-people-to-say-yes “Influence” by Robert Cialdini, A Short Review Bill Moist, MS, CPA

  1. Reciprocity Give them something first, i.e. giving a free taste of candy when going into a candy store and customers were 42% more likely to buy because they felt obligated to give back to someone who had given to them.
  2. Liking Find a commonalty with those we are negotiating with. We get a better deal and more grace here.   We do more business with people we like.
  3. Authority  We say yes to people who have more authority who can give us evidence that they are competent, credential, and experience in a particular area.
  4. Social Proof If we find a lot of our peers are doing something or this is the largest selling item we are more likely to buy. A restaurant owner can increase the likelihood of buying a certain item by adding – this is one of our most popular items.  It increases sales by 13 to 20%.  Why not say most popular options.
  5. Scarcity We want items that are more rare. Grocery store can increase sales by saying “only x number of items available per family.”
  6. Commitment and consistency. We want to be consistent with what we already said or have done publicly. Ask people to take a small step in our direction.  Then they are more likely to follow through.  In health care no shows are a big problem.  Instead of giving patient a card with date and time, give them a blank card and have them write it in.  No shows drop 18% because they’ve made an active public commitment to that time and date.

It has been a pleasure to share The 6 Secrets To Getting People To Say Yes.  A link to this book, Influence,  is provided later.  This is Bill Moist, MS, CPA

Previously Unthinkable Is Now Fully Possible

Previously Unthinkagle Is Now Fully Possible

Negative interest rates are spreading like a virus.  Central banks in the Eurozone, Switzerland, Sweden, and Japan all have below-zero interest rates.  “NIRP,” as economists call a negative interest rate policy is a desperate move-but the only move those banks think they have available.

Negative interest rates are now fully possible in the United States.  But, first let’s discuss what NIRP means.

Negative interest rates are an attempt by the central banks to push commercial banks to lend more money to business and consumers rather than maintain large balances at the central bank that costs them interest.  Said differently, these banks must now pay the central bank to keep their surplus cash accounts.

This does not guarantee that the banks will lend more money freely.  If the underlying economy is not growing significantly, the banks are more likely to pass this cost onto its customers by charging them to “store” their money.

Bank depositors may decide to hoard their money instead of being charge to keep it at the bank.  Japan’s negative interest rates are driving up sales of safes.  So, it appears the hoarding has begun.

Negative interest rates have not appeared to stimulate economic growth in Europe.  In short, future downward interest rates by the European Central Bank will seriously impair European baking industry, increasing instability in European markets. Negative interest rate policy will most likely hurt European economic growth, not help it.

So why in the world would the Federal Reserve go down the same path as Europe?  Is it even possible? Many observers are saying yes it is possible and likely in the next U.S. recession.

The Fed’s Jackson Hole retreat explored such a possibility.  The lead presenter, Marvin Goodfriend of Carnegie Mellon University, is a strong proponent of NIPR.  His paper “makes the case for unencumbering interest rate policy so that negative interest rates can be made freely available and fully effective as a realistic policy in future crisis.”  In other words, Mr. Goodfriend thinks the banks should charge you to store your money.

The Fed Chair, Janet Yellen’s, own Jackson Hole speech had a footnote describing a monetary policy rule that would have sent rates down to negative 9% in late 2008.  Clearly, NIPR is on her mind.

In summary…Previously Unthinkable Is Now Fully Possible…The evidence appears the U.S. Federal Reserve will in fact consider using negative interest rates in the next recession.  However, that won’t help economic growth if there is no demand for additional borrowing.

This author suggests that negative oppressive regulatory policies and high taxes have a much greater impact on economic growth than negative interest rates ever will.  A few industries that are currently being gutted by U.S. regulatory practices include medical, pharmaceutical, real estate, manufacturing, insurance, and construction.  These industries have had major revenue declines and/or massive cost increases leading to significant layoffs of workers.

What to do to project yourself?…Consider higher interest alternatives to commercial banks which my start charging you to keep your money.  More on this in later additions of this newsletter.

References: John Mauldin, The Fed may be preparing for the unthinkable-negative interest rates in America, Yahoo! Finance, September 3, 2016; Charles Kane, Here’s Why Negative Interest Rates Are More Dangerous Than You Think, Fortune, March 14, 2016


In Pursuit Of Higher Yield

In Pursuit of Higher Yeild

The Bank of Japan, the European Central Bank, and several smaller European authorities have ventured into the once-uncharted territory of negative interest rates. But what are negative rates, and how do they come about?

These banking authorities have had historically low interest rates for the last decade or more in attempts to stimulate their weak economic growth.  The results have been anemic.

So what does a negative deposit rate at the central bank accomplish?

It pushes down short-term rates on other types of lending. In theory, that is supposed to provide an economic boost. And, also in theory, it weakens the country’s currency.

One home mortgage customer in the Netherlands reported that his mortgage company paid him interest each month if he paid his principal payment on time. A good deal for the borrower, but not the holders of that currency.

It may surprise you where this Pursuit of Higher Yield brought these European investors.  One U.S. municipal bond trader reported recently seven European insurance companies opened accounts.  Most American investor thinks of municipal bonds as a lower yield.

However, the European insurance companies were comparing a negative interest rate to a 5.2% rate plus the most likely depreciation of European currencies.  All of a sudden this makes the U.S. municipals attractive.

Where does an U.S. based person or entity go in Pursuit of Higher Yield?  A review of the last ten years is helpful even though it is not a guarantee of future result and this blog is for educational purposes only.

With that disclaimer out of the way, let’s review data collected from McGowan Asset Management Group’s April 2, 2016 radio broadcast.

We heard a lot of doomer gloomers telling us after the Great Recession that the U.S currency was going to collapse and you better buy as much gold as you can stand.  In fact, the U.S. currency has appreciated over that time as deflation hit the commodities market.  They saw only an 8/10th of a percent increase.

What did better than commodities? Keeping your money in cash.

Here is how the bottom third of the market segments performed:

  • Cash paid 1.8% with a current yield closer to 1% per year.
  • Large Cap Stocks yield 4.1%
  • S. Treasuries yielded 4.2% over that ten- year period.

Next we have the middle third of the market segments in the 5% range:

  • Hedge Funds returned a mere 5.2% and so investors pulled $15.3 billion out of those funds in the first two months of 2016
  • Municipal Bonds yield was 5.2%
  • A Grade Corporate Bonds yielded 5.4%

Finally, we have the top third market segments average annual yield:

  • Emerging market stocks were pegged at 6%
  • Small Cap stocks returned 6.8%.
  • Corporate B Grade High Yield bonds yielded 8.2%.

What was top of the list may surprise you even after the 40% decline in value in 2008.  The top of the yield list was Real Estate Investment Trusts at 10.6% average annual yield over ten years. These trusts are required to return 80% of their Funds From Operation each year to unit holders.

What is even more amazing is what performed the best in the REIT sector.  There are five self-storage Real Estate Investment Trusts with a capitalization of $31.8 billion. These companies own less than 10% of this fragmented market.  A fragmented market is an inefficient market that provides great opportunity for those willing to do the work. Experts say it will be at least the year 2020 before the industry meets the current demand.

The five Self-Storage Real Estate Investment Trusts had a ten-year average annual return of 20.38%.  Is there any wonder so many are excited about the Self-Storage industry?

One large high-end local hotel chain sold their marquee properties and invested in what you ask?


If some of the smartest property owners have made the switch to Self-Storage, would it not be wise for you to learn why? Get 9 Little Known Secrets For Steady Real Estate Income by adding you email to the pithy newsletter update list at

Click here to watch In Pursuit Of Higher Yield.