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Suze: November 5, 2022. Welcome everybody, Suze O here... to another edition

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Suze: of the Women and Money podcast as well as everyone...

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Suze: and I do mean everyone smart enough to listen. Today

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Suze: is Suze School and we are going to talk about

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Suze: Series I bonds again. I know, but something you probably

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Suze: don't know about them.

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Suze: So Series I bonds. We're going to talk about Treasury

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Suze: bill bonds and notes since all of you are still

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Suze: so confused about that topic and time allowing, we will

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Suze: also talk about real estate and the interest rate on

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Suze: mortgages and my thoughts about that. And of course my

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Suze: favorite topic,

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Suze: Devon and energy stocks and where is the price of

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Suze: oil going.

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Suze: Let's start with Series I bonds as all of you

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Suze: know on November 1 of this year, this Series I

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Suze: bond rate was set for the next six months from

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Suze: November 1 until May 1, and that rate was set

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Suze: at 6.48%.

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Suze: But I bonds are made up of two interest rates,

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Suze: the variable interest rate that varies with inflation and all

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Suze: of us have experienced that now. We watched it go

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Suze: from November of 2021 when it was set at 7.12%

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Suze: to then May of

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Suze: 2022 where it was set at 9.62% to now where

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Suze: it is set at 6.4, as of November 2022. It

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Suze: has varied every six months according to inflation. But what

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Suze: most of you have probably never experienced

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Suze: is the fixed rate portion

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Suze: of the I bonds and the fixed rate portion of

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Suze: I bonds is the interest rate that is fixed for

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Suze: the life of that bond and that rate for November

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Suze: of 2022 happens to be .40%

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Suze: and that will be fixed for the life of that bond.

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Suze: Now

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Suze: what you need to understand and not get confused about

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Suze: is if you bought a bond before November one of 2022,

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Suze: you bought it let's say in October to lock in

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Suze: the 9.62% interest rate annualized. When those six months of

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Suze: that 9.62% is up.

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Suze: You will get for the next six months, 6.48% annualized.

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Suze: But you will not participate in the .40% fixed rate.

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Suze: You will only get that

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Suze: if you purchase a new I bond starting in 2023.

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Suze: So let's just say January comes about and now you

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Suze: can purchase I bonds all over again and you purchase

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Suze: an I bond, then you will get the 6.48% annualized rate.

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Suze: That changes all the time.

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Suze: But it will continue to have the fixed interest rate

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Suze: of .40%. For the life of the bomb giving you

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Suze: an interest rate of the combination of the two of 6.489%.

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Suze: That is how it is going to work. So I

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Suze: hope I made that clear. Don't think you're gonna get

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Suze: that extra 0.40% when your bond rolls over to the

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Suze: new interest rate that you purchased before November 2022 you

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Suze: will only get that .40% fixed if you bought it,

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Suze: November 1st or later.

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Suze: Got that? Good. Now the question is going to be

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Suze: given that, that's true.

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Suze: Should you continue to buy I bonds? I have to

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Suze: tell you at this particular point I think you should

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Suze: because that is still a better rate than you can

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Suze: get anywhere as time goes on. We'll re-evaluate that and

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Suze: I'll tell you what I think. Are you better off

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Suze: buying TIPS? Are you better off buying just straight Treasurys?

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Suze: What's the best thing for you to do? But at

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Suze: this point in my opinion for really safe money.

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Suze: Safe money. That not necessarily that you want to lock

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Suze: up for the next 20 years but that you want

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Suze: to lock up for maybe the next 2 - 3 years or so.

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Suze: I still think in the series I bond is the

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Suze: way to go. So that's what you need to know

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Suze: about that. Many of you have written me and said

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Suze: Suze remember you said that you bought I bonds back

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Suze: in November

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Suze: of 2001 or something like that whenever I bought them

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Suze: back then and that you had a fixed rate of 3%.

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Suze: Which I still do what that means just so you

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Suze: know is that I have been getting when the interest

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Suze: rate was at 9.62% annualized. I was getting like 12.62%

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Suze: at that time because of the fixed rate.

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Suze: If fixed rates ever happen to on I bonds go

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Suze: back up again 1, 2 or 3%. Now we have a whole another

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Suze: thing happening there but just so you know for now

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Suze: the fixed portion is at .40% and it will stay

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Suze: with that bond forever. Okay.

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Suze: Alright Treasuries let's just talk about Treasuries why this topic

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Suze: is so confusing is beyond me. You keep writing me

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Suze: and you keep saying Suze, can you just explain the

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Suze: difference between bills, notes and bonds

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Suze: And what is the difference between a Treasury and a

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Suze: certificate of deposit or anything else that we can buy?

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Suze: That gives a fixed interest rate? Right one more time

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Suze: a Treasury is issued by the United States Government and

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Suze: therefore it is guaranteed by the authority of the United

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Suze: States Government.

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Suze: Number one.

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Suze: Number two, the maximum that you can buy of a

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Suze: treasury of any kind is $10 million.

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Suze: So in essence you have the authority of the United

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Suze: States Government backing up to a $10 million purchase of

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Suze: a Treasury bond that maybe you want to do another

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Suze: $10 million in a note. Okay that's backed by the

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Suze: authority of the United States government. Unlike a certificate of

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Suze: deposit

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Suze: that only carries a $250,000. F. D. I. C. or N. C. U. A.

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Suze: insurance on it. Now. I've done a podcast before where

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Suze: I talk about how you can get more insurance if

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Suze: you want by adding beneficiaries. But no way if you're

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Suze: going to invest large sums of money,

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Suze: can you get up to $10 million dollars worth? So

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Suze: you need to know that

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Suze: the only difference between a bill, a note and a bond.

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Suze: The only difference is the length of maturity. That's it people.

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Suze: There is no other difference. Bills are usually short term

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Suze: a year or under notes are about a year or

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Suze: two years. All the way up to 10 years, bonds

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Suze: are 20 and 30 years.

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Suze: The only difference. And when I talk about a two

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Suze: year note or a five year note, when you purchase one,

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Suze: the interest rate that you are getting at the time

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Suze: is given to you for the entire time. Until that

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Suze: note bill or bond matures.

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Suze: That is the basic difference. A bill is bought at

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Suze: a discount.

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Suze: So if they are giving you, let's just say a 4%

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Suze: interest rate, you might buy it for $980. And then

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Suze: when it matures you get $1000 again, if you buy

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Suze: a bill note or bond through Treasury direct dot gov,

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Suze: the minimum purchase is $100.

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Suze: However you can buy them also through any brokerage firm

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Suze: out there. But if you do the minimum is $1000.

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Suze: So bills are sold at a discount where you buy

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Suze: it for X. But it will mature and whether it's

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Suze: 13 weeks or six months or whatever at $1000. If

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Suze: you bought a Treasury note

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Suze: and let's just say the interest was 4% you would

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Suze: buy it at $1000 if you bought it at a

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Suze: brokerage firm for instance. So that means you would get

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Suze: on $1000 you would get $40 a year of interest

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Suze: And that $40 would be divided into six month increments.

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Suze: So every six months you would get $20 and that

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Suze: $20 would go directly into your brokerage account.

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Suze: It's really just that simple everybody.

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Suze: The reason why I've been wanting you to buy Treasuries

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Suze: is because for instance on Friday,

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Suze: the two year treasury hit a 15 year high at 4.88%.

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Suze: So if you had purchased it then it's a little

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Suze: bit lower right now. But if you had purchased it

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Suze: then

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Suze: you could have locked in 4.88% on your money guaranteed

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Suze: by the United States Authority for two years

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Suze: now. I think that is a great interest rate for

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Suze: safe money.

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Suze: The other thing though I want you to understand is this,

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Suze: you can buy Treasuries

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Suze: in a retirement account.

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Suze: So let's just say you have a Roth IRA

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Suze: and you were able to buy that two year Treasury

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Suze: in a Roth IRA,

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Suze: you would be getting 4.88% on your money essentially tax free.

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Suze: Now that is a big interest rate. I mean if

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Suze: you were in even, let's just say the 25% tax bracket,

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Suze: which isn't a very big tax bracket for state and

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Suze: federal tax bracket, that's almost equivalent of you getting a 6.5%

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Suze: taxable yield.

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Suze: That's a lot of money for safe money. So for

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Suze: those of you who for some reason are just like

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Suze: not understanding Treasuries and you're afraid of the stock market

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Suze: going down and you want your money to be safe

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Suze: and sound,

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Suze: Especially the money that you have in retirement accounts you want,

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Suze: maybe you're older and you want your retirement money to

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Suze: be absolutely safe and sound.

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Suze: I don't know. I think Treasuries are absolutely for you

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Suze: the way to go. Maybe you're going to retire in

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Suze: two years. Maybe you're gonna need this money in two

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Suze: or three years for you to live on and you

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Suze: don't want to risk any money whatsoever. What is so

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Suze: wrong with you putting your money in a two or

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Suze: three year Treasury note

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Suze: for those of you, maybe you want to do what

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Suze: I called a Treasury ladder where you buy 13 week

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Suze: treasury bills, maybe six month treasury bills, maybe a one

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Suze: year treasury bill and you go out maybe five years,

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Suze: maybe you put $10,000 in each one

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Suze: so that as interest rates go up, you have money

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Suze: maturing and maybe you can lock in a higher interest

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Suze: rate now. I haven't wanted you and I still don't

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Suze: want you to go out really long in Treasuries, meaning

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Suze: I don't want you right now to be buying a

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Suze: 10 year treasury note or a 20 or 30 year

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Suze: treasury bond. Because I am still of the belief

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Suze: and I hope I'm not wrong. But I'm still of

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Suze: the belief that they could go up to 5 5.5%.

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Suze: And then then I want you to buy 20 and

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Suze: 30 year Treasury bonds. And why is that? Everybody once

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Suze: again as interest rates go down, the value of bonds

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Suze: go up

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Suze: as interest rates go up. The value of bonds go down.

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Suze: Now somewhere here within 20 or 23 24 the latest.

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Suze: We hopefully will see that the Fed funds rate and

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Suze: interest rates have tapped out there as high as they're

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Suze: going to go for now. Not sure are they, are

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Suze: they are they not time will tell?

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Suze: But when that happens, maybe they'll stay there for a

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Suze: year or two, Maybe it'll stay high, but eventually they

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Suze: will start to come down and when interest rates start

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Suze: to come down

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Suze: then the value as I just said of bonds go

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Suze: up

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Suze: bonds that have longer term maturity ease go up and

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Suze: down more than bonds that have shorter term maturity ease.

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Suze: Now I've said this over and over again

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Suze: but too many people are writing in so I thought

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Suze: I will do it one more time. But the main

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Suze: thing that I want to stress here is that yeah,

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Suze: you can absolutely buy Treasuries with money that you have

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Suze: outside of retirement accounts. Absolutely. You can do that.

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Suze: But a lot of you have been taking your money

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Suze: from where? From your 401K plans because either you have

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Suze: retired or you're going to retire. You have been doing

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Suze: an ira rollover with that money

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Suze: and then you have started to convert little by little

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Suze: into a Roth IRA.

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Suze: Especially for those of you in a Roth IRA where

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Suze: this money in a Treasury,

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Suze: the interest rate on the treasury could seriously end up

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Suze: being absolutely tax free to you. It might be something

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Suze: you really, really consider.

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Suze: Have I made sense to you now? I hope so

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Suze: because I'm telling you right now, I don't care how

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Suze: many of you continue to write in and ask about it.

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Suze: I am not addressing this again until the time comes

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Suze: when I want you to buy ten-year notes or 20

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Suze: or 30 year Treasury bonds.

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Suze: Okay, so you should write the date of this podcast

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Suze: down

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Suze: November 5th 2022

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Suze: because if you write in all I'm going to write

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Suze: back to you is november 5th 2022 Take a listen.

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Suze: Next, let's talk about real estate

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Suze: now. Real estate is starting to soften. Absolutely. And the

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Suze: reason that it's starting to soften right now in prices

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Suze: is because there is more and more inventory that is

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Suze: coming on the market and the reason that there is

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Suze: more inventory on the market is because it is taking

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Suze: longer for homes to sell.

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Suze: So what's interesting for instance if you're in these places

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Suze: such as Nashville or Raleigh North Carolina or Phoenix Arizona

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Suze: where the real estate market was absolutely so hot. I

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Suze: can't even tell you the inventory in those three places

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Suze: has actually increased by anywhere from 145% to 174%.

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Suze: And when you have more inventory

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Suze: and less demand for that inventory

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Suze: Then prices have to come down to entice people to

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Suze: want to buy that inventory because now people have more choices,

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Suze: they have more time, they're taking their time because mortgage

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Suze: rates are at 7.3%, they are not so anxious to

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Suze: want to buy a piece of property with interest rates

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Suze: at 7.3%.

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Suze: So the only way that you can equalize that out

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Suze: is to bring the price of real estate down

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Suze: and that is the exact effect that the feds have

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Suze: wanted to have on real estate. A big factor of

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Suze: inflation is they want those prices to come down

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Suze: so that inflation can also come down when inflation comes down,

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Suze: then a lot of their problems are solved. But until

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Suze: prices on real estate, on rent on food come down,

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Suze: the feds have problems and that is why they are

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Suze: going to continue to raise the fed funds rate

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Suze: until mortgages are so high that all of you are

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Suze: like I am absolutely not going to buy a home.

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Suze: Like you know if you just look at the difference,

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Suze: if let's just say you bought a $500,000 home

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Suze: and you bought it a while ago you put 20% down,

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Suze: $100,000 and your mortgage interest rate was 3.5% for 30 years.

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Suze: Your monthly mortgage would have been $1796.

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Suze: Even if the prices of real estate came down 20%,

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Suze: you bought a home for $400,000, you put 20% down

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Suze: And that's only $80,000 now versus $100,000 when it was

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Suze: at $500,000. And so now you have a $320,000 mortgage.

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Suze: That $320,000 mortgage at 7.5% is $2,237.

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Suze: That's a whole lot more. That's almost $441 more for

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Suze: a house, that is $100,000 less.

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Suze: So they have to get prices of homes to come

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Suze: down so that they can then lower mortgage rates so

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Suze: that all of you start to buy all over again.

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Suze: So until that happens,

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Suze: you all should be really careful. You're asking is now

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Suze: a good time to buy a home.

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Suze: I have to tell you, it's really hard pressed to

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Suze: say yes at this moment in time. And the only

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Suze: reason isn't because mortgage rates aren't so high at 7.5%

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Suze: because there was a time when 678% as I've said before,

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Suze: isn't that abnormal? But because homes have appreciated so much,

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Suze: it is abnormal.

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Suze: So you might just want to think about that or

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Suze: if you go in to the real estate market, make

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Suze: an offer that it makes sense that you offer like

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Suze: 25 or 30% under what they are currently asking because

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Suze: then at these interest rates maybe you'll be paying the

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Suze: same is if you bought a higher priced home at 3.5%

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Suze: but these are really, really high rates given the appreciation

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Suze: of real estate. So let's just see what happens and

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Suze: I will not be rushing to buy a home right now,

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Suze: as far as rents go

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Suze: rents are starting to come down, it's almost like the

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Suze: homeowners who thought that I can keep charging more and

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Suze: more and more because the prices of real estate are

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Suze: going up and up and up. Even now, you're starting

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Suze: to see some reductions in rents,

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Suze: so that is kind of a good sign, you know

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Suze: what's funny though, is depending on where you live because

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Suze: in places like Milwaukee and Chicago, the inventories are down

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Suze: by 10% people are still really buying homes there,

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Suze: so it really depends on the price of the home

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Suze: And what that mortgage payment would be at 7.5%.

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Suze: So just something again for you to think about last

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Suze: week when the market went down big on Wednesday, so

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Suze: did a stock by the name of Devon,

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Suze: Oh my energy stock that I love so much and

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Suze: that stock actually went down 13% in one day at

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Suze: one point it was down 16 or 17% in one

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Suze: day and I'm sure a lot of you thought I

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Suze: need to sell, Oh my God, look, it's going back

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Suze: down again, remember I told you that you buy stocks

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Suze: like that for the dividend?

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Suze: The reason that Devon went down is because they cut

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Suze: their dividend from a dollar 55 a share to a

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Suze: dollar 35 a share, it's still essentially at $70 a share.

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Suze: It went back up again the next day and on friday,

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Suze: by the way,

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Suze: It's still approximately at a dollar 35 a share, it's

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Suze: going to be around in 8% dividend at this price,

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Suze: still a fabulous dividend

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00:26:12,020 --> 00:26:17,090
Suze: when a company cuts its dividend, it doesn't necessarily mean

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Suze: that the company is in trouble because its reports were fabulous.

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Suze: It means that there possibly preparing because everybody is starting

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Suze: to come down on energy companies to really step up

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Suze: and start to drill more, start to do more, start

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Suze: to pass more of their profits down in prices

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Suze: so that you don't have to pay as much in

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Suze: gasoline costs.

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Suze: So I still love Devon and I don't have a

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Suze: problem with it whatsoever. For those of you who are

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Suze: wondering what you do need to be prepared for. However,

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Suze: Is do not be shocked to see once again the

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Suze: price of gasoline go up significantly when you go in

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Suze: for a refill where now at almost $92 a barrel

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Suze: up a big four or 5% from where it was

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Suze: just the other day.

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Suze: So you have to be prepared for that. Now, when

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Suze: that starts to happen again, here we go with inflation

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00:27:31,540 --> 00:27:35,710
Suze: inflation rather than going down, may very well start to

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00:27:35,710 --> 00:27:42,540
Suze: go up when you see the Mississippi River dry up

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Suze: and all of those container ships not being able to

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Suze: ship their cargo via the Mississippi River, there goes the

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Suze: price again of the food that's delivered on those ships.

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Suze: So do not be surprised if you see us going

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Suze: into a situation where gasoline is more expensive again, food

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00:28:09,920 --> 00:28:15,619
Suze: costs are more expensive again, we also have a situation

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00:28:15,619 --> 00:28:21,160
Suze: where china is almost being forced to open up again

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Suze: and when they open up again, you are going to

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00:28:24,730 --> 00:28:27,340
Suze: see things like energy,

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Suze: all those things start to go up again.

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Suze: You're also going to see this winter Ukraine and europe,

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00:28:37,460 --> 00:28:41,290
Suze: having a very hard time with energy. So do not

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Suze: abandon your energy stocks at this point in time.

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Suze: So

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Suze: I think that brings us to the end of this

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Suze: Suze School.

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Suze: Now there is one more thing that I want to

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00:28:55,740 --> 00:28:58,510
Suze: bring you all up to date on. You know, I'm

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00:28:58,510 --> 00:29:03,660
Suze: a Gemini, you know how KT always says, Suze always

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00:29:03,660 --> 00:29:09,090
Suze: changes her mind and I do. So I'm going to

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00:29:09,090 --> 00:29:11,450
Suze: make one more change

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Suze: that I said I might make and in the end

379
00:29:15,120 --> 00:29:18,030
Suze: here I'm going to make. What is that change, Suze O?

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Suze: Remember how the podcast always dropped on Thursday and Sunday mornings?

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00:29:26,030 --> 00:29:30,130
Suze: And then somehow I got this idea. Well let's drop

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00:29:30,130 --> 00:29:32,900
Suze: it on Wednesday and Saturday nights,

383
00:29:33,400 --> 00:29:38,010
Suze: but it doesn't seem to be fitting into our schedule.

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Suze: It's not quite working for me. So therefore starting next Sunday,

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00:29:45,780 --> 00:29:50,100
Suze: we are going to go back to our original schedule

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00:29:50,110 --> 00:29:51,550
Suze: of dropping

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00:29:51,560 --> 00:29:59,320
Suze: a podcast on Sunday mornings and Thursday mornings. So I

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00:29:59,320 --> 00:30:03,180
Suze: just thought I would tell you that alright, everybody, there's

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00:30:03,180 --> 00:30:05,640
Suze: only one thing that I want you to remember when

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00:30:05,640 --> 00:30:08,220
Suze: it comes to your money and it is this, I

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00:30:08,220 --> 00:30:14,380
Suze: want you all to be smart. Strong, secure. Just that simple. Really?

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00:30:14,380 --> 00:30:19,020
Suze: Just that simple now you stay safe, Bye bye. Everybody