4 ms·

Should individuals also count mark to market losses in their savings? I have a three year CD at 2%. Have I lost money?

mrcode007 4y ago
Yes if you pledge it as a collateral. In such a case you’d have a margin call if paper losses exceeded the agreed upon thresholds. In much of finance bonds and CDs are treated as cash equivalents because it’s easier to move a 100k single bond than make a wire transfer.
jrumbut 4y ago
Do you have depositors expecting >2%? If not I wouldn't worry too much.
usefulcat 4y ago
> Should individuals also count mark to market losses in their savings? If there's a reasonable chance you'll have an urgent need to sell that CD well before it matures, then yes, otherwise probably not.
JumpCrisscross 4y ago
> have a three year CD at 2%. Have I lost money? Yes. If you sold that CD, you'd sell it for less than par. (EDIT: Check if you have the right to take your money back at par. If you do, it may make sense to call that option and re-invest.)
- tedunangst 4y ago
  I think a lot of people would be very angry if they had free checking in exchange for maintaining $10k across accounts, the bank marked their CD down so they now have $9500, and then started charging them. Something about rigging the system, market manipulation, etc.
  - JumpCrisscross 4y ago
    > rigging the system, market manipulation, etc. Which would be nonsense, because a CD* isn't a deposit. *There are CDs and there are CDs. Many CDs have a put which lets you redeem your principal at any time. Those don't lose value when rates go up. But many CDs don't, particularly tradable ones, and that's part of the risk one takes when trying for a higher return. How a bank counts deposits for waiving fees is a separate question from fair market value.
    - mlyle 4y ago
      > because a CD* isn't a deposit. What does CD stand for?
devoutsalsa 4y ago
Do you make financial statements for yourself?
francisofascii 4y ago
Yes, a follow-up question is how much less. If you can get 3-year CDs at 4% now, is it worth about 94% of face? Since you lose about 2% each year?
benjaminwootton 4y ago
Indeed. If the banks can hold the bonds to maturity then they get par value back. It's a temporary paper loss but not a problem unless other things start to go awry and they are forced to liquidate as per SVB. There aren't many assets like that. If the value of a property or an equity goes down, all you can do is hope that it goes back up. With bonds you just have to wait, and indeed every day that passes the value will converge back to par.
s1artibartfast 4y ago
The whole svb Fiasco I'd like to an army of amateur armchair Economist opining on unrealized losses without a full understanding of what they are. At the end of the day they are still a profitable asset yielding positive returns with a guaranteed payout when held to term. I think this is a great buying opportunity for banking stocks and have put my money where my mouth is.
prottog 4y ago
> Have I lost money? Technically yes, but you only realize it if you sell. And if you hold until it matures, then there is no loss, since you get everything back (barring default). But as other commenters pointed out, there are only very few specific cases where you would need to mark this to market and have it matter enough for you to become a forced seller.
- s1artibartfast 4y ago
  I would argue that technically no, you have not lost money. It is a theoretical risk of loss until you are actually forced to withdraw early. The realization of the loss is contingent on an event that has not come to pass.
drak0n1c 4y ago
If a "wealth tax" for individuals passes, I would hope so.
rvba 4y ago
You lost due to inflation. Inflation mostly caused by thr central bank (effect of Ukraine war on food/oil is much smaller). Meanwhile economy books claim that central banks are good. When they run insane policies that screw the the people.. Most central banks are so tertible that they make 2-3% inflation just for using cash. This hidden tax is incredible. Yet most fail to see that, apart from maybe cryptobros.

Yes if you pledge it as a collateral. In such a case you’d have a margin call if paper losses exceeded the agreed upon thresholds. In much of finance bonds and CDs are treated as cash equivalents because it’s easier to move a 100k single bond than make a wire transfer.

jrumbut 4y ago

Do you have depositors expecting >2%? If not I wouldn't worry too much.

usefulcat 4y ago

> Should individuals also count mark to market losses in their savings? If there's a reasonable chance you'll have an urgent need to sell that CD well before it matures, then yes, otherwise probably not.

JumpCrisscross 4y ago

> have a three year CD at 2%. Have I lost money? Yes. If you sold that CD, you'd sell it for less than par. (EDIT: Check if you have the right to take your money back at par. If you do, it may make sense to call that option and re-invest.)

tedunangst 4y ago
I think a lot of people would be very angry if they had free checking in exchange for maintaining $10k across accounts, the bank marked their CD down so they now have $9500, and then started charging them. Something about rigging the system, market manipulation, etc.
- JumpCrisscross 4y ago
  > rigging the system, market manipulation, etc. Which would be nonsense, because a CD* isn't a deposit. *There are CDs and there are CDs. Many CDs have a put which lets you redeem your principal at any time. Those don't lose value when rates go up. But many CDs don't, particularly tradable ones, and that's part of the risk one takes when trying for a higher return. How a bank counts deposits for waiving fees is a separate question from fair market value.
  - mlyle 4y ago
    > because a CD* isn't a deposit. What does CD stand for?

devoutsalsa 4y ago

Do you make financial statements for yourself?

francisofascii 4y ago

Yes, a follow-up question is how much less. If you can get 3-year CDs at 4% now, is it worth about 94% of face? Since you lose about 2% each year?

benjaminwootton 4y ago

Indeed. If the banks can hold the bonds to maturity then they get par value back. It's a temporary paper loss but not a problem unless other things start to go awry and they are forced to liquidate as per SVB. There aren't many assets like that. If the value of a property or an equity goes down, all you can do is hope that it goes back up. With bonds you just have to wait, and indeed every day that passes the value will converge back to par.

s1artibartfast 4y ago

The whole svb Fiasco I'd like to an army of amateur armchair Economist opining on unrealized losses without a full understanding of what they are. At the end of the day they are still a profitable asset yielding positive returns with a guaranteed payout when held to term. I think this is a great buying opportunity for banking stocks and have put my money where my mouth is.

prottog 4y ago

> Have I lost money? Technically yes, but you only realize it if you sell. And if you hold until it matures, then there is no loss, since you get everything back (barring default). But as other commenters pointed out, there are only very few specific cases where you would need to mark this to market and have it matter enough for you to become a forced seller.

s1artibartfast 4y ago
I would argue that technically no, you have not lost money. It is a theoretical risk of loss until you are actually forced to withdraw early. The realization of the loss is contingent on an event that has not come to pass.

drak0n1c 4y ago

If a "wealth tax" for individuals passes, I would hope so.

rvba 4y ago

You lost due to inflation. Inflation mostly caused by thr central bank (effect of Ukraine war on food/oil is much smaller). Meanwhile economy books claim that central banks are good. When they run insane policies that screw the the people.. Most central banks are so tertible that they make 2-3% inflation just for using cash. This hidden tax is incredible. Yet most fail to see that, apart from maybe cryptobros.