In reality, keeping liquid cash will no longer make any sense whatsoever, and further push all other assets up in value, property and equities for example.
A huge number of retirement plans and endowments and pension programs will still hold negative yielding bonds, because they need to diversify their assets.
In theory those safe government bonds will shoot up in price just as equities crash. Because these assets aren’t correlated, your long term return will actually be higher. So, yes, that is probably worth paying a bit of money for.
Safe Deposit Boxes Aren't Safe (nytimes.com)
The parent comment was maybe being slightly imprecise, but his core point isn't wrong that positive nominal rates means that your losses are less than inflation (whereas for cash they're equal to inflation).
https://www.bloomberg.com/graphics/2019-negative-yield-debt/
Also, to the original commenter, I will never put all my cash under the mattress. One break in and it's all gone.
I currently have all my cash parked in a 1% interest checking account with strong protections and fringe perks.
I am content with taking an extremely small loss on inflation while I wait for the market to eventually tank. It's been longer than I expected (2 years already), but I do not ever shed a tear over the what, $16,000 in pretax capital gains I theoretically could have made?
https://www.doctorofcredit.com/high-interest-savings-to-get/
I don’t know what the answers are and no one does. In my opinion there has been a global phenomena of easy money in various ways for a decade, and it has filtered out in all sorts ways, from the premium in equities, the absurd rise in housing prices, the art market, basically anything that can eat excess cash has been eating it. A crash and hangover is coming but it will primarily affect richer people though it will bleed out to the non-monied classes via job losses and retirement accounts falling in value.
But when this will happen? It could be next year or in 50 years! The governments of the world have so many options to keep the party going.
However at least for me, my current earning potential in my job is not that high, and my cost of living therefore has been what I've sought to optimize instead of capital gains.
For people who have lots of taxable income, lots of asset exposure, and a high cost of living, then a mixed bag of investments is definitely crucial to preventing those people from going bankrupt.
But for me, as long as I find ways to continue to live healthy, have a good network of friends, a job, money in my main bank accounts in case I need to put up a security deposit or take an extended vacation, then I am very happy. I therefore would never want to keep $40,000 or something in a market account when I really do need all of that money at any time.
so the safe strategy is to make sure you have an appropriately balanced portfolio (among cashlike securities, equities, bonds, etc.) and to leave your equity investment in place while riding out the downturn.
investors typically get more conservative as they get older, so your advice might be ok for most 25 year olds, but not for most 65 year olds. the conventional wisdom then is to hold increasing proportions of weakly/negatively correlated securities like bonds in your portfolio as you get older, particularly through downturns.
and the s&p500 is a reasonable basket of equities, but it's not perfectly representative of the asset class either, since it's composed of primarily large cap domestic stocks. it doesn't include any startup equities, for instance.
[1] https://www.wsj.com/articles/the-upside-down-world-of-negati...
This is how we revert back to a barter economy, or one that uses gold/Bitcoin/etc... Since the Fiat currency is rapidly inflating.
edit: let me add, I mean the consumer space. There can be some oddity in the bank-to-bank market because of various technical reasons, but it is extremely rare.
What comes to interbank markets, it is far from rare and far from only technicalities, it is nowadays pretty normal that the floating leg of the swap pays negative interest rate. (In Euro, that is, USD has higher rates)
And can you show me euribor-based long-term loan where the interest rate is negative? For the most part, banks have no need to loan unless compelled, so maybe where is some policy forcing them to? I would call those extremely strange technical factors.
My old mortgage would have become technically negative a couple of years ago, but I was forced to prepay it due to selling my apartment before the rates went that far down. As I said, my understanding is that my bank would have refused to honor our contract, though, and insist there is a zero floor in my mortgage even if nothing like that was agreed when I took the loan, so in that sense you are right.
Negative coupons would be quite difficult to implement but having a positive coupon doesn't really mean anything: bonds are not necessarily sold at the nominal price even when they are initially issued.
"Henkel and Sanofi sell first negative yielding euro corporate bonds"
https://www.ft.com/content/6fdfeee8-2045-3452-a55d-3744a9091...