Certificates of deposit (CDs) are accounts you can invest in at the bank.
If you agree to lock up your money for a certain number of months, you collect a bit more interest than a savings account.
In the past, they were a way to earn a decent return on your savings. Not amazing, but decent.
In the 1980s, you could collect a 10%-plus yield on CDs. However, over the years, they have become less attractive:
Historical CD Interest Rates
Today, the highest rate on a one-year CD at BankRate.com is 0.67%.
Yet the consumer price index is 1.4%. That is the rate at which the cost of consumer goods and services is rising.
That means if you lock up your money in the bank for a year at the highest CD rate in the country, you will lose value.
There are better options.
Look to History for Guidance
If you are reading this essay, there is a solid chance you already own some stocks. That has probably worked out well for you since last March.
But what else could you own to protect yourself?
Low CD rates are a result of the low Fed funds rate. The low rate has also reduced demand for the dollar.
There are a lot of dollars out there. The government continues to print them like drunken sailors.
The government is spending more than it’s bringing in … and debt is rising like crazy.
In a world with a struggling dollar, you need to work harder to maintain your purchasing power. One asset that helps you do this is gold:
(Source: Bloomberg, Federal Reserve Bank of St. Louis.)
Gold is a place to go to protect the value of the dollars in your wallet.
It has served as a protector of value for thousands of years.
I expect it will continue to do so.
The New Gold?
But what about bitcoin?
It has the nickname, “digital gold.”
How has it fared compared to our ever-growing debt?
It has done well … very well:
Since Bloomberg began reporting bitcoin prices in July 2010, total debt has more than doubled.
Bitcoin traded for $0.08 on its first day of trading.
It was about $48,000 per coin on Thursday morning.
Let that sink in.
It has risen by 600,000 times.
It has been an amazing protector against dollar weakness.
No, most of us didn’t buy bitcoin when it traded for less than a dollar. And you may not want to buy at its current level.
But you can see it has been super volatile. You’ll have chances to buy at a better price.
At one point, it fell from $18,600 to about $3,200 per coin … in a year!
From July 2019 to March 2020, it fell from $12,700 to $4,900.
Less than a month ago, it fell from $40,000 to $31,000 in 13 days.
And its past suggests it’ll fall again.
Plus, I generally do not look to buy things after they rise 10 times in 11 months. Call me old-fashioned.
I like to wait for a pullback for a decent-sized purchase. But you can dip your toe in the water if you haven’t already.
Make sure you have an account set up. Fund it. Have the money available when you are ready to buy.
Educate yourself. Read more about…