I was always a saver growing up.

Whenever I got money for birthdays, holidays, church stuff, my allowance, or summer jobs, I would sock it away. At first that was in a secret compartment in a wallet in the top drawer of my dresser.

In high school, I finally opened up my first bank account. My first job was as a bus boy. I probably saved a thousand dollars that summer. The next summer I delivered furniture and saved a little more.¹

After 17 years or so of saving I had a few thousand dollars saved up so my dad and I went over some cash management options at the local bank where my money was just sitting in a checking account.

CD rates were higher than they were paying on a savings account so that made sense. I think it paid something like 5% over 12 months.

I put a few thousand bucks into that CD with the idea that it would mature as I was going away to college. A year later I collected my money along with a little bit of interest.

Is this the most boring first investment story in history? Probably. Too practical for a teenager? Most certainly.²

But I had no knowledge whatsoever of the stock market at that point and my time horizon was so short that a boring old certificate of deposit made the most sense for my risk profile.

This was back in the late-1990s so CD rates were much higher than they’ve been for the majority of this century.

JP Morgan has a chart that compares average 6-month CD rates by decade along with some different measures of inflation:

It’s hard to believe average CD rates in the 1980s were higher than the inflation rate. It was a stairstep down from there with average rates near the ground floor level by the 2010s. Average rates for the 2020s aren’t any better but the rates today have finally reached the respectable levels I was getting when I made my first CD purchase.

Savers have taken notice.

The Wall Street Journal had a piece out recently detailing the huge flow of capital in CDs:

High inflation, rising interest rates, and economic anxiety are making CDs cool again, with yields rising as high as 5.25% recently at some banks. Balances in CDs rocketed from $36.5 billion in April 2022 to $418.4 billion in January, according to the Federal Reserve.

The average yield on a 12 month CD is still just 1.6% but if you know where to look (just search some of the online banks) you can get something in the range of 4% to 5% right now.

The rate depends on the provider and your time horizon.

I pulled up the CD rates for Ally Bank this morning. A 12-month CD was quoted at 4.5% but go out to 18 months and it was 5%. However, 3 and 5 year rates were 4.25%. Go shorter and rates were lower (2% annualized for 3 months).

There are pros and cons to CDs.

On the positive side of things, locking in 5% short-term rates takes some of the interest rate volatility out of the equation if the Fed is forced to cut rates if they help cause more pain in the economy or banking system (or both).

It’s also nice to have an end date in mind if you’re planning on using the money at a certain point in the future.

One of the biggest downsides of CDs is you give up liquidity to lock in those yields. Most banks will let you pull your money early but there is typically a penalty in the form of lost interest.

On the other hand, locking up your money does take some of the temptation away from constantly tinkering with your cash.

I’m not sure how long today’s CD rates will last. Short-term bond yields have come down quite a bit in recent weeks so that could be a precursor to lower rates in the future. Or maybe the bond market is just as confused as everyone else right now.

I don’t know the future path of interest rates from here so I’m not going to pretend I do.

But I would enjoy the yields we have on CDs right now because they might not last very long.

Michael and I talked about the first investments we ever made and much more on this week’s Animal Spirits video:



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Further Reading:
More Money Doesn’t Make Make You Better at Managing Your Finances

Now here’s what I’ve been reading lately:

¹Not a fun job at all but lifting all those heavy sleeper sofas, dressers and sectionals did help keep me in shape.

²My investment style is so boring my second investment was an IRA contribution into a targetdate fund. Sorry not sorry.

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Peterborough is proudly a hockey town. We love our Petes. Hockey fans have successfully lobbied the City for a new twin-pad arena. Competition for hockey ice-time is intense. In Peterborough, hockey rules.

But at what cost? The city subsidizes hockey in many ways, as it should. Money well spent, or so we would like to believe. But what do we get back from this financial support?

It might shock many of us to realize that compared to sports, the arts generate a far better dollars-in vs. earnings-out ratio. Considering the relatively meagre support arts groups get from the city, the earnings are far more impressive than those generated by sports. Why?

Arts facilities are smaller and less expensive to operate. Hockey players need an arena. Actors need an empty stage. Artists are paid pitifully little. Yet audiences pay for tickets, buy meals, and for some, accommodation. In short, for a much smaller investment, the arts generate a surprising volume of revenue for our town.

According to Hill Strategies Research Inc., Canadian performing arts organizations generated $2.70 for every $1.00 of government investment.

From a business standpoint, why doesn’t the city increase its investment in the arts? Instead, arts funding is shrinking. Why?

One of Peterborough’s local gems, The Theatre on King or TTOK, has had its grant from the city slashed to zero. This small downtown theatre has a record of brilliant productions that have employed dozens of local performers, artists, dancers and musicians.

TTOK is a success story that has, over its 10-year history, grown to become a cornerstone of the local theatre community. Many local actors get their first onstage exposure at TTOK. Think of TTOK as a successful farm team for larger theatre companies.

Hockey players need ice-time to develop. Theatre artists need time on stage to develop. Peterborough is indeed a hockey town. But it seems that council has forgotten that Peterborough is also an arts town. City council needs to reinstate the city’s grant for The Theatre on King to its 2022 level of $15,000.

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Nike continues to draw in sneaker fans and activewear lovers.

The retailer reported revenue of $12.4 billion for its third fiscal quarter of 2023, beating analysts’ predictions of $11.47 billion, according to Refinitiv consensus estimates. The company also reported earnings per share (EPS) of $0.79, compared with the $0.55 analysts expected.

Additionally, the company reported that revenue rose 14% compared with the year-earlier period.

For several years, Nike has worked to expand its ability to sell directly to consumers rather than through other retailers. This has included increasing its digital sales, building experiential stores and bolstering its loyalty program.

Nike Direct, the company’s direct-to-consumer brand, sales rose by 17% during the holiday quarter to $5.3 billion, according to its quarterly report. Nike Brand Digital sales were up 20%.

But you’ll still be able to find Nike products outside of the company’s own stores and website.

In January, Nike CEO John Donahoe told CNBC that wholesalers remain “very, very important” to the company.

“Consumers in this day and age want to get what they want, when they want it, how they want it, and in our industry, they’ve been very clear they want a premium and consistent shopping experience regardless of channel,” he said.

To that point, Foot Locker touted a “revitalized” relationship with Nike during its “2023 Investor Day” presentation on March 20, saying the partnership is complementary to Nike’s direct-to-consumer strategy.

What this means for investors

Investors should do their research

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