📈High Yield

Last week we discussed the narrative battle of a recession amidst strong job numbers, and how this put Fed Chair Jerome Powell in a tough position. 

It didn’t take long for us to hear what he had to say about this contradiction as he went in front of Congress and discussed the need to hike rates higher and hold them for longer than previously thought due to stubborn inflation and a strong job market. 

As we had predicted, inflation remains too high to ignore and puts us on the path to higher interest rates. However, some members of Congress didn’t agree with this path of continued higher interest rates. Some noted the pain that higher rates are causing to first-time home buyers, with mortgages rising for the 5th straight week. 

These rates combined with housing prices that remain stubbornly high following the post-Covid run-up has led to some shocking statistics for new buyers.

While this is unfortunate, home prices rose so quickly in 2021 largely due to low-interest rates and a booming post-Covid economy. Lowering rates would simply drive prices even higher, while high rates make new mortgage payments prohibitively expensive. 

The only thing to do is keep rates high for long enough to lower housing prices, despite the pain that may cause. 

On the job front, Powell also battled with some members of Congress, specifically Sen. Elizabeth Warren, who accused the chairman of attempting to put millions out of work with his rate hikes. 

This exchange succinctly covers the issue at hand for the Fed. They have a dual mandate to keep inflation in check and also achieve maximum employment. Because the job market is so strong they have to fight inflation, but in doing so they risk causing people to lose their jobs. 

This tradeoff is something called the Misery Index, which we covered in a recent Instagram post. (Go follow us if you don’t, my girlfriend is forcing me to post, and trying to use Instagram makes me feel old so please help)

weekly.upside

A post shared by The Weekly Upside (@weekly.upside)

Since we provided no actionable advice last week, we thought it would make sense to talk about the good side of higher rates. And that is savers can finally earn some money on their savings somewhere other than the stock market. 

Last year we spoke about buying bonds as a safe short-term way to make some money and rates today are even higher. So if you haven’t done so or want to read more about why you should do so read the blog below.

📈 Bond Fire

If that seems like a lot of work for you I have an even easier piece of advice. 

Step 1: Open a High Yield Savings Account

Step 2: Profit

With rates as high as they currently are there are numerous options for reputable banks paying more than 3.5% on cash.

A year ago this would have been close to zero and if you are not careful your bank still may be paying 0%. Talking to you Chase.

If you are saving for a downpayment for a now far too expensive house, or simply have money set aside for a rainy day using one of these accounts could pay you significant interest. $30k in one of these would pay over $1k a year in interest, with no effort from you and zero risk.

What’s the Upside?

High rates aren’t fun for really anyone, including the man in charge of setting them. But the fight to control inflation remains the most important financial topic of 2023.

You can try to reap the rewards of high rates by getting the most of your idle cash via bonds or High Yield Savings accounts.

And hey, if you read something interesting this week, do us a favor and forward to a friend… or an enemy. We’re agnostic. We’re just trying to grow here and we can only do that with your help.

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For Your Weekend

Watch

History of the World, Part II ($ Hulu)

Do you like Drunk History? Well, Drunk History probably wouldn’t exist without Mel Brooks or the original History of the World, Part I. The sequel is now streaming on Hulu.

Listen

🚨Politics ahead! Proceed with caution🚨

Amb. John Bolton: I Thought Trump Would Be Disciplined (The Bulwark)

Prepare to have your assumptions about John Bolton challenged. Host Charlie Sykes, no shrinking violet, goes right at Bolton asking tough but fair questions about his record, why he wrote a book instead of testifying, and how the US has responded (or failed to respond) to global challenges. A fascinating and insightful interview.

Read

It’s Time to Kill the Multiverse by Charles Holmes (The Ringer)

Don’t let ‘Everything Everywhere All at Once’ and its Oscar front-runner status fool you: The supposedly limitless storytelling device has been pushed to its narrative limits. Just look to ‘Quantumania’ for proof.

Chuckle