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URL:  http://boards.fool.com/but-replacing-my-5-year-cds-that-mature-in-2015-30297810.aspx

Subject:  Re: Howard: Your Maturities? Date:  10/3/2012  2:41 PM
Author:  trader2012 Number:  34440 of 35576

But replacing my 5 year CD’s that mature in 2015 is a different matter. Now that will be a real problem!

Howard,

Possibly, and maybe even probably. But, also, maybe not. It all depends… on factors far beyond Bernanke’s control, such as an increasing global unwillingness on the part of lenders to let themselves be taken advantage of. To some extent, there were the beginnings of protest in Europe as lenders backed away from Italy’s bond auctions, forcing a rise in rates to about 7%. But fearing a spillover-effect, the problem was papered over by printing money, as was done for Greece, Spain, UK, US, which the emerging nations are beginning to protest as inflation is forced upon them by the currency skirmishes (not yet ‘wars’, though coming soon to a country near you). In short, Bad Things could easily happen, and interest-rates could rise, though I’d bet against it, too, which raises a larger question:

What, really, should the role of CDs be in an investment portfolio? What are the investor’s characteristics that determine allocations to this instrument? The desire to avoid the loss of nominal principal? The need for short-term liquidity? A desire for not much more market-risk than cash but a better rate of return?

Except in the rarest of circumstances, i.e., coming off the top of an historic, Volker-style spike in interests-rates, cash-equivalents, such as CDs, short-term Treasuries, prime agencies, corporates and minis, will never offer a real-rate of