Dear Masters of the Universe:
Just wanted to send a note of thanks for making it so much more attractive for me to save for my children’s college education since you started monkeying around with the economy. With yesterday’s announcement that the Fed will start intervening in the long-term Treasury market, the one remaining attractive savings option I had has been eliminated. Long-term treasury rates are sure to plunge to below 1% very shortly. My daughter will be attending college in 15 years. As a baseline, I was hoping to have available $30,000 for her, for each year of college she attends. One simple way to do that (and to avoid interest rate risk, which I should be seeking now) is to buy and hold to maturity zero-coupon bonds that stand to mature at the time she gets into college, and each year thereafter.
With rates where they were when I started saving for her, it would have required less than $15,000 put away today in order to have the necessary $30,000 when she got into college. Now, it will take me over $25,000 to accomplish the same task. Interesting strategy for a group of people that think college is too expensive, and are pushing everyone to go at least for a little bit. While it takes universities many years to increase their tuition by $10,000, you guys have managed to do it just about overnight!
Furthermore, investing in the stock market may not be as attractive as it once was, given the uncertain investment environment you have stirred up, given the fact that it is likely for you to continue to crack down on greed, and keep up the double taxation of dividends, so that is one less option for me right now too.
Should I buy commodities? Sounds a bit risky for a college savings plan, but given that you are running the printing presses on full blast, maybe that is an attractive option. However the TIPS spread does not seem to indicate that this would be such a hot idea either.
Should I put cash under the mattress? Not a good idea either.
Maybe I should overextend myself on a house purchase, and then go buy a couple of jet-skis, flat-screen TVs, snowmobiles and power boats. That is what you want after all, isn’t it? And if I have nothing saved by the time I get to college, won’t I be rewarded with generous financial aid packages?
Why do you make it so difficult for folks to wish to be prudent? Pray tell my dear masters.