Wisdom wanted on savings
So here I am, where I didn't want to be. Sold my house, now I'm renting. I want to get my sizeable former equity moved into a reasonably safe place to wait out more of the bubble pop.
I can look up on bankrate.com and find "high yield" savings accounts (like US Bank's 0.40% deal!). But I'll take into consideration any input from other Seattle Bubblers, and with great appreciation. Any experiences with the high-yield savings banks that were so bad I should not test their waters myself?
I don't want to take any big bets or risks, since I'll use the money for another house someday, but I am aware that staying in the US dollar may well be a bet of sorts. For now I'm willing to take the risk that the FDIC will answer the phone if my bank fails (for $100K max).
Do you think the dam will break in the next few years, so that CD rates are, say, 7+% again?
I can look up on bankrate.com and find "high yield" savings accounts (like US Bank's 0.40% deal!). But I'll take into consideration any input from other Seattle Bubblers, and with great appreciation. Any experiences with the high-yield savings banks that were so bad I should not test their waters myself?
I don't want to take any big bets or risks, since I'll use the money for another house someday, but I am aware that staying in the US dollar may well be a bet of sorts. For now I'm willing to take the risk that the FDIC will answer the phone if my bank fails (for $100K max).
Do you think the dam will break in the next few years, so that CD rates are, say, 7+% again?
Comments
Silver.
US Treasuries.
The higher the interest rate offered by a bank, the more desparate they are for cash and the more likely your money will be tied up by FDIC paperwork.
I thought you just bought your house recently. What gives?
Of most of us working stiffs and retirees a 10 year ladder is reasonable and should enable you to catch any interest rate increases along the way. This assumes you don't plan to use all of it sooner.
If you plan to buy another home in say two years consider what you would put down on the house (lending standards will be much tighter, so budget 20% at least). Manage your ladder so that much money will be available by your target date.
As my Mother used to tell me when I went shopping, don't spend all your money in one place.
I don't know a lot about bonds but they may have a bit better interest right now, but obviously tie your money up for a longer time.
The question as to how soon you may want to tap this money is significant to your approach. If you're planning on renting for 5 years, that changes the equation a bit.
I agree with Alan that higher savings/MMA rates mean greater risk of dealing with the FDIC. I read that they expect 100-200 bank failures in the next couple years, up from 4 last year. They're adding to staff in anticipation. Scary stuff. Supposedly they reimburse depositors within 2 days, but I doubt it. With 100-200 bank failures, who knows what expediency you'll get, if any.
I suspect what will happen is that the housing bottom won't hit until after it's no longer prudent to have money in the banks, and I suspect that day will come without advance notice, like one day all accounts will be frozen. Call me a pessimist!
Read today that Alabama's largest county is facing bankruptcy and may default on their municipal bonds. Hasn't happened since Orange County about 10 years ago.
I think the advice of $20K to $50K max per account is sound, just for diversification (needed only when banks are failing).
Berkshire Hathaway and silver, gold etc. is appealing, but probably has more volatility (ups & downs) than I'm looking for. I don't want to be 20% down when I'm next in the market for a house. Then again, it has a safety feature; I don't need the FDIC, I just need a working stock market. I'll consider that further.
I'll rent as long as it seems to be the better deal. Probably 2+ years.
Criminals will always be in the White House, no matter which party it is.
-David
You might want to consider municipal bonds. I don't think somone as saavy as Mr. Buffet would offer to be an insurer if there really was increased risk of default.
Muni market full of buried treasures
In a topsy-turvy market of worry and low interest rates, investors are finding deals in a place they might not generally look—municipal bonds.....
.....In recent weeks, the prices of even the safest of municipal bonds have declined because of factors that have little to do with whether states and cities will make good on their promises.....
.
Mostly I'm just chicken to bet my future house on anything somewhat risky. I acknowledge that muni bonds may be less risky than CDs and MMAs though, given the likelihood of many bank failures and the unlikelihood that the FDIC will deal with those in a timely manner. So I'll look into muni bonds further. Thanks for the suggestion and the search link. Great article.
Ah, I get it, so only if they have an (R) after their name are they designated as criminals. Sorry, I'm still trying to get used to this new way of thinking.
A) Isn't Clinton the only (or at least most) criminal president since Nixon? I believe perjury is generally a felony.
C) Our fiscal policy was screwed up during the Carter administration as well. And at least some of the credit for Clinton's budget surpluses can be attributed to economic growth of the time, some portion of which was its own dotcom bubble.
D) C can be partially blamed on Nam, which was started during a democratic presidency.
Not that I am trying to support the republicans per-say, but lets admit that both parties make mistakes, and both parties commit unethical or criminal actions.
Are you so politically biased that you are blind? Don't forget that the popping of the dot-com bubble and the recession we had in the early 2000's was CLINTON's recession. Any economist will tell you that. But I guess you don't believe that because Bush was in office. And what if there just happens to be a recovery in 3Q of this year? Will you give him credit for that? Or will credit go to individuals with (D) behind their name, namely in the Congress that has a LOWER approval rating than the president and hasn't done shit except for to push their uber-liberal agendas through only to get vetoed? This is a party that will waste our time and taxpayer money trying to impeach a president who only has 9 more months left in office (see Boulder City Council, Vermont Legislature, etc). Now, if the D's don't win the White House (you still won't win "flyover" country or the south) in November, what is the solution? Violence? Riot? Moving to Canada? Or just pouting like the last time? I think there's going to be a lot of surprised people the morning of November 5, especially in the media and Seattle.
What happened? What the f**k happened?
Sorry for the political rant, but I feel the need to call people on their shit.
I found that credit unions offer higher rates. They are insured not by the FDIC, but by the NCUA (National Credit Union Association), also backed by the US gov't (for now), and also for $100K per account. Here is a list of them in the Seattle area:
http://local.yahoo.com/WA/Seattle/Legal ... dit+Unions
Here's a gov't search form for banks. You can search for credit unions in Seattle:
http://www.ffiec.gov/nicpubweb/nicweb/SearchForm.aspx
I'm limiting the credit unions I use to those with multiple physical branches in the Seattle area. The big ones will take almost anyone as a member.
The one question I've not found an answer to is, can MMAs return a negative rate? The rates are variable, and underlying money market funds can lose principal in theory, so can banks pass that on to the customer?
On politics, my opinion is that the party most culpable for the US' downfall is encapsulated in this chart:
You can see that it took Clinton many years to eliminate the overspending of the Reagan / Bush Sr. years; it takes years to turn around a ship the size of the US. (And yes, Clinton gets credit. I remember reading in the paper almost weekly about him harping to Congress about the need to spend less--you hear the opposite from Republican presidents. The executive branch proposes the budget.) I think history will show that 99+% of the reason for the US' downfall is due to excessive deficit spending. As long as the prez balances the budget, he can have hookers in the Lincoln Bedroom for all I care.
I know, that's all you need, some godforsaken mosquito infested property in Texas.
But you can research the properties and make sure they are in good areas and worth far more than the lien costs.
I worked with a guy who bought land via a tax lien. He became the proud owner of 40 acres of undeveloped grassland near Poteau Oklahoma. I think he said be paid about $3,000. I couldn't quite understand why he thought he had a great deal. Maybe there was an undiscovered oil well on it or something.
But generally, the liens are less risky than the tax deeds, but also less fun.
While I don't disagree with your political views, your chart might look different if it were graphed against who controlled Congress.
Going with a Credit Union is also one of my possibilities. Group Health Coop offers share certificates (both IRA and not), for anywhere from 6 months to years for a decent rate. The 9 month certificate is around 4.25% APY right now. Can't say what it will be next month.
The other is in a TIPS fund, as the yield is considerably higher than a straight indexed fund, and expenses are very low. Vanuguard (VIPSX) is one I'm considering, that you might want to take a look at. You can always sell it when ready, and know you won't lose principal to inflation, at least that is the theory.
So avoid twinstar?
Loved your graph. Makes me yearn for Gerald Ford.
... and mean more if graphed as a percent of GDP rather than dollars.