After the Fall: High Yield Checking Accounts

Another week, and more pain for savers.  Dollar Savings Direct continued their rate chopping from 3.20% APY to 3.05% APY on their online savings accounts.  While still offering one of the highest rates available, their margin is no longer much more than competitors.  Here's a roundup of some other rates we here at the LookBlog follow:

• FNBO Direct  2.60%
  
• HSBC Direct 2.45%
• Emigrant Direct 2.40%
• ING Direct 2.20%

So what's a saver to do?  We mentioned a while back about High Yield checking accounts and the relatively high rates they are still offering as long as you are willing to jump through a few hoops.  The guys over at http://www.highyieldcheckingdeals.com/  have some great resources on what is available in your area, as well as a primer on how these checking accounts can still offer up these rates.  Long story short, by making you use your debit card they earn more on fees allowing them to keep a nice little spread while still offering you a high rate.  Check the site, its definitely worth a read.

As a NJ resident, I'm leaning more and more towards pulling the trigger and opening an account at The Provident bank.  Currently they are offering 5.01% APY on up to 25K and a $123 sign up bonus.  O how I salivate when looking at this compared to the meager online savings yields.  A couple more drops and I'm all but forced to open this up! 

Lets hope things start turning around soon!

One Love,

Look

So much for saving... VFINX in the dumps

A dollar saved is a dollar earned?  Not so much.  So I've been investing in Vanguard's 500 Index (VFINX) for quite some time now.  The graphic above shows the 10 year performance of the fund.  The end of 2007 to now has hit the fund hard erasing gains and causing negative performance.  Bah.  So... what's an investor to do?  Is it a fire sale? Time to buy some new shares? Dollar Cost Average?  Mmm with "experts" prediciting further struggles and the abysmal performance in January causing the year outlook to be just as bad (As January goes, so goes the year...)  its a hard call.  Wait and you could miss those huge upside days.  Invest now and you could see further losses.

They say this recession is worse and more far reaching than any before and that the boost in the stock market post-recession can be a long time away and isn't guaranteed.  Is it the end of an era?  I'm in it for the long haul so I'll stay put for now.  Invest in some more shares slowly and hope things start to turn around.  Hope Warren is right... be fearful when others are greedy, be greedy when others are fearful.  

Steelers just won the Super Bowl. Super.

One Love, 

Look

Interest Rates: Dropping like they're hot.

Another couple weeks, another drop in interest rates.  The honeymoon with Dollar Savings Direct is over as they finally caved in and dropped the savings account APY from 4% to 3.5%.  Sadly, this was expected as they had already dropped the rate on their CDs weeks earlier to 3.5%.  Along with the drop in savings, they followed up with another drop in CDs to 3.25%.  So probably only a month or so before more cuts are coming.

DSD had stood out above the rest, but the pack is getting tight at the bottom.  Seems like its the cool thing for all banks to offer basically nothing on savings account.  What infuriates me is seeing ads like Citibank's "Earn More in Less Time with a Citibank 12-Month CD: You can feel confident with a short-term CD at a great rate. All from a bank you can trust."  Really? 2.40% is a great rate? Please don't patronize me.  And a bank you can trust?  Actually... Big Vik hasn't done much to salvage C from the ginormous death spiral its been on.  The government bailout wasn't enough and the rumors of nationalization persist.  So can I really trust you Citibank?  FDIC insurance my friend.  Thats what I trust (even then where is the FDIC getting all this money... something has to give).

Not many options out there.  You can still grab some great rates if you get into the whole High Yield Checking account thing, but that doesn't come without some effort.  They usually require auto-deposits, a # of debit card transactions, etc.  Is the hassle worth the rate?  Yes if you usually use your debit and are set up to auto-deposit in that bank already.  Since my banks don't offer that and I never use a debit card, I'll just grin and bear the low rates for now.  When I get desperate I might just have to take the plunge though... 5.01% at Provident.  So tempting....!  Good luck out there :) 

What an up-beat post.  Sorry!

BTW, my netbook rocks my socks.

One Love,
Look

Time to throw in the towel on WaMu?

The beleaguered bank just can't catch a break. Today Standard & Poor's Rating Services downgraded WaMu's counterparty credit rating to "CCC" from "BB-" further miring it in junk status. The reasoning being a split of the bank on any sale, as vultures are keen on snatching the strong deposit base while staying as far away as possible from the toxic mortgage assets.

As seen in the chart, WaMu's stock price (NYSE: WM) has fallen along with the confidence in the bank, dropping another $0.94 to a 52-week low of $2.26. Uncoincentally, this battering has led them to increase interest rates on online savings to 4.00% and on 12 month CDs to 5.00% in attempts to shore up capital.



While these are GREAT rates given current market conditions (who wouldn't want guaranteed returns in this financial crisis!) how safe is your money? Sure its FDIC insured on deposits up to $100,000 but with all these bailouts and government takeovers, but how long will the FDIC's printing press be available until it breaks down? Here's a great article on reasons to stay with WaMu from MyMoneyBlog, but seeing that nearly 60% of my cash is sitting with WaMu, I still am pretty uneasy with leaving my money in there.

I have an online savings account and an 8-Month CD (which I opened for 4.25% APY) and the trigger is itchin for me to withdraw the money. IndyMac is the closest example to what would happen should WaMu fail and after reading some stories from those customers (via SlickDeals) seems like it took 4-5 weeks for money to be returned. So seeing that a bailout of WaMu would be greater than IndyMac, I can't imagine how long my money would be locked away NOT earning interest.

So do I forgo the attractive interest rates and settle for a lower rate but more security? I'm leaning towards a move back to EmigrantDirect at 3.00%. So far I'm undecided, but I'll wait for this month's interest to be deposited and then I'll make a decision.

Happy rate hunting!

One Love,

Look

Interest Rate Roundup

Rates have come up a tad bit in the last month. Here's the current roundup:

WaMu Online Savings: 3.75%

WaMu 8 month CD: 4.25%

WaMu 12 month CD: 4.50%

Emigrant Direct: 3.00%

ING Direct 3.00%

HSBC Direct: 3.50%

E-Loan Savings: 3.01%

E-Loan 6 month CD: 4.06%

So my in my rate chasing, I moved my matured E-Loan CD into WaMu and dumped it into an 8 month CD. I've been socking most of my savings into the online savings account as well. Due to the turbulence in the market I'm reluctant to move everything into WaMu, so I still maintain my other account at Emigrant Direct. While these rates are better than what we've been seeing, the forecast looks bleak. About a week or two after I opened the 8 month CD, WaMu was offering a 12 month, 5.00% CD which I would have definitely jumped on. I jumped the gun too early, then waited to late and now they've dropped the 12 month rate to 4.50%. So unfortunately looks like there won't be another uptick in savings rates anytime soon :(

One Love,

Look

Financial Crisis: The Broken American Dream

It's been quite some time since my last post and much has transpired. The housing market in the U.S. has collapsed with Countrywide Bank being bought by Bank of America, BearStearns the fifth-largest investment bank collapsed and was absorbed by J.P. Morgan, Freddie Mac & Fannie Mae have tumbled as a result of the housing debacle forcing government guarantees, IndyMac was taken over by the FDIC, Lehman Brothers is facing the way of BearStearns, S&L's like WaMu and Wachovia have had their balance sheets come into question. So where does this leave little investors like us?

They say don't panic. Easier said than done. Since the turmoil began last August, my portfolio has seen double-digit percentage declines and the bleeding has still not stopped. Following the "buy low, sell high" adage, I've bolstered these falling positions by purchasing additional shares. While I'm getting these shares at a "discount" this strategy will only bear fruit if a rebound occurs. So since I'm young I'm holding my breathe and blindly sticking to my guns. That's not to say I'm totally exposed to the market. I still have a considerable cash balance and just recently invested in a bond fund to diversify away from my stock exposure. Jumping ship and selling shares seems like the wrong thing to do. Interest rates are at all time lows so there leaves growth possibilities very low. I guess the only thing it would do is to stop the losses. This may be good for someone at/near retirement, but my time horizon is too long to have my money just sit and do nothing. No risk, no reward right?

So what happens if a rebound doesn't occur and we enter a prolonged bear market recession? Well the buy & hold strategies, the dollar cost-averaging and the long term views will end up destroying my retirement plan. No social security to count on, a fledgling 401k. What's a boy to do? Time will tell. I'll suck it up until I can take it no longer and decide what my next plan of action is.

So for those rate chasers, a mini-update. IndyMac failed so I wouldn't recommend pouring cash there (seeing that it might be a process to get it back), but here's the latest rates:

• HSBC - 3.5%
• WaMu - 3.3%
• ING Direct - 3.0%
• EmigrantDirect - 2.75%
• Citi - 2.65%

Good luck investors!

One Love,
Look

Interest Rate Freefall

Long story short. Fed cuts overnight interest rates from 5.25% to 4.75%. Result: Interest rates fall off a cliff.

Glad I locked in a 5.36% 12 month CD at E-loan before the carnage, but kicking myself for not locking in for 18 months. Unfortunately 2 CDs expired after the freefall and blah. My Wamu CD i rolled into a 4month CD @ 4.65% APY (They were offering ~2.7% for all other maturities!). My Emigrant Direct CD I transferred into my savings account earning 4.75%.

So there's little options out there as all banks seemed to have followed suit. There are higher rates at Countrywide and IndyMac, but their exposure to subprime worries me. Although they are FDIC insured, I don't feel like the small bump in rate would be worth the headache should they fail. So for now I'm going to sit tight and see how the rates play out in the coming weeks.

In other portfolio news, I'm roughly 50% cash which is way to conservative for my age bracket. Sadly, this is probably the lowest cash ratio I think I've ever had for my porfolio showing my uber conservativeness. I've been ramping down this cash number, however. I set up an auto-investment with Vanguard into my VTRIX mutual fund. I'd invest more, but with the market so hot right now and everything trading at all time highs, I'm hesitant to do more.

Well I guess we'll see what happens in the coming weeks.

One Love,
Look

The Incredible Falling Interest Rate

The Fed announced today that the fed fund rate would remain unchanged for the time being. So what does that mean for interest rates? So far online savings rates have stayed the same. E-Loan remains at 5.25% and Emigrant at 5.05%. In recent weeks, however, the CD rates at these two institutions have dropped to 5.26% and 5.10%, respectively. E-Loan had a huge drop from 5.41% to 5.26% over the last week or so, while Emigrant has been holding at 5.05%. My CD at Emigrant expires tomorrow, so what to do? Open an account at E-Loan and hold it at 5.25%? Or will the rates drop at E-Loan too and converge to the rate at Emigrant? Sigh.. Missing the rate hike!

or

I'll let you know!

One Love,
Look

CDs? Nah, stay liquid with online savings...

If you're lookin for a place to stash your holiday cash, you might want a traditional CD to get a guaranteed rate of return. In this day and age, however, look no further than online savings accounts. They offer comparable rates to traditional CDs, but lack the restrictions of being able to pull out your money. So if you need access to your dough asap, or are looking for a temporary place to stash your cash and get a decent return without the penalites, look at an online savings account.


Here are a look at some of the biggest names in this arena:







ING DIRECT

• 4.50% APY
• First big player on the market; interest rates have not kept pace with competitors
  
• $25 referral bonuses for recommending friends

Citibank E-Savings

• 5.00% APY
• Convenient transfers/set up if already have Citibank accounts
• Requires Citibank EZ-Checking account
  
  

EmigrantDirect

• 5.05% APY
• Big player offering one of the most competitive rates
• After peaking around 5.15%, interest rates have trailed off recently
  
  
  

E-LOAN

• 5.38% APY
• Newest big player on the market, started offering 5.50% APY but has trailed off recently
• Still offering one of the most competitive rates
• Require $5,000 minimum for accounts

These are only a small handful of the biggest players, but by doing your own research you may be able to find better deals for smaller, regional players. Either way, set up your account and start making your money work for you!

One Love,
Look