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

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

Interest Rate Roundup

I opened a couple of CDs at WaMu while I was in college and have since been rolling them over. My returns haven't been too great, with some of my earlier CDs locked in at rates around 3%, but recently trending around 5%. This weekend one of my CDs expired so I was forced with the decision of rolling it over again or pulling the money out. Interest rates at online banks have trended downwards over the past few months, so I decided to stay locked in another CD for 8 months with a rate of 5.10% APY.

My old faithful in online savings, Emigrant has served me well, but I think I held my money in these accounts for too long. Currently I have 2 CDs with 6 month maturities locked in at 5.20% APY and my regular savings account at 5.05% APY. In the past couple of days, the CD rate has fallen to 5.10% and I'm fearing a draw down on the regular savings account will soon follow.

That leaves me with E-Loan. I was late to jump on the boat when they were offering 5.50% APY on their online savings account out of sheer laziness on my part in my unwillingness to open yet another online account and shuffling money from Emigrant to my Citi Checking to E-Loan. In hindsight, I should've gone through with all the hassle for the better rate. Currently, they're offering 5.25% APY for their online savings account which is higher than any interest rate I currently have. Suffice it to say, my money is locked in various things and I'd have to do some money management/stop spending my paychecks to roll the $5,000 minimum into an E-Loan account. Boo. I guess better late than never, however, so in the coming weeks I shall do some portfolio shuffling and open yet another account. I'll report back later on my progress or lack thereof.

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