What’s Your Housing Bubble Exposure?
Several readers want input on where to park their housing cash. “I’m looking for a new bank for my cash. The main thing i’m concerned with is stability in the event of trouble ahead. that and good rates on 6 to 12 month cd’s.”
“And while we’re on the subject, how safe is internet banking (Ing Direct etc). Finally, do you guys like the ibonds?”
A reader responded, “I’ve used ING direct for about 5 years now, and haven’t had any problems with it, yet. But lately with all the bad financial news banging about, I’m getting antsy about having my cash in a digital account. If you want to get it out in a hurry, you’re out of luck. It takes at least 2-3 business days to transfer funds from Ing to your local bank, then you gotta hope your local bank’s doors are still open for business.”
One reader broadened the subject. “I’d like to read about where other readers have their money invested. What the rate and terms are and if it has worked out for them. Did the bank/company give them what was offered, were there any hidden fees, for example to move money in or out, do they know what this bank/company invests in primarily, has anyone discovered something new, has anyone tried something new and did it work out?”
“I’m seeing a lot more offers out there (some pretty good) and lots of them are from unknown banks, so I wanted to get an idea of which are the better more reputable ones to stick with. Also, if anyone has suggestions ideas for a good mutual fund with respect to sector or class. Such as ‘good to invest in bio-tech or perhaps energy funds’ or ‘good to invest in growth or emerging markets or maybe small cap.’”
Another is curious about housing bubble exposure. “Which institutions are holding GSE-issued or private MBSs and CMOs (asian banks vs. American mutual/retirement funds)? Do asian central banks own more of the stuff, or do Americans (through their mutual/retirement/401K/IRA funds)?”
“While GSE-issued debt is fairly easy to spot on a prospectus/annual report (look for Fannie & Freddie), how can you tell if your mutual fund also owns PRIVATELY-issued MBSs or CMOs?”
This reader had some answers. “Have you used Weiss Ratings for bank safety ratings? Nobody is as conservative as Weiss when it comes to rating financial institutions. He has a much better track record than AM Best, Moody’s, Fitches, etc, when it comes to warning subscribers of impending bank failure BEFORE the failure.”
“Just last night we got our annual Weiss ratings book in the mail. A number of banks no longer have the A+ rating, probably because they are exposed to local bubbly real estate markets.” “Fortunately Farmer’s and Merchants bank, right in Southern California, is one of the best banks in the country, at least by Weiss’s standards. Even better, they know about their rating and work hard to maintain it.”
“My survival strategy has largely consisted of having a Treasury Direct account wired to my F&M savings account. I won’t mess with any Treasury money funds from a mutual fund company that might have to go through a bank that, you get the idea.”
http://www.treasurydirect.com is the way to go and you can set it up with a direct link to your checking account. You have access to all ot the treasury instruments and can purchase short (90 day bills up to a year or more) Know one knows for sure where rates are going ,but up is a better bet than down these days, so you can pick your own guess on interest rates.
2/04/2006 12:19:24 PM
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foobeca said…
Most of the banks that pay higher interest have lots and lots of exposure in the housing market.
Emigrant Direct, everyone’s favorite has a good amount of exposure.
http://emigrantdirect.com/info.php
“As a traditional savings bank, Emigrant originates home loans in New York and 19 other states. Last year, Emigrant provided 5,000 home loans totaling $1.62 billion. As of year-end 2004, Emigrant has 250,000 depositors and 22,000 home loans. In addition to its own substantial loan portfolio, Emigrant has a loan-servicing portfolio of more than $7 billion for third parties.”
2/04/2006 12:22:07 PM
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Russ Winter said…
There are literially trillions sitting in low interest CD and savings in financial institutions. I’ve calling this derisively the dumb and dumber crowd, see Jan. 29 writeup on DSL, Jan. 25 on GDW, and Jan. 21 on WM:
http://www.xanga.com/russwinter
To presume financial institutions will be protected by FDIC in a panic, bust or run, is very naive and very lazy.
Plus banks rarely even beat 4 week, 3 month and 6 month Treasury bills (4.37%, 4.49%, and 4.60% respectively at the last auction, and headed higher at the next one)that anyone can buy directly from Treasury Direct.
https://www.treasurydirect.gov/tdhome.htm
2/04/2006 12:29:24 PM
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HOMEPOP said…
World Savings offers some good short-term (6-8 months)CD rates (about 4.5%), at least in CA and NV. FDIC insured. That’s where I’m parking my cash. No, I don’t own stock in the company.
2/04/2006 12:30:59 PM
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rotary13bt said…
I just opened an account with HSBC. They just raised their interest rate to 4.80%!!! Does anyone know how many loans they have given out and their exposure in this market?
2/04/2006 12:31:47 PM
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thejdog said…
Great topic, one I spend a lot of time and research on.
The safety of internet based banks: They are as safe as your local B&M bank, as they carry FDIC insurance, up to $100k like the big boys.
Rates: I’d stay away from any CD that has a longer term than 4 months right now, due to rising interest rates. High-yield MMA’s at some on-line institutions are paying rates comparable to 6 month CD’s. My favorite: UFB Direct. 4.50 APY MMA no fees. They are also quick to increase their rates. Very responsive over the phone too.
My advice with MMAs & CDs: Visit FatWallet.com - finance section. Users there update the highest rates all over the country daily, and there is also good discussions on the pros & cons of different banks.
iBonds: they are paying a great rate right now (6.73%) but they re-adjust yearly May & November. The rate is actually 2 part. You have a base rate (currently 1%) & an inflation indexed rate (currently 5.73% due to high oil prices after Katrina) This is where it gets sticky: The base rate stays the same for as long as you hold the bonds. The current 1% is quite low IMO. If you buy them now, come May when they re-adjust, you’ll be stuck with the 1% fixed rate and the inflation indexed rate will be lower, most likely 3%-4%, which equals a 4%-5% return for 6 months. YOu muyst also hold onto ibonds for at least a year, and if you sell them within 5 years you lose the last 3 month of interest.
My advice with ibonds: wait untillthey re-adjust in May. They will probably raise the fixed portion 1/4 to 1/2 %. I know people who bought ibonds back in 2001 when the fixed rate was 2.75% - those bonds are now paying a whopping 8.48%!
2/04/2006 12:33:00 PM
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jeffolie said…
Does anyone know reliable or have experience with GoldMoney.com or egold? GoldMoney states, “You have 24/7 online access to your precious metal, which you can sell at any time. Also, your gold can be used as online currency and transferred instantly to anyone with a GoldMoney account.Looking for a better way to buy and sell gold and silver? GoldMoney is easy to use and inexpensive, plus you have the convenience of transacting online. Your precious metal is secure because it is:
safely stored for you in a specialised bullion vault, and
insured by Lloyd’s of London.
”
2/04/2006 12:44:34 PM
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thejdog said…
In regards to FDIC insurance, which is
backed by the full faith and credit of the United States government:
TRhe FDIC has NEVER not paide a valid claim after a Bank fails. They are also VERY responsive and pay the majority of claims within 30 days.
It is also very easy to get up to $200,00 worth of insurance at a single bank. Google “payable on death FDIC” for details.
Now, if you believe the US Gov’t is in serious peril of going under (that’s what would have to happen for them not to bail out a failed bank) then this discussion is pointless. The USD will be worthless. You migt want to get started on that hole in the backyard to bury your gold in…
2/04/2006 12:50:24 PM
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Russ Winter said…
I think those of you here blithly talking about placing your cash with the likes of World Savings and their ilk at rates even below Treasury Bills truly need to get your heads out of your asses. I don’t know how else to put it!!
Almost all financial instititions have massive and record exposure to a real estae Bust:
http://www.idorfman.com/Charts/MortgagePctOfBankCredit.jpg
2/04/2006 12:58:02 PM
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nobubblehere said…
“I just opened an account with HSBC. They just raised their interest rate to 4.80%!!! Does anyone know how many loans they have given out and their exposure in this market?”
Bankrate.com gives both HSBC and ING a rating of 3 on a scale of 1-5 with 5 the highest rating. You can get loan details on these banks at bankrate.com
2/04/2006 01:18:21 PM
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poor said…
Okay,
What’s the difference between I and EE bonds. I can’t remember.
2/04/2006 01:20:43 PM
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thejdog said…
HomePop:
World Savings will be offering a 6 month CD that pays 4.86% APY starting Monday (2/6) - only problem with that is by March we’ll be seeing 6 month CD’s a over 5% IMO
rotary13b:
HSBCs 4.80% rate is a teaser until April (just like INGs 4.75%) - then it reverts back to the current rate, which HSBC is normally 1/2% too low. At the very least it is a good 3 month CD.
russ winter:
I disagree. The latest treasury aution had 91 day T-bill % 4.48% - one can find better rates right just by using a MMA. And in one month your T-bill will still be paying 4.48 and my MMA will be at 4.75. Both are backed by the US Gov’t.
2/04/2006 01:28:09 PM
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VirtualChris-OC said…
I just parked $300K here back in November:
http://1800fremont.com/IDA/signaturesavings.ASP
To get over $100K of FDIC insurance I was instructed to get a ‘qualified beneficiary’ relationship for each $100K of insurance. That is basically your parents or kids. Just give them their SSN#’s and you are good to go I was told.
I have a Brick and Mortar branch here in Orange County where I can go get my $$$$$$ at anytime. It is not in a CD either so I will not be penalized for early withdrawl. My rate is not bad either. I just got $950 last month in an interest payment.
My $0.02.
VirtualChris-OC (cant remember my password)
2/04/2006 01:30:59 PM
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SB BubbleBeliever said…
We got out of the Santa Barbara real estate market in early fall 2005. We got lucky and were one of the last to do well on property there (bidding war, more than asking price).
The better half and I then researched banks to put our nest egg into “safe” keeping while waiting for the prices to deflate in SB. we figure it may take a year or more. In the meantime, we are happy renters watching our nest egg grow and the ensuing real estate price corrections take place.
We found bankrate.com to have excellent information and stats on the best rates, safety of banks, etc. We ultimately signed up with several of these banks to at least have the percieved “FDIC insurance” and have been making incredible interest rates of 4.5%+
It was nerve racking to place this kind of cash into unknown banks, but now that we have recieved several statements with these great rates, we are more comfortable with it now.
So I am with a previous poster… check out bankrate.com as one good place to research. The highest interest paid on todays chart is 4.7% Be sure to follow through with checking the specific bank’s safety rating.
2/04/2006 01:38:21 PM
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SB BubbleBeliever said…
We got out of the Santa Barbara real estate market in early fall 2005. We got lucky and were one of the last to do well on property there (bidding war, more than asking price).
The better half and I then researched banks to put our nest egg into “safe” keeping while waiting for the prices to deflate in SB. we figure it may take a year or more. In the meantime, we are happy renters watching our nest egg grow and the ensuing real estate price corrections take place.
We found bankrate.com to have excellent information and stats on the best rates, safety of banks, etc. We ultimately signed up with several of these banks to at least have the percieved “FDIC insurance” and have been making incredible interest rates of 4.5%+
It was nerve racking to place this kind of cash into unknown banks, but now that we have recieved several statements with these great rates, we are more comfortable with it now.
So I am with a previous poster… check out bankrate.com as one good place to research. The highest interest paid on todays chart is 4.7% Be sure to follow through with checking the specific bank’s safety rating.
2/04/2006 01:40:14 PM
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Jasunnyoutlook said…
GREAT
too bad the US is in a technical default of its debt. If congress doesnt raise the debt cieling soon (and it looks like they arn’t) some goverment operations will shut down.
This in it’s self is horrible and shows the blatent disrespect for the american people by its government.
This action is essentially a breach of contract between the U.S. and it’s bond holders.
It will be fun to watch I guess.
THe US has been in default since
Thurs Jan 24 and is going higher.
So i guess Im saying im not even sure about treasury direct.
I vote for a tax increase.
Its Pravda but its true
http://english.pravda.ru/world/20/91/368/16741_dollar.html
http://sf.indymedia.org/news/2006/01/1724170.php
TRACK THE DEBT YOURSELF
http://www.publicdebt.treas.gov/opd/opdpenny.htm
2/04/2006 01:42:22 PM
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Jasunnyoutlook said…
for the best rates for everything go to
bestcashcow.com
2/04/2006 01:43:25 PM
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Out at the peak said…
Wow, I’m surprised to see many posters here being really tied to USD. If any of you believe the housing bust is going to have more implications than just lower housing prices, then you have to consider precious metals and foreign currency.
My portfolio of USD exposure will dwindle to about 15% by the end of the year. I’m not saying you should take such extremes as I am, but do consider diversifying from USD as a safety measure.
With Bernanke in office now … be wary.
2/04/2006 01:53:43 PM
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LossAngeles said…
SB wrote:
It was nerve racking to place this kind of cash into unknown banks, but now that we have recieved several statements with these great rates, we are more comfortable with it now.
—————————
I’m with you on that. I’m earning what I think is a solid and fair return from Emigrant and ING. Now I just have to keep my eye on the value of that pesky dollar
2/04/2006 01:53:52 PM
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pt_barnum_bank said…
Can anyone tell me how (if) I can go about opening a foreign bank account? Preferably a Canadian or Northern European account. I really want to hedge my bets against the US dollar. I have seen some shady seeming website that do it for you and would like to avoid these.
How do these foreign countrys handle taxes on interest? Thanks for any info.
2/04/2006 01:57:56 PM
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Russ Winter said…
to thejdog:
Backed by the US government? In what sense, an insurance pool? This insurance is offered by “an INDEPENDENT AGENCY of the federal government”, not to be confused with the US government. The FDIC insurance pool is designed for localized small scale default, not systemic bank failures and runs. Further should a perfect storm arrive, folks like you scalping a few extra bps from marginal bankers will have a sick feeling in your stomach for sure.
If you feel rates are ticking up in a month, just use four weeks then. That’s the beauty of having three Treasury bill maturites now, you can ladder to your expectations.
Finally I’d like to address the issue of broker’s and bank’s “government securities” money market funds. Read the portfolio holdings and you will often find these are mislabeled and outright fraudulant. For example here are the holdings of TD Waterhouse’s government securites money market as of Dec. 31, 2005. This yields 3.57% (80 bp less than the last four week T-bil auction)and charges 0.92% in total operating expenses to hold this junk, often quasi-GSEs involved with housing subsidy, and hardly Treasury bill quality. I don’t think Waterhouse is alone on this practice either, so check your MM holdings.:
% of portfolio holdings
-FNMA: 29.09%
-Morgan Stanley repo 16.33% (now there’s a stretch)
-Bankamerica repo: 12.86%
-Army and AF Exchange: 9.58%
-Federal Home Loan Bank: 8.88%
-Overseas Private Investment: 5.64%
-Federal Home Loan Mortgage: 5.26%
-Buchanan Leasing: 4.69%
-Alameda Leasing 4.32%
-Clement Leasing 3.29%
2/04/2006 01:59:47 PM
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Out at the peak said…
JA Sunny Outlook:
I agree that we do need a tax increase to stop the implosion. Bush thinks he did a good job with his tax rebate/cut program and “improved” the economy. It wasn’t from the tax rebate! It all came from the credit bubble. Damn magic M3 machine.
2/04/2006 02:02:49 PM
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LossAngeles said…
I found this story interesting PT.
http://biz.yahoo.com/usat/060202/13378463.html?.v=2
2/04/2006 02:02:56 PM
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pt_barnum_bank said…
Jasunnyoutlook -
I agree, it is disgraceful what this administration (I am guilty of voting for Bush in 2000, not 2004, although Kerry is an idiot). I am a Republican and find his wreckless spending disgusting. How can he call himself a Repub? He has out spent any “Spendocratic” President ever. I am all for tax cuts, but not by borrowing from our future. Also, where are his spending cuts? He has created a much much much bigger government now. My party is supposed to be about SMALLER government. The other day I saw a “Homeland Security” brand new SUV on the highway.
Talking about doublespeak.
2/04/2006 02:04:32 PM
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Uncle Bigs said…
I wouldn’t keep my money in any bank or institution right now. Nearly every one of them has loaned out your money secured by bubble real estate.
With Treasurydirect you can get a higher interest rate and it is State Income Tax Free. For people in higher tax states like California, that is a 10% bonus right off the top. Plus it is 100% risk free.
No bank or S&L is risk free. They all have huge mortgage exposure and even if the FDIC paid out the insurance funds, how long would you have to wait to get your money back?
Treasurydirect is simple, cost free and the best risk free rate of return. There is simply no reason whatsoever to keep any money in a bank other than daily living checking acounts.
2/04/2006 02:08:54 PM
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nocommonsenseleft said…
I parked some of my cash in my online brokerage account (Etrade). I get 3.6% APR. They have no exposure to RE market, I think…
On a different note, I have my mortgage with CountryWide. I told tem that I wanted to put a large amount of cash into their CD with the following condition:
If they cannot repay my CD for any reason, the balance on this CD will get deducted from my mortgage balance. They blablabla’ed about FDIC insure crap, and didn’t agree to my condition. So I took my cash somewhere else…
2/04/2006 02:09:22 PM
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foobeca said…
pt_barnum_bank:
GWB has forced me to become a Libertarian because of his wreckless and irresponsible spending, economic, and immigration policies.
And us pussyfootting around fighting a politically correct war in Iraq pisses me off as well. Let the Marines do their job and kick some ass.
2/04/2006 02:12:58 PM
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thejdog said…
Out at the Peak:
I totally agree with you, putting all your eggs in one basket (the USD in this case) seems foolish. Having some exposure to different curriencies, be it an Everbank CD, Euro currency ETF, or simply an international equity fund, is smart.
Having said that, I’m getting killed on my Euro ETF, and my International fund is returning less than what is should be because of the strong USD of late.
IMHO, the USD has been strong simply because of rising interest rates. Our rates are currently much higher than Europe, Japan, or any number of developed countries. That has attracted more foreign money, as they get a higher rate of return here. With the Fed all but assured of raising rates the next two meetings, the USD is only going to get stronger IMO.
I believe short term one can really get hurt if they have 85% of their money outside of the USD. Longer term (6 months +), once the housing market is in full implosion and the fed is forced to now cut rates, the USD will start to fall.
2/04/2006 02:20:26 PM
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Jasunnyoutlook said…
“GWB has forced me to become a Libertarian because of his wreckless and irresponsible spending, economic, and immigration policies.”
Mee too I used to be a bleeding heart liberal, but now i’m a bleeding heart virtious libertarian. (if that makes sense).
I care for all people at a fair price.
2/04/2006 02:23:15 PM
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rotary13bt said…
My credit union insures up to 500,000 through ASI, a private insurance.
http://www.americanshare.com/public/index.cfm
I’m assuming that most credit unions don’t do these crazy IO/Arm loans but if they did. I hope this private insurance that insures most credit unions would be able to withstand some hard times.
2/04/2006 02:35:09 PM
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SD_suntaxed said…
I guess my question with the rates that are being mentioned here is HOW.
How are groups like ING, Emigrant, and others able to pay such high rates on a savings account when most other banks are offering terrible rates on their savings accounts? I’ve heard the answer claiming that it is because they ‘don’t have to have locations all over town’, but I have a hard time believing that accounts for the wide difference in their rates vs. the much lower rates of more traditional banks.
I had been looking into foreign currency denominated accounts with Everbank as a hedge. It looks like the funds are just rolled into derivatives rather than the actual currency. Not quite what I had in mind. I’d also be curious to know how much exposure they are holding after I looked through some of their mortgage products.
“While GSE-issued debt is fairly easy to spot on a prospectus/annual report (look for Fannie & Freddie), how can you tell if your mutual fund also owns PRIVATELY-issued MBSs or CMOs?”
I’d love to hear a good answer to this question. Anyone?
(Not intended as investment advice.)
Russ,
That TD Waterhouse MM fund’s holdings? Yuk! Talk about an implosion waiting to happen.
2/04/2006 02:40:26 PM
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fewlesh said…
Sitting on cash,
I don’t want to sound like the perennial gold bug, but try and put some of your cash in commodities on some of the commodity exchanges. See it like insurance. Commodities are extremely volatile, and so you have to invest on the long term (much like real estate).
Also, it’s not a bad idea to buy a few damn coins. I hate the internet gold vaults, etc. Investing in precious metals is so fraught with potential scams, that I suggest actually physically holding the stuff. (I’m paranoid though).
Do some research, look into the commodities, and invest. It is much like stocks.
Commodities (things that have inelastic demand that everyone needs) are a good hedge against dumb things our government does, because they have verifiable known intrinsic value, and are relatively liquid.
There are significant global imbalances that might be set in motion from the housing colapse. The probability of serious inflation to prop up all the bad debt is too hard to ignore. Hell, Helicopter Ben has written several great papers on exactly how to prop up debt bubbles to stop deflationary debt colapses.
There is such a huge demand in commidities, vanguard is closing off their ETF funds that trade in them, because the funds grew so quickly, that they are unable to acquire the raw assets!
Now I know you are going to say: Hey, we go from a stock bubble, to a housing bubble, to a commodity bubble, one must stay 1 step ahead of the herd.
Time to sell your gold stash: when your taxi driver says gold is a great investment.
2/04/2006 02:42:52 PM
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SD_suntaxed said…
Rotary13bt,
Heh, I’m a little worried about a good sized credit union I’m using in San Diego. I sat on hold with their cs a few weeks ago and the hold messages were all pitching their IO mortgage products.
2/04/2006 02:47:19 PM
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ecojpr said…
jeffolie:
Re: Goldmoney.
Been holding a goldmoney account now for more than a year and a half. Never had any problems with them. They are as good as it gets in the field of electronic gold (heard good things about bullionvault but cannot vouch for them). Was able to use goldgrams to buy some silver eagles at kitco. They recently started offering the possibility to hold silver which I also enthusiastically bought into. I have not yet sold any of my holdings; more than happy to have seen a 25-30% increase in the value of gold in 2005. Would not be surprised if ventures such as goldmoney could become serious competitors to fiat currencies (particularly the USD) in the coming years.
2/04/2006 03:54:52 PM
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DavidB said…
I have money at First Horizon in Northern Virginia. In early January, I got 4.48% six month CD, but here’s the kicker–you can take your money out of the CD at any time, so as rates go up, you can chase them!
2/04/2006 07:52:34 PM
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sleepless_near_seattle said…
fewlish,
Any recommendations on whom to buy gold/silver coins from?
Thanks.
2/04/2006 08:12:28 PM
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(the real) amoney said…
Say for instance the fed starts
cutting rates, as the housing
bubble implodes. A chain reaction
occurs across the world where they
are forced to lower their rates to
stay competitive in the marketplace
with respect to the US.
Our currency weakens, but so do
foreign currencies (this seems to
support gold, just as the stock
market decline of 2000-2002 did).
My question is (to anyone who might
know, firsthand knowledge would be
greatly appreciated), what exposure
do the banks in europe have to the
housing bubble in their respective
countries? I’m trying to get a
feel for the best areas on a relative basis to invest in (bonds
and/or currency). I’m into gold
and commodities in general fairly
heavily, as well as some foreign
bonds, but I’d like to have a
better understanding of europe’s
situation vis a vis the housing
market. Is there a Fannie Mae type
organization in the EU?
2/04/2006 08:16:48 PM
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rotary13bt said…
“Rotary13bt,
Heh, I’m a little worried about a good sized credit union I’m using in San Diego. I sat on hold with their cs a few weeks ago and the hold messages were all pitching their IO mortgage products.
”
Yeah, I think my credit union should be alright. It’s not too big but we never know. Best bet is to spread your money around.
2/04/2006 08:25:06 PM
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catspit said…
Wow sounding pretty dire… so what happens to brokerages like Ameritrade and Fidelity for instance? that’s where all my money is.
2/04/2006 08:53:59 PM
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bottomfeeder1 said…
the fed cant drop rates we have inflation and upward trend in wages.we also have to support the dollar.interest rates will be going up for a while.6 month cds are fine and real estate is falling just wait and buy in 3 to 4 years.we may be going into war with iran so oil is going to hit 100 bucks a barrel.think 70s oil embargo inflation just hang on cause re will deflate very fast
2/04/2006 08:58:07 PM
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Out at the peak said…
thejdog: Sorry to hear about your Euro ETF. Ouch. I’m spread between six currencies and overall I’m still winning against USD even with the recent strength. However, if USD needlessly rallies more, I could be hurting. I wrote a blog post that I am not moving into Euro until late Feb, and the amount for the position will be modest. UN Sanctions on Iran will be unfavorable.
The great thing with foreign CDs, is that you can use the interest earned as a hedge against USD strength. However, I’m not using this interest padding to state my position above.
2/04/2006 09:09:05 PM
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pismobear said…
One blogger had it right!!! In California(Don’t know about NY or NJ taxes)up to 9.3% or so tax on interest on MMs or CDs. Makes short term Treasury’s more efficient.Sitting ,watching with bunch of treasurys, and listening to the hissing of the bubble here on the Central Coast.We had the honor (SLO County) of having one of the highest foreclosure and preforclosure rates in the state (along with Napa among others). What’s up with the MLS and Real Esate Board in Santa Barbara if any of the bloggers know?I have been gone for several days. Have they resumed giving the SB News Press numerical data on sales and inventory? Another chamber of commerce day here, trees starting to bud, looking for my fishing liscense. Santa Ynez river just stocked with rainbow trout.
2/04/2006 09:26:14 PM
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Jonnies1 said…
“once the housing market is in full implosion and the fed is forced to now cut rates, the USD will start to fall”
“Say for instance the fed starts
cutting rates, as the housing
bubble implodes. A chain reaction
occurs across the world where they
are forced to lower their rates to
stay competitive in the marketplace
with respect to the US.”
Don’t make the mistake of believing that the Federal Reserve controls interest rates. They can influence interest rates to a certain extent, but the lending institutions and especially the bond market controls interest rates, not the Fed.
For instance, if the banks are losing money because of defaults on mortgages, then they will not offer low interest mortgages because they have to have interest rates high enough to cover the risk, no matter what the Fed tries to do to encourage them to keep low rates.
The treasury bill rates are set by auction, they are not set by the Federal Reserve.
When the housing market implodes, the lending institutions will not be willing to give low rates for what they will finally understand to be higher risk loans, and the Federal Reserve can’t do anything about that. And the Banks and mortgage companies will not be able to keep selling the high risk, low interest rate mortgage packages to the secondary market either, when the secondary market begins to take the losses from the implosion.
How much or whether the USD falls depends mainly on how much deflation or inflation the other currencies are experiencing in comparison to the USD.
We have our money in Washington Federal Savings, which still has an A+ rating from Weiss, with most of it in 3 and 6 month treasury bills through Treasury Direct. I noticed that the CD’s that WFS offers have lower interest than the Treasuries. I believe that this is because they probably put their own money into Treasuries, themselves, or other very conservative products, and this is why they are such a safe bank. I don’t think the FDIC insurance will come through with the large scale problems that are ahead.
2/04/2006 10:39:46 PM
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TJ & The Bear said…
jasunnyoutlook:
I vote for a tax increase.
Your 1040 allows you to voluntarily send more money. Otherwise, please leave the rest of us out of it.
The problem’s never been taxes, just spending. The government exercises absolutely no fiscal discipline.
2/04/2006 11:38:46 PM
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nhz said…
the banking situation in the US sounds quite good compared to Europe …
Interest rates on 1 year deposits and the best savings accounts are a little over 2% here (even if you put over 1 million on the account)
and government insurance is limited to just 15.000 euro or so.
So even without considering taxes, you cannot keep up with inflation (2.4% officially).
And most of the EU banks are up to their ears into real estate (either through mortgages and similar securities, or investments that are strongly associated with the RE bubble).
no way to hide
2/05/2006 06:29:48 AM
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nhz said…
(the real) amoney said…
My question is (to anyone who might
know, firsthand knowledge would be
greatly appreciated), what exposure
do the banks in europe have to the
housing bubble in their respective
countries?
I don’t have any hard facts but from what I have read here(Netherlands), most banks have a large part of their money invested in RE - in Europe, emerging EU markets and the US. This includes the few banks with the highest AAA credit ratings, so I don’t think these ratings are of much use.
Other large European holders of RE investments are the pension funds (the Dutch pension fund ABP is one of the biggest in the world) and they tend to have a lot of the risky stuff - while at the same time many people assume they will be bailed out by the government somehow if things go wrong.
Is there a Fannie Mae type
organization in the EU?
every EU country is different; the Netherlands has the NHG which is a low profile government-backed organisation that is slowly becoming something like Fannie, through which the state is backing a large percentage of all mortgages and subsidizing homes for lower incomes (because otherwise they cannot afford to buy a home).
I think we will see more of this in Europe in the next years when the housing market gets in more trouble; there is a strong tendency (especially with the labour parties) to let all voters participate in the RE orgy and move the risk to the taxpayer.
2/05/2006 06:42:44 AM
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LauraVella said…
Regarding credit unions, check out Patelco, I think they might be in just the CA bayarea and Sacrameto though. Also, they do have home loans, not sure on their exposure to that market. Best to call and inquiry before putting $$ there. I had an account with them before, and they were pretty good at the time.
Regarding investments in mutual funds I have $$ in both Vanguard energy fund-VGEMX and precious metals fund-VGPMX. I also have $ in Fidelity energy-FSENX and their Gold fund-VSAGX. Both are doing well, and they have low maintance fees which I like.
I like gold and silver mining stocks, they are doing well right now, and I expect them to go higher as the interest rates go up via helicopter Ben. Be prepared for some volatility though, thats the nature of the game with these kinds of stocks - especially right now. I also agree with another poster who said it’s a good place to be with the housing bubble about to implode.
2/05/2006 07:02:26 AM
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Northern VA said…
I have posted this before but I like presidentialbank.com They have no fee checking with an interest rate of 4.25% and Savings @ 4.37%
I think the doom and gloomers thinking of massive bank failures and not being able to get your money are off the mark though. The Fed will loan failing banks money in a pinch and FDIC should get your money back. The biggest worry should be that the purchasing power of the dollar could be significantly lower in the future.
2/05/2006 08:44:17 AM
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Nicholas Weaver said…
If you are going to be exposed to the stock market (IMO, long term it seems wise to do, for at least SOME of your long term assets, my personal allocation is about 50% stocks), you want it to be mostly in index funds.
The management fees are MUCH lower, and the performance is consistent (a lot less variance than actively-traded mutual funds), and most of the gains end up being long-term capital gains.
Additionally, you can very well mimic what many of the actively traded mutual funds do: Start with a broad index fund and then add some small active investment to try to gain an edge, since they are compared against the index.
2/05/2006 09:26:57 AM
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Out at the peak said…
sleepness near seattle:
I shopped around for awhile, and American Precious Metals Exchange had the best prices and the best overall selection (they were only missing one product that I desired). Not to mention you can order online. Half of the other shops want you to call or mail in an order form.
http://www.apmex.com/
To look at the competition, please go to Ben’s Money and Metals page (linked from main page), and click through the Google ads to all the dealers.
2/05/2006 12:31:28 PM
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I have money with Fidelity Bank, located in Orlando and Merritt Island, Florida, for the simple reason that they are brick and mortar banks that I can walk into easily and they had a 5-star rating in Bankrate.com’s list. I regularly check Bankrate’s top 100 rates for 3-month and 6-month CDs because it is easy and free. I have noticed, also, that some ratings have declined over the past six months — it seems like a number of 4-star banks now show 3 stars. Could be wrong, but it’s worth following for the banks of your choice. When things start looking dicey, I’ll start looking at Treasury Direct.
The problem with waiting for things to get ‘dicey,’ is that by the time you get moving, you will find it is already too late.
Is there any way to use Treasury Direct with your IRA accounts?
Hey guys,
I have all my investment cash in e-trade bank and e-trade brokerage.
There used to be limits on the banking you could do with them, but they dropped all those limits.
They give you checks and an ATM card and don’t limit you on the check writing.
If you ask for a margin account they basically give you a credit line that equals your deposit (or market value of you stock), the currant interest is around 8.5%.
I just checked to make sure and the brokerage account has electronic bill paying, just like my local checking account.
I know there are less expensive discount brokers (like $6/trade), but e-trade is larger and stands to lose much if they screw any customers. They charge from like $7-10/trade, not a differance worth the bother of moving my account.
So check out e-trade (bank & brokerage).
https://us.etrade.com/e/t/home
This bank “Everbank” offers CD’s denominated in foreign currancies. Kinda hard to believe, but I read somewhere that they are the only one to do this. If you see a doomsday scenario for the dollar as I do foreign CDs might be of interest, although I prefer foreign company stocks traded on our exchanges.
None the less, check out everbank for foreign CD’s.
http://www.everbank.com/main.asp?
affid=eb