Cash Rates are Terrible and So Are U.S. Treasury Yields: Time to Buy Stocks?

Well money market rates are officially pathetic right now. According to Bank Deals 4.0% APY is about as good as you can get and most places yields are much lower. Pretty soon I bet 3.0% is the high. Going out to long term US treasuries isn't too appealing either with the 10-year yielding a pathetic 3.7%. This basically tells me that there has been a flight to quality (i.e. panic). My plan is to take a long-term view and move towards being more fully invested in some much riskier assets now that we have had a nice correction across both the credit and equity markets. I will look at lots of international equity mutual funds. I may even look at some retail and financial specific sector funds since those secotrs have both been hammered. I am also considering looking at an inverse long-term US treasury bond fund or ETF to take advantage of what I view as unsustainably low yields on US treasuries. When I finally make some moves I will be sure to let you know what I did. They will probably be gradual over the next 3-9 months. Anyone else have any thoughts on where to put capital now? Leave them in the comments.

Bank of America to Buy Countrywide: Will Savingslink Survive?

Well, Bank of America announced last week that they will buy ailing lender Countrywide Financial. That is likely to mean the end of Savingslink in my opinion. Savingslink's role for Countrywide was to increase their deposit base. This was a major reason for their 5.25% APY on the account -- to draw more capital which Countrywide then used to provide home loans. Bank of America on the other hand already has a huge deposit base due to their many branches and strong retail customer base. Therefore, soon after the transaction closes in Q3 2008 I would expect the Savingslink program to be rolled into some Bank of America savings program or shut down all together. At the very least, interest rates on the account should come down appreciably. If you have a Savingslink account, it's time to start looking for another account and as I mentioned a few weeks ago you should visit Bank Deals to help you find the highest rates. I recently set up an account at FNBOdirect and found it quite easy to do.

For the Best List of CD and Savings Account Rates Bankrate is No Longer the Winner

I have been a big user of Bankrate to find high paying savings accounts and CDs, but no more. A couple of days ago I found Bank Deals. I like the site better than Bankrate for a number of reasons. First, it appears to be more comprehensive than Bankrate -- it even includes local credit unions. Second, there appears to be no axe to grind. On Bankrate some banks pay to be listed while Bank Deals generates his revenue through adsense ads, clearly marked sponsored links, and donations. The next time you are looking for a new savings account or CD I highly recommend you check out Bank Deals.

Should I Stick With Countrywide Savingslink?

Countrywide Financial is clearly a company in trouble, and why shouldn't they be? They are the nation's largest mortgage originator and we are in the midst of one of the biggest housing declines since the great depression according to Wells Fargo CEO John Stumpf. However, Countrywide also offers the best savings rate of anybody out there with their FDIC insured Savingslink account. I can't exactly afford to lose my savings, but a 5.3% APY is pretty darn good so what should I do about it?

First, determine how much FDIC insurance your account has. This is easy to do by using the calculator available here. The general rule is that each person on the account is insured at up to $100k per institution. So if a husband and wife have a joint account they are insured up to $200k at that institution. My advice is never to put more than the insured limit with any one institution.

Next, think about how willing you are to have your money locked up. If this is money that you could need at the drop of a hat you need to keep it with an institution you are confident with. For me, Countrywide doesn't qualify right now. I think there is at least a 5% chance they could go bankrupt. Wells Fargo on the other hand is as safe as they come (but their savings rates are a lot lower). So the way I view Countrywide right now is that as long as I am below the FDIC insurance limit and as long as I know I don't need the money there tomorrow, it is ok to capture their 5.3% APY. Why am I not 100% confident that the FDIC insured money will be available at the drop of a hat? Because I think if this housing debacle gets really bad and Countrywide and Washington Mutual, and a couple other large banks go under I think it may take the FDIC a little while to sort out their payments. To be fair when Netbank went under the FDIC insured funds were avaiable the next day through ING who bought the accounts, but nonetheless I prefer to be modestly paranoid.

Checking account has more than one month's expenses in it? You are wasting money!

Checking accounts pay notoriously low interest rates. For instance, my Wells Fargo account pays a measly 0.1% Annual Percentage Yield (APY) for up to $5,000 balances and a 2.75% APY for balances from $5,000-$100,000. Those rates just aren't very good! You should keep as little money as possible in your checking account (I find one month's expenses to be comfortable). As an alternative, I set up an FDIC insured SavingsLink account with Countrywide. This account pays 4.00% APY on balances less than $10k, 5.25% from $10k-$50K, and 5.40% for balances above $50k. The account is linked to my Wells Fargo account and allows me to transfer money back and forth with just a few clicks of the mouse and a two day lag typically. There are numerous other accounts out there, but Countrywide is paying the highest rates right now. In fact, the blog over at getrichslowly.org just detailed the highest paying accounts in this post. Rates tend to vary over time, so if you are reading this long after the original post you should check Bankrate for Money Market Accounts (MAAs) in the Checking and Savings section to compare rates. If you have $25k lying around for emergencies (and I do advocate having a little something stashed away), you will save $625 per year by keeping that money in a higher yielding online savings or money market account as opposed to in your checking account.