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Sep. 20th, 2005 08:29 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
which_chickI'm sure everyone follows interest rate news with the same amount of obsessive interest that I do, but just in case you don't, the Fed added another 25 basis points to the federal funds rate today. I'm currently getting 3.5 (until Sept. 29) on a money market special thingie my bank is doing. However, I'm going to need to do something else with the money here directly because after the introductory rate period ends, it goes to like 2.7% and I can do better than that. 2.7% is not good enough.
Most of the time, when my money isn't out making me richer at a cool 7% APY, it's cooling its heels over at ingdirect.com where it garners a return of 3.30% (as of right now -- they'll probably jack up rates .25% to follow the Fed here directly) and I can kind of live with that, at least as long as inflation doesn't pick up. The Fed's been busy with their 25-basis-points-per-meeting measured rate of increases and their statement from today's meeting leads us to expect more of the same. (The FOMC uses the statement to kind of foreshadow what we should probably expect from the next meeting of the FOMC, so that nobody is unduly surprised. Finance people do not like surprises.)
Now, the problem here is that 3.30% APY isn't all that impressive as a rate of return. I generally loan money at 7% APY, and I like getting that kind of return on it. That kind of return is comfortable. It's a good thing. Higher interest rates do NOT make Baby Jesus cry. Higher interest rates buy me more lattes, a horse trailer, ten bras on a whim, and cute horse sneakers that are taking rather a while to ship to me. :) My FDIC-insured options, right now, for investing my money, are as follows:
ING savings account at 3.30% Advantages: electronically linked to brick-and-mortar bank, do not have to apply for yet another fucking account. Disadvantage is that it's not as good as I could be doing.
ING CD at 4.2% for a year, higher rates if you pick a longer term. Problem there is that I don't like locking up my money for that long what with us getting a new Fed guy along about the end of January. Uncertainty is not a feeling that inspires confidence in investors, even weenie little ones like me. I don't know what rates are going to do and I would feel a lot better if I'd heard more on who our new Fed guy was gonna be. Also, if someone comes along who wants to pay me 7% and all my money is locked up in a CD, I will have ye olde opportunity cost going on there. Ick. I like liquidity.
I note with interest that EmigrantDirect.com offers 4.00% APY for MMAs, rate guaranteed through 12-05. Their online set up an account thing doesn't like me because Equifax can't tell where I live. I believe I'll try the snail-mail application thing to see if that works any better. Fucking Equifax. I've lived at the same address for ten years. It's not MY fault that they can't tell where I live. Assholes.
So, then, I've spent about an hour finding a new home for my money when, at the end of September, the MMA at my bank drops to 2.7%. Is it really worth looking around to find a better rate? Yes. I'll make almost a hundred dollars by moving the money and it's not like shopping for better interest rates bores me. We'll see what the rate at ED does after their initial introductory period. If I link the EmigrantDirect bank to my brick-and-mortar account and ED starts sucking, I can then shift the money to ING by clickiting so that there is not any great time lag involved. (Time lag makes Baby Jesus cry. Money should all the time be working, not dawdling about in transit.) If ING then beats ED, we'll bank with ING and leave like a hundred bucks in ED to keep the account open in case they do better later.
High finance! Yo HO. Yo HO. A pirate's life for me.
Most of the time, when my money isn't out making me richer at a cool 7% APY, it's cooling its heels over at ingdirect.com where it garners a return of 3.30% (as of right now -- they'll probably jack up rates .25% to follow the Fed here directly) and I can kind of live with that, at least as long as inflation doesn't pick up. The Fed's been busy with their 25-basis-points-per-meeting measured rate of increases and their statement from today's meeting leads us to expect more of the same. (The FOMC uses the statement to kind of foreshadow what we should probably expect from the next meeting of the FOMC, so that nobody is unduly surprised. Finance people do not like surprises.)
Now, the problem here is that 3.30% APY isn't all that impressive as a rate of return. I generally loan money at 7% APY, and I like getting that kind of return on it. That kind of return is comfortable. It's a good thing. Higher interest rates do NOT make Baby Jesus cry. Higher interest rates buy me more lattes, a horse trailer, ten bras on a whim, and cute horse sneakers that are taking rather a while to ship to me. :) My FDIC-insured options, right now, for investing my money, are as follows:
ING savings account at 3.30% Advantages: electronically linked to brick-and-mortar bank, do not have to apply for yet another fucking account. Disadvantage is that it's not as good as I could be doing.
ING CD at 4.2% for a year, higher rates if you pick a longer term. Problem there is that I don't like locking up my money for that long what with us getting a new Fed guy along about the end of January. Uncertainty is not a feeling that inspires confidence in investors, even weenie little ones like me. I don't know what rates are going to do and I would feel a lot better if I'd heard more on who our new Fed guy was gonna be. Also, if someone comes along who wants to pay me 7% and all my money is locked up in a CD, I will have ye olde opportunity cost going on there. Ick. I like liquidity.
I note with interest that EmigrantDirect.com offers 4.00% APY for MMAs, rate guaranteed through 12-05. Their online set up an account thing doesn't like me because Equifax can't tell where I live. I believe I'll try the snail-mail application thing to see if that works any better. Fucking Equifax. I've lived at the same address for ten years. It's not MY fault that they can't tell where I live. Assholes.
So, then, I've spent about an hour finding a new home for my money when, at the end of September, the MMA at my bank drops to 2.7%. Is it really worth looking around to find a better rate? Yes. I'll make almost a hundred dollars by moving the money and it's not like shopping for better interest rates bores me. We'll see what the rate at ED does after their initial introductory period. If I link the EmigrantDirect bank to my brick-and-mortar account and ED starts sucking, I can then shift the money to ING by clickiting so that there is not any great time lag involved. (Time lag makes Baby Jesus cry. Money should all the time be working, not dawdling about in transit.) If ING then beats ED, we'll bank with ING and leave like a hundred bucks in ED to keep the account open in case they do better later.
High finance! Yo HO. Yo HO. A pirate's life for me.
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no subject
Date: 2005-09-21 11:55 am (UTC)no subject
Date: 2005-09-21 02:47 pm (UTC)1. To control inflation
2. To provide for measured growth in the economy
3. To keep furriners (mostly China) buying our debt
4. To shift long term rates higher and (hopefully) quiet down the housing market which is irrational in many areas and funding the assumption of massive debt for a lot of Merkin households via wave after wave of refinance goodness and/or equity mining (cashing out the increased on-paper equity in your home that was created in a rising real estate market... and yes, people actually do this, the silly asses).
I did a post (http://www.livejournal.com/users/which_chick/128108.html) about inverting the yield curve (with a GRAPH, damn it) here a while back. The inverted yield curve is a concern for finance gurus because it has historically portended a recession of unpleasantness.
The capitalist economy depends on long-term investment to develop new factories, new products, new stuff. Long-term investment is the fuel for capitalism. (All those people telling you that capitalism runs off of the sweat of the worker-man's brow, they are wrong.) When the yield curve inverts, short-term paper pays BETTER than long-term paper... so people stop doing long-term paper. They stop funding new factories and new products and new companies and new schools and new-anything. This is not good.
Let's look at a real-world example. If I can get 4% from a savings account (EmigrantDirect.com) where I can have my money ANY DAY I WANT IT without having to pay a penalty and I can only get 4.2% by locking my money up for twelve months (ING Direct 12-month CD rate) while W picks a new chairman of the Fed... I'm not very motivated to invest for twelve months let alone twenty years. Neither are a whole lot of other people.
Some long-term investment is funded by people with different goals and/or requirements. Fixed income generation, pension funds, IRA accounts -- these types of things might still fund long-term investment because the money is dependable and reliable and whatnot... but that's not really enough to keep things ticking along at a properly healthy level.
In order to get things back on a more-normal footing, long-term rates have to rise to a level where the serious money feels like putting their money back into long-term paper. The FOMC and finance gurus take the behavior of the long-term paper (usually bonds) market quite seriously, something that is illustrated quite clearly in Greider's Secrets of the Temple, a fairly readable book about the Federal Reserve System.