Fed Cuts Rate by 50 Basis Points

Arguing that the downside risks to the economy continue to to rise, the Fed lowered the rates by another 50 Basis Points.? This brings the Fed Funds rate to 3.00%.? This followed a 0.75% cut on 1/22/08.? As far as I can tell, this is the largest effective percentage cut in history.? The cost of funds has been reduced by 29.4%.

Hank Paulson spoke shortly after the announcement.? He said they are focused first on getting the economy back on track and providing some additional stimulus to help accomplish this.?

The next phase is suggesting?some legislation to strenghthen lending practices and not allow the current low rates to create a second housing bubble / credit crisis.

The biggest problem I see though is that they are encouraging spending, more loans, etc., instead of boosting efforts to encourage more saving.? This may be good for the short-term, but I can’t see it being good for the long-term.

I encourage you to sound off.? I would love to get some dialogue going.

Banking Online Article

Posted a new article on the safety of banking online and what to look out for.? Check it out and let me know what you think.

EmigrantDirect Savings Rate – Update 2 – Jan 2008

Updated: 2/12/08.? EmigrantDirect’s saving rates still staks up nicely to others.? Currently at 3.60% APY.?

This savings account works really well. You link the account to another bank account, such as where you do your primary banking, and you can transfer funds between the two accounts on-line.

The FDIC# for Emigrant Bank is 12054. They are over $11.5 Billion in assets.

Here is their website, EmigrantDirect

cd :O)

Highest CD Rates Commentary Updated

Updated our running commentary.

Highest CD Rates

cd :O)

Fed Funds Rate – Hysterical (or Historical)

Trying to track down the data for historical Fed Funds rates has been fun. Here are a couple of links for you: Fed Reserve back to 1954and Fed Reserve back to 1990.

As you may have read, Tuesday’s drop was the biggest since October 1984. At that time it was dropped about 1.25%, from 11.30% to 9.99%. There was also another drop of about 1.00% in December. Rates went from 9.43% to 8.38%.

Reading deeper than the numbers, the actual effect of the drop is interesting. The October drop was about 11.6%. The December was about 11.1%. The first January 2008 drop (there may be a second one, they are saying) was a 17.6% drop. So our 2008 cut was much larger as a percentage. However that still isn’t the largest % drop. June 2003 was pretty high when it went from 1.25% to 1.00%. That was a 20% drop. The award so far goes to November 2002. It went from 1.75% to 1.25%, a 28.6% drop.

If the Fed does drop rates again next week hysteria, I mean history,may truly be made. If they drop a quarter, that will be a 23.5% drop in a single month. If they drop .50%, that will be 29.4%. And then Janaury 2008 will be the new winner.

I invite you to dig into the above links and let me know what you find.

cd :O)

Fed Cuts Rates By 75 Basis Points

In a surprise pre-meeting move, the Fed cut the rates by 75 Basis Points (0.75%).? They dropped the overnight rate from 4.25% to 3.50%.? This came after the European and Asian markets had huge losses yesterday.? The US markets were closed for the Martin Luther King, Jr. holiday.

They are hopping such a large cut will give the economy the ncessary shot in the arm to stave off or get us out of a recession.? The FOMC left the door open for further cuts if things detoriate further.

We’ll be back later.? CD Rates will be dramatically affected by the cut.

Market Rundown

Hey, that’s got a double-meaning today.? First, the markets are, in fact, making a rundown.? The DOW posted a 277 point loss for the day to end at 12,501.? Back in October it was pushing 14,000.

Treasuries gained in price, which means the yields went down.? The price moves inversely from the rates.? The 2Y ended at 2.48%, the 5Y is at 2.95%, and the 10-year is at 3.67%.? And don’t forget the 30-year bond that the gov’t brought back.? It is at 4.27%.? At least treasuries have an almost normal curve going for them.? The 3-month and 6-month ruin it a little bit.

Fed funds stand at 4.25%.? At this point most people expect the fed to cut rates at least 50 Basis Points or 0.5% to 3.75%.? Even if they do, the fed funds will still be above all of the rates except for the 30-year bond.? This means that more cuts are also likely.? CNBC keeps giving rumors of an early cut, but I think that is just them trying to push the Fed along.

In other news, Merrill Lynch got a cash infusion from?the?mid east?to the tune of $6.6 Billion dollars.? They are paying 9% for those funds.? Citigroup received about $14 Billion dollars.? I’m not sure what that is costing them.? First question, with the treasury yields being what they are, why such a hugh premium for the money?? I wonder how much confidence their new outside investors really have in them.? Second, question, didn’t people learn the first time around?? The big banks, big firms, etc. are posting huge losses because of their over exhuberance for the pre-2007 housing market.? I don’t really think they have shown any evidence of learning their lesson.? So the big, BIG, BIG question is what is going on?

Honestly, I don’t know.? I tend to have faith in the power of American to overcome and make it through tough times, but I believe that can only happen if as individuals we learn the proper lessons.? You can’t keep spending more than you make.? You can’t buy a house that is bigger than you need for a price that you can’t afford, just becuase you can get a 2% loan for a year.? We need to get back to the fundamentals or this is going to get much uglier than it already is.

EmigrantDirect Savings Rate – Updated Jan 2008

EmigrantDirect has lowered their savings rate?again, to?4.55% APY. It is still very competitive though.

This savings account works really well. You link the account to another bank account, such as where you do your primary banking, and you can transfer funds between the two accounts on-line.

The FDIC# for Emigrant Bank is 12054. They are over $11.5 Billion in assets.

Here is their website, EmigrantDirect

cd :O)

Countrywide Bailed Out

Bank of America is buying Countrywide and giving them the much needed bail-out that the markets seemed to want.? Lots of stories on the various news sites, here is the one from Bloomberg,?Bank of America to Acquire Countrywide for $4 Billion.

The big Question is whether or not this will be good for BofA.? They are certainly buying them at a deep discount, but will all of the loan problems from Countrywide, drag down BofA.? Bank of America?thinks not.? Only time will tell.

What do you think?? cd :O)

Lots of Turmoil Today

The stock markets had lots of turmoil today.? Initially, the markets staged a rally, but that fell apart in the afternoon.? This year’s start has been one of the worst on record.

There were some rumors about banks in trouble that have proven to be unfounded so far.? The bank of question suffered some serious loss in their stock price and the NYSE even stopped trading on that stock for a short period of time.? Whoever started the rumor should face some serious consequences.

AT&T warned investors that they expect to see “softness” in the consumer end of their business.

Stocked ended up with a loss of -238.? As banks smell blood in the water and are expecting the fed to come to the rescue again, even with a possibility of a 50 Basis Point cut, CD rates have been falling across the board.? It is difficult to find rates above 5%, although we still have a few.

You may find my post on 10-year CDs of interest.? For some other places to read, check out Bloomberg or WesCorp.

cd :O)