Equity Safety

NEW -> Contingent Buyer Assistance Program
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patientlywaiting_IHB

New member
I was wondering where those of you who have sold recently are keeping your equity? For those saving in CDs, are you concerned about the institution's exposure to subprime loans, or are you satisfied just knowing that it is FDIC insured? Thanks!
 
I didn't sell a home recently, but I'll tell you what I'm doing with my down payment savings... It's spread across several on-line savings accounts and 28/91-day treasury bills at TreasuryDirect.gov. The savings accounts are FDIC-insured and the t-bills are backed by the "full faith and credit of the United States government." Whatever that's worth.
 
I parked mine in CDs at World Savings. Wachovia Bank bought out World last year and they're pretty big so I'm not concerned. Plus I hold the CDs in separate titles and each is insured up to 100K. I also have an HSBC online savings account that pays 5% (currently 6% for new money). HSBC has been hit pretty bad with subprime loans but they're pretty big so I think they can weather the storm.
 
check out ING direct checking (that's right checking) They are currently paying 5.18% if you have more than 100K. I'm looking to possible jump on a foreclosure property so I may need to get the cash at any moment; Plus, it's paying just as good as many 6 months CDs.
 
We've got ours, for the most part, in laddered CDs in several banks. Our GMAC account was above the $100K FDIC insured limit, and given the news from them lately, we skimmed the cream and moved it elsewhere just to be on the safe side.
 
Does anyone know what will happen to interest rate from here on; now that banks are not lending out their money easily? I am just thinking about supply and demand.
 
IrvineMom,





As banks and investors in mortgage backed securities (MBS) get burned, they will demand higher returns for the risk they are taking on. This will increase the spread between the FED funds rate and mortgage interest rates; therefore, mortgage rates will rise. Because of this increasing risk premium, even if the FED lowers interest rates, mortgage interest rates will move higher.
 
I have an online savings account at eloan.com. They're currently paying 5.12% (regardless of account balance).
 
Hello <a href="../../../account/125/">patientlywaiting</a>,





I sold a condo last year and opted to park the cash in VHGEX, VCAIX, AAPL, and HSBCDirect.com (5.05% APY). Please note that I'm not recommending anyone to invest in Vanguard mutual funds or Apple stocks (still waiting for my iPhone!), as they carry higher risk. Consult with your financial adviser.





Most banks are FDIC insured up to $100k, so I wouldn't worry too much if your deposits are kept under it. If you flip house and have several hundred thousand dollars in cash, you can always divvy it up among several banks.
 
This may be a little OT, but does anyone here park money in a Business account? I've had a hard time finding Business accounts (Checking, Savings, or CD) that have rates comparable to the one's offered to Consumer accounts.
 
<p>We used <a href="http://www2.fdic.gov/edie/">FDIC's "EDIE"</a> to help us make sure each of our accounts were meeting the FDIC coverage requirements.</p>
 
<p>I am not a big fan of CDs or cash since they don't provide any protection against inflation. But I concede the stock markets look nervous nowadays. I've increased my gold-related positions but otherwise haven't made any big moves.</p>

<p>The problem with credit bubbles is all the easy money tends to corrupt all forms of assets - when money is cheap, people will borrow and buy just about anything, not just houses.</p>

<p>I'm all ears if anybody has any ideas for defensive assets apart from CDs or cash.</p>
 
<p>muzie: <em>"I'm all ears if anybody has any ideas for <strong><u>defensive assets</u></strong> apart from CDs or cash."</em></p>

<p>I can only tell you what has worked for us personally over the past 8-10 years. No investment advice is expressly implied.</p>

<p>At <a href="http://www.pimcofunds.com">www.pimcofunds.com</a>, you can take a look at some of their <a href="http://en.wikipedia.org/wiki/Closed_end_funds">closed end funds</a> that pay a very high dividend yield of 8-10% per year (based on market value, not NAV). I have held at various times over the last few years, and continue to hold some of the following:</p>

<p>RCS, NCV, PHK, PFN, PTY, PCM, and at different times, some of their closed end muni funds...</p>

<p>If you map out the price performance of these securities, you will notice that most of them have a fairly tight trading range, and they are somewhat interest rate sensitive, since they tend to maintain very large positions in bonds (PIMCO being primarily a bond shop after all). Their dividend yield is what attracted me to these funds - they are typically in the 8-10% range so you get a "real" cash rate of return, which you can use to buy more of these funds or for other purposes. In flat or down years (measured by price performance), the total return has been consistently postive mainly because of the high dividend rate.</p>

<p>Tax-wise: they may or may not make sense for some people because the divs do not qualify for the lower "qualified dividends" tax rate, so they are pretty much like bank/CD interest in that regard, but obviously at a higher yield.</p>

<p>Trading-wise: you want to make sure there is enough volume on trade historically to support your buy/sell needs. I have never bought or sold more than 500 shares of any at a time, so I have had no problems with execution - there appears to be enough liquidity out there, but it is something you need to check - because unlike a mutual fund, you are not trading with the "house" but on the open exchange, so you want to make sure someone is out there to buy what you want to sell.</p>

<p><em>(BTW, I have no personal or professional relationship with PIMCO, I just like their closed end bond funds better than the other one's out there.)</em></p>
 
<p>Disclosure: The information contained in this post is not to be considered investment advice. If you chose to follow what I do note that some people would think I am crazy for the way I invest and I will not be held liable for my mistakes. Please seek investment advice from an investment adviser to confirm that what I do is not normal and have him or her sell you some asset allocation funds.</p>

<p>For mutual funds I have money in the CGM Focus fund CGMFX. I like this fund because the fund manager Ken Heebner sold off homebuilders at their peak and he does short stocks. Kiplinger rates the fund #1 year after year. It made 76% between 2000 and 2002 and I don't think any other fund can come close to that during that period. The other fund I have money in is the Janus Contrarion JSVAX. They got a bad rep from the dot bomb but they fired their fund managers and this fund has done quite well for me.</p>

<p>I also have money invested in stocks that are all over the place but most importantly they all trade in high volume. I already learned from the mistake of buying a low volume stock and having to wait three days for the order to go through. Also I have stop losses set and raise them once they get to a certain point. Lately I have been experimenting with options. I have been playing with the VIX and I am taking advantage of buying puts on the subprime lenders. My NEW put made 400% profit in one day but could have just as easily lost 100%. So take it for what it is worth and do what you is appropriate for your risk tolerance. There is nothing wrong with a savings account that earns 5% because it beats inflation.</p>
 
<p>Graphrix, congratulations on the NEW puts. Even today NEW is down another 50%.</p>

<p>I shiver at the amount of profit that could have been made by buying puts when NEW was still around 40$... I don't have any source for historical option prices, but since a regular short should have netted around 2500% percent profit so far (with perfect timing), the profit ratio for the puts must have been gigantic. Of course hindsight is always 20/20.</p>

<p>Somebody somewhere is coming out rich from all this...</p>
 
muzie - The hardest thing to get over is the woulda shoulda coulda. I have many myself and still look back and say if I only did this or that. I am in by no means getting rich but I know some hedge funds are. With trading suspended on NEW I may be stuck with my last two contracts not closing. I need to look into it but I would imagine I am ok. I kept two just to see how much further it would go. It has been discussed on this forum before but you should have a certain amount of assets you are willing to do some gambling with. Maybe I have just been lucking out but I have made more money than I have lost on my gambles. Hopefully it will continue because you just shrug off the losses. But I am also fully prepared to take some losses and take a step back if needed.
 
<p>What about prosper.com ? Seems like if you spread out your loans and stay with the high credit ratings (ie low default rate) you can still get 7.65% over the 3 yr period of the loan, better than any CD out there. Even after subtracting their loan fee of 0.5% / year ...</p>

<p>Or is prosper too good to be true???</p>
 
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