For a couple of years now, I have been a good boy and saving some money in an ING Orange savings account. And of course, this isn't something that I generally look at pretty closely. All I know is that I was flying high when I first started, but when I was poking on it today, I was able to see pretty clearly how the Fed's interest rate drops have affected me:
| Sep 19, 2007 | Interest Rate Change to 4.218% (4.30% APY) |
| Nov 1, 2007 | Interest Rate Change to 4.121% (4.20% APY) |
| Dec 13, 2007 | Interest Rate Change to 4.025% (4.10% APY) |
| Jan 23, 2008 | Interest Rate Change to 3.590% (3.65% APY) |
| Feb 1, 2008 | Interest Rate Change to 3.348% (3.40% APY) |
| Mar 11, 2008 | Interest Rate Change to 3.057% (3.10% APY) |
| Mar 19, 2008 | Interest Rate Change to 2.960% (3.00% APY) |
That is a pretty swift drop of over 1.2% in the interest rate in around 6 months. I guess I'm going have to start parking my money somewhere else. :(
-Andy.
"I guess I'm going have to start parking my money somewhere else."
That is exactly the fed's intended effect. Not that it's too sinister or anything but they are trying to lower the bar to tip some more investors into putting money into the stock market rather than savings. That's why the markets tend to jump when there's an interest drop.
I had a similar experience watching E*Trade's savings account go from 5.05% to 3.01%. Of course I had to deal with the fear that they were going to go under completely a few months ago and give me a 404 error at etrade.com.
So speaking of the fed manipulating you into reconsidering your investments, the stock market isn't a terrible place to look. There are ETFs that allow you to bet on the entire stock market going up (or down) rather than individual stocks which is a crapshoot. Look into DIA for the Dow, SPY for the S&P500, and QQQQ for the NASDAQ. They go up and roughly the same magnitude as those markets. It basically is betting on capitalism as a whole so it's not a bad bet if you believe in that sort of thing.
There's also double weighted ETFs that go up and down twice the amount of the market. So if the S&P500 goes up 2% in a day, SSO will go up 4%. Pretty radical if the market is kinda low and you don't think the western world is going to crumble. QLD is the double weighted NASDAQ and DDM is the double weighted Dow. I really like SSO because it also gives a pretty sweet dividend.
If you're all gloom and doom, you can bet short on the markets. SDS, QID, and DXD all go up twice the amount as their markets go down. That's really playing with fire though since historically markets trend upwards and you'd be betting against that trend. Double betting.
The markets have been recovering a bit so it's not a local bottom but it's still not a terrible place to put some money if your boring accounts aren't cutting it. There's risk of loosing it all of course so don't put all your money in any one place. I'd avoid CDs right now since they're going to be low too but you'll lock your money in while rates go back up.
Also remember that capital gains taxes are likely to go up with a democrat in office so you have to factor that in.
Think of this as a opportunity.