Comments on Boston Gal's Open Wallet: The anemic interest rate CD options are getting me...

Have you looked at rates at any Boston Credit Unio...

2011-11-09T21:50:02.378-05:00

Have you looked at rates at any Boston Credit Unions? I recently opened up a few CDs at Industrial Credit Union (www.icu.org). They are the second oldest credit union in the country and at least you know your money will be used locally.

I am BEYOND impressed by your savings prowess. Wh...

2011-10-25T12:44:14.414-04:00

I am BEYOND impressed by your savings prowess.

While annoying you can't make money on the $120k ... it sounds as if its purpose for you is to be your safety net. Maybe if you think of it that way it will feel less frustrating: you have security that almost no middle-income earner I know has. Which is such an accomplishment in its own right. Maybe you just leave savings put and focus on where your next investing will go. I'm completely impressed.

Use I-bonds as per this blog http://valueinvestin...

2011-10-22T16:00:03.447-04:00

Use I-bonds as per this blog

http://valueinvesting.proboards.com/index.cgi?action=display&board=general&thread=122&page=1#194

Regarding advice from Dave on Oct 19 about HELOC. ...

2011-10-20T23:55:16.110-04:00

Regarding advice from Dave on Oct 19 about HELOC. I am probably misunderstanding some of his figures, but based on our recent experience with a HELOC, I would be super careful about putting your liquid cash into your mortgage and then counting on the HELOC for liquidity. We owned our home outright, no mortgage, no other debt, then opened a HELOC a few years ago to finish our basement. Even with the HELOC debt from those improvements, we still had 80% equity in our home's value (value at the time of opening the line). However, this spring, the bank froze our HELOC without any advance warning because of a general market valuation method they do that showed home values in our area have dropped. We appealed the freeze immediately, but we still had to pay out-of-pocket for an appraisal on our home to counter this freeze, and in spite of our speedy action, it took nearly three months for them to lift the freeze. During all of that time, we had NO access or liquidity. Again, other than the home improvement debt, we have no mortgage and no other debt, plus we have excellent credit. The banks have all kinds of power to freeze a HELOC for all kinds of reasons; they run their market valuation stuff every month; you are constantly at risk of a freeze, getting the freeze lifted isn't easy; and they can deny your appeal even if your appraisal value comes in high enough. The fine print is always in their favor. My advice from experience: Don't ever rely on a HELOC for liquidity. Never. Too risky.

Buy 10,000 of I bonds. Yields 4.6 for the next 6 m...

2011-10-20T21:08:34.162-04:00

Buy 10,000 of I bonds. Yields 4.6 for the next 6 mo, then drops to abou 3 percent

When CD rates are lower than savings account rates...

2011-10-20T14:12:33.273-04:00

When CD rates are lower than savings account rates, that is a big clue that savings account rates are poised to drop. We have already been told to expect no interest rate changes for at least 2 more years.

Keeping so much in cash is a bad strategy, IMO. Consider what you are willing to do to get a bit of return on your money. Another rental? Mortgage prepayment? Stocks and/or bonds in a taxable account? Peer to peer lending?

I have suspected for a long time that you have a specific reason or goal in mind to be piling up so much cash. But you have been mum on the matter! The curiosity is killing me. :)

It is so nice to see some new blog posts! You've been missed, BG.

Just pay down the mortgage. In fact, if I were yo...

2011-10-19T16:15:05.454-04:00

Just pay down the mortgage. In fact, if I were you I'd look at the Pen Fed 5/5 HELOC (not the ARM). Refi your house for just an appraisal ($300 ish), get a rate of 3.75% locked for 5 years (you won't need it, you will pay off by then), then move your $120K against the mortgage, immediately capturing a yield equal to the retired mortgage (your before situation). Still have liquidity, since its a HELOC, you can set your line to 75% LTV (at least $350K based on your last update).

The only wrinkles are you have to pay 2% of the outstanding balance each month ($2K per month based on your april balances - 221K loan, less 121K of cash, *2%). Also, you would have to leave a small balance on the line for 3 years, as a pay off would require you to pay closing costs.

I suppose a third, tangental risk is that they freeze your HELOC, limitting your planned liquidity. But at that point you have 80% equity - what banker is going to worry about their collateral in that instance. If the economy is so bad that would happen, ING, Ally and the others probably would have failed and you would be in line waiting for the FDIC to release your cash anyways.

Do it.

Good suggestions above regarding real estate, prec...

2011-10-18T22:58:34.344-04:00

Good suggestions above regarding real estate, precious metals, and bonds. I think you stopped or dialed way back on the Great Mortgage Smackdown when you refinanced. But it might be worth revisiting, even if you have a good new rate, given how terrible rates are on deposit accounts at the moment. There are still some decent reward checking accounts out there (3%-4% rates), but they require upkeep, and prevailing wisdom is that they will slowly die out with the new debit card regulations.

I turned my ing cds into savings accounts and am l...

2011-10-18T19:57:24.317-04:00

I turned my ing cds into savings accounts and am leaving them parked. I don't want to bank with Capital One (which ing USA just became), but I *reeally* have no intention of doing any business with Government Motors and its spawn, especially not GMAC (Ally).

73.8% of Ally is owned by the taxpayers, so when they're beating the market on banking perks, guess who's getting fleeced?

I turned my ing cds into savings accounts and am l...

2011-10-18T19:37:25.750-04:00

CD Yields now are ridiculously low. Most of the Do...

2011-10-18T15:00:23.498-04:00

CD Yields now are ridiculously low. Most of the Dow 30 Industrials have better dividend yields than that.

Do you really need over $120,000 in cash savings? ...

2011-10-18T09:32:39.611-04:00

Do you really need over $120,000 in cash savings? You have some experience as a "landlady"... might be time to deploy some of that cash into cash-flowing investments. Buy a duplex or fourplex, and get your money to really work for you! Do it right, and you can easily earn double-digit rates of return, regardless of property price appreciation.

This really is depressing!! I remember when I open...

2011-10-17T16:56:06.923-04:00

This really is depressing!! I remember when I opened my first ING savings account and it was at 4.5%! SO SAD!!

I glad I managed to find 2,5% interest rate on my ...

2011-10-17T07:05:24.049-04:00

I glad I managed to find 2,5% interest rate on my savings account (gross).
But still, when I calculated it in the long run - it is not worth it, unless it is your emergency fund.

But even then you might be better off the bonds or precious metals.

Yes, it is quite depressing that rates are so low....

2011-10-16T17:52:35.248-04:00

Yes, it is quite depressing that rates are so low. I'm not sure if you'd consider putting part of the funds in a bond index fund, some highest-quality short-term or medium-term at the most. I've done that with some of our non-retirement money and it seems to be going well. The yield is over 3 percent right now on vanguard's total bond market fund etf. Of course any bonds that are not short-term might dip for periods of time but in my experience have gone up soon enough to retain good liquidity/stability.

Well, if it helps, in August the Federal Reserve p...

2011-10-16T12:30:29.534-04:00

Well, if it helps, in August the Federal Reserve publicly stated they do not intend to increase rates for two years - an unprecedented announcement and I suppose they could change their mind. Seems unlikely though, so if I were into CDs, I wouldn't worry too much about the rates going up for at least two years. Locking in for two years to get a slightly less horrible rate might not be that risky.