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Purepoint May Be Changing Its Focus

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Purepoint MUFG, a subsidiary of the Japanese conglomerate Mitsubishi UFG Financial Group, entered the online banking market in late 2016 in a very aggressive manner, offering what was then the highest online savings and highest 1-year CD rates.

Through early 2017, Purepoint stayed competitive, raising its rates faster than many of its largest competitors and offering a service which by many accounts was positively reviewed.   Read reviews of Purepoint here.

Then, something happened.  In late 2017 and early 2018, as the other major players – Ally, Goldman, Synchrony, Barclays – and many smaller players began raising their rates, Purepoint froze theirs. 

Today, Purepoint’s savings rate is competitive, but far from the highest rate that we have become accustomed to seeing in 2017.  See all the best online savings rates here.   Its 1-year CD rate stands at 1.55% and that is simply not competitive in the world of one-year CD rates.

As reviews became less enthusiastic, we noticed that Purepoint began opening a series of overstaffed so-called banking centers all over New York, Chicago, Dallas, Houston, Miami and Tampa.  They have taken some key locations, with their first center opening in the middle of 2017 at American Express’s outpost on 53rd and Park Avenue in New York.  Other locations, many of which are still unopened, are listed here.  We’ve also been alerted to the fact that Purepoint seems to be offering slight enhancements on its CD rates to customers in those markets where it is opening these centers (about 10 basis points on its 1-year CDs, but still not competitive).

It isn’t a complete novelty for an online bank to open a banking center.  ING Direct did this in the early 2000s in order to promote their brand in New York, Chicago, San Francisco, Los Angeles and Atlanta and to branch into other products.  But, at that point, ING Direct had already mastered online banking and the centers were Starbucks-like places to hang out. 

If Purepoint intends to continue to be a player in the online banking space, they will need to raise their rates as fast as their competitors.  They’ll also need to offer the same rate consistently throughout the country, to provide phone support off hours like their competitors do, and to make their banking centers into something that someone would want to visit more than once.


2018 Starts with A Bang!

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2018 started with a complete bang in global financial markets.  The Dow Jones Industrial Average broke 25000 and seems well on its way to 26000.   Not only did our President say that it could go much higher in 2018, but so did David Tepper.   The latter, of course, is one whose opinion matters.  He is not only a real billionaire, but has real and tested insight into financial markets.

That having been said, it is still an important time to keep one’s wits and not to be over-exposed to financial markets.   Crashes just as severe as the ones that we had in 2000 and 2008 could easily come from excesses like we have today and, as in the past, there will be no warning.

It is important, therefore, to pay attention to another big bang that we have seen in the first week of 2018.   That is the pronounced rise in the best savings and CD accounts.

Last week, we suggested that rising rates in 2018 will finally offer a reason for investors to finally move from money center banks or major brokerages – where cash earns basically nothing – to savings and short-term CD rates.   We have suggested concentrating on savings rates paying at or over 1.40% and one-year CDs at or over 1.70%. 

This week we saw both Synchrony Bank and Sallie Mae Bank raise their online savings and money market rates to 1.45% APY.  We also saw Dollar Savings Direct raise its online savings rate to 1.60%.  These banks all rank highly on BestCashCow and if you have $2 million to move from Merrill Lynch, Goldman Sachs or Morgan Stanley, you might start by opening an account at each of these.  You’ll be covered in a personal account up to $250,000 at each bank by the FDIC (or $500,000 in a joint account).  See all of the best online savings rates here

The first week of 2018 has also brought us our first 1-year CD in years that pays over 2%.  Other online banks have recently raised their online on-year CD rates to or above 1.80%.  These rates aren’t certain to extend into February, and January could be a good time to lock into a great rate for money that you definitely won’t need until 2019.  

Last week, we encouraged investors to be cautious about locking into 5-year CD in a rising rate environment.  We reiterate that caution, but we are seeing interesting 5-year CD products and interesting special term CD products in some markets.

Again, Happy New Year! 


Blue States Thinking Creatively In Response to 2018 Federal Property Tax Deductibility Changes

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Blue States are working hard to overcome many of the hits they took following the all-Republican Tax Law – a law that decidedly disadvantage Blue high-tax states like New York, New Jersey, Connecticut, Illinois and California.   Specifically, under the new tax law, state and local tax deductions were capped at $10,000, leaving everything above that figure subject for the first time to non-deductibility. 

Worried about residents moving to lower tax states, Blue States are getting seriously creative about addressing these new burdens on their taxpayers.  Specifically, they are quickly moving to identify and weigh a range of creative and legal strategies to lift the new tax burden unfairly levied on many of their most wealthy citizens.  In this regard, they are looking seriously at a particularly creative strategy that would allow state and local taxes to be paid under the new tax law up to the new maximum limit of $10,000 per tax payer, and at the same time converting the remainder of taxpayer liability for state and local taxes into a tax-free “contribution” to the State.  Such a strategy would effectively make the entire state tax obligation fully tax deductible, just as it had been prior to the new law.  This is a highly imaginative solution and one being explored with great energy at this time.

The urgency and incentive behind the work of Blue States is not only to address unfair attacks on their taxpayers in the new all-Republican Tax Law. These states are also very concerned about losing essential funding for schools, mass transit, social programs and other services long embedded in the fabric of their infrastructure and social systems.

It is likely that the pressures they are facing in the near term will result in imaginative, even if short term, fixes addressing the new Law.  As obvious will be efforts by all Blue States to win back majorities in Congress, and to seek to turn back this unfair all-Republican Tax Law there.


2018 Is A Lousy Year to Leave Your Money Where It Earns Nothing

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Happy New Year!  2018 is going to be a great year.  Will it be another barnburner on the stock market like 2017?  Maybe, but you sure cannot bet everything on it.

What you can be sure of is that savings rates have moved up.   There are many online banks that are beginning the year paying 1.40% on savings accounts.   There are now many 1-year CD rates at or above 1.70%.  (Longer-term CD rates have also recently moved up and are worth watching in 2018, but we would begin the year by exercising some caution here.)   Depending where you live, you may even find local rates at banks and credit unions that are much higher.

For many years, I have heard the constant refrain.   “Why bother?   I may be making 0.01 at Chase or Citibank or Wells Fargo or Morgan Stanley or Merrill Lynch, but it just isn’t worth my time.”  I often hear this from people who have millions sitting in cash.

If you have $2 million spread across 8 or 9 online savings accounts and short-term CDs (to stay below FDIC and NCUA limits), you can easily earn $30,000 pre-tax in 2018 on this money - and more as rates go up from here.  Even if you are lucky enough to be in a high tax bracket and to live in a blue state and be severely impacted by the Trumpian tax law, you are still likely to net $16,000 or $17,000 after tax on this money.

We think that there is a lot you can do with that $16,000 or $17,000 in “free” money in 2018.  You can put it towards a new car, take your family on a trip to Hawaii or save for your kids’ education.   You could also give it to any small charity that will also be severely impacted by the tax changes.

It will take you 30 minutes online to open the accounts and set up the transfers.  Just don’t let the bank make (or take) the money for free for another year.

Make a New Years' Resolution and fix this now.


Bitcoin and Blockchain: “That’s OK. I Didn’t Really Understand It At First Either”

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I am old enough to have lived through 1999 and 2000.  Actually, I am old enough to say that it is part of my adult experience.  I worked in the internet and telecom sector then.   We were building real things and the world was being transformed by the internet and the new opportunities it was creating.  Was pets.com’s stock worth what it at then?  Or AOL?  Or Akamai?  Or Cisco?  We learned later in 2000 and 2001 that these companies didn’t have the value that the markets ascribed.  But, in many cases there was cash flow and these companies were transformational; they were changing our world.

In 2007 and 2008, the market again became dramatically overheated, largely due to over-lending on the part of the financial institutions.  I personally was fortunate and managed to sidestep the financial damage that many suffered.  I respect those who miscalculated though.  There was cash flow and the prospect of moving our country from one of 62% home ownership to one of 75% home ownership seemed transformational.

Fast forward to today.  With Bitcoin at $17,000 and all sorts “coins” and stocks geared to blockchain spiking in value, there is very little that appears transformational.  There seems to be a whole lot of commotion and a whole lot of opportunity to move money around outside of governmental oversight (with perhaps Russian and North Korean involvement).

But, Bitcoin has brought back out all of the people whom I know and who created late stage businesses in 1999 and 2007, companies that had little economic merit but were designed to piggy-back off of what became a frenzy.  They have again reappeared on CNBC, and by connecting with me on LinkedIn.  This time they aren’t talking about cash flows and economic transformation.  They are talking about Etherium and blockchain and the only thing they are saying is: “That’s OK.  I didn’t really understand it at first either.”

I am not going to get into the credibility or motives of these people.  They may manage to drive Bitcoin and all of its ancillaries a lot higher.  But, I don’t buy it; I do not believe nor understand adequately the hype or the foundational elements underlying the Bitcoin phenomenon.  And, I am not alone.  Consider it safe to say that I am not going to be trying to make my fortune on Bitcoin.  


New Tax "Cut" Not Really A Christmas Gift for America

The details of Donald Trump’s and Congressional Republicans’ tax cut have only just come out.  And, the details tell all.

First, I would not go out and celebrate, unless you:

  1. are in the real estate business
  2. run a large corporation
  3. have millions (many) in the bank and plan to die in the next 8 years
  4. are a wealthy investment manager
  5. are in the liquor business
  6. are a tax accountant

And, even then, those above have only an eight-year window before the new cuts expire for individuals (but not for corporations).  Eight years will go fast, and it could be much faster if the Democrats come into power in 2022 and reverse the tax cuts immediately. 

But, most of all, it is important to understand that this is not a middle class tax “cut” for needy Americans.  In fact, it is just the opposite.  The wealthiest, from extremely wealthy to very wealthy, are clearly those who win here.  And, the rest get a bone here and there, but nothing lasting and nothing that will seed the promise of continued and expansive economic growth.

So, be careful.  Do not listen to those who tell you the good times are here again.  Husband your resources and buy only what you need.  Invest with great caution with every market at exceptionally inflated levels, saving the rest in the highest yielding savings accounts and CD accounts.

And, remember that the best lesson gleaned from all this talk about a tax cut for all Americans is that Congress is out for itself and certainly not acting in the public’s interests.  In fact, all conservative principles about debt and taxes have been thrown out of the window to pass this bill.