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Online Savings & Money Market Account Rates 2022

Online Savings & Money Market Account Rates

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Fed Liftoff Day is Here

The Federal Reserve has raised interest rates by 25 basis points today, moving the Fed funds target rate off of zero to a target of 0.25/0.50.   The target rate had been at zero since COVID-19 arrived on US shores more than two years ago, and was brought there along with extraordinary Fed intervention in an attempt to stimulate financial markets and keep the US from entering a recession or depression.

We’ve had two previous liftoff days in the last twenty years.   On June 30, 2004, the Consumer Price Index (CPI) was 3.1%.  And, on December 16, 2015, the CPI stood at 0.5%.   The fact that the CPI has reached 7.90% before the Fed has acted indicated that Chairman Jay Powell’s monetary policy has been way behind the curve.

Not only are the Fed’s actions too late, but a quarter-point move in the Fed funds rate – or a handful of such moves as is now projected – is too timid.  Even if the Fed raises each month from now until June, the Fed funds rate will only be at a target rate of 1.00/1.25 over the summer.  This is not an inflation-fighting rate move.  

Rather, the Fed has indicated today that in 2 years it will bring the Fed funds rate to 2.80%, but that is two years until we are finally going to be fighting inflation.

In the meantime, the Fed has created a financial market that is dramatically overvalued with valuations in many sectors that are so irrational that equity investors are all but guaranteed to lose money.  As rates rise, bond prices too are certain to fall.   And, because the Fed’s move is so timid and inappropriate to address current inflationary circumstances, cash investors will continue to watch the deterioration of their real wealth as rates remain below anything even remotely necessary to ensure purchasing power parity.

Jerome Powell has allowed himself and the Fed to be frozen by his uncertainty.   If this world has a future after Putin, he will certainly go down in history the worst possible Federal Reserve Chairman at the worst possible moment in time.

Four Steps to Prepare for A Russian Cyberattack on the US Financial System

I practiced law in Moscow in the 1990s.   While there, I learned that Russian law is an oxymoron.   I also learned a lot about Russia and its strengths.  I am certain that in spite every precaution that US financial institutions have taken, Russian hackers are extremely talented and have the ability to initiate a wave of crippling cyberattacks on the US system.

Now is the time to take preventative measures to avoid leaving yourself exposed.

First, maintain your liquid bank accounts across multiple banks.   We should not assume that the country’s largest banks (Chase, Citibank, Bank of America, Wells Fargo) will be immune to attack.  Likewise, do not assume that you local bank will be immune.  No matter where you bank principally, you should be opening multiple online bank accounts and transferring assets to them.   This will also enable you to take advantage of rising rates on savings and money market accounts in 2022.   Compare online accounts and rates here.

Second, do the same thing with your online brokerage accounts.   If you trade through Etrade or TD Ameritrade, consider opening an account with the other to be sure that you will continue to have access to financial markets in the event of an outage.   After all, we know that online brokers are prone to going down without an attack.  Imagine what can happen if they are deliberately targeted by the best hackers in the world.   Heck, you might even want to have accounts with multiple online brokers, and depending on your asset balances, this could be a good chance to qualify for some nice cash balances.   Compare online brokerage accounts here.

Third, keep detailed records on your liquid accounts and online brokerage accounts so that you can recreate any missing or removed records.   Download your most recent statements monthly or take screenshots.

Fourth, consider carrying credit cards issued by multiple issuers.   Lots of folks are loyal to Amex or Chase cards for their great sign up bonuses.  The loyalty is understandable, but you need to carry multiple personal cards in case there is an attack that knocks one or more issuers entirely offline.   Since there are plenty of cards that do not have annual fees the first year, you may want to focus on one or two of these.  And, again, you might even be able to take advantage of bonuses, cash-back options or point earning capabilities that you had not previously known were available to you.

If we are fortunate and do not experience a Russian cyberattack on our system in 2022, you will have done no harm to yourself through these simple four steps.

Fed Ends January Meeting Planning to Raise Rates, but Not Until March

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The Federal Reserve is going to be raising rates in 2022.  This action is desperately needed to fight inflation.  But, it isn’t ready to act now.

It has been clear that Federal Reserve Chairman Jay Powell has been about as wrong on inflation as imaginable.   He may have acted appropriate in moving the Fed Funds rate as low as possible and flooding the market with liquidity in early 2020 when COVID-19 became a reality.   But, for almost two years, he has failed to respond to economic circumstances.   Continuing to leave interest rates at zero while inflation diminishes (damages) the real value of the dollar to depositors, has thrown people into wildly inflated assets. 

The longer the Fed waits and the more it claims that it is acting slowing and deliberately in order to be transparent, the more pain the economy will risk encountering.   And, if Powell is concerned about whether the economy can tolerate a move in the Fed funds rate from its current 0/0.25 to 0.25/0.50, then it is hard to see how it will respond as the Fed funds rate moves much higher which is what it will need to do in order to contain inflation.

For savers, we’d expect to see online savings rates begin to become a little more competitive as we get closer to the Fed’s first and very well projected move in March.   And, we’d continue to steer clear of both long-term and short-term CDs.

Meanwhile, it remains a good time to look at looking into a home loan, or to consider refinancing your mortgage if you haven’t done so recently.