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Online Savings & Money Market Account Rates 2019

Recent Articles


Uber and Lyft Are At Least 7x to 10x Overvalued

I am watching Bloomberg and CNBC this morning as Uber prepares to come public.   The discussion among analysts is on whether Uber and Lyft should be trading at 4 times sales or 6 times sales.   Lyft is a pure play US taxi service.   Uber is more international, and plays in a whole series of other industries, including transport and food delivery.   Lyft’s top line is growing much faster.   Hence, presumably one merits a premium over the other.

The discussion strikes me as patently absurd.

To be clear, the last time that analysts suddenly switched from trying to rationalize equity pricing at multiples of sales was, umm, March 2000.   The argument was made that internet stocks could create such efficiencies that a top line multiple could be applied.   But, those companies had wide margins at the time.   Uber and Lyft today are operating at margins of around 20% that are continuing to compress.

These types of valuations that are being applied to Lyft and Uber are predicated on robotaxis replacing cars that require a driver in the immediate future and on automation leading to wider margins.

Now, I am a big believer in the future of automated driving, but I don’t see that necessarily expanding the margins of either Uber or Lyft operating fleets of driverless cars in 2020.  Even Uber CEO, Dara Khosrawshahi, says it will be “quite a few years” beyond 2020.

When the industry becomes completely automated (whether that happens in 3 years, 5 years or 10 years) and Uber and Lyft are operating fleets of driverless cars, their margins will not be expanding at the rate that would justify a sales multiple of four or six times sales today.   Rather, the margins will continue to compress as the market for robotaxis will be perfectly competitive (as will the market in every other industry in which Uber participates). 

So, I believe that even under the most realistic and optimistic circumstances, a fair valuation for companies operating in this industry would target a PE of about 10x in 5 years or a price to sales of about 0.4x to 0.6x.   That would make both of these companies overvalued by 7 to 10x.   And, I intend to invest in both of these companies when they trade at those valuations.


May 2019 Update – The Fed May Be On Hold for a While

Rate information contained on this page may have changed. Please find latest savings rates.

The Federal Reserve concluded its 2 days meeting yesterday and acted unanimously to hold the Fed Funds target rate to 2.25% to 2.50%.   Guidance continues to be for no more rate changes in 2019, as the Fed previously indicated in its March meeting.   Although the Fed statement expressed concern about inflation falling below target, Jerome Powell resisted questions indicating that it might create the basis for lowering rates later in the year. While Powell has already compromised Fed policy by bowing to Presidential harassment in November, he now seems to be resisting calls by the President and Larry Kudlow and other pretend economists to lower the Fed Funds rate.

ONE-YR CDs

Against this backdrop, we think short-term CDs now look pretty attractive.  While many banks have lowered their 1-year CD rates to levels that are no longer competitive (Synchrony, Sallie Mae Bank and others), you can still find rates at or above 2.80%.    We think you are unlikely to lose much or any interest by locking in money that you wont need at that rate, especially as interest rates would need be raised twice by 25 basis points for savings rates to achieve that level.  You should, nonetheless, only invest in products that have early withdrawal penalties of three months interest or less.

Two one-year CD products that we like here are:

  1. Citizens Access – 1-Year CD, 2.85%, $5,000 Minimum

CitizensAccess has gotten positive reviews on BestCashCow since launching in 2018.   Their accounts are by-and-large easy to open and manage online and the penalty for early withdrawal is only 3 months’ interest.

You can learn more about CitizensAccess here

  1. Live Oak Bank – 1-Year CD, 2.80%, $2,500 Minimum

Live Oak is a tiny little NC-bank, but their website is well-developed, and their 1-year CD rate is still competitive (although it was lowered from 2.85% in March).   Their penalty for early withdrawal is also only 3 months’ interest.

You can learn more about Live Oak Bank here.

See all 1-year CD rates here.

NO PENALTY CDs

In addition, we recently wrote about the increased attractiveness of No-Penalty CDs, and you can read that article here.

  1. Purepoint – 13-Month No Penalty CD, 2.50%, $10,000 Minimum

Since we wrote that article, Purepoint’s rate has fallen by 10 basis points (from 2.60% to 2.50%).   However, even at 2.50%, Purepoint’s No Penalty CD rate matches that of the best online savings account.   Since you can access a No Penalty CD at any point after the first few days, they just do not have the liquidity risk of long-term CDs.  

Check out other No Penalty and Special Term CD rates here

ONLINE SAVINGS

In our April update, we cited My Savings Direct and CIBC as two online savings rates that are very competitive (offering 2.40% and 2.39% APY, respectively) with no or very low minimum balance requirements.   While savings rates are not guaranteed and could change from day-to-day, these two have remained competitive and are well worth a look.

See and compare all of the best online savings rates here.

Have a great month.


Sell In May And Go Away?

We have all heard the old stock market adage: “Sell in May and Go Away.”   But, anyone who has followed the market for the last few decades knows that the adage only held true in 1999 and 2008.   Even if you had sold in May 1987, you would have missed a tremendous run into October of that year.

But, this year there are too many telling signs to discard the adage.   The stock market is up over 16% since its Christmas Eve 2018 low (the S&P has moved from 2350 to 2900), for its best four-month start to the year in over 3 decades.   All indices appear poised to eclipse all time highs.   But, it isn’t just the pace and the intensity of the move up.   Valuations are entirely out of whack in some favored sectors.  For example, casual service restaurant stocks like Starbucks and McDonalds are trading at PE ratios over 25x and PEG ratios over 2x.   Some REITs are trading at similar valuations, regardless of asset quality.   And, then in the wake of the Lyft, Pinterest and Zoom IPOs, people are no longer speaking about PE and PEG ratios, but instead trying to rationale 15 + Sales – to – Earnings ratios (remember 1999 anyone?).

To boot, there is still so much that can go wrong.   While we have heard about the UK and the possibility of a hard Brexit catastrophe for 2 years, the risk is still sitting out there for the second half of 2019 (the new deadline is October 31).   Likewise, in the US, over the same period, we’ve worried about an egomaniac in the oval office who appears increasingly irrational and unhinged, and while the economic risks associated with the underlying situation have not materialized, the risks to the market remain.   We also seem to have North Korea brewing again.

As the Wall Street Journal pointed out this past weekend, many institutional investors are wondering whether to lock in their gains for the year and go away.

Longer-term investors, unlike many institutional investors, face the risk of being forced back into a market that is still higher at a later date.   They also may face significant capital gains taxes.   Its hard to sell out of a rising market, but it just might be a pretty prescient move to raise cash now.

See the best savings rates here.