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Best Online Savings & Money Market Account Rates 2024

Best Online Savings & Money Market Account Rates

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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.


2022 Is Signaling Wealth Preservation Mode

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I am old enough to remember October 1987. I was a college freshman then and I remember my floormates calling their parents to inquire whether they would be able to stay enrolled in college.

I also have vivid memories of 2001 and 2008 and 2009. In the 2000-01 period, I was working for a telecom venture capital firm in Europe where valuations on major carriers and CLECs were bananas.

What I am not old enough to remember is any time when the valuation of US stocks was so distorted from reality. In fact, Charlie Munger recently said basically the same thing and he has several decades on me.

If I learned nothing in two years studying equity valuations during my MBA, it is that there are only two or three ways to ultimately value an equity issue. One is its price to earnings (PE) and the other is its price to earnings to growth (PEG). A reasonable PE multiple is 12 or 15 or maybe 18 and not 100. And, a PEG multiple should be a lot closer to 1 than to 3 (or sometimes now 10). You can also use price to revenue, but that metric really only works if there is some sort of plan for the company to ultimately become profitable (I’d note that it is absolutely the valuation metric that you would have wanted to use when analyzing Amazon, Netflix or Spotify one or two decades ago).

But, as a whole, this just isn’t that complicated. Multiples on US stocks make no sense. They have reached this point from bringing interest rates to zero and flooding the market with liquidity. But, for a world where all of that is being withdrawn, they are just bonkers. Most smaller tech stocks, including virtually all that have recently been taken public, have no basis in valuation. Even many smaller companies that have been around for some time that have great and meaningful products, such as Exact Sciences or Box (where stock pundits have argued for Amazon, Netflix or Spotify-type valuations), may face market circumstances where they have no path to profitability.

The market has been led to these levels because of extraordinary growth that we have seen in companies like Apple and Microsoft, and super extraordinary growth in stocks like Marvell and Nvidia. Make no mistake, these are the companies that you want to own and that you probably should not sell (I am not selling them), but you need to have a very long term view because the valuations are now three times higher than where they were in 2015 or 2016. Apple was a great investment at 10x earnings less cash in 2016; it may still be a good long-term investment at 28x earnings (less cash) in 2022, but it may not move up from here quite as easily as it has for the last 25 years.

And, then there are cryptocurrencies. It is also difficult to predict the immediate trajectory of crypto. But, in spite of losing half of their value, crypto remains the biggest and most widespread Ponzi scheme in the history of mankind.

Take it from someone who can remember the not too distant past. I am not saying there is going to be a crash, and I am not saying that the stock market isn’t the best place to be for the long term. I personally will remain very heavily exposed to large tech, major pharm and European wind stocks, but these aren’t positions that I would be selling for the next 10 years.

I am just saying that everything is dramatically elevated. If you absolutely need to protect your wealth here, there is only one safe way to do that in 2022 and that is cash.

Compare the best online savings and money market rates here.


Could the Climate Crisis Lead to A Banking Crisis?

I’ve previously espoused the belief that banks need to be given time to formulate a response to the current climate crisis. After COP26 in Glasgow, it is clear that the costs of wind and solar are falling and production advances in both are happening so quickly, I no longer believe that banks need to be extended the benefit of an extended period to outline their climate practices.

But, this opens up a new reality. A quick transition to an electric economy dependent primarily on wind and solar may result in the rapid abandonment of oil, gas and coal-based generation. We may quickly reach a point where environmental events become so extreme that abandonment of these assets could be required by local or federal authorities. Even without government action, these assets might well be rendered obsolete due to costs of operation, and closed due to adverse public relations of continued operations.

I have many friends in credit departments of the major banks on Wall Street who privately confide that their banks have not performed any sort of sensitivity analysis to reflect the possible implications of default of their fossil fuel creditors or projects. Some of these banks have such extensive loan networks that they cannot even begin to analyze which creditors are fossil fuel creditors and which projects could be jeopardized by the climate crisis or when.

I had believed that while the Federal Reserve has lagged in requiring US banks to analyze this information, we should be able to get some insight and direction from Europe where the European Central Bank (ECB) is several years ahead of the US in analyzing and adjusting to climate exposure. Unfortunately, the news from Europe is not good. The ECB reported this week that of 112 European banks analyzed, not one is fully prepared for the possibility of stranded or abandoned assets. Even today, according to the report, only 28% of the banks surveyed are fully modeling environmental or climate change risks when evaluating a debtor’s credit profile.

At the same time, an article that I found on the ECB report suggests that banks’ credit is much more exposed to a fully functioning ecosystem and cites a French study showing that 42% of security in the French banking system is exposed to the ecosystem.

I think we can boil this down to some very unsettling facts regarding the banking system. First, we are going to get very little information from banks on their exposure to fossil fuels companies; it may take years for the largest banks to begin to quantify their risk internally. Second, the climate crisis poses a systemic risk to the banking system. It is very clear that the entire banking system – and not just the largest banks -- is extremely exposed to the fossil fuels industry and corollary industries (as well as to the nuclear industry), all of which may be forced into obsolescence prior to maturity or even significant loan amortization. Third, banks are equally exposed to disruption and dysfunction in the environment, and they cannot drag their feet in the funding of new solar and wind projects. They should be leading the way on this transition as a failure of the ecosystem would be even more costly for them (and the Earth writ large) than writing off their fossil assets.