Here's a Wall Street Journal article that's stating the obvious if you read BestCashCow. Money market funds, not money market accounts, are returning close to 0%. On BestCashCow, the highest money market fund rate is W&R advisors with a 0.67% 7-day trailing average. With inflation, or deflation, the returns are a bit better (add another 1%) but still well below the return on an FDIC insured savings account, money market account, or CD.

The Journal article even suggests short-term bond funds although the article states that last year, "Vanguard Short-Term Investment Grade took a beating—returning a negative 6.9% in the six months through November."

That's not where I want to park my "safe" cash. Go with a savings account or a CD. And if you have several million dollars to invest and are worried about FDIC insurance limits and don't want to run around opening 10 different bank accounts, then consider the CDARS program. The Certificate of Deposit Account Registry allows individuals to get up to $50,000,000 in FDIC insurance from a single bank when opening a CD.

Is the economy headed for a recovery or are we getting ready to sink back into recession? Is the stock market rise for real? Since reaching a bottom of 6,448 in March the market has risen to nearly 10,000 in late September (9,820). Despite the markets rise, bond yields have remained flat.

In an article entitled, "What the Treasury Bond Market Tells Us About the Economy" Sam Cass from BestCashCow writes:

"So, I'd say we have an ecomomy that is not as strong as the last couple of months has made appear, a stock market that is ahead itself and that will fall back, and with banks, Wall Street, and foreign investors buying and holding Treasuries as the safest investment in an otherwise risk-fraught world.

I've learned that divergences in assets never last. Either the stock market must come down or Treasury yields must go up. I'm betting both will happen."

Bond yields are generally considered an even better leading indicator of future economic conditions than the stock market.

Looking at the yield curve we have developed for deposit accounts, we can see that the spread between savings rates and 36-month CDs is nearing its high since we began tracking last year. While longer term CD rates have remained stable and even gone up a bit, short term CDs and savings account rates continue to drop. The yield curve is steepening which is normally a sign of economic recovery and expansion.

All of this seems to fit a scenario described by Dr. Doom, otherwise known as Nouriel Roubini. He said today that "there are signs right now that the recession might be close to over,” and that there remains a “a risk” of “a double-dip recession.” What the data seems to indicate is an improving economy, but one that is still teetering that that could go back into a recession once the government stops spending money or if there is another shock to the system. A fragile economy.

For now, rates seem to be watching and waiting.

Savings rates inched down 3 basis points in the past week while 36-month CDs crept up 3 basis points. That created the 6 basis point widening between the two products. Both 12-month CDs and 5-year CD rates stayed the same.

Like the economy, rates seem to have pretty much hit bottom. The question now is when they will go back up. It may be some time.

The FDIC announced two significant pieces of information today: it estimates that the cost of bank failures would rise to $100 billion over the next four years, and that it was going to pre-assess banks today for payments through 2012. The result of this is that the FDIC will have an estimated $45 billion in extra cash to use in insuring bank deposits at failed banks.

FDIC Chairman Sheila C. Bair said, "First and foremost, bank customers should know that their insured deposits have and always will be 100 percent safe, no matter what. This commitment to depositors is absolute. The decision today is really about how and when the industry fulfills its obligation to the insurance fund. It's clear that the American people would prefer to see an end to policies that look to the federal balance sheet as a remedy for every problem. In choosing this path, it should be clear to the public that the industry will not simply tap the shoulder of the increasingly weary taxpayer. This proposal is a vote of confidence for the banking industry's resilience, and it will continue to recover its strength as we work through the significant challenges ahead."

An analysis done by the FDIC indicates that this prepayment strategy is likely to impair bank lending than a special one-time assessment.

If you own banks, look for a one-time hit to profitability as banks make the payment, but increased ongoing profitability. Of course, if bank's financial conditions continue to deteriorate and the Fed has to do a special assessment on top of this pre-payment, then all bets are off.