CD Rates and More – A Look Back at 2010 and a Look Ahead to 2011

2010 is finished. We are already 3-weeks into 2011. I thought I would do an article and give some of my perspective on last year and what 2011 could bring. I do not have a crystal ball so I could be way off. I would love to read your thoughts (as I'm sure others would, too) so please leave your comments in the comments section.

Looking Back – 2010
In 2010 there were 157 bank closures and 18 credit union closures. There are still some banks exhibiting extreme weakness, but for the most part, the pace of closures should drastically slow down for 2011.

[Side note:] It has taken me so long to complete this article that I have to revise the above. A quote from our friend at DepositAccounts makes me wonder if in 2011 we could see a lot of bank closures.

In the FDIC's 2009 Third Quarter report, it listed the number of problem banks at 552. In its 2010 Third Quarter report, the number has increased to 860.

Unfortunately, it appears that the "too big to fail" institutions are even larger. I do believe in free markets, but the markets were not allowed to separate the chaff from the wheat. Institutions that pose a systemic risk should be broken down into smaller pieces. In my opinion all of the various stimulus measures have just prolonged true recovery. A Home Tax Credit earlier in the year boosted home sales temporarily, but now that the credit has long expired, home prices are falling again. The fact is that home prices need to fall in-line with what the economy and proper risk analysis can accommodate. That could be another 20 – 30%, perhaps more in areas such as CA, NV, and FL.

The Fed erected overnight interest rates near 0% for the entire year. This has caused CD rates to steadily drift down. In the beginning of the year there were still 2%, 1-year CD rates out there. But, now you are lucky if you can find anything above 1.00%. 5-year CD rates were in the high 3.00% range and now they are around 2.00%. Recent increases in Treasury yields have caused some upwards pressure, but I do not expect those levels to hold past January of 2011. Throughout the year, the difference between the short-term and long-term rates has been quite pronounced. For those with longer-term ladders or those that are willing to deal with an early withdrawal penalty, the pick-up in income is quite good.

The FDIC has basically been at war with broken deposits. They levied an assessment of 20 Basis Points (0.20%) in the late spring. This has caused more and more banks to go looking towards rate services for deposits and avoid being under scrutiny. The ultimate problem with this is the FDIC really does not have a handle on the mix of deposits that banks are carrying. Now, I do not believe broken deposits are the problem, but by basically allowing banks to hide them, many bank closures have been more expensive than necessary.

Official employment has remained close to 10% (today it was 9.4%), however, when those who have given up looking or are only able to work part-time is factored back in, the percentage is closer to 17%. Given a rate that is about 2 1/2 times greater than the Fed likes to see they have tried various methods to encourage investments into people. But so far, those efforts have not produced much success. I think most companies are just too leery of expanding with the uncertainties that they are facing (think healthcare, taxes, and regulations).

Looking Ahead – 2011
I do not see the real economy changing much in the first half of the year. We are already seeing higher gas prices and home heating costs. Those dollars will help keep local gas stations and utility companies in business, but stores that market the non-essentials will still most likely struggle through the year.

Everyday, you hear about the stock market roaring ahead, but I do not see that it is based on any true data. Just lots of hot air. With the Fed still basically handing out free money to institutions, they are hedging their bets on longer term, "higher" yielding assets. It seems that some very dangerous bubbles are appearing.

If you have funds to play with, real estate could be great for you. Prices are expected to fall more and in many areas they are already down 30% to 50%. I'm not in the extra funds area, so do not ask me where the deals are.

The web seems poised for another run. But, I just worry about too much over valuation. Facebook has been valued at $ 50 Billion dollars, but all they have is advertising (at this point). Google still controls search and most still go there for their digital inquiries. Another problem is the speed of innovation (and downturns). Companies can rise and fall so quickly. Take Groupon. They rebuffed Google's $ 5BB offer and now Google is looking at creating a similar service. That could drastically alter Groupon's revenue.

Finally, what about CD and savings rates? I do not see much changing. There is still just too much money in the system and too few "qualified" people seeking loans. Banks are taking a much harder look at who they loan to these days. I suspect that as the Fed increases rates (late 2011 for the optimists / sometime in 2012 for the less so) that there could be some flattening of the yield curve. This means that the difference between the rates on the different terms could shrink. Right now we have average 1-year CDs around 1.00% and 5-year around 2.00%. I suspect the longer-term rates will rise more slowly than the short-term. Ultimately this will depend on how well people think the Fed can control inflation.



Source by Chris Duncan

The Rules for Day Trading

If you want to start trading today then you need to know the rules of this type of trading. You must become familiar with these rules before you start. Generally the day trading includes the practice trading in stocks, shares, equity index futures, commodity futures and many more within that specific trading day. The involvement of various features like margin trading and electronic trading has created opportunities for the individuals participating. Those who take part in such trading are generally known as day traders. These traders are usually well funded and well educated. They use high amounts of leverage and short-term trading strategies to capitalize on small price movements in highly liquid stocks.

The Rules and Regulations for This Type of Trading

There are some day traders who buy stocks, hold them for a few hours and then finally sell them when the price goes high. All these phases happen on a single day of trading. They are generally called pattern day trader. These people are typically well-established in the field and have in-depth knowledge of the marketplace. The pattern day traders follow several rules set by the Securities and Exchange Commission (SEC). The pattern day traders must have a margin account for such trading. The margin account requires the depositing of a minimum amount of money. The amount set by the SEC is $ 25000. If you do not have such an account then you will not be able to trade. For trading with a cash account there are some rules set by the authority. You need to pay a security amount for cash trading. For the regular trading of shares you need to meet the minimum equity or margin calls. Therefore, you need to make your trading style clear when you are thinking about the day trading. The trading includes both loss and profit. So you should be prepared for any of them.

When you are only thinking of making the advantages of the stock market then you can opt for options trading. You can choose your desired one of many options. In comparison with the day trading, they can provide you some greater return. The day trading involves various risks. It is because you have to buy and sell the stocks within a single day.

Tax Rules for This Type of Trading

Day trading works as an alert option. Therefore, you need to pay tax for that too. Generally the tax is paid to the federal Government when shares are traded. Those who have participated several times a week are called investors by the IRS. There are some ways available through which you can reduce the amount of tax. The expenses related to investment like computer and newsletter subscription are not included in the tax. You can definitely save some money by showing all these expenses.

Day trading can occur in any marketplace, but the most common platform is the stock market or foreign-exchange market. It can bring some quick money for you. But you can become a victim of losing at any time. It is very difficult to succeed at trading without a concrete plan. Therefore, step in this business with proper knowledge.



Source by Cathy E Goulart