Currently, savers have plopped more than $1.6 trillion into mutual-fund money-market accounts. In addition, another $2 trillion is in bank-related money fund accounts, including bank certificates of deposit. Banking officials are already seeing new dollars flowing into CDs as a result of higher rates.
At Astoria Federal Savings in New York, for example, six-month variable-rate CDs are now yielding 5.76 percent, up sharply from the past month. A conventional one-year CD is yielding 5.40 percent. In both cases, savers can buy in with as little as $500, a bank spokeswoman notes.
Funny how that little word "savers" has been neglected by Fed speech makers who claim that US investors are not saving enough. There is $3 trillion in saving right there for them to acknowledge all paying very high interest rates.
Btw, I saw a sign today advertising 2 year CD's at 7.5% so the quoted figures above are pretty low.
And yes, so long as the Fed raises rates, we'll see the stock mania mitigated to a certain extent. Unfortunately, it will not resolve the one true problem with the market, namely the relative illiquidity of the lower tiers of the market. And that won't be solved until there is reform within the mutual fund and 401K/pension industry which bias investors money toward only the highest liquidity big-cap stocks, leaving the other 90% of the market as unwanted step-children.
Regards,
Ron |
