Personal Finance Blog By MoneyRates - July 2007
July 31, 2007
The PayPal Money Market Fund (the “Fund”) is designed primarily as an automatic sweep investment for uninvested cash balances in PayPal customer accounts. PayPal customers may choose to have their free cash balances swept
into the Fund in order to earn income until the cash is used. Shares of the Fund will be automatically redeemed to pay for transactions such as payments, purchases and other electronic money transfers from PayPal customer accounts. The fund is a feeder fund for Barclay Global Investors who manage over a trillion dollars and are considered blue-chip fund managers. Despite the fund's unique way of raising funds, the holdings of the fund are similar to other money funds and aims to maintain a net asset value of $1. Investors considering using the PayPal Money Market should consider it at safe as a mutual fund money market run by a company with a large asset base. The risk, if any, might be that PayPal customer's service and website is a separate entity than Barclay's Global Investors and liquidations would by initiated by PayPal and not Barclays. PayPal offers a minimum deposit of $1. The current 7-day average yield of the fund is 5.03%. The historical returns (as detailed below) of the PayPal Money Market have been very competitive.
PayPal Money Market Fund Average Annual Total Returns vs 90-day T-Bills
(as of December 31, 2006)
PayPal Return of 4.88% vs 4.86% for the 90-day T-Bill
PayPal Return of 2.49% vs 2.43% for the 90-day T-Bill
Since Inception date of November 18, 1999:
PayPal Return of 3.02% vs 3.04% for the 90-day T-Bill
Posted in: Money Market Funds
July 30, 2007
Fed watchers have been buried with conflicting economic data as GDP, employment, consumer confidence, and even CPI (consumer price inflation) show an economy under control, while energy and food prices have increased significantly pressuring American consumers. Recent comments by the Fed indicate that the priority of keeping inflation in a narrow range of 1% to 3% - and preferably closer to 2% - remains in place. Trading in the futures contract of the 30-day Federal Funds rate, sometimes considered the smart money when guessing the directions of the Fed, indicates a decrease in the Federal Funds rate before 2008:
Implied Yield in current prices of Fed Funds Futures Contracts:
October 2007 expiration - 5.18%
November 2007 expiration - 5.14%
December 2007 expiration - 5.07%
CURRENT FED FUNDS RATE = 5.25%
source: Chicago Board of Trade
The Fed meet on August 7th and the general consensus is that a move at that meeting is extremely unlikely. If economic in the third quarter is strong or if the U.S. dolalr continues to depreciate the Fed may also opt for holding the line on rates, but at the moment the probability of the Fed decreasing rates in the fall or winter appears more likely than a rate increase or no change to rates. More information available here.
July 30, 2007
Investors who have held safer investments this year have matched or nearly matched the returns seen on riskier investments when factoring in YTD returns (including income generated).
YTD Index Returns (January 1st, 2007 - July 26, 2007)
S&P 500 Index: 2.87%
NASDAQ Composite Index: 6.80%
Dow Jones Industrial Average: 6.44%
Russell 2000 Index: -1.25%
Dow Jones 3000 Wilshire Index: 3.18%
JP Morgan Government Bond Index: 2.60%
JP Morgan Global Government Bond Index: 0.43%
Lehman Brothers Fixed Rate MBS: 1.66%
Lehman Brothers U.S. Aggregate Bond TR: 1.77%
Lehman Brothers Municipal Index: 2.42%
Lehman U.S. Government: 0.91%
U.S. Treasury 90-day Bill: 2.59%
money-rates.com Model Savings Portfolios
Money-rate.com has four different model savings portfolios to track different investment classes:
Bank Deposits Model Portfolio: 2.59%
Consists of bank deposits either CDs, money markets, checking accounts or savings accounts issued from FDIC-insured banks and available online with low minimum deposits. Risk categorization rate extremely low.
Money Funds Model Portfolio: 2.85%
Consists of mutual fund money market accounts. Risk categorization rates low.
Commercial Paper Model Portfolio: 3.21%
Consists of commercial paper or corporate notes made available directly to individual investors without purchasing via a brokerage firm or without large minimum deposits. Risk categorization rated moderate.
Dividend Stocks Model Portfolio: -2.66%
Consists of stocks with a strong history of dividend pay-out and with strong earnings. Risk categorization rated low-to-moderate.
Model portfolio holdings listed here
July 27, 2007
Market Update for week of July 23 - July 27:
Dow Jones Industrial Average -4.2%
S&P 500 -5.0%
Bank Stock Watch:
The bloodbath in the markets last week left our group of favorite dividend-paying group of bank stocks to watch (which includes the 5 largest banks in the country) with a higher yields for those who purchase the stock at the current price and a lower price-to-earnings ratio. The banks listed below are not heavily invested in the sub-prime mortgage industry and are not expected to bear the brunt of further deterioration in the sub-prime market or mortgage delinquencies in general. This list includes well-capitalized banks with large deposit bases and solid dividend-payout histories. The list includes:
Citigroup (C) - 4.60% yield, 11.32 p/e
Bank of America (BAC) - 5.40% yield, 9.70 p/e
JP Morgan Chase (JPM) - 3.44% yield, 9.72 p/e
Wachovia (WB) - 4.70% yield, 9.99 p/e
Wells Fargo (WFC) - 3.69% yield, 12.86 p/e
Key Corp (KEY) - 4.17% yield, 10.77 p/e
Washington Mutual - (WM)5.80% yield, 12.04 p/e
National City (NCC) - 5.49% yield, 9.05 p/e
US Bancorp (USB) - 5.34% yield, 11.58 p/e
Fulton Financial (FULT) - 4.53% yield, 13.25 p/e
Fifth Third Bancorp (FITB) - 4.57% yield, 17.35 p/e
New York Community Bancorp(NYB) - 6.22% yield, 21.17 p/e
To realize the yield quoted above an investor would have to purchase the stock at the closing price from Friday. An increase in the price of the stock decreases the dividend yield and conversely a decrease in price increases the dividend yield.
July 26, 2007
The Dow Jones Industrial Average fell over 300 points on Thursday sending investors scrambling for shelter. One possible shelter could be an investment that affords an investor the luxury of realizing 100% of the gain in the Dow Jones Industrial Average (DJIA), while having their principal protected from losses and FDIC-insured up to $100,000 per depositor. That's the idea behind the investment offered by Patriot Bank (FDIC# 14783) called the Patriot Bank Dow Jones Industrials Indexed CD.
from the Patriot Bank site:
Patriot Bank Dow Jones Industrials Indexed CD features a number of unique benefits:
Unlimited Upside Returns
No Risk to Principal
No Sales or Management Fees
Peace of Mind!
Patriot Bank Dow Jones Industrials Indexed CD is the best combination of earnings potential and security. This hybrid deposit product gives you the chance to participate in market gains, but provides you the assurance that you won't lose a dime on your original deposit when held to maturity. The Patriot Bank Dow Jones Industrials Indexed CD will earn the performance of the Dow Jones Industrials Average over a five-year term which provides an opportunity to achieve higher than fixed rate returns.
One of the primary benefits of Patriot Bank Dow Jones Industrials Indexed CD is that it is FDIC insured. FDIC insurance guarantees your principal just like traditional CDs have done allowing you to invest without the risk associated with other investments.
Patriot Bank Dow Jones Industrials Indexed CD comes along at a unique time as well. With recent volatility in the stock market, an insured deposit of this type provides peace of mind for you. It can serve a large variety of savings needs with a low minimum investment of $1,000 and no sales fees or charges which puts your entire deposit to work for you.
More information here.
Posted in: Certificates of Deposit