Personal Finance Blog By MoneyRates - August 2007

A quick look at the YTD (year-to-date returns) for the markets in 2007 show that the broad-based market index the Russell 2000 is in negative territory for the year, while the blue chips and NASDAQ composite index are still positive. Bond indexes have not outperformed the money-rates.com Model Bank Deposit Portfolio which is 100% comprised of FDIC-insured bank deposit accounts. The money-rates.com money fund portfolio also is outperforming bonds with a 3.39% return for the year.

Domestic Indexes

Dow Jones Industrial Average 8.95%
NASDAQ Composite 6.68%
Russell 2000 -0.83%
S&P 500 5.54%
S&P MidCap 400 8.28%

Bond Indexes

Lehman Brothers Fixed Rate MBS 2.81%
Lehman Brothers US Aggregate Bond 2.72%
Merrill Lynch US HY Master II 0.81%

Municipal Indexes

Lehman Brothers Municipal -0.60%
Lehman Brothers US Government 3.50%
U.S. Treasury T-Bill 3.02%

money-rates.com Model Savings Portfolios

money-rates.com Bank Deposit Portfolio 3.84%

money-rates.com Money Funds Portfolio 3.39%

money-rates.com Commercial Paper Portfolio 3.95%

money-rates.com Dividend Stocks Portfolio -2.89%

see portfolio holdings here

General Electric (GE) is one of just a handful of companies that makes their commercial paper available to individual investors through their GE Interest Plus program. While most commercial paper or corporate notes are only available in large denominations and through a securities broker, the GE Interest Plus Notes can be purchased online for as little as $500. The GE Interest Plus account offers limited check-writing privileges and pays interest at the following tiered rate levels:

Less than $15,000
4.80% rate, 4.91% yield
$15,000 - $49,999
5.05% rate, 5.17% yield
$50,000 and more
5.30% rate, 5.43% yield

Safety is a big question raised regarding this investment as their is no FDIC-insurance, government-backing, or SIPC guarantees. This investment is backed by the faith and credit of the issuer - General Electric. Of course, General Electric is the bluest of the blue chips with a 100-year history and a Dow Jones Industrial stock. In addition, the notes are rated AAA by Standard and Poor's and Aaa by Moody's the highest credit rating available by both rating services.

A snapshot look at the returns of some of the highest profile mortgage lenders reveals significant losses to shareholders. The returns listed below represent the decline from the 52-week high to today's 1:30 CST market price.

Countrywide Financial (CFC) -53.1%

IndyMac Bancorp (IMB) -50.8%

E*Trade Financial(ETFC) -41.4%

Popular Inc(BPOP) -37.4% (owner of E-Loan.com)

Bear Stearns Company (BSC) -33.5%

Lehman Bothers(LEH) -33.5%

H&R Block(HRB) -22.7%

Washington Mutual(WM) -20.4%

Intuit(INTU) -20.3% (owner of Quicken Loans)

Barclays PLC(BCS) -19.5%

Citigroup(C) -16.3%

Charles Schwab(SCHW) -14.9%

JP Morgan Chase(JPM) -14.8%

Companies with significant mortgage lending operations whose stocks have weathered the recent turmoil in better shape include:

Wells Fargo(WFC) -3.5%
Bank of America(BAC) -7.1%
American International Group(AIG) -8.9%

The worst news for investors in these stocks that the shaky loans made by many mortgage lenders will remain in their portfolios for years as ticking time bombs should economic conditions worsen. Besides the 15% of the mortgage market that is rated subprime, another estimated 20% to 25% is considered interest-rate sensitive and could be subject to increased delinquencies if interest rates increase.

In only five days the yield on the 1-month Treasury Bill has fallen from 4.18% to 2.47% as an enormous amount of money has poured into the very shortest U.S. Treasury terms available.

8/1/2007

1-month T-Bill - 5.05% yield
3-month T-Bill - 4.89% yield
6-month T-Bill - 4.96% yield

8/20/2007

1-month T-Bill - 2.47% yield
3-month T-Bill - 3.12% yield
6-month T-Bill - 4.17% yield

The continuation through this week of this rally in prices of short-term Treasuries may indicate that investors do not necessarily feel that the actions of the Federal Reserve are enough to calm the credit markets. Short-term government bond funds have seen good price appreciation in August, but now offer lower yields to new investors. Treasury buyers may play be playing a dangerous game by trying to outguess the direction of yields as prices jump crazily from day-to-day (the yield on the 1-month T-Bill fell 80 basis points today), but investors can be guaranteed that they are not alone in buying Treasuries because they are the safest investment on the planet.

National Bank of Kansas City (FDIC# 35014) has increased their certificate of deposit rates to 5.35% with an annual percentage yield (APY) of 5.50% on all terms from 90 days to 5 years. In addition, if you open an IRA account at this bank you can receive the 5.35% rate and 5.50% APY for all terms from 6 months to 5 years.

National Bank of Kansas City is relatively small bank based out of Kansas City with over $300 million in deposits and 6 branch offices. The bank is active in the mortgage lending business, but the increase in deposit rates may or may not be related to their mortgage business.

Investors interested in opening a CD can apply online or call (913) 341-1144.