| CDs
& investing: A look ahead
from 4 top experts |
| By Laura Bruce • Bankrate.com |
|
The financial
world is loaded with people
who will tell you where to spend
your investment dollars. All
too often you're told to load
up on stocks only to find fixed
income was the place to be or
vice versa. No one has a crystal
ball, but we asked four people
who are experts in their fields
to give us an idea what they
think is ahead in 2007.
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A look ahead: |
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Peter G. Crane: "Cash will be king"
Up first is Peter G. Crane,
publisher of the monthly newsletter
Money Fund Intelligence and
co-founder of Crane Data LLC,
based in Westboro, Mass. When
it comes to money markets and
money market mutual fund, perhaps
no one is better known than
Crane who lives and breathes
yields and economic trends.
Crane predicts 2007 will be
another banner year for folks
who enjoy the safety of cash.
I think 2007
will be a tipping point when
it comes to investors caring
about the rates they earn
on their cash. While the top-yielding
money market funds and bank
savings accounts are paying
5 percent or higher, more
than $4 trillion of the $6
trillion in "cash"
is still earning less than
3 percent.
Savers and investors
understandably didn't bother
moving money for a few extra
dollars or basis points, but
the incentives are too big
to ignore. The upside to switching
now is measured in hundreds
of dollars for someone with
thousands, so you're starting
to see this formerly passive
cash get active. Upgrading
just 1 percent on just $1
trillion of this savings horde
would earn investors $10 billion.
While, of course, nobody knows where money market rates will be next year, the odds are good that they'll be pretty close to where they are now. This means cash should be king for a second year in a row. While many pundits are calling to extend and lock in rates -- the standard tactic when the Fed's finished raising rates -- this time may be different. Investors should consider staying liquid. Normally, long-term CD rates or bonds give a significant premium over money markets, but not in the current flat-rate environment. The penalty for safety has never been lower -- stick with cash in '07.
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