Is Ford money account investment safe?
|  Dear
Dr. Don,
I have money invested with Ford Interest Advantage money account
that is not FDIC insured. Is this a safe investment? How do I find the credit
rating for this company?
Thanks,
-- Michael Monies
 Dear
Michael,
You're buying floating rate demand notes issued by the Ford Motor
Credit Corp. The prospectus for the notes explains the risk inherent
in the investment including, but not limited to, the possibility
of a credit downgrade, the lack of diversification, the lack of
a secondary market for the notes and the notes being unsecured obligations
of Ford Credit.
Firms have both short-term and long-term credit ratings
and a ratings outlook that provides some guidance by the rating
agencies as to the company's future outlook.
 |
Ford Credit's short-term ratings and ratings
outlooks currently are: |
|
| Dominion Bond Rating Service Limited | R-4 | Negative |
| Fitch Inc. |
B | Negative |
| Moody's Investors Service
Inc. |
Not prime |
Negative |
| Standard & Poor's Rating
Services, a division of McGraw- Hill Companies Inc. |
B-3 | Negative |
To stay abreast of ratings changes you should see if your
local library subscribes to one or more of these services.
The Ford Credit Web site posts the Ford Interest Advantage
rates weekly. Shown below are the rates from that site for
the week of April 23.
|
Current rates for the week beginning April
23, 2007 |
|
| Under $15,000 | 5.61% | 5.76%
| | $15,000 to $50,000 | 5.76%
| 5.91% |
| Over $50,000 | 5.91%
| 6.07% |
Whether you're being adequately compensated for taking on this level of credit
risk is subject to debate and is, in part, based on the size of your position
in these notes.
You're getting a yield pickup versus FDIC-insured
money market accounts, MMAs, and non-insured money market mutual
funds, MMMFs, because you're accepting the risks inherent in investing
in these notes. I can't tell you that the notes are a safe
investment. You have to decide if the yield pickup is worth
the risk.
Note: Thanks to Jeffrey
Matthias of the American Family Mutual Insurance Co. in Madison, Wis., for his
assistance in helping me answer this reader's question.
|
