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2006: A look back - A look ahead  
  The stock market rocked between overbought and oversold in 2006, so we asked four experts for a view toward 2007.
 CDs & investing
 Personal finance calendar  Personal finance calendar 

CDs & investing: A look ahead from 4 top experts

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.

A look ahead:

Peter Crane 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.

-- Posted: Nov. 1, 2006
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