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Old 09-08-2008, 12:09 PM   #41
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Doesn't matter. Would you actually buy a 1 year CD knowing FDIC may have to step in to pay them off? You'd be losing interest, AND waiting to get paid back. So, if you think WAMU lasts a year, why not buy their bonds paying a ton more income for a much shorter period?
You've GOT to be kidding us, right? That's absurd. The risk of losing some small amount of interest if they fail is not even close to the risk you're talking about taking. Buying the bonds is a purely speculative play and isn't in the same ball park as buying a CD.

Surely you know that, right?
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Old 09-08-2008, 01:18 PM   #42
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Who was it that said return of principle was more important than return on principle? Buffet? Rockefeller? Groucho Marx or Will Rodgers? Suze Orman?
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Old 09-09-2008, 08:43 AM   #43
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Buying a CD vs. buying the equivalent of a junk bond from an extremely distressed company is essentially what it comes down to. It is simply a matter of risk vs. reward.

The CD has essentially no risk, you risk possibly losing a weeks worth of interest. You only get 5% over the course of the year for a return as a result. For comparison's sake, this would be a return of 1.66% over 4 months.

The corp bond has extremely high risk, you risk losing all your principle, what exactly that risk level is, who knows, but is in the very high range based on current market information. So, you get a 24.5% return over 4 months (if that is right).

So, is a huge amount of risk worth an increased return of about 22.85% over 4 months? Essentially, do you think there is a less than 22.85% chance the company will go under in 4 months? Who knows, it depends on your risk tolerance and if you know something the rest of the market doesn't, which currently believes there is a 22.85% chance of the equivalent of a total loss in the next 4 months.
Well your math is wrong, but nonetheless.....apparently my point was too subtle, so let me be more blunt.
QUIT SEARCHING THE INTERNET FOR AN ADDITIONAL .2% AND INSTEAD FIND YOURSELF SOME QUALITY BANK NOT AT RISK OF DEFAULT.
Amazing, you guys get that return OF principle is paramount and yet still have a thread devoted to finding tenths of a point, even though there's a risk you'll have to wait to get your money back. Perhaps you all should go back and read the thread about how much time FDIC has to repay.
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Old 09-09-2008, 11:46 AM   #44
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Yea, I was being lazy, but the numbers sort of in the general ballpark I guess, also, the numbers didn't account for the huge difference in return caused by taxes, assuming it is in a taxable account. The point probably would have been just as clear though by snipping it down to one sentence for describing the risk difference, "potentially losing all your principle AND return vs. potentially losing a small fraction of your return and keeping your principle".
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Old 09-09-2008, 01:02 PM   #45
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QUIT SEARCHING THE INTERNET FOR AN ADDITIONAL .2% AND INSTEAD FIND YOURSELF SOME QUALITY BANK NOT AT RISK OF DEFAULT.
I don't disagree with that. I guess we got lost in the "subtleties" of your post
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Old 09-09-2008, 02:07 PM   #46
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I will try to be less subtle in the future.
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Old 09-26-2008, 10:12 AM   #47
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Well I hope no one bought those WaMu CDs.
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Old 09-26-2008, 10:16 AM   #48
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Well I hope no one bought those WaMu CDs.
Why? Especially in amounts under $100,000?
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Old 09-26-2008, 10:20 AM   #49
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The FDIC protection wasnt even used, so even deposits over 100k are still fine.

No word on whether they'll give you your CD money back, offer a lower rate or continue paying the rates given by Wamu.

Really, quite the horror show. Just like buying high risk bonds. Same thing, right?
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Old 09-26-2008, 10:27 AM   #50
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The FDIC protection wasnt even used, so even deposits over 100k are still fine.
Yes -- for now. No guarantee that these assets over $100K will continue to be safe in the future. I prefer to think that those who had more than $100K at WaMu just dodged a bullet, and should use their good fortune as a second chance to do the prudent thing with their savings and spread it around to maximize their coverage by the FDIC or NCUA.
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Old 09-26-2008, 10:50 AM   #51
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I'm under $100k but was tempted to try to set up POD accounts for more.

They were giving out 5% for 12-months.

I knew this was a distinct possibility but I figured at worst, FDIC gives me money money back and I end up with a lower interest account.
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Old 09-26-2008, 11:02 AM   #52
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The people pulling out money over $100k is what caused WaMu to be in the immediate danger they were in. The sale was forced because the Government is trying its darnedest to avoid getting FDIC involved.
Again, assuming FDIC does have to get involved in numerous banks, the odds of getting your $100k returned quickly goes down and down and losing out on interest.
Ahhhhh, so many doubters, so few to learn.
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Old 09-26-2008, 11:51 AM   #53
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I'm under $100k but was tempted to try to set up POD accounts for more.

They were giving out 5% for 12-months.

I knew this was a distinct possibility but I figured at worst, FDIC gives me money money back and I end up with a lower interest account.
I just learned about the POD account setup to increase my FDIC insurance about a month ago. For those of you who have more than 100,000 at a given bank, just add POD's to your CD's and have the title changed to include "POD" and you'll be covered for more than 100k. (see the FDIC website for information)

I have $143,000 at one bank as an individual and changed my CD's there to add 3 POD's (sister, brother and mother), added "POD" to the CD account titles and I now have $300,000 FDIC coverage. I'm not sure why more people don't do this, now that I know about it. I will set up all future CD's in my name to include POD's.
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Old 09-26-2008, 11:55 AM   #54
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Again, assuming FDIC does have to get involved in numerous banks, the odds of getting your $100k returned quickly goes down and down and losing out on interest.
Ahhhhh, so many doubters, so few to learn.
And if that happened, a lot of annuities would be toast, too.
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Old 09-26-2008, 01:17 PM   #55
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And if that happened, a lot of annuities would be toast, too.
BWHAHAHAHAHA! Gotta love the hata's!
Yes, and no. Annuities don't fall under FDIC, but 'tis true, if the market totally tanks and insurance companies go under, all that you'd get back is the current value of your account and your guarantee would mean nothing. Even more reason, (which I had suggested months ago) to choose your annuity company very carefully.
I forget, was this another variable annuity discussion thread?
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Old 09-26-2008, 01:24 PM   #56
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The FDIC protection wasnt even used, so even deposits over 100k are still fine.

No word on whether they'll give you your CD money back, offer a lower rate or continue paying the rates given by Wamu.

Really, quite the horror show. Just like buying high risk bonds. Same thing, right?
IF they propose to cut the rate or terms of an existing CD you are entitled to withdraw your Principal (100%) AND any accrued interest at least as of yesterday WITHOUT penalty of any kind. Of course they may honor the existing rate and term in which case the only thing that changes is the letterhead.
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