3 things NOT to do with your savings now that the Fed has cut interest rates - MarketWatch

The Federal Reserve announced Wednesday that its Open Market Committee had voted to cut the federal funds rate by 25 basis points to a range of 1.75% to 2%.

The federal funds rate is the benchmark interest rate that banks use when lending to one another. Interest rates on loans and deposits are typically influenced by the Federal Reserve’s decisions vis-à-vis the federal funds rate.

“Banks have to lower the deposit rates now in response to the Fed rate cut,” said Dan Geller, founder of consulting firm Analyticom. Here’s what not to do now that the Fed has cut rates:

Don’t ignore certificates of deposit

Rates on certificates of deposit have been falling for months now — the first time that has happened across the board in five years.

As a result, people will earn less substantial returns when they take out a CD these days than they would have at the start of 2019. But that doesn’t mean they should shift away from this savings tool.

In fact, CDs may be a better bet, Geller said. “If you can get a good high-yield now and you’re guaranteed to receive this rate for the next three to five years, you’re going to ride the next recession with a relatively high rate,” he said.

Read more: Trump blasts Jerome Powell after Fed rate cut: ‘No “guts,” no sense, no vision!’

Many people make the mistake of moving their cash into liquid accounts, such as high-yield money-market and savings accounts, particularly as the threat of a recession looms, Geller said.

The yield on those accounts isn’t guaranteed like it is with a CD. He estimates that Americans lost billions of dollars in interest by giving into this money anxiety during the last recession.

“Resist the temptation to think that if you put it in a money-market account that it’s more accessible to you in a time of need,” Geller said. “Even if you have to pay a small penalty at some point to break the CD, it’s worth it.”

Geller’s simple rule of thumb for approaching CDs today: Find the highest rate for the longest term.

Don’t just leave your money in a bank account and forget about it

A recent survey from Bankrate found that nearly 70% of Americans had savings accounts that paid less than 2% interest. At a time when interest rates are falling, that can be an especially costly mistake.

“Do not let your money sit fallow in a bank paying an uncompetitive return,” said Greg McBride, chief financial analyst at Bankrate. He added, “Be prepared to move their money to a bank paying a better return.”

Also see: Millennials share their retirement plans on Twitter — let’s just say it’s not good

Many online banks offer upwards of 2% interest on their savings accounts — even in the current climate. Those banks will continue to compete on interest despite rates falling overall in order to score more customers.

Don’t make major adjustments to your long-term savings plan

The Fed’s interest-rate decision initially sent stocks falling — both the Dow Jones Industrial Average DJIA, +0.13%  and S&P 500 SPX, +0.03%  both dropped in afternoon trading before recovering — largely because the central bank did not clarify whether it will cut rates yet again later this year.

Markets have been volatile in recent months, thanks to monetary policy, an increasingly volatile stock market and President Trump’s ongoing trade dispute with China.

As such, this isn’t the time to pull money out of the market or make significant changes to your retirement planning. Instead, experts suggest seeking out healthy distractions like hanging out with friends or hitting up the gym.

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https://www.marketwatch.com/story/3-things-people-should-not-do-with-their-savings-now-that-the-fed-cut-interest-rates-2019-09-19

2019-09-19 10:08:00Z
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Tesla's Model 3 joins Audi's E-Tron in claiming top safety award - Engadget

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IIHS

The Tesla Model 3 has joined the Audi E-Tron as one of the safest cars on the road, earning a Top Safety Pick+ award from the Insurance Institute for Highway Safety (IIHS). The organization said that the Model 3 earned "good" ratings across the board for tricky accidents like driver- and passenger-side "small overlap front" crashes (below). It also did well to avoid collisions in the first place during 12 mph and 25 mph track tests.

Last month, Audi's flagship E-Tron also garnered a 2019 Top Safety Pick+ award, becoming the first EV to do so, according to the organization. That vehicle also impressed the IIHC with its crash ratings, collision avoidance systems and headlights that automatically dim thanks to a high-beam assist feature.

Along with the two EVs, another alternative fuel vehicle, the hydrogen fuel cell powered Hyundai Nexo, also qualified for a Top Safety Pick+. Chevy's Bolt, meanwhile, earned "good" ratings in most crash tests, but failed to receive a Top Safety Pick award because its headlights gave off too much glare to oncoming drivers.

Tesla's Model 3 has previously received a five-star safety rating from the NHTSA. However, it got into trouble with the organization for making certain safety claims about the Model 3 in its marketing materials. The NHTSA issued a cease and desist letter and referred the matter to the FTC.

The IIHS awards buttress the argument that EVs are safer than internal combustion engine (ICE) vehicles in a crash. Without a large, heavy gasoline engine in the front, the theory goes, manufacturers are better able to design the structure to absorb impacts and protect the occupants. "The fact that the battery can be placed in in a variety of places, maybe with more flexibility than a gas tank, [also] provides the potential to make electric vehicles safer," chief IIHS research officer David Zuby told CNBC.

The IIHS hedged that a bit, though, saying that EVs aren't "inherently" safer than ICE cars. However, Zuby noted that the vehicles seem to be at least on an equal footing. "There's no need to trade away safety for a lower carbon footprint when choosing a vehicle," he said.

Source: IIHS

In this article: Award, Crash, gear, IIHS, Safety, Tesla, TopSafetyPick+, transportation

All products recommended by Engadget are selected by our editorial team, independent of our parent company. Some of our stories include affiliate links. If you buy something through one of these links, we may earn an affiliate commission.

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2019-09-19 10:03:36Z
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OECD Sees Global Economy Slipping to Weakest Growth in a Decade - Bloomberg

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1. OECD Sees Global Economy Slipping to Weakest Growth in a Decade  Bloomberg
2. OECD says global economy will grow at worst pace since financial crisis  MarketWatch
3. Global Growth to Hit Decade Low Amid U.S.-China Trade War  The Wall Street Journal
4. No-deal Brexit will cut 3% off UK economic growth, warns OECD  The Guardian
5. Rising trade conflicts are weakening the global economy  OECD
6. View full coverage on Google News

https://www.bloomberg.com/news/articles/2019-09-19/global-economy-seen-slipping-toward-weakest-growth-in-a-decade

2019-09-19 09:00:00Z
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US futures point to slightly lower open after Fed cuts rates - CNBC

U.S. stocks were set to open slightly lower Thursday morning.

At around 1:44 a.m. ET, Dow futures fell 50 points, indicating a negative open of more than 53 points. Futures on the S&P and Nasdaq were also trading lower.

Wall Street ended Wednesday's session little changed after the Federal Reserve did not match market expectations of further rate cuts this year. The central bank cut the overnight rate by 25 basis points on Wednesday. This is the second time this year the Fed has lowered rates.

Money managers are following a new round of face-to-face talks between Chinese and American officials, starting in Washington later Thursday.

In terms of data, there will be jobless claims and current account numbers due at 08:30 a.m. ET, and existing home sales due at 10:00 a.m. ET.

On the earnings front, Darden Restaurants, Scholastic and Steelcase will be reporting.

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https://www.cnbc.com/2019/09/19/dow-futures-fed-rate-cut.html

2019-09-19 06:15:02Z
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Tesla Model 3 earns IIHS Top Safety Pick+, highest possible safety award - Electrek

The Insurance Institute for Highway Safety has announced that the Tesla Model 3 has won its highest safety award, Top Safety Pick+, after achieving “good” ratings across the board in all of their test categories.  The Model 3 is the second battery electric vehicle to win the award, after the Audi e-tron won it last month.

The Model 3 has won several other safety plaudits, including 5-star ratings in all categories and the lowest probability of injury ever tested from NHTSA, 5 stars from from Euro NCAP while being hailed as setting a “new safety technology benchmark,” and 5-stars from the Australiasian NCAP.

IIHS’ “Top Safety Pick” award requires vehicles to earn “good” ratings in the driver-side small overlap front, moderate overlap front, side, roof strength and head restraint tests, and a good or acceptable rating in the passenger-side small overlap test.  Vehicles also must have a front crash prevention system with an advanced or superior rating and good- or acceptable-rated headlights.

The highest-tier award, “Top Safety Pick+,” further requires “good” ratings in the passenger-side small overlap test and the headlight evaluation.

The Model 3 managed to achieve “good” ratings in headlights and all categories for crash safety, along with a “superior” rating for front crash prevention.  The only injury risk recorded in IIHS tests was a moderate risk of leg injury in driver-side small overlap front crash tests.

In the same release, IIHS stated that the Chevy Bolt narrowly missed out on a Top Safety Pick award due to “poor” headlight performance and an “acceptable” passenger-side small overlap rating.

The Model S previously missed a Top Safety Pick award for the same reason – “poor” headlight performance.

Here’s a video from IIHS announcing the awards, with photos and video from the testing procedures.  Tesla fans, if you’re squeamish, you may not want to watch this one:

IIHS Chief Research Officer David Zuby was quoted in the release, stating that “vehicles with alternative powertrains have come into their own.  There’s no need to trade away safety for a lower carbon footprint when choosing a vehicle.”  The Hyundai Nexo, a fuel cell vehicle, has also earned a Top Safety Pick+ award.

Tesla responded to this news with a blog post touting the award, stating:

We engineer our cars to be the best in the world – in every category. Model 3, our most affordable car yet, is no exception. From the start, we designed it to be among the safest cars ever built, with the goal of getting as many Model 3s on the road as possible to further our mission.

The safety of our customers is what matters most, which is why our active safety features and passive safety equipment come standard on all of our cars. We’re also committed to making our cars even safer over time via over-the-air updates, helping us ensure that all Tesla drivers have access to the best safety features available for their cars.

Tesla was particularly proud of the strength of the Model 3’s all-glass roof, which resisted 20,000 pounds of force during testing – more than the weight of five Model 3s stacked on top of each other.

Previously, IIHS had said that Model 3’s front crash prevention was “superior,” but had criticized the earliest cars for their headlights, rating them only “acceptable.”  Tesla improved the headlights, and IIHS increased their rating.

Click through to IIHS website for a full breakdown of how the Model 3 fared in every test category.  Several videos have been posted showing individual side, moderate overlap, and driver-side small overlap crash tests.

Electrek’s Take

We’ve heard a lot of nonsense lately from people trying to suggest that electric cars aren’t as safe as ICE cars – as if having a giant tank of flammable fluid which is constantly being combusted at a rate of thousands of times per minute is somehow supposed to make a car safer.

One reason among many that EVs can be made safer than gas cars is because EVs can have larger front crumple zones.  Since there’s no engine under the hood, crash energy can be dissipated over a longer area, which slows the car down more gradually and thus reduces the amount of crash energy transferred to the driver.  In this way, when a car crumples in a crash, it helps to make the occupants safer.  Crumple zones have been used in cars since the 1950s.

But despite these advantages, just hours ago we heard the argument that reducing fuel efficiency is supposed to make cars safer.  This is a ridiculous assertion, as we covered earlier on Electrek.

So it’s nice to have yet another confirmation, and a timely one at that, that the current best-selling EV is indeed not only “safe enough,” but safer than almost all other vehicles on the road.

---

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2019-09-19 05:09:00Z
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Fed's Powell: No Negative Interest Rates at Next Crisis - WOLF STREET

The Fed has different priorities than the ECB, the Bank of Japan, the Swiss National Bank, et al.

During the press conference today following the FOMC meeting, Fed chair Jerome Powell was asked if and when the Fed would push its policy interest rate into the negative. Powell did not respond with his usual, “we will act as appropriate.” He had a real answer.

For months, there has been clamoring from Wall Street and speculators, and from the White House, that the Fed should or would cut its policy rates into the negative. Peak of the negative-interest-rate momentum was likely in late August or early September.

Since then, longer term yields have risen across the board, and a substantial part of the $17 trillion in negative yielding debt has turned into slightly positive-yielding debt. So maybe folks are worried that the negative interest rate era is coming to an untimely end, and they want the Fed to step in and save the day.

At the post-FOMC meeting press conference, negative interest rate policy (NIRP) came up in the context of the Fed’s blowing its firepower with these rate cuts before there is even a recession; and then not having much firepower left when that recession arrives. Powell was asked directly about it: Is there “any scenario in which you would envision rates drifting lower into negative territory, and are there any other tools that you could use before having to go there?”

And Powell replied:

“Negative interest rates is something that we looked at during the financial crisis and chose not to do. After we got to the effective lower bound [near-zero effective federal funds rate], we chose to do a lot of aggressive forward guidance and also large-scale asset purchases.

“Those were the two unconventional monetary policy tools that we used extensively. We feel that they worked fairly well.

“We did not use negative rates. And if we were to find ourselves at some future date again at the effective lower bound – not something we are expecting – then I think we would look at using large-scale asset purchases and forward guidance.

“I do not think we’d be looking at using negative rates.”

So negative interest rates are not happening. Over the years, other Fed officials have expressed their unwillingness to deploy negative interest rates as well – and for good reason.

Negative interest rates are even worse than near-zero interest rates. They have not proven to be beneficial for the economy anywhere where they’re currently in operation, and they entail seriously destructive side effects for the people and the banking system in the country.

However, negative interest rates as follow-up and addition to massive QE were effective in keeping the Eurozone glued together because they allowed countries to stay afloat that cannot, but would need to, print their own money to stay afloat. They did so by making funding plentiful and nearly free, or free, or more than free.

This includes Italian government debt, which has a negative yield through three-year maturities. The Italian 10-year yield is only 0.9%, rather than 7% or 8%, as it was during the Debt Crisis, when Italy was approaching a default, like Greece had already done. The ECB’s latest rate cut, minuscule and controversial as it was, was designed to help out Italy further so it wouldn’t have to abandon the euro and break out of the Eurozone.

The US doesn’t need negative interest rates to stay glued together. It can print its own money.

In Switzerland, Denmark, and some other countries, negative yields are used as blatant currency manipulation, to push down their currencies. That would be tempting for the US as well, but then there is a price to pay – as we can see from the economic doldrums and the banking fiasco in Europe and Japan.

Negative yields have been another blow for the European and Japanese banks hobbling from crisis to crisis, their shares wobbling along multi-decade lows. Negative yields are the final blow for pension and retirement systems. Negative yields distort the pricing of risk, and therefore distort the cost of capital and lead to business decisions that would otherwise be idiotic waste and malinvestment. This is an issue that is already playing out with low interest rates – such as share buybacks funded with borrowed money – and it gets a lot worse with negative interest rates.

The Fed is the guardian of the banks and has been created for the banks. The 12 regional Federal Reserve Banks are owned by the financial institutions in their respective districts. And a monetary policy that is damaging to the banks, undermines the banking system, and puts bank shareholders at risk of massive losses is just basic anathema to the Fed. Powell wasn’t the first one to just say no to NIPP, but he said clearly.

The 10-year Treasury yield rips. Unstoppable negative yields become stoppable. Read…  THE WOLF STREET REPORT: Snapback Bloodletting in the Overripe Bond Market

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2019-09-19 04:32:20Z
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Instant view: U.S. fed funds rate breaks above Fed's target range - Reuters

(Reuters) - A key interest rates the Federal Reserve aims to influence to control monetary policy broke above the top-end of the central bank’s target range for the first time since the global credit crisis more than a decade ago.

The effective or average interest rate on what banks charge each other to borrow reserves overnight rose to 2.30% on Tuesday, above the Fed’s current target range of 2.00%-2.25%, New York Federal Reserve data showed.

WILLIE DELWICHE, INVESTMENT STRATEGIST, BAIRD, MILWAUKEE

“It’s probably nothing. It’s probably the sort of seasonal, technical sorts of things that people are using to explain it away. But there is a risk that there is some trouble in the monetary plumbing in the economy.”

“If you step back, Fed easing for the most part was extremely experimental. This tightening phase has been extremely experimental. You don’t realize what is going on until you are actually in it, and you start to see some of this stuff and that could be what’s going on.”

“I’d be more reassured by it if someone was saying, ‘Hey, this might happen,’ it happened and then people say, ‘But don’t worry about the rest of it, it’s going to be fine.’ Instead, it’s something that was a surprise and people are quick to say, ‘It’s no big deal.’ You weren’t anticipating it in the first place, so then how can you say there’s no other problems that are going to come after it?”

KEN POLCARI, MANAGING PRINCIPAL, BUTCHER JOSEPH ASSET MANAGEMENT, NEW YORK

“I wouldn’t say everyone got up in a panic the way they did, remember two weeks ago — the minute the 10-year inverted there was this panic. I wouldn’t be so panicky today based on what happened last night. But it speaks of maybe a broader underlying trend that may be developing, so in order to not lose control the Fed is going to have to stay on top of that. I don’t believe it is a signal of concern, I think it is an aberration. The Fed is constantly doing those overnight repos, it is part of what they do to help fund the system. A lot of that was driven by the huge tax payments that came due and big corporation had to pay so, therefore, that was part of the reason and that makes perfect sense. Which is why I wouldn’t necessarily be raising the alarm bells going, ‘oh my God this is over,’ I don’t think that is the case. Nor do I think the Fed is losing control, but that being said, if this continues, if tomorrow is the same thing, the next day is the same thing then I would say there is more under the hood but I wouldn’t say that right now.

“We are still much closer to the highs than not and therefore today’s announcement that they are cutting rates by 25 basis points could actually produce that buy-the-rumor, sell-the-news report. Because they took the market right back up to the highs, now they are going to announce it so it wouldn’t surprise me to see the market get hit today as people take the profits over the past couple of days.”

MICHAEL SKORDELES, U.S. MACRO STRATEGIST, SUNTRUST ADVISORY SERVICES, ATLANTA

“The big takeaway is it’s not a big issue. A lot of companies had parked funds in money markets, but with the expectation of the Fed continuing to lower rates, why keep it in money markets if it’s going to be parked a little while longer? Why did the Fed have to step in? They used to always do it. But since there has been so much liquidity sloshing around, there wasn’t much need. Now that rates are moving downward and people are moving funds around, rather than parking them in money markets, there’s an opportunity to have a mismatch in funds. Our view is that it’s fairly straightforward and not that big of a deal. We’re not seeing the signs of stress that some people are ascribing to it.”

“This (jump in the fed funds rate) is lock, stock and barrel the same mismatch of funds in the money market (pushing up) the fed funds rate.”

SUBADRA RAJAPPA, HEAD OF U.S. RATES STRATEGY, SOCIETE GENERALE, NEW YORK

“It adds the uncertainty, the repo market is $1 trillion plus and when you start seeing funding stresses of this magnitude it signals that it’s probably demand for reserves.”

“The question really becomes how is the Fed going to make sure we don’t have this volatility in the repo markets, and reacting to it with the repo facility and making cash available for traders. The question is should they be doing more? With the spike in effective fed funds will that mean they will be cutting IOER, and also they could potentially introduce a standing repo facility which they have discussed in the past, or they can start organically growing their balance sheet.”

“I think it’s a bit premature to either grow the balance sheet or introduce a standing repo facility, but we might get a little bit more color in the press conference from Chair Powell.”

LOU CRANDALL, CHIEF ECONOMIST, WRIGHTSON ICAP LLC, NEW YORK

“The fed funds rate is a sideshow when you have seen all the volatility in the repo rate. Yes it’s above the top end of the Fed’s target range. It was 5 basis points out of the range. It’s a pretty small miss.”

Compiled by Alden Bentley

Our Standards:The Thomson Reuters Trust Principles.

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2019-09-18 13:56:00Z
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