I want to throw a chunk of cash into CDs in one or two convienient walk in banks. Maybe a million or so. But I don't want to get totally ripped off just for the sake of safety, by accepting B of A type rates which are more than one percent below the best. On the othe hand, I don't want to take any more than about a one in a two thousand chance of losing my non insured money.

Does anyone think they know which, if any, banks in my neck of the woods ar within about a third of a percent of the top paying ones and are safe enough to ignore the FDIC? If so please tell me who they might be.

put your money outside the USA

As a general and probably easier note you can just get additional insurance for amounts over the FDIC standard limits. Most banks will offer the additional insurance and it's fairly cheap to buy, should be much less then the one % difference in rates

Steve

i agree.

fly to Australia and open an account there. OR, open a eurodollar account in australian dollars.

then hope the currency doesn't actually depreciate like it should in terms of interest rate diffs.

Barron

the real best thing to do with US dollars now though is to buy silver.

i own australian dollars too though, not a bad a move in general.

definitely agree that AUD is a good place to be.

why do you think silver would yield more in terms of opporutnity cost than AUD?

i don't see silver appreciating like other things right now given the direction of the US / global economy.

what are your thoughts?

thanks,
Barron

I agree not to get a CD. Invest in other currency. Euros, Canadian $ or even British Pounds. Or somehow open a foreign account in the currency of your choice and get the going rate for a CD in that country. What are the odds that you put a Mill into a US CD and a year or 18 months or whatever from now the US $ depreciates > than the % you earned against 1 of those foreign currencies?

Revocable Trust Accounts, estate planning trusts and or (living trust, family trusts) are insured for up to $100,000 for each person on the account. Or just ask the bank to use a CDARS (which will cost you a very small percentage of your total yield).

Or since you are the genius perform the math yourself, from 2001 through 2004 22 banks were taken over by FDIC and four of these banks failed to return 100 cents on the dollar on uninsured accounts when the final dividend was paid.


SOURCE: FDIC

<font class="small">Code:</font><hr /><pre> Failed Bank--- Date Closed----- Total Uninsured Deposits Repaid

Bank of Sierra Blanca
18 January 2002
65.35%

Sinclair National Bank
7 September 2001
82.17%

The Malta National Bank
3 May 2001
91.21%

First Alliance Bank &amp; Trust
2 February 2001
94.99%

</pre><hr />

The remaining eighteen banks that went under had returned, by the spring of 2005, anywhere between 30% and 98% of uninsured deposits, but they are still in receivership and could return more.

One percent of all the banks in the US fail each year.

This should give you all the data you need to compute your 1 in 2000 thousand chance.

www.idcfp.com is a good website to get an accurate rating of a banks solvency.

We don't know the probability that a good bank will fail. There aren't enough events in recent years to estimate it very well. However, your requirements are fairly stringent and it may be that no institution today satisfies them.

In any event, retail bank CDs are unlikely your best alternative. If you think you are giving up too much owning Treasuries, you can find money market funds that both can get you where you want to be and are more liquid than CDs.

There are a lot of issues in the short term funding markets today, so since you appear to be quite risk averse, find a super vanilla 2a-7 fund.

I don't understand all the Australia stuff. Aside from being nonresponsive to the poster's question, Australia has been hit hard with -- US subprime mortgages!

Why AUD?

AUSSIE AUSSIE AUSSIE!!!

I can go into more reasons myself if you have more questions but here's a short case written by someone else (since its late and im lazy right this second). In fact i'll just write my opinions on this tomorrow but here a few facts to start with. I know you dont like article postings and prefer a summarization but these words are pretty concise and quite to the point.

Commentaries from James Turk:

Silver Is Money.




This chart presents a base-100 analysis of crude oil prices in terms of dollars and goldgrams (grams of gold, and the unit of account of my company, GoldMoney) – and it now includes silver too, about which more in a moment. In other words, to establish the comparison in this chart, this analysis assumes that one barrel of crude oil equals 100 units of each currency as of December 1945. The month-end price is thereafter calculated based on the actual dollar price of crude oil and the prevailing dollar-to-goldgram rate of exchange. We can see from this chart (the red line is the price of crude oil in goldgrams) that a goldgram today purchases basically the same amount of crude oil as it has at any other time shown on this data line.

Thus, the price of crude oil today is not out of line with past experience, provided it is measured in terms of goldgrams. When viewed by its goldgram price, crude oil today costs not much more than it did throughout the sixty-two years presented in this chart, and has occasionally cost a lot less.

These two prices of crude oil are surprisingly different. Why has the price of the same commodity taken two separate paths so unexpectedly divergent? Clearly, the answer lies in the money used to calculate crude oil’s price.

We can see that crude oil’s price fluctuates in both data lines, rising and falling in dollars and goldgrams. After all, nothing in our world is static, and we clearly see in these prices an example of that reality. Supply and demand changes cause the price of crude oil to fluctuate in both dollars and goldgrams.

This interaction between supply and demand is basic economics, but this fundamental principle becomes distorted and therefore difficult to assess over long periods of time when the dollar – or for that matter, any other national currency – is used to measure prices. National currencies do not provide an accurate, consistent measure of buying power. In other words, because the dollar is being inflated, the trend of crude oil prices in dollars in this chart (the blue line) is rising. But goldgrams are not being inflated, so the price of crude oil in terms of goldgrams continues to trend sideways.


More on Silver.

The movements up and down in the gold/silver ratio very clearly show the ebb and flow of demand between gold and silver. This ratio also shows us something else.

There exists a phenomenon that I call the ‘silver paradox’. Namely, if we analyze the minerals in the earth’s crust, there is about ten times more silver than gold. Therefore, given this amount of the relative supply of these two metals, why isn’t the gold/silver ratio 10:1 instead of the present level of 55:1?

The simple answer is that supply is only one-half of the supply/demand equation that determines price. The demand for gold and the demand for silver also need to be factored in, which leads to the second part of the silver paradox. Given that there is relatively little demand for gold as an industrial metal or for its use in items such as jewelry, gold’s demand clearly arises almost entirely from its monetary use, but silver is different.

Silver has a very strong industrial demand. What’s more, in contrast to gold which is hoarded and not consumed – i.e., gold does not disappear – silver is consumed in photographic and other applications, never again to re-appear. To explain this observation another way, essentially all of the gold mined throughout history exists in its aboveground stock. While the size of the aboveground stock of silver is controversial and probably unknowable, it seems likely that less than one-half of all the silver mined throughout history still exists in its aboveground stock, which brings us back to the silver paradox. Given the relative amounts of gold and silver that appear in the earth’s crust and given silver’s relatively small aboveground stock compared to gold, should not their ratio be 10:1 or perhaps even less?

The answer again comes back to demand. The demand for silver is elastic, while that for gold is relatively inelastic. Therefore, at the bottom of the precious metal bear market in the early 1990’s, it took over 100 ounces of silver to buy an ounce of gold. It still takes 55 ounces of silver to buy one ounce of gold, but the trend is clear. Silver is gaining on gold, and will continue to do so as this precious metal bull market continues to develop because on the margin any new money coming into the metals has a bigger impact on silver.

Thus, while I am very bullish on the long-term prospects for gold, I am even more bullish on silver. Historically, the ratio of these two precious metals is about 16-to-1. Therefore, as both gold and silver climb higher in this current bull market, I expect silver to climb even faster than gold, outperforming so that eventually the gold/silver ratio approaches 16-to-1.

Nice post but the "only" reason besides supply and demand is is because silver production is lower than the current demand. If the demand curve increases too much many more silver mines will open and silver will fall back to stable levels. I see no reason to hold silver over gold nor especially Zinc, nickel or oil.

Jimbo


btw, silver is a base element, although it may not be cost effective to recover it never disappears, but the same holds true of gold used in production of electronic components.

This isn't really entirely true for any of the above. Deposits are becoming rarer and the costs of mining are going up.

This was more true in the past. Less true today.


Gold used in electronic components does not disappear. This can be refined and extracted. There is major industry around this.

How does this differ from what I wrote?

Not quite entirely? What portion please, I was referring to silver in that portion of my comment. There is much more silver still underground than above. Why do you think we are drilling for oil in the middle of the ocean? I'll help, the current market price makes it worth drilling out there. Perhaps you weren't around when oil dropped to below $20 per barrell and stripper wells were closed all over the Anadarko basin. Guess what, they are up and operating again.

Noetheless my conclusion that investing in silver is far from the best choice seems reasonable to me.

Jimbo

i did read what you said wrong. im half asleep right now.

however, gold is cost effective to extract.

I shouldn't even have drifted to this point because this isn't a significant part of my case.

However demand is outpacing any bright picture for rare commodities supply increases. Regardless, the main point is an inflation issue. Oil isn't increasing that much in real terms, oil is mostly just increasing in inflated currencies.

Gold and silver on the hand will have massive monetary demand increases when US bond markets start to really suffer. Thats the main reason to be in them.

Great thread guys....esp. the siver/gold ratio debate

David,

Before I start typing a fairly long answer to your question that will solve your dilemma from many perspectives:

1.Is your comment of a TOP TIERED walk-up money center bank (such as a Chase,BOA,Citi,etc),due to actually being able to withdraw physical CASH at some time at that particular location?

2.Is it imperative that the $1MM NOT be in a one chunk/one location/one time frame type vehicle?

3.When you say BOA is offering 1% BELOW other comparative CD's...are you referring to the interest rate/time period of each CD individually or as ONE CD over x months/years?

4.What is the min/max time frame of putting this money to work?

5.Where is your neck of the woods?

I have several large trust accounts for my family/children(I have also helped clients with similar packages) that I have set up that have covered many of these bases.....such as secure bank worries,inconveniencies,FDIC concerns that you are addressing ...as well as NOT having your money tied up for a lengthy period of time without being substantially penalized

Stephen Feraca

"silver is consumed in photographic and other applications, never again to re-appear."

With everyone using digital cameras these days this barely holds true

To keep the discussion to the original question, the risks have been pointed out very well. The good news is with online banking with a joint account you should be able to pick 5 financial institutions and open accounts at all in well under an hour of time.

There are many financial institions who have not reacted well strategicly to the change in interest rate environment and some rates 3-5 years out will look good now, but will look like a killing 6 months from now.

I appreciate the advice but the posters here do not understand the degree of my laziness. Let's simplify the question.

Which of the following places would have a greater than a .05% chance of not giving me back all of my money plus interest in five years if I were to put a million bucks in there.

Bank of America

Citibank

Nevada State Bank

Washington Mutual

Charles Schwab tax free sweep funds.

I guess to be more precise I should say a .05% chance over and above the chance that Treasury Bonds or an FDIC insured account would.

Many places also offer free SIPC insurance to supplement FDIC insurance. Generally this insures you for between $500k and $10M, and is quite reliable. I would check the fine print for whichever place you want to deposit to see if they provide this added insurance. I would think Charles Schwab or other brokerages would be most likely to.

I would NOT put your money into Washington Mutual. Look at their stock price and default swaps....

Bank of A and citi are both safe. I'd say Schwab is safe as well, but thats a money market and not a CD though right? Different risks there.

My original answer was the best one for the lazy man who doesn't want to think about it or worry about default risk. The extra insurance is insanely cheap and easy to get, just have to ask for it when you walk in. In this environment the bank may even pay it for you.

SteveOMS

Banks are rated by people at Moody's and S&amp;P. You can check the rating for considered institutions and go with the best one.

There is also Bank Rate's rating: http://www.bankrate.com/brm/safesound/ss_home.asp I don't know if Bank Rate's rating is just a gimmic or a solid assesment (never heard of it) but Moody's and S&amp;P data is what you should be looking at.

Don't pay for insurance. Many Banks offer programs where they will take your money and give anything over $100K to various other banks (keeping your deposits under $100K at each bank). The Bank is part of a network and will get money back in return. Many will do this for free, especially with the bargaining leverage you will have with $1M +.

The Bank of course pays to be part of this network, but in return they are able to satisfy their high net worth clients which is worth much more than the few bps they charge.

I work at a Bank and we use CDARS. Read more about it here:

http://www.cdars.com/

Make sure you give them a list of all the institutions you have money at currently. They can select which institutions not to send your $ to.

After I attempted to give some sound advice,and reply to your post....your reply of "I am too lazy to figure out where to put my MILLION dollars"...this is either a thinly veiled brag post..or just plain STUPIDITY

There are PLENTY of 2+2 members in BFI,that would LOVE to have "your million $$$ problem"...and would digest any useful information this forum may produce from the many intelligent posters.

This is a "NICE" example you are setting(LOL)... for the younger/novice investors,as I would expect MUCH more from you.If you can compute,compare or even care about your &lt;.05% loss worry.....what was the purpose of your post in the first place?

Just drive to the nearest BOA branch...tell them how lazy you are.....deposit your $1MM in ONE five year CD at whatever interest rate they give you,....and "hope" your principle + interest is still there in 2012

I am pretty shocked right now,as I guess I would expect more from someone like you in BFI

I am also THRILLED I didnt give you the sound advice I was sincerely going to suggest prior to me asking you some simple questions in my previous post...making you many times more than a standard CD will return w/o risk!

Very Disappointed,
Stephen Feraca