The Finatical
Week of February 15th - Money Market Accounts, Higher Interest Rates, Bitcoin's Bounce Back
Upcoming Events
The countdown to the Youth Financial Summit has begun. We are less than 15 days away!
The Youth Financial Summit is the first-ever all inclusive event for young finance enthusiasts and will be hosted online through Zoom on Saturday, February 26th. The summit allows participants to learn about hot financial topics, win cash prizes, compete against students from all over the nation, and network with like-minded individuals.
The summit includes over $2000 in prizes, a guest appearance by billionaire and legendary investor Howard Marks, and a presentation by distinguished UCLA finance professor, Avanidhar Subrahmanyam.
The summit will include a portfolio construction competition where competitors will have to create a portfolio that balances risk and reward that will then be graded through a variety of metrics and a portfolio back-tester. A combined $750 will be given in prizes.
The summit will also include a Quiz Bowl where participants can answer rapid-fire questions individually or in a team of up to 4 on a wide variety of finance questions. A combined $1000 will be given in prizes.
Note: Registration and participation is completely free. Attendees are not required to take part in every competition or speaker event.
Click below to learn more about the event and access the official event website.
FinaticTips - Learn about Money Market Accounts
A money market account is an interest-bearing account at a bank or credit union—not to be confused with a money market mutual fund. Sometimes referred to as money market deposit accounts (MMDA), money market accounts (MMA) have some features not found in other types of accounts. Most money market accounts pay a higher interest rate than regular passbook savings accounts and often include checkwriting and debit card privileges. They also come with restrictions that make them less flexible than a regular checking account. They are important for calculating tangible net worth. Money market accounts are offered at traditional and online banks and at credit unions. They have both advantages and disadvantages compared with other types of accounts. Their advantages include higher interest rates, insurance protection, and check writing and debit card privileges. Banks and credit unions generally require customers to deposit a certain amount of money to open an account and to keep their account balance above a certain level. Many will impose monthly fees if the balance falls below the minimum.
Higher Interest Rates
One of the attractions of money market accounts is that they offer higher interest rates than savings accounts. When overall interest rates are higher, as they were during the 1980s, 1990s, and much of the 2000s, the gap between the two types of accounts will be wider. Money market accounts are able to offer higher interest rates because they're permitted to invest in certificates of deposit (CDs), government securities, and commercial paper, which savings accounts cannot do. The interest rates on money market accounts are variable, so they rise or fall with inflation. How that interest is compounded—yearly, monthly or daily, for example—can have a substantial impact on the depositor's return, especially if they maintain a high balance in their account.
Unlike savings accounts, many money market accounts offer some check writing privileges and also provide a debit card with the account, much like a regular checking account.
Limited Transfers
One potential downside of money market accounts, compared with checking accounts, is that Federal Reserve Regulation D limits depositors to a total of six transfers and electronic payments per month. The types of transfers affected are: pre-authorized transfers (including overdraft protection), telephone transfers, electronic transfers, checks or debit card payments to third parties, ACH transactions, and wire transfers. Depositors who exceed the limits may be assessed a fine. If they continue, the bank is required to revoke their transfer privileges, move them into regular checking or close the account. However, depositors can make an unlimited number of transfers in person (at the bank), by mail, by messenger, or at an ATM. They can also make as many deposits as they wish.
Money Market Accounts vs. Mutual Funds
Unlike the various bank and credit union accounts described above, money market mutual funds, offered by brokerage firms and mutual fund companies, are not FDIC- or NCUA-insured. Both money market accounts and money market mutual funds offer quick access to the depositor's cash. Money market accounts have the government-mandated six-transactions-per-month limitation mentioned earlier, which money market mutual funds do not. The companies that offer them, however, can place limits on how often depositors can redeem shares or require that any checks they write be for over a certain amount. The returns on money market mutual funds tend to be higher than those on money market accounts.
FinaticTrends - Financial Trends
High Wages Could Contribute to Higher Interest Rates
According to Labor Data, in the U.S., the average hourly earnings increased by 0.7% in January and is projected to undergo an increase of 5.7% over the next 12 months. While this is great news for workers, it means even more problems for the Feds to deal with. Due to the constant increase in average hourly wages, it is making it harder for the Feds to deal with inflation which has been rising the most it ever has, in the last 40 years. BofA (Bank of America) has issued the most aggressive Fed call on Wall street for this year as economists are predicting seven quarter-percentage-point-rate hikes in 2022, followed by four more in the following year.
Various markets have been raising their stakes relatively slowly for the Fed, with pricing in five hikes this year but leaving the possibility for more and at a faster rate. The Fed stated that it was willing to let inflation occur more than its initial 2% target in its interest of achieving full employment throughout the U.S. However, with inflation now over 7% year-over-year and the demand for labor in the market is starting to get competitive and tighter, the Fed is currently in the process of playing catch up.
Bitcoin Bounces Back from January Lows
On Monday, bitcoin gained more than 6% in value, which was its highest value in over a month. According to Coin Metrics, Bitcoin rose as high as $44,500 which was its highest value since January 5th. There are economic stories that have been constantly pressuring bitcoin more than ever, as new investors are treating it like a risk asset. At the same time, there is still no consensus on how to properly value bitcoin. As major stock indexes saw strong weekly gains, it also resulted in the value of bitcoin increasing. There has been a surge in open interest regarding the open interest in bitcoin futures, which proves that traders are once again willing to take an opinion on bitcoin.
However, the perpetual futures of bitcoin funding rates are hovering around zero, which still leaves uncertainty with bitcoin for investors. If investors start to take short positions with bitcoin, then the funding rate of bitcoin would become negative and as a result would lead to a faster uptick in some of the open interest from investors. Experts are still not completely sold on bitcoin yet despite the recent increase in value, as bitcoin fell below the $40,000 mark twice in January.
Financial Guidance
“Money poisons you when you’ve got it, and starves you when you haven’t.” – D.H. Lawrence
Money Fact
A majority of U.S. bills have traces of drugs on them.
A 2009 study by chemist Yuegang Zuo of the University of Massachusetts Dartmouth found that 85 percent to 95 percent of paper money in circulation contains traces of cocaine.