from The American Heritage® Dictionary of the English Language, 4th Edition
- n. The lowest rate of interest on bank loans at a given time and place, offered to preferred borrowers. Also called prime interest rate.
Sorry, no etymologies found.
"What's your bank prime rate today, Mr. Gavallan?"
The IDL is the percentage rate that the prime rate must achieve in order to trigger a switch.
When the prime rate is rising, Money Movement becomes more of a defensive strategy, but profits are still in the 10% to 15% range for the year.
From March 1987 to October 1987, while the prime rate rose from 7V2% to 9V4%, bond investments dropped 10% to 20% in value.
As I write this, the prime rate is 7.75%, so Money Movement investors would wait until the prime rate reaches or exceeds the 9% level before moving from stock to money market mutual funds.
The prime rate is the easiest of the interest rates for you to follow when using the Money Movement Strategy.
Never invest in bonds, tax-exempt bonds, GNMAs, or government securities when the prime rate is going up.