Money Market Funds Try to Calm Investors
Submitted by
CalculatedRisk on Wed, 09/17/2008 - 9:52am (111 comments)
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Recent Recommendations
Re: Russia markets
I'm sort of proud of "Bubble, Bubble, Oil and Rubles"
Everybody who is paying attention is calling their broker to "make sure my money market only invests in Treasuries". Then they are telling two friends.
"None of our U.S. money market portfolios has any exposure to Lehman, American International Group Inc. or Washington Mutual Inc.", said Invesco in statement released on Wednesday."
LMAO
first
S&P's Chambers: Pressure building on AAA rating
S&P says pressure building on U.S. AAA rating
| Reuters
Fun times a' coming. YEEAAHHH!!!!
What a day. It seems like they are coming closer and closer together.
On the upside, there are many fresh tomatoes at 131 Cony Street, Augusta, Maine. Stop by for a few.
CR should get a nap if he can. He's been working hard.
Cheers to all.
After this debacle: Seeing money-market funds "breaking the buck" and however many with cash infusions, getting hammered a few months ago on Schwab's "Safe" bond fund by 5%, I've concluded "don't invest in ANYTHING you can't understand".
Which means, anything risk-averse is FDIC only and below the limit, have a nice day, accept nothing else.
And anything risk tolerant is stock market index funds.
I'm still waiting for Bank of America (Bank or America?) to buy the U.S. Treasury. For $4.63.
This is good to see that these guys are trying to keep clean rather than chasing yield.
Buy when there's blood in the streets.
Rome is burning. Would you like some wine with the show?
So Cal #'s out....TIMBERRR
If we see an accelerating movement out of currencies and into precious metals, things could get really interesting.
Be prepared to show the contents of your safe deposit box to the IRS.
Ministry of Truth, exactly. I think most money funds understand the purpose of a money fund. Yeah, the yields will be low, but they will hold the $1 NAV.
Best Wishes.
WAMU: I'm not dead...
Comrades,
"Our first priority in managing these funds has been and will continue to be maintaining that $1 Net Asset Value."
Gosh, I've heard something VERY similar a lot lately.
Problem is, it never seems to be true.
Nostrovia,
We are about to watch what happens in a central-banker controlled casino/command economy.
No one said late stage capitalism would be fun.
Marx proves the existence of time travel- no one could be this correct in his analysis.
"I'm sort of proud of "Bubble, Bubble, Oil and Rubles"
3 Gold Stars, and a Silver Bear
"$1 Net Asset Value"
Thank you for your candor.
Two-buck Chuck:
WM 2.12 -0.20 -8.62%
I know somebody who bought a bunch of WM at $12 to make some quick money. I told him I would dump it, but...
Why doesn't the gubmint just lend the money to the money market funds? You guys are such dummies
OTH ,when they start making statements like that like that, you have to wonder if they are trying to prevent a run of the MM fund .
TED Spread: 3.04
remember Robocop?
YouTube - I'D BUY THAT FOR A DOLLAR!!
Dick, you're fired!
YouTube -
Comrades,
"FEDS TRY TO FIND A BUYER FOR WAMU"
I know it's the New York Compost...
http://www.nypost.com/seven/09172008/business/feds_try_to_find_a_buyer_for_wamu_129499.htm
Nostrovia,
all your banks are belong to us
CR writes-
"I'm sure WaMu enjoys being grouped with the dead and dying."
Great, now I have an image of video of a deserted southern Manhattan with "nothing but the dead and dying back in my little town...." running over & over in my head.
Oh well, its not like I was contributing much of anything to GDP today anyway
It was on my to do list for today:
1)\tCalling your institutional brokerage on the update on the situation with MM funds...
if experienced professionals have the fear scale, the MM collapse would be 9 out of 10. (treasury 10 is out of 10)
Hottiebabe on CNBC just commented that some people are making communist jokes.
Think they are watching?
Well, I'm off to invest in a known investment vehicle that I fully comprehend - Powerball! C'mon baby, daddy needs new shoes!
experience professionals - whoever involved in asset management, etc.
Max,
Are you trying to give me a heart attack.
Ted Spread 3.0...
That's just silly.
Nostrovia,
Please help me understand the implications of the 3-month T-bill going to 0%
Ahhh, another day, another bailout.
Wamu is definitely on tee for friday this month.
The noises regarding hitting the treasury backstop for Fdic are unmistakable.
I do notice that Glod and sliver have shot up magnificently on the dollar panic. Hope nobody has too much exposure to Russia, after all, it doesn't look too liquid any more.
Now, buy everything heavily shorted, as the mamoth short squeeze courtesy of Cox at the SEC will be underway by Friday.
Ready, Set, speculate!
Someday this war's gonna end...
Waitasec... going back to comment from Tokyo U's sumi-e-economist from yesterday...
If this a hill just what the heck are the himalayas?
Did he go all sepuku after he said that?
I caught that too CCC, I'm wondering why she thinks it is a joke?
Scotto writes:
Please help me understand the implications of the 3-month T-bill going to 0%
2 people just did in the last thread you posted this in.
The next leg down has got to be the US$. No way are people tolerating zero yields on treasuries for long, especially when the U.S. government is taking steps that jeopardize its own credit rating.
Wamu prediction- Good bank/bad bank split, with the good bank taken over by . . . humm, not sure who has the cash, but Wells is best guess. And the bad bank goes to . . . . you and me!!!! In some sort of RTC style vehicle. The justification being that the FDIC fund would be killed by a direct takeover.
The big news under the radar is China calling for the world to move off US dollars, do you want to know what the kung fu death move is?
China dumps US treasuries = game over USA.
Comrade Kristina,
"I caught that too CCC, I'm wondering why she thinks it is a joke?"
ROFL!
Nostrovia,
thanks CSC i figured that thread would die with this one ope
dryfly writes:
WAMU: I'm not dead...
...yet.
Attention: Please begin referencing Fascism instead of Communism. The CEOs are running the gov and there is no pretense of helping the little guy.
Thanks,
Superfine Deelicious Redhot CNBC Sweetie
Alex writes:
The big news under the radar is China calling for the world to move off US dollars, do you want to know what the kung fu death move is?
China dumps US treasuries = game over USA.
Alex | 09.17.08 - 2:22 pm | #
Exactly. People tell me that we're going to war with china at some point in the next 10 years. I tell them the war started 5 years ago.
"$1 Net Asset Value"
That might be all these funds are worth by the time the dust settles. We are witnessing the largest wealth transfer in all of history. 401ks are getting routed. The government is confiscating assets left and right. Total fascist coup in progress.
As a regular listener of the Alex Jones show, I've seen all this coming every step of the way. But since he's just a kook conspiracy theorist, I guess none of this is real.
I am sure Schwab's money funds are quite clean, but I am clearing out money funds and buying insured CDs and foreign treasuries to get to 50% non US$.
NEW YORK (Reuters) - Pressure is building on the pristine "AAA" rating of the United States after a federal bailout of American International Group Inc, Standard & Poor's sovereign ratings committee chairman said on Wednesday.
The $85 billion bailout of AIG on Tuesday by the U.S. Federal Reserve "has weakened the fiscal profile of the United States," S&P's John Chambers told Reuters in an interview.
"Lack of a pro-active stance could have resulted in further financial stress and put pressure on the U.S. triple-A rating," Chambers said. "There's no God-given gift of a AAA rating, and the U.S. has to earn it like everyone else."
S&P earlier this month affirmed the "AAA" sovereign rating of the United States, noting risks to the U.S. credit profile including the deteriorating credit profiles for most U.S. financial institutions over the past 12 months, S&P said in a September 3 statement.
Potential up-front costs to the government of maintaining financial stability could reach 24 percent of gross domestic product in the case of a "deep and prolonged recession," the report said.
Chambers on Wednesday compared the U.S. rating to a lobster cooking in a pot of cold water.
"The lobster is still in the AAA pot and still moving," Chambers said. "The heat is turning up, but the water is still AAA stable."
Chambers also called the AIG bailout "a signal event without precedent," adding: "This will be case studied for decades to come."
(Editing by Chizu Nomiyama)
24% of GDP OMFG!
But Fascism is so 1930's...oh wait...it's beginning to look alot like 1930
Are we watching the cause of a new global currency?
"and there is no pretense of helping the little guy."
There wasn't under Communism. Talk to some of those Ukrainians...oh wait most died.
Nostrovia,
Why would the US nlose its AAA rating. This is rediculouse. Why would the US default on payments made in a currency they issue. S&P adds to the problem with stupid statements like this.
Is it a bad thing when gold has it's biggest one day gain ever? I wonder what rice futures are looking like...
Lobster in a pot???
kinda harsh
"Scotto writes:
Please help me understand the implications of the 3-month T-bill going to 0%"
it is not going to happen.. (more unlikely then 5% GDP growth next qtr.)
Implication, if t-bill gets close to 0, the buy power of your cash under mattress goes to (infinity - kidding) goes up!
CCC: you just read my freaking mind.
"Attention: Please begin referencing Fascism instead of Communism. The CEOs are running the gov and there is no pretense of helping the little guy."
But is fascism so bad if many people don't die sudden violent deaths?
ew thread everone
It's like Monty Python and the Holy Grail...
John Cleese: Bring out yer dead!
WaMu (old man in cart): But I ent dead yet!
(WaMu gets clubbed)
John Cleese: Bring out yer dead!
The wonder is that Glod was testing a bottom last week.
S&P Chambers says no God given right to AAA rating.
Ass Jack Moron. Where were you when all that MBS was getting AAA's!
Asshat!
Nostrovia,
Klepto-idiocracy 'bout sums it up.
say, what's the conjure clock set to these days?
Quite a few should learn the difference between socialism and corporatism (fascism). The latter is what we see in Russia these days, in addition to....
Implication, if t-bill gets close to 0, the buy power of your cash under mattress goes to (infinity - kidding) goes up!
DrChaos | 09.17.08 - 2:28 pm | #
DocC: Just about happened this AM, we were down at that princely yield of 0.03%, thats just about zero in my book
ac:
re your comment on the safety deposit box.
Until recently, didn't think much of that argument since we were a fiat currency.
My apologies to you. My bad.
What safety deposit box?
ot-dgp was stuck on 19.29 for a bit there....
t bills will trade at esentially 0 and the bid to cover on the auctions will go into the hundreds as decisions are made with return of capital in mind instead of return on capital. credit creation is being destroyed and we are facing a period of deflation unles the gov't acts to take assets onto their balace sheet.
"China dumps US treasuries = game over USA."
BS
$ will collapse, US mfrs will be happy, china will be screwed.
they are afraid to dump those assets as much as we are afraid of china, unless whoever runs gov finances in there, has little brains.
I would call it fascism when all of this was engineered by corporations and the private bank. This is a ponzi scheme, made possible by a bunch of suckers who failed to realize that their tvs lie to them and that tv, radio, and print actually do serve a useful purpose besides entertainment.
conjure clock melted down awhile back...
fascism
Will the trains run on time?
Where were you when all that MBS was getting AAA's!
Standard & Poors: Poor in standards.
Hottiebabe on CNBC just commented that some people are making communist jokes.
Think they are watching?
Currently Comrade Cannabis
All of CNBC is clustered here at CR. LOL
Hi Larry!
"Just about happened this AM, we were down at that princely yield of 0.03%, thats just about zero in my book
Dirk van Dijk"
is it an annual yield?
3-Month 0.000 12/18/2008 0.02 / .02 -0.66 / -.670 14:00
6-Month 0.000 03/19/2009 0.95 / .97 -0.49 / -.503 14:13
12-Month 0.000 08/27/2009 1.42 / 1.45 -0.16 / -.166 14:22
Bloomberg.com:
Government Bonds
anyone remember mr. biderman?
"There's no credit risk; no bank is going to lose money on this subprime fear," he added. "Income-tax collections are strong, and you don't have a housing collapse when wage income and job growth are surging."
Second-biggest outflow of year points to fund-market jitters FundWatch - MarketWatch
I noticed this morning that Fidelity no longer allows me to view the monthly holdings of it's money market funds. When did this change?
gold currently up $60 today; t-bill yield has crashed to nothing.
of course china dumping treasuries is BS unless the reason they hold those treasuries no longer applies - ie. their peg to the dollar and a desire to have an export lead economy. they work 16 hours a day making stuff for us and they get treasury securities in exchange. exports are a real cost to them, imports are a real benfit to us.
fed will begin paying interest on resrves. this will end much of the variability around the funds target and allow them to better adddress term rates while leaving the overnight unchanged.
Jay:
Post a screenshot to document this, please.
So whatever happened to that rumored emergency rate cut?
I hold Vanguard mutual funds like Total Stock Market Index, Total International Index, REIT, etc.. Should I sell all these and get into a money market fund today or should I keep holding them?
If you hold Vanguard Total Stock Market Index (VTSMX) then you're screwed! lol I have my 401k in mostly cash, as has been the case for most of the year. But I do have some money in a similar fund. I am not moving that money into cash. It's too late to move it now...
They are trying to rally this sucker, up about 150 off the lows. I dont buy it, but wonder if they will be able to bring it back above 11,000 for the close
Eric: I was sure that Schwab's Short Term bond fund (SWBDX) was clean too. It was supposed to be their ultra-conservative, short term, bond fund. It lost 5% between March 1st and May 1st of this year, as buried deep in it were the same crap stuff in their high yield (SWYPX) bond fund which lost %35+, just in less proportion. These aren't money-market funds, but are advertised as "close enough".
NOTHING can be assumed to be clean unless it is FDIC/Treasuries or under the mattress.
"$1 Net Asset Value"
O Rly?
I can't even get a glass of water for a dollar.
What am I missing?
"None of our U.S. money market portfolios has any exposure to..."
Why didn't he go with the faster and easier to say "None of our portfolios has any exposure to..."???
Is he hiding something?
"$1 Net Asset Value". That just means that if you write a check for $1.00 on your MM fund (or use their debit card), there is (at least) $1 in assets in the fund to support it.
Anonymous: Money market funds and stock index funds serve different purposes.
A money market fund is supposed to be a "0-risk, 0-volatility" investment, which means also very crappy returns.
An index fund is the stock market: higher returns, higher risk, and high volatility
Thus I don't cry if my stock index funds swing down 20%, or cheer if they shoot up 40%. Ignore it. The market? Who cares. Up, down or indifferent, it doesn't matter day to day.
But if my "money-market equivelent" short term bond fund drops 5%, I scream bloody murder, pull my money, and don't trust anything for the 0-risk assett class beyond FDIC/treasuries.
Thus the only question: are you comfortable with your general asset allocation.
Question about Govie only MM funds. Dont these things generally have expense ratios of about 20bp or so. With the 3M bill at 0.03%, is there a chance that even govie only funds could break the buck?
"even govie only funds could break the buck"
Notice the comments about MM sponsors having to top up funds at times in the past. That's rebating fees, in effect?
But if a fund is holding bills bot with 2 or 3-handle discounts, then they're way above water right now as the prices go to face.
The dollar plunged against the sterling and euro Wednesday afternoon amid fears about the growing financial crisis that compelled that US government to rescue AIG just days after Lehman Brothers went bankrupt.
After treading water in morning dealing, the dollar plummeted to a multi-week low of 1.8215 from an early level near 1.80. The dollar also came under heavy pressure versus the euro, falling more than 2 cents to 1.4373.
does anyone know of a site that can show the relative inflow or outflow or mutual funds?
I don't care WHAT they say. I moved all my VMMXX to VMPMX today. I suggest you do the same. Per Vanguard up to 25 % of the VMMXX can be in financial sector CP. I do not want my money swimming in that end of the pool.
"All of CNBC is clustered here at CR."
Dennis, you SUCK!!!
Larry, go pound sand.
Erin, how YOU doin'?
Jay,
Fidelity hasn't been posting the monthly reports for a month or so, although I'm not sure exactly when the change happened. It was after the Bear collapse, because I remember looking up monthly data on their site the morning after.
Is GS at 100 just part of the "dump 'em all" mood or is it telling us that the model built on M and A fees and arb, and prop trading derivatives, is blown?
Read your money market prospectus, and then see what they have been trading in, as in repos, CDO, CDARS, Fannie, etc... go on, get your paperwork out and read it!
Song of the day:
The WHO We're not gonna take it
YouTube - The WHO We're not gonna take it
Do I have to get my Vanguard prospectus out and tell yah the truth about this shit? Don't tempt me, don't push me, cause I did this last summer, and I'm ready to do it again! Go ahead, make your move, punk...
We're going to have to dust off Herbert Hoover and bring him back for comments. Krudlow would be a good one to ask him some questions.
aked... do tell.
I'm sorry. I would rather be the first one out than the last one. When they have to state there's nothing wrong, then........
Tom writes: "does anyone know of a site that can show the relative inflow or outflow or mutual funds?"
Absolutely, there are two. One is the Investment Company Institute, the most comprehensive and accurate (simply because they get data from the lion's share of funds). However, their data is lagged by a month, IOW, the August numbers will be available at the end of September.
404 : Page Not Found
"Trends in Mutual Fund Investing" is what you want.
There's another site with shorter-term activity, AMG Data.
AMG Data Services
Sebastia
Two years ago, in July, I got this supplement to the Vanguard money market prospectuses which as of July 6, 2006, implied that VIPERS are now ETF shares... so, I go huh, what does that mean...
Два года назад, в июле я получил эту дополнения к Vanguard денежного рынка проспектов, которые по состоянию на 6 июля 2006 года, предполагает, что в настоящее время VIPERS ЕФО акций ... да, да я иду, что это значит ...
So, look inside my prospectus and it says my shares are valued on the basis of amortized costs...
It further states, that the values of shares are based on NAVs of the underlying funds (in the case of conventional share classes) or the market value exchange traded funds like VIPERS.
To make a long story short, The VIPERS made me uneasy, so I started looking at the financial statements and the holding and trying to understand essentially how a money market find generates yield in terms of their investments, and this is when I began to notice all the Fannie obligations, the commercial paper, the CDS, euro dollars, repurchase agreements and the long string of derivatives linked to VIPERS...
In a nutshell, I ran away and jumped into a money market that is 100% Treasury, but even that fund has the discretion to use proceeds to do anything.
Do I feel safe there? No!
I'm sorry, I can't type or spell check, but..
I also looked at days to maturity for these holdings, e.g, the Prime MM back then had an average weighted maturity of 39 days, versus the AWM of Treasury MM which had 51 days (this is based on august 31, 2006)
what spooked me was the fact that teh Prime MM can have up to 25 % in Financial CP. Who knows what that could be. At least with the Treasury MM the gubment needs to go broke.
wait a minute...... oy vey
Furthermore, I was curious about the fact they offered, re: Prime MM invests more than 25% of its assets in MMs issued by financial service companies.
In addition, I was curious about what they meant by investing in banker's acceptances and other MM securities, and that securities that are unrated must be issued by a company with a debt rating of A3 or better... I also had a heart attack at the time when they said they invested in real estate related companies, securities firms, leasing companies, and other companies principally engaged in providing financial services, which are related to bank obligations, and securities issued by the automobile finance industry.
In a word, I started reading more details in my prospectus and paying attention to details and coming to places like CR and nakedcapitalism!!!! I have also been warned to not talk about pension funds at both places, but, after a year of posting general shit under hundreds of names, I have become a part of history, as mainstream media is replaced by this type of blogging. This is God's Plan!
Спасибо за ваше время товарищи, я буду искать обрезки кустов и готовить двор на сезонные изменения
I suspect "calming the investors" will ultimately play out like Nikolai Ceauşescu's last public speech, followed by the pock-marked wall.
aked kings unplugged, read the prospectus for Federated Treasury Reserves fund (UTIXX), which invests solely in Tsy securities and doesn't do repos, which would expose it to counterparty risk with investment banks.
"I'm sure WaMu enjoys being grouped with the dead and dying."
Let's see, mutual funds hold debt, and WAMU's debt was just downgraded to junk. I would think that would be at the top of WAMU's concern as it is now in a slow-motion free-fall to destruction - unless some diving vulture plucks it out of the air.