Link of The Day
Website IndexUniverse writes "ETFs 'Poaching' the Market", which discusses the possibility of a "money market ETF". It cites the recent filing of SSgA's SPDR S&P Commercial Paper ETF and the recent launch of WisdomTree's U.S. Current Income Fund (USY), but says, "None of these funds, however, will be able to call themselves actual money markets just yet." It quotes our Peter Crane, "Right now, ETFs are beginning to hover around the edges of money market mutual funds. But they're not the same thing as money market mutual funds. The seeming simplicity of maintaining a stable value is actually a formidable obstacle for the ETF industry." Also, see Crane Data's July 17 story, "SSgA Files to Launch SPDR SnP Commercial Paper, First Cash ETF", and see IndexFunds' other new article, "Money Market ETFs In Europe".
Investors' Business Daily writes "Parent Firms Bucking Up The Buck", which says about 17 advisors to date "bolstering" their money market funds, "So far the strategy has worked. No fund has broken the buck." IBD quotes Peter Crane, "Money market funds, though they've had painful bailouts, benefited from this.... High yield is good when it comes from certain things. Low expenses are good. A big, diversified (portfolio) is good. Also, a big asset base gives you protection." Also, see ignites.com's "Money Funds Act to Address Investor Concerns", which summarizes recent communications efforts by money funds. (The article was derived in part from Crane Data's "Money Funds Step Up Communications With Conference Calls E-mails").
European Treasury publication GTNews just posted a "Guide to Money Market Funds - Part I: The Current Landscape", which "considers the advantages of money market funds and key investment issues that corporate treasurers should keep at the forefront of their minds." BlackRock's Mark Rimmer compares bank deposits vs. money funds (in the U.K. and "offshore" market), discusses key steps for investing and lists key questions treasurers should ask their money fund providers.
Tracs Financial's Institute of Public Investment Management hosts its annual Summer Investment Symposium in Park City, Utah August 3-6, 2008. The company, run by government pool watcher Jeff Flynn, brings together government "cash" investors. (The company has no website, but e-mail PCSeminar@tracsfinancial.com or Pete for the full program. Speakers include: Peter Rizzo of S&P, Tom Jordan of MBIA, Deanne Woodring of Davidson, Paige Wilhelm of Federated, and Peter Crane of Crane Data.
Chuck Jaffe in San Francisco Chronicle says "Fannie and Freddie's woes no big threat to money market funds"
MarketWatch Columnist Chuck Jaffe writes "Fannie and Freddie's woes no big threat to money market funds" in today's San Francisco Chronicle. The veteran fund writer responds to a radio show listener's concerns about his money fund holding Fannie Mae and Freddie Mac debt, saying, "While the Fannie Mae and Freddie Mac situation threatened the credit market, it's not actually a big worry for investors in money market funds.... Since the subprime crisis took hold, money funds have been more talkative about what they do; several big firms have sent notes to shareholders about the Fannie and Freddie concerns -- which most experts believe have been resolved for a minimum of six months, thanks to Treasury support -- because they don't want guys like Edward to bail out."
Today's Wall Street Journal writes "FDIC Issues New Deposit Rules for Big Banks", which says, "The agency said it will consider whether to make automated sweep transactions at banks of all sizes ineligible for deposit insurance. These refer to transactions that move money back and forth among different accounts to capture higher yields." It continues, "Swept funds that are transferred from insured deposit accounts to nondeposit investment vehicles or accounts may not qualify for deposit insurance, the FDIC said, though the agency said it would defer implementing that change until July 1, 2009. The agency is expected to finalize the sweep-account rules after receiving comments from the industry." (See FDIC's Financial Institution Letter here.) In other news, WSJ also writes, "Auction Prices Cheyne".
The Investment Company Institute reported its latest money market mutual fund asset totals last night, showing a decline of $6.91 billion to $3.498 trillion in the week ended July 16. Institutional assets decreased by $16.89 billion to $2.270 trillion, likely impacted by the July 15 quarterly corporate tax date. Retail money fund assets increased by $9.98 billion to $1.228 trillion. Institutional funds saw declines in every category, though government funds fared surprisingly well considering (unfounded) concerns over Fannie Mae and Freddie Mac. Govt Inst funds decreased just $1.49 billion.
This recent Vanguard Podcast entitled, "The Fed funds rate and what it means to you", explains the basics of the Fed funds rate and interest rates. It says, "The Federal Reserve has made several cuts to the federal funds rate since the summer of 2007. Joseph H. Davis, Ph.D., Vanguard's chief economist, explains the Federal Reserve's purpose behind making these cuts, how these rate cuts impact other interest rates, and what it all means to investors." He also clarifies the relationship between short-term and long-term interest rates.
Aron Chazen, a principal in online money fund trading portal TreasuryCurve, wrote an article for a recent issue of AFP Risk! entitled "Assessing Market Risk". Chazen says, "When I began my career in institutional cash in 1991, clients typically rolled repo or kept their money in traditional bank accounts earning little or no interest. Today, I have seen treasurers invest in securities they don't understand, don't know how to price nor have the resources to do either. Regardless of the impressions that may exist, institutional treasurers are not typically greedy. Their compensation is not based on earning an extra basis point on their investments. To the contrary, treasurers know their jobs are on the line if their portfolios are not safe and liquid."
Bloomberg writes "Money Funds Stick With Fannie, Freddie Debt on Rescue". It says, "Vanguard Group, Federated Investors Inc. and The Reserve, investment firms that manage more than $520 billion in money-market funds, said they will continue to buy Fannie Mae and Freddie Mac debt because the U.S. Treasury's rescue plan has bolstered confidence." It quotes Reserve CIO Patrick Ledford, "The auction today was oversubscribed.... On the equities side, it's a totally different story, but from a credit perspective, we're very comfortable with Freddie and Fannie exposure."
The Arizona Republic's Russ Wiles writes "Despite the economic worries, there are a few pieces of good news", which says, "But not everything has unraveled on the economic front. Here are a few examples of reasonably good news: Money-market funds: When the credit crunch hit last year, many experts worried about money-market mutual funds. Dozens of funds held exotic IOUs carrying credit risks. The fear was that defaults would cause funds to incur losses so that their prices would 'break the buck' or drop below the standard $1 a share, triggering panic.... But those fears have largely abated. The funds stopped buying shaky instruments, and most problem holdings have since matured, said Peter Crane, publisher of the Money Fund Intelligence newsletter. He said 16 fund-management firms voluntarily absorbed losses on bad holdings, while investors continued to add money to the funds, diluting problems with new cash." It quotes Crane, "The saving grace has been a large cash inflow. Investors haven't blinked."
The Associated Press writes "Government shuts down mortgage lender IndyMac", which says, "IndyMac Bank's assets were seized by federal regulators on Friday." AP says it is the second largest bank failure in history. The FDIC's letter may be seen here. FDIC's press release says, "IndyMac Bank, F.S.B., Pasadena, CA, was closed today by the Office of Thrift Supervision. The Federal Deposit Insurance Corporation (FDIC) was named conservator.... IndyMac Bank, FSB had total assets of $32.01 billion and total deposits of $19.06 billion as of March 31, 2008." AP adds, "Some 10,000 depositors had funds in excess of the insured limit, for a total of $1 billion in potentially uninsured funds, the FDIC said." See also Monday's WSJ article, which says, "[T]he percentage of uninsured deposits has doubled since 1992, climbing to about 37% of the nation's $7.07 trillion in deposits at the end of the first quarter."
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