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ContraryInvestor.com has a thing or three to say this week about money market funds. Since this is a paid subscription service I won't quote it.
But I do want to discuss the skinny on what it all means.
1. Money market fund yields are down around .5% - 1%
2. These funds often charge fees that can quickly make the tiny yields above equal zero, or even go negative.
3. Banks are guaranteed now to US$250K
4. Money market funds are loaded with commercial paper that has been "AA"ed using derivatives.
5. IF short yields fall much more, and money market funds go negative, there may be a run on MM funds.
6. MM funds would have to sell their CP right quick.
7. Every MM fund would be selling at the same time.
Get the picture??
But I do want to discuss the skinny on what it all means.
1. Money market fund yields are down around .5% - 1%
2. These funds often charge fees that can quickly make the tiny yields above equal zero, or even go negative.
3. Banks are guaranteed now to US$250K
4. Money market funds are loaded with commercial paper that has been "AA"ed using derivatives.
5. IF short yields fall much more, and money market funds go negative, there may be a run on MM funds.
6. MM funds would have to sell their CP right quick.
7. Every MM fund would be selling at the same time.
Get the picture??
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