Posted on 09/28/2009 12:20:38 AM PDT by bruinbirdman
Treasury's money market fund guarantee just expired. Where to go for safety?
A little over a year ago the collapse of Lehman Brothers sparked heavy redemptions from the dozen or so money market funds that held Lehman debt securities. The hit was particularly hard at The Reserve Fund, a money market fund that had a $785 million position in Lehman commercial paper. Soon The Reserve saw a run on its Primary Fund, spreading to other Reserve funds. Reserve tried to furiously sell its portfolio securities to satisfy redemptions, but this only depressed their values.
Despite its best efforts, The Reserve Primary Fund couldn't find enough buyers and on Sept. 16 the unthinkable happened. The Primary Fund "broke the buck," meaning that the net asset value of the fund, $1, fell to $0.97 a share. It was only the second time a money market fund, which are commonly thought of as guaranteed, broke the buck in 30 years.
Panic set in. During the week of Sept. 15, investors withdrew $300 billion from prime (i.e., taxable) funds, or 14% of their value. The money market funds system danced on the edge, says Jack Winters, a chartered financial analyst, who has worked with money funds since 1976. "Reserve blew up and the market was frozen," he says. "All the prime money funds broke the buck. The government came in, and the Treasury guaranteed the funds, and the Federal Reserve provided liquidity programs to back it up."
Winters says the danger of a repeat is all too real. Despite last year, the industry has been resistant to reform. "The industry is in denial that it was bailed out," he says. "They are in denial that a major event
(Excerpt) Read more at forbes.com ...
Ha!
The ones who are in denial are the pinheads in Congress who will just bail them out again the next time!
buy gold/silver to protect yourself. Sitting in cash isn’t going to save you if FDIC is broke
If the pinheads don’t, I hope they give me a heads up so I can get my money the hell out.
Gold and silver make a good hedge, but putting too much money into these would be a huge mistake.
Gold and silver are acting as common commodities right now. I firmly believe gold will drop below $800/oz. and silver below $10/oz.
Our nation is in a deflationary spiral. Sitting on physical cash is EXACTLY what people should be doing, in my opinion.
Keeping that cash inside a bank is a mistake. The FDIC is currently insolvent. This doesn't mean that they can't get more money from Congress (us) - it just means that it may take you some time to get your money back if your bank folds.
Two months worth of cash-on-hand is what folks should look at. Just my 0.02.
if you’re going to sit on cash, sit in another currency e.g canadian or australian dollars, not USD. Have you noticed USD value have been dropping
I think I should go into the home Safe business.
You can not go ‘broke’ with paper. They, the Federal Reserve and Company will just print a ‘special’ paper, note, bond, some sort of wood pulp with ink on it, and presto chango, you are not broke. Granted the Chinese might not want them, but we don’t live in China and the government will, by force, make you accept the script.
I’m suspicious of articles such as this. I think they are planted in an attempt to drive people out of holding cash and into the stock market. Perhaps the purpose is to try to continue to prop up an already artificially inflated market. More likely, Goldman Sachs wants to dump it’s stocks and needs some bag holders.
You might notice that we import a lot of things. Things paid with dollars. Naturally the people getting paid with dollars will want more dollars for the same stuff they sold yesterday. Like oil, for example. Basically oil consumption is down, world wide, yet oil is at 70 dollars. That’s because the oil producers want double the amount of dollars then what they accepted a few years ago.
Well so too will people that make shoes, computers, cloths. All will go up.
General trend. Higher prices, continued job destruction, wage stagnation, asset price decline, higher taxes and more centralization/socialization.
If everyone is into something, who can you sell to? Everyone already has it.
GS just knows to get out early, and that people in large groups behave like cattle, like herds.
(Hey, it’s ugly, but someone has to fleece the sheeple. )
Correctly stated. And, the scripture substantiates your point:
Proverbs 23:4 Do not weary yourself to gain wealth, Cease from your consideration of it.
Proverbs 23:5 When you set your eyes on it, it is gone. For wealth certainly makes itself wings, Like an eagle that flies toward the heavens.
I like that.
Market is way up today. How right I was (at least for a little while).
There is a great market niche DELIVERING HOME SAFES.
There are almost no companies delivering home safes UPSTAIRS. All you need to enter this business is a good dolly, a truck, and 3-4 guys who can deadlift 400 lbs.
A typical delivery charge would be $300 for about one hours work. Not bad!
When I was young I delivered 800 lb. pool table slates upstairs. My partner was 65 years old.
Dow up 124 today on "thin volume".
yitbos
Banks May Have to Prepay FDIC Insurance Premiums
The Federal Deposit Insurance is expected to take the unprecedented step of collecting banks’ regular premiums early to inject cash into the shrinking deposit insurance fund........
http://www.cnbc.com/id/33061278
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