Wed, October 08, 2008
Today's WSJ notes that Fidelity, Vanguard, and T. Rowe Price Group have signed up for the Treasury Dept's guaranty fund for money market funds that were held prior to September 19th. Now all the major mutual fund families with large money market funds appear to be participating in the fund (Charles Schwab is also on the list).
Investors wondering about their accounts should check their fund's web site; participating funds seem to be announcing their participation fairly prominently. You may also want to confirm that the specific fund that you own is covered; for example, Schwab's U.S. Dollar Liquid Assets Fund is not included because it's not a U.S.-based money fund.
The guaranty fund will be in effect for at least three months and the Treasury dept. has the option to extend the coverage for a year. I decided to add this post because the blog is still getting a lot of traffic from people with questions about whether their mutual funds or money market funds are insured, and this information might be helpful to them. People with questions might also want to try the Treasury's FAQ page on the money-market guaranty fund.
See a related post here: How Can I Tell If My Money Market Fund Is Safe?
Postscript added 3-3-09: The current termination date for the money market fund guaranty program is April 30, 2009. The Secretary of the Treasury may extend the program to September 18, 2009. Read the full article
Tue, October 07, 2008
A recent survey finds that households that have put into place a comprehensive financial plan tend to experience greater confidence during times of market uncertainty than those that don’t. These households also are more likely to be actively pursuing behavior that enhances the likelihood of financial success. Read the full article
Mon, October 06, 2008
For the last couple of years, Fidelity Investments has surveyed parents of children under the age of 18 about their plans for future college expenses. The most recent survey of about 3,000 parents looks at anticipated college costs and family resources available to pay for college. This year's survey found that 62 percent are counting on student loans to help cover the cost of their children's college education.
Read the full article
Thu, October 02, 2008
Dimensional Financial Advisors is a passive-investment-oriented investment firm closely associated with Eugene Fama, 2003 Economics Nobel Laureate and father of the efficient market hypothesis. Today they sent me a link to a very nice presentation by their vice president, Weston Wellington.
The presentation, “Is It Different This Time?” runs about 18 minutes long and puts the present stock market gyrations into a historical perspective by reviewing some of the “bear markets” of the last 50 years. It’s not overly jargon-filled and should be pretty accessible.
The present market downturn reflects concerns about the non-availability of credit, the extent and duration of the housing market downturn, and the fact that we are probably in a recession. But in the end, if you’re investing for the long term, the question you must to ask is whether you think the economy is going to completely collapse. If not, you should hang on, assuming you’re holding a diversified portfolio that fits your tolerance for risk.
The presentation is marked for general use, so I don’t think I’m breaking any rules by sharing it.
Read the full article
Sat, September 27, 2008
Unless you live in Lake Wobegon, it hasn't been a quiet month:
- Fannie Mae and Freddie Mac are in federal conservatorship
- Merrill Lynch is now part of Bank of America
- Lehman Brothers Holdings filed for Chapter 11; its assets have been purchased by Barclay's PLC
- The two investment banking giants left standing, Goldman Sachs and Morgan Stanley, have been converted to bank holding companies
- AIG has received an infusion $85 of billion from the Federal Reserve in return for a 79.9% ownership position
- Washington Mutual became the 13th bank failure of the year (and the largest bank failure in U.S. history); the bank's assets have been sold to J.P. Morgan Chase
Read the full article
Mon, September 22, 2008
The Subprime mortgage mess and its aftermath were partly the result of risks not being priced appropriately. Interest rates for risky mortgages and bonds should have been much higher given the level of risk involved. As financial markets still recover from the aftermath of risk being underestimated, there is a good chance that there are now areas where risk is being overestimated. This week’s issue of Barron’s has two interesting suggestions in this regard. Read the full article
Mon, September 22, 2008
The financial markets seem to be taking a breather after last week's roller-coaster rides. We're all digesting the latest news of short-selling restrictions and a $700 Billion stabilization plan for mortgage-related debt. But now is also a good time to step back and think more broadly. Read the full article
Fri, September 19, 2008
Web-based e-mail accounts like Yahoo and GMail provide a lot of convenience, but apparently with convenience comes risk. Prior to the news of the hacking of Sarah Palin's Yahoo account, I had assumed that this kind of thing required a phishing attack, but now I know better. Tech sites have been speculating about how her account was accessed and it's been noted that the "lost password" protocols for Yahoo are not hard to beat. A hacker might be able to guess well enough to gain access to your account.
Read the full article
Fri, September 19, 2008
This Monday, something very unusual happened: a money market fund began trading its shares at 97 cents, instead of a dollar.
Reserve Primary Money Fund (RPFXX) was forced to write down three quarters of a billion dollars of Lehman Brothers debt as a consequence of the Lehman bankruptcy. Even though the debt may eventually be partially paid through the bankruptcy process, as a current obligation the debt has no value. Thus the fund’s share value had to drop, forcing the fund to “break the buck.” On Monday and Tuesday, investors in the fund pulled out $27 billion in response.
FT Alphaville reports that one of Putnam Investments’ institutional money market funds has decided to close and liquidate itself, not because it needs to “break the buck” now, but because of concern that a future run on the fund might force a fire sale of its assets.
Money market funds are normally thought of as stable places to put cash, but even money market funds are not guaranteed not to lose money. How can you judge how safe your money market funds are?
Read the full article
Mon, September 15, 2008
Douglas Adams' Hitchhiker's Guide to the Galaxy described a fictional intergalactic travel manual of the same name. The guide had the words "DON'T PANIC" written "in large friendly letters" on its cover. Investors could use a copy of the Hitchhiker's Guide right about now. Read the full article
Thu, September 11, 2008
As the graph below from BlogPulse.com shows, the announcement of the Fannie-Freddie takeover generated a burst of activity in the blogosphere.
In perusing some of the posts on the topic, it looks as though a lot of people are upset at what appears to them to be a bailout. In fact, it is a bailout, but at this point in the game, I think the U.S. Treasury really had very little choice. Read the full article
Mon, September 08, 2008
The Treasury Department's much-anticipated plan to prop up Fannie Mae and Freddie Mac has finally been (mostly) revealed. The move should help a bit to keep mortgage markets afloat, but if you're not sure what all the fuss is about, this short primer should help.
Read the full article
Wed, September 03, 2008
Master Limited Partnerships are complicated investments in which you share in the profits from an income-generating business. Most often these partnerships make their money in energy-related businesses. They’re publicly traded and offer certain income tax benefits. They aren’t for everyone, however. Read the full article
Wed, September 03, 2008
As a result of a class-action suit against the Transunion credit bureau, consumers can obtain six to nine months of free credit report and credit score access if they qualify for inclusion in the class. Read the full article
Mon, August 25, 2008
Although I’ve been slow to notice it, I’m now certain that it’s true: our food is shrinking.
More precisely, the companies that sell food and consumables are putting their goods into smaller packages and hoping that we won’t notice. Read the full article
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