|
PureBytes Links
Trading Reference Links
|
----- Original Message -----
From: "_Craig" <craigbud@xxxxxxxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: Wednesday, September 25, 2002 7:39 AM
Subject: OT: How safe are money market funds?
> When I ask my brokers about money market funds, I get less than satisfying
answers. I ask them when I exit a position, where does my money go? Where
do they park my money? They say I get credit earning interest in a money
market fund. When I ask more specific questions about this money market
fund, they essentially say, "it's just a money market fund."
Money market funds are typically made up of bankers acceptance notes,
overnight repurchase agreements, treasury bills, short term cd's, etc. to
provide an interest rate close to the federal funds lending rate (currently
1.75%). Because they are typically backed by direct and indirect government
obligations, their stability is directly linked to the banking health of the
U.S..
Most brokers do provide a similar "canned" answer that you received from
your broker simply because they don't understand the underlying instruments
and more importantly, I do not believe that any U.S. money market fund has
ever come into question resulting a drop in share price below $1 (per
share).
>
> Given the ongoing rumblings about US financial health, I've become more
curious about the true safety of these generic money market funds. Sure we
have the $500,000 SIPC, but when I ask for more details about their
additional insurance that covers up to several millions per account, they
say they don't have much information about it, if any.
SIPC provides $500,000 of insurance in your account and most brokerage firms
have insurance account "wrappers" that provide up to $25,000,000 in coverage
against any fraudulent wrong doings in your brokerage firm or the investment
firm managing the money market itself.
Although the health of the U.S. economy has come into question recently, the
health of the U.S. banking sector has not. The U.S. dollar remains
relatively strong against other foreign currencies ; the U.S. dollar remains
the choice currency for foreign investors to faciliate world trade.
If strength of a U.S. money market going below $1 ever came into question,
it is my opinion that you have far more things to worry about at that time
then what you have parked in a U.S. money market fund!
If problems truly were to ever arise where the Federal Reserve could not
provide the liquidity necessary to meet consumer demand, a banking failure
could cause a global economic dilema, changing world trade as we know it.
Bottom line - it isn't going to happen and I don't believe there has been an
ounce of concern among anyone in the industry that would cause them to worry
about it(my opinion).
If you're really panicked about it - consider buying tangible commodities
such as oil & gold that you believe would have worth and that the world when
it comes to a global crash would begin trading with/bartering as opposed to
using the U.S. dollar.
I think most would agree that route would be the far riskier parking place
than a U.S. money market.
It looks like you need to get a new broker who knows what he's talking about
:)
Mike Herron
President & CTA
Viper Trading, LLC.
www.vipertrading.com
mike@xxxxxxxxxxxxxxxx
1-866-468-4737
THERE IS A RISK OF LOSS TRADING FUTURES. PAST PERFORMANCE IS NOT INDICATIVE
OF FUTURE RESULTS.
>
> I'm curious what people do here with their "parked" money. Are you
comfortable with what your brokers do with it on default? Do they give you
choices of funds (unlike my brokers), or do you do something more proactive,
like trading treasuries?
>
> Thanks.
>
>
>
>
|