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In my previous note to Gary I failed to answer his question "Would
investing in foreign bonds be better?" as related to US general purpose
money funds. I didn't reply for I really wasn't sure of the answer.
Talked to an old friend at Goldman Sachs where I clear some of my trades
with the following results.
1. Many foreign money funds have some of the same kind of holdings that
US funds have, for their portfolio managers were pushing for higher
yields just as ours were. Additionally, most are not easily purchased by
US investors. Certainly not as sweep vehicles for idle cash awaiting
other investments.
2. Awfully hard to purchase anything other that individual foreign
securities through most USA brokerage accounts, and then the minimum
size of for individual purchases would be prohibitive for most investors.
3. Looks like Treasuries or Treasury funds are the only alternate for
most.
As an aside we got into a discussion of how big is problem, and how long
will it last. Consensus on "how long" is nobody knows and there is no
precedent to even guide estimates.
As to amount it is almost the same, but billions with a B, even for
individual companies. For Citi alone 50 BILLION.
He asked me if I understood "a billion." I didn't, and here's his take,
in minutes:
60 minutes = 1 hour
24 hours = 1,440 minutes
1 year = 525,600 minutes
100 years = 52,560,000 minutes
2,000 years = 1,051,200,000 minutes (that's 67 generations and we
finally got to only one billion -- Citi's problem is 50 times that and
it's only one company.
Goldman doesn't disclose their individual conclusions to pip-squeak
investors like me, and more probably to anyone other than their managing
partners, but I'd sure bet that they have a lot of "shorts" out there
somewhere.
He did leave the conclusion that there will be more great investment
opportunities out there than there have been for generations. Sounds
like the old Chinese proverb -- "May you live in interesting times."
Regards,
Richard Funkhouser
Gary Fritz wrote:
I wonder 1) what are the chances of money-market funds losing value
and going below $1.00 NAV, and 2) if that happens, how soon and how
rapidly it is likely to happen.
Assuming you have the ability, switching from money funds into
government securities seems like a prudent move. And then you hope
THOSE say solvent...
I wonder if overseas bonds would be any better?
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