Cash, Money Market Funds etc.

Cash, Money Market Funds etc.

Postby winston » Thu Sep 03, 2009 3:30 pm

After the massive US$327 bln outflows since March, money market mutual funds in the US are still sitting on US$3.58 trilllion cash, equivalent to 34% of total US market capitalization, vs 19% at the 2007 market peak, and 29% just before the big bull market began in 2002.
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Re: Money Market Funds

Postby kennynah » Thu Sep 03, 2009 7:34 pm

means what ? that when these money decide to enter the equities markets.... the pigs will fly ? 8-)
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Re: Money Market Funds

Postby iam802 » Thu Sep 03, 2009 9:13 pm

maybe they are holding off in case...more people want to redeem.
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Re: Money Market Funds

Postby winston » Thu Sep 03, 2009 10:08 pm

winston wrote:money market mutual funds in the US are still sitting on US$3.58 trilllion cash


I think there used to be US$8 trillion of cash on the sidelines. So more than half has been put to use already ..
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Re: Money Market Funds

Postby sidney » Thu Sep 03, 2009 11:45 pm

Will / does the money market percentage held currently corelate with the percentage held just before recovery in past crisis?
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Re: Money Market Funds

Postby winston » Fri Sep 04, 2009 8:34 am

The article was posted on May 2 in the "Rewards Out There" thread ...

============================================

Eight Trillion Reasons to Stay Invested by Alexander Green

In February, I wrote that the decline in stocks was just about over. Why?

There was more money available to buy shares than at any time in almost two decades. The $8.85 trillion held in cash, bank deposits and money market funds was equal to 74% of the market value of U.S. companies, the highest ratio since 1990, according to the Federal Reserve.
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Re: Cash & Money Market Funds

Postby winston » Wed Oct 07, 2009 8:32 am

The real beauty is the amount of cash still parked in savings accounts and money-market instruments (roughly $3.5 trillion). Such idle capital will likely be the fuel that extends the rally into next year...

Source: Robert Williams, Investment U
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Re: Cash & Money Market Funds

Postby winston » Mon Oct 19, 2009 10:37 pm

Why Cash Just Became My Favorite Investment By Tom Dyson

"We've never seen this aggressive paying down of debt before," said a banker in the Financial Times last week. "Once you slap households in the face... it sticks."

Each month, the Federal Reserve calculates and reports the total amount of consumer credit outstanding in America. This is the money Americans have borrowed to pay for cars, vacations, education, and refrigerator-freezers at Wal-Mart.

When this number rises, it means credit is easy and Americans are in consumption mode. They're buying SUVs, houses, flat-screen TVs, granite countertops, and stainless-steel appliances. And they're borrowing money to make these purchases – often using credit cards – so they're not worried about finances.

When this number falls, Americans are in thrift mode. They prefer saving money and paying off debt to shopping at the mall and going on vacation.

Despite the improvement in the economy and the bounce in the stock market, the American desire to save money seems to be getting stronger...

In the last year, American consumers have reduced their outstanding debt by more than $100 billion, according to the Federal Reserve's data.

In July, Americans reduced their consumer debt by $21 billion... the sixth monthly decline in a row and the largest monthly drop in borrowing ever recorded.

The report for August came out earlier this month. It showed American consumers paid back another $12 billion of their outstanding credit, the seventh monthly decline in a row. At this rate, Americans will have paid off 13% of their outstanding credit-card balances by this time next year.

Not only are Americans paying off debt, but they're saving more money...

Each month, the St. Louis Fed publishes America's savings rate. This is the percentage of disposable income Americans choose not to spend.

In 2005, the personal savings rate fell to less than 1%. This year, it has averaged 4.1%. The last time it averaged more than 4% for the year was in 1998.

Here's the thing: While demand for cash in America soars, investors have been dumping it from their portfolios as if it were venom...

This year, cash has fallen...

60% in terms of Russian stocks
55% in terms of lead
53% in terms of coal
50% in terms of copper
40% in terms of Internet stocks
33% in terms of sugar
17% in terms of gold
16% in terms of the S&P
13% in terms of cotton

The terrible sentiment and Americans' new attitude toward saving make cash the most contrarian investment opportunity in America right now.

Source: Daily Wealth
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Re: Cash & Money Market Funds

Postby winston » Tue Oct 20, 2009 8:09 pm

My Favorite Ways to Hold Cash By Tom Dyson

In yesterday's DailyWealth, we discussed America's huge new appetite for saving cash and paying off debt.

For the first time in years, individuals want cash. The paradox is that at the same time, investors hate cash. The government, the mainstream press, and even most newsletter writers have emphatically discouraged its ownership, leading most investors to dump their cash in favor of stocks, gold, and other noncash assets.

With cash so desirable, yet so shunned by investors, I think now's the perfect time to own it. But the thing is, hiding bank notes under your mattress is not a sensible way to invest in cash. The cash doesn't pay you interest, and you run the risk of theft or fire destroying your nest egg.

I'm not particularly comfortable leaving my money in a local bank, either. Already, 170 banks have collapsed in this crisis, and thousands more will follow. If I were a banker, my first motivation would be making sure my institution was a safe warehouse for people to deposit their money. I'd trade on this reputation. Profit would be a secondary consideration.

But nowadays, depositors don't care about the safety of their deposits. FDIC insurance allows modern bank managers and loan officers to pursue profits without considering their reputations. So naturally, most banks have reached too far for profits, and the worst offenders will eventually collapse.

I don't count on FDIC insurance. I worry the government will bankrupt itself in its fight against the recession. When the crunch comes, it won't be able to honor the promises it has made through the FDIC system.

So where do I think you should put your cash?

The first, absolute safest, cheapest way of storing your cash is to buy Treasury bills. When you buy a Treasury bill, you lend the U.S. government your money for less than one year. These ultra short-term debts of the federal government have virtually no credit risk or interest-rate risk. The downside is, you'll get less than 0.5% interest per year in these instruments.

You can buy these bills through your broker, possibly your bank, or visit www.treasurydirect.gov. It's the Treasury's official site for selling its bonds. You can open an account at Treasury Direct and manage your investments directly through the Treasury's website. You'll pay no commissions or trading fees this way, unless you ask the Treasury to sell a bill in the open market before it matures, in which case, it'll charge you a flat $45 fee.

You can also buy T-bills on the stock market, using exchange-traded funds. This is a convenient option if you don't feel like opening a new account with the Treasury, or you want to be able to sell at short notice.

The iShares Barclays Short Treasury Bond Fund (SHV) holds a basket of the shortest-term T-bills. It has an expense ratio of 0.15%. It has $1.6 billion in assets. This year, its price has fluctuated between a high of $110.47 and a low of $110.18.

If you want to earn more interest than T-bills will pay – and have the flexibility of checking – I recommend you open a checking account or take out a CD with EverBank. EverBank promises to pay an interest rate in the top 5% of nationwide interest rates. It doesn't charge checking fees or monthly fees, and it offers even higher "teaser" introductory rates for the first three months. Right now, it pays 2.51% for the first three months and 1.72% thereafter.

Steve Sjuggerud and I know Frank Trotter, EverBank's founder. Frank is a prudent banker and his bank is safe. But if it's important to you, the checking account is FDIC-insured. EverBank controls more than $6 billion in assets.

Cash is the most contrarian asset in the world right now... and there's huge demand for it at the same time. With economic risk and uncertainty the highest they've been in decades, I recommend you start building a cash pile immediately.

Source: Daily Wealth
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Re: Cash & Money Market Funds

Postby winston » Mon Oct 26, 2009 1:04 pm

Retail: Assets of retail money market funds decreased by $11.66 billion to $1.104 trillion.

Taxable government money market fund assets in the retail category decreased by $4.46 billion to $170.53 billion, taxable non-government money market fund assets decreased by $5.85 billion to $691.90 billion, and tax-exempt fund assets decreased by $1.35 billion to $241.35 billion.


Institutional: Assets of institutional money market funds decreased by $19.61 billion to $2.269 trillion.

Among institutional funds, taxable government money market fund assets decreased by $8.88 billion to $901.14 billion, taxable non-government money market fund assets decreased by $8.71 billion to $1.196 trillion, and tax-exempt fund assets decreased by $2.02 billion to $171.53 billion.
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