Dave wrote:
I appreciate all the commentary you have provided and will never be able to thank you enough. Thank you. I am concerned about this latest rumor of the fed doing reverse repo's on mmf's. I large portion of my portfolio in currently in a treasury mmf with schwab. Would you advise purchasing treasuries outright or is it okay to leave them in the treasury mmf
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A long time ago, I think it was on MW around end-2007, I pointed out that almost all MMFs were secretly broke or about to go broke. Since then, many major MMFs have been shut down after breaking the buck. 100% Treasury backed MMFs are the strongest of the weaklings, but as you point out, at best they are a source of funds to garner against the named beneficiary's other losses, so they will eventually get drained.
There is no reason to accept high risk for little cash when you can buy Treasuries yourself. Even Treasury's C of I at 0% is a fine place to park and will return anywhere from 10% to 200% in annual increased buying power for many years to come.
Purchase Treasuries through treasurydirect.gov
Over the next decade or two, no "investment" will be able to deliver a fixed interest rate of return above a small fraction of a percent without the ability to go short. Nothing can. Get out.
Saturday, September 26, 2009
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Hello FDR,
ReplyDeleteHow can the government default on its debts? If it does, what does that mean for Americans holding Treasuries?
I've stopped acquiring PM's but holding cash still seems safer than government debt for this reason?
Thank You,
-hp
FDR,
ReplyDeleteI know there are essentially no other alternatives, but how is holding cash in a treasury C of I account safe considering the govt can just refuse to allow withdrawals, especially since the Treasury is complicit with the Fed? Also, even in the event they allow withdrawals, wouldn't you have to initiate an electronic transfer to a bank account or receive a check from the Treasury? As far as I know, you can not access Treasury Direct funds from an ATM machine. When it is all said and done, I'd rather have my cash in a fortified safe bolted to the floor within my house.
Thanks for all you do by the way.
"I know there are essentially no other alternatives, but how is holding cash in a treasury C of I account safe considering the govt can just refuse to allow withdrawals, especially since the Treasury is complicit with the Fed? Also, even in the event they allow withdrawals, wouldn't you have to initiate an electronic transfer to a bank account or receive a check from the Treasury? As far as I know, you can not access Treasury Direct funds from an ATM machine. When it is all said and done, I'd rather have my cash in a fortified safe bolted to the floor within my house."
ReplyDeleteI agree with you. There is a ton of risk holding cash, I think the biggest one is that they change it up and charge 2 or 3 for 1.
At least we'll have 2 or 3.
"I've stopped acquiring PM's but holding cash still seems safer than government debt for this reason?"
ReplyDeleteCash is govt debt. I don't see a difference between a $10 bill and a $10 T-bill or C of I at 0%. They are essentially the same thing, but I agree the first is more tradable. It's also stealable and burnable so its a tradeoff.
Fdr,because of your advice, I went all cash in my 401k before the fall. My only cash position that is Available to me in my 401k, like so many others here on your blog,is the MMF or a Fixed account much like a CD, within the managing company.In my case Nationwide Ins. Co. Since you are advising getting out of MMF's what would be your advice for protecting my self applied retirement funds that must stay within the options offered by the managing Company? Thanks, from all of us that are in my position. And we're so glad your back!!
ReplyDeleteFdr,on your advice I went to MMF before the stock market fall in my self directed 401k, managed by the Nationwide Insurance Company.Since you are advising to get out of them ( MMF ),the only other option for me and so many others that follow your blog, would be to transfer the money to the fixed accounts which are like CD's. Would this be a safer place or the MMF since this is an Insurance Company and not a bank ? Thanks for the education and we're glad your back!!
ReplyDeleteHey FDR,
ReplyDeleteAny thoughts on the vanguard treasury-backed MMF (VUSXX) in particular? Each vanguard fund is treated as its own company, so that was giving me comfort that there wouldn't be risk to such things as getting drained as a "source of funds to garner against the named beneficiary's other losses".
The reason I ask is that I can't park 401K money in treasuries at tresurydirect.gov, but I can park it in treasuuries in MMFs. I know you see 401Ks as being exposed to government grab too, and if it were up to me alone I'd cash out already. But I'm still negotiating with my spouse on that, and in the mean time, I've been keeping the 401K money parked in vanguard's treasury-backed MMF fund.
Appreciate any thoughts and Good to see you posting again!