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General Collateral At -0.002%: Lowest EVER, As Scramble Out Of Money Markets Hits Afterburner, Primes

Tyler Durden's picture




 

A few days ago we pointed out that special repo rates are now negative. Fine. How big is special collateral after all - in the grand scheme of things it is a tiny market. Well, as of today, General Collateral just hit -0.002, the lowest rate in the history of the series, and in our humble opinion this is a far more troubling indication of broad liquidity developments than the 1 month bill touching on -0.001%. Simply said, this confirms our speculation that there is now a massive rolling of funding out from money markets and into any market that will accept the maturing short term funding without it being rolled due to European contagion concerns. We said: "this latest move has unpleasant implications for money market managers, who unable to find yield in repo (0.01%?) will now be forced to look for higher yielding assets, and thus expose them to even more contagion risk once the house of cards falls, facilitating the "breakage of the buck" once again just like what happened in the aftermath of the Lehman catastrophe, and snarling all global fund flows, forcing the Fed to become liquidity provider of last resort." As of today, this prediction is well en route to being confirmed.

After we have been pounding the table on this threat for over a week, finally this topic has gotten sufficiently relevant that Bloomberg decided to dedicate an article to it:

Institutional investors pulled out of U.S. prime money market funds at the fastest pace in 15 months as they shifted assets to funds that invest only in U.S. government-backed securities.

Institutional funds eligible to buy corporate debt lost $39 billion to net withdrawals in the week ended June 28 and $75 billion in the past two weeks, according to data from research firm iMoneyNet in Westborough, Massachusetts. Institutional money funds that buy only U.S. government-backed securities gathered $27 billion in net deposits

The logic for the scramble out of money funds is as expected: Europe.

The European sovereign debt crisis has raised concern that prime money market funds may suffer losses if sovereign defaults cause big banks to fail to meet obligations. Greek Prime Minister George Papandreou today clinched enough votes to pass the first part of an austerity plan aimed at meeting European Union aid requirements and staving off default for his debt- laden nation.

A Greek default would pose a potential threat to money funds because they have lent to European banks that, in turn, have lent to Greece and other heavily indebted European countries. U.S. money funds eligible to buy corporate debt had about $800 billion, or half their assets as of May 31, in securities issued by European banks, Fitch Ratings estimated.

And yes, it is a big move:

The $39 billion withdrawal was the most pulled from prime institutional funds in one week since investors took $42 billion out in the week ended March 16, 2010.

What is surprising is that in a closed-end liquidity system, the excess money market funds, which have certainly gone into repo, have so far not invested one cent into equity markets, and instead have pushed aggressively into general fixed income: the same product  which for the past 2 weeks has seen dramatic pain courtesy of one after another worse auction and a general blowing out of the curve now that everyone is wondering how soon before Bill Gross is finally proven right.

Per ICI, domestic equity funds saw an outflow of $4.3 billion in the week ended June 22: the 9th consecutive week of outflows, during which time mutual funds were met with $27 billion of redemptions. Is there any wonder the Fed would do everything in its power to push the market higher at the end of the month and prevent a redemption-driven liquidation drop in the market, facilitated by near record NYSE margin debt?

Is it time to start guessing who will break the buck first?

For those asking, here is a long-term chart of GC:

 

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Wed, 06/29/2011 - 16:44 | 1413303 GeneMarchbanks
GeneMarchbanks's picture

Seems Hyperinflationary which is bullish.

Wed, 06/29/2011 - 17:17 | 1413430 CrazyCooter
CrazyCooter's picture

I have some 401k bucks in money market right now (100% actually). I have a genuine question: if my options are equities, bonds, reits, or money markets, do I really have a better option?

I have pretty much accepted that the paper empire is going to divide by zero at some point, so figured this was my best chance to minize losses during the turmoil phase. I will go into equities at some point, but only if stocks completely tank.

Would be interested in constructive thoughts on the subject.

Regards,

Cooter

Wed, 06/29/2011 - 17:32 | 1413467 Montecarlo
Montecarlo's picture

I have the same poor choice.  Finally received an offer at a new employer.  I'll be cashing out part of that 401K this year - screw it, maybe the whole damn thing!

Wed, 06/29/2011 - 23:25 | 1414443 Thomas
Thomas's picture

If you can, go to treaury-backed money market funds. The current standard MMF pays you nothing for the risk--absolutely zero. James Grant has been crystal clear on this point this week.

Wed, 06/29/2011 - 17:36 | 1413477 redpill
redpill's picture

That's the problem with 401ks, your options tend to be restricted if its a company plan.  if it's an independent 401k under a corporation you own or something, then that is a different story, though.  There is 401k eligible precious metals but they'll probably figure out a way to hose you on that.  If you can get an independent broker involved I like the concept of getting some of the money overseas in non-US dollar currencies that are more likely to appreciate and in companies that are stable, profitable, and provide a good dividend.  That way even if you don't get capital appreciation out of the stock, you get dividend income in an appreciating currency and you can do OK.

Otherwise I might think about pulling back on your contributions until it becomes more clear what the hell is going to happen in the near term.  If anyone tells you they know with certainty, run the other way.

 

Wed, 06/29/2011 - 18:26 | 1413637 macholatte
macholatte's picture

...currencies that are more likely to appreciate and in companies that are stable, profitable, and provide a good dividend...

Give me my robe, put on my crown; I have Immortal longings in me.
William Shakespeare

Well sure, it comes complete with diagrams on page 47 of how to be a detective in 10 easy lessons correspondent school textbook and uh, your father offered me a drink.
-- Philip Marlowe

 

Wed, 06/29/2011 - 19:41 | 1413900 optionswriter
optionswriter's picture

He might be able to buy CYB (Chinese) AUD (Aussie) etc. etf's to get exposure to foreign currencies.  (Not a recommendation of course.  You need to do your own homework.) 

Wed, 06/29/2011 - 21:03 | 1414134 CrazyCooter
CrazyCooter's picture

I actually went through all ... 18 prospectuses or there abouts ... in actuality I have four choices as listed. They present them as more options, but there aren't really. By this I mean I got 6 options that are all similar blends of equities and bonds, or I got all bonds, or I got all govvies, or some reits. Like that.

I don't have a lot in (I cashed out when I moved) so just accumulation since Feb. That doesn't preclude me from paying attention though.

As long as money market doesn't book a permanent loss, I am happy, but if money markets are about to book some haircuts, I don't want any of that.

Regards,

Cooter

Wed, 06/29/2011 - 17:35 | 1413483 blunderdog
blunderdog's picture

If you're talking a small amount of your overall wealth in your 401K, it makes as much sense as anything else.  But if *most* of your money is in a 401K, you'd be well-served to cash some out, tax-penalty be damned, and put it into a commodity of real value.

If you've already got 25% of your wealth in physical PMs, then maybe leaving another X% in paper is a good idea.

Wed, 06/29/2011 - 18:39 | 1413671 dcb
dcb's picture

no, you fing trade it. keep it in.

Wed, 06/29/2011 - 19:47 | 1413923 blunderdog
blunderdog's picture

When you're talking about paper, "liquidity" is another way of saying "can be lost instantly."

Fing sht dchbg.

Wed, 06/29/2011 - 17:43 | 1413507 BoNeSxxx
BoNeSxxx's picture

I have a genuine question: if my options are equities, bonds, reits, or money markets, do I really have a better option?

Yes.  It's called an Open Opportunity IRA.  Do it now before the assholes kill it.  It's legit and and it makes complete sense.

You open a LLC and then register with a custodian.  There are companies that will help with all of it for a small fee (most of it payable by the LLC).  Once funded (with your own $$$), you can invest it (as manager of the LLC) in pretty much anything you want -- Gold, Silver, Land, etc...

As I have posted here in the past, my IRA now owns acres of beautiful farm land with a crystal clear spring delivering over 100 GPM of potable water.

I like that much better than FRNs, MMs, or any vehicle traded by the ass clowns on Wall St.

If anyone wants more info, you can hit me up at myusername@gmail.com

Peace,

Wed, 06/29/2011 - 21:04 | 1414147 CrazyCooter
CrazyCooter's picture

My contributions are mandatory, otherwise I wouldn't be putting any in at all. My choices are very restricted, so nothing other than the 18 flavors presented.

I figured out the scam that 401ks are at my last job when I needed cash badly during divorce. My money wasn't mine!

I do save PMs on the side, with left over savings, am working on a small pile of emergency cash, and have a calorie stash to boot. Nothing huge mind you, but gotta start somewhere!

Thanks all for the feedback.

Regards,

Cooter

Wed, 06/29/2011 - 17:57 | 1413537 hambone
hambone's picture

Hey Coot - I'm in same spot as you...not sure of your situation but I'm of the mind nobody knows how this will play out so I'm figuring best to have a diversified portfolio, so use the 401k part as the equity or bond or MM holding portion (fucked up paper part that I have to admit could do well in many circumstances whether I believe in it or not). 

Beyond that I hold 6 months worth of cash and 1yrs worth of PM's - beyond that I look at multi family rentals w/ enough down to be cash flow positive). 

Right or wrong, I don't know but I'm sleeping better w/ a more hedged outlook.

Plus, nothing beyond checking acct in bank.

 

Wed, 06/29/2011 - 18:04 | 1413560 hambone
hambone's picture

BTW - would be nice if ZH had a defcon (or multiple opinions) of defcon warnings available.  Hard to keep days after days dire warnings and dire structural issues in perspective. 

Serious, some kind of "advanced economic tsunami" warning (1-7) or whatever would be helpful...nobody's gonna hold you to it but some gauge to help understand is it time to pull what's left from the bank, is it time to load the shotgun, is it time to load the car, is it time to drink another G&T and laugh while we watch the bullshit circus?

On a 1-7 scale...where do people (smart people...wall street economists ruled out) think we are???  4? 6? 6.9? 7.1?

Wed, 06/29/2011 - 19:06 | 1413757 Misstrial
Misstrial's picture

Good idea, but for now, you'd have to subscribe to an investment newsletter in order to get those warnings.

2 days ago, Larry Edelson of Uncommon Wisdom sent out an alert telling subscribers to get out of MMMF and gave us a list saying that if we had any positions in these funds to get out now.

Here is part of his alert:

"The venerable James Grant of Grant's Interest Rate Observer recently published an article confirming what I suspected all along: Money Market Mutual Funds, or MMMFs, are plowing tons of their investors' money into European banks and securities in search of higher yields.

Never mind the fact that they're picking up, at best, one more basis point of yield (.01) for their investors — enough to double your principal in 6,931.8 years — they're taking on huge lop-sided risks investing in Europe's banks, just as the European sovereign debt crisis is starting to pick up momentum.

Grant cites the five largest money market mutual funds, which hold a total of about $230 billion of customer funds. An average of 41% of their assets are invested in Europe.

That's insane. When Europe goes down the tubes, which it will, that money is at risk, big time. And even if Europe doesn't totally meltdown, the euro is sure to get annihilated in the months ahead. So the currency risk alone could cause these funds to inflict some pretty heavy losses on their depositors.

The five money market mutual funds Grant cites are ...

 Fidelity Cash Reserves (FDRXX)

 Vanguard Reserve Prime (VMRXX)

 Fidelity Inst. Prime MM Portfolio (FIPXX)

 Fidelity Inst. Money Market Portfolio (FNSXX)

 BlackRock Liquidity TempFund (TMPXX)

If you own any of these money market funds, just get the heck out. Period."

~Misstrial

Wed, 06/29/2011 - 19:48 | 1413928 hambone
hambone's picture

Thanks -

Wed, 06/29/2011 - 21:30 | 1414189 CrazyCooter
CrazyCooter's picture

Ohhh, this is good (bad) stuff. My MM is State Street, but my fear was exactly what you just said was happening. I don't want a return at this point, I just don't want a haircut. I first started getting nervous when I saw BruceK post on this subject.

Here is what I am saddled with (bulk of each option):

  • Russel 3000
  • 87% large cap stock / 10% small cap stock
  • 71% small cap stock / 21% mid cap stock
  • 100% non US stock
  • 100% non US stock
  • 30% t-note / 36% corp bond / 10% t-bond / 10% fed agency bond
  • 71% t-bond / 17% fed agency bond / 6% t-bond
  • 100% treasury
  • 99% TIPS
  • 99% non US govvie bonds
  • 95% SIC (sythetic investment contracts)
  • 100% t-bills
  • 100% reit
  • 43% us stocks / 35% cash / 11% non US stocks / 10% bonds (2010 target)
  • <<bunch of date targets inbetween>>
  • 72% us stocks / 18% non US stocks / 10% bonds (2055 target)

I am for sure going to reallocated tommorrow. I guess my next best safe bet is one of the bulk US Treasury funds, but not sure I have an opinion beyond that. Anyone have thoughts on treasury blend versus t-bills versus tips?

UPDATE: It looks like my MM is 100% t-bills, so I think I am going to stand pat. I should have looked closer before posting but I was hacking in the data ...

Regards,

Cooter

Wed, 06/29/2011 - 21:28 | 1414211 Misstrial
Misstrial's picture

Please see my post below re GICs. imo, T-bills and short-term Treasuries are OK.

~Misstrial

Thu, 06/30/2011 - 05:02 | 1414764 Yen Cross
Yen Cross's picture

  Thanks cooter. keep up the good work. Can we keep it horizontal please/via trend lines and candles/?

Wed, 06/29/2011 - 23:53 | 1414482 blunderdog
blunderdog's picture

Remember that DEFCON is about providing a state of readiness.

This week and the first two days of next week should definitely be considered DEFCON 2.

No doubt about that.

Wed, 06/29/2011 - 18:04 | 1413554 unununium
unununium's picture

Move it to an all-equity option, and buy an offsetting $ amount of SH in your IRA.

Rebalance occasionally.

Wed, 06/29/2011 - 18:56 | 1413735 Misstrial
Misstrial's picture

My MMMF switched out from lending to euro banks to investing in U.S.-based insurance contracts - synthetic GICs and traditional GICs.

~Misstrial

 

 

Wed, 06/29/2011 - 19:57 | 1413940 Dont Stop the C...
Dont Stop the Carnival's picture

I read in a ZH article that 44% of Money Market Funds are invested in European Banks.  I'd be getting the heck out of anything associated with European Banks right now.

Wed, 06/29/2011 - 20:02 | 1413959 Citxmech
Citxmech's picture

My wife and I cashed-out, took the hit, and put the proceeds into PMs.  We were back in the black within a year and now are miles ahead of where we would have been had we left the money in the market.

It was a little stressful at first - but we never regretted our decision.   

Wed, 06/29/2011 - 20:59 | 1414125 Enceladus
Enceladus's picture

CC,

Your money market is provided by a mutual fund company. Go pull the prospectus and see if you can find what your exposure maybe. i.e what are the underlying investments. Money markets generally invest is very short term, highly liquid paper, but they have latitude in the specifics. In 2008, the 65 billion, Reserve Primary Fund 'broke the buck', that is it fell in price from $1.00 NAV when a $785 million investment it had Lehman's went to zero. 

Besides how the money market is invested is the issue of systemic liquidity, which is why the FED/Tres/FDIC stepped in to guarantee money market funds in '08 preventing a run on the banks. If the banks won't lend and everyone pulls their money, funds can freeze withdrawals for up to 7 days. This potential of a liquidity freeze is the second reason some are concerned about Europe's banks.

~Linda Green

Wed, 06/29/2011 - 21:25 | 1414201 CrazyCooter
CrazyCooter's picture

Oh, I should have looked closer when I posted earlier with my list of options ... it looks like my MM is 100% t-bills. They list 87% of the allocation (I just ten keyed it) which are all t-bills for May/June (as of March this year). I suppose it is possible they changed the allocation. I will have to double check, but if I can't confirm anything, I may just stick with what I got.

Thanks for your response!

Regards,

Cooter

Thu, 06/30/2011 - 09:14 | 1415099 ThirdCoastSurfer
ThirdCoastSurfer's picture

I'm no financial advisor, but if your risk tolerance level is money market then you have no choice but to sit in cash or other low risk and wait until inflation or hyperinflation or some other factors raise the interest rates. To do anything else will risk getting caught in a situation where your riskier investment is at a negative return at just the point that the interest rates become attractive and to dump one in favor of another will leave you in a hole that negates the positive effect of an increasing interest rate.  

It isn't what your balance is today or in 5 years, it's what you'll have beginning when you reach age 59.5. It's not that you'll have enough to retire on a yacht but to retire "comfortably" and that is the function that interest rates play in the first place. 

Wed, 06/29/2011 - 17:23 | 1413438 anti Oligarchy
anti Oligarchy's picture

Speaking of Hyperinflation, I think its time for another round of Inflating the ZeroHedge bank account.

 

This is the type of information, dialogue, and general anit Cartel activity we need to support.

What better use for worthless dollars than to support Tyler's gold habit?

Wed, 06/29/2011 - 23:30 | 1414446 mortiis
mortiis's picture

good call... i've been advocating to my friends/family for a while that we should pull our money out of wall st and invest locally, or in causes we believe in (after saving "enough")... i haven't donated to ZH in a bit.  read it every day and this is a "cause i believe in."

time to put my money where my mouth is!

Wed, 06/29/2011 - 17:29 | 1413457 tao400
tao400's picture

That's exactly what I was wondering. I was literally about to go buy some dividend producing stocks like intc and boeing because of this. Anyone have an answer as to what they think is safe now.

Wed, 06/29/2011 - 21:34 | 1414220 CrazyCooter
CrazyCooter's picture

Just commenting off the cuff, but the only thing that is safe during a tsunami is only knowable in retrospect. If TSHTF in financial markets again, I think there are going to be lots of surprises with regards to what isn't standing when the waters recede.

Regards,

Cooter

Wed, 06/29/2011 - 19:59 | 1413964 SheepDog-One
SheepDog-One's picture

Hyperinflation cant happen, no one can afford it, americans are bankrupt.

Thu, 06/30/2011 - 00:09 | 1414511 blunderdog
blunderdog's picture

Hyperinflation won't happen, but that's not why.  Our current saving grace is we have no competing form of exchange.

(No one can ever afford it when it comes.)

Wed, 06/29/2011 - 16:40 | 1413305 hugovanderbubble
hugovanderbubble's picture

Tyler,

iF anyone could explain

This upward movement in the indexes is just a window dressing? (Its typical the last week of any quarter?)

Thanks,

Wed, 06/29/2011 - 16:46 | 1413332 101 years and c...
101 years and counting's picture

he already answered your question:

"Is there any wonder the Fed would do everything in its power to push the market higher at the end of the month and prevent a redemption-driven liquidation drop in the market, facilitated by near record NYSE margin debt?"

Wed, 06/29/2011 - 16:52 | 1413337 buzzsaw99
buzzsaw99's picture

the hedgies are probably doing some of that to lessen redemptions. also, dumb pension money will be pouring in on friday and monday, so they are front running that. booyah!

Wed, 06/29/2011 - 16:57 | 1413351 statlawyer
statlawyer's picture

if it is window dressing it's unusual. I got a free moment at work today and looked back at the end of quarters for the last couple of years. The last week of each quarter is normally flat to down from what I can tell...

Wed, 06/29/2011 - 17:02 | 1413371 buzzsaw99
buzzsaw99's picture

yeah but paulson had that fraudcap thing and bill miller et al were heavy into the flagging financials. desperation.

Wed, 06/29/2011 - 17:10 | 1413398 statlawyer
statlawyer's picture

hope you're right. S&P needs to finish out the right side of its shoulder already. I'm getting raped in my short positions, but I know the instant I cover it will all go back down...

Wed, 06/29/2011 - 17:15 | 1413417 buzzsaw99
buzzsaw99's picture

here's hoping for a bloodbath in july.

Wed, 06/29/2011 - 16:48 | 1413322 youngman
youngman's picture

The politicians...the bankers..the money fund guys....they have to print this stuff away....that is their only option of survival...if the people have a choice..they would rather default...take the pain..and get on with life...we are close to a total breakdown I think...the Greeks will riot until it destroys their country...then the other chips fall...Spain has hidden debt...I am sure italy does too...and the US banks say they only have 41 billion exposed...yeah right...I be GS is talking right now to get all their CDS covered again by the Feds like their AIG ones...first in line for the bailouts...hang in their boys...we got problems coming up..

Wed, 06/29/2011 - 17:06 | 1413382 SWRichmond
SWRichmond's picture

the US banks say they only have 41 billion exposed...yeah right

Yes, this is why the Fed has decided it was necessary to stuff the excess reserve acconts with $1.6 Trillion.

Wed, 06/29/2011 - 20:03 | 1413965 disabledvet
disabledvet's picture

"his name is Sudden Debt" and absolutely Europe is hiding trillions of it.

Wed, 06/29/2011 - 16:50 | 1413329 Arch Duke Ferdinand
Arch Duke Ferdinand's picture

Reasons Why Canada Should Close Its Border and Trade to the USA ...

http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/06/reasons-canad...

Wed, 06/29/2011 - 16:54 | 1413341 slaughterer
slaughterer's picture

This week looks like a nice EOQ window dressing ceremony.  Expect things to break down on Friday with an ISM print below 50.  

Wed, 06/29/2011 - 17:31 | 1413462 Boston
Boston's picture

Yup.

And it's the FIRST day after the end of QE2.

Getchya popcorn ready!

Wed, 06/29/2011 - 17:38 | 1413492 blunderdog
blunderdog's picture

Here, here.  I'm tempted to take a day off work just so I can pay closer attention. 

Wed, 06/29/2011 - 16:56 | 1413345 DoChenRollingBearing
DoChenRollingBearing's picture

This means that holding cash FRNs have no opportunity cost...

Wed, 06/29/2011 - 16:56 | 1413346 Hank Paulson
Hank Paulson's picture

just picked up some V stock after hours, is there any real chance I can lose, I mean, come on!

Wed, 06/29/2011 - 16:54 | 1413349 TruthInSunshine
TruthInSunshine's picture

Boy, and this all kicks off with Greece initially accepting externally imposed austerity terms and passing initial legislation codifying it?

Not only is the acceptance not a done deal in Greece, but PIIGS+UK is still lurking.

Zero Hedge had an article about major waves on all things Italy the past couple of days.

...some Italy, a little Spain, a dash of Portugal, throw in some Ireland again, plus maybe England for good measure, and voila!

Let the voilatility ensue!

Wed, 06/29/2011 - 17:02 | 1413367 Global Hunter
Global Hunter's picture

and Belgium.  There is so much going on, the ruling class must be doing everything they can to just act normal, wing it and hope it works out.  In my lifetime I've never witnessed so many storms lurking

Wed, 06/29/2011 - 17:17 | 1413433 Highrev
Highrev's picture

Can you say red herring?

Wed, 06/29/2011 - 17:36 | 1413474 Version 7
Version 7's picture

Add to the fact that Belgium has a small problem with the coherence of the country at the moment and the prospect that it might break into two halves that speak different languages. Maybe they can then claim "odious debt" and the creditors knew the place could break apart..

Wed, 06/29/2011 - 16:54 | 1413354 tradebot
tradebot's picture

Wed, 06/29/2011 - 16:58 | 1413355 Cow
Cow's picture

Which money market fund is safe these days?  Just for some idle cash that you might need.

Wed, 06/29/2011 - 17:06 | 1413368 hambone
hambone's picture

Safe???  There is no safe...just safer.  Safer is cash in a safety deposit box or like (no reason to keep anything beyond cash for checking in a bank).  Safest is likely the money market fund that's in physical gold / silver / anything in your possession.

Wed, 06/29/2011 - 20:14 | 1414005 SheepDog-One
SheepDog-One's picture

Hell with cash in a safe deposit box, real safety is an AR in the closet with 10 loaded magazines.

 

Wed, 06/29/2011 - 22:23 | 1414336 Jack Napier
Jack Napier's picture

1. Food storage, garden, water purifier (1 million oz)
2. Reliable transportation. 4x4 + cycle. You can run diesel off fast food grease if you have to.
3. Guns and ammo. Remington or Mossberg at minimum. Saiga preferred.
4. As much silver as you can carry, hidden in a safe place.
5. Anything else you think you'll need; first aid kits, flammables, generator, etc, etc.

Of course knowledge trumps all of these.

There is no safety in the paper game, especially not the insolvent SLV or GLD full of 400 oz gold plated tungsten bars.. well, just the ones India didn't buy from the IMF already that is. It's obvious that the system is rigged from top to bottom, and there is nothing safe other than tangible assets that people will need for survival.

Wed, 06/29/2011 - 17:08 | 1413392 Farcical Aquati...
Farcical Aquatic Ceremony's picture

The firm of Underyour Mattress has some good options.

Wed, 06/29/2011 - 18:44 | 1413683 macholatte
macholatte's picture

The firm of Underyour Mattress has some good options.

Now think that through.... Had you put all your "investable" money in your mattress, bank safe, house safe, coffee can buried in the back yard (whatever) over the past 20 years you would have missed out on all the stock market crashes and the real estate crash and the bank failures and the brokerage failures and all the bubbles and bangles and bullshit. You'd still have principal and your kid's college fund would still be there. Maybe, if you were really, really brilliant, you might have put just 10% of that into silver dollars. You sleep well ever night. Minimal risk. The mattress wins ever time.

Wed, 06/29/2011 - 18:49 | 1413703 Farcical Aquati...
Farcical Aquatic Ceremony's picture

No fees.  Easy to extract.  Just make sure it's somewhere fire-proof.  But with the way central banks are creating digi-dollars these days, that's fire enough to burn cash.  No matches needed.  Now if you had put the money in a gold-plated safe...

Wed, 06/29/2011 - 18:08 | 1413581 Cow
Cow's picture

Wanted: Non-smartass answer once in a while

Wed, 06/29/2011 - 18:32 | 1413650 HungrySeagull
HungrySeagull's picture

Sorry, this Nation is beocoming less safe by the month, you do well to look to your own safety at home and that of your family. The "Street" is not going to do that for you.

Wed, 06/29/2011 - 18:43 | 1413687 Farcical Aquati...
Farcical Aquatic Ceremony's picture

I think a lot of people (including myself) are looking for the same answer.  For a while I thought we'd get a market crash to scare people into putting their retirement funds into some newly-created US debt option.  But now I'm wondering if they'll just try to flush the MM money there if/when they start breaking the buck. Or maybe we'll wake up and all MM money will have been forced into some US debt option "for our protection".  Bottom line, I don't think too many on this site currently think of MM's as "safe".  And that's why we're sarcastic.  But I'm always open to other opinions.

Wed, 06/29/2011 - 19:04 | 1413767 Cow
Cow's picture

It's all relative as far as safety. I'm thinking a US Treasury backed MM is safer these days than a Prime MM account.

Corporate Bonds or US Treasuries short term.

 

Wed, 06/29/2011 - 19:31 | 1413853 hambone
hambone's picture

See Misstrial's response above...citing Grant's article, more about what MMMF's not to be in than what to be in.  Leaves me in a quandry as I've money stuck in a 401k and view the MMMF as the safest option available to me (all others are Bond or long equity high risk stuff).

Wed, 06/29/2011 - 16:56 | 1413358 Frank N. Beans
Frank N. Beans's picture

transitory, bitchez. but i'm not waiting around - i'm moving MMF into short term treasuries like BIL (ETF).

 

What is surprising is that in a closed-end liquidity system, the excess money market funds, which have certainly gone into repo, have so far not invested one cent into equity markets...

 

That part I don't understand; how do you know it's not going into equities (especially this week)?

 

 

Wed, 06/29/2011 - 17:47 | 1413517 TruthInSunshine
TruthInSunshine's picture

There are MMAs that are essentially checking/saving accounts insured up to the $250,000 FDIC limits.

Wed, 06/29/2011 - 18:05 | 1413577 ouchtouch
ouchtouch's picture

That would be the FDIC that will be insolvent in the event of any serious banking crisis?

Non-IRA cash is safer in treasurydirect.com.  IRA/401k cash in shortest term US government bill ETF/fund available.

Wed, 06/29/2011 - 17:00 | 1413362 Hank Paulson
Hank Paulson's picture

Try the gold shop for some 100 oz. silver bars

Wed, 06/29/2011 - 17:05 | 1413393 buzzsaw99
buzzsaw99's picture

i only buy ten pound gold bars. lol

Wed, 06/29/2011 - 17:13 | 1413409 wandstrasse
wandstrasse's picture

Hello Hank! nice to meet you here, I love this site, too - but I mainly look Banzai's documentary images, most of the articles are too complicated. How is your wife? The dinner recently was fantastic. Ah, BTW, it is me, Larry Summers.

Wed, 06/29/2011 - 17:05 | 1413372 wandstrasse
wandstrasse's picture

what was that perfect rectangle in 2005 (in the GC long term)? An early VLFT (very low frequency trading) algo?

Wed, 06/29/2011 - 17:05 | 1413394 achmachat
achmachat's picture

missing data / charting bug

Wed, 06/29/2011 - 17:04 | 1413390 PaperBear
PaperBear's picture

"higher yielding assets" ?

An extinct form of life these days.

Wed, 06/29/2011 - 17:19 | 1413426 Mike2756
Mike2756's picture

I thought we were saved!

Wed, 06/29/2011 - 17:17 | 1413432 RobotTrader
RobotTrader's picture

I suspect the one more follow through day with the banking sector and everyone will start draining their money market accounts and pile into stocks.

I stand by my prediction that the smartphone and tablet revolution will be essential tools to get the sheep back into stock speculation like we had back in 1998 - 1999.

At the end of this run, most will be bragging about how much money they are making "on the side" by buying stocks from their E-trade accounts with their iPads.

Wed, 06/29/2011 - 17:19 | 1413440 Highrev
Highrev's picture

I think the technicals indicate that the higher probability scenario is a retest of lows (minimum) first.

Wed, 06/29/2011 - 17:51 | 1413533 bbq on whitehou...
bbq on whitehouse lawn's picture

Money markets have nothing to do with people and everything to do with bureaucracy. Its not the little fish that blow up the world is the highly leveraged banks that do.

Ipads, e-trade accounts? Really, you are smarter then this. Others may give you a hard time but momo trading can make you money if you open early and close fast.

Thats not what happens in money market accounts they are used as cash accounts for day to day expenses. MM are not used to make money or invest its the safe money.  You kill safe money, you kill everything that is less safe, just like in 08.

 

 

Wed, 06/29/2011 - 20:14 | 1414020 disabledvet
disabledvet's picture

this is what money markets are suppose to be.  "safe."  when i percieved liquidity drying up from 2008 to present i fled to nat gas in the form of companies that produce, distribute and use.  there are very few dedicated actually.  "slow and steady wins the race."  there are what we call the "extremes" but in Wall Street parlance "in their world extreme when it comes to money is normative" namely:  "Darwin will win and therefore so will I."  To me it's madness--but it has a long history to it as well.

http://www.youtube.com/watch?v=NvG_fZ2-H2A&feature=player_detailpage

Wed, 06/29/2011 - 17:22 | 1413445 mr. mirbach
mr. mirbach's picture

Exchange Stabilization Fund actively propping up the market!

Wed, 06/29/2011 - 17:29 | 1413454 tao400
tao400's picture

this is serious

Wed, 06/29/2011 - 17:25 | 1413455 zorba THE GREEK
zorba THE GREEK's picture

 You guys are all wrong with your predictions of gloom. I watch CNBC and they

 all say this bad stuff is only temporary. The DOW will be 14000 by years end.

 Don't any of you listen to Kramer and Kudlow? I also hear they are going to

 have a new weather segment where everyday's forecast will be 80 and sunny

 with light breezes and low humidity. 

Wed, 06/29/2011 - 17:29 | 1413456 Highrev
Highrev's picture

If I go by what the original analysis was, this has ZILCH to do with Europe, and everything to do with the FDIC:

For nearly two years banks collected the proverbial pennies in front of the rollercoaster... until last Friday, when the FDIC decided to spoil the party. What happened as a result of the FDIC's decision to establish an assessment rate which spoiled the arb, was a blow out for most institutions playing the IOER-GC carry trade leading to a major disruption in this funding market, possibly far more serious than the FX carry trade unwind, and a plunge in overnight GC repo rates on Monday (see chart) by over 75%! Does this mean banks have lost one key carry funding source? So it would appear.

http://www.zerohedge.com/article/will-repo-reserve-carry-trade-blow-force-bernanke-pull-liquidity-and-kill-stock-market-rally

Wed, 06/29/2011 - 17:32 | 1413464 bbq on whitehou...
bbq on whitehouse lawn's picture

Money markets are the meal ticket they are the foundation. Negative is not good but its not a run. Yet.

If we start getting draw downs in money market funds the market will be next.

So who could or would draw down money market funds? Swap lines are open across the board with the Fed. Japan could pull in its liquidity but so far its silence. If Japan opens swaps with the Fed then you know they are getting strapped for credit.

Who need credit so badly that they are willing to set fire to the world?

 

Wed, 06/29/2011 - 17:34 | 1413481 Highrev
Highrev's picture

Precisely. Japan.

Or, maybe that ought to be the United States of America . . .

 

Wed, 06/29/2011 - 17:37 | 1413490 bbq on whitehou...
bbq on whitehouse lawn's picture

Libya? Someone needs credit and they dont have direct swap lines open. Who? that is the question.

Wed, 06/29/2011 - 17:41 | 1413499 BennyBoy
BennyBoy's picture

-0.002 is nothing when the inflation rate in the US is around 5.002% to 7.002%.

Wed, 06/29/2011 - 17:48 | 1413511 Quantum Nucleonics
Quantum Nucleonics's picture

But, but,... Greek Parliament passed austerity bill, so everything is fine.  Crisis averted.

Wed, 06/29/2011 - 17:48 | 1413525 monopoly
monopoly's picture

It takes time for all the pieces to come together. We see the "big picture", but until it matters, well is just does not. Think we have a way to go on the upside before it ends in the burning of Rome, Greece, Dublin, Madrid, or whoever. Tough to short outside of a day or two, and the momo crowd will keep pushing until it is over.

And when it all comes down on one Sunday night and opens into a bidless market, then lets see the "brilliant ones" get out of AMZN PCLN, TZOO, CMG, CME, and CRM with their profits. Splatt!

Good luck Robot. Not for me.

Wed, 06/29/2011 - 18:17 | 1413609 Caviar Emptor
Caviar Emptor's picture

You're assuming that the stock market reflects the real economy. It hasn't since 2009. It reflects the health of the TBTF financials which in tun reflect the prospect of ongoing monetary expansion. 

I guarantee you a market crash if the Fed indicates it will stop monetary expansion. They know better now. 

 

Wed, 06/29/2011 - 18:23 | 1413611 RobotTrader
RobotTrader's picture

Attn: monopoly

The market has shaken off the worst news ever with bond spreads blowing out all over the place in Europe, SHIBOR rates to the moon yet all we have managed is a paltry 8% correction.

I'd say the market's resilience is second to none and you must wonder what happens when news gets better.

Not only that, every company has been warning and lowering guidance and soon we will be back in earnings season with the "better than expected" nonsense and stocks could take off again based on low expectations.

Economies don't stay in recessions forever and this is the longest one I remember so it is only a matter of time before things get better and then the bears will really be in a quandry as to what to do if TEOTWAKI fails to arrive.

Poor guys like Jim Sinclair would have invested huge in pigs, chickens, gardens, farm equipment, huge underground storage, etc. for nothing.

Wed, 06/29/2011 - 18:52 | 1413707 hambone
hambone's picture

Economies don't stay in recessions forever and this is the longest one I remember so it is only a matter of time before things get better and then the bears will really be in a quandry as to what to do if TEOTWAKI fails to arrive

Robo - might try googling Japan lost decade(s) and Great Depression...luckily there's no correlations from present to either of those situations as we've made great strides from '01 and '08 to deal w/ our structural and debt issues unlike those mentioned above<sarc>

Thu, 06/30/2011 - 01:26 | 1414602 hungarianboy
hungarianboy's picture

I have to agree with Robo here.

Things don't seem to crack. And he's right. The time Earning Season comes, ohw boy we could see a huuuge rally indeed as he described.

A jewish guy once told me. 

" You can either be right, or rich " 

Just think about it.

Wed, 06/29/2011 - 18:07 | 1413579 PulauHantu29
PulauHantu29's picture

Is this why everyone is buying physical silver, gold, etc....?

Wed, 06/29/2011 - 18:18 | 1413603 RobotTrader
RobotTrader's picture

I can assure you that people are getting sick and tired of earning nothing in their bank accounts and CD's.  We hear it every day from our corporate customers begging for better interest rates on their deposits.  Most of the big California banks finally caved in and will be offering a whopping 10 basis points on all Reg. Q accounts.

You would be amazed at the amount of cash sitting around, these CEO's are scared to death to spend or invest any of it.  Eventually the news of stocks soaring like V and MA did today will start getting people's attention and a lot of this money will be fleeing the safe accounts and piling back into Merrill Lynch, Schwab, Vanguard, etc.

It is the bank's worst nightmare, we are enjoying free funding costs from all this scared money laying around, but eventually it is going to be used for speculation and we will lose our 45-year record low funding costs.

Wed, 06/29/2011 - 18:50 | 1413621 hambone
hambone's picture

I think CEO's, CFO's (off Wall St.) and the like are too well versed now to throw in recklessly w/ the newest expectations for leveraged growth...Growth, sure, but measured and paced (nice and safe)...particularly when they can see a very cleeeear mismatch of strong corporate picture premised on a macro world wide government funding problems and the potential implications (Rumsfeldian known knowns, uknown unknowns, yada) that could hit them and quickly (so many landmines out there right now and no idea when we'll hit one and how severe the damage). 

I think your scenario is more likely for the general investor but even there, folks are mighty leary of this whole game now and now understand now what they didn't in '07...RISK is very inherent to the game and big brother is unlikely to be able to put humpty dumpty back together again if / when he falls again.

Absent willingness to leverage up at all levels, your bull market in equities will have a tough time due to a sputtering economy that just can't start firing up again...and leverage is premised on greed and confidence.  Greed, sure but I don't see the confidence.

BTW - todays jump in V and MA is exactly why CEO's are even more worried that their profits and business models are capricious and at the whim of congress (a congress painting itself into a corner)...not bullish.

Wed, 06/29/2011 - 18:31 | 1413649 Caviar Emptor
Caviar Emptor's picture

Amazed at the amount of cash sitting around? Not really. That was the goal of the Fed's gargantuan interventions since the 1980s, but especially since 2008. And yes, preservation of capital in a deflationary environment takes precedence over yield or risk. That's why they're not lending it or investing it. 

But now they're worrying about erosion of the value of their cash through inflation (biflation really). The smart ones know that if they're having a tough time in this environment so are the other companies. Margins are getting squeezed, consumer behavior is changing and the future is less than predictable. 

So it will be preservation of capital is king because the winner will be the last soldier left standing as consumers get stingy and change their behavior and the unfolding story of the world financial crisis plays itself out with lots of unpleasant surprises still to come. 

 

Wed, 06/29/2011 - 18:57 | 1413748 BORT
BORT's picture

I know a CFO in a large company that had to weather a blow through of five layers of liquidity in 2008.  Think he wants that again, or even slightly trusts the 20 somethings on Wall Street who throw out H bombs like we're impressed

Wed, 06/29/2011 - 18:31 | 1413648 Sutton
Sutton's picture

I have all of my money in coffee futures.

Wed, 06/29/2011 - 18:55 | 1413718 jm
jm's picture

Tyler:

Can't the Fed could just open the discount window to any business with a pulse, just like the BOJ did?

Their bullshit has pretty much killeld the viability of MMMFs anyway.  This is just the logical central planning conclusion.

 

Wed, 06/29/2011 - 19:04 | 1413774 Cow
Cow's picture

Bernanke needs a crisis to start QE3.  He needs to create one.

Wed, 06/29/2011 - 19:18 | 1413812 chump666
chump666's picture

Yes good post.  That is why a slew of banks in Europe were against the austerity vote, the pressure on repo money rates is looking dire.

Lock in liquidity crisis soon, three day meltups are 100% a bulltrap. 

Wed, 06/29/2011 - 19:53 | 1413938 Buck Johnson
Buck Johnson's picture

Hyperinflation is coming to the world, believe me.

Wed, 06/29/2011 - 20:02 | 1413975 russwinter
russwinter's picture

Money Market Funds, Run Don't Walk

http://www.wallstreetexaminer.com/blogs/winter/?p=3994

 

Wed, 06/29/2011 - 20:43 | 1414083 DavidDavid
DavidDavid's picture

I love reading all these "doom & gloom" comments.  You people are so paranoid.  Hyperinflation is such a joke.  It will never happen.  The "doom & gloom" crowd has been predicting hyperinflation since Reagan tripled our national debt in the 1980s.  That was 30 years ago and still there is no hyperinflation.  Not even close.  Like I said many times before, if things are so terrible, gold would be $10,000 per ounce.  Gold has risen $700 in the past 31 years.  Gee, I'm shaking in my boots worrying about hyperinflation.  How funny!

Wed, 06/29/2011 - 22:03 | 1414294 ebworthen
ebworthen's picture

 

Everything is fine, invest in equities and muni's.

No problems here, just like 2007, and 1999.

Where did I leave that stogie and my paid date?

Shit.  She's flirting with the bartender, better flash my GS I.D. card...

 

Wed, 06/29/2011 - 21:57 | 1414285 ebworthen
ebworthen's picture

 

Short version:  "Give us our money now you MOFO's, we have NO TRUST."

 

Wed, 06/29/2011 - 22:16 | 1414330 FranSix
FranSix's picture

A negative discount rate presages a crash. It's only a question of just how much of it was priced in beforehand. It's been more than 70 years this will have occurred in money markets, nobody knows exactly what to do.

I would say that the gold futures market, which was just slammed shut to small traders by Dodd-Frank is the money-market vehicle that ppl might be looking for.

Wed, 06/29/2011 - 22:43 | 1414367 A Cruel Accountant
A Cruel Accountant's picture

Do not put cash into MM. If possible use it to pay off some of your debt. No risk there.

Wed, 06/29/2011 - 23:00 | 1414387 Atomizer
Atomizer's picture

Sounds like a toilet flush to me.

Wed, 06/29/2011 - 23:06 | 1414390 Atomizer
Atomizer's picture

duplicate post

Thu, 06/30/2011 - 01:21 | 1414596 hungarianboy
hungarianboy's picture

Well, as long as the markets don't fall just go long I'd say.

Who cares? we're above 1300 again, EU is surging, Silver and gold are getting a snap back,

Going against the tide is blowing your account. by the time the house of cards collapse I go short.

Until then, better to go with the flow and dance. I don't need to be at the top. Will blow your account anyway.

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