• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

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

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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.



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.



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


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.



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."


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 ...



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.


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.




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


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!



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.



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


iF anyone could explain

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


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 ...


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


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!

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