According to Jim Grant the five largest money market mutual funds (three Fidelity funds, one Vanguard, and one BlackRock fund) have about 41% of their money in European bank debt. This according Fleck is one reason it may make sense to shift cash holdings into T-Bills.
How do you handle your cash at your brokerage? What precautions are you taking to avoid euro bank debt risk?
For that matter US back debt risk.
Any good T-Bill funds to consider?
DPN
Comments
That works better for me then a Tfund
Important to note is that the choice of bank and rate is controlled by Fidelity. "A hierarchical list of Program Banks ... will be assigned to you. ... You will be informed of the Program Bank List. [Y]ou cannot make withdrawals from the Program Deposit Account even if you contact the Program Bank." Emphasis in original.
Here are the interest rates set by Fidelity for the IRA FDIC-insured sweep. And here's the list of IRA Program Banks, which include WF and Citi, as you mentioned, but also BofA.
For non-IRA accounts, you'll have to move cash yourself into a bank account. You can do that via Fidelity's mySmart Cash account, but you're still manually moving the money from your brokerage account to the mySmart Cash account. From there, the account works like the IRA sweep - Fidelity selects the list of banks for you, you have no access to the underlying bank acccount(s), and Fidelity sets the interest rate. The mySmart Cash Program Bank List is different, though. It is currently Fifth Third, SunTrust, and Union BGanks. Here are the mySmart Cash " rates.
Either way, the rates are 0.1%. About 10x the MMF rates, but still lousy. For IRAs, this is likely the best you'll do, because you can't manually move money in and out of an IRA (nasty IRS withdrawal rules). But for a taxable account, you can link your brokerage account to a better paying (1%+) bank account, and use ACH transfers. Again, no sweep.
Contrast that with WellsTrade. WellsTrade accounts have no cash features (no check writing, no bill pay, etc.). So to get around this, they allow you to set up a bank account as the core account. However (at least this is what a WF rep told me), their brokerage cannot give preferential treatment to WF bank. So you can link any bank account to your brokerage account as the core (settlement) account. That is, automatic sweeps. But since (I'm guessing here) that's a real external bank account that you can access directly (cf. Fidelity), they'll only do this for non-IRA accounts where there are no withdrawal restrictions.
Here's the WellsTrade "glossy" on the feature: "You may link your Account to your Wells Fargo PMA(R) Prime Checking Account or another bank account. Cash balances will be swept into and out of the designated deposit account and can be used for settlement activity." Here are the Account Terms See Section 7 ("I ... [may] link my Brokerage Account to a bank deposit account to be used in connection with settlement of transactions in my Brokerage Account.") on pdf p. 9. I linked to a non-WF site because Wells Fargo says that its application/disclosure is being updated.
Finally, if safety of cash is the concern, and the brokerage doesn't give you access to an FDIC-insured account, you might consider leaving the cash directly with the brokerage (e.g. Fidelity Cash account). Most brokers offer this - they hold the cash and keep it as a general liability of the brokerage. If you feel that the brokerage itself is more secure than a MMF, this is another option. (The cash accounts are SIPC-insured, but that covers cash awaiting investment: "SIPC does not protect customer funds placed with a broker-dealer just to earn interest." FINRA - Your Rights Under SIPC.)