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What will happen to the corporate bond fund market if the yahoos in DC don't get this debt ceiling fixed? I'm ready to move all of my investmnents to MM funds, any suggestions
I don't think MM's will necessarily be entirely safe harbor, either if this really happens and happens in a sizable way. There has already been a good deal of concern about what some MM funds searching for yield have apparently been investing in lately, as is.
well. MM funds are treasury bills and government can't borrow. i dunno. i am staying put, but if you want to react, just go to cash -- and i mean insured cash deposit at a bank, not a MM fund which suddenly can't roll its 3-6 months bills.
on the other hand, i think the impact of a real default is sooo outlandish, that it will not happen.
MM funds, for the most part, are not t-bills unless you buy one that is. If the government isn't paying its bills how safe will your FDIC "insured" cash deposit at the bank be.
Here are the holdings of FDRXX: (Fidelity Cash Reserves)
Composition by Instrument (%) as of 06/30/2011
Treasury Debt 9.31 Government Agency Debt 0.89 Asset Backed Commercial Paper 0.26 Financial Company Commercial Paper 13.28 Other Commercial Paper 1.55 Certificates of Deposit 44.99 (FOREIGN BANKS) Insurance Company Funding Agreements 0.15 Other Notes 4.88 Repurchase Agreements 23.28 Variable Rate Demand Notes 0.99 Other Municipal Debt 0.0 Investment Companies 0.0 Other Instruments 0.42
Understand the difference between a default and a loss. Failure to make timely payments is a default; that doesn't mean you won't get your money. In this sense, it's not much different from the bank failing - you can get your insured money out, but it can take a few days. The bank has not paid you your money on demand (i.e. when it is due), but you are ultimately made whole.
IMHO the worst case scenario if an FDIC insured bank fails and the FDIC fails to merge it with another bank that makes good on its debt and the Treasury defaults and Congress doesn't get shocked enough to immediately raise the debt limit is that it could take a few extra days to get your money out.
John N, Washington is filled with drama queens. All with their eye on next year's elections. A lot of them are now saying 'oops.' The debt ceiling will be raised, the poor and the retired will give up some, the rich will get richer. It's the American way.
Comments
on the other hand, i think the impact of a real default is sooo outlandish, that it will not happen.
If the government isn't paying its bills how safe will your FDIC "insured" cash deposit at the bank be.
Hi fundalarm,
Here are the holdings of FDRXX: (Fidelity Cash Reserves)
Composition by Instrument (%) as of 06/30/2011
Treasury Debt 9.31
Government Agency Debt 0.89
Asset Backed Commercial Paper 0.26
Financial Company Commercial Paper 13.28
Other Commercial Paper 1.55
Certificates of Deposit 44.99 (FOREIGN BANKS)
Insurance Company Funding Agreements 0.15
Other Notes 4.88
Repurchase Agreements 23.28
Variable Rate Demand Notes 0.99
Other Municipal Debt 0.0
Investment Companies 0.0
Other Instruments 0.42
Take care,
Catch
IMHO the worst case scenario if an FDIC insured bank fails and the FDIC fails to merge it with another bank that makes good on its debt and the Treasury defaults and Congress doesn't get shocked enough to immediately raise the debt limit is that it could take a few extra days to get your money out.
http://www.smartmoney.com/invest/markets/the-debt-crisis-where-you-should-invest-1311022836526/?cid=djem_sm_dailyviews_h
personally, I think if US T or US market 'crap out', all hell break loose, nothing is safe except for maybe inversed sp500 or inversed dows...
but looks like they are fighting in congress to see how much US gov will 'dish out' to continue payment these debts...