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My memory may not be the perfect data source, but when Bill Simon was
Treasurer and we had the last big one (See his book "A Time For Truth")
I recall that more than 20 had the problem of real current values
dropping below the $1.00 amount that most investors believe to be locked
in stone.
To solve the problems they (the management companies) purchased the
impaired securities from the funds, for the original amounts the fund
paid, and put them on their own balance sheets. Couldn't stand the loss
of confidence, and that was at a time when funny money securities hadn't
been invented.
Much the same thing that the new Chairman of Citi just did with billions
of their impaired Structured Financial Vehicles. We'll probably see
other follow the same path if their capital structure permits it.
BTW, just looked at my son's accounts again, still stuck in the old
funds after their rep said he would make an exception and transfer them
to governments by today.
Also, this week Schwab closed another money fund to new investors.
Next week I'm going to sell all non governmental money funds in my son's
accounts and buy T-Bills. Commissions yes but at least I'll get out at
$1.00, unless they close redemptions also.
I personally don't think we are even close when it comes to knowing when
this is going to be over and/or how much it will cost everyone.
Richard Funkhouser
Gary Fritz wrote:
Given the credit crunch, those higher risk profiles have become, for
many investors, more risk than they are willing to expose themselves
to, and they have therefore decided to opt for quality rather than
rate -- and that means government or treasury securities.
I wonder 1) what are the chances of money-market funds losing value and
going below $1.00 NAV, and 2) if that happens, how soon and how rapidly it
is likely to happen.
Assuming you have the ability, switching from money funds into government
securities seems like a prudent move. And then you hope THOSE say
solvent...
I wonder if overseas bonds would be any better?
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