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Thanks for the reply.
I deffinately agree with number 1. And I have told my brokerages many
times that I would rather the money be swept into a Bank account than a
money market account. And most brokerages seems to be listening to their
customers and offering this.
I know some brokerages are offering 10 or more different banks for this,
with the insurance limit of $99,000. So one could have close to $1,000,000
but it would be swept into 10 different banks. I like and want this myself.
I believe, but not sure. That OptionsXpress is working on offering 10 banks
for this.
But. Number 2.
Not allowing a customer to put money into a money market fund themselves if
they want, is crazy. So I would leave Schwab, if I wanted money in a money
market fund.
But as I said above. I don't want any of my money in a money market fund.
To each his own. And hopefully some or most brokerages will offer both and
let the customer decide.
----- Original Message -----
From: "The Funkhousers" <funkhouser@xxxxxxxx>
To: "RB" <rhodes@xxxxxxxxxxxxxx>; "Omega List" <omega-list@xxxxxxxxxx>
Sent: Sunday, December 16, 2007 1:01 PM
Subject: Re: Last rant on Schwab
I'd suggest you go back and read earlier mail to get a better handle on
the subject, because the answer to both your question 1 and 2, is both.
Money you haven't committed to purchases and the results of security sales
is generally swept into a money fund, usually on a daily basis. Often the
broker will specify which sponsored fund is to be used for that purpose,
and some permit more than one fund to be chosen for that purpose. Some
will also require (If they also own a bank, and Schwab does.) that the
bank option is the only vehicle available for sweep cash.
The bank option, when required, is usually disadvantageous, compared to a
treasury money fund because of the substantially lower rate of return,
which is equally secure. In effect you are making a below market rate of
return investment to the banks advantage.
Additionally, most brokerages will have other non sweep money funds
available, with different potential rates of both risk and returns, which
can be purchased via direct purchase just as with any other security.
Schwab has a number of those, some of which are restricted to treasury or
government securities, and some of which are not.
Some of these funds are the ones which are now being closed to accounts
which are not already invested in those funds.
Richard
RB wrote:
I missed the early part.
1. Are you talking about the excess money in the customers accounts?
2. Or are you saying, (which is hard to believe). That as a customer of
Svhwab, one can't buy or put money in a money market fund?
If it is number 1. I agree with it and most brokerages are now or in the
future will be doing that. Because of the insurance.
I have already told my brokerage, I want mine in a bank.
----- Original Message ----- From: "The Funkhousers"
<funkhouser@xxxxxxxx>
To: "Omega List" <omega-list@xxxxxxxxxx>
Sent: Saturday, December 15, 2007 9:14 PM
Subject: Last rant on Schwab
In an earlier memo I raised the question about what possible motivations
Schwab might have in closing money funds to new investors.
While the most plausible reason didn't come from our group, here's what
I got: 1) They now own a bank. If that were the case every
accountholder, when forced to, would move their cash elsewhere, for the
Schwab Bank current rate is about net one half of one percent. They
couldn't afford to lose the existing management fees they now earn. 2)
They didn't want to give newer investors the advantage of participating
in an investment pool where older existing holdings were generating
rates substantially above current rates. In other words rate dilution
for longer term holders. Very altruistic, but if that was the real
reason they'd create a new one for just for new money and consolidate
later when rates stabilized. 3) And the one I believe is the most
plausible -- They didn't want the exposure to law suits that they would
have if some of their current pricing on existing holdings were at
knowingly optimistic levels, and therefore any new money which purchased
shares at $1.00 per share overpaid.
I've been wrong before, on many occasions, but in my mind that's the
most logical opinion, and that's all it is.
Anybody know if others are closing money funds to new investors?
Hope I'm wrong again.
Richard
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