Click to enlarge:
The Financial Times – Gillian Tett: The Achilles heel of America’s financial system
What is the weakest link in America’s financial system today? That is not a question many have asked recently. After all, US banks look pretty healthy these days, at least relative to the horrors of eurozone banks. And the unfolding Libor saga has dominated much of the political debate and regulatory attention. But while the markets are distracted by Libor, an intense fight is bubbling, largely ignored, about one weak link in the system – America’s vast money market funds. And while it may not be producing the same fireworks as Libor, investors should watch this battle, since it could have big implications for the wider financial world. The issue is whether this $2.6tn money market fund sector is vulnerable to “runs”. Before 2008, few observers ever asked that question, since the funds were considered extremely dull. After all, they are supposed only to invest in “safe” assets (think highly rated bonds) and they pay low returns. Moreover, it was widely assumed that money market funds would never “break the buck” (return less than 100 per cent of investors’ cash).
Source: Bianco Research
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For more information on this institutional research, please contact:
Max Konzelman
max.konzelman@arborresearch.com
800-606-1872
Category: Think Tank
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Why does this chart have two 2007′s?
CTB, anything to make it seem like a terrifying disaster looms. The fact that MM funds have doubled their lobbying effort…
http://mobile.businessweek.com/news/2012-08-01/money-funds-seen-failing-in-crisis-as-sec-bows-to-lobby
…to block rule changes the SEC is trying to make. Why are they being ‘ignored?” Beats me. Why should you be fearful of your Money Marke now? Because they want you afraid. They want you to vote for the guy that will give them tax cuts, and screw you.
http://www.washingtonpost.com/blogs/fact-checker/post/a-tough-new-obama-ad-that—-surprise—-is-accurate/2012/08/02/gJQAuigQSX_blog.html
Money markets are for fools.
You’re taking credit risk for zero return, and now the regulators are talking about liquidity lockups as well.
Put your cash in a vault or FDIC-insured savings accounts or CDs.
@CTB;
It was such a good year it had to be repeated.
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