Showing posts with label Reserve Primary fund. Show all posts
Showing posts with label Reserve Primary fund. Show all posts

Wednesday, September 17, 2008

Money market fund breaks a buck

Forget everything else you have heard about the financial crisis. Focus on this. According to USA Today,

"The share price of the Reserve Primary fund, a money market mutual fund, has fallen below the sacred $1 mark, thanks to the Lehman Bros. meltdown.

Money market funds have been the fund industry's haven for more than three decades, and investors often view them the same way they do bank checking accounts. The funds' safety record has attracted more than $3.5 trillion in assets.

Until now, no money fund open to the general public has ever allowed its share price to dip below a dollar — "breaking the buck," as it's called. (A small institutional money fund, Community Bankers Money fund, broke the buck in 1994.)

Money market funds have long feared that if they broke the buck, thereby shrinking investors' principal, people would shift their money into bank money market accounts or ultrasafe Treasury securities. The question now is whether other money funds will follow the Reserve fund in dipping below $1."

Let me answer that for you: yes. What do we suggest? Two things:

One - Treasury Direct. Now.
And two - Pray. Hard.