Money Funds- High Risk, Zero Return- Are They Nuts Or Are We?

Russ Winter and Lee Adler continue their regular brief updates on the market and economic scene. Lee translates the FOMC statement from Benspeak to the plain truth. Russ examines fund risk and the practical difficulty in mitigating it. Lee takes a big look at the cracks beneath the surface of the Treasury rally.

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3 comments for “Money Funds- High Risk, Zero Return- Are They Nuts Or Are We?

  1. 8bits
    June 24, 2011 at 9:03 pm

    FWIW TDAmeritrade provides FDIC insurance of at least 250k per account. What’s odd is their language indicates they may provide 500k per account:

    The boiler plate is below. What’s odd is the clause about possibly being covered from 250k to 500k. I called up a broker and he read that their internal wording is “will be” not “could be” covered for each account and said he would look into having the website change the wording.

    Cash Sweep Vehicles Interest Rates
    TD AMERITRADE FDIC INSURED DEPOSIT ACCOUNT, NOT COVERED BY SIPC
    Effective June 1, 2011

    Dollar Range Interest Rate Annual Percentage Yield
    $0.01 – $4,999.99 0.04999% 0.05%
    $5,000.00 – $24,999.99 0.04999% 0.05%
    $25,000.00 – $99,999.99 0.04999% 0.05%
    $100,000.00 – $199,999.99 0.04999% 0.05%
    $200,000.00 + 0.04999% 0.05%

    Cash in the IDA is held at TD Bank, N.A., TD Bank USA, N.A., or both. Assets at each bank will be eligible for FDIC insurance of up to $250,000 per depositor. Because there are two banks in the IDA program, IDA balances could be covered for up to $500,000 per depositor. TD Bank N.A. and TD Bank USA, N.A. are affiliates of TD Ameritrade.

  2. Christopher Rupe
    June 25, 2011 at 2:55 pm

    Hey Lee and Russ,
    There was a SEC rule change that was quietly pushed through in late 2009 that now allows money market funds to suspend redemptions. So, not only will they break the buck but you potentially won’t be able to get anything out when they suspend redemptions.

    On another note, Schwab has a similar setup as TDAmeritrade because they also have a bank. But you have to arrange with them to setup CASH as your default cash account instead of the MMFs they offer.

  3. Bill Oglesby
    June 27, 2011 at 11:46 am

    Just had a chance to listen to the latest podcast. You might want to tell Russ that Fidelity just reopened the Treasury Money Market Fund which is made up entirely of US Treasury instruments. Just an FYI if you have not already heard.

Comments are closed.