`Oh, My God' Money-Market Flight

[marmar]

from Bloomberg:



Putnam, Mellon Spur `Oh, My God' Money-Market Flight (Update2)

By Michael Janofsky

Sept. 19 (Bloomberg) -- Before yesterday, Sheila Bialka, a retired dance and drama teacher in Laguna Woods, California, said she hadn't thought about shifting money out of her money-market account.

Then she learned that Boston-based Putnam Investments LLC closed its $12.3 billion institutional Putnam Prime Money Market Fund and a similar fund run by Bank of New York Mellon Corp. had fallen to less than $1 a share. BNY Mellon's shares fell as much as 36 percent yesterday, then mostly recovered amid a broad market rally and gained as much as 36 percent today.

``Oh, my God,'' said Bialka, 74, whose money is with Fidelity Investments. ``Now I think I will move it. I wasn't concerned before. Now, I am.''

Advisers say larger companies, such as Boston-based Fidelity, have more resources to prop up their money-market funds. Still, fears over potential losses in the low-risk investment accounts have become the latest source of angst for investors as they adjust their portfolios and lifestyles to the tremors of Wall Street.

Investors pulled a record $89.2 billion from money-market funds on Sept. 17, according to data compiled by the Money Fund Report, a newsletter based in Westborough, Massachusetts. The withdrawals totaled a decline of 2.6 percent in money-market assets.

The redemptions countered a trend in which assets in money- market funds increase almost 14 percent, to $3.58 trillion, from January to the beginning of September, according to IMoneyNet Inc., the research firm that publishes the Money Fund Report. ......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601213&sid=a6KUeuLbdNuA&refer=home

[RagAss]

1. Me and everyone I know are pulling out first thing Monday AM !

[Mojorabbit]

3. I thought the govt

decided to back money market funds?

[tuckessee]

5. That's all the more reason to get out.

Things must really be bad (like terminally bad) if the goobermint has decided to prop them up.

[Snarkoleptic]

2. I moved my Fidelity funds out of mutual funds and into "Fidelity Cash Reserves".

Now I'm wondering if that's even safe.
Meanwhile, someone please remind me why the DJIA is not at 7500 and gold at $2,000/oz.

[Pab Sungenis]

4. Because we're not in full bore panic mode...yet.

The bigwigs are convinced that Uncle Sam is going to bail them out, so they're keeping their money in. The little guys are still in it for the long haul. A mass pull out by either will start the cascade to ruin.

[jwirr]

8. Remember Enron - it was the little guys who got left with the loses.

[Pab Sungenis]

9. I don't deny that.

But we aren't seeing the full bore panic selling like we saw in 1929 yet. That's why the Dow hasn't crashed to 7,500 and gold isn't at $2K/oz, like the OP asked.

[orwell]

6. So let me get this straight...

...Money market funds, which have never been guaranteed by the US government, are now going to be guaranteed by the US government? How often are we going to change the rules midstream?

I thought MMF returns were slightly higher than deposits because their risks were slightly higher - ie they were not insured. If FDIC insurance only covers $100,000, wouldn't it make sense to pull all money out of CD's and bank accounts and get the now inferred unlimited protection of money markets which are suddenly going to be backstopped by Uncle Sam.

This is all just nuts.

[jwirr]

7. I wonder how this mess is effecting credit unions with local members

and local investments?

[L0oniX]

10. These are NOT bank money market funds.

If anything, my bank money market interest rate has gone up from 2.5% to 3.2% and is expected to continue go up. Sun Trust, my banks stock is also going up. I am also seeing 5% 1 yr CDs again.