Over the weekend, Crane Data Founder & CEO Peter Crane appeared on Consuelo Mack's WealthTrack, a financial TV show airing on most PBS stations. This week's show featured "hedging against volatile market swings". (See the full video here.) Mack asked about how to differentiate among "not equal" cash equivalents. Crane replied, "You really need to look for 'money market in the title, whether it's a money market mutual fund ... or bank money market deposit account. If it says 'money market', it gives you that daily liquidity, and those investments have yet to be impaired."
Mack also asked, "Are there any money market funds that are vulnerable?" Crane told her, "It's always possible. As they tell you in the prospectus, these things are not guaranteed. But it's highly unlikely. There have been 12 instances to date where advisors have purchased troubled securities out of the funds in order to protect investors. That's the most probably outcome if something further occurs." He added that though money funds aren't FDIC insured, they can't invest in non-cash investments like auction-rate securities.
Crane also said, "Though it pains savers, you have to take what the Fed gives you. It hurts, but now's not the time to take risks." He recommended tax-exempt money market funds, like the largest Fidelity Municipal Money Market Fund (FTEXX), for those in the highest tax bracket or two, and added on municipal money fund safety, "It would take severe events to breach the $1.00 NAV."
