Last month's issue of Treasury & Risk magazine contained an article entitled, "Cash: Irrational Insecurity?, which says that "Corporate investors are rethinking previous paradigms and still settling for low rates of return, although some see that beginning to change." The piece cites several industry experts on the current state of corporate cash investing. It says, "[F]or the foreseeable future extreme safety is in and return is out."
The article quotes Lee Epstein, president and CEO of Money Market One, "For years, corporate investors stuck to what were considered safe investments. Now we know that nothing is safe. You have to consider that the unthinkable can happen. It's the new paradigm."
It also cites, Mike Gallanis of Treasury Strategies, "Companies still are willing to take very little risk with their cash and are settling for incredibly low rates.... We definitely have not turned the corner yet."
Ben Campbell, president and CEO of Capital Advisors Group disagrees. He tells the magazine, "The flight to quality is over and the market has stabilized.... Confidence is starting to build in the money-fund arena. The market today is quite different than it was in early October, when the flight was in full swing." He adds, "Investment portals really don't give a lot of background information on the risk and credit processes used by the money funds."
In other news, see the new Kiplinger's Personal Finance "Not as Good as Cash," which wonders whether there is something wrong with ultra-short bond funds. Jeffrey Kosnett writes, "[T]he average ultra-short-term fund lost 8% last year. That's not my idea of a low-risk investment. From the middle of 2007 through the end of 2008, many of these funds lost more than 20%. No money-market fund, not even the impaired Reserve Fund, ever came within a step of a 20% loss."
