The San Francisco Chronicle asks, "What are the best places to stash your cash?" The article answers, "Surviving a panic like the one that started 10 years ago -- when Lehman Bros. went under and nearly took the financial system with it -- requires courage, patience, and a comfortable cushion of cash. 'Having that cash cushion allows you to ride out a financial storm, like having a few days of canned goods helps you live out a physical storm,' said Peter Crane of Crane Data, which tracks money market funds." We quote from this article, and also review ICI's latest Money Market Fund Holdings summary, below.
Columnist Kathleen Pender writes, "With the stock market hitting record highs, readers have been asking about the best places to stash their cash. The good news is that after hovering near zero for the better part of a decade, yields on short-term securities are now in the 2 percent range, if you know where to look."
She tells us, "A rule of thumb calls for having six months of living expenses in cash, in case you lose your job. Having cash also lets you weather the market's ups and downs, and pick up stocks on the cheap when others are panic selling. Berkshire Hathaway CEO Warren Buffett is renowned for building up a cash stockpile, and deploying it when there's 'blood in the streets,' Crane said."
The Chronicle piece explains, "Cash is shorthand for safe, liquid assets such as checking and savings accounts and money market funds. Some would include certificates of deposit and Treasury bills maturing in one year or less. If you're worried about a potential catastrophe, actual currency 'may be something to consider,' Crane said."
It states, "The trouble with currency is finding a safe place to store it and earning exactly zero. Here are some other options for your cash: Savings and money market deposit accounts. These are insured accounts at banks and credit unions. The accounts are very similar, except money market accounts may offer limited check-writing. But neither should be used as a checking account."
The article continues, "Money market mutual funds. These are run by mutual fund companies and invest in low-risk, short-term debt securities. They are not guaranteed by the government. Their yields tend to follow the federal funds rate -- now at 1.75 to 2 percent. If the Federal Reserve, as expected, raises the fed funds rate twice this year and two more times next year, your yield should follow shortly. The highest yielding money market funds are a little over 2 percent, according to Crane Data."
It also says, "These funds are often linked to a brokerage or mutual fund account. In the past, when you received dividends or proceeds from a stock sale, it was 'swept' into a money market fund. Today, almost all brokerage firms are sweeping these funds into a low-yielding, albeit insured bank account. This makes more money for the firm, and less for the customer. You can always move cash from your bank sweep account to a higher-yielding money fund."
The piece adds, "Money market funds got a bad name during the financial crisis, when the Reserve Primary Fund became the second one in history to 'break the buck,' or trade below $1 per share. 'During the crisis, it froze up, and was priced at 97 cents,' Crane said. If you sold at that price, you would have lost 3 cents on the dollar. This contributed to chaos in the financial markets. In the end, investors ended up getting 99 cents on the dollar. 'When all was said and done, the loss was minuscule.'"
They also mention, "Certificates of deposit," saying, "CDs are insured savings accounts offered by banks that mature in a certain number of months or years. (Credit unions call them share certificates.) If you cash in a CD before maturity, you'll pay a penalty, usually some months worth of interest."
In other news, the Investment Company Institute released its latest monthly "Money Market Fund Holdings" summary Friday. Their monthly update reviews the aggregate daily and weekly liquid assets, regional exposure, and maturities (WAM and WAL) for Prime and Government money market funds. (See also our Sept. 13 News, "September MF Portfolio Holdings: Treasuries Up; Agency, Repo Down.")
ICI's MMF Holdings release says, "The Investment Company Institute (ICI) reports that, as of the final Friday in August, prime money market funds held 30.9 percent of their portfolios in daily liquid assets and 43.6 percent in weekly liquid assets, while government money market funds held 61.5 percent of their portfolios in daily liquid assets and 78.7 percent in weekly liquid assets." Prime DLA increased from 25.6% last month to 30.9%, and Prime WLA increased from 43.0% last month to 43.6%. Govt MMFs' DLA increased from 59.2% to 61.5% last month, and Govt WLA increased from 77.2% last month to 78.7%.
It explains, "At the end of August, prime funds had a weighted average maturity (WAM) of 33 days and a weighted average life (WAL) of 66 days. Average WAMs and WALs are asset-weighted. Government money market funds had a WAM of 30 days and a WAL of 88 days." Prime WAMs increased by two days from last month, and WALs were also up by two days. Govt WAMs were up by one day from July and Govt WALs were up by two days from last month.
Regarding Holdings By Region of Issuer, ICI tells us, "Prime money market funds' holdings attributable to the Americas increased from $199.8 billion in July to $213.4 billion in August. Government money market funds' holdings attributable to the Americas declined from $1,716.62 billion in July to $1,675.69 billion in August."
The Prime Money Market Funds by Region of Issuer table shows Americas-related holdings at $213.4 billion, or 40.3%; Asia and Pacific at $99.6 billion, or 18.8%; Europe at $210.4 billion, or 39.8%; and, Other (including Supranational) at $5.5 billion, or 1.1%. The Government Money Market Funds by Region of Issuer table shows Americas at $1.676 trillion, or 76.0%; Asia and Pacific at $130.3 billion, or 5.9%; and Europe at $393.9 billion, or 17.9%.
