Daily Links Archives: May, 2007

"NetBank Sells Parts of Its Operations" from AP describes the implosion of NetBank Inc. (NTBK) and sale of its assets to Everbank. "[E]xtreme financial pressure for more than a year due to a difficult mortgage origination market" and "a flat yield curve" were cited as factors contributing to the $2.5 billion in deposit company's demise.

Money Fund Portal Technology Provider CacheMatrix Has Launched an Indian Subsidiary. The new CacheMatrix India is a "wholly-owned and fully-integrated subsidiary" based in Bangalore, India, and "provides development capacity and expertise for the company's unique money fund portal technology that is being incorporated into a growing roster of multinational banks."

Flat Is Back: The Chicago Board of Trade's (CBOT) 30-Day Federal Funds Futures table is indicating very low odds of a Federal Reserve interest rate cut in 2007. (Take 100 minus the close to get the expected FFF level for that month, then divide the difference from the current rate by 0.25 to get the percent odds of a move.) Futures now indicate a less than 1 in 4 chance of any cut through November 2007.

"Traditional vs. online banking: Which one is for you?" from The Orlando Sentinel finally points out some of the drawbacks to high-yield online savings accounts. "The business has not been free of trouble," says the article, citing the recent collapse of `NetBank, and investor problems with cross-marketing, access to cash, and temporary teaser rates. (Crane Data Says: If it looks too good to be true, run!)

The Securities and Exchange Commissions Proposed Rules Page features SEC rules before they become rules. Before they're accepted, they'll be posted here, along with the chance for anyone to comment. Currently, the hot topic is Amendments to Financial Responsibility Rules for Broker-Dealers which will impact money market funds and brokerage sweep accounts.

Bank Deals Blog Comments on HSBC vs. FNBO 6% Yields The website excerpts an HSBC Direct letter to a client that moved her cash to FNBO Direct, chasing the latest temporary 6% offer. It also mentions FNBO's banner ad campaign and push into several cities, including Boston (see Boston Globe mention).

"Money Funds a Good Bet" Says Kiplinger's Ask Kim (Lankford). Money fund yields have been below 1%, and as high as 17%. But "[d]on't look for either extreme anytime soon," says the response to a reader question. Kiplinger's adds, "with long-term rates as low as they are, there is a lot more risk of rates rising (and bond prices falling) than there is of rates falling (and bonds appreciating).... So money-market funds make a lot of sense for cash you can't afford to lose."

Black Enterprise "Money Sense: Building an Emergency Fund" says to keep 6 to 12 months of living expenses, and gives tips on how to find money for your savings stash.

The Virginian Pilot runs AP story "Places to Stash Your Cash". Reporter Meg Richards reviews banks, CDs, money market mutual funds and ultra-short bond funds.

FNBO Bank Officially Announced 6.0% APY Online Savings Account. The company's press release says the online savings account market is $120 billion (as of 2005), citing research by Celent (which estimates that online deposits should triple to $380 billion by 2010). The company's offering will have no minimum and the 6.0% "special" is available only through Sept. 28, 2007.

Sunday's NY Times writes "The Online Broker as Your Financial Supermarket". The piece details checking options at Schwab, Fidelity, E*Trade, TD Ameritrade, and Bank of America, and discusses the push by financial companies to become a "financial supermarket". It also talks about the new high rates on checking battle, a reversal of the trend of brokerages paying lower interest rates on cash.

"Countrywide Bank's SavingsLink Savings Account Sees Tremendous Growth in First Year" Says Press Release. Countrywide Bank President Timothy Wennes says, "[C]onsumers today are drawn to high-yield online savings rates that allow their money to grow at a much faster pace than traditional passbook and statement savings accounts, which on average pay less than one percent annually." The release adds, "However, even with the phenomenal growth of SavingsLink and similar online savings products in the marketplace, recent data from a Countrywide Bank-commissioned survey indicate that while 42 percent of U.S. households surveyed took time to shop for high yielding savings rates, only eight percent bothered to move their money for a better rate."

While down visiting New York City yesterday, we couldn't help but notice Wachovia Bank's huge 5% Money Market signs in the window of a midtown branch. Alas, the bank says it's only available onsite and we didn't have time to stop in, but BankDeals Blog says they're running 4.75% specials as well. (We also enjoyed the ING Direct billboard on the way in to Boston's Logan airport, "Wicked High Yields.")

The Economic Times (of India) writes "Cash reserves of PSUs may swell MF, saying Indian companies too are flush with cash reserves. "Blue chip public sector companies sitting on huge cash reserves may be allowed to temporarily park them in mutual fund instruments," says the article.

Thailand's Bangkok Post writes "Investors turning to low-risk funds: Money-market funds offer good liquidity". The piece describes a doubling of the Thai money market mutual fund sector in 2006. Lertchai Kochareonrattanakul of Fitch Ratings, the lone rater of money funds in Thailand (including TMB Money Funds), says, "money-market funds became popular over the past two years and would continue to grow this year, thanks to their high liquidity and attractive returns. More investors were using money-market funds as an alternative to current and savings accounts."

"Sweep Up More Income" Says The Motley Fool. This article says, "If your broker offers you a sweep option, take a careful look at it. The key is to make sure that the interest rate you're getting is competitive."

SEC Chairman Cox Says "Overhaul of 12b-1 Fees Likely" Reports Investment News. Cox told the paper that alternative ways of funding servicing expenses could be discussed, but that "reform or repeal" of the marketing expenses is likely. For funds charging 12b-1 fees or distribution expenses, the average is 0.24%, according to Crane Data.

The Federal Reserve Board of Governors met this week and left the benchmark Federal funds target rate unchanged at 5.25%. The Statement from the Fed's Open Market Committee says " the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."

Money Fund Assets Resume Record Run Say Recent ICI Stats. Money funds gained $19.5 billion to a record $2.466 trillion in the week ended May 9. Retail MMFs rose $6.5 billion; Institutional MMFs rose $13.1 billion.

"Savers should savor Fed policy" says LA Times' Tom Petruno. "The yields they're earning on money market funds and other short-term accounts are likely to hold near current levels, which are close to six-year highs," says the article.

The Motley Fool writes on "The Best Money Market Funds". The article very briefly compares money funds and bank deposits, discusses the types of funds, and mentions a handful of fund names. Nice primer but a little short.

"Protect your profits before market cools" says The Arizona Republic. "Today, it's not hard to find funds paying 5 percent and up, on a virtually risk-free basis since money funds have a superb record of avoiding losses," says Sunday's article.

For those who missed it, InsuranceNewsNet has posted a transcript of last week's Q1 2007 Federated Investors Earnings Conference Call. Highlights in the Q&A include: a discussion on higher money fund inflows through the broker-dealer channel (taking market share from banks), and trends in adding corporate cash management customers.

Moody's to Host "Money Market Fund Industry Portfolio Developments, Credit and Liquidity Trends" Seminar next Wednesday, May 9. The session will "Present Moody's money market funds 2007 survey outlook results and update on money market funds risk exposures."

The Israel Securities Authority presented changes to investment managers yesterday clearing the way for money market funds in Israel says Globes online.

The Treasury Management Association of New England (TMANE) hosts its annual conference next week (May 9-11) in Boston. Money fund content on the program includes: Goldman Sachs' Keith Wilton on "Understanding and Evaluating Money Market Portals" and Capital Advisors' Lance Pan on "A Check-up on Institutional Money Market Funds".

Money fund pioneer The Reserve will host a Cash Summit May 17-18 in New York. The event will focus on "best practices" from leading brokerages, and will feature Crane Data's Peter G. Crane presenting "Cash Outlook and Issues 2007."