Daily Links Archives: July, 2007

AP and Bloomberg mutual fund columnist Chet Currier dies. Chet Currier was a great writer, a tireless advocate of mutual funds, and a rare friend of money market funds. Crane Data links to his recent Bloomberg columns include stories on record low cash in stocks, choosing between bonds and money funds, and "Money Funds Make a Quiet Comeback".

"Money fund assets hit a new record" writes this week's Financial Week. "With the markets potentially teetering on the top of another bubble and the Fed still holding steady at 5.25%, wary investors continued to pour even more cash into the ever-dependable money-market fund". Access Financial Week's monthly money fund top 10 rankings tables (provided by Crane Data) here.

TheStreetcom's "Never Sell Into a Panic" discusses moving to money market mutual funds. Writer Terry Savage says, "This week, the total in money market funds is likely to jump to a new record high." While she's expecting large flight-to-safety inflows due to market declines, seasonal factors -- month-end -- may outweigh market timer movements. We think we're more apt to see outflows than inflows into money funds this week, unless of course we get a real crash Monday.

"Talking to Chuck", The Wall Street Journal Interviews Charles Schwab. Saturday's Journal discusses "democratic capitalism with the founder of the eponymous brokerage and asset manager. "Mr. Schwab sweat those transaction costs out of the process so that even small traders could have a go at it. Brokers have become "commoditized" agents, he likes to say. Schwab's fees on its money-market funds are as low as 0.4% and they keep shrinking, says the article.

Kiplinger's Retirement Report "Sweep Your Cash Into Higher-Yield Accounts: Find better returns for your cash-sweep account" discusses options for investors stuck in low-yielding brokerage sweep programs. According to Crane Data, the average brokerage sweep account is paying 2.80% vs. 4.97% for the average money market fund.

ICI Reports Weekly Money Market Mutual Fund Assets. The Investment Company Institute reports that money market mutual fund assets rose by $10.59 billion in the week ended July 25 to a record total of $2.584 trillion. Assets have grown by $202 billion, or 11.0% YTD, and by $435 billion, or 20.2%, over the past 52 weeks.

"Maltese money market fund launched" says Times of Malta. HSBC Fund Management launched the Maltese Money Market Fund reports the Times of Malta. The fund, possibly Malta's first (we were unable to determine), is denominated in lira, requires a minimum investment of Lm2,500 and should pay around 3.5%, says the paper. The FT recently mentioned the Mediterranean island of Malta as a possible upstart competitor to Dublin and Luxembourg in the "offshore" fund business due to its low regulations, low taxes and EU membership.

CacheMatrix Adds "24/7 Trading and Future-Dated Trading Capabilities" Says Press Release. Denver-based CacheMatrix Holdings LLC, which provides "institutional money market fund trading technology to financial institutions", such as Comerica, US Bank, and Barclays, announced around the clock trading and future-dated trading enhancements to its portal platform. The enhancements are "aimed at helping CacheMatrix's bank and financial services customers better serve their multinational corporate clients."

"T-bill rates rise to a four-month high" writes AP via Boston.com. The Treasury Department sold $17 billion in 3-month T-bills at 4.89% (discount rate), up from 4.84% last week. Another $16 billion in 6-month bills was sold at 4.89% (discount rate), up from 4.87% last week, according to the article. The 1-year yield average declined to 4.99% from 5.00% said The Treasury.

CNNMoney.com writes "FUNDWATCH: Cash Private Equity Deals Seen Flooding Mutual Funds". The article discusses the cash torrent produced by private equity deals and mergers. It mentions money markets, citing TrimTabs numbers, saying, "Another $565 billion was invested in money market funds and bank savings accounts over the same period."

Financial Week: "A Bent for Cash, Literally". The new weekly Crain Communications publication interviews The Reserve Fund founder and money market fund inventor Bruce Bent on the creation of the money fund and on corporate treasurer's use of money funds through the years.

Flagstar Bank Offers 5.3% APY Express Money Market Account. The blog BankDeals informed us last week that Flagstar Bank, based in Troy, Mich., is now offering a 5.17% rate (5.30% APY) on a no minimum money market deposit account.

CNNMoney.com's "Safe havens for risky times" says "safe-haven investments are growing more appealing to some analysts, who say the market has gotten ahead of itself and is due for a correction". The article includes a section on "Cash", saying "With the fed funds rate at 5.25 percent, it's fairly easy to find a high-yield savings account paying 5 percent, according to Peter Crane, president of Crane Data, a firm that tracks money market mutual funds and other cash investments.... [E]veryday investors looking to beef up their cash reserves will probably want to opt for money market mutual funds or bank savings accounts".

Standard & Poor's "Asset-Backed Commercial Paper Hot Topic Conference", which was held last Tuesday, has posted some handouts online. Conference topics with handouts available include: "Introduction to ABCP", "Liquidity in ABCP", "Extendible Note Programs", "What is Driving the Demand for ABCP?", "Analytical Considerations for Repo and Market Value Structures", and "Sub-prime Mortgage Exposure in Conduits and Servicing Issues".

"Money market funds a quick pick" in New York Daily News. Monday's paper contains a brief discussion of the types of money market mutual funds, saying, "[T]here's more to picking one than just looking at yields." Peter Crane comments, "Convenience is a factor that's underrated."

"Stocks beating bonds so far this year" writes the Arizona Republic. Fund columnist Russ Wiles says, "Meanwhile, bond prices continue to stagnate and are flirting with their first overall losses since 1999." He says Lipper numbers show bond funds returning 1.7% on average through June 30, 2007. (The Crane 100 Money Fund Index has returned 2.49% year-to-date and is on pace to return over 5% in 2007.) "Recent bond weakness raises a basic question: Why hold bonds or bond mutual funds when you can earn nearly the same yields now on money-market funds, with virtually no risk of price declines?", he asks.

Suffolk Country, NY, Proposes Local Government Investment Pool Says NewsDay. Suffolk County Executive Steve Levy proposed that "county, towns and school districts aggregate their revenues of up to $5 billion annually". New York "state law would have to be changed to permit the state to invest local municipalities' money" says the article. New York remains one of the few states that don't allow LGIPs or money market mutual funds for municipalities' cash investments.

See the transcript of PBS's Nightly Business Report segment on money market fund fee waivers. Anchor Paul Kangas interviews Jason Zweig of Money Magazine and "asks Jason for the scoop on money market funds, including the reasons why investors should carefully consider offers to waive fees on these funds."

On Wall Street Magazine "Wedded Bliss" Discusses Wachovia, A.G. Edwards Merger. The piece says, "Horrified, they [AGE brokers] read ... Thompson told analysts ... that one way he plans to raise their production would be to move their clients' cash out of A.G. Edwards' money-market funds and into lower-interest-rate Wachovia bank accounts. But ... what Thompson really said was that Wachovia plans to shift A.G. Edwards' money-market clients from a third-party provider, OppenheimerFunds, into money-market funds from Wachovia-owned Evergreen Investments. At the time of the call, A.G. Edwards' Centennial money-market funds paid up to 4.79% ... the cash-sweep account at Wachovia paid 1% or less.

Chicago Tribune's Bill Barnhart writes "Bull rush on for snail's pace return" describing the lobbying debate over whether stable value funds and money market funds should be excluded from Labor Department guidelines on default investment choices in 401k plans. The article says, "Mutual funds want stable-value products, including their own money-market mutual funds, excluded as a stand-alone option. They cite a wealth of research proving that low-yielding, fixed-income investments rob employees of future retirement income easily available through investing in stocks or a combination of stocks and fixed-income investments.

Financial Week writes "Commercial paper to grow 18% this year and 22% next year, says S&P" in this week's issue. The article says, "CP issuance has posted 27 straight months of double-digit year-over-year growth, according to Diane Vazza, head of global fixed income research at S&P, reaching $2.1 trillion in CP outstanding as of June."

Wells Fargo Introduces New Select Class Money Market Shares. As we wrote last week, Wells Fargo Funds has launched two new 0.13% expense share classes for large ($50 million minimum) institutional investors.

"Diversify Into Cash?" Asks The International Herald Tribune. Writer Paul Lim says, "[I]t's easy to overlook the value of cash. But a strong case can be made that this ultrasafe asset is even more appealing now than it was last year, when cash yields were climbing and cash investments were paying out higher interest rates than riskier long-term bonds." (The article quotes Peter Crane of Crane Data.)

Wall Street Journal Says "Money Fund Assets Rise". The article summarizes the weekly ICI asset numbers "Money-market mutual-fund assets increased by $23.13 billion to $2.56 trillion in the week ended Wednesday, up from an adjusted $2.536 trillion in the previous week, according to the Investment Company Institute."

We recently discovered another company that tracks the bank rate industry. Market Rates Insight provides bank deposit rate surveys, as well as other market research on bank products. The San Rafael, Calif.-based company also tracks bank product advertising and does market research on rate pricing.

The Charlotte Observer Profiles Bank of America's Columbia Management Cash Business in a story entitled "Deal gives a boost to BofA's cash investments". The piece says the U.S. Trust's Excelsior money funds will be integrated into Columbia's fund lineup, and that these account for $8 billion in cash assets. "Columbia's cash investments unit has about 37 employees, most of whom are in Charlotte. The unit made 60,000 trades last year worth $8.5 trillion," wrote The Observer, citing Randall Royther, chief investment officer of the cash investments business. (Bank of America invited reporters to Charlotte last week for a "media day" to see Columbia's cash management operations.)

"A Lesson on Bonds and Their Yields" from USA Today explains to a reader why the stock market usually worries when bond yields rise. "If you think you'll only get 7% returns from stocks and the yield on government-backed Treasuries rises to 5.25%, you might consider the Treasuries, because they are less risky than stocks," writes Matt Kranz.

"Sometimes, consumers' outrage is out of bounds" writes columnist Chuck Jaffe. The column discusses a letter from someone "outraged by an expense fee on a money market account" (Columbia Cash Reserves Daily) with an expense ratio of 0.8%. The writer describes the fund as a "poorest performing cash investment" though the fund returned 4.63% in the year through May 31, 2007 -- higher than ING Direct's Orange Savings. Though the fund isn't exactly a world-beater among money market funds, it is hardly a poor performance for "cash".