Grant'​s Interest Rate Observer writes about "Warren Buffett'​s money fund" in its latest issue. The piece tells us, "​As recently as June 30, 2022, Berkshire Hathaway'​s cash, near cash and Treasury-​bill holdings tallied to just 31% of the Berkshire equity portfolio. On June 30, 2024, cash, near cash and bills weighed in at 88% of equities. It'​s an even bet that September'​s balance sheet will show more cash, near cash and bills than stocks. If the past were invariably prologue, one might conclude that the greatest equity investor is fast converting his corporate life'​s work into a money-​market fund." It continues, "​But the past is not invariably prologue. Nor does past performance guarantee future results. Everyone knows it, yet many ignore it. Just to keep up with the Dows and the Joneses, some of the best-​credentialed portfolio managers choose to do '​that which has worked.' They buy high because the market is high. They eschew international diversification because American stocks have excelled. Never mind the time-​tested reasons for buying low and spreading out one'​s country bets: The very opposite is what'​s ringing the cash register." Grant'​s writes, "​There was a curious alignment of the financial stars on Tues., Sept. 3, when a 9.​5% drop in the NVDA share price shaved $​279 billion off that world-​beating chip maker'​s market cap. It was a sum, as it happened, that very nearly equaled the size of Berkshire'​s June 30 Treasury-​bill and cash holdings. 'I don'​t mind at all, under current conditions, building the cash position,' Buffett told the Berkshire Hathaway shareholders at the May 4 annual meeting. 'I think when I look at the alternative of what'​s available in the equity markets, and I look at the composition of what'​s going on in the world, we find it [​the cash position] quite attractive.'" The article adds, "Buffett hastened to add that Berkshire doesn'​t own bills for their 5%-​plus yield (​though, in the second quarter, Berkshire'​s interest income, at $​2.​6 billion, handily topped its dividend income, at $​1.​5 billion). It would own them as readily at 1% as it does at 5%. What commends the Treasury'​s IOUs to the Omaha stock jockeys is rather their dissimilarity to Apple, Inc., Berkshire'​s top equity holding (​even following sales of 506 million shares in the first and second quarters) and perhaps its all-​time greatest investment (​up 800% on its initial investment in 2016, according to the Financial Times)."

The Investment Company Institute published its latest weekly "Money Market Fund Assets" report Thursday. ICI shows money market mutual fund assets jumping for the sixth week in a row (​up $​23.​4 billion) to a record $​6.​324 trillion. Assets have risen in 17 of the last 21 weeks, increasing by $​346.​1 billion (​or 5.​8%) since April 24. MMF assets are up by $​437 billion, or 9.​2%, year-​to-​date in 2024 (​through 9/​11/​24), with Institutional MMFs up $​167 billion, or 5.​5% and Retail MMFs up $​270 billion, or 16.​1%. Over the past 52 weeks, money funds have risen by $​681 billion, or 12.​1%, with Retail MMFs up by $​444 billion (​21.​0%) and Inst MMFs rising by $​237 billion (​6.​7%). ICI'​s weekly release says, "Total money market fund assets increased by $​23.​37 billion to $​6.​32 trillion for the week ended Wednesday, September 11.... Among taxable money market funds, government funds increased by $​31.​75 billion and prime funds decreased by $​6.​00 billion. Tax-​exempt money market funds decreased by $​2.​39 billion." ICI'​s stats show Institutional MMFs rising $​17.​2 billion and Retail MMFs rising $​6.​2 billion in the latest week. Total Government MMF assets, including Treasury funds, were $​5.​148 trillion (​81.​4% of all money funds), while Total Prime MMFs were $​1.​048 trillion (​16.​6%). Tax Exempt MMFs totaled $​127.​3 billion (​2.​0%). ICI explains, "Assets of retail money market funds increased by $​6.​21 billion to $​2.​56 trillion. Among retail funds, government money market fund assets increased by $​4.​43 billion to $​1.​62 trillion, prime money market fund assets increased by $​3.​33 billion to $​818.​84 billion, and tax-​exempt fund assets decreased by $​1.​55 billion to $​116.​82 billion." Retail assets account for over a third of total assets, or 40.​5%, and Government Retail assets make up 63.​5% of all Retail MMFs. They add, "Assets of institutional money market funds increased by $​17.​15 billion to $​3.​76 trillion. Among institutional funds, government money market fund assets increased by $​27.​32 billion to $​3.​52 trillion, prime money market fund assets decreased by $​9.​33 billion to $​229.​60 billion, and tax-​exempt fund assets decreased by $​841 million to $​10.​46 billion." Institutional assets accounted for 59.​5% of all MMF assets, with Government Institutional assets making up 93.​6% of all institutional MMF totals. According to Crane Data'​s separate Money Fund Intelligence Daily series, money fund assets have risen by $​42.​1 billion in September (​through 9/​11) to $​6.​657 trillion. They hit a record $​6.​682 trillion on 9/​5 but have fallen slightly since. Assets rose by $​109.​7 billion in August, $​16.​6 billion in July, $​15.​7 billion in June and $​91.​4 billion in May, but they fell $​15.​8 billion in April and $​68.​8 billion in March. They rose $​72.​1 billion in February, $​93.​9 billion in January, $​32.​7 billion in December and $​226.​4 billion in November. MMF totals fell by $​31.​9 billion in October and they rose $​93.​9 billion last September. Note that ICI'​s asset totals don'​t include a number of funds tracked by the SEC and Crane Data, so they'​re over $​400 billion lower than Crane'​s asset series.

The Wall Street Journal writes on "The Shadow Dollar That'​s Fueling the Financial Underworld." The article explains, "A giant unregulated currency is undermining America'​s fight against arms dealers, sanctions busters and scammers. Almost as much money flowed through its network last year as through Visa cards. And it has recently minted more profit than BlackRock, with a tiny fraction of the workforce. Its name: tether. The cryptocurrency has grown into an important cog in the global financial system, with as much as $​190 billion changing hands daily. In essence, tether is a digital U.​S. dollar -- though one privately controlled in the British Virgin Islands by a secretive crew of owners, with its activities largely hidden from governments." It continues, "Known as a stablecoin for its 1:​1 peg to the dollar, tether gained early use among crypto aficionados. But it has spread deep into the financial underworld, enabling a parallel economy that operates beyond the reach of U.​S. law enforcement." The Journal adds, "Tether is arguably the first successful real-​world product to emerge from the cryptocurrency revolution that began over a decade ago. It has made its owners immensely rich. Tether has $​120 billion in assets, mostly risk-​free U.​S. Treasury bills, along with positions in bitcoin and gold. Last year it generated $​6.​2 billion in profit, outearning BlackRock, the world'​s largest asset manager, by $​700 million. 'We need a regulatory framework that doesn'​t allow offshore dollar-​backed stablecoin providers to play by a different set of rules,' Deputy Treasury Secretary Wally Adeyemo told The Wall Street Journal. Adeyemo singled out tether in April testimony before Congress."

Barron'​s writes, "Retirees, It'​s Time to Give Yourself a Raise," which says, "If you'​re going it alone, consider putting your portfolio into buckets, a strategy popularized by Morningstar and credited to financial planner Harold Evensky. The approach can accommodate withdrawal rates like 4% or 5%, and it'​s useful to tailor your portfolio to your specific spending and long-​term growth needs. The idea is to divide your portfolio into three buckets: one holding cash for near-​term expenses, a second in fixed income and high-​yielding equities to handle intermediate expenses, and a third in growth stocks to help your portfolio beat inflation and possibly keep growing." They explain, "Your cash bucket is like your Fort Knox -- it'​s solid, no matter what the market does. Sitting on cash isn'​t bad now, with yields of 4% to 5%, but this is an all-​weather strategy to employ even after yields fall. You don'​t want to be left vulnerable in a year like 2022, when both stocks and bonds fell by more than 10%. If that happens again and you don'​t have a cash cushion, you’​d be forced to withdraw money from a declining portfolio to pay the bills, locking in your losses and hastening the depletion of your savings. Your cash bucket should hold enough money to help cover up to two years of expenses: budget items like housing, food, and transportation. It might hold vehicles like FDIC-​insured certificates of deposit, high-​yield savings accounts, and money market mutual funds from companies like Vanguard, Charles Schwab, and Fidelity." Barron'​s says, "This bucket doesn'​t hold one to two years of your overall expenses -- just what you need from your portfolio. Add up your annual spending and then subtract the amount you'​ll receive from Social Security and other income, such as rental properties or a pension. Factor in taxes. Whatever is left over would come from the cash bucket.... Once your cash needs are set, move on to the second bucket. This should hold five to eight years' worth of your required portfolio income. It should hold things like high-​quality bonds and stocks that pay relatively high yields, such as utilities; real estate investment trusts, or REITs; and midstream energy companies. Bonds are at a pivot point, with the Federal Reserve expected to start an interest-​rate cutting cycle in September. The yield curve, measuring the difference between short- and long-​term rates, looks close to un-​inverting, finally pushing up the long end over the short. That poses reinvestment risk for bonds maturing in a year or two; when they come due, market yields could be much lower."

Money fund yields inched lower to 5.​08% (​down 2 bps) on average in the week ended Sept. 6 (​as measured by our Crane 100 Money Fund Index, an average of 7-​day yields for the 100 largest taxable money funds) after remaining unchanged the week prior. Yields were 5.​10% on 8/​31, 5.​13% on 7/​31 and 6/​28, 5.​14% on 5/​31, 5.​13% on 4/​30, 5.​14% on 3/​31 and 2/​29/​24, 5.​17% on 1/​31/​24, 5.​20% on 12/​31/​23, 4.​94% on 6/​30/​23, 4.​61% on 3/​31/​23 and 4.​05% on 12/​31/​22. The vast majority of money market fund assets now yield 5.​0% or higher. The broader Crane Money Fund Average, which includes all taxable funds tracked by Crane Data (​currently 668), shows a 7-​day yield of 4.​98%, down 2 bps in the week through Friday. (​This is the first time our Crane MFA fell below 5.​0% since July 2023.) Prime Inst money fund yields were unchanged at 5.​19% in the latest week. Government Inst MFs were down 2 bps at 5.​08%. Treasury Inst MFs were down 2 bps at 5.​01%. Treasury Retail MFs currently yield 4.​78%, Government Retail MFs yield 4.​79%, and Prime Retail MFs yield 4.​99%, Tax-​exempt MF 7-​day yields were down 12 bps to 2.​71%. Assets of money market funds rose by $​48.​4 billion last week to a record $​6.​663 trillion according to Crane Data'​s Money Fund Intelligence Daily. For the month of September, MMF assets increased by $​48.​4 billion, after increasing by $​109.​7 billion in August. Weighted average maturities were unchanged at 33 days for the Crane MFA but were down 1 day to 32 days for the Crane 100 Money Fund Index. According to Monday'​s Money Fund Intelligence Daily, with data as of Friday (​9/​6), 109 money funds (​out of 787 total) yield under 3.​0% with $​116.​7 billion in assets, or 1.​8%; 14 funds yield between 3.​00% and 3.​99% ($​16.​6 billion, or 0.​2%), 279 funds yield between 4.​0% and 4.​99% ($​1.​508 trillion, or 22.​6%) and 385 funds now yield 5.​0% or more ($​5.​022 trillion, or 75.​4%). Our Brokerage Sweep Intelligence Index, an average of FDIC-​insured cash options from major brokerages, was unchanged (​again) at 0.​62%. The latest Brokerage Sweep Intelligence, with data as of Sept. 6, shows that there was no changes over the past week. (We haven'​t seen many of the changes mentioned on earnings calls, which apparently only apply to a narrow slice of "​advisory" accounts. Only a couple of brokerages report these rates, which aren'​t included on our BSI report.) Fifteen weeks ago, we removed the rates for TD Ameritrade from the listings, which completed its merger with Charles Schwab and which pushed the averages higher (​2 bps). Three of the 10 major brokerages tracked by our BSI still offer rates of 0.​01% for balances of $​100K (​and lower tiers). These include: E*​Trade, Merrill Lynch and Morgan Stanley.

Fitch Ratings published "Local Government Investment Pools: 2Q24," which says, "Fitch Ratings' two local government investment pool (​LGIP) indices experienced an aggregate asset increase in the second quarter of 2024 (​2Q24). Combined assets for the Fitch Liquidity LGIP Index and the Fitch Short-​Term LGIP Index were $​624 billion at the end of 2Q24, representing an increase of $​9 billion qoq and $​47 billion yoy. [​Fitch says Liquidity LGIPs total $​407.​7B vs. Short-​Term LGIPs at $​216.​7B.] The Fitch Liquidity LGIP Index was up 2.​1% qoq and the Fitch Short-​Term LGIP Index was up 0.​4% qoq, compared to average growth of 6.​0% and 6.​9%, respectively, in the second quarter over the past three years." They comment, "Weighted average maturities (​WAMs) decreased incrementally in 2Q24, as the Fed maintained a target range of 5.​25%–​5.​5%. The WAM of the Fitch Liquidity LGIP Index decreased to 37 days, but is still higher than prime '​2a-​7' money market funds at 17 days. The Fitch Short-​Term LGIP Index ended the quarter with a duration of 1.​22 years, up 2.​2% since last quarter.... Sector allocations were relatively consistent qoq for both indices. The Fitch Liquidity LGIP Index increased exposure to CP by 1.​08% and decreased exposure to Government Agencies by 1.​98% qoq. Exposure to Treasuries, Supranational, and Asset Backed Securities increased in aggregate by 0.​84% qoq. The Fitch Short-​Term LGIP Index decreased exposure to Treasuries by 1.​76% and increased exposure to Government Agencies by 1.​1% qoq. Both indices continue to have a majority of sector exposure to direct, guaranteed or securities collateralized by obligations of the U.​S. Treasury and its instrumentalities/​agencies."

BofA Securities latest "European Rates Watch features a brief titled, "Assets of EUR MMFs at new highs." Rates Strategist Ronald Man, who will also be speaking at our upcoming European Money Fund Symposium (Sept. 19-​20 in London), writes, "Assets of EUR MMFs in the euro area rose to record highs. Assets of short-​term EUR MMFs, which follow similar rules as US SEC 2a-​7 MMFs, exceeded €​300bn since July 2024 and continued to rise.... Assets of French MMFs, mainly standard MMFs that can hold longer maturity assets than short-​term EUR MMFs and are mostly denominated in euros, also recorded a record high of €​421bn in 1Q 2024." Man says, "We believe the inflows in EUR MMFs over the past year reflect growing expectations of rate cuts by the ECB. Curve flattening associated with such expectations may have also reduced the attractiveness of longer-​dated assets to investors vs parking cash at MMFs. Bank interest rates on new deposits have also fallen below yields of short-​term EUR MMFs.... Short-​term EUR MMFs reduced their WAM since July 2024 to 30 days.... The reduction in WAM may raise MMF demand for assets with shorter maturities, including CP and CD that collectively account for [​about] 50% of short-​term EUR MMF assets.... Newly issued CP and CD by Euribor panel banks at shorter maturities to meet this demand may feed into the Euribor fixings and keep the fixing curve steep." The update adds, "The reduction in WAM has also been achieved by increased allocation of MMF assets to repo, which tend to have among the shortest maturities. The share of short-​term EUR MMF assets in repo rose to 15%, a decade high; while the share of TD declined.... The decline in short-​dated EUR MMF WAM may keep the Euribor fixing curve steep and be a source of support for our 2y 3s6s widener recommendation. But we are also mindful of days with no or low eligible Euribor transactions, as it is possible that fixing risks to our recommendation may be exacerbated by the current phasing out by mid-​November 2024 of level 3 contributions to Euribor submissions."

Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Wednesday, which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (​with data as of Aug. 30) includes Holdings information from 49 money funds (​down 30 from a week ago), or $​2.​509 trillion (​down from $​3.​638 trillion) of the $​6.​615 trillion in total money fund assets (​or 37.​9%) tracked by Crane Data. (​Our Weekly MFPH are e-​mail only and aren'​t available on the website. See our latest Monthly Money Fund Portfolio Holdings here and our Aug. 12 News, "August Money Fund Portfolio Holdings: TDs, Treasuries Up; Repo Slides.") Our latest Weekly MFPH Composition summary shows Government assets dominating the holdings list with Treasuries totaling $​1.​131 trillion (​down from $​1.​561 trillion a week ago), or 45.​1%; Repurchase Agreements (​Repo) totaling $​956.​4 billion (​down from $​1.​420 trillion a week ago), or 38.​1%, and Government Agency securities totaling $​228.​8 billion (​down from $​296.​4 billion), or 9.​1%. Commercial Paper (​CP) totaled $​62.​5 billion (​down from a week ago at $​127.​5 billion), or 2.​5%. Certificates of Deposit (​CDs) totaled $​48.​3 billion (​down from $​82.​2 billion a week ago), or 1.​9%. The Other category accounted for $​61.​3 billion or 2.​4%, while VRDNs accounted for $​20.​5 billion, or 0.​8%. The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $​1.​131 trillion (​45.​1% of total holdings), Fixed Income Clearing Corp with $​236.​3B (​9.​4%), the Federal Home Loan Bank with $​168.​6 billion (​6.​7%), the Federal Reserve Bank of New York with $​110.​1B (​4.​4%), JP Morgan with $​76.​5B (​3.​0%), Citi with $​68.​5B (​2.​7%), BNP Paribas with $​59.​8B (​2.​4%), Federal Farm Credit Bank with $​52.​9B (​2.​1%), Goldman Sachs with $​47.​6B (​1.​9%) and RBC with $​40.​9B (​1.​6%). The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($​264.​5B), Goldman Sachs FS Govt ($​234.​8B), Fidelity Inv MM: Govt Port ($​228.​8B), JPMorgan 100% US Treas MMkt ($​205.​6B), State Street Inst US Govt ($​133.​7B), Morgan Stanley Inst Liq Govt ($​130.​8B), Allspring Govt MM ($​129.​5B), Dreyfus Govt Cash Mgmt ($​115.​4B), First American Govt Oblg ($​92.​8B) and Goldman Sachs FS Treas Instruments ($​89.​4B). (​Let us know if you'​d like to see our latest domestic U.​S. and/​or "​offshore" Weekly Portfolio Holdings collection and summary.)

The website DL News writes that, "Franklin Templeton sees '​vanilla' tokenisation funds matching $​171bn stablecoin boom." The brief claims, "Stablecoins are one of crypto'​s biggest success stories, but they face growing competition from another kind of digital asset: tokenised money market funds. The key difference between the two products can be traced to how investors take advantage of federal interest rates, according to Roger Bayston, the head of digital assets at Franklin Templeton, a giant investment firm offering a tokenised money fund. 'A money fund offers yield to the users, rather than that yield being accrued to the stablecoin issuer,' Bayston told DL News." It continues, "Stablecoins are cryptocurrencies designed to stay on par with government-​issued currencies like the US dollar. And there'​s significant demand for them, with the stablecoin market currently worth over $​171 billion. The tokens issued by dominant stablecoin firms like Tether and Circle are backed one to one by dollar reserves.... But these firms don'​t simply keep their reserves lying around in cash. Rather, they invest them in short-​term US Treasury bonds and make a profit from the yield.... Tokenised money market funds differ in that they allow crypto investors to gain exposure to an array of low-​risk, short-​term debt securities. Like stablecoins, money fund shares remain at a $​1 valuation, but they provide yield on top of that." The article explains, "Franklin Templeton'​s Onchain U.​S. Government Money Fund -- FOBXX for short -- provides holders with a 5.​12% yield, which it earns through investments in various US treasury bills and Federal Home Loan Banks. The fund is worth $​420 million, and its shares are represented onchain through Benji tokens. Each token is worth one share, and each share is worth $​1. While FOBXX is available on a number of different networks -- Arbitrum, Avalanche, Stellar, Polygon -- investors can only gain exposure to it through Franklin Templeton'​s web portal and dedicated apps."

Reuters writes "Cash-​loving investors dig in even as US rate cuts threaten payouts," which tells us, "A golden era for cash may be winding down as the Federal Reserve gets ready to cut interest rates. Many fans of the investment class are staying put anyway. Assets in U.​S. money markets hit a record $​6.​24 trillion this month, data from the Investment Company Institute showed on Aug. 21, even as markets became increasingly confident that the Fed was gearing up to lower rates at its Sept. 17-​18 meeting." The article explains, "Those reductions are expected to eventually pull yields in money markets down from above 5%, a rate unimaginable a few years ago. So far, however, there is little evidence that individual investors are abandoning cash to chase returns in stocks and bonds. Some $​100 billion flowed into money markets in August, according to data analysis firm EPFR." It continues, "​The durability of money markets is a recent example of how cash has reemerged as an asset class that can compete with stocks and bonds, one of the most striking shifts in the post-​COVID investment landscape. Assets in money markets have grown by $​313 billion this year, according to Crane Data, which tracks money market funds, despite heady returns in stocks and expectations that the Fed will cut rates.... Cash is seen as one of the safest and most liquid asset classes, boosting its appeal to retirees and investors looking to get paid while staying on the sidelines. Though yields are expected to fall in coming months, projections show them stopping well short of the near-​zero levels of a few years ago, when hedge fund legend Ray Dalio famously declared cash '​trash'. Clients are also hanging onto cash because of worries about rich stock valuations following an 18% year-​to-​date rally that has taken the S&​P 500 to record highs, as well as uncertainty ahead of the U.​S. presidential election, wealth advisors said." The piece adds, "But investors holding too much cash could miss out on the often superior returns of other asset classes.... The latest inflows into money-​market funds included money from institutional investors seeking to lock in yields ahead of Fed cuts, EPFR'​s data showed."

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