(snip)"from Doug Kass:
As I recently warned, the next shoe to drop will be the fear and then actual losses in money market funds.
In their grasping for yield, many money market funds — including BlackRock (BLK), Charles Schwab (SCHW) and Fidelity (FSBI) — attempted to enhanced their investment returns by purchasing low-quality debt instruments (collateralized debt obligations, continuous linked settlements, mortgage-backed securities, etc.). And many of those money market funds — like the hedge funds that invest in them (particularly futures funds, which typically keep large cash positions) — have yet to mark to market, or if they have, in certain cases have halted redemptions.
Yep, that’s correct: Money market fund management companies have begun to halt redemptions. In fact, here is one example of a management company that has halted redemptions.
Despite the protestations of bullish ostriches, their heads remain firmly entrenched in the sand. The credit backdrop is getting more and more murky. Resist those who suggest that there is value in the equity market; they may very well be right, but in this environment, the evolving credit risks don’t seem to justify the risks in longer-dated assets like equities."(snip)
(snip)"Why does it matter? Because such money market instruments are heavily bought by money market funds (MMF's), those supposedly ultra-safe repositories of peoples' savings. Most Americans may not be aware of this, but several european "enhanced" MMF's (they go by names like "LIBOR Plus") have already experienced heavy losses due to asset-backed CP investments going sour. We're not talking 1-2% losses here, but double digit hits. One insurance company had to bail out its own fund."(snip)
This is receiving zero mainstream publicity in the US media, but for a fact some of the higher interest rate paying European based money market funds have now LOST 10%+ of their depositors' principal ... and some of those European money market funds have also halted depositors from withdrawing their remaining money to avoid even larger losses of their depositor's principal which would result from forced sale of 'toxic' CDO's, MBS's etc which are owned by the money market fund to satisfy depositor's cash withdrawl demands. As referred to in the link, some US based money market funds may not be in much better shape than their European counterparts. I don't mean to be the purveyor of unjustified gloom and doom, BUT ...
~



Reply With Quote
Sophia_Starina = stripper goddess

Bookmarks