Comments on: Municipal Money Market Funds: Caveat Emptor

By: TeakWoodKite

TeakWoodKite — Wed, 01 Jul 2009 18:25:42 +0000

What happens to all those “frozen” ARS?

Thanks LD, I appreciatte your explinations as I might not ask the right questions.

When do you think we will see a subprime market for Cap and Trade?

By: Larry Doyle

Larry Doyle — Wed, 01 Jul 2009 16:39:45 +0000

TWK….In my opinion, the municipal auction-rate security, x-Tender, does not adhere to the standards being established for money market investments. That said, the SEC will allow these ‘pigs’ to be eligible for municipal money market funds. To do so, though, I believe the municipal money market funds need to be excluded from these new regulations.

This is my supposition. I can’t imagine that anybody in the industry would share this opinion…certainly not on the record.

However if the municipal ARS market develops it may serve to address municipal financing needs, although i do not believe investors will appreciate the risks they are taking.

The decline in the value of the dollar should not truly have an effect on these funds as they would not look to make investments in foreign markets thus presenting currency risks.

Given that the funds will have higher cash requirements going forward only means they will need to hold more cash on hand.

By: TeakWoodKite

TeakWoodKite — Wed, 01 Jul 2009 16:25:51 +0000

LD munipalities across the US are under severe stress for operating cash. This pent up demand / pressure needs financing. How does excluding them make it easier for the muncipalities to obtain the “sausage” by making this exception?

Second, how does the declining dollar effect translate in higher cash requirement in these funds?

By: Larry Doyle

Larry Doyle — Tue, 30 Jun 2009 09:48:56 +0000

The guarantee is actually not provided by the SEC but by Treasury. The initial guarantee was put in place September ‘08 and ran out in March ‘09. It was renewed and is now scheduled to expire, I believe in Sept’09.

To the extent that you have exposure to any of these funds, I STRONGLY encourage you to call your adviser or a rep at the fund manager to double check on your funds coverage and the expiration date of the guarantee.

Please let us know what you learn.

By: .

Tue, 30 Jun 2009 04:43:21 +0000

LD,

When I check the web sites of various investment firms (Dreyfus, Schwab, Vanguard, American Funds, etc.) they each list several MMF’s at their firm that were covered by the SEC guarantee. These funds are not limited to municipal funds. What happens to the funds that are not munis, such as basic MMF’s that are used as primary MMF’s for investment accounts? Are they still guaranteed?