Cracks emerging in money markets?

Discussion of the Cash portion of the Permanent Portfolio

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ochotona
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Re: Cracks emerging in money markets?

Post by ochotona » Fri Sep 20, 2019 8:50 pm

FYI, the Schwab US Treasury cash fund is SNSXX, I'm discontinuing the use of the one loaded with repo agreements which is SWVXX.
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ochotona
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Re: Cracks emerging in money markets?

Post by ochotona » Sun Sep 22, 2019 7:02 am

Doug Noland weekly commentary:

"With the collapse of Lehman setting off the “worst financial crisis since the Great Depression”, instability in the multi-trillion repurchase agreement marketplace generates intense interest. This crucial market for funding levered securities holdings is critical to the financial system’s “plumbing.” It is a market in perceived “money” – highly liquid and virtually risk free-instruments. If risk suddenly becomes an issue for this shadowy network, the cost and availability of Credit for highly leveraged players is suddenly in question. And any de-risking/deleveraging at the nucleus of the global financial system would pose a clear and present danger of sparking “risk off” throughout Credit markets and financial markets more generally."
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Re: Cracks emerging in money markets?

Post by pugchief » Sun Sep 22, 2019 8:22 am

Even Fidelity's "treasury MM fund" sweep account FZFXX is mostly repos
fzfxx.png
fzfxx.png (58.75 KiB) Viewed 428 times
If you really want safety, you need to manually move the money to FDLXX "treasury ONLY MM fund"
fdlxx.png
fdlxx.png (55.98 KiB) Viewed 428 times
Who knew?
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sophie
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Re: Cracks emerging in money markets?

Post by sophie » Sun Sep 22, 2019 8:42 am

77% repos? That's gone up since I last checked (was about 60%). Crazy.

I only wish FDLXX could be used as a sweep account. It's not that hard to keep shifting cash into it though. With the smartphone app I can do it while walking to work, or while stuck in boring meetings. I also have 3 sets of T bills on autoroll, and it looks like you can add to those positions anytime with the "buy" button. Pugchief have you tried that?
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Re: Cracks emerging in money markets?

Post by pugchief » Sun Sep 22, 2019 8:48 am

sophie wrote:
Sun Sep 22, 2019 8:42 am
77% repos? That's gone up since I last checked (was about 60%). Crazy.

I only wish FDLXX could be used as a sweep account. It's not that hard to keep shifting cash into it though. With the smartphone app I can do it while walking to work, or while stuck in boring meetings. I also have 3 sets of T bills on autoroll, and it looks like you can add to those positions anytime with the "buy" button. Pugchief have you tried that?
Tried T-bills/autoroll? Yes, but I prefer the liquidity of a MM fund.

I didn't know about this whole repo thing until this thread, but I have held cash in other MM funds at Fidelity, and they do automatically pull funds if necessary to cover debits that can't be paid from the sweep fund, so I will be keeping most of my cash there in FDLXX going forward.
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Re: Cracks emerging in money markets?

Post by mathjak107 » Sun Sep 22, 2019 9:08 am

i use fzfxx as a sweep account
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sophie
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Re: Cracks emerging in money markets?

Post by sophie » Sun Sep 22, 2019 10:30 am

pugchief wrote:
Sun Sep 22, 2019 8:48 am
sophie wrote:
Sun Sep 22, 2019 8:42 am
77% repos? That's gone up since I last checked (was about 60%). Crazy.

I only wish FDLXX could be used as a sweep account. It's not that hard to keep shifting cash into it though. With the smartphone app I can do it while walking to work, or while stuck in boring meetings. I also have 3 sets of T bills on autoroll, and it looks like you can add to those positions anytime with the "buy" button. Pugchief have you tried that?
Tried T-bills/autoroll? Yes, but I prefer the liquidity of a MM fund.

I didn't know about this whole repo thing until this thread, but I have held cash in other MM funds at Fidelity, and they do automatically pull funds if necessary to cover debits that can't be paid from the sweep fund, so I will be keeping most of my cash there in FDLXX going forward.
That's what I do now, except I have the FDLXX fund in a separate brokerage account and use the cash account only for ATM withdrawals. I put all the credit card auto-debits on the brokerage after an episode this past April where Fidelity's auto-transfer software failed, and a bunch of people got stuck with late fees from their credit cards. I went with the separate brokerage because you can't set up auto transfers into a money market fund in the cash account, and its sweep pays essentially no interest.
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Re: Cracks emerging in money markets?

Post by pugchief » Sun Sep 22, 2019 12:03 pm

mathjak107 wrote:
Sun Sep 22, 2019 9:08 am
i use fzfxx as a sweep account
And are you concerned that it is 77% repos?
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Re: Cracks emerging in money markets?

Post by mathjak107 » Sun Sep 22, 2019 2:24 pm

Nope..not concerned at all..repurchase agreements are standard fed action whether a fund takes part or not
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Re: Cracks emerging in money markets?

Post by jhogue » Mon Sep 23, 2019 11:55 am

mathjak107 wrote:
Sun Sep 22, 2019 2:24 pm
Nope..not concerned at all..repurchase agreements are standard fed action whether a fund takes part or not
I think a lot of investors would have described buying and selling in the large secondary market in collaterized mortgage obligations-- the sort held by Bear Stearns prior to 2008 -- as a standard action for all the TBTF investment banks on Wall Street.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Cracks emerging in money markets?

Post by Tortoise » Mon Sep 23, 2019 1:33 pm

Exactly. All the articles I've read state that the Fed's current intervention in the repo market is not typical and hasn't happened since 2008. That seems like cause for at least a little bit of concern and scrutiny.
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Re: Cracks emerging in money markets?

Post by Kbg » Mon Sep 23, 2019 3:35 pm

https://www.pragcap.com/three-things-i- ... o-madness/

Good article.

PS: if you have a brokerage that you can see futures quotes with and monitor stocks, T-bonds, currencies, gold and large industrial commodities it’s pretty easy to see if something is up. I haven’t seen anything to suggest a problem.
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