What is in your wallet? We all have heard this commercial repeatedly. I have a better question that has more of an effect on your personal wealth. What is in your bank's money market or your mutual funds cash equivalent fund? Do you have any idea? How about, Do they?
My wife so adequately calls me obsessive compulsive paranoid. In all honesty these days with all the financial surprises and blow ups from Northern Rock or E*TRADE, maybe one needs to be.
I want to share with you a story that transpired yesterday. One of my tenets in life is always surround yourself with the smartest people you can. Approx 7 years ago I became interested in another asset class to invest in undervalued commercial real estate. One of my largest clients (and richest) has been involved for years and is exceptionally brilliant. We did townhouse projects, warehouse complexes and land in the golf capital of Tennessee Fairfield Glade. Through these efforts we accumulated substantial profits and would leave the money on deposit with a major bank in one of their cash equivalent funds. In all honesty never really gave any thought to how the cash could slightly outperform short term US treasuries and the like. We were under the impression that this money was in VERY SAFE short term government paper. I asked my colleague and he thought that the banks paid a slight premium in order to maintain accounts and potentially offer other products.
OK, fair answer... but due to my paranoia... I wanted to know exactly what the underlying items were. I received the breakdown and on the top of the 8 page list of items was the title WORLD CLASS INVESTMENT MANAGER. Then shock set in. One of the first items was Asset backed securities of 3 items of car loans totaling 83 million dollars. Then Retail Finance almost 500 million dollars (Store credit cards?). This Retail Finance was comprised of items that sure were not short term government bonds that is for sure. Ok, next item was CDs... Ok some relief, and ok some were European banks. The next item made me sick, Collateralized Loan Agreements. So they bought packages of loans... and now I was one of the lucky investors. Great, seems very similar to Collateralized mortgages and to make it in better only $3.5 Billion dollars of these were to some the news making brokerage firms that are writing off billions of dollars as if they are dollar bills. Next item was some variable notes and some corporate notes. The shocker was; the underlying of these notes was surely credit worthy entities such as an office park in Alabama, a country club in Bethesda and Callaway Garden Resort.
I discussed this with my colleague and we immediately sold off our money fund being managed by our WORLD CLASS INVESTMENT MANAGER and purchased short term US Treasuries registered in our company's name.
What is in your Money Market or Cash Equivalent Fund? I would suggest you immediately check it out. I do not think you would want to stand in line like all of these people who did at Northern Rock Bank in England.
Andrew Abraham
[email protected]
http://capitalinvestor1836.blogspot.com/
My wife so adequately calls me obsessive compulsive paranoid. In all honesty these days with all the financial surprises and blow ups from Northern Rock or E*TRADE, maybe one needs to be.
I want to share with you a story that transpired yesterday. One of my tenets in life is always surround yourself with the smartest people you can. Approx 7 years ago I became interested in another asset class to invest in undervalued commercial real estate. One of my largest clients (and richest) has been involved for years and is exceptionally brilliant. We did townhouse projects, warehouse complexes and land in the golf capital of Tennessee Fairfield Glade. Through these efforts we accumulated substantial profits and would leave the money on deposit with a major bank in one of their cash equivalent funds. In all honesty never really gave any thought to how the cash could slightly outperform short term US treasuries and the like. We were under the impression that this money was in VERY SAFE short term government paper. I asked my colleague and he thought that the banks paid a slight premium in order to maintain accounts and potentially offer other products.
OK, fair answer... but due to my paranoia... I wanted to know exactly what the underlying items were. I received the breakdown and on the top of the 8 page list of items was the title WORLD CLASS INVESTMENT MANAGER. Then shock set in. One of the first items was Asset backed securities of 3 items of car loans totaling 83 million dollars. Then Retail Finance almost 500 million dollars (Store credit cards?). This Retail Finance was comprised of items that sure were not short term government bonds that is for sure. Ok, next item was CDs... Ok some relief, and ok some were European banks. The next item made me sick, Collateralized Loan Agreements. So they bought packages of loans... and now I was one of the lucky investors. Great, seems very similar to Collateralized mortgages and to make it in better only $3.5 Billion dollars of these were to some the news making brokerage firms that are writing off billions of dollars as if they are dollar bills. Next item was some variable notes and some corporate notes. The shocker was; the underlying of these notes was surely credit worthy entities such as an office park in Alabama, a country club in Bethesda and Callaway Garden Resort.
I discussed this with my colleague and we immediately sold off our money fund being managed by our WORLD CLASS INVESTMENT MANAGER and purchased short term US Treasuries registered in our company's name.
What is in your Money Market or Cash Equivalent Fund? I would suggest you immediately check it out. I do not think you would want to stand in line like all of these people who did at Northern Rock Bank in England.
Andrew Abraham
[email protected]
http://capitalinvestor1836.blogspot.com/
