Money fund yields could go negative, expert says
Peter Crane, a leading expert on money-market mutual funds, says you soon may have to pay your fund to hold your money. According to a Bloomberg story, he believes an interest-rate cut by the Federal Reserve next week might push the funds to that point. Reports Bloomberg:
“No one has ever paid above and beyond their interest income to be in a fund,” Crane said. “But if we see another cut, we’ll likely see negative yields.”
Already, the story points out, some Treasury securities sport zero or near-zero yields. Monday’s auction of three-month T-Bills, for example, came in at 0.005 percent. Such a microscopic sum isn’t nearly enough to cover a mutual fund’s operating expenses. Many funds are waiving fees, but probably won’t keep doing that forever.
According to Crane, no one is exactly certain how a negative yield would work. His Crane Data site reports:
Money funds have begun discussions on how to handle a negative dividend, should it be needed. Crane Data assumes that it would be handled the exact opposite of a how dividends are currently handled. A daily negative credit would be accrued, and the account would be charged at the end of the month (instead of the dividend accruing then paying). Thus, a “negative dividend” would not involve “breaking the buck”. But rather shares would be sold from the account in order to pay fees monthly, which would not be much different from how checking accounts used to charge a monthly fee.
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
I worked for Ford Motor Co. for 10 years. I made $28 dollars an hour. I understand the inflated amount is due to benefits and such, but not $70 an hour. Yes, I thought that was good money for what I did. But I think that people need realize how much wear and tear is going on with the workers body (even the one putting the floor mats in). I beleive that the wage is to compensate us for some of the conditions that the blue-collar worker puts up with. Our building would be 100 degrees inside. Our hours were being changed constantly. I was on nights for nearly the entire time, making me feel like an outsider in my family. Some of the comments on here made it sound like some one in manufactering shoulded make $30 an hour. Why not? Hourly employees have made concessions in the last contract. I appreciate that I have health insurance, but I do have a $25 co-pay and only 50% of my sons braces were covered. There are problems with management and the UAW, and some of the hourly workers, but I’m not God, I can’t make them all be good. I have mixed feelings about the bailout. I just don’t like reading all the hating going on here for the hourly worker. If I didn’t make that kind of money I couldn’t afford a house in California. I don’t know how anyone can afford to go to the movies ? and buy popcorn? Let’s talk about that next.
Why would anybody be crazy enough to keep money in a money market fund paying negative interest? Rather than do that, why not simply put the money in a bank savings or checking account? And if the interest on those went negative, why not just hold cash in a safe place like a safe deposit box?
People’s ability to exercise these alternatives make it very unlikely that yields on money market funds will go negative. Most money market funds will shut down before that happens.
The 70 dollar an hour quote from the big 3 is to COOK the books. Retiree health care cost have nothing to do with what they pay their current employee’s. The skilled trades that worked for me made about $32 an hour and were reluctant to do PM’s on the weekends. They thought if they did 2 of them in 8 hours they were doing you a favor when they could have effectively done 16 of them. By doing this cost soars because you need more people to come in on the weekend to do the same amount of work a few people would do.
Kind of like screwing the pooch. Now the pooch is screwing them. The big 3 are almost a thing of the past. The buyouts will allow them to hire $14 entry level positions. Meanwhile I will be installing the tooling in Saltillo so that Fenton Truck Plant can be closed, if they make it to March with the money they do not have. Good Luck
Why would anyone be crazy enough…?
And yet there exist vast funds languishing in todays markets, pension trillions, insurance trillions, banking trillions, etc. The personal responsiblity for those investors, predictably continues because of complicated contracts, impending penaltys, and apathy. At high finance levels, FORCED complicity in the madness known as $700b swindle (TARP) continues the fraud, continues financial support of NONSENSE.
Happily, there was just barely enough contention to the Friedman madness…a few years ago, when Social Security was NOT thrown overboard for privatized accounts. Don’t count on that contention to last, as it faces the most daring of the ‘leadership corrupt’ which continue the assault. If you like Paulson…your going to love Geithner!
wild;)