Information for Money Fund Investors

We’ve noticed that we’re beginning to attract a number of corporate, government and individual investors to http://www.cranedata.us. While our site is geared primarily towards money market professionals, we’d like to hear about what investors would like to see. Crane Data is developing a free e-mail and web area for investors, which will likely contain rankings, news, and indexes. But we’d like to hear what you’d be interested in receiving.

How often would you like an update? Monthly, weekly, bi-weekly, daily?

What elements are you most interested in? Rankings, indexes, news?

Would you be willing to answer a brief survey on your money fund or money market investments?

E-mail pete@cranedata.us with any feedback you’d rather not post….

Let us know!

Awash in Liquidity (Bring Back M3)?

A post on The Wall Street Journal’s MarketBeat blog today by David Gaffen (http://blogs.wsj.com/marketbeat/2006/11/21/money-thats-what-i-want/) entitled “Money (That’s What I Want)” talks about recent merger activity and liquidity. The posting discusses robust growth in the money supply, and the reconstruction of the Fed’s now defunct M3 measure. We of course have noted the strong growth in money market assets, which make up a substantial portion of both M2 (retail money funds) and M3 (institutional money funds), but note too that the shift from commercial paper into institutional money funds accompanying the Fed “pause” may be inflating these numbers.

The blog sources a website, Shadow Stats (http://www.shadowstats.com/cgi-bin/sgs/data), which attempts to reconstitute M3 from various statistics. (M1 is cash and checking; M2 is M1 plus savings, retail money funds and small CDs; and, M3 is M2 plus institutional money funds, large CDs, repos and Eurodollars.) It speculates that the shift from hard assets (currencies, commodities) is fueling growth, but it’s clear that money funds and CDs — anything with a 5% yield — are drawing assets from other classes.

Is there too a lot of liquidity or not? Let us know your thoughts!

Online Money Market Trading Portals

If you browse the news archives of http://www.cranedata.us and our publication, Money Fund Intelligence, you’ll notice an increasing number of references to online trading money fund “portals”. These sites or programs account for from 10%-15% of institutional money fund assets, or approximately $140-$210 billion (depending upon whether you include online only or all “platforms”). Costs that fund companies pay distributors reportedly range anywhere from 1-15 basis points, with the bulk of payments clustered in the 3-7 basis point range. (We’re guessing at both of these estimates above — no hard numbers exist yet, though we hope to survey in ‘07.)

We’d like to start a discussion about the players, pros, and cons of money fund portals. For a listing of online money market trading portals, or money fund supermarkets, go to: http://www.cranedata.us/resources/resources/#supermarkets.

BMA Index and Tax-Exempt Money Funds

This month in Crane Data’s Money Fund Intelligence (see http://www.cranedata.us), we discuss the volatility of yields in the tax-exempt money fund marketplace, and the factor that the BMA Index (published by the Bond Market Association) plays in contributing to this volatility. Some money fund managers believe that dealers are purposely pushing the index down at the beginning of each month, in order to gain favor with their larger issuer clients (the state and municipalities that sell debt to funds). Is this volatility caused by dealer interest? Or is it merely a function of an illiquid market beset by institutional investors? We’d love to hear your thoughts.

Blogs Mentioning Money Funds

We’d like to thank the Progressive Prosperity blog, http://azmythblog.blogspot.com/, for mentioning http://www.cranedata.us in a recent post. In a post, “Yields are Back”, blogger Todd from Arizona warns investors against getting carried away with cash. Todd is correct. While cash looks better than it has since 2000 or early 2001, long-term investors should not try to time the money markets either. Match your investment to your needs, risk tolerance, and time horizon, and pay no attention to whether markets are rising or falling. Let us know if you run into other blogs discussing money funds or money markets, and we’ll be sure to keep you posted on the ones we discover. -PeteC