15 replies to this topic

[TTHQ Staff]

The market continues to deteriorate as speculation about a letter to clients from a money market fund halting redemptions is confirmed.

CNBC reported that Sentinel Management Group has asked permission from the CFTC to halt money market redemptions.

Sentinel's inability to meet significant redemption requests has exacerbated the liquidity concerns that have led many to believe a real credit crunch is forthcoming. While the credit markets continue to experience liquidity problems, which are real and of serious concern to the financial markets, there is no evidence yet of a credit crunch that would impact the overall economy. Nonetheless, the Financial sector has edged even lower and is now down 1.9% as the bottom continues to fall out of the brokers and banks. DJ30 -147.38 NASDAQ -24.26

[HoseB]

Did Sentinel offer a MMKT fund with well-above market yield so that prospective investors might have been cautious about investing?

[ogm]

The problem is that there are no buyers for the paper they are holding. It may be the best paper in the world, and they are getting timely payments on it and if they hold it forever, they'll make a tonn of money, but... IF they have to meet redemptions, they have to sell it. And everyone is afraid to buy, since no one knows what they should be paying for it. So the only bids they are getting are lowballs. And they don't want to sell at lowball bids. Thats why they halted. Once again.. its not the problem with the paper.. its the problem with selling the paper.

[humble1]

ogm: but what if the market is RIGHT ? what if there IS an impending problem with the paper. with respect, i think this is the mistake many are making. i admit it is probably overdone, but i really don't know that. the funds should be required to mark to market their assets and let the customers decide if they want to withdraw at the greatly reduced asset price. hey, if that happens you might see the run stopped or at least equal to inflows. but that will not happen because many good and smart and fairminded people believe they are helping the customers by freezing their money.

[SemiBizz]

it's only $1.6B fund... no big deal. Just another reason to panic on light volume... I think the other shoe will drop later, like after Options expiry.

[ogm]

ogm: but what if the market is RIGHT ? what if there IS an impending problem with the paper. with respect, i think this is the mistake many are making.

i admit it is probably overdone, but i really don't know that. the funds should be required to mark to market their assets and let the customers decide if they want to withdraw at the greatly reduced asset price.

hey, if that happens you might see the run stopped or at least equal to inflows. but that will not happen because many good and smart and fair minded people believe they are helping the customers by freezing their money.

I think its just supply and demand situation. So much paper was issued that supply overwhelmed the demand for it. This will certainly take time to resolve no doubt about it.

The real danger is that it will slow down economic activity... then the defaults will start growing and then it will be the real problem.

But at this point potential US slowdown is offset big time by booming global growth.

Even today's trade deficit improved unexpectedly, exports grew faster then imports. So the world economy is mitigating the housing slowdown here somewhat.

Besides, since the demand was so high before this situation, the prices paid for that paper were unrealistic.. so at this point the market is just normalizing. But while this is happening, people are just standing aside, and opportunists lowball the bids.

[OEXCHAOS]

I'm no expert on this MM, but most MM paper is very short term. Before the attorneys can file their law suits, the principle should be paid off. One hopes. Remember when I said get your money markets in government funds? Mark

[SemiBizz]

Boy they have the chum in the water this morning... Going to be a lotta fish caught on this BEAR BAIT. There are $2.67 Trillion invested in MM funds.. this doesn't even amount to a rounding error...

Edited by SemiBizz, 14 August 2007 - 11:20 AM.

[OEXCHAOS]

Boy they have the chum in the water this morning... Going to be a lotta fish caught on this BEAR BAIT. There are $2.67 Trillion invested in MM funds.. this doesn't even amount to a rounding error...

One worries about a run and a domino effect.

And maybe some bleed over.

Still, I think it's bear bait.

Mark

[nimblebear]

I'm no expert on this MM, but most MM paper is very short term.

Before the attorneys can file their law suits, the principle should be paid off.

One hopes.

Remember when I said get your money markets in government funds?

Mark

Mark,

Can you suggest something safe when the money is in a 401k. (i.e. type of gov't mm fund)