|
|
Zero Hedge has an
interesting review of proposed rule changes by the SEC and the Obama
Administration which you can read in its entirety here.
Yet new regulations proposed by the administration, and
specifically by the ever-incompetent Securities and Exchange Commission, seek
to pull one of these three core pillars from the foundation of the entire
money market industry, by changing the primary assumptions of the key Money Market Rule 2a-7.
The primary concern seems to be the new ability of money market
fund managers to freeze redemptions (withdrawals) of funds at their
discretion.
"A key proposal in the overhaul of money market regulation
suggests that money market fund managers will have the option to 'suspend
redemptions to allow for the orderly liquidation of fund assets.'"
If you have the time, you
should sit down and read through the entire essay at ZH, because it is
fascinating. I understand that many will not because of the length and
density of the piece, which is really not all that bad, and fairly well written
as all of their pieces tend to be. I am not so adverse to some of the other
changes in the MMFs such as the tightening of durations, but that is more a
quibble.
One also has to wonder if and when the government will begin to more
aggressively manage the access of private citizens to their 401K's and IRA's
and other forms of savings. Or is it just sufficient to manage the things
that one might hold in them. Hard to say.
Now that the government will be forcing Americans to buy private health
insurance (and presumably use it to prevent certain trasmittable diseases for
the public good as your private health insurer will have your records) where
will they stop? What about life insurance, long term disability insurance,
and retirement plans? How about psychological counseling and sensitivity
training for social malcontents? "A gram is better than a damn."
Here is the concluding paragraph from this essay and I wanted to highlight it
here because otherwise it will be overlooked by many who should read and understand
it. The conclusions that the author draws about WHY the changes are being
made are more important perhaps than the changes themselves. Or at least to
me, because I have very little money in any US money market fund, and even
that is 100% short term Treasuries. The fraud and mispricing of risk in the
US financial system has become pervasive and epidemic, such that a good stiff
headwind could have taken it all down, and because of a lack of serious
reform, still can. Rather than fixing potential causes of the next disaster,
the Obama Administration seems content to block the escape routes and issue
priority passes to the big Wall Street banks and a favored few.
"At this point it is without doubt that even the government
understands that when things turn sour, and they will, the run on the bank
will be unavoidable: their solution - prevent money from being dispensed,
when that moment comes. The thing about crises, be they liquidity, solvency,
or plain-vanilla, is that "price discovery" occurs all at once, and
at the very same time. And all too often, investors "discover" they
were lied to, as the emperor, in any fiat system, always has no clothes.
Just like in September 2008, when the banks were forced to look at
each-others' balance sheet and realize that there are no real assets on the
left backing up the liabilities on the right, so the moment of enlightenment
occurs are the most importune time: just ask Hank Paulson. Had he known his
action of beefing up Goldman's FICC trading axes would have resulted in the
"Ice-Nine'ing" (to borrow a Mark Pittman term) of money markets,
who knows- maybe Lehman would have still been alive. Perhaps risking the cash
access of 20% of US households and 80% of companies was not worth the few
extra zeroes in Goldman's EPS. But we will never know.
What we will know, is that now i) the government is all too aware that the
market has become one huge ponzi, and that all investment vehicles, even the
safest ones, are subject to bank runs, and ii) that said bank runs, will occur.
It is only a matter of time. And just as the president told everyone
directly to buy the market on March 3, so the SEC, the Group of 30, and
Barney Frank are telling us all, much less directly, to get the hell out of
Dodge. Alternatively, the game of "last fool in", holding the
burning hot potato, can continue indefinitely, until such time as the
marginal utility of each and every dollar printed by Ben Bernanke is zero."
This Is the Government: Your Legal Right To Redeem Your Money
Market Account Has Been Denied - ZeroHedge
Stand your ground and wait. All is well. Someone has to take the
big hit while the important people are transported to safety.
The only constraint on the Fed's printing money is the acceptability
(marginal value) of the Bond and the dollar, which is the bond of zero
duration. And the people making the decisions about printing and distributing
those dollars are more unworthy of holding such power than you might imagine,
even in your lowest expectations.
And if, even now, you do not 'get this' then the next ten years could be
particularly disappointing.
Jesse
Please visit Jesse’s Café Américain
for refreshing news on the markets
|
|
