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Wed Apr 1, 2020, 09:45 AM

Fidelity shuts three money market funds to most new investors (way lower yields coming anyway)

https://finance.yahoo.com/news/fidelity-shuts-three-money-market-205320236.html
Fidelity Investments, one of the world's largest asset managers, on Tuesday closed three money market funds to new investors to protect the return of existing shareholders after the Federal Reserve this month cut short-term interest rates to near zero.

Restricting the money flow into the three funds will help reduce the number of new Treasury securities paying lower yields that Fidelity will need to purchase and thereby halt the dilution of existing shareholder returns.

"Newer issues generally have lower yields than the funds' current holdings, and as such they would affect the funds' ability to continue to deliver positive net yields to shareholders," Boston-based Fidelity said in a statement.


This isn't posted to discuss Fidelity, rather that no matter what money market funds you have with whomever, expect to see their yields drop way low (like back to the 0.10% range we saw a few years ago, if we're lucky.

The last sentence of the excerpt scares me "affect the fund's ability to continue to deliver positive net yields" -- uggh, meaning we may have negative yields, net after expenses.

I was thinking of putting all the equity holdings I sold on the 30th into money market funds for awhile, but decided to go with an intermediate bond fund. I will be posting about my decision in an OP here soon. I still have 46% of my investable assets in equities (and 54% in fixed income mostly bond funds). I was at 64% equities for most of the year before March 30. (I was at 90% or more before April 2019).

As some may know, I've been preaching buy-and-hold equities buy-and-hold equities endlessly here, and making an enormous hoo-hah about how I didn't change my equity holding percentage at all at any point during the 2007-2009 crash, so this is an extremely extraordinary decision on my part. Anyway, I feel a lot better not having a majority portion of my investable assets subject to the coming market bloodbath.

I may work on further reducing the 46% equity proportion to 40% or so, but will have to incur capital gains taxes to do that. I could get into much higher Medicare premiums if I'm not careful (they are based on AGI, and capital gains add to AGI as do Roth conversions -- a good time for those is in a market downturn -- and IRA RMD distributions).

Edited to add: The transactions I made on March 30 did not generate any capital gains taxes because they were in an IRA account -- very nice to have a large IRA account to do rebalancing or repositioning without having to worry about taxes.

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Reply Fidelity shuts three money market funds to most new investors (way lower yields coming anyway) (Original post)
progree Apr 2020 OP
SWBTATTReg Apr 2020 #1
MLAA Apr 2020 #2
progree Apr 2020 #3
MLAA Apr 2020 #4
SWBTATTReg Apr 2020 #5
bucolic_frolic Apr 2020 #6
SWBTATTReg Apr 2020 #7
progree Apr 2020 #8
SWBTATTReg Apr 2020 #9
progree Apr 2020 #10
SWBTATTReg Apr 2020 #11
progree Apr 2020 #12
SWBTATTReg Apr 2020 #13
JJWdad May 2020 #14
Alacritous Crier May 2020 #15
progree May 2020 #16

Response to progree (Original post)

Wed Apr 1, 2020, 09:50 AM

1. I looked into getting into equities some six+ months ago, to see if I could get a better return ...

than my interest bearing savings/checking accounts, and I couldn't find anything worth a hoot. Now, there are loads of respectable stocks paying decent returns now, w/ the top ones I am looking at anywhere from 7 to 11+ percent. Talk about a total change. Of course I don't think the markets are fully done yet in going down, but it's time to start looking again and I am, seriously, since I'd would like a 7% to 11+% return on my money.

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Response to SWBTATTReg (Reply #1)

Wed Apr 1, 2020, 09:56 AM

2. I'm no expert

But from personal experience, companies who have had major price drops that make their returns look particularly high may/will drop their earnings to be more inline with what they were before the stock price drop or may forego paying dividends for a period of time. 🙂

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Response to MLAA (Reply #2)

Wed Apr 1, 2020, 10:02 AM

3. "may/will drop their earnings" -- you probably mean will drop their dividends --

their earnings are going to drop big big big time in the next two quarters at the very minimum (and just the next two quarters if we're extremely very lucky, I think several years). Dividends will follow downward with metaphysical certainty.

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Response to progree (Reply #3)

Wed Apr 1, 2020, 10:04 AM

4. Indeed, I was trying to not sound as certain as I really am, you caught me 😊

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Response to MLAA (Reply #2)

Wed Apr 1, 2020, 10:04 AM

5. Obviously. That is definitely a risk, I didn't think I had to say it, but yes, this is possible.

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Response to SWBTATTReg (Reply #1)

Sat Apr 25, 2020, 04:02 PM

6. This is the 4th crash in my lifetime

Last edited Sun Apr 26, 2020, 12:25 PM - Edit history (1)

There were good stocks that i owned briefly in 2009-2012, and should have kept. I mean dividend payers in sold companies that got beaten up hard at that time.

Currently there are also stock ETFs that are either US blue chip or global blue chip (really there's fund that slices the world anyway you can contemplate) that focus on dividends or dividend achievers. These funds get beaten up along with everything else. Yes some companies in these funds will reduce dividends, but some of the S&P dividend funds that were yielding 3-5% in January have almost double those yields now. If the market moves down further yields will rise. I find such funds a good bet long term because the holdings are solid and the yield is currently good. Beware there are REITS and covered call funds with "yields" over 16% or over 20% and I'm avoiding them as they are more speculative. And I needed to read the details of ETF dividend funds. Some have REITS as a component, some have bonds, notes, some return a portion of principle as monthly or quarterly payment. I wanted all stock. A good broker knows ETF, and they're also researchable online such as on ETFconnect or a brokerage site.

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Response to bucolic_frolic (Reply #6)

Sun Apr 26, 2020, 11:00 AM

7. Thank you very much. This is very helpful to me. I still haven't done anything yet, as I feel...

things are still up in the air, with this whole CV thing and rump's pure incompetence in dealing with this matter (after all, his incompetence triggered the entire downward trend of the markets when they were not getting any answers whatsoever from rump).

Rump is actually blaming the CV on the Chinese etc., lashing out at everyone using all the lame excuses he can, but CV is branded into his forehead. That's why he's finally stopped the stupid daily press conferences. Everybody saw through them. Everybody. What does he think we are? Stupid?

The reality of the situation is that it was his sole actions and lack of answers and/or intelligent responses / actions related to the CV that started the cascade downwards. Sure the markets were primed to go down after such a long time going up, but it didn't have to collapse like it did.

No one else caused it, the markets were primed and armed to the teeth because of the CV as well as being ready for a downturn of some type anyways (after 10-11 years up constantly).

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Response to SWBTATTReg (Reply #7)

Sun Apr 26, 2020, 12:19 PM

8. An interesting week of economic data coming up...

https://www.marketwatch.com/economy-politics/calendar

Tuesday
# Consumer confidence index for April

Wednesday
# First estimate of Q1 GDP - if it's negative, that means we will have 2 quarters in a row of negative GDP -- the informal definition of a recession -- (the official one, by the NBER National Bureau of Economic Research, usually takes a year after one has started before it to be declared, ditto for recoveries)

Thursday
# The weekly initial unemployment claims
# Personal Income and Consumer Spending for March

Friday
# ISM manufacturing index for April
# Motor vehicle sales for April


On the stock market ... someone posted that we've recently been here before:

In 2018 from peak to trough, the market (S&P 500) declined 19.8% (just 0.2% shy of a bear market)
9/20/18: 2930.75 12/24/18: 2351.10

Whereas we're currently (Friday 4/24/20 close of 2837) down 16.2% from the 3386 all time high on February 19

(Although at the bottom on 3/20/20 it closed at 2305, down 31.9% from the all time high -- which looked like this, on a graph of the S&P 500 all the way back to 1927 or 1928 on a logarithmic scale) :



Details:
https://www.democraticunderground.com/10142452432#post14

I'm fascinated that the dot-com crash and the housing bubble crash look like little notches in a multi-decade history of the S&P 500, and that the 31.9% plunge from the all-time high from Feb 19 - March 20 looks so small. But this is something that averages a doubling every 9-10 years (even shorter average doubling times on a total return basis with dividends included)

Edited to add: the graph was produced with an interval setting of 1 month (otherwise it wouldn't show the entire 1928-2020 span). So that's why one doesn't see the 3386 2/19/20 close on it, for example -- so actually the 31.9% peak-to-trough plunge is longer than shown on the graph -- but not by much: 3386 would be a very tiny short distance above the 3364 line on the graph. Right click on the graph and choose Open Image in New Tab (or in New Window) to see a bigger version of the graph).

The reason for a logarithmic graph is that a positive-sloping straight line is a constant percent increase -- so for example a climb from 10 to 20 (a doubling) is the same vertical distance on such a graph as a climb from 1000 to 2000 (a doubling).

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Response to progree (Reply #8)

Sun Apr 26, 2020, 12:46 PM

9. Thank you for the additional information. I will keep an eye out on these indexes, claims,

sales, and numbers. It's a lot to shift through, but heck, I'd rather have a lot of information than not enough, eh?

I've been sitting on the sidelines for some time, still a little nervous (not really 'nervous', just hesitant) in getting into the markets. I have been wanting to rebalance the majority of my stock holdings that I got from my Mom's estate (she passed), mainly because she was all over the map, had 5 shares of this, 10 shares of that, 2 shares of ABC, 1 share of DEF, etc. It's a mess, but the stock broker did say my Mom did a pretty good job of picking winners.

By the way, just a question, I wonder what the graph would look like, overall, if a steady value of a currency was used, that is, the value of a dollar back in (an example only here) 1960 was $1. In 1970, it was .85 cents, etc. I am just asking if inflation is taken into account w/ these graphs?

Take care and be safe!

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Response to SWBTATTReg (Reply #9)

Sun Apr 26, 2020, 01:41 PM

10. On inflation-adjustment ...

I've been sitting on the sidelines for some time, still a little nervous (not really 'nervous', just hesitant) in getting into the markets. I have been wanting to rebalance the majority of my stock holdings that I got from my Mom's estate (she passed), mainly because she was all over the map, had 5 shares of this, 10 shares of that, 2 shares of ABC, 1 share of DEF, etc. It's a mess, but the stock broker did say my Mom did a pretty good job of picking winners.


I inherited back in 2005, and my parents had about 5 accounts, and lots of stock holdings in small amounts like you describe. I happily cleaned house in 2008-2009 back when the market was way low, thus generating a lot of capital losses and reinvested it in a few of my existing mutual fund holdings and a few additional mutual funds and ETFs (all equity). Anyway a huge consolidation. I only have one individual stock holding now, the rest are in mutual funds and ETFs.

I've got too much egg on my face though to suggest what to do, because I made a big shift from equities to bond funds on March 30 when the S&P 500 was 2627 (it closed Friday at 2837, so far I'm "under water" on that manuver by 7.4%). This after 2 decades of preaching buy and hold, buy and hold, and practicing what I preached until now. The 2nd half of my OP above has more about this so-far not-so-good decision. But at the time there seemed to be no end to the Cov-19 doubling every few days trend and no Western countries showing any progress getting a handle on it (and I doubted and doubt that Western countries would take the drastic measures that some east Asian countries took -- i.e. real enforced quarantines in real isolation -- not this stay home and infect your family shit). Not to mention being led by a dementia-addled fuckhead pushing anti-malarial drugs and bleach- and ultraviolet light injections.

The other thing about market timing that makes it tough is that it's 2 decisions, not one. To beat a buy-and-hold equity investor, one must (#1#) sell at the right time and (#2#) buy at the right time. So when I made the decision to sell, I knew that, in order to make it work out better than buy-and-hold, I had to buy back in at a level below what I sold it at. That might not ever happen, given that the market is 7.4% above where I sold it at.

Still, I have 46% of my reasonably liquid investable assets in equities as of March 30 after the equity funds -> bond funds exchange, which isn't unreasonable for my age and anticipated life expectancy, according to the thumb rules out there.

By the way, just a question, I wonder what the graph would look like, overall, if a steady value of a currency was used, that is, the value of a dollar back in (an example only here) 1960 was $1. In 1970, it was .85 cents, etc. I am just asking if inflation is taken into account w/ these graphs?


The graph I showed is in plain old "greenbacks" aka "current dollars" aka "nominal dollars" -- there's no inflation adjustment. A graph like that will certainly look a lot less impressive if it's inflation-adjusted. I've seen them around, along with tables of returns, but I don't know where I saw these, so if I were to look, I'd have to do a Google search from scratch.

I often show this: the relative returns of 3 month treasury bills, bonds, and stocks.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

It shows the yearly inflation rates and the annual REAL returns on the 4 assets in the last 5 columns (real return means inflation-adjusted return), but unfortunately doesn't show the cumulative returns (e.g. value of $100 invested at start of 1928) as it does for the non-inflation adjusted returns in the first several columns.

I think I've got this in a spreadsheet, so I suppose I could come up with cumulative inflation-adjusted returns.

What I do know is that stocks way out perform inflation in the long run. Whereas T-bills fall short. Bonds have trouble beating inflation but I don't know if they come out positive or negative on an inflation-adjusted basis over the long term.




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Response to progree (Reply #10)

Sun Apr 26, 2020, 02:05 PM

11. Very nice, thank you so much. I can do the inflation numbers myself, I'll just incorporate ...

your spreadsheet and incorporate some formulas, doing some google searches too (after importing into an excel spreadsheet, on the last four columns, to come up w/ cumulative inflation adjusted returns, and maybe some specifics that I'm looking for. Can I use your spreadsheet, to do this, with your permission?


The manipulation seems rather doable, and actually kind of exciting to me, believe it or not, since it's been a while since I've manipulated an excel spreadsheet to some degree.

Your spreadsheet is amazing, and chock full of information. I certainly agree w/ you on that giving recommendations etc. can leave egg on one's face. I've been there before, like you, so now I don't give or take recommendations, like you, when someone asks me, and let the person themselves make those decisions, which is really, the thing to do, because everyone has different meet points that they are trying to accomplish, different from everybody else's.

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Response to SWBTATTReg (Reply #11)

Sun Apr 26, 2020, 02:33 PM

12. "Your spreadsheet is amazing" - of course, of course, 😊😊😊

But it's not mine! 😢😢😢

I don't remember where I found out about it, but am pretty sure it was some DU discussion like this.

The link I gave you in #10
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
is an HTML file. But I remembered downloading it in Excel format somewhere somehow.

It turns out one can go to

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datacurrent.html

And the one we're interested in is this in .xls Excel format:

http://www.stern.nyu.edu/~adamodar/pc/datasets/histretSP.xls

Enjoy!

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Response to progree (Reply #12)

Sun Apr 26, 2020, 02:49 PM

13. Thanks! Believe it or not, I'll enjoy this mental exercise if anything, plus, if I gain anything,

the better! Take care and be safe!

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Response to progree (Original post)

Sun May 3, 2020, 10:17 PM

14. not happy about this news

this was an issue for me

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Response to JJWdad (Reply #14)

Mon May 4, 2020, 08:51 AM

15. Welcome!

Welcome to DU.

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Response to progree (Original post)

Fri May 8, 2020, 03:57 PM

16. Cash Havens With $4.8 Trillion Fret Unthinkable Negative Returns

Assets in money-market funds have soared to a record $4.77 trillion amid a flight to safety by investors this year. More than three-quarters of that is parked in Treasury-only and other government funds perceived to be the least risky, Investment Company Institute data show, in part because of regulatory reforms in 2016 that triggered an exodus from prime funds.

Giants of the industry like Vanguard Group and Fidelity Investments already have done what’s known as “soft closes,” or shutting down some funds to new investors. Speculation is swirling that management fees may be waived eventually by some companies in the industry. And managers are getting creative with their investments. It’s all an effort to preserve some sort of positive return for clients, a task that may get more difficult as traders start to bet on a negative Federal Reserve benchmark rate.


TexasTowelie https://www.democraticunderground.com/100213409935

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