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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.htmlFidelity 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.
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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https://www.marketwatch.com/economy-politics/calendar
Tuesday
Wednesday
Thursday
Friday
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).
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).
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.
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.
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