Desperate for Yield

A couple of years ago, Vanguard and others slapped daily investment restrictions on short term treasury funds, because fund managers couldn’t cover their modest fees in this low rate environment. Could it get worse? Yes, of course, and it did.

The Wall Street Journal had an excellent summary of the problem this weekend, “How To Top Money Funds’ Near Zero Percent Yields.” Now it is the turn of riskier traditional short term money market funds. Yields are near zero, and they will soon go negative net of fees.

I attended a dinner with top managers, and they all admitted they are investing in “crazy” instruments, because they have to compete with one another. If everyone else is doing it, and they don’t, they will end up in the bottom quartile and lose investors. It doesn’t matter if their investors eventually end up in the bottom quartile; the music is still playing, so they must dance. How has that worked out for the global financial markets in the past?

Coming April 4 (eBook available for pre-order. Print edition ETA May):  Decisions: Life and Death on Wall Street.

Meanwhile

President Obama has been pushing a false narrative about Islam. Why does he say the USA needs to be transformed, but Islam is just fine the way it is? Muslims don’t think so. Just ask Muslim Egyptian President Sisi. If you read Unveiled Threat, you know what I think and why.