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Pastimes : Ask Mohan about the Market
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To: John Hunt who wrote (12709)1/5/1998 2:17:00 PM
From: Mike M2  Read Replies (4) of 18056
 
A friend of mine received a special report from Investech Research titled The 1997 "New Paradigm Bubble". I know poor James Stack has been a long suffering bear but the report is full of factual information for the bears. Free reprints are available (406) 862-7777. One alarming tidbit is that mutual fund families have asked the SEC for permission to borrow between funds INCLUDING MONEY MARKET FUNDS to meet redemptions if necessary. I thought people put their money in money markets to AVOID exposure to the stock market now the funds want to make them involuntary creditors. This is preposterous and absurd. I don't know how old this information is and if the SEc has ruled on this matter but it is an example of how desparate the bulls are to find new ways to stem a market decline. I guess one must be ever vigilant even your money market funds may not be safe first derivatives and now this. While this approach may sound reasonable at first to some what if the market slides continues for an extended period of time and does not bounce back. Where will the funds come from to repay the money market fund loans? They are asking risk averse savers to subsidize the performance and underwrite the risk of more aggressive investors.People who put cash into a money maket are implicitly saying I am willing to accept lower returns to avoid risk why should a fund be allowed to betray their trust. To allow this would encourage stock funds to keep minimal cash balances knowing they can tap into money market funds. Does anyone know the status of this absurd request? Mike
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