muses of the moment

May 9, 2012

Mutual funds

Filed under: Economic Crisis, Global Debt, Odds 'n ends, The Banking Crisis, The Federal Reserve — totallygroovygirlfriday @ 7:08 pm

As we all found out in 2008-2009, market mutual funds are the revolving 120-day credit cards for the real US economy and business. Without them, US businesses can not buy goods to manufacture and/or sell. Things tend to just stop, and we have a credit freeze and rapidly falling economy. Things have improved, but the recent months’ out-flows is concerning.

Click here. Something to keep an eye on.

And finally, for those wondering how it is possible that every month US investors can pull cash out of mutual funds without them running out of cash, we say: observe the distinct pattern in Chart 2, which shows that as of March mutual funds held a record low 3.3% in liquid assets on their books.

No need to worry about the shadow economy and the too-big-to-fail banks and countries, they have the Fed’s credit card with no limit. But they are not sharing.

Side musing: and Spain has “nationalized” its most insolvent bank. Click here. Whether bailed out or “nationalized”, this is how TBTF banks’ imploding debt gets transferred to the taxpayers. In earlier times, banks were left to die a quick and dignified death. The carcases were used as fertilizer for new, stronger, and better banks. And speaking of slow bank deaths, here is one on life support. Notice the high volume and yet small flux in price? At least they are still paying dividends.

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