With "35% of Assets in European Holdings," Is Your Money Market Fund Safe?

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With "35% of Assets in European Holdings," Is Your Money Market Fund Safe?
Bernanke says U.S. money markets "remain structurally vulnerable"

By Editorial Staff
Mon, 14 May 2012 14:30:00 ET

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Millions of risk-averse individuals put their hard-earned savings into money market funds. They expect their principal will be safe.

Very rare exceptions aside, money markets have been safe.

But as Fox Business News recently reported (3/20), U.S. money markets now appear a lot less safe:

Federal Reserve Chairman Ben Bernanke will warn Congress...that possible "contagion" from the European debt crisis for U.S. banks and money market funds remains "a concern" for the Fed and other financial regulators...

...U.S. money markets, with 35% of their assets in European holdings as of February, "remain structurally vulnerable" to Europe's debt problems...

How many depositors know that over a third of their money market assets are exposed to Europe? If their "personal banker" or mutual fund representative told them (assuming they know the facts), you can bet their clients wouldn't be too happy about it.

Now, that doesn't mean your money market account or fund is in imminent jeopardy. But consider this from the just-published May Financial Forecast:

...As the availability of new credit diminishes and the income available to service the vast amounts of already outstanding debt vanishes, the sovereign debt implosion will intensify.

In normal economic times, banks routinely do daily business with other banks. But today's uncertain financial outlook has prompted European commercial banks to place their deposits with the European Central Bank's Deposit Facility. The reason: European banks fear the solvency of other European banks. Take a look at this chart:

If Europe's bankers and the head of our own central bank are concerned about financial safety, perhaps you should be too.

Global Distress Starts in Europe is the title of another "must see" chart which you can see and read about in the new Elliott Wave Financial Forecast.

The new chart compares the U.S. stock market with the price action of Europe's bourses. The implication is clear. It shows that European stocks have already started their descent.

But contagion may not be confined to stock markets. Deteriorating economic developments could also spread across the Atlantic with lightning speed.

We've seen it before. But can we "stimulus package" our way out of the next financial crisis?

Take a look at the just-published May Financial Forecast risk-free via a special offer to save 57%>>

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Tags: Home > U.S. Economy
With "35% of Assets in European Holdings," Is Your Money Market Fund Safe?
Bernanke says U.S. money markets "remain structurally vulnerable"

By Bob Stokes
Fri, 04 May 2012 16:15:00 ET