Word: lehman
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Dates: during 2000-2009
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...talk about Reserve Primary Fund, which was the first of three funds at Reserve Management to break the buck. What Reserve announced was that because of investments in Lehman IOUs, it was worth 97 cents per share instead of a dollar. In other words, it was down by 3%. Not worthless. Down by 3%. Let's keep that in mind...
...early problems were tied to commercial paper issued by mortgage-related structured investment vehicles and collateralized debt obligations (don't worry: there won't be a quiz on the terminology), but more recently four funds (at least so far) have propped up their money markets because of investments in Lehman...
...time. In 1994, for example, amid the bankruptcy of Orange County, Calif., more than 20 money market funds were bailed out by their corporate parents. Only one fund was liquidated. And even then, investors received 96 cents on the dollar. The reason Moody's is considering downgrading 13 of Lehman's money markets isn't because of what they own, but because the ratings agency isn't sure the parent company, which is in bankruptcy, would be able to step in if needed...
...starters, look at the yield on your money market fund and compare it to the sector. Naturally, you want the highest return on your money. Except that maybe you don't. Higher yields usually mean riskier investments - more commercial paper, say, as opposed to Treasuries. Last Friday, before the Lehman implosion, Reserve Primary Fund was the second highest-yielding fund of the 100 largest tracked by Crane Data. For months before that, it was in the No. 1 slot. "You want to act like the smart caribous and stand in the middle of the pack," says Crane. And, of course...
...terms of the discussions, one senior Hong Kong-based banker said today, are likely to be very harsh for any potential recipient of capital: "You're basically looking at structuring a deal at this point in which there is no downside - none. Even if a company goes under, like Lehman, you're first in line to get paid a return on your assets. Take it or leave...