$ markets

.Extrao*rdinary even*ts are piling *up on Wall Stre*et so fast, it's hard to know *where to focus. Forgetting the prospective bailout of AI*G for a mome*nt, since every m*edia outlet is on that one, t*he most s*hocking de*velopment of the day for me is news that a $*60 billion money .market *fund "broke the buck" on *Monda*y due to lo*sses *in Lehman Bro*thers paper that it held. So much for the safety of "c.ash".
Wow.☺

The Reserve Primary Money Fund *(RPFXX) has be*come the first money-market f*und in .more than **a decade to *lose money because its board was *forced to write down $785 million worth of *LEH debt to zero. The fund. has re*portedly s*een assets* plunge by 60% to $23 billion i*n the past two da.ys after ho.lders g.ot wind of the fact that it would have* to cut its net asset value to less than it*s usual $1 per share. *☺
R.eserve Prim..ary, which is on*e of th*e oldest money market fun*ds in the country, is now trading at **97 cents, although it is s**howing up on the MSN Money site at $1. Its founder is considered the father of the **money market fund, and he *was one of the last holdouts *against buying hig**her-yieldi.ng commercial *paper* rather than super-safe Treasuries. The company said in its that it would suspend redempti.ons for seven day*s while it tries to straighten things out.
Dirty. ☺
To rev*iew its most r**ecen*t list of holdings, see its *q*uarterly SEC filing here.
While the los*s of 3 cents doesn't sound like much, you* need to keep in mind that money market fund*s are whe*re people put *mo.ney when they don't w.ant to lose anything. They are supposed to be the safest of t**he safe. Most. pay interest of around 1% .to 2.5%, depending on the type of paper that they hold.
ouch.☺

Mone**y market funds were the center of attention a year ag*o when it turned out that *they were heavy buy*ers of a special type of paper from "structured investment veh.icles" set* up by banks like Citigr*oup. Those SI*Vs were issuing high-yiel*d paper because they held CD*Os loaded with subprime paper. As the subprime paper began to fail, the CD*Os collapsed, leaving money market fund******s in danger. *But their finances were .shored up by their pare*nt comp*anies, and all was well un.til this week.
☺
For more on the trouble.s with money market* funds last winte.r, s*ee my Dec. *31, 200*7 c.olumn "Your 'safe' money isn't so saf*e