Here is the next problem

Is Money Market Fund safe? That is the big question. And no one has right answer. Login to your brokerage account and check the 7-day yield of swaping money market account . Do not surprise if it is over 4%. I am talking about CA Tax Free money market account, so taxable yield is over 6%. Any point over 3.5% is consider risky this days.

So what is going on? The bank are looking for your money - to raise the capital. So this is the way they are attracting investor. The money market fund usually buy Commerical short term papers and other short term securities. This securities are too many in the market and fewer buyer, hence its prices has gone down and yield going up. So your brokerage is passing this high yield to you. Very unusal, I have never imaging this could happen. This does not mean underlying security is very risky. If this underlying securities are risky then you will see the value of your $1 money market fund will be $0.97 or even lower after some time. People says that it never happend, but it happend last week. Since August, Wamu was offering 5% FDIC insured CD for 1 year and 4% in saving account. (It is still available Sep 24, 2008) Fed overnight rate is 2% and treasury yield is less than 1%, however they are offering 4.5%, something is cooking which is beyond our imaginations. I think they want to raise the capital. I just found the news that Wamu is taken control by FDIC through JPM or in other word 12th bank failed this year. Here is the list of all failed banks since 2000.

This high yield investmet securities will be available at lower price until the market stabilizes and find the buyer for this securities. At this point, international buyer are going away from US, we have record outflow of investment dollor in July. So here is the question again, where to put the money?

My mother used to tell me if you have money, do not put in the bank - Buy Gold.