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The Money Market ‘Feast’ is Over

Certainly everyone knows by now that the money market feast (feast is relative to zero interest rates received a few years ago) is over. While one could take comfort in their cash holdings receiving 1.5-2% or so last year those days are gone.

I noticed my Fidelity Ready Reserves (FDRXX) is now tossing off just .02%–essentially nothing. My Gabelli US Treasury AAA (GABXX) is paying .47%–their portfolio has longer maturities and so has not hit bottom yet–probably will just keep drifting lower.

According to a Bloomberg article Money Market funds hold $4.8 trillion in assets–quite a chunk of ‘dry powder’–seems to me the money is poised to move into investment grade assets–maybe some utility and closed end fund preferreds and baby bonds (my favorites)–at current yields in the 5% area it is a damned site better than nothing–or potentially negative rates in the future.

I have always hated being forced into a corner with my investments–meaning taking more and more risk to earn the same meager return–but this is where we are going eventually.

So as we move thru this turmoil in the next year I will likely be carefully picking up more risk–as we all will if we want to maintain a reasonable return. A 7% target worked for a few years—then a 6% target for a few more, but maybe I will be looking to maintain a 5% return in the future–honestly I will be happy if I can get to 3% for this year.

My 3 main equity market account are currently overall down about 3% for the year–1 of them just got to the black today, while one is off 2% while the 3rd account is off 6%. I just reviewed the last 3 years and quite by accident I am running 6% annually or so overall–2019 was great, while in 2018 most income investors took a hammering in 2018 which took nice gains all the way down to a small loss–this year I need to get 2-3% to get back to my longer term average.

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