Plunging rates mean that some funds are getting less in interest from their investments than it costs to run the fund. And investors who sought safety in money funds could face losses because of the funds' management costs.
The average money market mutual fund now yields just 0.94%, down from 4.16% a year ago, says iMoneyNet, which tracks the funds. Funds that buy only Treasury securities have seen their yields fall to an average 0.25%. Some 206 funds have yields of 0.09% or less, according to iMoneyNet.
Funds have few options. Many are already waiving expenses — essentially, running at a loss. Funds that say in their prospectuses that they will invest only in Treasuries can't suddenly move money into other investments as a way to boost their returns.
By law, funds can't charge account fees, as banks do, for fund management. Instead, they must charge a percentage of the fund's assets.
A few funds have stopped taking new money. For example, Evergreen 100% Treasury Money Market fund closed to new investors on Dec. 1, citing "current conditions in the Treasury markets."
Other funds may shut down entirely, returning money to investors and leaving the money fund business to large companies that can afford to use the funds as loss leaders.
Funds would likely slide to negative territory slowly in a period of weeks or months, says Peter Crane, editor of Crane Data. "It would not be with a bang, but a whimper," he says.
Funds that invest in other money market investments, such as commercial paper or jumbo bank CDs, have a bit more room before hitting zero. Vanguard Prime Money Market fund, one of the largest money funds, currently yields 2.51%.
If the Federal Reserve nudges the key fed funds rate to half a point next week, as is expected, more funds could struggle to keep from posting losses.
The average money fund tracked by Morningstar charges 0.70% a year to run the fund. Normally, that's not a problem. But rates have fallen far on Treasury securities, a staple of the funds.
Tuesday, the Treasury auctioned off $32 billion in one-month T-bills with a zero yield, the first time that has happened. Three-month T-bills yielded 0.01% Wednesday; six-month T-bills, 0.2%.
Those low yields haven't stopped worried investors from running to Treasury-only money funds. Assets in Treasury-only funds have doubled, to $412 billion, since Sept. 2.
World's first refrigerated BEACH to be built next to luxury hotel in Dubai
The world's first refrigerated beach is to be built at a luxury hotel in Dubai so the filthy rich holidaymakers don't burn their feet on the scalding hot sand.
The revolutionary beach will sit next to the new Palazzo Versace hotel and will include a system of heat-absorbing pipes built under the sand and giant wind blowers, designed to keep tourists cool in the searing 40-50C heat. The hotel, which is due to open late next year or early 2010, will be controlled by thermostats linked up to computers and feature a cooled swimming pool.
However, the plans have been criticised by campaigners who are infuriated by the potential impact on climate change. Rachel Noble, of Tourism Concern, said: 'Dubai is like a bubble world where the things that are worrying the rest of the world, like climate change, are simply ignored so people can continue destructive lifestyles.'The lavish project will enhance Dubai's appeal to the celebrity jet-set and increase competition to a region that already houses the world's first seven-star hotel, the Burj Al Arab.
However, the city's continued expansion will also add to its huge carbon footprint. Each person living in Dubai has a carbon footprint of more than 44 tons of CO2 a year.
Despite the environmental fears, Versace says the beach will be environmentally sustainable. Soheil Abedian, president of Palazzo Versace, said: 'We will suck the heat out of the sand to keep it cool enough to lie on. This is the kind of luxury that top people want.'
A source added: 'The super rich want pure luxury. They don't want to walk on scalding sand.' A British firm, Hyder Consulting will oversee the project, and it is hoped the 10-storey hotel will help attract some of the 800,000 Brits who visit Dubai each year. There is already one Palazzo Versace hotel, operating on Australia's Gold Coast, which has attracted the rich and famous. Fifteen more hotels are in the pipeline. http://www.dailymail.co.uk/sciencetech/article-1094797/Worlds-refrigerated-BEACH-built-luxury-hotel-Dubai.html
2008: Year of Surprises Gold rises 11% in a week!Stocks and dollar weaken ahead of Fed rate cut
"The dollar hit a two-month low against the euro and a basket of currencies on Monday, as investors shunned the U.S. unit on uncertainty surrounding the fate of ailing U.S. automakers and its possible economic impact," reports Reuters.
* "The dollar WILL NOT be king in a protracted recession or lite depression as there is nothing to back it up. The Treasury's willingness to print money in order to satisfy the need created by huge government spending programs virtually assures a lower dollar," Swiss America CEO Craig Smith writes.
* Robin Griffiths, technical analyst at Cazenove Capital, told CNBC he sees gold heading toward $1,500 in the next 12 months. "Cash doesn't give you a return, at the moment not one worth having, so the negative about gold has gone away. It does traditionally preserve value both in panicky inflationary times and deflationary times."
* Gold may reach $1,000 an ounce next year and “I think you’re going to see the $2,000 level in 2010,” as the global economy heads for a bigger slump than currently forecast, said Philip Manduca, head of investments at ECU Group.
* "U.S. crude rose more than $3 a barrel in early Monday to top $50 then fell back near $45 -- still far from the "fair" price of $75 a barrel identified by Saudi Arabia, the world's biggest crude exporter. OPEC ministers could make their deepest oil supply cut ever when they meet on Wednesday," reports Reuters.
* "U.S. stocks fell on Monday, with financial shares weighing on the broader market as firms detailed their exposure to the alleged $50 billion fraud by Bernard Madoff. "What's amazing is the magnitude of bad news that we've had to digest during the last two weeks," reports MW.
* "When the Federal Reserve policymakers decide on interest rates Tuesday, investors will probably look one step beyond their decision, to gauge how much money will the Fed be willing to print once it is out of rate ammunition. Rates won't likely hit zero Tuesday, but this could be unavoidable in the near future, according to strategists and market experts," reports CNBC href="http://www.swissamerica.com/article.php?art=11-2008/200811300835mn.txt
Here are a few parts from USA Today political blog
• RushLimbaugh.com -- Cheney says Obama will appreciate things the Bush administration did on national security: Vice President Dick Cheney spoke with conservative radio's Rush Limbaugh yesterday. He said the most significant thing the Bush administration accomplished was preventing further al-Qaeda attacks "on the U.S. homeland." And, said Cheney:
"My guess is once (the Obama administration gets) here and they're faced with the same problems we deal with every day, that they will appreciate some of the things we've put in place. We did not exceed our constitutional authority as some have suggested, but we -- the president believes, I believe -- very deeply in a strong executive, and I think that's essential in this day and age, and I think the Obama administration is not likely to cede that authority back to the Congress. I think they'll find that, given the challenge they face, they'll need all the authority they can muster."
From a related story by ABC News: In another interview, Cheney called Obama's national security choices "a pretty good team."
• Politico -- Pelosi has laid down the law to incoming White House team: Sources tell Politico that in talks with soon-to-be White House chief of staff Rahm Emanuel and others on President-elect Barack Obama's team, House Speaker Nancy Pelosi, D-Calif., "has 'set parameters' for what she wants from Barack Obama and his White House staff -- no surprises, and no backdoor efforts to go around her and other Democratic leaders by cutting deals with moderate New Democrats or conservative Blue Dogs. Specifically, Pelosi has told Emanuel that she wants to know when representatives of the incoming administration have any contact with her rank-and-file Democrats -- and why, sources say."
http://blogs.usatoday.com/onpolitics/2008/12/whats-new-10.html
Police find dynamite at Paris department store December 16, 2008 - 9:15am
By JEAN-PIERRE VERGES Associated Press Writer
PARIS (AP) - Police acting on a warning Tuesday found a bundle of dynamite inside a Paris department store at the height of the Christmas season, and a group demanding that France withdraw from Afghanistan claimed responsibility.
Sticks of dynamite tied together but without a detonator were found in the Printemps department store, a favored shopping destination for tourists, and a Christmas season attraction because of its festive window displays.
Interior Minister Michele Alliot-Marie said the explosives appeared "relatively old." Police said they were found in the third floor restroom of the menswear department. Five sticks were found together, officials said.
"There was no risk of explosion," the minister said.
French news agency Agence France-Presse said it received a letter Tuesday morning from a group calling itself the Afghan Revolutionary Front saying that several bombs had been planted in the store. Police said they searched the store and found the dynamite because of the warning.
Alliot-Marie said the group was "totally unknown" to police but that the claim was being studied.
In the letter, the group demanded the withdrawal of French troops from Afghanistan before the end of February, and threatened attacks if France refuses.
"Otherwise we will go back into action in your big capitalist stores and this time without warning you," the letter said, according to AFP.
President Nicolas Sarkozy, who has increased France's troop levels in Afghanistan, quickly stressed that he would not bend to terrorism. France has 2,800 troops in Afghanistan.
"We need to be vigilant about terrorism. That is the only right policy. We have to be firm. We cannot compromise with terrorists," Sarkozy said.
Officers cordoned off streets around the building. Anti-crime brigades and bomb squads were called in.
Store employees and customers left the building.
"It's worrying, but there's no reason to panic," said Evelyne Bredy, a sportswear saleswoman who works on the third floor, where the explosives were found. She and a shivering colleague waited outside the store while police with sniffer dogs worked inside.
"We're used to it. It happens," she said. "There are often suspicious packages _ though maybe not this type of evacuation."
http://wtop.com/?nid=111&sid=1550588
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