Ok, everyone, time to go Treasury-only MMFs

Discussion of the Cash portion of the Permanent Portfolio

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Re: Ok, everyone, time to go Treasury-only MMFs

Post by vnatale » Tue Mar 24, 2020 2:16 pm

KevinW wrote:
Tue Mar 24, 2020 1:40 pm
vnatale wrote:
Wed Mar 18, 2020 10:46 pm
Like I either shift this Federal to Treasury and then later collapse the accounts. Or, tomorrow I collapse all the accounts and then Friday shirt Federal to Treasury. I don't think it will work to do all the same day.
Slow and steady wins the race. Usually when I'm rebalancing or doing account maintenance I only have one transaction per account "in the air" at a time, I fire one thing off, then a few business days do the next thing, etc. Under the PP ethos none of these things are really ever "urgent" so it's fine.
vnatale wrote:
Wed Mar 18, 2020 10:46 pm
collapsing my eight different retirement accounts into as few as possible - putting like tax treatment ones together - Roth, Traditional, and other
+1, I think it's wise to hold the fewest accounts possible. For most people that's 1) employer, 2) Roth IRA, 3) traditional IRA if applicable, 4) taxable if applicable. It simplifies a lot of things and helps with the account-minimum thresholds you were talking about.
In addition to being an employee I've also been self-employed. So, according to how much self-employment income I had in a given year I opened various retirement vehicles - Keough plan, SEP-IRA, SIMPLE IRA, Solo 401(k) - for whichever one would allow me the maximum contribution that year.

Thus, already having ALL the four you named, I have all of those on top of those. Hence, nine separate accounts. Until now It's now really been an issue.

Vinny
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by Xan » Tue Mar 24, 2020 2:17 pm

I'm pretty sure if you're not making further contributions, you can merge SEP and SIMPLE into your traditional IRA. The tax treatment is the same, after all. Your brokerage should be able to do this for you.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by vnatale » Tue Mar 24, 2020 2:30 pm

Xan wrote:
Tue Mar 24, 2020 2:17 pm
I'm pretty sure if you're not making further contributions, you can merge SEP and SIMPLE into your traditional IRA. The tax treatment is the same, after all. Your brokerage should be able to do this for you.
Definitely NOT with the SIMPLE IRA as self-employed.

Massachusetts has income taxes and it does NOT recognize SIMPLE IRA for the self-employed. Therefore, I'd NEVER want to commingle that SIMPLE IRA with a traditional IRA where I did get Massachusetts tax advantages. For the same reason I need to go back to the years I did my SEP contributions and see how I treated the contributions on my Massachusetts tax returns.

I am going to review past Massachusetts tax returns for all my retirement accounts to fully make certain the tax treatment of each so that when I start combining retirement accounts I'm combining like tax treatment with like tax treatment.

Vinny
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by Xan » Tue Mar 24, 2020 2:35 pm

vnatale wrote:
Tue Mar 24, 2020 2:30 pm
Xan wrote:
Tue Mar 24, 2020 2:17 pm
I'm pretty sure if you're not making further contributions, you can merge SEP and SIMPLE into your traditional IRA. The tax treatment is the same, after all. Your brokerage should be able to do this for you.
Definitely NOT with the SIMPLE IRA as self-employed.

Massachusetts has income taxes and it does NOT recognize SIMPLE IRA for the self-employed. Therefore, I'd NEVER want to commingle that SIMPLE IRA with a traditional IRA where I did get Massachusetts tax advantages. For the same reason I need to go back to the years I did my SEP contributions and see how I treated the contributions on my Massachusetts tax returns.

I am going to review past Massachusetts tax returns for all my retirement accounts to fully make certain the tax treatment of each so that when I start combining retirement accounts I'm combining like tax treatment with like tax treatment.

Vinny
Wow, gross. Sorry, I'm not used to having to deal with state income taxes.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by dualstow » Tue Mar 24, 2020 2:36 pm

Time for Vinny's Massachusetts IRA thread?
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by vnatale » Tue Mar 24, 2020 2:40 pm

Xan wrote:
Tue Mar 24, 2020 2:35 pm
vnatale wrote:
Tue Mar 24, 2020 2:30 pm
Xan wrote:
Tue Mar 24, 2020 2:17 pm
I'm pretty sure if you're not making further contributions, you can merge SEP and SIMPLE into your traditional IRA. The tax treatment is the same, after all. Your brokerage should be able to do this for you.
Definitely NOT with the SIMPLE IRA as self-employed.

Massachusetts has income taxes and it does NOT recognize SIMPLE IRA for the self-employed. Therefore, I'd NEVER want to commingle that SIMPLE IRA with a traditional IRA where I did get Massachusetts tax advantages. For the same reason I need to go back to the years I did my SEP contributions and see how I treated the contributions on my Massachusetts tax returns.

I am going to review past Massachusetts tax returns for all my retirement accounts to fully make certain the tax treatment of each so that when I start combining retirement accounts I'm combining like tax treatment with like tax treatment.

Vinny
Wow, gross. Sorry, I'm not used to having to deal with state income taxes.
No one who I've ever talked to at Vanguard nor my friend who is a CPA in Rhode Island (neighboring state) was ever aware of this specific Massachusetts tax treatment. Their response is uniformly, "I didn't know that!"

Once I'm involved in something I thoroughly research all the both Federal and Massachusetts tax rules governing it and document it in the Taxes spreadsheet I maintain.

Vinny
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by jhogue » Wed Mar 25, 2020 8:59 am

Vinny,
Please see my comments regarding your situation over at the bond buying tutorial thread.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by dualstow » Wed Mar 25, 2020 9:09 am

jhogue wrote:
Wed Mar 25, 2020 8:59 am
Vinny,
Please see my comments regarding your situation over at the bond buying tutorial thread.
Yeah, read jhogue’s post, Vinny. It’s excellent advice.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by vnatale » Wed Mar 25, 2020 9:41 am

dualstow wrote:
Wed Mar 25, 2020 9:09 am
jhogue wrote:
Wed Mar 25, 2020 8:59 am
Vinny,
Please see my comments regarding your situation over at the bond buying tutorial thread.
Yeah, read jhogue’s post, Vinny. It’s excellent advice.
I've responded. Need to be able to fit it all in with all the rest of my life and the other demands that need to get done.

Vinny
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by mathjak107 » Fri Apr 03, 2020 5:38 pm

Fidelity closed fdlxx to new investors on March 30th .....
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by Libertarian666 » Fri Apr 03, 2020 8:30 pm

mathjak107 wrote:
Fri Apr 03, 2020 5:38 pm
Fidelity closed fdlxx to new investors on March 30th .....
Anyone who listened to me when I posted this got in under the wire.
I got my mother's cash balance into that fund before it was closed.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by Libertarian666 » Fri Apr 03, 2020 8:31 pm

MangoMan wrote:
Fri Apr 03, 2020 8:08 pm
mathjak107 wrote:
Fri Apr 03, 2020 5:38 pm
Fidelity closed fdlxx to new investors on March 30th .....
Because there aren't enough Tbills to go around? :o
Probably not. It's because with 0 yields, it costs Fidelity money to maintain those accounts because they won't charge the customers for expenses.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by mathjak107 » Sat Apr 04, 2020 3:22 am

Libertarian666 wrote:
Fri Apr 03, 2020 8:30 pm
mathjak107 wrote:
Fri Apr 03, 2020 5:38 pm
Fidelity closed fdlxx to new investors on March 30th .....
Anyone who listened to me when I posted this got in under the wire.
I got my mother's cash balance into that fund before it was closed.
yes , you planted the seeds in my head and i moved 1 million dollars awaiting investment in to fdlxx so i thank you for that idea .

one of the positions i had a lot of money in was fidelity conservative bond fund fconx so i decided to move it after that started to get some crazy hits ... that thing never moved more than a penny or two and that crazy week for bonds it moved 10 cents .
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by Libertarian666 » Sat Apr 04, 2020 9:08 am

mathjak107 wrote:
Sat Apr 04, 2020 3:22 am
Libertarian666 wrote:
Fri Apr 03, 2020 8:30 pm
mathjak107 wrote:
Fri Apr 03, 2020 5:38 pm
Fidelity closed fdlxx to new investors on March 30th .....
Anyone who listened to me when I posted this got in under the wire.
I got my mother's cash balance into that fund before it was closed.
yes , you planted the seeds in my head and i moved 1 million dollars awaiting investment in to fdlxx so i thank you for that idea .

one of the positions i had a lot of money in was fidelity conservative bond fund fconx so i decided to move it after that started to get some crazy hits ... that thing never moved more than a penny or two and that crazy week for bonds it moved 10 cents .
You're quite welcome!
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by jhogue » Sat Apr 04, 2020 5:05 pm

Libertarian666 wrote:
Fri Apr 03, 2020 8:31 pm
MangoMan wrote:
Fri Apr 03, 2020 8:08 pm
mathjak107 wrote:
Fri Apr 03, 2020 5:38 pm
Fidelity closed fdlxx to new investors on March 30th .....
Because there aren't enough Tbills to go around? :o
Probably not. It's because with 0 yields, it costs Fidelity money to maintain those accounts because they won't charge the customers for expenses.
Investors who have recently joined the rush into FDLXX, Fidelity’s Treasury Only Market Fund, might want to read the firm’s note, “Money Market Mutual Funds and Market Conditions, March 26, 2020,” a list of FAQs.
https://www.fidelity.com/bin-public/060 ... itions.pdf

This note preceded the fund’s closure to new investor at the end of the first quarter of 2020, just five days after this note. Fidelity will likely not explicitly say so, but I am fairly certain that the answer to why they closed the fund can be found in two FDLXX charts:

1. Net Shareholder Flows (Daily) chart of FDLXX:
https://fundresearch.fidelity.com/mutua ... /31617H300

This chart shows the massive rush into the fund that took place in March; a classic flight-to-safety scenario of market participants buying up T-bills as the stock market crashed.


2. Daily Market value chart of FDLXX:
https://fundresearch.fidelity.com/mutua ... /31617H300

Note the spike in the price of the fund as market liquidity evaporated. Can’t operate a money market fund without liquidity; hence the need to slam the door shut. The expense ratio that the fund charges is set independently of the overall yield of the T-bills in its portfolio.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by Libertarian666 » Sat Apr 04, 2020 5:16 pm

jhogue wrote:
Sat Apr 04, 2020 5:05 pm
Libertarian666 wrote:
Fri Apr 03, 2020 8:31 pm
MangoMan wrote:
Fri Apr 03, 2020 8:08 pm
mathjak107 wrote:
Fri Apr 03, 2020 5:38 pm
Fidelity closed fdlxx to new investors on March 30th .....
Because there aren't enough Tbills to go around? :o
Probably not. It's because with 0 yields, it costs Fidelity money to maintain those accounts because they won't charge the customers for expenses.
Investors who have recently joined the rush into FDLXX, Fidelity’s Treasury Only Market Fund, might want to read the firm’s note, “Money Market Mutual Funds and Market Conditions, March 26, 2020,” a list of FAQs.
https://www.fidelity.com/bin-public/060 ... itions.pdf

This note preceded the fund’s closure to new investor at the end of the first quarter of 2020, just five days after this note. Fidelity will likely not explicitly say so, but I am fairly certain that the answer to why they closed the fund can be found in two FDLXX charts:

1. Net Shareholder Flows (Daily) chart of FDLXX:
https://fundresearch.fidelity.com/mutua ... /31617H300

This chart shows the massive rush into the fund that took place in March; a classic flight-to-safety scenario of market participants buying up T-bills as the stock market crashed.


2. Daily Market value chart of FDLXX:
https://fundresearch.fidelity.com/mutua ... /31617H300

Note the spike in the price of the fund as market liquidity evaporated. Can’t operate a money market fund without liquidity; hence the need to slam the door shut. The expense ratio that the fund charges is set independently of the overall yield of the T-bills in its portfolio.
The expense ratio is set independently only insofar as Fidelity isn't absorbing those expenses.
Are they going to reduce the NAV of FDLXX to pay expenses?
Because that's what would be needed with a 0% yield on the T-Bills unless Fidelity is absorbing those expenses.

Ok, maybe that's not how they would handle it. Apparently they would just start charging a fee.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by jhogue » Thu Apr 09, 2020 1:03 pm

An article about FDLXX (Fidelity's Treasury Only Money Market Fund) that expands on its closure to new investors, 31 March 2020. I currently keep FDLXX as cash for both taxable and tax-deferred accounts. Apparently, lots of other investors have suddenly awakened to the singular quality of US Treasury-backed securities in the midst of the biggest market panic since 1929.

https://theconservativeinvestordaily.co ... investors/
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by jhogue » Sun Apr 19, 2020 8:58 am

Libertarian666 wrote:
Mon Mar 16, 2020 6:46 am
Fidelity has FDLXX, which contains only T-Bills and Treasury coupons.
You can keep all your cash in it even though it isn't eligible to be a core account; you just have to buy and sell it when you need money.
I've just entered orders to do that at the open.
The money markets are going to be in turmoil.

Stay safe.

(Edited because apparently it doesn't trade intra-day. However, you can still withdraw funds and they will sell whatever is needed at the end of the day.)
Investors who bought FDLXX because it contains ONLY T-bills and coupons should be aware that the fund has now begun buying a significant chunk of TIPS for its portfolio (7.2%), according to the 3.31.2020 Monthly Holdings Report which it has to file with the SEC. I have owned FDLXX in taxable and tax deferred accounts for over 5 years and do not recall seeing any TIPS in the fund's portfolio until now.

While TIPS are Treasury-issued securities, as mandated by the fund's prospectus, they do not behave in the same manner as T-bills. Their yield can go negative in an environment of falling interest rates and they have a different tax treatment. Long time members of this forum may recall that TIPS were craig's least favorite bond, for those among other reasons.

Whether this new development in the fund's strategy poses a problem for HBPP investors remains to be seen, but we will certainly want to scrutinize the fund's holdings going forward.
Last edited by jhogue on Sun Apr 19, 2020 9:16 am, edited 6 times in total.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by mathjak107 » Sun Apr 19, 2020 9:00 am

fidelity is propping up fdlxx or it would be minus now
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by jhogue » Sun Apr 19, 2020 9:25 am

mathjak107 wrote:
Sun Apr 19, 2020 9:00 am
fidelity is propping up fdlxx or it would be minus now
That would be one interpretation, and it would align with Fidelity's abrupt decision to close the fund to new investors.

On the other hand, rather than buying short duration TIPS for the fund, Fidelity could also have voluntarily waived some of its fee (+0.42%), which is one of the highest in the industry, as I recall. With $1 trillion in money market funds alone under management, the firm could have easily absorbed some fees, rather than resorting to this sleight-of-hand-- which it did without notifying its retail investors like you and me.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by jhogue » Sun Apr 19, 2020 10:07 am

We need not worry ourselves that Fidelity will look after its own profits.

What I am suggesting is that they might have practiced a bit more enlightened self-interest.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by Libertarian666 » Sun Apr 19, 2020 11:08 am

jhogue wrote:
Sun Apr 19, 2020 8:58 am
Libertarian666 wrote:
Mon Mar 16, 2020 6:46 am
Fidelity has FDLXX, which contains only T-Bills and Treasury coupons.
You can keep all your cash in it even though it isn't eligible to be a core account; you just have to buy and sell it when you need money.
I've just entered orders to do that at the open.
The money markets are going to be in turmoil.

Stay safe.

(Edited because apparently it doesn't trade intra-day. However, you can still withdraw funds and they will sell whatever is needed at the end of the day.)
Investors who bought FDLXX because it contains ONLY T-bills and coupons should be aware that the fund has now begun buying a significant chunk of TIPS for its portfolio (7.2%), according to the 3.31.2020 Monthly Holdings Report which it has to file with the SEC. I have owned FDLXX in taxable and tax deferred accounts for over 5 years and do not recall seeing any TIPS in the fund's portfolio until now.

While TIPS are Treasury-issued securities, as mandated by the fund's prospectus, they do not behave in the same manner as T-bills. Their yield can go negative in an environment of falling interest rates and they have a different tax treatment. Long time members of this forum may recall that TIPS were craig's least favorite bond, for those among other reasons.

Whether this new development in the fund's strategy poses a problem for HBPP investors remains to be seen, but we will certainly want to scrutinize the fund's holdings going forward.
Thanks for the heads up. 7% isn't enough to make me too nervous but if it gets much higher I'll probably just buy T-bills with most of those funds.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by jhogue » Fri Apr 24, 2020 2:07 pm

jhogue wrote:
Sun Apr 19, 2020 9:25 am
mathjak107 wrote:
Sun Apr 19, 2020 9:00 am
fidelity is propping up fdlxx or it would be minus now
That would be one interpretation, and it would align with Fidelity's abrupt decision to close the fund to new investors.

On the other hand, rather than buying short duration TIPS for the fund, Fidelity could also have voluntarily waived some of its fee (+0.42%), which is one of the highest in the industry, as I recall. With $1 trillion in money market funds alone under management, the firm could have easily absorbed some fees, rather than resorting to this sleight-of-hand-- which it did without notifying its retail investors like you and me.
This just in:

Fidelity has just posted a supplement to its prospectus for its Treasury Only Money Market Fund (FDLXX) prospectus dated 22 April 2020 that cuts its management fee from 0.42% to 0.25% and states the following:

"In order to avoid a negative yield, FMR may reimburse expenses or waive fees of Fidelity® Government Money Market Fund. Any such waivers or expense reimbursement would be voluntary and could be discontinued at any time. There is no guarantee that Fidelity® Government Money Market Fund will be able to avoid a negative yield."


Of further interest, Fidelity left themselves added another line that allows them to charge up to 0.17% in "Other Expenses" (which it declined to specify in greater detail).
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by jhogue » Fri Apr 24, 2020 2:23 pm

jhogue wrote:
Fri Apr 24, 2020 2:07 pm
jhogue wrote:
Sun Apr 19, 2020 9:25 am
mathjak107 wrote:
Sun Apr 19, 2020 9:00 am
fidelity is propping up fdlxx or it would be minus now
That would be one interpretation, and it would align with Fidelity's abrupt decision to close the fund to new investors.

On the other hand, rather than buying short duration TIPS for the fund, Fidelity could also have voluntarily waived some of its fee (+0.42%), which is one of the highest in the industry, as I recall. With $1 trillion in money market funds alone under management, the firm could have easily absorbed some fees, rather than resorting to this sleight-of-hand-- which it did without notifying its retail investors like you and me.
This just in:

Fidelity has just posted a supplement to its prospectus for its Treasury Only Money Market Fund (FDLXX) prospectus dated 22 April 2020 that cuts its management fee from 0.42% to 0.25% noting the following:

"In order to avoid a negative yield, FMR may reimburse expenses or waive fees of Fidelity® Treasury Only Money Market Fund. Any such waivers or expense reimbursement would be voluntary and could be discontinued at any time. There is no guarantee that Fidelity® Treasury Only Money Market Fund will be able to avoid a negative yield"


Of further interest, Fidelity added a new line that now allows them to charge up to 0.17% in "Other Expenses" (which it declined to specify in greater detail).
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by jhogue » Fri Apr 24, 2020 2:51 pm

I suppose it is understandable that Fidelity might suddenly close FDLXX to new investors. They are worried they can't handle a flood of too much new money chasing too few Treasurys -- which may also add downward pressure on the fund's yield. That could be construed to be in the interests of the pre-existing investors.

The sudden addition of short-dated TIPS to the portfolio and the publication of a revised expense schedule-- the one coming right after the other-- is beginning to look fishy to me. I think they are afraid of being caught carrying a ludicrously high expense money market fund sporting a potentially negative interest rate.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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