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 technovelist » Mon Mar 16, 2020 4:22 pm

Tortoise wrote:
Mon Mar 16, 2020 4:16 pm
vnatale wrote:
Mon Mar 16, 2020 4:04 pm
Now you are making me think what am I doing keeping that investment in VFSIX. I've always considered that part of my "fixed" investment and since I wrote earlier that I'm favoring safety over return why am I not then also exchanging that to VUSXX?
For "deep cash" (i.e., cash that you don't need to access quickly), why not go for the safest option of all: Directly-held T-bills?

The only significant cash I hold in an MMF is taxable savings that I may need to access within less than a year (e.g., emergency funds, renovation funds, new-car funds).
Yes, exactly.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by technovelist » Mon Mar 16, 2020 4:23 pm

vnatale wrote:
Mon Mar 16, 2020 4:04 pm
technovelist wrote:
Mon Mar 16, 2020 3:57 pm
stuper1 wrote:
Mon Mar 16, 2020 3:52 pm
technovelist wrote:
Mon Mar 16, 2020 3:44 pm
Tortoise wrote:
Mon Mar 16, 2020 1:22 pm
A good chunk of my cash at Vanguard is in the Federal MMF as my settlement fund, and now I'm wondering if I should move it to the Treasury MMF.

Here are the current holdings of the Federal MMF (VMFXX). Looks like only 32.3% is in Treasuries and 18.7% is in the ailing repo market:

Code: Select all

Bankers Acceptances	0.0%
Certificates of Deposit	0.0%
Other	0.0%
Repurchase Agreements	18.7%
U.S. Commercial Paper	0.0%
U.S. Govt. Obligations	49.0%
U.S. Treasury Bills	32.3%
Yankee/Foreign	0.0%
Total	100.0%
Normally I think, "At least the Federal MMF is safer than the Prime MMF," but in light of all the repo market turmoil... maybe that's not quite good enough?
I would switch to as close to all-Treasurys as you can get.
We are in uncharted territory.
Would an ultra short term Treasury ETF count, say SHV? I can't get VUSXX because I don't have the $50k minimum in cash in any one account.
How about VFISX? That has a $3k minimum.
VFISX is what I've been invested in since January 2003 (from an initial investment then). But I'm not considering it ultra-safe. If you cannot get into VUSXX because of the minimum (and I could not in some of the eight retirement accounts I have with Vanguard) my next best choice and what I used today was: Vanguard Federal Money Market Fund;Investor Fund: VMFXX.

Now you are making me think what am I doing keeping that investment in VFSIX. I've always considered that part of my "fixed" investment and since I wrote earlier that I'm favoring safety over return why am I not then also exchanging that to VUSXX?

Vinny
What's wrong with VFISX? It says 97% Government obligations, IIRC. Do you know more about its composition than that?
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by Tyler » Mon Mar 16, 2020 4:48 pm

technovelist 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.
Thanks for the reminder. I just switched my Fidelity core position to FZFXX. It's maybe not as pure as FDLXX because it also depends on overnight repurchase agreements, but it's based on treasuries and is better than the default FCASH. I try not to let it build up to much before reinvesting it anyway, but it never hurts to reduce risk even to small positions.
Last edited by Tyler on Mon Mar 16, 2020 4:53 pm, edited 1 time in total.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by technovelist » Mon Mar 16, 2020 4:51 pm

Tyler wrote:
Mon Mar 16, 2020 4:48 pm
technovelist 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.
Thanks for the reminder. I just switched my Fidelity core position to FZFXX. It's maybe not as pure as FLDXX because it also depends on overnight repurchase agreements, but it's based on treasuries and is better than the default FCASH. I try not to let it build up to much before reinvesting it anyway, but it never hurts to reduce risk even to small positions.
I entered an order to buy FDLXX with my FCASH position. It didn't get executed at the close. I called Fidelity and got disconnected after 15 minutes on hold.

Now I'm #56 in the queue on live chat. I hope this is just because they are behind due to volume and it will be done tonight.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by pmward » Mon Mar 16, 2020 4:57 pm

Going from one fund to another with Fidelity usually happens later in the evening. If you have the app they will send you a notification when it goes through.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by vnatale » Mon Mar 16, 2020 5:12 pm

technovelist wrote:
Mon Mar 16, 2020 4:23 pm
vnatale wrote:
Mon Mar 16, 2020 4:04 pm
technovelist wrote:
Mon Mar 16, 2020 3:57 pm
stuper1 wrote:
Mon Mar 16, 2020 3:52 pm
technovelist wrote:
Mon Mar 16, 2020 3:44 pm
Tortoise wrote:
Mon Mar 16, 2020 1:22 pm
A good chunk of my cash at Vanguard is in the Federal MMF as my settlement fund, and now I'm wondering if I should move it to the Treasury MMF.

Here are the current holdings of the Federal MMF (VMFXX). Looks like only 32.3% is in Treasuries and 18.7% is in the ailing repo market:

Code: Select all

Bankers Acceptances	0.0%
Certificates of Deposit	0.0%
Other	0.0%
Repurchase Agreements	18.7%
U.S. Commercial Paper	0.0%
U.S. Govt. Obligations	49.0%
U.S. Treasury Bills	32.3%
Yankee/Foreign	0.0%
Total	100.0%
Normally I think, "At least the Federal MMF is safer than the Prime MMF," but in light of all the repo market turmoil... maybe that's not quite good enough?
I would switch to as close to all-Treasurys as you can get.
We are in uncharted territory.
Would an ultra short term Treasury ETF count, say SHV? I can't get VUSXX because I don't have the $50k minimum in cash in any one account.
How about VFISX? That has a $3k minimum.
VFISX is what I've been invested in since January 2003 (from an initial investment then). But I'm not considering it ultra-safe. If you cannot get into VUSXX because of the minimum (and I could not in some of the eight retirement accounts I have with Vanguard) my next best choice and what I used today was: Vanguard Federal Money Market Fund;Investor Fund: VMFXX.

Now you are making me think what am I doing keeping that investment in VFSIX. I've always considered that part of my "fixed" investment and since I wrote earlier that I'm favoring safety over return why am I not then also exchanging that to VUSXX?

Vinny
What's wrong with VFISX? It says 97% Government obligations, IIRC. Do you know more about its composition than that?
Sorry, I'd confused it with this one, which I do own: Vanguard Short-Term Investment-Grade Fund;Investor
Fund: VFSTX. One letter different in their symbols.

I go here: https://investor.vanguard.com/mutual-fu ... file/VFISX and see its description:
This fund invests in debt issued directly by the government in the form of Treasury bills. A key risk of the fund is the fact that changes in interest rates can eventually lead to a decrease in income for the fund. The fund has a reduced risk of default, since the bonds in the portfolio are backed by the full faith and credit of the U.S. government. Although short-term bond funds historically tend to have higher yields than money market funds, unlike money market funds, their share price fluctuates. Investors with short-term savings goals who are willing to accept some price movement may wish to consider this fund.

Compare it to VMFXX: https://investor.vanguard.com/mutual-fu ... file/VMFXX with this description:

Vanguard Federal Money Market Fund, which invests in U.S. government securities, seeks to provide current income and preserve shareholders’ principal investment by maintaining a share price of $1. As such it is considered one of the most conservative investment options offered by Vanguard. Although the fund invests in short-term U.S. government securities, the amount of income that a shareholder may receive will be largely dependent on the current interest rate environment. Investors who have a short-term savings goal and are interested in a fund that invests in securities issued by U.S. government agencies may wish to consider this option.

Comparing them, VFISX is a mutual fund with varying prices while VMFXX is a money market fund maintaining the $1 price. Also, its expense ratio is nearly half of that of VFISX.

If one wants safe money market performance then it seems VMFXX is the better choice?

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

Post by technovelist » Mon Mar 16, 2020 7:03 pm

technovelist wrote:
Mon Mar 16, 2020 4:51 pm
Tyler wrote:
Mon Mar 16, 2020 4:48 pm
technovelist 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.
Thanks for the reminder. I just switched my Fidelity core position to FZFXX. It's maybe not as pure as FLDXX because it also depends on overnight repurchase agreements, but it's based on treasuries and is better than the default FCASH. I try not to let it build up to much before reinvesting it anyway, but it never hurts to reduce risk even to small positions.
I entered an order to buy FDLXX with my FCASH position. It didn't get executed at the close. I called Fidelity and got disconnected after 15 minutes on hold.

Now I'm #56 in the queue on live chat. I hope this is just because they are behind due to volume and it will be done tonight.
Ok, I finally got to the top of the chat list, and the guy said it should go through tonight. I should get confirmation tonight or tomorrow morning.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by technovelist » Mon Mar 16, 2020 7:06 pm

vnatale wrote:
Mon Mar 16, 2020 5:12 pm
technovelist wrote:
Mon Mar 16, 2020 4:23 pm
vnatale wrote:
Mon Mar 16, 2020 4:04 pm
technovelist wrote:
Mon Mar 16, 2020 3:57 pm
stuper1 wrote:
Mon Mar 16, 2020 3:52 pm
technovelist wrote:
Mon Mar 16, 2020 3:44 pm
Tortoise wrote:
Mon Mar 16, 2020 1:22 pm
A good chunk of my cash at Vanguard is in the Federal MMF as my settlement fund, and now I'm wondering if I should move it to the Treasury MMF.

Here are the current holdings of the Federal MMF (VMFXX). Looks like only 32.3% is in Treasuries and 18.7% is in the ailing repo market:

Code: Select all

Bankers Acceptances	0.0%
Certificates of Deposit	0.0%
Other	0.0%
Repurchase Agreements	18.7%
U.S. Commercial Paper	0.0%
U.S. Govt. Obligations	49.0%
U.S. Treasury Bills	32.3%
Yankee/Foreign	0.0%
Total	100.0%
Normally I think, "At least the Federal MMF is safer than the Prime MMF," but in light of all the repo market turmoil... maybe that's not quite good enough?
I would switch to as close to all-Treasurys as you can get.
We are in uncharted territory.
Would an ultra short term Treasury ETF count, say SHV? I can't get VUSXX because I don't have the $50k minimum in cash in any one account.
How about VFISX? That has a $3k minimum.
VFISX is what I've been invested in since January 2003 (from an initial investment then). But I'm not considering it ultra-safe. If you cannot get into VUSXX because of the minimum (and I could not in some of the eight retirement accounts I have with Vanguard) my next best choice and what I used today was: Vanguard Federal Money Market Fund;Investor Fund: VMFXX.

Now you are making me think what am I doing keeping that investment in VFSIX. I've always considered that part of my "fixed" investment and since I wrote earlier that I'm favoring safety over return why am I not then also exchanging that to VUSXX?

Vinny
What's wrong with VFISX? It says 97% Government obligations, IIRC. Do you know more about its composition than that?
Sorry, I'd confused it with this one, which I do own: Vanguard Short-Term Investment-Grade Fund;Investor
Fund: VFSTX. One letter different in their symbols.

I go here: https://investor.vanguard.com/mutual-fu ... file/VFISX and see its description:
This fund invests in debt issued directly by the government in the form of Treasury bills. A key risk of the fund is the fact that changes in interest rates can eventually lead to a decrease in income for the fund. The fund has a reduced risk of default, since the bonds in the portfolio are backed by the full faith and credit of the U.S. government. Although short-term bond funds historically tend to have higher yields than money market funds, unlike money market funds, their share price fluctuates. Investors with short-term savings goals who are willing to accept some price movement may wish to consider this fund.

Compare it to VMFXX: https://investor.vanguard.com/mutual-fu ... file/VMFXX with this description:

Vanguard Federal Money Market Fund, which invests in U.S. government securities, seeks to provide current income and preserve shareholders’ principal investment by maintaining a share price of $1. As such it is considered one of the most conservative investment options offered by Vanguard. Although the fund invests in short-term U.S. government securities, the amount of income that a shareholder may receive will be largely dependent on the current interest rate environment. Investors who have a short-term savings goal and are interested in a fund that invests in securities issued by U.S. government agencies may wish to consider this option.

Comparing them, VFISX is a mutual fund with varying prices while VMFXX is a money market fund maintaining the $1 price. Also, its expense ratio is nearly half of that of VFISX.

If one wants safe money market performance then it seems VMFXX is the better choice?

Vinny
I don't like the "Yankee/Foreign" component of VMFXX, and it comprises almost 62% of assets.
Does that sound like a US government investment to you?
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by vnatale » Mon Mar 16, 2020 7:09 pm

technovelist wrote:
Mon Mar 16, 2020 7:06 pm
vnatale wrote:
Mon Mar 16, 2020 5:12 pm
technovelist wrote:
Mon Mar 16, 2020 4:23 pm
vnatale wrote:
Mon Mar 16, 2020 4:04 pm
technovelist wrote:
Mon Mar 16, 2020 3:57 pm
stuper1 wrote:
Mon Mar 16, 2020 3:52 pm
technovelist wrote:
Mon Mar 16, 2020 3:44 pm
Tortoise wrote:
Mon Mar 16, 2020 1:22 pm
A good chunk of my cash at Vanguard is in the Federal MMF as my settlement fund, and now I'm wondering if I should move it to the Treasury MMF.

Here are the current holdings of the Federal MMF (VMFXX). Looks like only 32.3% is in Treasuries and 18.7% is in the ailing repo market:

Code: Select all

Bankers Acceptances	0.0%
Certificates of Deposit	0.0%
Other	0.0%
Repurchase Agreements	18.7%
U.S. Commercial Paper	0.0%
U.S. Govt. Obligations	49.0%
U.S. Treasury Bills	32.3%
Yankee/Foreign	0.0%
Total	100.0%
Normally I think, "At least the Federal MMF is safer than the Prime MMF," but in light of all the repo market turmoil... maybe that's not quite good enough?
I would switch to as close to all-Treasurys as you can get.
We are in uncharted territory.
Would an ultra short term Treasury ETF count, say SHV? I can't get VUSXX because I don't have the $50k minimum in cash in any one account.
How about VFISX? That has a $3k minimum.
VFISX is what I've been invested in since January 2003 (from an initial investment then). But I'm not considering it ultra-safe. If you cannot get into VUSXX because of the minimum (and I could not in some of the eight retirement accounts I have with Vanguard) my next best choice and what I used today was: Vanguard Federal Money Market Fund;Investor Fund: VMFXX.

Now you are making me think what am I doing keeping that investment in VFSIX. I've always considered that part of my "fixed" investment and since I wrote earlier that I'm favoring safety over return why am I not then also exchanging that to VUSXX?

Vinny
What's wrong with VFISX? It says 97% Government obligations, IIRC. Do you know more about its composition than that?
Sorry, I'd confused it with this one, which I do own: Vanguard Short-Term Investment-Grade Fund;Investor
Fund: VFSTX. One letter different in their symbols.

I go here: https://investor.vanguard.com/mutual-fu ... file/VFISX and see its description:
This fund invests in debt issued directly by the government in the form of Treasury bills. A key risk of the fund is the fact that changes in interest rates can eventually lead to a decrease in income for the fund. The fund has a reduced risk of default, since the bonds in the portfolio are backed by the full faith and credit of the U.S. government. Although short-term bond funds historically tend to have higher yields than money market funds, unlike money market funds, their share price fluctuates. Investors with short-term savings goals who are willing to accept some price movement may wish to consider this fund.

Compare it to VMFXX: https://investor.vanguard.com/mutual-fu ... file/VMFXX with this description:

Vanguard Federal Money Market Fund, which invests in U.S. government securities, seeks to provide current income and preserve shareholders’ principal investment by maintaining a share price of $1. As such it is considered one of the most conservative investment options offered by Vanguard. Although the fund invests in short-term U.S. government securities, the amount of income that a shareholder may receive will be largely dependent on the current interest rate environment. Investors who have a short-term savings goal and are interested in a fund that invests in securities issued by U.S. government agencies may wish to consider this option.

Comparing them, VFISX is a mutual fund with varying prices while VMFXX is a money market fund maintaining the $1 price. Also, its expense ratio is nearly half of that of VFISX.

If one wants safe money market performance then it seems VMFXX is the better choice?

Vinny
I don't like the "Yankee/Foreign" component of VMFXX, and it comprises almost 62% of assets.
Does that sound like a US government investment to you?
No. But I just checked and the current "Yankee / Foreign" holdings are 0%.

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

Post by Kevin K. » Mon Mar 16, 2020 7:15 pm

Wanted to point out that VUSXX isn't technically a pure Treasury MM fund. From the fund's description on Vanguard:

"The fund invests solely in high-quality, short-term money market securities whose interest and principal payments are backed by the full faith and credit of the U.S. government. Under normal circumstances, at least 80% of the fund’s assets will be invested in U.S. Treasury securities; the remainder of the assets may be invested in securities issued by U.S. governmental agencies."

I remembered this from Craig and MT's PP book. Same reason they don't like Vanguard's LTT fund. Too much leeway for the fund managers. iShares seems to be a better choice albeit no pure MM fund but they do have SHV. For sure direct ownership is best and Schwab at least now allows automatic rollovers of bills bought at auction. Paying any ER on money earning nothing is kinda difficult anyway.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by dualstow » Mon Mar 16, 2020 7:21 pm

Kevin K. wrote:
Mon Mar 16, 2020 7:15 pm
..I remembered this from Craig and MT's PP book. Same reason they don't like Vanguard's LTT fund.
Although, I am 100% sure that somewhere in this forum, early days, Craig wrote the Vanguard long-term fund was good enough, while conceding that it was not pure.
EDIT: here’s one instance: viewtopic.php?t=3060#p41929

VUSXX money market:
I wrote to Vanguard when I saw that the yield wasn’t dropping very quickly and noticed the non-treasurys under the hood that you pointed out. Vanguard rep responded that they’re adhering to their mission statement.
I mostly bailed on the fund to roll my own t-bills, but during these plaguey times I just don’t want to deal with it.
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Re: Ok, everyone, time to go Treasury-only MMFs

Post by vnatale » Mon Mar 16, 2020 7:31 pm

Kevin K. wrote:
Mon Mar 16, 2020 7:15 pm
Wanted to point out that VUSXX isn't technically a pure Treasury MM fund. From the fund's description on Vanguard:

"The fund invests solely in high-quality, short-term money market securities whose interest and principal payments are backed by the full faith and credit of the U.S. government. Under normal circumstances, at least 80% of the fund’s assets will be invested in U.S. Treasury securities; the remainder of the assets may be invested in securities issued by U.S. governmental agencies."

I remembered this from Craig and MT's PP book. Same reason they don't like Vanguard's LTT fund. Too much leeway for the fund managers. iShares seems to be a better choice albeit no pure MM fund but they do have SHV. For sure direct ownership is best and Schwab at least now allows automatic rollovers of bills bought at auction. Paying any ER on money earning nothing is kinda difficult anyway.
I believe that VUSXX was not in existence when they wrote the book and they were writing about the Federal money market fund. Or, its equivalent that existed at the time.

However, I do agree with your criticism as I started this Topic:

"Vanguard Treasury Money Market Fund (VUSXX) Questions!"

viewtopic.php?f=4&t=10277

If you read that you can see that they are all over the place in that 80% to 100% range.

Once I have gone full classic Permanent Portfolio and have down all my procedures and patterns (i.e, know what I am doing) I will fully ditch VUSXX and go fully Treasury Bills.

Vinny
"I only regret that I have but one lap to give to my cats."
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