Mutual Fund Suspension?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Yesterday evening I heard an interview of David Bresnahan (who writes for World Net Daily). He was discussing a new book he has written called something like: We Have Come to Take You to the Shelter. Subtitled Clinton is Ready for Y2K, are You?
Unfortunately, I tuned in late but I did hear him say that military and paramilitary groups were being put on alert the first of September. He had looked for the reason why and he said he had discovered that some of the mutual funds plan to freeze trading at the end of the third quarter (Aug 31) in order to prevent people from selling stock in December, planning to reinvest in January.
I am putting an enquiry on this board, as I have observed a high degree of savvy here. Does anyone know any more than I do? Is this information confirmable? If it gets wide coverage, will plans be cancelled as they were in the case of nuclear power plant closures?
-- Gypsy (GypsiGold@aol.com), July 08, 1999
Smells wrong to me. Given the disconnect, the response from the public to such Draconian measures for a "non-problem" would be fast and severe.
-- Dave (firstname.lastname@example.org), July 08, 1999.
Hell of a rumor!
Let's see, if all those funds froze trading, people couldn't pull their money out of the market, therefore, they couldn't withdraw that money from banks, so we wouldn't have bank runs. Right? Moreover, if the funds were frozen, it would eliminate fund withdrawals in a market drop and would act as a buffer against a crash, since public panic contributes to the crash.
Nah, can't be true. The feds aren't that clever.
I'm glad I'm not a believer is conspiracies.
-- de (delewis@Xinetone.net), July 08, 1999.
A mutual fund cannot refuse to give customers their money back. Would you invest in a fund that had that ability? The worst case scenario is that a fund that is getting hit with mass redemptions has to continually sell holdings to pay off investors. If the market is tanking, the fund still has to sell, regardless of the losses. However, they have the option of giving you actual holdings instead, if they determine for whatever reason, they cannot raise the money (such as the market closing or being suspended.) So, instead of cash, they can pay you off with some of the shares that make up the portfolio.
They have three days to provide your money if you request liquidation. This rumor is patently false. They cannot "freeze trading".
-- ariZONEa (I_dont_think@so.com), July 08, 1999.
Aside from the date mishap (end of 3Q is Sept 30), the wording "some of the mutual funds plan to freeze trading" does not make sense. The "trading" is done at such places as exchanges and NASDAQ, not at mutual funds.
I would would not be surprised if some mutual fund managers are considering various coontingency plans in case of investor panic, as well they might, but "freezing trading" does not seem to me to be one of their options.
-- Jerry B (email@example.com), July 08, 1999.
It might make sense that the fund managers stop trading stocks for a while, and "go long" - but freezing people's assets would not be good.
Based on the wording of the original post, it sounds like the limits would be on the fund manager, not the investors. In this scenario, fund managers would still have to sell to pay-off investors.
Of course, WND might be way "off-base", but it would make sense to put limits on the mutual funds. They account for the bulk of the "market", I think.
My only observation is that if this rumor is in any way true, Y2K could result in a number of "Bad Hair Days".
-- Anonymous99 (Anonymous99@Anonymous99.xxx), July 08, 1999.
let's see? shelter 250,000,000 people? yea right! as screwed up as this administration is they'd be able to even attempt to pull something like that off. sounds like a plan to me.
-- corrine l (firstname.lastname@example.org), July 08, 1999.
corrine1 has a good sense of the practical. Why would government wish to become the 'provider' for the entire continent? Answer: NOT! Similarly, they are trying in every way possible to avoid responsibility for anything at all. Why would they wish to preemptively act when reaction (well managed) can gain them something (people clamoring for help). I do not see this 'America in Concentration Camps' thing happening.
Quite the opposite IMO. There is so little that government can do practically for most people that they will say 'Sorry but you all are on your own now'. About all they have resources to do is lock down a few critical areas and try to influence a few others through advisors.
One of the biggest problems for government in this whole mess is that it threatens to undermine the image that government is powerful in a larger sense. There are too many opportunities for government to appear frail, impotent and indecisive across this country let alone the world in the wake of significant problems.
Watch the terrorist gambit. It seems to be picking up players. IMO this will be the 'story' spun to enmess the public. Those were not Y2K failures but those nasty terrorists (communists, arabs, etc) attacking us. This along with some real terrorist acts will drive the public into the waiting arms of the politicians.
-- ..- (email@example.com), July 08, 1999.
I think ariZonea describes it the way it is. A mutual fund that decided to freeze trading for a quarter or two would be just as far up the creek as a mutual fund that was paralysed by actual y2k failures for that amount of time. When they come out of the freeze, I'd think most of their investors would shift their money elsewhere asap. I did have a crazy thought that all mutual fund trading could be frozen, perhaps by some sort of NSC decree. This treatment too would probably kill the patient. But if they perceive the patient to be terminally ill, they may well try some sort of radical, experimental treatment as a last resort. ?
-- number six (Iam_not_a_number@hotmail.com), July 08, 1999.
I e-mailed David B. Here is his answer:
My new book is We're Here to take YOU to the Shelter: Clinton is Y2K ready -- Are You?
It is available as a preliminary printing pending full publication in August by the publisher. Call 800-338-8824.
I did not say that trading would be suspended.
-- j bishop (firstname.lastname@example.org), July 08, 1999.
WHO CARES WHAT THEY DO? Just take all your money out of your mutual funds now! All the major indexes are already up 20% for the year. If you're still invested in the market you did very well this year. Pat yourself on the back - then take your money and run. Just get out. Screw everyone else.
-- Clyde (email@example.com), July 08, 1999.