Remember the most important golden rule in the financial world: no disorientated no return

Absrtact: In the 2008 financial crisis, propped up the two cornerstones of the rapid growth of the U.S. Monetary Fund--cash-level liquidity and capital preservation have broken down the two countries in the financial system, Internet technology, there are many differences, but the internet itself is borderless, and the financial

In the 2008 financial crisis, the two cornerstones underpinning the rapid growth of the US Monetary Fund--cash-level liquidity and capital preservation-broke down

There are many differences between the two countries in the financial system and Internet technology, but the internet itself is borderless, and the nature of finance is consistent with the financial demand of the service people. The stone of his mountain can attack Jade, the author analyzes several concrete forms of American Internet finance, and hopes to bring some enlightenment to the future development of Chinese Internet finance.

The famous third party pays pioneer PayPal in 1999 to create the first MMF (money harsh Fund, Currency market fund), up to the size of $1 billion in 2007. Not only PayPal, the United States market MMF on the scale of growth, in 8 years from the opening of the policy from a blank to 2008 3.75 trillion U.S. dollars scale.

But in the 2008 financial crisis, the two cornerstones of the rapid growth of MMF--cash-level liquidity and capital preservation-broke down. Because MMF is to provide customers with higher returns than the market risk-free benchmark interest rate, it is inevitable to invest in short-term, high-quality short-term assets such as government bonds, short-term business bills and so on.

During the 2008-09 financial crisis, previously considered safe assets were all in trouble, a large number of MMF for the first time break the buck (1 Yuan MMF is not worth the nominal price), no longer capital preservation. Investors are accustomed to assuming that MMF is capital preservation, even if the loss of a little will produce great panic.

In the context of the financial crisis, only Cash was the king (only cash held in hand is king). Do not joke that, at that time, investors hug the husband's wife at night is not enough, but also have to hug the cash to sleep. A flood of investors ' redemptions has left another cornerstone--liquidity--collapsing.

Finally, the US Treasury and the Federal Reserve had to join forces to provide temporary guarantees for a small portion of MMF, preserving the fate of 72 mmf. The MMF market was also destroyed almost. Then, coupled with the Fed's attempt to stimulate the economy by crushing short-term interest rates close to 0%,paypal and others who survived the financial turmoil, they all reluctantly withdrew from the market.

The recent development of MMF in the country is a raging fire, 7% or even 10% of MMF overwhelming. But investors should keep a clear mind and remember the most important golden rule in the financial world: no disorientated no return (any high returns are accompanied by high risk).

Because there is no strict regulation of the new things, the domestic industry in order to rob MMF this big cake, using a variety of methods to "create" a higher rate of return: the agreement to deposit, the use of repurchase methods to increase the leverage, the sale of time lag, income and cost of different methods of valuation, and even All this is in exchange for investors taking on a larger stealth risk, a way that is unlikely to be allowed in the US regulatory system.

In order to reassure investors, some MMF also provides corporate guarantees. But are these guarantees in the real crisis and the risk of the advent of the company can still be immune? How much credibility does his guarantee have? Lehman was a big enough player before it was poured out, and the corporate bonds it guaranteed ended up being miserable! Only the central bank and the Federal Reserve are guaranteed to use state credit.

However, the domestic MMF has a unique advantage, that is, the overall high level of domestic interest rates (Shibor, that is, Shanghai interbank lending rate can be 5%), which gives people free from low deposit rates to create good conditions.

Although there is no short-term trend to see the market decline, but the interest rate itself will fluctuate up and down is also a risk. The experience of the United States to the domestic MMF practitioners of the Enlightenment is: pay attention to the market and credit risk prevention, increase the education of the public's product risk and completely open its operating mode, while paying attention to regulatory changes.

(The author of this article: the Secretary-General of the Internet finance thousand people's Wall Street branch, chartered Financial Analyst (CFA), Financial risk Manager (FRM), is currently working for the U.S. Strategic Science and Technology Department of Deutsche Bank. )