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Hi All,
We are one of many co-ops that are contemplating capital work – Facades, elevators, Heating etc.
During an open discussion around financing such work, reserves, assessments, refinancing, lines of credit, it was mentioned that we should invest some of our reserve fund in a higher yielding product.
We currently manage our cash in house, and are getting 1% for the year on average with FDIC protection through traditional cash products (e.g. CD’s, money market etc).
What are you and your co-ops doing? Are there other products outside of CD’s and Money Market accounts that are being utilized? What about Bond funds and structured products?
I look forward to discussing this further and thank you for responding in advance.
David
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Hi David,
My Co-op was invested with almost $1 million in reserves in short-term US Treasuries. However, with the US at its debt ceiling and the potential for near maturity bonds to be defaulted, we are holding all investments as cash. We rejected Money Market accounts for the near term too as they are also heavily invested in short-term US Treasuries. Also, with the FDIC fund in the shape it is in (it is currently negative), the US guarantee of “full faith and CREDIT of the US” rings a little hollow so CD’s are out. The FDIC fund’s own projections do not call for a positive balance until 2012 and will not reach the statutory minimum until 2017 as per here: http://www.fdic.gov/deposit/insurance/memo3.pdf
Let's be honest, I don't believe that even if the US defaults, that the funds would never be repaid. However, getting access to the funds could be delayed - and my Co-op needs those funds this year for Capital Projects. My Co-op can’t afford to delay a roof project while Congress debates the broader issues.
My Co-op has decided not to reinvest until the debt ceiling debate has been answered. To us, a lousy 1% return or even a 4% return is not worth the current risks.
Sincerely,
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