The Markets October 1, 2008

Reserve Primary Fund Promises $20B in Shareholder Repayments

Money market fund Reserve Primary Fund, which helped set off the financial crisis after it “broke the buck,″ said it will return at least one-third of investors' money soon.
Reported by

The Wall Street Journal reported that the fund promised to redeem $20 billion to investors in the fund as of September 15. As part of a liquidation of Reserve Primary, this move would reimburse investors for 30% to 40% of their original investments, the Journal said. The reason the outlay is $20 billion, a Reserve spokeswoman said, is that this sum is what is “currently available at the fund at this time.”

The partial distribution is expected to occur around October 13, and will be made pro rata in proportion to the number of shares each investor held as of the close of business September 15.

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According to the news report, the fund’s troubles started when the Reserve Primary Fund, flagship of Reserve Management Corp., announced September 16 that its $1 net asset value had fallen three cents. No money fund had “broken the buck” since 1994, and the news set off a firestorm.

The fund got massive redemption requests September 15 and 16, and received an exemption from the Securities and Exchange Commission to suspend payments.

Data & Research October 1, 2008

Obama, McCain Tied Among Wealthy Voters

Among the wealthiest 10% of U.S. households, this presidential election is a dead heat.
Reported by

John McCain and Barack Obama each received 48% of the votes among likely voters in a survey by the American Affluence Research Center (AARC) in Atlanta. According to a press release, the survey is representative of the wealthiest 11.4 million households (as defined by net worth in the most recent Federal Reserve Board research) that will account for almost 25% of all votes to be cast in the presidential election.

About 4% of the likely voters indicated they had not made a decision or were supporting another candidate, according to the release. Wealthy men were clearly in favor of McCain, with 59% for McCain and 36% for Obama. Contrastingly, women respondents favored Obama 61% to 36%.

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The respondents reported party affiliations of 42% as Republicans, 30% as Democrats, and 27% as Independents. The source of McCain’s support was 80% from people who considered themselves Republicans, 19% from Independents, and 1% from Democrats. The source of Obama’s support was 63% from Democrats, 31% from Independents, and 6% from Republicans. Overall, independents favored Obama 55% to 34% for McCain, according to the release.

Of 18 possible issues that were listed, the five issues most important to McCain’s supporters are state of the economy (48%), war on terrorism (33%), war in Iraq (29%), long term energy program (29%), and 2001 Bush tax cuts (27%).

The issues most important to Obama’s supporters are the economy (59%), war in Iraq (55%), universal health care (28%), foreign policy (28%), and energy program (26%).

The study surveyed 552 respondents with an average income of $304,000 and an average net worth of $3.1 million. The survey was completed September 25.

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