The last week has brought up some VERY basic questions.

With Matt now traveling and generally busy, you may need to get ready for a steady blast of me ... though maybe we could get Murray or even Trader Don to step in here with some bluster. Speaking of Mr. Friedman, he had mentioned maybe we should hedge our bets with the company bank accounts in the face of last week's meltdown.

We've already drawn down our Washington Mutual account & even the main one, Bank of America, which is a buyer in this market, was making him nervous. If you want to REALLY get nervous, start looking at and thinking about your likely wildly underperforming money market sweep account.  THAT really IS at risk as the news in the last week has made clear.

My question is, WHERE ARE ALL THE ETFs that promise no loss of principal and steady income at the minimum fee? That is one area it just feels like ETFs have been lacking in. At one point last week, Treasuries I believe were down to zero on yield as money searched for a safe haven. And bonds by their nature move around on the yield curve. What if you just want INTEREST and ZERO risk?

I got this from an IU.com reader discussing the point. And maybe it will lead to more and better ETFs stepping in to provide more transparency, good yields and lower costs. He mentions the treasury funds out there, plus the new WisdomTree fund. The currency products are close ... but of course you're also buying the currency direction. ETF industry - any thoughts on this? Seems like an obvious area. I really ought to move my sweep account, which is a JOKE - and an unprotected joke at that - into one of those funds. Here's the note from our reader:

With all that's going on, any of you stirred at all by developments on the money market fund side of the world?

The ETF/ETN industry has done a poor job on the ETN front --- It didn't have go that way, but it did.  And the ETF industry has also (completely) dropped the ball in relation to needs associated with cash and money market alternatives.  This is one of a few very important areas where the ETF industry has been quite slow and reactive rather than clear-minded and proactive. 

Need for innovation and education on the cash and money market front have always existed but has clearly taken on added importance since universally non-transparent money market funds began incurring losses last September.  The fact that increasingly-strained issuers consistently covered principal losses in money market funds over the last 12 months, combined with a fundamental lack of understanding on the part of the investing public and the media, kept the brewing problem from becoming major headline material or from maintaining any story-line shelf-life.

Isn't it absolutely incredible that on any given day an owner in a money market mutual fund has no way of reviewing exactly what the fund holds --- that reporting on holdings in these funds is, by regulation, allowed to be only quarterly and a quarter in arrears at that?  ... Meaning that the information is always stale by at least three and up to six months?  ... On portfolios that likely have duration well under six months?  And there's nothing wrong with this picture?

Traditional mutual fund money market assets ballooned to $3.5 trillion (by 40%+) in the 15 months through July 31.  Any thoughts on how average credit quality might have evolved over that period?  With assets growing by one trillion dollars and given the "credit crisis" that has been unfolding?  Why are ETF sponsors so focused on niche plays when there is plenty of heavy lifting and incredible, untapped opportunities associated with the addressing real and broad-based needs?  Investors need fully transparent alternatives to traditional money market funds.  Attacking proactively, on the part of ETF sponsors, would have meant rolling out both products and aggressive educational programs last fall (where the education really does the marketing - just as in other areas of true innovation for ETFs).  Come on!  Lets get this part of the program into shape!  So far the ETF industry gets a D- on work done in the money market fund alternative arena (and that's being quite charitable).

In the "for what its worth" column, I started migrating "cash" (or, more correctly, very short-term fixed income) residing in single treasury holdings (mostly 1 or 2 month zeros) to BIL a few weeks ago as the treasuries mature.

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