Dick Bove to Moneynews: Banks Are a Safe Investment Option

Wednesday, 26 Jun 2013 07:20 AM

By Glenn J. Kalinoski and David Nelson

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Investors concerned with the safety of their money market funds are justified in considering banks as an option, according to Dick Bove, vice president of research for Rafferty Capital Markets.

"The banks are obviously an option because they do have FDIC insurance, and if they're that concerned about the safety of their funds, they can move in that direction," Bove told Newsmax TV in an exclusive interview.

"But since I'm an equity analyst, I would say take another look at mutual funds and think about the bond funds because they do represent an alternative," he said.

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"However, given our view that equity funds will decline in value over the summer and that interest rates are going higher, maybe the best alternative is just put it in the bank."

Editor’s Note: Put the World’s Top Financial Minds to Work for You

Bove's advice also included not putting "a whole lot of money into Treasurys." He was asked about fissures in the financial system putting money market funds at risk.

"What we're talking about essentially is marking to market the value of money market funds," he said.

Bove added that money market funds are willing to pay 100 cents on the dollar for every person who wants to withdraw their money, whether or not there is 100 cents on the dollar in the money market fund.

"That's what's creating the problems because the Treasury and the Federal Reserve say, 'If you don't have the money there, you can't pay out 100 cents on the dollar. You've got to mark to market.' People on the other side say we've made a commitment to pay out 100 cents on the dollar and we're going to do so and if the money's not there we will charge the shareholders in our company for the difference."

He also said the money market funds are "providing a real service to the economy" by making funding available when it's not available through the banks.

"But they are not FDIC-guaranteed institutions, and it doesn't seem right that shareholders should be backing up the losses of the money market fund investors," he said.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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