Monday, March 17, 2008

Maximizing Interest on Our Reserves

An election flyer recently circulated in Section 3 alleges that “some” residents want our cash reserves to be put in “speculative investments.” It states: “If these critics of the board had their way last year, a significant percentage of our association’s cash reserves would have been wiped out in the stock market.”

It seems par for the course this election season that candidates “stretch” the truth. Since both committee members and non-committee residents are impacted, the blog will address this inaccuracy.

Those who attended every board meeting last year do not recall any discussion about investing in the stock market. Residents, however, did ask the Board Treasurer why some of our funds are invested in money market accounts, and others in multi-month CDs. Their point: many bank savings accounts now pay interest rates that are close to, or on par with CD rates, and certainly higher that typical bank money market accounts. In addition to better interest rates, our funds would not be locked up for months at a time. The exchange was along the order of: are we getting the most return for our money? What are our options?

Base case: no reasonable person would suggest the board throw our hard-earned savings into the Wall Street cyclone. And no resident did.

Perhaps this was just another instance of meaningless political gossip.