Barron's "Income Investing" column, titled, "Inflation and Taxes Are Eating Into Your Savings. What You Can Do About It," contained the same error as a Wall Street Journal piece from last week -- it compared the current yield on money funds with the inflation rate over the past year. Columnist Randall Forsynth writes, "Congratulations, savers. Your money-market fund is now yielding more than inflation, if only by a hair. But after paying taxes on your money fund's earnings, you're still behind the inflation bogey. What to do? 'Nothing' seems to be the answer from those individuals who keep $3 trillion stashed in money funds yielding about 3.5%, 10 basis points more than the 3.4% increase in the consumer price index in the latest 12 months, but less than that after rendering unto Uncle Sam." (Crane Data Note: The latest money fund yield would be more appropriately compared with the latest month's inflation reading, which is 1.2% annualized.)
The column continues, "Those in the very top federal tax bracket of 37%, plus the net investment income tax of 3.8%, net a little over 2% from money-market yield. A relatively well-off married couple earning over $250,000, who would face a 27.8% rate including the 3.8% NIIT, would need a pretax yield of 4.71% just to stay even with inflation. That doesn't count state and local taxes (which can be avoided by sticking to Treasury securities)."
It says, "That's not a terribly high bar to clear. The benchmark 10-year Treasury note yielded about 4.70% this past week. But the iShares 7-10 Year Treasury Bond exchange-traded fund, which tracks that section of the yield curve, has had a negative 1.07% total return for the year through Aug. 12, according to Morningstar. Given the ineluctable bond math -- prices go down when yields rise -- risk-averse investors aren't abandoning money markets."
Barron's piece explains, "While it's always dangerous to generalize from anecdotes, some folks I’ve heard who have sold businesses for a nice chunk of change are content to stick with T-bills. They're the polar opposite of Gen Z day traders who, as Bob Dylan sang, 'ain't got nothin' and got nothin' to lose.'"
It adds, "But what's the answer for those who aren't so well off and have to stay ahead of inflation and taxes and want to do so without taking on risk? 'That's the great, several-million-dollar question,' says Abhijeet Patwardhan, portfolio manager of the FPA New Income fund. Unfortunately, there are no magic answers, he quickly adds. Higher-yielding corporate bonds provide only a slim spread over government securities, while longer-maturity Treasuries are a 'dangerous path to go down,' he says, given the aforementioned price risk from rising yields."
In other news, Franklin Templeton submitted a request to the U.S. Securities and Exchange Commission <i:https://www.sec.gov/files/investment/no-action/franklin-templeton-no-action-incoming-letter-081226.pdf>`_ asking for permission to other Franklin funds to invest in its Franklin OnChain U.S. Government Money Fund. It states, "Franklin Templeton is submitting this letter on behalf of the U.S. registered open-end and closed-end investment companies within the Franklin Templeton family of funds ... that are advised by investment advisers that are under the direct or indirect control of Franklin Templeton, to respectfully request assurance that the staff of the Division of Investment Management of the U.S. Securities and Exchange Commission will not recommend enforcement action to the Commission under section 17(f) of the Investment Company Act, as amended and Rule 17f-2 thereunder, if the Funds establish custodial arrangements in the manner and subject to the representations described below, with respect to the Funds' investments in shares of the Franklin OnChain U.S. Government Money Fund, a series of Franklin Templeton Trust, without compliance with paragraphs (b), (e) and (f) of Rule 17f-2."
The request continues, "This no-action request is informed and supported by the Staff's September 24, 1992 no action letter to Franklin Investors Securities Trust ..., which provided a no-action position with respect to the same paragraphs (b), (e) and (f) of Rule 17f-2 in connection with an affiliated master-feeder fund arrangement. The Funds are, however, requesting that the Staff provide new assurances because certain relevant facts differ from those addressed in the 1992 NAL."
It states, "In particular, for the OnChain Fund, Franklin Templeton Investor Services LLC ('FTIS'), a registered transfer agent under the Securities Exchange Act of 1934, maintains the official record of share ownership (i.e., the master securityholder file) using a proprietary recordkeeping system that is integrated with blockchain/distributed ledger technology, rather than solely through the traditional book-entry system described in the 1992 NAL. In addition, FTIS will maintain and secure the private keys associated with the blockchain wallets holding the investing Funds' shares of the OnChain Fund."
The request states, "Notwithstanding the changed factual circumstances, we believe that safeguards similar to those described in the 1992 NAL would satisfy relevant investor-protection objectives served by Rule 17f-2. Further, we believe that compliance with paragraphs (b), (e) and (f) of Rule 17f-2 would be burdensome and impractical with respect to the custody of shares of the OnChain Fund without corresponding benefits to the Funds shareholders.... The 1992 NAL involved the Trust, its Franklin Adjustable Rate Securities Fund series, and Adjustable Rate Securities Portfolio, another registered open-end management investment company in which the Feeder Fund invested."
It adds, "The OnChain Fund is an open-end management investment company and a money market fund relying on Rule 2a-7 under the 1940 Act. The OnChain Fund invests at least 99.5% of its total assets in Government Securities, cash and repurchase agreements collateralized fully by Government Securities or cash, and operates as a 'government money market fund,' as such term is defined in or interpreted under Rule 2a-7 under the 1940 Act. The OnChain Fund does not invest in cryptocurrencies or other digital assets. The OnChain Fund operates in the same manner as other money market funds registered under the 1940 Act, except with respect to the method FTIS uses to record the OnChain Fund's share ownership. Beginning Feb. 8, 2022, and after extensive discussions with the Staff, as well as the staff of the Division of Trading and Markets and the Division of Corporation Finance, FTIS began maintaining the official share ownership records of the OnChain Fund on the Integrated System."
The SEC's "Response of the Office of Chief Counsel Division of Investment Management" regarding "Investment Company Act of 1940 - Section 17(f) and Rule 17f-2" states, "In your August 12, 2026 letter on behalf of the U.S. registered open-end and closed-end investment companies within the Franklin Templeton family of funds ... that are advised by investment advisers that are under the direct or indirect control of Franklin Templeton, you request our assurance that we would not recommend enforcement action to the Securities and Exchange Commission against the Funds under section 17(f) of the Investment Company Act of 1940, as amended and Rule 17f-2 thereunder, if the Funds establish custodial arrangements in the manner and subject to the representations described below, with respect to the Funds' investments in shares of the Franklin OnChain U.S. Government Money Fund, a series of Franklin Templeton Trust, without compliance with paragraphs (b), (e) and (f) of Rule 17f-2.... Based upon the facts and representations set forth in your letter, staff of the Division of Investment Management would not recommend enforcement action."
