How does the current financial crisis affect the Challenge funds?

alfaniner

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alfaniner
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Seeing as the Challenge funds are currently in negotiable bonds at Goldman-Sachs, and hearing the news about all the bank buyouts, what does this mean for the million dollars? I know the Challenge will be retired soon, but I was wondering what would happen if the current value of the bonds falls below the million dollar level.
 
alfaniner said:
Seeing as the Challenge funds are currently in negotiable bonds at Goldman-Sachs, and hearing the news about all the bank buyouts, what does this mean for the million dollars? I know the Challenge will be retired soon, but I was wondering what would happen if the current value of the bonds falls below the million dollar level.
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Bonds aren't like stocks in that their values go up and down based on value estimated by buyers and sellers. They are more like a loan made to a financial entity in return for interest paid over time (similar to a savings account).

These are unusual economic times though, and since G-S has made the news recently I suppose one could suggest $900,000 of the prize money is at the risk of them becomming extremely illiquid forcing the FDIC to take over and possibly only making $100,000 of total available should the prize be awarded. Even given the recent news this seems unlikely (don't take my word for it though, feel free to research the matter more deeply and it may be more likely than I seem to claim here).

Perhaps the money would be safer in 10 seperate $100,000 FDIC insured accounts, but what 9 other banks would you put your money in if you were really concerned G-S would fold?
 
petre said:
Bonds aren't like stocks in that their values go up and down based on value estimated by buyers and sellers. They are more like a loan made to a financial entity in return for interest paid over time (similar to a savings account).

These are unusual economic times though, and since G-S has made the news recently I suppose one could suggest $900,000 of the prize money is at the risk of them becomming extremely illiquid forcing the FDIC to take over and possibly only making $100,000 of total available should the prize be awarded. Even given the recent news this seems unlikely (don't take my word for it though, feel free to research the matter more deeply and it may be more likely than I seem to claim here).

Perhaps the money would be safer in 10 seperate $100,000 FDIC insured accounts, but what 9 other banks would you put your money in if you were really concerned G-S would fold?
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Goldman Sachs isn't a bank. I believe none of the money is FDIC insured. The JREF statement doesn't give details of how the money is invested.

Unless the assets invested in are particularly vulnerable, the likelihood of the value falling below one million is very, very low. I wouldn't worry too much about someone winning the challenge and JREF having to delay payment.
 
The money is very conservatively invested, and is quite safe. There is more than enough in the account to pay the million should we need to.
 
Not to imply any incompetence or deception on the part of Randi or the JREF, but many NGO's and Councils in Australia thought they had money invested in AAA rated funds, only to find the AAA rating was no longer AAA when the crises hit. These funds were supposed to be as conservative as you could get, these bodies were only allowed to invest in A rated or better, and they still lost money.
 
"very conservatively invested, and is quite safe" This can only mean they are invested in the government. This is about the only organization that cannot go bankrupt. Anything less and money could be lost.
 
According to BBC Radio 4 this morning in the UK Warren Buffett (sp?) is allegedly about to purchase $5bn of Goldman Sach shares, he probably thinks they are at least safe enough to invest in.
 
Jeff already answered you in your challenge thread, that there is more than $1m in the account.
 
The Professor said:
Thanks!
This is an update from the previous one I believe, however a newer one would show the current trend in the market.
Is there a link to something "Current" since the market problems have arisen?

Inquiring minds want to know :)
:cool::cool:
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It is dated Aug 31, 2008. I guess you'll have to wait until Thursday + smail-mail + website update time for the next, none of which entities owe you or me a favor. Think you can hold your britches for that long?

I predict the sum will have increased, my personal opinion. As stated above, while stocks are a share of a company's assets, a bond is a promissory note. It would seem that the former would be more stable (what company looses all it's assets, whereas companies default on loans more often than fail), but the opposite is the case. Defaulting on bonds will quickly put a company legally out of business via forced bankruptcy, while stock prices go up and down on whims. Further, if the company does fail, secured bond repayment comes well before final asset computation and reimbursement (even before owed employee compensation). Further, it looks like half of the binds are the USG's own.

You could, of course, read the pdf and do your own day-to-day estimates of the fund's current worth. It could be called the Unhatched Egg Study. Do have fun.
 
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alfaniner said:
Seeing as the Challenge funds are currently in negotiable bonds at Goldman-Sachs, and hearing the news about all the bank buyouts, what does this mean for the million dollars? I know the Challenge will be retired soon, but I was wondering what would happen if the current value of the bonds falls below the million dollar level.
Click to expand...

No one has really answered this yet.
 
TP, I can answer the question. If the current value of the Bonds falls below One Million Dollars, they will no longer be worth One Million Dollars.

What do I win?

Norm
 
The Professor said:
No one has really answered this yet.
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Why do you keep making such false statements?

Of course this has been answered. Repeatedly.

Question #1: How did the current financial crisis affect the million dollars?
Answer:
Jeff Wagg said:
I checked the challenge account at Goldman Sachs and it contains well over the amount required for the challenge.
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Question #2: What happens if the value of the bonds falls below the million dollars?
Answer:
Jeff Wagg said:
We guarantee the million, even if the account falls below a million. There's doesn't appear to much chance of that at this point. If you win, you get $1,000,000 from us, regardless of the amount in the account.
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As anyone of sound mind can see, 100% of the OP has been answered.
 
fromdownunder said:
TP, I can answer the question. If the current value of the Bonds falls below One Million Dollars, they will no longer be worth One Million Dollars.

What do I win?

Norm
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Just got a gig in The Land Down Under, so I will buy you ten Pints of Beer!!!!!
(When I get there this March) Congratulations. :) (I'm not kidding!)

I know Jeff says that the JREF will pay it but they can't if they don't HAVE IT. (Critical thinking here)
If it fall below $1,000,000 will they change the name or call the Carson estate?
:cool::cool:
 
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The Professor said:
Just got a gig in The Land Down Under, so I will buy you ten Pints of Beer!!!!!
(When I get there this March) Congratulations. :) (I'm not kidding!)

I know Jeff says that the JREF will pay it but they can't if they don't HAVE IT. (Critical thinking here)
If it fall below $1,000,000 will they change the name or call the Carson estate?
:cool::cool:
Click to expand...

*Takes deep breath*

Are you unable to comprehend simple statements.If the rules state you win a million dollars,that's what you win.
But all this is so premature for reasons I can't state in this thread. :)
 
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