Bogleheads.org

TheTimeLord wrote: ↑Thu Mar 23, 2023 9:18 am

DeliberateDonkey wrote: ↑Thu Mar 23, 2023 12:46 am Yes, it is safe.

I would go so far as to say that VTSAX is systemically important.

I am not sure what your point is here, a mutual fund is not a bank it is a collection of stock holdings owned by shareholders.

FYI, regulators have been dancing around this question. They think the big mutual fund complexes and funds are systemically important. What this will actually translate into nobody knows..

bloom2708 wrote: ↑Thu Mar 23, 2023 9:00 am Facebook Marketplace?

The kid will likely outgrow it in 3-4 months.

Garage sale, thrift store. Buying a "nice/quality" bike at that age is not needed unless more kids are coming up below.

Also, you can add training wheels to virtually any bike.

I will second this.

Mutual funds are very safe and they have robust safeguards. This was my job for a while.

enad wrote: ↑Thu Mar 23, 2023 12:54 am Vanguard is different from other asset management firms. Vanguard is owned by its member funds, which in turn are owned by fund shareholders. With no outside owners to satisfy, Vanguard's focus is squarely on meeting the investment needs of their clients.

But not this. This doesn’t matter, and doesn’t make the funds more or less safe.

In the case of a money-market fund, those assets are Treasury bills, which do not lose value. A shareholder with $1M in assets can withdraw them by requiring the fund to sell 1/1000 of its Treasury bills, which can be sold for face value and will thus give the shareholder $1M. This is false and misleading. The NAV of the fund is the NAV of the fund. T-bills are priced at a discount and if sold would be sold at that discount, not par. T-bills routinely lose money over the short term. Well, the very short term. You can’t force a fund to sell above the limits in the prospects. I have worked besides the mutual fund trading desk where the can say no to large or late trades. You maybe could argue for a in-kind distribution but those are not easy...

I work with this stuff on both sides of the issue. Me and my colleagues have a long running debate over this issue. A critical take away is that professionals can argue over mole hills. The differences between these very safe products are nuanced and situational. I wouldn’t lose any sleep over it.

I don’t have time got a full recap, but I will start here since it is all variations on a theme. I would start by recasting your goals. Note, I have had formal training in this area. I have had to work at a high level coding systems. This is not a criticism of anything you have written. Rather a rewriting so we actually cast this into some formal logical. You're making a lot of assumptions with just this paragraph. In any case, this is the high-level description of portfolio functions, not all of the details. I'm certainly not going to answer in detail about any of this. Start by striking the liability matching. That is not a goal, that is a portfolio building technique. Maybe it turns out that liability matching is the best option for you ...

If a CFo can't understand that uninsured deposits aren't insured I don't know why they are a CFO. If it's not the CFO's job then it's the treasurer's. Or the accountant or bookkeeper or whoever is putting the money into the account but understanding that money that is uninsured is not insured is not a difficult concept. Maybe some companies need to have more than $250k cash on hand? I think the fact that so many companies were caught offsides by the current situation suggests that cash management, even for more established companies, isn't as straightforward as you make it seems. That or the corporate world is just full of incompetent CFOs and treasurers It’s not taught in school, so folks are learning this on the job. If you’re a start up...

This has been on my mind as well. How do responsible companies manage this? I work for a $8B revenue company that at one point I heard had a payroll of nearly $3B. While not all was US, it would imply that its biweekly payroll was somewhere around $100M. To stay under FDIC limits would require 400 banks! Or do big companies just go with big banks that are "too big to fail"? They don't have all $100M in a business checking account at BoA. It's constantly moving around in short term commercial paper and other highly liquid instruments, some of which are routinely turned over every day to meet various payroll or accounts payable needs. Yeah, but even at that it does mean a few days with really big balances. As I said above, this is ...

Banks.

Ok, it is slightly more complex than that, but not much. Banks often have money centers, which offer savings and tine accounts at negotiable rates, money market mutual funds, and Treasuries. There is a trade off between rates, liquidity, and complexity.

Most businesses will find themselves constantly above the 250k FDIC limit. No way around that. I would be relaxed about that.

I wouldn’t take it as a negative or positive sign that they had large amounts of cash in the bank.

This is fantastic and I have always appreciated your insight on the forum. However, I know I need to do the roof and paint the house in a little under 3 years. Therefore, I put it in a treasury yielding 4.8 with a small coupon maturing around that time. In my opinion, that is the definition of liability matching. Do I think the market will be higher by then? Probably. Do I explicitly know I need that principal then? Yes! So, is that as you say "putting the horse before the cart?" Maybe it is a bigger chunk of the portfolio and therefore I chose to not put it in equities? I was under the assumption that 0-5 years out (per the wiki) should be in safer assets. The wiki is about simple rules, heuristics, and being risk adverse. I am ...

Honestly, expected this conversation to be more about the concept of "Mental Accounting" and how we label (classify) certain types of assets. I honestly haven't been able to follow the intent of what is being discussed. One of the things I find frustrating on this forum is the inability to agree on common terms and definitions. Without that it is really impossible to have useful and profitable conversations, shared terminology is key to shared understanding imho. The problem is that the question is about a "emergency fund", which is a form of mental accounting. It is a cognitive error. i.e. the brain is taking a hard problem and breaking it down into simpler fuzzy problems that better fit our heuristic method of thinkin...

I tend to view it as liquidity. Maybe 9 months expenses in bank cash and another couple of years worth in ibonds. I don’t view it as irrational to have a fixed stack of cash or cash equivalents. Some will say “mental accounting”, but that presumes an individuals risk aversion curve will always dictate the same asset allocation whether one has $100,000 or $1 million. By setting a hard minimum, via a fixed emergency/liquidity fund when the value of your portfolio goes down, your stock allocation will decrease if looking at entire net worth. That isn’t optimal for long term growth but it does provide a safety cushion. It is very plausible for a 60 year old to have a risk aversion based optimal asset allocation of 0/100 at $100k, 50/50 at 1 mi...

The regulations say you must show 10 years. That way you can easily compare 2 different funds from 2 different families. If from inception then every comparison would be unique.

I can see the emotional appeal for showing 10 year returns. As someone who has actually worked and used them I would value their effectiveness as somewhere between mildly educational to deeply misleading. Historically returns have little to do with future ones.

Allow me a option of something other than 10 years and I can manipulate it to show just about anything.

I tend to view it as liquidity. Maybe 9 months expenses in bank cash and another couple of years worth in ibonds. I don’t view it as irrational to have a fixed stack of cash or cash equivalents. Some will say “mental accounting”, but that presumes an individuals risk aversion curve will always dictate the same asset allocation whether one has $100,000 or $1 million. By setting a hard minimum, via a fixed emergency/liquidity fund when the value of your portfolio goes down, your stock allocation will decrease if looking at entire net worth. That isn’t optimal for long term growth but it does provide a safety cushion. It is very plausible for a 60 year old to have a risk aversion based optimal asset allocation of 0/100 at $100k, 50/50 at 1 mi...

Geologist wrote: ↑Tue Mar 21, 2023 1:27 pm If there is an important change between annual prospectuses (for example, there is a manager change), then a supplement will be produced and this is generally placed at the beginning of the existing prospectus if you download it.

Annually.

Usually a addendum is only added because there was a major material defect. They are very expensive to do.

quantAndHold wrote: ↑Tue Mar 21, 2023 11:46 am A Scamp is quite a bit more trailer than OP claims he wants. It has water and waste tanks, for one thing.

Ours does not have black water. You can even skip the grey water tank. Almost any camper that can sleep 4 and has a kitchen will have a grey water tank. Not all, but then you are looking at some off models. (Not odd as in bad, but odd that very few are looking for those features).

That being said, squeezing in 4 is a bit of a challenge. IIRC the top bunk is ratted at 110 pounds and the bottom is a bit claustrophobic. Our young child doesn’t seem to mind.

technovelist wrote: ↑Tue Mar 21, 2023 10:22 am Yes, if there hadn't been a bank run, SVB would have been fine (we assume).

We don't assume that. The balance sheet was showing the stress of the duration mismatch. The probably colipase was written on the wall. The bank run just sealed the deal.

You may not need all the features, but they tend to come with all the features, whether you want them or not. That all has a cost, and is why stuff is so expensive. I mean if you want no bathroom, no water, and a minimalist kitchen, that sounds a lot like a tent to me. Well, what does one want? The problem with cars, houses and RVs is that it is so tempting to buy more than what you need. Is a fiberglass egg basically a hard sided tent? Sure. Ours doesn't even have a AC, but it does have a heater. The point of RVing in our case is to spend time outside, not inside. For my wife it is important to have a reliable good and dry bed. So the add ons are not that important. Since Scamps are so simple they tend to hold their value pretty well. We ...

If you’re just looking to get up off the ground, a pop up trailer is probably going to give you the best bang for buck. Friends we travel with have one. They’ve been everywhere in it. It’s not luxurious, but plenty of space for a family and they can tow it with their midsize SUV. The problem with anything in the “small RV” space is that they all have to have the same stuff in them as larger RV’s, except in miniature, to fit it in the small space. Which makes it expensive. Often, the small ones are more expensive than larger ones for that reason. The problem with a pop-up is durability, which is sub-par. The roofs are known to leak after a few years. I will modestly disagree with the small RV point. Do you need all of the features of a larg...

rkhusky wrote: ↑Tue Mar 21, 2023 7:57 am

fsrph wrote: ↑Tue Mar 21, 2023 12:41 am
The SVB's CEO was a director at the Federal Reserve Bank of San Francisco. The very organization that issued warnings to SVB but didn't follow up with action. Maybe a little to cozy of a relationship?

https://www.thestreet.com/technology/sv ... rful-board

Francis

That should not be allowed. Clear conflict of interest.

How so? The Fed is owned by it’s members banks.

Ah, the joys of a self-regulating industry. On the plus side you have many technically inclined people who really want the industry to be stable.

As a refresh, here is a old link.

viewtopic.php?t=251449

We bought a 13 ft scamp. Absolutely love it. In part because it is absolutely bare bones and thus quality for the money.

For 4 people and a weight of 2k I would probably skip the bathroom & shower. Well, in principle I would skip them. They are heavy, complex, and expensive to maintain.

Under Glass-Steagall, until 1999, it was illegal for a bank to have branches in more than one state. I don’t think that’s completely accurate. I banked with First Interstate Bank in the 80’s and 90’s and they had branches in different states, specifically near my hometown and in the state where I went to college. Here is the trick. FI would have had a bank called FI New York NA, FI California, FI Florida NA, etc. All of these banks would have been owned by the same holding company, FI. These banks would have had a separate charter, separate reserve requirements, etc. Now lets say that FI New York NA had surplus capital but FI California had a deficit - lets say because FI California NA had a bank run. Well, all you had to do to transfer ca...

retired@50 wrote: ↑Mon Mar 20, 2023 6:54 pm I don't know if it would be Shariah compliant, but what about preferred stock shares?

Technically yes. But most preferred stocks are issued by banks or utilities which have issued lots of loans or bonds. That strikes out those industries.

Gold and cash? For context, I have volunteered in financial literacy programs in a poor immigrant muslim community. It has been a few years since I have done so but there are limited options and they tend to be poor options. The assumptions that underpins American’s system just don’t map well. For example real estate is popular. However, no mortgages. Contact-to-deed might work but probably not. And where I live there has been a host of scandals. Cash is technically a bond. I personally don’t like precious metals. Lending out metal at a discount rate technically can be in-bounds. And that leaves us with equities. Unfortunately most of the equities are not low risk. You have to exclude all financial stocks and those with large bond issues.

ResearchMed wrote: ↑Mon Mar 20, 2023 6:37 pm Amana has had some Shariah compliant funds.

How does this one look as an "income fund"- not strictly a "bond" fund, of course, but serving a similar function?

https://www.saturna.com/amana/participa ... gJJSvD_BwE

RM

You are not going to find a true bond fund. You can’t earn “interest on interest”. We can debate what this means. However the general consensus here is that there must be some type of risk sharing between the investor and the owner. As such one’s investment has to be on the equity side.

unclescrooge wrote: ↑Mon Mar 20, 2023 6:34 pm

chinchin wrote: ↑Mon Mar 20, 2023 6:20 pm Zero coupon treasuries?

That's what I was thinking, but I don't know if shariah-compliant.

Probably not. There are multiple schools of law on the subject. And one time they were, but not anymore.

Makefile wrote: ↑Mon Mar 20, 2023 4:10 pm At least with Fidelity (non-Youth Account) and T. Rowe Price (who put their pdf applications online w/o signing in so it is possible to answer questions like this without going through an account opening wizard) it appears you have to be 18 even to be a co-owner. T. Rowe says "All owners must be 18 or older except for custodial accounts." even for a mutual fund account.

Its been years since I had to deal with this in operations.

You have to be 18 to sign any account document, agree to split your assets in any way shape or fashion. I have no idea how this could work.

1. No. Both mutual funds and ETFs are open ended funds. The creation/redemption process is different. I would argue that the ETF process tends to be more efficient than the mutual fund side.

2. Generally, vaguely, yes, smaller funds have more issues than larger ones - both mutual and ETFs.

With recent events regarding Credit Swiss are Convertible Bonds ( CoCo, AT1 ) the first in line to be written down in the case of an insolvency? I thought shareholders of equities were the first to be negatively impacted. https://www.washingtonpost.com/business/2023/03/19/why-credit-suisse-coco-bonds-are-causing-anxiety-quicktake/945ef2fe-c69c-11ed-9cc5-a58a4f6d84cd_story.html These are actually “Contingent Convertible” bonds. These CoCo bonds are the opposite of Convertible bonds. Convertible bonds turns into equity as the holder’s request, giving them a upside participation. Thus they carry a lower coupon than a straight bond. CoCo bonds turn into equity at the bank’s request, to shore up capital. CoCo bonds have a higher coupon than a s...

Leesbro63 wrote: ↑Mon Mar 20, 2023 6:10 am I remember some relatives, in about 1979, being offered by their Savings & Loan, to pay off their mortgage at less than 100 cents on the dollar. I think their balance was something like $25,000 and they paid it off for about $18,000. Perhaps this is what led to the S&L crisis.

The S&L crisis is the SVB crisis writ large. Long term rates were supper high. Probably the loan was at 6% when inflation was at 10%.

simplesimon wrote: ↑Mon Mar 20, 2023 5:54 am The FMV calculation assumes that the mortgage is held to term. Given that the average homeowner doesn't stay in the same house for 30 years let alone same mortgage, banks will just wait you out.

No, banks don’t make that assumption. Prepay rates are heavily considered. It is that optionality that makes it so difficult to price.

1. Yes, it is worth less now.

2. You would need a very fancy bond calculator. Something that could handle the optionality on penalty free repayments.

3. Whoever has your servicing rights (who you send you payments too) probably isn’t the one who owns it.

4. Because of technical issues, it is only economical to do thus at a wholesale level. i.e. 100s of mortgages for 10s of millions of dollars.

5. Even if held and serviced at your small bank accounting rules would discourage this because the bank would have to take a immediate hit to its capital instead of a delayed one.

Ask me anything. Kind of my day job. A bank needs to fund itself. It can do that by issuing stocks. Or it can do it by borrowing money. Options are bonds, CDs, savings deposits. These are all basically the same thing. Variations on a theme. Bank CDs are just journal entries into the books. As such the bank can offer as many different types they like and change them as often as they want. Brokerage CDs are closer to bonds, thus work closer like bonds. You have to set up individual issues of CDs with CUSIPs, with DTC, line up the offerings documents with all of the brokers, etc. From a technical level it just takes longer to do things. You can buy institutional sized CDs but why? They will be above the FDIC insurance level, there is no liquid...

Loon11 wrote: ↑Sun Mar 19, 2023 2:14 pm is this really a threat? Doesn't SIPC kick in? I transferred the bulk of my tsp into schwab for the 1K promotion and its done well in swvxx but reading this, makes me worry. It's 500K and don't want to worry about it. Is the treasury money market really safer? This is in an ira - do they charge to move it?

No, SIPC does not kick in. That is for when your brokerage mislays your assets.

That being said, these funds are super safe because they invest in super safe assets.

Dottie57 wrote: ↑Sun Mar 19, 2023 12:30 pm

alex_686 wrote: ↑Sun Mar 19, 2023 12:25 pm

Fremdon Ferndock wrote: ↑Sun Mar 19, 2023 11:31 am This is concerning, especially Citi.

Why?

Even with such a high portion of the depositors over the insurance limits SVB has sufficient assets to cover all of them without a penny coming from the FDIC.

But the assets if sold this coming week would not cover deposits. The value of the assets have gone down.

No, they wouldn’t cover SVB bonds, which is lower down than the depositors. And of course the equity tranches would get wiped out.

But there would have been enough to cover the depositors.

Fremdon Ferndock wrote: ↑Sun Mar 19, 2023 11:31 am This is concerning, especially Citi.

Why?

Even with such a high portion of the depositors over the insurance limits SVB has sufficient assets to cover all of them without a penny coming from the FDIC.

Presumably this is what the true NAV would be, if it weren't artificially held to $1. Is this not what you meant by "shadow NAV"? Yes. I am used to the older terminology. The point being this is where I would start if I was concerned about a fund’s viability. Overfunded is good. From the webpage, you will see that in last September, it was slightly underfunded with a market NAV of 0.9999 on 9/14 and 9/16 but it was 1.0000 on 9/15. So I guess some sort of rounding happened. It was down to 0.9997 at one point last October. Then it became overfunded throughout the rest of the year and this year. Probably not a rounding error. I have gotten into more than one discussion on Bogleheads about pricing and prices. For context I have struc...

The Beauty Contest points to the instability of the stock market, not that one couldn’t outperform via skill or that one could profit from it with zero skill (i.e. passively). It actually argues the opposite, that superior skill can reap profit.

For context, Keynes made mad profits from day trading.

jeffyscott wrote: ↑Sun Mar 19, 2023 9:17 am Presumably this is what the true NAV would be, if it weren't artificially held to $1. Is this not what you meant by "shadow NAV"?

Yes. I am used to the older terminology. The point being this is where I would start if I was concerned about a fund’s viability. Overfunded is good.

student wrote: ↑Sat Mar 18, 2023 6:51 pm

ebeb wrote: ↑Wed Mar 15, 2023 4:44 pm

alex_686 wrote: ↑Wed Mar 15, 2023 4:41 pm Why do you think that is safer?

I would start first by checking the “shadow NAV” of each fund.

Not just me look at the outflows/inflows for these two funds today -3.3B and +2B so maybe lot more people think SNSXX is safer and I dont know what is shadow NAV

I am guessing shadow NAV is the same as market NAV. It was $1.0001 on 3/16.

Well, no. The NAV was $1.0000. That is the point. You always buy and sell at $1.0000 even when the Net Asset Value is not $1.0000. On this case it looks like the fund is slightly overfunded, which is a good sign.

TomatoTomahto wrote: ↑Sat Mar 18, 2023 3:44 pm Regardless of last name …

Google news stories about people with the last name Null. That can be a difficult name to grow up with.

typical.investor wrote: ↑Sat Mar 18, 2023 2:49 pm For new issues, since the CUSIP is the same, the yield can't be changed, and they are selling at par, I'd assume that every broker is receiving the same mark up.

Not necessarily but generally yes. If there is a difference, it would be the issuing bank that would receive fewer funds from the CD.

iudiehard1 wrote: ↑Sat Mar 18, 2023 2:39 pm https://www.portfoliovisualizer.com/

And be careful with this. Highly subjective. If I can pick the time period I can probably game the system to get the stock of my choice to win.

Why are you trying to figure this out? I have done this stuff professionally. There are so many deceptive questions.

Triple digit golfer wrote: ↑Sat Mar 18, 2023 2:38 pm Look at total return, not a price chart.

Then adjust for risk.

I've read several articles on how to purchase CDs and I want to see if I'm correct on my understanding: -When you buy a brokered CD - you are buying it from another person and not the bank. -When you buy a brokered CD - the seller is turning it over to you (like a car title) and all the interest will be coming directly from the bank after you buy it. -At Vanguard (Schwab, etc), new issues are not brokered issues (even though they are in a brokerage account). Brokered only means you bought it from a previous owner (and not the bank) I don't think those are right. New issues from a broker are brokered CDs as well. If they weren't, you'd have to hold it at the bank the way you do with a bank issued CD. They can't be moved. -When you buy a pre...

-On the same exact CD, interest rate is always attached to that specific CD. Any interest rate the bank offers cannot be changed (no matter where you bought it or how many people have owned it) and the bank must pay you that interest rate. Sorry for the essay. Am I correct (more or less)? You didn't make clear when you wrote "exact same CD" what you meant. If a bank fails, then various rules change and the interest rate on a CD can change too. In my experience, what happens to a brokered CD is that you receive the principal and accrued interest in your settlement or core account (and therefore you no longer have the CD no matter how much longer it had to run). If you buy a CD directly from a bank, in most cases, the FDIC arranges...

catnamedspot wrote: ↑Sat Mar 18, 2023 2:11 pm

sport wrote: ↑Sat Mar 18, 2023 2:04 pm

Thanks so much for taking the time to respond to my statements. I've read a lot - and yet I still wonder if I'm understanding it correctly. I never, ever, would have guessed how complex these things can be (for a newbie). My only experience is going to the credit union and buying a CD. But there is a lot more involved when starting to explore it more.

Having worked behind the scenes, bonds and CDs work almost identical. Not saying it is simple, just identical.

I've read several articles on how to purchase CDs and I want to see if I'm correct on my understanding: -When you buy a brokered CD - you are buying it from another person and not the bank. This is true if you buy one on the secondary market. An original issue is from the bank -When you buy a brokered CD - the seller is turning it over to you (like a car title) and all the interest will be coming directly from the bank after you buy it. Yes if bought on the secondary market -At Vanguard (Schwab, etc), new issues are not brokered issues (even though they are in a brokerage account). Brokered only means you bought it from a previous owner (and not the bank) No, all CDs in a brokerage account are brokered CDs, regardless if they are new issue...

...I think part of what is new is the ease in which panic can spread due to social media, combined with the ease at which withdrawals can be made due to mobile technology... And that's a problem doesn't seem to be receiving much attention, and it could be addressed. The stock market has circuit breakers. Bond funds and money market funds have liquidity fees and redemption gates. Mutual funds have the right to delay large redemptions that could "disrupt" the operation of the fund. I'm slightly puzzled as to whether or not the language is still there--it used to be printed right in the bankbooks--but everything except checking accounts and the lowest tier savings accounts used to have fine print giving the bank the right to delay w...

Charles Joseph wrote: ↑Sat Mar 18, 2023 12:12 pm

alex_686 wrote: ↑Sat Mar 18, 2023 7:54 am Some try to beat the market, others to match, but many don’t try to beat the market.

So since the odds of beating the market are overwhelmingly against them, and matching the market can be done by anyone, the types of charlatans you describe are just ripping people off.

No. You can see my above post where I am paid to lose.

I am a modest proponent of active management. Why would anyone want to beat the market? Please be specific. Maybe bragging rights but that is about it. The point is to create a portfolio which helps the client meet their goals.