Investing Thread

[Goose]

Sultan

Have you been to Elsa’s over the past year? They have raised prices multiple times.

You are correct I have been dooming the economy for quite some time. Not exactly sure what your point is, I think there are lot smarter people than me that have voiced concerns as well.

I will add that it was reported that top financial minds briefed the White House today over concerns going into tomorrow.

I would much rather be talking about massive amounts of money that is hanging off of trees than dooming the economy.

[The Hippie Satan of Hyperbole]

I have not been to Elsa's but I have been plenty of places. Yet to see 50% increases however.

[nyg]

Goose, the FDIC guarantee is $500K for a couple with a joint account. It's also $500K or $250K per account, not per person. So an individual who is lucky enough to have, say, $5 million cash can fully insure every penny of it if he or she spreads it around between 20 banks. (Or 10 for a couple.)

I'll let others debate the condition of the economy -- but just wanted to include that about FDIC insurance.

This is correct. Husband/wife is $500K, single is $250K and that is per account, not per bank.  In last six months I have transferred and opened 12 month CDs in a joint accounts.  I have been using Capital One Bank, which currently offering 5.00% for 11 month CDs.  The deal runs out on 3/14/23 on that rate.

[tower912]

Quit drinking beer.   Dropped my bills so much. 

[Goose]

tower

I said beer,  but I am a bourbon guy and my wife is wine person. You are correct on saving money, it was very noticeable during dry January.

[Skatastrophy]

This is correct. Husband/wife is $500K, single is $250K and that is per account, not per bank.  In last six months I have transferred and opened 12 month CDs in a joint accounts.  I have been using Capital One Bank, which currently offering 5.00% for 11 month CDs.  The deal runs out on 3/14/23 on that rate.

To be specific in case anyone is interested in this stuff: FDIC insurance per account is per dissimilar account. If you have 2 checking accounts at one FI, they will be considered to be one account for FDIC insurance purposes. If you have a checking and a savings account, those are considered separate and are insured separately. If you have a taxable, roth, and trad IRA account at Vanguard, those are considered 3 separate accounts. Your invested money is covered by SIPC. The FDIC insures cash. SIPC insures up to $500k invested, so it behooves you to have a few accounts at different institutions as you grow your nest egg past $500k invested in an individual account.

Happy to be corrected if I'm imprecise about something.

[jesmu84]

Good news. Bailed out

[Skatastrophy]

Good news. Bailed out

Making depositors whole. Investors are still up a creek. Fair, imo.

The Federal Reserve, Treasury and Federal Deposit Insurance Corporation announced in a joint statement that, “depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

https://www.nytimes.com/2023/03/12/business/janet-yellen-silicon-valley-bank.html

Additional bad news, Signature Bank (servicing law firms) also entering conservatership. Same deal as SVB. Signature has $110B AUM, so about half the size as SVB.

[jesmu84]

Making depositors whole. Investors are still up a creek. Fair, imo.

The Federal Reserve, Treasury and Federal Deposit Insurance Corporation announced in a joint statement that, “depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

https://www.nytimes.com/2023/03/12/business/janet-yellen-silicon-valley-bank.html

Additional bad news, Signature Bank (servicing law firms) also entering conservatership. Same deal as SVB. Signature has $110B AUM, so about half the size as SVB.

Where does the money come from for the bailout?

Isn't Signature Barney Frank's bank?

[Skatastrophy]

Where does the money come from for the bailout?

Isn't Signature Barney Frank's bank?

I'm no expert, but I think it's a loan from the FDIC's fund while they assess the respective FI's books and liquidate assets. Just trying to accellerate money to market.

From the NYT

> The government’s plan to avert a catastrophe took advantage of an exception that allows the F.D.I.C., which is usually supposed to clean up a failed bank in the cheapest way possible, to risk incurring additional costs if there is a risk to the financial system involved. The regulator will tap the Deposit Insurance Fund to make sure it can pay back depositors in full. That fund comes from fees paid by the banking industry, which the Treasury official emphasized.

> The agencies said that “any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”

> The Fed’s new lending program will be backed by $25 billion in cash from a pot of money at the Treasury. The facility will offer up to one-year loans to banks, savings associations, credit unions and other eligible depository institutions in exchange for collateral including U.S. Treasuries, agency debt and mortgage-backed securities.


Also, the Federal Reserve is stepping in to allay market fears by providing a backstop for any banks having depositor issues next week. Probably just in case the boomers make a run on the banks. https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312a.htm

[Goose]

Skat

Yeah, they were concerned about a Boomer run on the bank. I do hope that was a joke.

[Herman Cain]

Sultan

Have you been to Elsa’s over the past year? They have raised prices multiple times.

You are correct I have been dooming the economy for quite some time. Not exactly sure what your point is, I think there are lot smarter people than me that have voiced concerns as well.

I will add that it was reported that top financial minds briefed the White House today over concerns going into tomorrow.

I would much rather be talking about massive amounts of money that is hanging off of trees than dooming the economy.

Memo to Goose:
The Broccoli Appetizer at Elsa’s is delicious.

Then have the Pork Chop Sandwich and ask them to make it Au Poivre.

As to Silicon Valley Bank . They did not diversify their base of business and that is what killed them.

Other banks are far more diverse .

[Skatastrophy]

Skat

Yeah, they were concerned about a Boomer run on the bank. I do hope that was a joke.

What else are they concerned about? An uninformed public run on banks is it. There's not a systemic risk that I'm aware of.

And yes, everything I say should be taken literally.

[Goose]

Herman

Nice tip on the pork chop sandwich recommendation. Enjoy The Players? That was one tournament I have not attended on my bucket list.

[Goose]

Skat

I have no idea why they are concerned and making policy changes on a Sunday. I am sure it is nothing. Good news, President Biden will be addressing the non event tomorrow morning.

[Skatastrophy]

Skat

I have no idea why they are concerned and making policy changes on a Sunday. I am sure it is nothing. Good news, President Biden will be addressing the non event tomorrow morning.

I figured

[Herman Cain]

Herman

Nice tip on the pork chop sandwich recommendation. Enjoy The Players? That was one tournament I have not attended on my bucket list.

We enjoyed The Players very much . We were lucky bough to get invited to one of The Sky Boxes on 17. Great Panormic View of 16 and 17. Followed some players on the course and then watched the leaders play 17 . That tee shot on the last day with the wind blowing is not easy.

[The Hippie Satan of Hyperbole]

From 2018:

https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rolling-back-some-dodd-frank-regulations.html

"The measure eases restrictions on all but the largest banks. It raises the threshold to $250 billion from $50 billion under which banks are deemed too important to the financial system to fail. Those institutions also would not have to undergo stress tests or submit so-called living wills, both safety valves designed to plan for financial disaster."

Silicon Valley Bank was about $210 billion.

(Not blaming Trump because this passed with bi-partisan support, but perhaps we were a little too hasty to lift regulations if SVB is now deemed "too big to fail.")

[MU82]

Here's a take on bank bailouts by DealBook's Andrew Ross Sorkin:


Federal regulators yesterday unveiled the most sweeping backstop for the U.S. banking system since the 2008 crisis, to limit carnage from the collapse of Silicon Valley Bank. The decision has shaken up global markets, with investors selling bank stocks and betting that the Fed would hold off on further interest rate rises.

Today’s newsletter is a special edition deep dive into what just happened. Let’s start with some takeaways from the dizzying turn of events: Too Big to Fail is as alive as ever, but now no bank is too small to fail as well.

Banking is now officially a government-backed business, if it wasn’t before. Let’s admit it: Once the government guarantees all deposits, the “business” of banking isn’t much of a business — and maybe shouldn’t be. This is likely to become the biggest debate of the coming weeks and months.

The venture capital community, a group that includes a vocal group of libertarians, was just bailed out. Yes, these investors do good by funding start-ups, but they have also long lobbied for fewer regulations and also benefited from the special treatment of carried interest. This all looks particularly egregious after some of them spent the weekend begging for government help.

But the reality is that if S.V.B. was just a small regional bank that did not have ties to loud, politically connected venture capitalists and the tech community, it might have been allowed to die — and its customers, individuals and small businesses, would have suffered. Instead, because it is Silicon Valley, it commanded attention.

We have become a country of bailouts. We did it after the Sept. 11 attacks, in the wake of the financial crisis in 2008, during the pandemic — and now we are at it again. For those that say we should have lower taxes and shouldn’t fund the government, how are these bailouts supposed to be financed? (It’s also fair to say regulators should have done a better job, but the truth is that they have been pushed to do less, not more.)

Now that regulators will likely force small banks to raise their capital requirements to a level similar to bigger banks, costs for businesses and consumers will go up in the short term. That, of course, comes on top of higher interest rates.

Regulators should have kept a closer eye on small banks. They spent too much of the past decade or so focused on the big banks, because they apparently didn’t think that small lenders posed a systemic risk. But guess what? We have now decided that regional banks are just as risky.

Some of these institutions, including S.V.B., pushed back on more regulation, arguing that this wouldn’t allow them to compete with their bigger rivals. Silicon Valley Bank wrapped itself in the flag, arguing that was supporting small start-up businesses.

Shadow banking will expand. As more and more of the banking system faces tighter regulation, the business of making loans will increasingly move down the food chain to private firms. This has been happening for years already, but the trend is now likely to accelerate.

Bank runs are even more dangerous in the age of social media. Confidence can evaporate faster than ever when misinformation can spread in a matter of minutes, and a single tweet can send customers fleeing.

The big winner: Jamie Dimon and the big banks. JPMorgan Chase’s bankers spent the week opening up new accounts as everyone fled smaller lenders in favor of its “fortress balance sheet.” Investors have complained over the years about Dimon’s focus on having enough capital and sufficient liquidity at the expense of earnings, but his approach now looks like the right one.

Big banks’ behavior this time has been shaped by the fallout from 2008. Why isn’t Dimon buying S.V.B.? He has complained about the headaches of buying Bear Stearns and Washington Mutual at the government’s behest in 2008, having spent years fighting litigation and paying fines for those firms’ bad behavior. Bank executives who were around back then remember that.

[The Hippie Satan of Hyperbole]

Hey, but at least we can draw the "bailout" line at student loan relief right?

[Skatastrophy]

Hey, but at least we can draw the "bailout" line at student loan relief right?

They are bailing out depositors, just not investors. Works for me, eh?

[MUBurrow]

They are bailing out depositors, just not investors. Works for me, eh?

Its better than also bailing out the investors, but its still a far cry from the invisible hand.

[jficke13]

no atheists in a foxhole, no libertarians in a bank run

[JWags85]

People can complain about his public statements (which may or not be headfakes) but Dimon shows again and again that he's one of the absolute best bankers in the world over the last 50-some years, he's a steady hand in a storm and nearly always has the right read on the market.  I have a lot of respect for him.

Tangentially related, before Dimon moved to NYC, he was still based in Chicago as CEO, from his time as leading Bank One.  My good friend was the newbie who was charged with getting Dimon the quarterly report before it was released.  Obviously its highly sensitive, so it was physically printed out and physically taken to him in a cab.  So my buddy gets to his old mansion, on the appropriately named Banks St, in Gold Coast with the manila envelope.  He's 22 and wetting himself a bit, but expecting to hand off to a housekeeper or driver.  Instead, Dimon answers the door in a t shirt and boxers, tells him to come in, has him sit in the kitchen and pours him a coffee and looks over it cause he wants to give him info to take back to the office.  So he sits and has coffee with the new CEO of Chase for 10 min before going back to the office to be just another low on the totem pole bank drone.

He's been at Chase for almost 18 years, risen the ranks substantially, and still has nothing that even remotely compares as an experience.

[The Hippie Satan of Hyperbole]

Wags, I have a family member who had a similar interaction with Dimon early in his career and your story doesn't surprise me one bit.