Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[Buehler445]

Originally Posted by SLC.Joe

Why don’t you open a cash management account with Fidelity? They layer your deposits across multiple institutions and its FDIC insured up to $3mm. And the rate (4.22%) is probably higher than your banks.

I’m setting up a similar deal with a different outfit, but I haven’t finished it yet. I’ll definitely look into Fidelity though, thanks.

[lewdog]

Makes you wonder if you should have all assets over $250k separated into different accounts/institutions to protect from something like this. I've always been told no, it's not needed, however..............

[ChiefRocka]

Just read that FDIC has enough on the books to insure about 1.3% of ALL current US deposits or about the size of all SVB.

[lewdog]

Originally Posted by ChiefRocka

Just read that FDIC has enough on the books to insure about 1.3% of ALL current US deposits or about the size of all SVB.

Source or link?

[ChiefRocka]

Originally Posted by lewdog

Source or link?

https://twitter.com/gaborgurbacs/sta...845079555?s=21

[DaFace]

Originally Posted by ChiefRocka

Just read that FDIC has enough on the books to insure about 1.3% of ALL current US deposits or about the size of all SVB.

I fail to see the issue here. It's not like insurance companies have the funds to pay out every policy at once.

[ChiefRocka]

Originally Posted by DaFace

I fail to see the issue here. It's not like insurance companies have the funds to pay out every policy at once.

1.3% of all policies seems low

[TwistedChief]

Originally Posted by lewdog

Makes you wonder if you should have all assets over $250k separated into different accounts/institutions to protect from something like this. I've always been told no, it's not needed, however..............

Of course you should. Absolutely. Though if you choose to do it, you’re likely safer with a Chase, Citi, or BOA.

And guys, re: the 1.3%. You do realize that during the largest financial crisis of our lives no depositors whether insured or uninsured lost money, right? Despite several hundred bank failures? There are assets against these bank deposits. And banks are so much more heavily regulated now than they had been (though a former unnamed president watered down regulations for smaller banks).

This SVB situation is super niche. They just did every stupid thing you could’ve done given their structure. Total mismanagement.

[TwistedChief]

Originally Posted by DaFace

Apparently my work banks with them as well. That's...less than ideal.

Not sure the extent to which we have funds there, but they're at least in the portfolio.

Not anymore!

[TwistedChief]

Just to take it a step further:

They have about 165bn of deposits. They also have 15bn of Federal Home Loan Bank liabilities that are collateralized and senior to those deposits. Total liabilities = 180bn.

On the asset side they have have 75bn-ish of liquid securities like Treasuries, mortgage-backed securities, etc. They have 40bn-ish of cash. And then they have 75bn-ish of loans which are the murkier part and you’d have to assume a larger discount if someone were to take them off your books immediately… So let’s say 15% which gets you to 65bn..

Assets =180bn
Liabilities = 180bn (75+40+65)

This isn’t to say this analysis is foolproof and everyone will absolutely get fully paid out. But 1/ I bet there will be a solution found where ultimately everyone will get paid out; 2/ no one lost their entire savings; 3/ in bank restructurings in the past pre-financial crisis even 80% recovery on uninsured deposits was really low; 4/ if things don’t get fully solved beyond this weekend, I imagine there will be a bridge solution where uninsured depositors receive something like 50% of their money immediately and then more over time as the assets are disposed of.

The world won’t end.

[Rain Man]

Originally Posted by TwistedChief

Of course you should. Absolutely. Though if you choose to do it, you’re likely safer with a Chase, Citi, or BOA.

And guys, re: the 1.3%. You do realize that during the largest financial crisis of our lives no depositors whether insured or uninsured lost money, right? Despite several hundred bank failures? There are assets against these bank deposits. And banks are so much more heavily regulated now than they had been (though a former unnamed president watered down regulations for smaller banks).

This SVB situation is super niche. They just did every stupid thing you could’ve done given their structure. Total mismanagement.

Okay, now what am I going to do with this cave and ammunition that I just bought? I can eat the pallets of canned goods, so that's not a problem.

[DaFace]

Originally Posted by TwistedChief

Just to take it a step further:

They have about 165bn of deposits. They also have 15bn of Federal Home Loan Bank liabilities that are collateralized and senior to those deposits. Total liabilities = 180bn.

On the asset side they have have 75bn-ish of liquid securities like Treasuries, mortgage-backed securities, etc. They have 40bn-ish of cash. And then they have 75bn-ish of loans which are the murkier part and you’d have to assume a larger discount if someone were to take them off your books immediately… So let’s say 15% which gets you to 65bn..

Assets =180bn
Liabilities = 180bn (75+40+65)

This isn’t to say this analysis is foolproof and everyone will absolutely get fully paid out. But 1/ I bet there will be a solution found where ultimately everyone will get paid out; 2/ no one lost their entire savings; 3/ in bank restructurings in the past pre-financial crisis even 80% recovery on uninsured deposits was really low; 4/ if things don’t get fully solved beyond this weekend, I imagine there will be a bridge solution where uninsured depositors receive something like 50% of their money immediately and then more over time as the assets are disposed of.

The world won’t end.

Yep. The issue here isn't everyone losing their money. The issue is that a ton of businesses temporarily lost access to capital, and it may take a little time for them to get it back.

[lewdog]

Originally Posted by TwistedChief

Of course you should. Absolutely. Though if you choose to do it, you’re likely safer with a Chase, Citi, or BOA.

And guys, re: the 1.3%. You do realize that during the largest financial crisis of our lives no depositors whether insured or uninsured lost money, right? Despite several hundred bank failures? There are assets against these bank deposits. And banks are so much more heavily regulated now than they had been (though a former unnamed president watered down regulations for smaller banks).

This SVB situation is super niche. They just did every stupid thing you could’ve done given their structure. Total mismanagement.

I’ve actually kind of done this over the past few years anyway without really thinking about it. I’ve had people tell me, just put it all together so it’s easy to track! Bitch, that’s what spreadsheets are for!

I have our investments spread between Vanguard, T Rowe Price and TD Ameritrade. Our liquid cash is between US Bank and Chase.

Thanks for your info on this.

[TwistedChief]

Originally Posted by lewdog

I’ve actually kind of done this over the past few years anyway without really thinking about it. I’ve had people tell me, just put it all together so it’s easy to track! Bitch, that’s what spreadsheets are for!

I have our investments spread between Vanguard, T Rowe Price and TD Ameritrade. Our liquid cash is between US Bank and Chase.

Thanks for your info on this.

Obviously, Vanguard isn’t a bank. So there’s no FDIC protection. But if you have it in the Vanguard money fund, it’s as safe as anything on planet earth. No need to spread it beyond that. Any cash you need for regular outlays keep in your bank but the rest of the cash you want to preserve should go to the Vanguards of the world.

I can understand people being lazy about this in a world of zero rates. Then a bank or a money market fund were all the same thing. But now most banks are still paying maybe 1-2pct (though other banks are trying to attract deposits and paying more) while money funds are paying levels approaching 5pct.

So the 1-2pct option is basically a loan to a bank where the 5pct option is a loan to the government. You receive a much better return on the latter and have significantly less risk (if you want to bring up the debt ceiling, we can discuss, but that’s a longer conversation and doesn’t remotely change this conclusion).

These Silicon Valley idiots were exceptionally lazy and careless in their cash management. And that allowed SVB to operate as it did until it couldn’t.

[ChiefRocka]

Originally Posted by TwistedChief

And guys, re: the 1.3%. You do realize that during the largest financial crisis of our lives no depositors whether insured or uninsured lost money, right? Despite several hundred bank failures?
.

Can you elaborate on how that was made possible?