So yes, I understand advice on the forum is worth what I paid for it but there are a lot of smart people here so I'm interested in their perspectives;
1) I use Ally Bank for my savings. It is FDIC insured. I know there's a limit and yes I'm well below it. Should I feel safe knowing it's insured? Ally has it's share of warts but should I consider moving to a big bank like BoA for now? Do I need to screenshot account info to prove what I have should Ally go belly up?
2) Is investing in some of the big banks now a sensible idea? I would think their stock prices would rise due to them appearing as a safe haven for large deposits (yet stocks are down today)?
3) Retirement is still in mostly equities (80+%) with more than 20 yrs to retirement. I have friends who brag about how they go to cash right before some big swan event and theyre sitting pretty. But I'm very hesitant to cash out right now. There doesn't seem to be a safe haven for anything retirement wise.
Thanks guys. Very jittery. I was single and in the gov't during 2008 so I felt insulated but now in a delicate situation with mortgage, kids, etc.
Heck, I have 80% equities too. Not tapping into funds for probably 20 yrs so I just keep dollar cost averaging every pay period. Max out 401ks to the best of your ability
The mind trick I do with myself is just assume your portfolio is 2/3 the value it is now when planning for retirement. It’s sorta like a dumb down layman’s Monte Carlo simulation. Don’t look at market as much
I wish I can do as I say :)
Our Ally savings account is out-performing our Vanguard investments (Conservative portfolio) FWIW
Don’t know if you need a money manager unless u have over 1-2 million in portfolio
To me, no reason to pay someone 1% if you dont
Unless numbers paralyze you.
Insured deposit holders at SVB are and were fine.
Regarding the other questions, I'd say 20 years is far enough away that keeping your retirement in the market is generally the right move.
Regarding this market, I think it's really hard to say what's going to happen now. I felt pretty good the Fed would strangle the economy with rates in order to cool inflation, but now we're having an interesting run of bank failures that may cool inflation for the fed. A "flight to quality" may be a move but you might want to see how deep these failures go, first. Pick the wrong big banks and you could pick one that takes a hit in their stock price by being connected to a failure, even if there's no risk of them going tits up.
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You shouldn't worry about anything short of a nuclear war. All this stuff will blow over. As long as you're in a diversified and TRANSPARENT portfolio with a reputable money manager you shouldn't be losing any sleep.
Don’t know if you need a money manager unless u have over 1-2 million in portfolio
To me, no reason to pay someone 1% if you dont
Unless numbers paralyze you.
I don't agree with this. I have a modest portfolio but it's done really well, much better than I could've done on my own, with a money manager.
My wife, with the same money manager, has also really benefitted.
That 1% is nothing compared to the performance we've received, and well more than we could've done if self-managed.
But if you wanted to take 5%-10% and try to play the market on your own I wouldn't scoff at it.
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In comment 16065202 Ron from Ninerland said:
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You shouldn't worry about anything short of a nuclear war. All this stuff will blow over. As long as you're in a diversified and TRANSPARENT portfolio with a reputable money manager you shouldn't be losing any sleep.
Don’t know if you need a money manager unless u have over 1-2 million in portfolio
To me, no reason to pay someone 1% if you dont
Unless numbers paralyze you.
I don't agree with this. I have a modest portfolio but it's done really well, much better than I could've done on my own, with a money manager.
My wife, with the same money manager, has also really benefitted.
That 1% is nothing compared to the performance we've received, and well more than we could've done if self-managed.
But if you wanted to take 5%-10% and try to play the market on your own I wouldn't scoff at it.
I tend to disagree first million is going to be put in a pretty standard allocation of equities ( growth and value, large, mid cap small, foreign, emerging etc plus diferent duration bonds) can a money manager make more? sure but most dont beat the market
JMHO to each his/her own whatever makes us sleep well at nite
Your Ally Bank Savings are insured, don't make any panic moves.
The time to think about cutting back on your Stock exposure was around this time last year, when the Fed started raising rates. Higher Interest rates are rarely good for Equities. Timing the Market requires correctly guessing the future.....twice, when to get out and when to jump back in.
Speaking strictly for myself, I would avoid any of the Bank Stocks right now. Both the Regional Banks and the Big Boys are getting clobbered. You could set up a Watch List on Market Watch to track their movements.
BTW, maybe I have you confused with someone else but I thought you were a geezer even older than myself. Are you not close to retirement or in retirement yourself ?
I have a state pension, but my VanGuard and Roth IRA have been taking some big hits and I fear the worst is yet to come.
Is there enough time for them to rebound if my timeline is 3 years?
There are many banks well diversified to never question if they are going to survive uncertainty like we have now.
Also these are the times a financial manager (a good one not crap) makes sense. You need to have the resources to look at the sectors and stocks, and pick out the good ones. Its not a good market to just play "the market" (ie SPY for the S&P, etc).
And you will lose
BTW, maybe I have you confused with someone else but I thought you were a geezer even older than myself. Are you not close to retirement or in retirement yourself ?
It is not about out performance. It is about your portfolio performs in accordance with what your financial plan needs to be successful. Evryone bitches about the 1% fee and performance, but a good financial planner will do the work to make sure you are in a position to succeed. Estate planning, tax efficiency, income generation are just a few areas I add value to clients. Too much emphasis on fee and performance and absolutely no mention of the value of financial planning. My clients appreciate the value I deliver and rarely mention fee or performance. Something to think about. It is not all about fees and performance.
BTW, maybe I have you confused with someone else but I thought you were a geezer even older than myself. Are you not close to retirement or in retirement yourself ?
59. But not touching 401k till RMDs hit at 75. Well, as long as I can help it.
I just cringe at the thought of paying a money manager possibly 20k a yr if my portfolio is 2 million then
I am not a money manager myself, a CPA who has some interest in the field.
To me, the tax planning part will mitigate paying a MM 1%
But each individual is different
When I am 75, might not want to deal with it. Or if I lose some faculty.
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As to the issue of using a money manager: Sure, you can do the leg work yourself, but its a lot of work and it takes a lot of studying. A decent money manager will outperform even the best managed mutual fund.
BTW, maybe I have you confused with someone else but I thought you were a geezer even older than myself. Are you not close to retirement or in retirement yourself ?
It is not about out performance. It is about your portfolio performs in accordance with what your financial plan needs to be successful. Evryone bitches about the 1% fee and performance, but a good financial planner will do the work to make sure you are in a position to succeed. Estate planning, tax efficiency, income generation are just a few areas I add value to clients. Too much emphasis on fee and performance and absolutely no mention of the value of financial planning. My clients appreciate the value I deliver and rarely mention fee or performance. Something to think about. It is not all about fees and performance.
I understand, I am a CPA s ( not a great one but somewhat competent) who works every tax distribution strategy I can think of ( within reason)
I have an estate plan already. Plus if I am in the two million area( or less) with portfolio, just not paying what could amount to 300k in fees ( 20 yrs. Average portfolio after yearly drawdowns around 1.5 million)
That could go to my LT care or vacation fund
When markets going down I am definitely not paying that. Best way to outperform market. Reduce fees. But this is my situation. Not everyones
Not my clients. Someone I work for
They have complex situations and I see the need bigtime for them and their clients. Way out of my league
I just don’t see it for a middle class person who know there way around tax planning to really have the need
Unless they get paralyzed by numbers. 1-2 million is middle class in Bay Area ( or NYC)
Bob. I am just talking about my own personal situation. I have the tax planning part, I am comfortable with my asset allocation from performance part
We did our revocable living trust, wills, POA etc. if I felt my portfolio wasn’t small potatoes, I would consider help
But 1/4 million of fees over my lifetime? That’s a tough sell. It’s also a cost I can control.
Unlike the market, where being a good MM or expert doesn’t always bode well
Case in point , look at the banks
All experts, not working out too well. jMHO
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In comment 16065267 Ron from Ninerland said:
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As to the issue of using a money manager: Sure, you can do the leg work yourself, but its a lot of work and it takes a lot of studying. A decent money manager will outperform even the best managed mutual fund.
BTW, maybe I have you confused with someone else but I thought you were a geezer even older than myself. Are you not close to retirement or in retirement yourself ?
It is not about out performance. It is about your portfolio performs in accordance with what your financial plan needs to be successful. Evryone bitches about the 1% fee and performance, but a good financial planner will do the work to make sure you are in a position to succeed. Estate planning, tax efficiency, income generation are just a few areas I add value to clients. Too much emphasis on fee and performance and absolutely no mention of the value of financial planning. My clients appreciate the value I deliver and rarely mention fee or performance. Something to think about. It is not all about fees and performance.
I understand, I am a CPA s ( not a great one but somewhat competent) who works every tax distribution strategy I can think of ( within reason)
I have an estate plan already. Plus if I am in the two million area( or less) with portfolio, just not paying what could amount to 300k in fees ( 20 yrs. Average portfolio after yearly drawdowns around 1.5 million)
That could go to my LT care or vacation fund
When markets going down I am definitely not paying that. Best way to outperform market. Reduce fees. But this is my situation. Not everyones
A effectively executed Roth conversion can save thousands in taxes and make up for the fees paid. Again, showing value.
And when you find a fund or an ETF that manages for free AND provides valuable financial planning, please let me know.
Wow, you are so off base with that comment. Makes you wonder who the "unsophisticated one" is.
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In comment 16065319 johnnyb said:
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In comment 16065267 Ron from Ninerland said:
Quote:
As to the issue of using a money manager: Sure, you can do the leg work yourself, but its a lot of work and it takes a lot of studying. A decent money manager will outperform even the best managed mutual fund.
BTW, maybe I have you confused with someone else but I thought you were a geezer even older than myself. Are you not close to retirement or in retirement yourself ?
It is not about out performance. It is about your portfolio performs in accordance with what your financial plan needs to be successful. Evryone bitches about the 1% fee and performance, but a good financial planner will do the work to make sure you are in a position to succeed. Estate planning, tax efficiency, income generation are just a few areas I add value to clients. Too much emphasis on fee and performance and absolutely no mention of the value of financial planning. My clients appreciate the value I deliver and rarely mention fee or performance. Something to think about. It is not all about fees and performance.
I understand, I am a CPA s ( not a great one but somewhat competent) who works every tax distribution strategy I can think of ( within reason)
I have an estate plan already. Plus if I am in the two million area( or less) with portfolio, just not paying what could amount to 300k in fees ( 20 yrs. Average portfolio after yearly drawdowns around 1.5 million)
That could go to my LT care or vacation fund
When markets going down I am definitely not paying that. Best way to outperform market. Reduce fees. But this is my situation. Not everyones
A effectively executed Roth conversion can save thousands in taxes and make up for the fees paid. Again, showing value.
And when you find a fund or an ETF that manages for free AND provides valuable financial planning, please let me know.
well,I am lucky enough that my wifes work pays all fund fees
so theres that:) they also tend to be a ton cheaper than 1%
also lucky enough to have pension that should cover majority of expenses to start ( not cola adjusted so buying power will be reduced thru the yrs)
reason why I love 75 RMD be alot of roth conversions going on in 12% bracket ( ok rates may go up but there should still be the planning opportunity)
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In comment 16065319 johnnyb said:
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In comment 16065267 Ron from Ninerland said:
Quote:
As to the issue of using a money manager: Sure, you can do the leg work yourself, but its a lot of work and it takes a lot of studying. A decent money manager will outperform even the best managed mutual fund.
BTW, maybe I have you confused with someone else but I thought you were a geezer even older than myself. Are you not close to retirement or in retirement yourself ?
It is not about out performance. It is about your portfolio performs in accordance with what your financial plan needs to be successful. Evryone bitches about the 1% fee and performance, but a good financial planner will do the work to make sure you are in a position to succeed. Estate planning, tax efficiency, income generation are just a few areas I add value to clients. Too much emphasis on fee and performance and absolutely no mention of the value of financial planning. My clients appreciate the value I deliver and rarely mention fee or performance. Something to think about. It is not all about fees and performance.
I understand, I am a CPA s ( not a great one but somewhat competent) who works every tax distribution strategy I can think of ( within reason)
I have an estate plan already. Plus if I am in the two million area( or less) with portfolio, just not paying what could amount to 300k in fees ( 20 yrs. Average portfolio after yearly drawdowns around 1.5 million)
That could go to my LT care or vacation fund
When markets going down I am definitely not paying that. Best way to outperform market. Reduce fees. But this is my situation. Not everyones
A effectively executed Roth conversion can save thousands in taxes and make up for the fees paid. Again, showing value.
And when you find a fund or an ETF that manages for free AND provides valuable financial planning, please let me know.
why I am paying someone to do my own ROTH conversions? seriously
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In comment 16065202 Ron from Ninerland said:
Quote:
You shouldn't worry about anything short of a nuclear war. All this stuff will blow over. As long as you're in a diversified and TRANSPARENT portfolio with a reputable money manager you shouldn't be losing any sleep.
Don’t know if you need a money manager unless u have over 1-2 million in portfolio
To me, no reason to pay someone 1% if you dont
Unless numbers paralyze you.
I don't agree with this. I have a modest portfolio but it's done really well, much better than I could've done on my own, with a money manager.
My wife, with the same money manager, has also really benefitted.
That 1% is nothing compared to the performance we've received, and well more than we could've done if self-managed.
But if you wanted to take 5%-10% and try to play the market on your own I wouldn't scoff at it.
I am curious if you compared your annual performance, factoring in fees charged, with the performance of a low-fee S&P 500 index fund, like Vanguard.
Not challenging you or anything, just wondering if your manager outperformed the market for you (when you factor in the fees he charges).
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In comment 16065361 Payasdaddy said:
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In comment 16065319 johnnyb said:
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In comment 16065267 Ron from Ninerland said:
Quote:
As to the issue of using a money manager: Sure, you can do the leg work yourself, but its a lot of work and it takes a lot of studying. A decent money manager will outperform even the best managed mutual fund.
BTW, maybe I have you confused with someone else but I thought you were a geezer even older than myself. Are you not close to retirement or in retirement yourself ?
It is not about out performance. It is about your portfolio performs in accordance with what your financial plan needs to be successful. Evryone bitches about the 1% fee and performance, but a good financial planner will do the work to make sure you are in a position to succeed. Estate planning, tax efficiency, income generation are just a few areas I add value to clients. Too much emphasis on fee and performance and absolutely no mention of the value of financial planning. My clients appreciate the value I deliver and rarely mention fee or performance. Something to think about. It is not all about fees and performance.
I understand, I am a CPA s ( not a great one but somewhat competent) who works every tax distribution strategy I can think of ( within reason)
I have an estate plan already. Plus if I am in the two million area( or less) with portfolio, just not paying what could amount to 300k in fees ( 20 yrs. Average portfolio after yearly drawdowns around 1.5 million)
That could go to my LT care or vacation fund
When markets going down I am definitely not paying that. Best way to outperform market. Reduce fees. But this is my situation. Not everyones
A effectively executed Roth conversion can save thousands in taxes and make up for the fees paid. Again, showing value.
And when you find a fund or an ETF that manages for free AND provides valuable financial planning, please let me know.
why I am paying someone to do my own ROTH conversions? seriously
My focus on Roth conversions is to keep clients in a specific tax bracket and also within IRMAA income limits as well. Not everyone has the ability to effectively do this. Some can, most cannot.
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In comment 16065396 johnnyb said:
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In comment 16065361 Payasdaddy said:
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In comment 16065319 johnnyb said:
Quote:
In comment 16065267 Ron from Ninerland said:
Quote:
As to the issue of using a money manager: Sure, you can do the leg work yourself, but its a lot of work and it takes a lot of studying. A decent money manager will outperform even the best managed mutual fund.
BTW, maybe I have you confused with someone else but I thought you were a geezer even older than myself. Are you not close to retirement or in retirement yourself ?
It is not about out performance. It is about your portfolio performs in accordance with what your financial plan needs to be successful. Evryone bitches about the 1% fee and performance, but a good financial planner will do the work to make sure you are in a position to succeed. Estate planning, tax efficiency, income generation are just a few areas I add value to clients. Too much emphasis on fee and performance and absolutely no mention of the value of financial planning. My clients appreciate the value I deliver and rarely mention fee or performance. Something to think about. It is not all about fees and performance.
I understand, I am a CPA s ( not a great one but somewhat competent) who works every tax distribution strategy I can think of ( within reason)
I have an estate plan already. Plus if I am in the two million area( or less) with portfolio, just not paying what could amount to 300k in fees ( 20 yrs. Average portfolio after yearly drawdowns around 1.5 million)
That could go to my LT care or vacation fund
When markets going down I am definitely not paying that. Best way to outperform market. Reduce fees. But this is my situation. Not everyones
A effectively executed Roth conversion can save thousands in taxes and make up for the fees paid. Again, showing value.
And when you find a fund or an ETF that manages for free AND provides valuable financial planning, please let me know.
why I am paying someone to do my own ROTH conversions? seriously
My focus on Roth conversions is to keep clients in a specific tax bracket and also within IRMAA income limits as well. Not everyone has the ability to effectively do this. Some can, most cannot.
absolutely obvious I do it myself If a CPA cant figure that out, in the wrong biz
for other people yes once of the easiest ways to add value
also you can bill for yr end tax planning :) ( we usually do planning quarterly since alot of bonus paid out during the yr)
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In comment 16065211 Payasdaddy said:
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In comment 16065202 Ron from Ninerland said:
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You shouldn't worry about anything short of a nuclear war. All this stuff will blow over. As long as you're in a diversified and TRANSPARENT portfolio with a reputable money manager you shouldn't be losing any sleep.
Don’t know if you need a money manager unless u have over 1-2 million in portfolio
To me, no reason to pay someone 1% if you dont
Unless numbers paralyze you.
I don't agree with this. I have a modest portfolio but it's done really well, much better than I could've done on my own, with a money manager.
My wife, with the same money manager, has also really benefitted.
That 1% is nothing compared to the performance we've received, and well more than we could've done if self-managed.
But if you wanted to take 5%-10% and try to play the market on your own I wouldn't scoff at it.
I am curious if you compared your annual performance, factoring in fees charged, with the performance of a low-fee S&P 500 index fund, like Vanguard.
Not challenging you or anything, just wondering if your manager outperformed the market for you (when you factor in the fees he charges).
i actually dont since fidelity handles my wifes accts thru work and work pays all fees (or negotiates them a hecka lot lower) I just take the market as it is
a co worker of hers just dropped 250K to a MM she wishes she didnt hates that when market goes down, she is still paying is she losing less? maybe just doesnt make sense to me on a small portfolio like I said, controllable cost in my book but not everyones
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In comment 16065417 Payasdaddy said:
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In comment 16065396 johnnyb said:
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In comment 16065361 Payasdaddy said:
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In comment 16065319 johnnyb said:
Quote:
In comment 16065267 Ron from Ninerland said:
Quote:
As to the issue of using a money manager: Sure, you can do the leg work yourself, but its a lot of work and it takes a lot of studying. A decent money manager will outperform even the best managed mutual fund.
BTW, maybe I have you confused with someone else but I thought you were a geezer even older than myself. Are you not close to retirement or in retirement yourself ?
It is not about out performance. It is about your portfolio performs in accordance with what your financial plan needs to be successful. Evryone bitches about the 1% fee and performance, but a good financial planner will do the work to make sure you are in a position to succeed. Estate planning, tax efficiency, income generation are just a few areas I add value to clients. Too much emphasis on fee and performance and absolutely no mention of the value of financial planning. My clients appreciate the value I deliver and rarely mention fee or performance. Something to think about. It is not all about fees and performance.
I understand, I am a CPA s ( not a great one but somewhat competent) who works every tax distribution strategy I can think of ( within reason)
I have an estate plan already. Plus if I am in the two million area( or less) with portfolio, just not paying what could amount to 300k in fees ( 20 yrs. Average portfolio after yearly drawdowns around 1.5 million)
That could go to my LT care or vacation fund
When markets going down I am definitely not paying that. Best way to outperform market. Reduce fees. But this is my situation. Not everyones
A effectively executed Roth conversion can save thousands in taxes and make up for the fees paid. Again, showing value.
And when you find a fund or an ETF that manages for free AND provides valuable financial planning, please let me know.
why I am paying someone to do my own ROTH conversions? seriously
My focus on Roth conversions is to keep clients in a specific tax bracket and also within IRMAA income limits as well. Not everyone has the ability to effectively do this. Some can, most cannot.
absolutely obvious I do it myself If a CPA cant figure that out, in the wrong biz
for other people yes once of the easiest ways to add value
also you can bill for yr end tax planning :) ( we usually do planning quarterly since alot of bonus paid out during the yr)
Agree as a CPA it is easy for yo but you would be surprised at how many sophisticated clients I have that need to see the benefits of a Roth conversion illustrated. I routinely find ways to protect my clients against paying higher taxes, some very opbvious to me but not to them. Again, my clients appreciate the value we offer. And for 42 Million it is less than 1%.
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In comment 16065431 johnnyb said:
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In comment 16065417 Payasdaddy said:
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In comment 16065396 johnnyb said:
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In comment 16065361 Payasdaddy said:
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In comment 16065319 johnnyb said:
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In comment 16065267 Ron from Ninerland said:
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As to the issue of using a money manager: Sure, you can do the leg work yourself, but its a lot of work and it takes a lot of studying. A decent money manager will outperform even the best managed mutual fund.
BTW, maybe I have you confused with someone else but I thought you were a geezer even older than myself. Are you not close to retirement or in retirement yourself ?
It is not about out performance. It is about your portfolio performs in accordance with what your financial plan needs to be successful. Evryone bitches about the 1% fee and performance, but a good financial planner will do the work to make sure you are in a position to succeed. Estate planning, tax efficiency, income generation are just a few areas I add value to clients. Too much emphasis on fee and performance and absolutely no mention of the value of financial planning. My clients appreciate the value I deliver and rarely mention fee or performance. Something to think about. It is not all about fees and performance.
I understand, I am a CPA s ( not a great one but somewhat competent) who works every tax distribution strategy I can think of ( within reason)
I have an estate plan already. Plus if I am in the two million area( or less) with portfolio, just not paying what could amount to 300k in fees ( 20 yrs. Average portfolio after yearly drawdowns around 1.5 million)
That could go to my LT care or vacation fund
When markets going down I am definitely not paying that. Best way to outperform market. Reduce fees. But this is my situation. Not everyones
A effectively executed Roth conversion can save thousands in taxes and make up for the fees paid. Again, showing value.
And when you find a fund or an ETF that manages for free AND provides valuable financial planning, please let me know.
why I am paying someone to do my own ROTH conversions? seriously
My focus on Roth conversions is to keep clients in a specific tax bracket and also within IRMAA income limits as well. Not everyone has the ability to effectively do this. Some can, most cannot.
absolutely obvious I do it myself If a CPA cant figure that out, in the wrong biz
for other people yes once of the easiest ways to add value
also you can bill for yr end tax planning :) ( we usually do planning quarterly since alot of bonus paid out during the yr)
Agree as a CPA it is easy for yo but you would be surprised at how many sophisticated clients I have that need to see the benefits of a Roth conversion illustrated. I routinely find ways to protect my clients against paying higher taxes, some very opbvious to me but not to them. Again, my clients appreciate the value we offer. And for 42 Million it is less than 1%.
we have good tax planning software so as long as I have the info, I can nail the bracket mgmt quiet easily.
for my own, I am around 8 yrs out from roth conversions and yrs will be lumpy due to when we decide pension kicks in, available cash, when to take SS etc and Yes, even IRMAA when we get paid out a lump sum on corporate stock so I am always running thru scenerios its just my mindset my wife hate the budget/distribution spreadsheet :)
But I did reach out to my advisor after the SVB collapse to ask if we need to change my portfolio. (His team is managing my portfolio so I don't really have to ask, but I did anyway.) He called me to say he wants to meet about changes, because the bailout has probably introduced more systemic risk.
His take is that from the first bank bailouts, the gov't essentially nationalized the banking system. He's not alone in that analysis. By guaranteeing all deposits, even beyond FDIC limits, the gov't has basically made bank deposits risk-free for depositors, and that encourages bankers to take on riskier investments.
This is a long term trend. Banks will occasionally fail, because — like all human institutions — they are fallible. So there will be occasional bailouts until there's a crisis so big that a bailout isn't possible. That day may be decades away but it's kind of inevitable unless banks are re-regulated. Like, the reimposition of Glass-Stegal.
I know that sounds like a paranoid conspiracy theory but there's plenty of historical evidence for how banks behave when they're regulated and how they behave when those regulations are rolled back, and the consequences of each.
Anyway, I figure that my money manager and I will discuss what to do to limit exposure to this kind of risk, since I'm reaching an age where I won't have a lot of new income and won't have a long horizon to recover from a crash.
As for the question of when/if to buy bank stocks: I'm not an expert on this kind of thing but it seems to me that either
1) the current system of bank regulations will continue, which makes bank stocks riskier, and as we've seen, when banks go south, there's often no time to get out before they collapse, OR
2) regulations of some sort will be reimposed, which will probably drive down the value of bank stocks. Regulation would Make Banking Boring Again, and it would return to being a staid industry with low growth but maybe annual dividends. Mostly safe but almost entirely dull. Bank stocks would be the thing you'd recommend your grandmother buy when she's starting to get forgetful so she's protected and doesn't have to watch her portfolio.
So I wouldn't invest a lot in that sector for the long term if I were in your situation.
But I could be entirely wrong, for the same reasons that SVB was wrong about buying a lot of safe treasury bonds at low yields: Nobody can see the future, and events are unpredictable. What looks like a safe investment today can literally turn worthless in a few days. That's why diversified portfolios are a thing.
But I did reach out to my advisor after the SVB collapse to ask if we need to change my portfolio. (His team is managing my portfolio so I don't really have to ask, but I did anyway.) He called me to say he wants to meet about changes, because the bailout has probably introduced more systemic risk.
His take is that from the first bank bailouts, the gov't essentially nationalized the banking system. He's not alone in that analysis. By guaranteeing all deposits, even beyond FDIC limits, the gov't has basically made bank deposits risk-free for depositors, and that encourages bankers to take on riskier investments.
This is a long term trend. Banks will occasionally fail, because — like all human institutions — they are fallible. So there will be occasional bailouts until there's a crisis so big that a bailout isn't possible. That day may be decades away but it's kind of inevitable unless banks are re-regulated. Like, the reimposition of Glass-Stegal.
I know that sounds like a paranoid conspiracy theory but there's plenty of historical evidence for how banks behave when they're regulated and how they behave when those regulations are rolled back, and the consequences of each.
Anyway, I figure that my money manager and I will discuss what to do to limit exposure to this kind of risk, since I'm reaching an age where I won't have a lot of new income and won't have a long horizon to recover from a crash.
As for the question of when/if to buy bank stocks: I'm not an expert on this kind of thing but it seems to me that either
1) the current system of bank regulations will continue, which makes bank stocks riskier, and as we've seen, when banks go south, there's often no time to get out before they collapse, OR
2) regulations of some sort will be reimposed, which will probably drive down the value of bank stocks. Regulation would Make Banking Boring Again, and it would return to being a staid industry with low growth but maybe annual dividends. Mostly safe but almost entirely dull. Bank stocks would be the thing you'd recommend your grandmother buy when she's starting to get forgetful so she's protected and doesn't have to watch her portfolio.
So I wouldn't invest a lot in that sector for the long term if I were in your situation.
But I could be entirely wrong, for the same reasons that SVB was wrong about buying a lot of safe treasury bonds at low yields: Nobody can see the future, and events are unpredictable. What looks like a safe investment today can literally turn worthless in a few days. That's why diversified portfolios are a thing.
guns and butter!
But I did reach out to my advisor after the SVB collapse to ask if we need to change my portfolio. (His team is managing my portfolio so I don't really have to ask, but I did anyway.) He called me to say he wants to meet about changes, because the bailout has probably introduced more systemic risk.
His take is that from the first bank bailouts, the gov't essentially nationalized the banking system. He's not alone in that analysis. By guaranteeing all deposits, even beyond FDIC limits, the gov't has basically made bank deposits risk-free for depositors, and that encourages bankers to take on riskier investments.
This is a long term trend. Banks will occasionally fail, because — like all human institutions — they are fallible. So there will be occasional bailouts until there's a crisis so big that a bailout isn't possible. That day may be decades away but it's kind of inevitable unless banks are re-regulated. Like, the reimposition of Glass-Stegal.
I know that sounds like a paranoid conspiracy theory but there's plenty of historical evidence for how banks behave when they're regulated and how they behave when those regulations are rolled back, and the consequences of each.
Anyway, I figure that my money manager and I will discuss what to do to limit exposure to this kind of risk, since I'm reaching an age where I won't have a lot of new income and won't have a long horizon to recover from a crash.
As for the question of when/if to buy bank stocks: I'm not an expert on this kind of thing but it seems to me that either
1) the current system of bank regulations will continue, which makes bank stocks riskier, and as we've seen, when banks go south, there's often no time to get out before they collapse, OR
2) regulations of some sort will be reimposed, which will probably drive down the value of bank stocks. Regulation would Make Banking Boring Again, and it would return to being a staid industry with low growth but maybe annual dividends. Mostly safe but almost entirely dull. Bank stocks would be the thing you'd recommend your grandmother buy when she's starting to get forgetful so she's protected and doesn't have to watch her portfolio.
So I wouldn't invest a lot in that sector for the long term if I were in your situation.
But I could be entirely wrong, for the same reasons that SVB was wrong about buying a lot of safe treasury bonds at low yields: Nobody can see the future, and events are unpredictable. What looks like a safe investment today can literally turn worthless in a few days. That's why diversified portfolios are a thing.
my moms portfolio has some banking stocks
I will call her planner and see if we should do something
thanks for the reminder
If that is not enough for you, you can easily check other banks assets online.
1) I wouldn't do event driven long or short without experience in those areas. If there is someone you really trust who you think is "in the know" go for it. Short of those things avoid at all costs I'd say. Especially a developing story like this bank thing where we are seeing more dominoes fall.
2) Bond yields took a dive today and tech stocks are up. This is not a frequent occurrence and represents a level of market volatility and risk where I wouldn't recommend opening up new positions at all.
3) If you are on a longer time horizon you can't really do better than something like Vanguard Total Return. If you are going to own individual stocks ESPECIALLY if you would be taking capital gains if you sold I'd strongly recommend Inverse ETFs to hedge risk over a liquidating to a cash position. If you want to share your holdings and more about your strategy and risk tolerance I'd be happy to recommend one.
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So what can banks do or not do with with depositors funds ? Are there any restrictions ?
So what can banks do or not do with with depositors funds ? Are there any restrictions ?
Agreed now there is someone who needs a good MM :)
what horrible decisions made
It has been a while since my series 7 and 63 lapsed. I'm just a civilian offering free investment insights. But good point lol.
So what can banks do or not do with with depositors funds ? Are there any restrictions ?
It really depends what they have licenses for and how broadly you define "bank."
The thing about the capital markets is you aren't literally taking people deposits and handing them over necessarily. (But also unlikely) Chances are strong they are just collateral for you to conduct other financial transactions with other counter-parties on margin.
All of the financial transactions you like to do is covered by a test of your assets and liabilities and for risk compliance based on what you are licensed and organized to do. But a big issue, especially in fast changing markets is marking assets and liabilities to their "real" market value.
That is the bigger issue than regulations around risk, essentially banks either intentionally or by mistake not doing a good job of managing their own risk. When the value of assets changes more officially and infrequently it is quite often behind how counter-parties of that bank who conduct their own valuation of assets. Unfortunately, it can take a blow up to even find the fair price of assets which have declined quickly in value. Especially if liquidity becomes more scare that can have a large effect on the market value of bad assets.
There is kind of a difficult issue at play where the problem isn't necessarily the risk test but the ability to price a wide variety assets and liabilities accurately and quickly. Which is something that obviously even some of the less capitalized banks don't do as well as the first tier ones. It certainly could be done but would cost a lot of money to build and also not be very popular with Wall St. so tough to get through legislation...
Not to mention even if you are taking on risk there is opportunity to raise more capital in a variety of ways so it is legitimately tricky to say when it is time to step in. (Outside of the systems we have now)
Quote:
After 2008 banks were prohibited from making certain types of risky loans. But that's not what SVB did. They invested short term deposits in long term government bonds. Since they had to redeem those bonds before maturity in combination with rising interest rates they lost money.
So what can banks do or not do with with depositors funds ? Are there any restrictions ?
Agreed now there is someone who needs a good MM :)
what horrible decisions made
Shorten the duration of their bond portfolio to protect against rising rates. As my colleague said i=on Bloomberg Radio Monday morning, it is difficult to regulate stupidity.
About bank stocks, I like them right now. They have been beat up and over sold. Some legitimate reasons, and some just by association.
But when there is fear and blood in the water, I jump in. This said, plan for banks to recover once/if int rates come down in 1-2 years. Need the inverted yield curve to go away, and banks should start making more loans. Like who's borrowing right now if they don't absolutely have to? It's gonna hurt short term, but they should come around. Also reading reports of deposit inflows to mega banks, so they just got a little bigger by those that are spooked about the current situation (SVB).