You have every right to wonder what’s going on with Charles Schwab. Its stock is off 30% this month. Its banking unit’s sweep account is bleeding deposits. Thankfully, dear reader, you’ve been with me through thick and thin, and by now, you know the deal. Schwab is a publicly traded company. It gobbles up smaller companies to help it grow. To help it meet quarterly earnings estimates. Sometimes they don’t pan out. Your Survival Guy doesn’t think you need your broker to “grow.” Just keep the money safe. And forget a broker/wealth manager. I want you to be with an advisor held—by law—to a … [Read more...]
Archives for March 2023
BEWARE: The Road to Digital Currencies
With everything going on in the banking world, is it any wonder Your Survival Guy likes doing business with Fidelity? It’s a non-bank, non-publicly traded company. Banks are under enormous government pressure to consolidate, while publicly traded brokerages are pressured to meet quarterly earnings. It’s a bad one-two punch. Look at Charles Schwab, for example. It has a banking division and is publicly traded. Its stock is down over 30% year to date. Fidelity is not a bank. It’s privately held. It’s a family-run business. What could possibly go wrong now that all depositors are … [Read more...]
Another Habit of Highly Successful and Fairly Wealthy People
Another habit of highly successful and fairly wealthy people is this: delegation. You didn’t get to where you are without a little help from your friends, staff, and loved ones. You learned habit #1, saving money, at an early enough age, and you saved til it hurt. You delegated that task. Did you set it and forget it? You didn’t forget. Not really. It was always on your mind. “Will we have enough to retire on?” you wondered. But it was basically on autopilot. Now, as you approach retirement (work for as long as you can, dear reader), there’s more to think about. You can’t afford to make a … [Read more...]
The Greatest Threats to the American Economy
Helicopter Ben Bernanke ushered in free money for all. Look at the growth in M2 in the era since Bernanke unleashed the Fed’s “extraordinary” powers on America’s economy. If interest rates were so important, then why is this chart from the St. Louis Federal Reserve so telling? Here, the St. Louis Fed explains the effect of Fed policy on consumption, writing: Consumption and Financial Conditions during the 2021 Tightening Episode The next figure focuses on the most recent tightening episode, the beginning of which is marked by the vertical dashed line. For simplicity, we … [Read more...]
Your Survival Guy’s #1 Habit of Fairly Successful People
Your Survival Guy’s number one habit of fairly successful people is saving money. Done. Simple. Easy to understand. Hard to do. Because, like all habits, it can be hard, initially, that is, but then it’s quite a bit of fun. Compounding money—the eighth wonder of the world. Don’t just take Your Survival Guy’s advice; go back in time and ask Albert Einstein. Life’s lessons seem to be the same no matter when you are born. If you’re a saver, you have a good handle on risk. You don’t like it. It’s a bad four-letter word. You don’t like staring at the ceiling in the middle of the night, wondering … [Read more...]
New Regulation Coming for CDS Market?
Credit default swaps (CDS) act as insurance contracts against company defaults. Now, markets for CDS are in turmoil as banks face troubling prospects around the world. The heavy involvement of CDS has some regulators calling for more oversight of these opaque contracts. Martin Arnold and Laurence Fletcher report for the Financial Times: The European Central Bank’s top supervisor has claimed “opaque” trading in credit default swaps is harming banks’ share prices and could threaten a run on deposits. Andrea Enria, chair of the ECB supervisory board, called for a review of the market after … [Read more...]
“You Just Have to Be Willing to Move Defensively”
Happy Monday. A perfect day for some tough love. Your Survival Guy read an article over the weekend showing the savings and investments of some retirees. Here are their annual spend rates based on my back-of-a-napkin math: 12.6%, 15.8%, 10.5%, and 2.5%. The first three are terrifying. The fourth one’s OK. When Dick Young’s North Star (the 3-month T-bill rate) is at 4.652%, where do they think the returns are coming from? If you’re a highly successful person, you’ve developed Your Survival Guy’s favorite habit: Saving. Right there, in one word. You’ve learned to do without, to save ‘til it … [Read more...]
Americans Are Fleeing Bank Deposits
After watching the dysfunction surrounding the failures of Silicon Valley Bank and Signature Bank, Americans are withdrawing their bank deposits and placing them in other places, such as money market fund accounts. Brooke Masters, Harriet Clarfelt, and Kate Duguid report for the Financial Times: Goldman Sachs, JPMorgan Chase and Fidelity are the biggest winners from investors pouring cash into US money market funds over the past two weeks, as the collapse of two regional US banks and the rescue deal for Credit Suisse raised concerns about the safety of bank deposits. More than $286bn has … [Read more...]
If You’re a Highly Effective Person, We Should Talk
Happy Friday. It’s tax season. Unfortunately for mutual fund investors, this can be the time of year you realize your fund was down, but you still owe taxes. Because of its structure, a mutual fund puts you in the same boat as other investors. If some head for the exits, the manager is forced to liquidate positions to raise cash. Some of the positions he sells could be at a long-term gain creating a taxable event. It’s a lot like going out to dinner with ten of your college friends, and then two of them leave before helping with the bill. Not cool. When Vanguard founder Jack Bogle … [Read more...]
Trouble Now Brewing at Deutsche Bank
European banks are experiencing a bit of turmoil, and it looks like Deutsche Bank is the next victim. Martha Muir, Katie Martin, and Sam Fleming report in the Financial Times: Bank stocks took a heavy hit on Friday, with Deutsche Bank falling 10 per cent, as policymakers struggled to calm nerves after failures on both sides of the Atlantic. The Stoxx 600 banks index, which contains Europe’s biggest lenders, fell 3.6 per cent by mid-afternoon, outstripping weakness in broad national indices. Germany’s Commerzbank fell 5 per cent while France’s Société Générale lost 5.6 per cent. “Europe … [Read more...]
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