There are two main ways for companies to finance themselves, debt and equity. Debt financing means that you borrow money and promise to pay it back on some set schedule with some set interest rate. Your creditors are entitled to exactly what you owe them, and if they don’t get it then they can sue you for the money, or put you into bankruptcy if you don’t have it.
Equity financing means that you sell stock to investors and you never have to pay it back. Your shareholders are not entitled to anything specific; there is no particular amount of money that they have to get back or any schedule for when they get it. But they are in some loose sense part-owners of the company, they have a residual claim on its cash flows, and they vaguely hope to one day get their money back through dividends or stock buybacks or mergers. They can’t make you share the profits in any direct way, but a share of the profits is what they want. And while there is no guarantee of what they’ll get, there is also no limit to it: If they buy 1% of the stock when the company is worth $10 million, they put in $100,000; if they then sell when the company is worth $100 billion, they get back $1 billion. That’s hard to do with debt.
These different economics come with different legal regimes. Broadly speaking, creditors have a specific contract — a bond indenture or loan agreement — saying how much they are owed, and they are entitled to what’s in the contract. If the company breaches the contract — if it doesn’t pay them what it owes when it owes them, or if it doesn’t do something else required by the agreement — then the creditors can sue and get their money back or put the company in bankruptcy. But if the company doesn’t breach the contract, then the creditors can’t complain.
And so we have talked occasionally around here about various sorts of debt shenanigans, where a company’s lawyers (or some of its creditors) read the debt contracts cleverly and say “hey, technically, this contract allows us to make life much worse for some of our creditors, we can work with that.” Generically, the way that this often works is that the company takes some value from 49% of its creditors and gives it to the other 51%, in exchange for more money or flexibility. And then the 49% creditors sue, saying “that’s not fair, you can’t do that, that’s not allowed by the agreement,” and the company says “no, actually, this paragraph says we can do that,” and there is a highly technical argument over what precisely the language of the contract allows.
Equity is different. Shareholders have much less in the way of contractual rights; they don’t have much legal right to force the company to do anything specific. But there are broad fiduciary duties requiring company executives not to put one over on shareholders, to treat shareholders fairly, to run the business on behalf of all of the shareholders equally. The shareholders are not entitled to specific stuff, but they are entitled to general fairness.
Last year, in this column, I wrote about a weird merger deal where a buyer was trying to pay some of the target shareholders more than others. My basic point was that you mostly can’t do that — there are some exceptions, but generally speaking the board of directors of a company has an obligation to treat its shareholders fairly, and courts will get annoyed if it doesn’t. And then in the next section of that column, we talked about some lawsuits over distressed debt shenanigans. “In debt, the rule is different,” I wrote. Treating creditors unfairly is generally fine:

The basic question in these cases is: Can you just read the debt documents as craftily as possible, do whatever is strictly allowed by the text, and benefit some creditors at the expense of others? Or is there some background requirement of fairness or “oh come on it can’t have meant that,” so that your craftiest readings don’t actually work? The traditional view is that shareholders are entitled to fiduciary duties — which is why mergers have to be more or less fair to all shareholders — while creditors are entitled only to the letter of their contract. That traditional view has given rise to, you know, all this: a whole industry of distressed-debt cleverness built on structuring transactions to exploit the documents as much as possible. I suppose it is possible to take it too far, though: If creditors get too good at ruthlessly exploiting each other, eventually courts might step in and say “oh come on it can’t have meant that.” If a rule like “creditors are only entitled to what their contract explicitly says” always leads to absurd results, it might stop being the rule.

Here is a fascinating paper, and a related blog post, by Jared Ellias and Elisabeth de Fontenay about “Law and Courts in an Age of Debt”:

Highly leveraged firms are now commonplace in many U.S. industries. Shifting from equity to debt financing is not simply a matter of optimizing a firm’s cost of capital, however. It also has profound implications for the firm’s behavior and investor outcomes.
In Law and Courts in the Age of Debt, we describe one underappreciated feature of the shift from equity to debt, which is that courts resolve disputes among shareholders and among creditors using strikingly different rules and decision frameworks. Shareholder disputes are typically resolved using equitable doctrines such as fiduciary duties, with the explicit goal of reaching a substantively fair result. In creditor disputes, by contrast, courts tend to limit their role to formal contract interpretation and procedural oversight, often reaching results at odds with both market expectations and notions of fairness. For example, a controlling stockholder attempting a minority freezeout faces punishing scrutiny aimed at ensuring fair terms for the minority stockholders, while majority creditor groups today can, and increasingly do, receive judicial blessing for transactions that simply extract wealth from other creditors (an outcome colorfully referred to by practitioners as “lender-on-lender violence”).
This disparate approach is increasingly difficult to justify. We argue that it rests on antiquated paradigms of powerless shareholders, in the one case, and all-powerful banks, in the other. Judges compound this error by incorrectly assuming that creditors can prevent all opportunistic behavior solely through contract language, when they make no such assumption in the case of shareholders.
There is no easy fix for this doctrinal confusion, however. By increasing their leverage, firms have typically also increased the complexity of their capital structure, creating more opportunities for conflicting incentives among investors and thus more potential for disputes. We simply suggest that, under the current judicial approach to creditor disputes, we should expect to witness more opportunistic investor behavior, rather than less.

One interesting thing to think about is whether some of the causation might run the other way: Are highly leveraged firms now commonplace because they allow for more opportunistic behavior? If you are the owner of a company that needs financing, and you are choosing whether to issue more equity or more debt, you will have a series of considerations:

• 1) There are, as it were, first-order corporate finance considerations: Selling equity gives up more ownership of your company, and thus more upside if things go right; if you are optimistic you will not want to sell equity. Selling debt requires repayment, though, and if things go poorly having too much debt can destroy your company. You will want to raise only as much debt as you can safely pay off.
• 2) There are various considerations that come from existing market and social and legal structures. You might not want to sell stock to meddling venture capitalists, or in a public offering where it will end up in the hands of activist investors and short-term-focused institutions. You might want to sell debt because interest payments on debt are tax-deductible and the cost of equity is not.
• 3) There is, also, the potential for opportunism. If you sell stock, you mostly cannot be opportunistic in your treatment of your shareholders; they can sue you for breach of fiduciary duty and come to court and say “this wasn’t fair” and a court will agree with them. If you sell debt, you can be very opportunistic in your treatment of your creditors; they can sue you for breach of contract and come to court and say “this wasn’t fair” and you will say “hahahahaha gotcha, in section 19.37(c)(ii) it says I can do whatever I want,” and the court will say “that’s true it does” and let you do whatever you want.

If you are confident in your ability to write and interpret contracts in a way that allows you to be opportunistic (and prevents your creditors from being opportunistic), and willing to put one over on your creditors to maximize value for yourself, you might be inclined to issue relatively more debt and relatively less equity. You get some option value by having more contracts that you can interpret opportunistically, which you don’t get from issuing equity that requires you to act fairly.
If I ran, oh, just for instance a private equity firm that employed a lot of very smart capital-structure experts and retained the best lawyers and got lots of repeat experience buying companies and raising financing for them and doing clever stuff to make money off of them, I might prefer to finance those companies with a lot of debt not only for the favorable tax treatment but also precisely because debt financing is a way for me to express and make money from my cleverness. You can’t be too clever with your shareholders! You can be very clever indeed with your creditors.

@yogi. With all due respect to your vast knowledge,,,,,, Schwab Bank does o=offer its own CD’s. Perhaps not to the general public but to Schwab customers. I have several,,, They aren’t offering them THIS MORNING but have recently. An example, CUSIP # 15987UAV0,,,, maturing 9/23/2024 and paying 5.4%

On the Schwab Brokerage site for CDs, they are offered quite frequently by the Schwab Bank. Then when I look up Schwab Bank on Bank Health website, discussed on another MFO thread, I get the Bank Health Rating of B overall, and F for the 2 subcategories of Deposits and Capitalization. Those F subcategory ratings have kept me from buying a Schwab Bank CD in the past

https://www.sec.gov/Archives/edgar/data/809593/000113322823003752/abzscef-html6518_497.htm
497 1 abzscef-html6518_497.htm AMERICAN BEACON ZEBRA SMALL CAP EQUITY FUND - 497
American Beacon Zebra Small Cap Equity Fund
Supplement dated May 24, 2023
to the
Prospectus, Summary Prospectus, and Statement of Additional Information, each dated January 1, 2023
The Board of Trustees of American Beacon Funds has approved a plan to liquidate and terminate the American Beacon Zebra Small Cap Equity Fund (the “Fund”) on or about July 14, 2023 (the “Liquidation Date”), based on the recommendation of American Beacon Advisors, Inc., the Fund’s investment manager.
In anticipation of the liquidation, effective immediately, the Fund is closed to new shareholders. In addition, in anticipation of and in preparation for the liquidation of the Fund, Zebra Capital Management, LLC, the sub-advisor to the Fund, may need to increase the portion of the Fund’s assets held in cash and similar instruments in order to pay for the Fund’s expenses and to meet redemption requests. The Fund may no longer be pursuing its investment objective during this transition. On or about the Liquidation Date, the Fund will distribute cash pro rata to all remaining shareholders. These shareholder distributions may be taxable events. Thereafter, the Fund will terminate.
The Fund will be liquidated on or about July 14, 2023. Liquidation proceeds will be delivered in accordance with the existing instructions for your account. No action is needed on your part.
Please note that you may be eligible to exchange your shares of the Fund at net asset value per share at any time prior to the Liquidation Date for shares of the same share class of another American Beacon Fund under certain limited circumstances. You also may redeem your shares of the Fund at any time prior to the Liquidation Date. No sales charges, redemption fees or termination fees will be imposed in connection with such exchanges and redemptions. In general, exchanges and redemptions are taxable events for shareholders.
In connection with its liquidation, the Fund may declare distributions of its net investment income and net capital gains in advance of its Liquidation Date, which may be taxable to shareholders. You should consult your tax adviser to discuss the Fund’s liquidation and determine its tax consequences.
For more information, please contact us at 1-800-658-5811, Option 1. If you purchased shares of the Fund through your financial intermediary, please contact your broker-dealer or other financial intermediary for further details.
***********************************************************
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE

@yogi. With all due respect to your vast knowledge,,,,,, Schwab Bank does o=offer its own CD’s. Perhaps not to the general public but to Schwab customers. I have several,,, They aren’t offering them THIS MORNING but have recently. An example, CUSIP # 15987UAV0,,,, maturing 9/23/2024 and paying 5.4%

PIMIX hasn't had a cap gains distribution since 2015, so all else being equal, a similar fund with an ETF structure does not seem likely to be more tax efficient.
[Because of the way tax efficiency is calculated, if you have two funds with equal gross earnings, i.e. before subtracting expenses, then the cheaper fund - the one with the higher net returns - will be less tax efficient. This is a good thing! Lower expenses mean higher income means higher divs means poorer tax efficiency. For example, PONAX has a 3 year tax cost ratio of 1.91%, while PIMIX has a 2.06% tax cost ratio.]
The last time PIMCO launched an ETF managed the same way as its (then) flagship fund, Bill Gross was running things, the fund was PTTRX, and the ETF was BOND. A lot has changed since then.
BOND was expected to underperform PTTRX because it could not use derivatives. It outperformed out of the gate, for reasons that led to a $20M settlement with the SEC.
https://www.sec.gov/news/press-release/2016-252
In 2014 the SEC removed the restriction on derivatives from BOND.
https://financialpost.com/investing/etfs/sec-allows-pimco-total-return-etf-to-trade-derivatives
Around 2017 BOND changed its name from Total Return Active ETF to Active Bond ETF and changed its objective.
In short, this is not Bill Gross' PIMCO. Perhaps this new flagship ETF clone will have better success.

@Old_Joe : Good post. Why do you think more people don't move their money ? When rates were .5% to 1% I can understand not moving your money, but at rates around 5% why not make the move ?
For the first time ever I received a personal note from bank thanking me for being a customer. It was kind of hard to believe as I had moved half of my cash out & only kept a higher amount to cover a new vehicle purchase.

5/22/23 filing:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1450011/000119312523149609/d465321d497.htm
or 5/19/23 filing:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1450011/000119312523149472/d485523d485bpos.htm

https://www.sec.gov/Archives/edgar/data/357204/000158064223002855/sbhliquidationletter.htm
497 1 sbhliquidationletter.htm 497
CI Asset Management
SEGALL BRYANT & HAMILL TRUST
Segall Bryant & Hamill Fundamental International Small Cap Fund
Supplement dated May 23, 2023 to the
Summary Prospectus, Prospectus and Statement of Additional Information,
each dated May 1, 2023
On May 18, 2023, the Board of Trustees (the “Board”) of the Segall Bryant & Hamill Trust (the “Trust”), based upon the recommendation of Segall Bryant & Hamill, LLC (the “Adviser”), the investment adviser to the Segall Bryant & Hamill Fundamental International Small Cap Fund (the “Fund”), a series of the Trust, has determined to close and liquidate the Fund. The Board concluded that it would be in the best interests of the Fund and its shareholders that the Fund be closed and liquidated as a series of the Trust, with an effective date on or about June 26, 2023 (the “Liquidation Date”).
The Board approved a Plan of Termination, Dissolution, and Liquidation (the “Plan”) that determines the manner in which the Fund will be liquidated. Pursuant to the Plan and in anticipation of the Fund’s liquidation, the Fund will be closed to new purchases effective as of the close of business on May 30, 2023. However, any distributions declared to shareholders of the Fund after May 30, 2023, and until the close of trading on the New York Stock Exchange on the Liquidation Date will be automatically reinvested in additional shares of the Fund unless a shareholder specifically requests that such distributions be paid in cash. The Fund has declared a special distribution which will be paid prior to the liquidation. Please see the Fund’s website at www.sbhfunds.com for additional information regarding the special distribution.
Although the Fund will be closed to new purchases as of May 30, 2023, you may continue to redeem your shares of the Fund after May 30, 2023, as provided in the Prospectus. Please note, however, that the Fund will be liquidating its assets between June 1, 2023 and the Liquidation Date.
Pursuant to the Plan, if the Fund has not received your redemption request or other instruction prior to the close of business on the Liquidation Date, your shares will be redeemed, and you will receive proceeds representing your proportionate interest in the net assets of the Fund as of the Liquidation Date, subject to any required withholdings. As is the case with any redemption of fund shares, these liquidation proceeds will generally be subject to federal and, as applicable, state and local income taxes if the redeemed shares are held in a taxable account and the liquidation proceeds exceed your adjusted basis in the shares redeemed. If the redeemed shares are held in a qualified retirement account such as an IRA, the liquidation proceeds may not be subject to current income taxation under certain conditions. You should consult with your tax adviser for further information regarding the federal, state and/or local income tax consequences of this liquidation that are relevant to your specific situation.
All expenses incurred in connection with the transactions contemplated by the Plan, other than the brokerage commissions associated with the sale of portfolio securities, will be paid by the Adviser.
Please retain this supplement with your Summary Prospectus, Prospectus and
Statement of Additional Information.

https://www.sec.gov/Archives/edgar/data/357204/000158064223002856/sbhworkplacesupplement.htm
497 1 sbhworkplacesupplement.htm 497
CI Asset Management
SEGALL BRYANT & HAMILL TRUST
Segall Bryant & Hamill Workplace Equality Fund
Supplement dated May 23, 2023 to the
Summary Prospectus, Prospectus and Statement of Additional Information,
each dated May 1, 2023
On May 18, 2023, the Board of Trustees (the “Board”) of the Segall Bryant & Hamill Trust (the “Trust”), based upon the recommendation of Segall Bryant & Hamill, LLC (the “Adviser”), the investment adviser to the Segall Bryant & Hamill Workplace Equality Fund (the “Fund”), a series of the Trust, has determined to close and liquidate the Fund. The Board concluded that it would be in the best interests of the Fund and its shareholders that the Fund be closed and liquidated as a series of the Trust, with an effective date on or about June 26, 2023 (the “Liquidation Date”).
The Board approved a Plan of Termination, Dissolution, and Liquidation (the “Plan”) that determines the manner in which the Fund will be liquidated. Pursuant to the Plan and in anticipation of the Fund’s liquidation, the Fund will be closed to new purchases effective as of the close of business on May 30, 2023. However, any distributions declared to shareholders of the Fund after May 30, 2023, and until the close of trading on the New York Stock Exchange on the Liquidation Date will be automatically reinvested in additional shares of the Fund unless a shareholder specifically requests that such distributions be paid in cash. The Fund has declared a special distribution which will be paid prior to the liquidation. Please see the Fund’s website at www.sbhfunds.com for additional information regarding the special distribution.
Although the Fund will be closed to new purchases as of May 30, 2023, you may continue to redeem your shares of the Fund after May 30, 2023, as provided in the Prospectus. Please note, however, that the Fund will be liquidating its assets between June 1, 2023 and the Liquidation Date.
Pursuant to the Plan, if the Fund has not received your redemption request or other instruction prior to the close of business on the Liquidation Date, your shares will be redeemed, and you will receive proceeds representing your proportionate interest in the net assets of the Fund as of the Liquidation Date, subject to any required withholdings. As is the case with any redemption of fund shares, these liquidation proceeds will generally be subject to federal and, as applicable, state and local income taxes if the redeemed shares are held in a taxable account and the liquidation proceeds exceed your adjusted basis in the shares redeemed. If the redeemed shares are held in a qualified retirement account such as an IRA, the liquidation proceeds may not be subject to current income taxation under certain conditions. You should consult with your tax adviser for further information regarding the federal, state and/or local income tax consequences of this liquidation that are relevant to your specific situation.
All expenses incurred in connection with the transactions contemplated by the Plan, other than the brokerage commissions associated with the sale of portfolio securities, will be paid by the Adviser.
Please retain this supplement with your Summary Prospectus, Prospectus and
Statement of Additional Information.

I don’t know. Bloomberg’s Chris Anstey and Liz McCormick report:

Investment bank clients are peppering Wall Street with questions about what happens if the US Treasury in coming weeks runs out of cash and does the unthinkable — failing to make payments due on Treasury securities, the bedrock of the global financial system. …
One school of thought is that the impact might not be so damaging. After all, since the 2011 debt-limit crisis, market participants have worked out a process for dealing with the Treasury announcing that it couldn’t make an interest or principal payment.
But JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon warned earlier this month that even going to the brink is dangerous, with unpredictable consequences.
“The closer you get to it, you will have panic,” he said in a May 11 interview with Bloomberg Television. “The other thing about markets is that, always remember, panic is the one thing that scares people — they take irrational decisions.”
And even a key group that helped to compile the emergency procedures, the Federal Reserve Bank of New York-sponsored Treasury Market Practices Group, has issued its own caution.
“While the practices contemplated in this document might, at the margin, reduce some of the negative consequences of an untimely payment on Treasury debt for Treasury market functioning, the TMPG believes the consequences of delaying payments would nonetheless be severe,” it said in its December 2021 gameplan.

And:

“We are likely to see localized dislocations in the event of missed payment,” if that were to happen, JPMorgan rates strategists, co-led by Jay Barry, wrote Friday in a Q&A for clients on a technical default.
RBC Capital Markets strategists, also writing Friday, said they “doubt” a downgrade would trigger any forced reallocation by fund managers away from Treasuries.
At the same time, RBC’s Blake Gwinn and Izaac Brook cautioned that the “back-office issues” of delaying payments “could very easily bleed into the front-office, causing disruptions to liquidity and market functioning.”
The TMPG noted that firms holding Treasuries in custody for other financial institutions tend to advance payments scheduled for those securities, and would need to sort how to proceed if those payments weren’t received from the Treasury on time.
Firms that offer pricing on Treasuries could run into challenges, “such as setting the price of a Treasury subject to a delayed payment to $0,” the group said.
Some market participants “might not be able to implement” the contingency plans, “and others could do so only with substantial manual intervention in their trading and settlement processes, which itself would pose significant operational risk,” the TMPG said.

Yesterday FT Alphaville published much of that JPMorgan rates strategy Q&A, which I would say is broadly sanguine about market plumbing. The first point is that, if the US government does default, that will probably cause the prices of Treasury bonds to go up, since a government debt default is a crisis and crises cause a flight to safety and the safest assets are, still, Treasuries:

This is certainly not our modal view, but in the unlikely event of a technical default, we think Treasury yields would decline and the curve would steepen. This seems unusual in the context of a default, but Treasuries have rallied into the latter stages of other serious debt ceiling debates in 2011 and 2013.

From first principles, if a US debt default does not reduce the value of Treasuries, then Treasuries should remain pretty useful for plumbing and collateral purposes. Of course very little about financial plumbing is derived directly from first principles, and if your computer has a switch that is like “IF bond is defaulted THEN don’t accept it as collateral,” then there are problems. But people have had years of debt-ceiling warnings to adjust their switches and one hopes they have things kind of right:

Treasury can, in principle, delay coupon or principal payment dates. If Treasury announces its intention to postpone a payment date in advance (the day before the payment is due), the security will remain in Fedwire, and would therefore still be transferable. …
If Treasury fails to notify investors of its intent to delay a principal payment due the following day by approximately 10:00 PM, the security in question will drop out of Fedwire, and such defaulted security will not be transferable. If (only) a coupon payment is missed, however, the underlying security is still in the system and remains transferable. ...
The status of Treasury collateral depends on the timing of Treasury’s notification of any delays in payments. If done in the timeframe discussed earlier, the security remains in Fedwire and is still transferable. As a result, it could in principal be used as collateral for repo and derivatives transactions, although possibly with higher haircuts.
If notification deadlines are not met, particularly for principal payments, that particular security is dropped out of the system and is no longer transferable, and as a result, cannot be used as collateral. It is possible that an OTC market may develop for securities that drop out of the system, but the likelihood of such an outcome is unclear at the present time.
Since Treasury securities do not have cross-default provisions, other Treasury securities that have not had a delayed/missed payment will remain transferable on Fedwire and can therefore continue to be used as collateral. ...
Under the US non-cleared margin requirements (NCMR) finalized by CFTC and prudential regulators, Treasury securities are considered eligible collateral even in the case of a missed payment. However, this is not the case under the UK and EU NCMR regimes. Thus, for any transactions facing counterparties in those regions, defaulted Treasury securities would be assigned zero collateral value, requiring the swap counterparty to substitute or post additional collateral. …
We believe the Federal Reserve will accept defaulted Treasuries as collateral at the discount window.

And so on. Money market funds, for instance, hold about $1 trillion of short-term Treasuries; “ultimately,” say JPMorgan, “we believe these funds would not be forced to liquidate Treasury securities in a technical default.”
I want to make a couple of points here:

• 1) I assume that they are basically correct not to be too worried about the plumbing. We have been having debt-ceiling crises every few years for ages now, and surely everyone has war-gamed this out over and over again. Financial markets are not full of idiots, and it would be annoying if this extremely predictable and predicted event brings down the global financial system through some technicality.
• 2) That said, I assume that with, like, 85% confidence. There is a lot of stuff out there. Surely the biggest global banks and asset managers have gamed out how they will keep markets going in the event of a US default, but is there some smaller firm whose computers will say “Treasury price = $0” and cause chaos? Maybe!
• 3) If you work in some corner of financial plumbing that you think won’t work in the event of a default, please do let me know! Send me an email. Also, though, fix it? You still have a little bit of time, and you’ve had plenty of warning.
• 4) Wouldn’t it be so tiresome to work in financial plumbing at some big bank and have to go to all the meetings about this stuff? To have to build all the systems to deal with a US government default, just because the US government can never get its act together to get rid of the debt ceiling, and because debt-ceiling negotiations always have to go to the last second? Like imagine pulling the all-nighters at JPMorgan to prepare for this, scrambling to save the US government from the consequences of its own incompetence and malice, and meanwhile the Securities and Exchange Commission is fining because sometimes you text your colleagues about work. Just pay your debts, come on.

The basic question about this year’s US regional banking crisis is “why weren’t the banks prepared for the very predictable problems that they faced when interest rates went up,” and the basic answer is “because they thought rates going up would be good for them.”
We have talked about this a few times around here, and I have described two theories of banking. In Theory 1, banks have short-term deposits and invest them in long-term assets, so when interest rates go up, their costs go up (they have to pay more on their deposits) while the value of their assets goes down (those assets continue to pay fixed rates, and now are worth less). Rising rates are bad. In Theory 2, bank deposits are actually long-term, because the banks have enduring relationships with their customers and their customers are unlikely to leave, or demand higher rates, as interest rates go up. And so banks can use those long-term-ish deposits to fund long-term assets, and as interest rates go up, the banks can earn higher rates, don’t have to pay higher rates, and so make more money. Rising rates are good. Theory 2 is the traditional theory of banking, and it is why many banks were not adequately prepared for rising rates.
At the Wall Street Journal today, Jonathan Weil and Peter Rudegeair report on Theory 2:

The recent spate of bank failures is upending a long-held theory among banking executives and regulators—that the value of a lender’s deposit business goes up when interest rates move higher.
The theory rests on an assumption: That banks don’t have to pay depositors much to keep their money around, even as rates rise. The deposits would be a stable source of low-cost funding while the bank earned more money lending at higher rates.
The more rates rose, the bigger the franchise value of those deposits would become—a natural hedge against the declining market values of a portfolio of fixed-rate loans and bonds.
But if rising rates or plunging asset values cause a bank’s depositors to flee en masse, the franchise value is zero—and, worse, it could beget other bank runs. That is what happened with Silicon Valley Bank. …
The Federal Reserve, which both regulates banks and sets interest-rate policy, in a November report pointed to large unrealized losses on banks’ bondholdings due to rising rates. Things weren’t so bad, the Fed said, because “the value of banks’ deposit franchise increases and provides a buffer against these unrealized losses.”

Not really! And yet Theory 2 has some truth to it, just not so much for regional banks:

JPMorgan Chase lifted its outlook for how much it expects to earn this year from its lending business following the recent purchase of First Republic, bucking a broader trend among US banks of shrinking profits owing to deposit withdrawals.
In a presentation for its investor day on Monday, JPMorgan lifted its 2023 target for net interest income (NII), excluding its trading division, to about $84bn from $81bn previously, because of its deal for First Republic. NII is the difference between what banks pay on deposits and what they earn from loans and other assets. …
Large lenders such as JPMorgan have benefited from the US Federal Reserve lifting interest rates last year, which enabled them to charge borrowers more for loans without passing on significantly higher rates to savers.
The bank said its deposits, which totalled $2.3tn at the end of March, were “down slightly” year on year. Chief financial officer Jeremy Barnum said the expectation was that system-wide deposits at US banks would continue to decline as the Fed tightened monetary policy and customers chased better yields on their cash.
“We will fight to keep primary banking relationships but we are not going to chase every dollar of deposit balances,” Barnum added.
JPMorgan is paying 1.21 per cent on average to depositors, lower than the 1.75 per cent average of its peers, according to data from industry tracker BankReg.

See, that’s a deposit franchise. Having a valuable deposit franchise means that you don’t have to chase every dollar of deposits, because they don’t go anywhere.

Pimco already has a lineup of multisector OEF & CEF funds. Now comes its active multisector ETF.
https://twitter.com/ETFhearsay/status/1661115242468745263?t=-vAgfbXrbhcW-UXl6z2YiQ&s=19

Vanguard is testing out two different cash programs. One is a bank sweep option for brokerage settlement accounts (Vanguard Cash Deposit). The other (Vanguard Cash Plus Account) provides enables bill payment but only via ACH pull (no checkwriting, no bill pay, no debit/ATM card).
https://investor.vanguard.com/investment-products/cash-investments
These programs are more or less by invitation:

You must be an existing Vanguard client to be considered. Not all Vanguard clients will be eligible to open a Cash Plus Account.
You must be an existing Vanguard client to be considered. Not all Vanguard clients will be eligible for Vanguard Cash Deposit.

Every time I've tried, I've received the message:

Enrollment is closed for now, but we’ll be in touch
We’re sorry you weren’t included in the pilot phase of Vanguard Cash Deposit. We’re in the process of adding clients and will let you know as soon as it’s ready for you.
We're sorry you weren't included in the pilot phase of the Vanguard Cash Plus Account. We're in the process of adding clients and will let you know as soon as it's ready for you.

Regarding the settlement sweep account, it's a nice option for people who don't feel comfortable using a government MMF (VMFXX) and would prefer a bank sweep. But it comes with a cost. Current 7 day yield on VMFXX is 5.02% (annual yield of 5.15%), while the bank sweep offers an APY of 3.5%.
The bank offering is more competitive. 4.5% though with very limited "banking" capabilities. Note that it is structured as a brokerage account with a bank sweep, as opposed to a pure bank account like a Schwab Bank account.
These two programs are all well and good, but not something I'd go out of my way for. Though 4.5% FDIC-insured is attractive at the moment. As a Vanguard client, I might use it (if Vanguard would deign to let me in).
I've seen at least a couple of the sweep program banks mentioned in articles of banks possibly at risk: Huntington National Bank (part of Huntington Bancshares) and Valley National Bank. There are also very solid banks on the list.

@davidrmoran: preserve us from the 70's and those interest rates!

not 51y ago

@fred495...question if you are comfortable answering...how much of a change meaning your 100% Treasury MMKT and FDIC CD portfolio from your past portfolio...were you very heavy in those investments prior and if so what % of your portfolio?
FWIW...I've been 85-90% for many years in those types of investments....now ~ 95%...."stop playing the game if you feel you've got enough...don't get greedy...get your portfolio where you can sleep well at night" I'm still working and do I guess you would say better than average out there...working for the "fun of the game, camraderie and challenge.."
...who the heck knows though right?
Good Luck to ALL,
Baseball Fan

I am a retired and fairly conservative investor who really doesn't need a lot more money - but I certainly don't want to lose a lot. In the current environment, preserving capital is more important to me than seeking return on capital. I prefer to err on the side of caution. As you said, "who the heck knows"?
I have been 100% in a Treasury only MM fund and in FDIC insured CDs from large national banks since the early spring of last year. Currently, the split between Treasury MM and CDs is approx. 40/60. This percentage will change as CDs mature and the proceeds are reinvested in the future.
Prior to that I was approx. 50% in allocation/options/macro trading funds with fairly low standard deviations, such as FMSDX, JHQAX, BLNDX, PVCMX, etc., and the other 50% in bond funds, such as NVHAX, OSTIX, RCTIX, TSIIX, etc.
Good luck,
Fred

I just spoke to Schwab a few minutes ago about uninvested cash just sitting. I was told that it is swept into Schwab Bank and pays .45%. I would not mention this normally but right now I am concerned about all MONEY market accounts. My adult kid sold off a major position in Swvxx and so far is too lazy to move it to her synch OLS.

@hank,
Japanese Companies = yes
Japanese Economy = not so sure
Buffet's 5 Japanese stocks:
japanese-stocks-that-warren-buffett-just-bought
Japanese Funds/ETFs i have followed:
HJPNX
HJPSX
FJPNX
DXJ - great returns over the last 5 years

***Also posted on Big-Bang
I currently hold FXAIX (FIDO) and PRILX (Parnassus), taxable and ROTH, respectively.
I am looking to compliment each of them with another fund (Mutual or ETF). I currently also have a small position in TDVG (PRDGX-TRP) but not sure if it's the best complimentary LCB option.
I am having a little difficulty narrowing down an ETF or Mutual fund; a consideration is JQUA (JPMorgan Quality Factor). One issue I am coming across is tax efficiency; most of my DD is leading me to higher than desired Tax Cost Ratio Mutual funds and some ETF's with .7 - .8 TCR.
Not that .7 - .8 is terrible, but if I am to invest in an ETF, I would prefer a more tax efficient one, if possible. Maybe it's not viable for this category?
EDIT: Just came across a 1-year old ETF from Capital Group "CGUS" (combining Growth and Income....can serve as a compliment to the S&P 500....). Any thoughts on this?
I'm looking to invest about 10% in this "complimentary" MF and/or ETF
Any suggestions, constructive criticisms, thoughts or idea's are very welcome!
Thank you in advance!
Matt

I am starting this thread because I have more questions than answer when it comes to money creation. Econ 101 explains that "money creation" is what banks do with excess reserves and how banks can create $9 of debt (loaned money...known as a liability) from a single $1 of revenue (known as an asset or as a bank deposit).
From Econ 101:
The Banking System and Money Creation
From this reading, I then found data on US income tax payments (deposits (taxes) made to the IRS).
Federal_tax_revenue_by_state
Let's consider the Federal Reserve and the IRS as one big bank. In 2019, the IRS collected $3.56 Trillion dollars in tax revenue. This was collected from earned and unearned income (taxes owed by US citizens). On the liability side of this bank, US citizens are running a debt (issued by the US government) of 31.8 Trillion dollars.
https://usdebtclock.org/
In the banking world (fraction reserve system),
Assets + Liabilities = Total Deposits
So,
US Tax revenue ($3.56T) + US Debt ($31.8T) = $35.36T
Using the same numbers we can determine that 10% reserves equals $3.536T which is slightly less than the $3.56T collected in tax revenue (IRS assets). This would make a bank's accountant department happy. ;)
If this Fractional Reserve system is how banks operate (10% bank deposits & 90% bank loans), it appears the US government (Bank of USA) operates in a similar manner, collecting about 10% in revenues (taxes) and loaning out 90% in debt (liabilities).
Now, if we all can agree that the US national debt is "loaned out" and that it will create new tax revenues for years to come and so long as we are collecting at least 10% of "total deposits" in tax revenue each year we should be as solvent as the banking system...
O.K., now I see the problem! :(

#5 @Sven did you happen to see 60 Minutes last night ? Over charging for tools that the armed forces use !! All at tax payer expense ! Armed services hurt to : 100 tanks ordered , can only buy 90 with their allotted dollars.