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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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In case of DEFAULT

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  • @Old_Joe : I did 1/2 of RMD last night . I'll be in contact with Vanguard & IRS this morning to make sure your SS gets paid in a timely matter.
    Sleep well, Derf
  • It is somewhat ironic, maybe even funny, that one of the demands to pass the debt limit is that congress wants work requirement rules stiffened for those receiving aid yet congress is doing little to no work themselves while receiving paychecks (aid) from these same workers. Go figure. Hypocrites.
  • larryB said:

    @Observant1. I paid my Estimated Tax due in June early to help the government delay the default. Hope it helps.

    My Es-tax won't cover very many SSec checks, but I'm planning on doing the same thing this week.
  • @dtconroe I'm surprised to hear that the process to transfer funds is that complicated and slow at Schwab.
    I just moved funds from my Fidelity investment account to my local (Synovus bank) checking account -- online. I clicked on Transfer, clicked to select From Where and select To Where, then Submitted. The funds were in my checking account the next morning.

    Fidelity automatically carries out the process of extracting the money from my MM Account FZDXX, moving it to my Core Account, then sending it to my bank.
    Very smooth.

    NOW -- if the country has a default lasting more than a few hours, how much of these everyday processes might be curtailed or even stopped? Could the local bank close the ATM? Or lock the doors?
    Remember the bank panic in the movie A Wonderful Life?
    I don't know and I hope we don't find out.
    Or maybe Jimmy Stewart will go to Washington and save us (to mix a couple of movie roles).

    David
  • At Schwab, I just use the linked Schwab Bank that has Bill Pay (as backup, as I use another Bill Pay as primary); it is also linked to some other accounts. If you sell Schwab m-mkt fund, the money is available for transfer to Schwab Bank the next morning (T+1).

    At Fido, I use what works at Fido.
  • 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.
  • edited May 2023
    I detect a note of hysteria in this thread.:)

    Calm down. Everything’s going to be OK. If all else fails the govt. will print more money. (It’ll just be worth a little less.)

    We survived ‘07-‘09 in terms of money market funds and FDIC insured bank accounts. The govt. opened up the spigots to prop-up faltering money market funds. Now … whether you’re a Dem or Rep you know what drives politicians of every stripe is the desire to be re-elected. Nobody involved in this theatrical affair wants his fingers anywhere near actions (or inaction) that results in any citizen invested in a bank savings account or money market fund losing a dime over this. Regardless of party, the stain on his fingers would be irremovable and likely lead to loss of elected office. Neither of the two principals (McCarthy / Biden) is that dumb..
  • edited May 2023

    @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

  • edited May 2023
    dtconroe said:

    Hi Fred, I am not sure what kind of portfolio you have. I have both a traditional taxable account, along with an IRA account. I am keeping my Brokerage IRA portion in MMs and CDs, but I am transferring "part" of my traditional brokerage taxable account to my Banking Account (checking and Savings) for liquidity reasons. Do you count your Banking Account as part of your portfolio?


    Hi dt,

    Good to hear from you again.

    I have a taxable and an IRA account at a brokerage firm which I define as my portfolio.

    I also have a "liquid" checking account at a large national bank to deposit my monthly SS and pension checks. I am able to defray all my living expenses from these accumulated deposits and do not consider them part of my portfolio. If there ever is a problem accessing these funds at my bank, I also keep some cash at home that will cover approx. 2 months of daily living expenses.

    Good luck,

    Fred

  • Based on the lack of progress on the debt negotiations, I am reducing my Brokerage Money Market holdings in my taxable account, and moving more money into my banking checking and savings accounts. I am well below the FDIC limits for protection on my banking assets, so the liquidity of having more assets in my banking account seems like a rational move, even if it is only temporary.
  • @dtconroe…. Me as well. As I have de-risked our assets I feel that I have prepared as best I can under the circumstances. As a former History grad student I have been pondering how this will be viewed fifty years from now if we indeed blow it up.
  • Yogi: "At Schwab, I just use the linked Schwab Bank that has Bill Pay (as backup, as I use another Bill Pay as primary); it is also linked to some other accounts. If you sell Schwab m-mkt fund, the money is available for transfer to Schwab Bank the next morning (T+1)"

    When I have researched Schwab Bank in Health Ratings for Banks, I get an overall grade of "B", but the Deposit and Capitalization subcategories are "F". That is not very inspiring to me, and the reason I will not use Schwab for CDs. Am I missing something regarding the health and safety of Schwab Bank?
  • edited May 2023
    @dtconroe, Schwab Bank is part of Schwab (holding co), and it is Schwab (holding co) that undergoes Fed stress-tests. There is no reason for Schwab to overcapitalize Schwab Bank so long as it is on the hook. Schwab Bank doesn't offer its own CDs - the only CDs are on Schwab brokerage platform and they are from other banks.

    I see Schwab Bank as a service appendage to Schwab Brokerage and have no problems in using its features to the extent that they complement/supplement brokerage services. Its basic services are checking, savings, ATM/debit card, credit card, lending (mortgages, secured lending; Schwab Brokerage customers probably get favorable treatment). Clearly, Schwab Bank isn't comparable to JPM, C, BAC.
  • edited May 2023
    @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%
  • @larryB, thanks for the info. I just browsed Schwab Bank site w/o login & didn't see any CDs offered. Next time I log into Schwab, I will check out Schwab Bank CDs too.

    In the past I have used Schwab Brokerage to buy other bank CDs.

    My main point was to ignore Schwab Bank's separate ratings & pay attention only to Schwab (holding co).
  • @YBB. Schwab Bank CD’s seem to me have just recently appeared. I bought my first one March 14th and the latest purchase was May 19.
  • edited May 2023
    JMarshall TPM:

    Shit Gets Real
    There’s a really stunning report out from the Journal last night. Corporate bonds at some of America’s top-rated companies are now trading at a yield discount to Treasuries. This isn’t quite the same as investors thinking U.S. corporate debt is safer over time. It’s focused on the what happens over the next few months rather than where you put money over time. But it’s still a stunning development, cutting at the very architecture of the world financial system and the United States’ position as its gravitational center.

    To put it in layman’s terms, if you need a place to put money over the course of this summer and you need it to be as safe as possible, investors are deciding Microsoft’s corporate bonds are more attractive than bonds issued by the U.S. Treasury.

    It’s a clarifying perspective on the impact of GOP extremism and nihilism on the nation’s finances and global power.
  • @David. +1. Since we know the current make up of the GOP doesn’t really care about the deficit,,, anyone care to discuss what the true motivation might be for holding the world economy hostage?
  • edited May 2023
    @yogibearbull, @dtconroe, @larryB

    Just to confirm your discussion above, Schwab Bank of Texas does in fact issue CDs from time to time, although not all that often, it seems to me. I'm holding one at the moment, purchased back in March, and have seen a few others in the last couple of months. I'm with Yogi: I view Schwab Bank as mostly a service appendage to Schwab Brokerage, and am not concerned about it's safety status- it's Schwab Holding (SCHW) that counts.

    By the way, I believe that I read somewhere in the last few days that Schwab Holding had issued two large tranches of bonds, by way of long-term financing.
  • larryB said:

    @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
  • larryB said:

    @David. +1. Since we know the current make up of the GOP doesn’t really care about the deficit,,, anyone care to discuss what the true motivation might be for holding the world economy hostage?



    Since a significant part of the GOP, including McCarthy, has apparently aligned itself with Trump and his presidential ambitions, I wouldn't be surprised if in their election calculus an American economy in recession, along with high unemployment, would harm Biden but enhance Trump's chances of being elected next year. Too cynical, maybe.

    Don't know what the GOP's "true motivation" is, but I wouldn't be shocked if next year's election isn't on their mind. After all, their bill would only suspend the debt ceiling through March 31. That would tee up another debt ceiling fight for early next year, just months before the November election when control of the White House and Congress will be decided.

    Fred


  • I'm with Fred.
  • If you connect Jan 6 ,,,,, election denialism,,,, worship of the AR 15, crashing the economy while fermenting social chaos by delegitimization of the LGBT community, non Christians and people of color and taking away women’s control of their health choices you can see something bigger. Try to see crashing the economy as a part of a broader movement to take down our democracy as we have known it. If it happens that’s how an Historian might write about these times in 2075.
  • >> an American economy in recession, along with high unemployment,

    cool

    we are truly doomed this time, since neither of this is true, has been true, or is going to be true,

    not remotely
  • edited May 2023
    Not into conspiracy theories. ISTM what we have is politicians behaving badly. Playing to the base.
  • edited May 2023
    Just a follow up note on Charles Schwab banks issuing CDs. On the Schwab Brokerage site today, Charles Schwab Bank, located in Westlake Texas, is offering an 18 month CD with an interest rate of 5.05%. It has an overall B rating, with 2 subcategories with F ratings. It appears that some of the posters on this thread is recommending ignoring that Banks Health Rating Status. Maybe they are right, but I will not invest in any Bank CD offering with that poor of a health rating--there are too many other Banks with better health ratings than this Schwab Bank.
  • @dt. Weiss ratings give Schwab Bank a safety rating of C with a red down arrow. And digging deeper it is noted to be poorly capitalized. I remember weiss to be a hard grader from my days in the insurance business. FWIW,,, B of A got a C+
  • @dt. What safety rating are you using? Thanks for your posts.
  • edited May 2023
    @larryb, good tip on the Weiss ratings. Very helpful.
  • edited May 2023
    larryB said:

    @dt. What safety rating are you using? Thanks for your posts.

    There is another thread on MFO, entitled "Financial Health Ratings of Banks", in which the rating details are discussed. Below is the Overview statement on the Schwab Bank:

    "www.schwab.com888-403-90003000 Schwab Way

    Westlake, TX 76262
    Charles Schwab Bank is an independent bank that was established by its parent holding company, the Charles Schwab Corporation, a publicly traded financial services company listed on the New York Stock Exchange (Symbol:SCHW). The bank was established in order to offer personal banking and lending products in addition to the brokerage services for which the company is commonly known."

    Under the Ratings section at the website, depositaccounts.com/banks/rates, the ratings for the Schwab Bank, you will find the following:
    Overall: B
    Components: Texas Ratio A+, Texas Ratio Trend C+, Deposit Growth F, Capitalization F

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