Likely short sellers are hard at work here
Reuters: U.S. officials assessing possible 'manipulation' on banking shares

Increased short-selling activity and volatility in shares have drawn increasing scrutiny by federal and state officials and regulators in recent days, given strong fundamentals in the sector and sufficient capital levels, said the source, who was not authorized to speak publicly.
"State and federal regulators and officials are increasingly attentive to the possibility of market manipulation regarding banking equities," the source said.
...
Short selling ... is not illegal and considered part of a healthy market. But manipulating stock prices, which the SEC has defined as the 'intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting" stock prices, is.

https://www.reuters.com/markets/us/us-officials-assessing-possible-manipulation-banking-shares-source-2023-05-04/

I don’t post here much, but I do follow the website each day.
So, in turn we are both turning 60 this year. I am military retired and work part time. My spouse works full-time for an insurance broker doing accounting procedures. I have been doing my own investing over the years and mine is at Fidelity and hers at T Rowe Price. I started hers at TRP when she was a green card holder and is now a dual citizen and has been this way for 20+ years.
We are both in generally good health. I have my aches and pains left from the military though which are covered by the VA. Our medical insurance is through Tricare and the other insurances (dental, eyes, car & house) comes through her work at discounted price. We purchased long term care insurance a few years ago for a cheap price for $4k a month if we ever need it.
Our current medical insurance is through Tricare (Humana Military). When we turn 65 will have to get Medicare as primary payer and Tricare for Life becomes secondary payer. We will continue to get our drugs through Medicare/Tricare
So, my wife has suggested to me that I get an advisor to manage what we have so it lasts throughout our lives and have a good time traveling seeing friends and family. Not so quick, wifey, I think I’ve done a good job of investing and saving.
Even took money out of Roth IRA and paid off the house, and this still leaves us over $1/2m to have a good time with.
My military retired check covers all the bills including the insurance coverages, plus some left over. Her pay and my pay collect in savings accounts for vacations, household repairs etc.
So, the odd question everyone has about their portfolio is what to do with it. Where do I put it? I had posted a thread under What is Pension worth: Old_Joe had mentioned to create a new thread in other investing in what to do with your portfolio now. We don’t have anyone to leave our money too, so now it’s time to spend it. But where do we put it.
So here I am:
Her’s
PRWCX – Capital Appreciation
PRHSX – Health Science
PRFDX – Equity Income
TREMX – Emerging Europe, bought it when price tanked 2.60 share
PRSVX – Small Cap Value
His
VWENX – Wellington
FSMEX – Medical Tech & Devices
TRMCX – Mid Cap Value
FIEUX – Europe Fund
FSCOX – Small Cap Foreign
FXAIX – S&P 500 Fund

Nice chart @Yogibearbull. Yes, KRE bottomed (fell out of bed) in March 2020 along with just about everything else. What I find worth watching for now is whether this trend downward accelerates and, if so, whether it has some spillover effect on monetary / fiscal policy. That, in turn, could change the long-term outlook for many other types of investments going forward.

Despite its sharp drop, the regional bank KRE is still +54.4% above its pandemic/2020 low. And now we are having a regional banking crisis, but this subsector hasn't yet reached panic-washout stage. I may take a bite at low-30s.
https://stockcharts.com/h-sc/ui?s=KRE&p=D&yr=3&mn=6&dy=0&id=p94432364595

@rforno. As far as I am concerned you nailed it. They have no problem crashing,,,,,, I trimmed our equity allocation today and I did no such thing in 2008 or 2020. Today there are bad people with power who don’t care what happens to the global economy.

(Part 2)
But this is not really right ...

First Republic’s loans had famously good credit quality; First Republic got itself in trouble by making low-interest mortgages to very rich people, who will probably pay back those loans. (But the loans have lost value due to the move in interest rates.) And JPMorgan’s investor presentation touts both the “high-quality portfolio” with a “strong credit profile” and also JPMorgan’s own “comprehensive due diligence to support transaction assumptions.” JPMorgan did not need a loss-sharing agreement with the FDIC because it was worried that First Republic’s loans were toxic.
JPMorgan needed a loss-sharing agreement to improve the capital accounting for the deal. I have, above, used simple math — assets minus liabilities, equity divided by assets — to describe bank capital, but actual bank capital requirements are based on risk-weighed assets. Capital is a cushion designed to protect a bank from losses, and a bank needs more capital against risky assets than it does against safe assets. A big pile of mortgages and commercial loans will get an okay risk weighting, but a big pile of mortgages and commercial loans insured by the FDIC will get a better risk weighting. If JPMorgan had just bought these loans outright, its capital ratios would have suffered. But, it says, the “FDIC loss share agreements reduce risk weighting on covered loans,” so its common equity tier 1 capital ratio will still be “consistent with 1Q24 target of 13.5%.”
On an analyst call this morning, JPMorgan Chief Financial Officer Jeremy Barnum discussed this point:
"What I would say broadly is that given the nature of the portfolio and question, I think First Republic is very well-known for very good credit discipline. As you point out, these are primarily rate marks. And therefore, the benefit of the loss share really is the sort of enhancement to the RWA [risk-weighted asset] risk-weighting, which in turn is what makes these otherwise generally not very-high returning assets, in other words, prime jumbo mortgages primarily, actually quite attractive from a returns perspective. So the CET1 [common equity tier 1 capital] numbers fully incorporate the expected risk-weighting of the RWA, and we'll leave it at that, I think."
A normal mortgage loan gets about a 50% risk weight, so at its 13.5% target capital ratio, JPMorgan would need to fund that mortgage with almost 7% equity capital. These mortgages get about a 25% risk weight, meaning that JPMorgan can get away with half as much capital, which makes its return on equity from these mortgages much higher.
This is, by the way, a classic sort of financial engineering, a capital relief trade. You have a situation where the bank has loans that it thinks are very safe, but the regulatory capital requirements treat them as kinda risky; the regulators and the bank disagree on their risk. So the bank finds some well-funded third party that agrees with it that the loans are very safe, and buys very cheap insurance from that third party: The bank thinks the loans are safe, the third party agrees they’re safe, so the insurance premium is low, and insuring the loans lowers their capital requirements. It’s just that, here, the regulator (the FDIC) is also selling JPMorgan the insurance (for free). Everyone agrees that these loans are safe, but the capital regulations treat them as risky. There is a trade to be done. With the regulator.
For that matter, why does JPMorgan need to borrow $50 billion from the FDIC to do this deal? Why can’t it pay $60.6 billion upfront? The answer is not that it couldn’t scrape together the $60.6 billion in cash today; the answer is that JPMorgan, as a big stable bank, needs to keep a lot of cash around in case it has a bank run, and spending so much cash on First Republic would not be a prudent use of liquidity. On the analyst call, Barnum described the FDIC loan in these terms: “The deal also includes a $50 billion 5-year fixed-rate funding facility from the FDIC, which helps manage the ALM [asset/liability management] profile of the transaction, as well as the liquidity consumption.” First Republic had some long-term loans that it funded with short-term deposits, and look what happened to it. JPMorgan is going to fund those long-term loans with long-term borrowing.
You can see the levers here, the financial engineering. The FDIC’s goal here is to minimize the loss to its insurance fund, to sell First Republic for roughly what it is worth. But its other goal is to make sure that the banking system is well capitalized, and selling First Republic for 100% of its asset value doesn’t help with that goal; it just moves the capital hole somewhere else. The solution is some combination of:
Sell First Republic to a very-well-capitalized bank, one that can absorb the capital hole. “Fortress principles position us to invest through cycles — organically and inorganically,” says JPMorgan’s presentation about the deal; it has spent years bragging about its “fortress balance sheet,” and that really does let it do deals like this. But this deal will bring down its capital ratios a bit; a well-capitalized bank that absorbs an insolvent one will become a bit less well capitalized.
Give that bank a discount: JPMorgan is paying a bit more than 100% of the current market value of First Republic’s bonds and loans, but a bit less than 100% of the total value of its assets. It will book a gain on the deal, which will help maintain its capital ratios.
Engineer the deal to optimize the regulatory treatment: If giving JPMorgan an FDIC guarantee on some assets will lower its risk-weighted assets, you do that. If giving JPMorgan a long-term FDIC loan will improve its liquidity ratios, you do that.
You can to some extent trade off the discount against the engineering: Surely JPMorgan could have absorbed First Republic with no loan from the FDIC (worse for its regulatory liquidity requirements) and no loss-sharing agreement (worse for its regulatory capital ratios), but it would have paid less, which means that the FDIC would have paid more. But the FDIC did the math and concluded that the loan and loss-sharing made for a better deal.
You could imagine going further. JPMorgan could have come to the FDIC and the Fed and said “look, we would like to pay full value for these assets, but we have these pesky capital requirements. But you set the capital requirements; you could, you know, waive them a bit. Let us ignore First Republic in calculating our capital ratios; then we won’t need as much capital to do the deal, and we can pay more.” Something a little like that happened in UBS Group AG’s deal to buy Credit Suisse Group AG in March: Swiss regulators, who insisted on the deal, agreed to “grant appropriate transitional periods” for UBS to meet its capital requirements after the deal.
But of course you want to minimize that sort of thing, because the goal here is not just to make sure that First Republic opens for business today or to minimize the dollar losses to the FDIC’s insurance fund. The goal here is to restore confidence in the banking system, to send the message that the crisis is over and everything is fixed. A rescue deal for First Republic that weakens the capital or liquidity of its buyer is not a good solution. You don’t want to do too much financial engineering; you don’t want to leave the buyer technically well capitalized but really in a more dangerous place. But a little engineering is fine.

Let’s start with some bank accounting ...

You’ve got a bank, its assets are $100 of loans, and its liabilities are $90 of deposits. Shareholders’ equity (assets minus liabilities) is $10, for a capital ratio (equity divided by assets) of 10%. Pretty normal stuff.
Then the assets go down: The loans were worth $100, but then interest rates went up and now they are only worth $85. This is less than $90, so the bank is insolvent, people panic, depositors get nervous and the bank fails. It is seized by the Federal Deposit Insurance Corp., which quickly looks for a healthy bank to buy the failed one. Ideally a buyer will take over the entire failed bank, buying $85 worth of loans and assuming $90 worth of deposits; borrowers and depositors will wake up to find that they are now customers of the buyer bank, but everything else is the same.
How much should the buyer pay for this? The simple math is $85 of assets minus $90 of assets equals negative $5: The buyer should pay negative $5, which means something like “the FDIC gives the buyer $5 of cash to take over the failed bank,” though it could be more complicated.
But that simple math is not quite right. If you pay negative $5 to take over a bank with $85 of assets and $90 of liabilities, you effectively get a bank with $90 of assets, $90 of liabilities and $0 of shareholders’ equity. That doesn’t work. The bank, in the first paragraph, in the good times, did not have assets that equaled its liabilities; it had assets that were $10 more than its liabilities. Banks are required — by regulation but also by common sense — to have capital, that is, shareholders’ equity, assets that exceed their liabilities. The buyer bank also has to have assets that exceed its liabilities, to have capital against the assets that it buys. If it is buying $85 of loans, it will want to fund them with no more than, say, $75 of liabilities. If it is assuming $90 of deposits, it will have to pay, like, negative $15 for them, which means something like “the FDIC gives the buyer $15 to take over the failed bank.”
This is a little weird. You could imagine a different scenario. The FDIC seizes the bank and sells its loans to someone — a hedge fund, or a bank I guess — for $85, which is what they are worth. Then the FDIC just hands cash out to all the depositors at the failed bank, a total of $90, which is the amount of deposits. At the end of the day there’s nothing left of the failed bank and the FDIC is out of pocket $5, which is less than $15.
The FDIC mostly doesn’t do this, though, for a couple of reasons. One is that usually banks, even failed banks, have some franchise value: They have relationships and bankers and advisers that allow them to earn money, and the buying bank should want to pay something for that. The value of a bank is not just its financial assets minus its liabilities; its actual business is worth something too. Selling it whole can bring in more money.
Another reason is that this approach is far more disruptive than keeping the bank open: Telling depositors “your bank has vanished but here’s an envelope with your cash” is worse, for general confidence in the banking system, than telling them “oh your bank got bought this weekend but everything is normal.”
Also there is a capital problem for the banking system as a whole: If the FDIC just hands out checks for $90 to all the depositors, they will deposit those checks in other banks, which will then have $90 more of liabilities and will need some more capital as well. Selling the whole failed bank to another bank for $75 will cost the FDIC $15, but it will recapitalize the banking system. The goal is to have banks with ample capital, whose assets are worth much more than their liabilities; the acute problem with a failed bank is that it has negative capital; the solution is for someone to put in more money so that the system as a whole is well capitalized again. Sometimes the FDIC puts in the money.
This morning the FDIC seized First Republic Bank and sold it to JPMorgan Chase & Co. My best guess at First Republic’s balance sheet as of, you know, yesterday would be something like this:
Assets: Bonds worth about $30 billion; loans with a face value of about $173 billion but a market value of about $150 billion; cash of about $15 billion; other stuff worth about $9 billion; for a total of about $227 billion at pre-deal accounting values but only $204 billion of actual value.
Liabilities: Deposits of about $92 billion, of which $5 billion came from JPMorgan and $25 billion came from a group of other big banks, who put their money into First Republic in March to shore up confidence; the other $62 billion came from normal depositors. About $28 billion of advances from the Federal Home Loan Bank system. About $93 billion of short-term borrowings from the Federal Reserve (discount window and Bank Term Funding Program). Those three liabilities — to depositors, to the FHLB, to the Fed — really need to be paid back, and they add to about $213 billion. First Republic had some other liabilities, including a bit less than $1 billion of subordinated bonds, but let’s ignore those.
Equity: The book value of First Republic’s equity yesterday was something like $11 billion, including about $4 billion of preferred stock. The actual value of its equity was negative, though; its total assets of $204 billion, at market value, were less than the $213 billion it owed to depositors, the Fed and the FHLB, never mind its other creditors.
Here is, roughly, how the sale worked:
Assets: JPMorgan bought all the loans and bonds, marking them at their market value, about $30 billion for the bonds and $150 billion for the loans. It also bought $5 billion of other assets. And it attributed $1 billion to intangible assets, i.e. First Republic’s relationships and business. That’s a total of about $186 billion of asset value. JPMorgan left behind some assets, though, mainly the $15 billion of cash and about $4 billion of other stuff.
Liabilities: JPMorgan assumed all of the deposits and FHLB advances, plus another $2 billion of other liabilities, for a total of about $122 billion. (Of that, $5 billion was JPMorgan’s own deposit, which it will cancel.) The subordinated bonds got vaporized: “JPMorgan Chase did not assume First Republic Bank’s corporate debt or preferred stock.” That effectively leaves the shell of First Republic — now effectively owned by the FDIC in receivership — on the hook to pay back the roughly $93 billion it borrowed from the Fed.
Payment: JPMorgan will pay the FDIC $10.6 billion in cash now, and another $50 billion in five years. It will pay (presumably low) interest on that $50 billion. So the FDIC will get about $60.6 billion to pay back the Fed, plus the roughly $15 billion of cash and roughly $4 billion of other assets still left over at First Republic, for a total of about $80 billion. First Republic owes the Fed about $93 billion, leaving the FDIC’s insurance fund with a loss of $10 billion or so. “The FDIC estimates that the cost to the Deposit Insurance Fund will be about $13 billion,” says the FDIC’s announcement, though “This is an estimate and the final cost will be determined when the FDIC terminates the receivership.”
Equity: JPMorgan is getting about $186 billion of assets for about $182.6 billion ($122 billion of assumed liabilities, plus $10.6 billion in cash, plus $50 billion borrowed from the FDIC), meaning that it will have about a $3.4 billion equity cushion against these assets.
JPMorgan was the highest bidder in the FDIC’s weekend auction for First Republic; Bloomberg reports that its bid “was more appealing for the agency than the competing bids, which proposed breaking up First Republic or would have required complex financial arrangements to fund its $100 billion of mortgages.” And this is a pretty high bid: JPMorgan is paying $182.6 billion, total, in cash and assumed liabilities, for a bank with about $180 billion of loans and bonds at their current fair value; it is paying a bit extra for the other assets and the intangible value of the First Republic franchise. Still, it is acquiring the total package of assets for less than they are worth. That discount is required so that JPMorgan can properly capitalize the assets, so that it can have enough capital against them. And that discount is paid for by (1) First Republic’s shareholders, preferred stockholders and bondholders, who are getting wiped out and (2) the FDIC, which is also taking a loss on the deal.
Another point of the deal is that the FDIC is entering into loss-sharing agreements with JPMorgan, in which the FDIC will agree to bear 80% of the credit losses on First Republic’s mortgages and commercial loans. You can sort of imagine a simple story here: First Republic is a failed bank, it made some bad choices, who knows if its loans are toxic, JPMorgan had only a weekend to review them, it is not comfortable taking the risk, so it demanded that the FDIC share in the risk.

@Anna +1 Your story is also relevant today and in general if one thinks about how companies are also being subsidized by welfare and Medicaid while paying starvation wages. Anyone who invests in Walmart or McDonald's--probably almost everyone on this board who owns a large-cap fund--is also being subsidized by these government programs for so-called lazy people, increasing these companies' profits. Meanwhile, 70% of SNAP and Medicaid recipients are working full time: https://salon.com/2020/12/12/government-study-shows-taxpayers-are-subsidizing-starvation-wages-at-mcdonalds-walmart/

The Government Accountability Office, a nonpartisan congressional watchdog, released a study commissioned by Sen. Bernie Sanders, I-Vt., last month based on data provided by 11 states.
The report found that, in every state studied, Walmart was one of the top four employers whose workers rely on food stamps and Medicaid. McDonald's is among the most subsidized employers in at least nine states.
Walmart employs about 14,500 workers in Arkansas, Georgia, Indiana, Maine, Massachusetts, Nebraska, North Carolina, Tennessee and Washington who rely on Supplemental Nutrition Assistance Program (SNAP) benefits, the study showed, while McDonald's employs about 8,780 SNAP recipients in those states.
More than 2% of the Walmart workforce in states like Georgia and Oklahoma have had to rely on Medicaid benefits, a number that rises to more than 3% in Arkansas, where the company is based.
Other corporate giants who have a large number of workers relying on federal benefits included Amazon, Dollar Tree, Dollar General, Burger King, Wendy's, Taco Bell, Subway, Uber, FedEx, Target, Dunkin' Donuts, CVS, Home Depot, and Lowe's.
The report cited data taken before the coronavirus pandemic hit, noting that the issues have likely grown worse.
"The economic effects of the covid-19 pandemic have further exacerbated conditions for these workers, increasing the importance of federal and state safety net programs to help them meet their basic needs," the report said.
Sanders said the report showed that America's largest companies are relying on "corporate welfare from the federal government by paying their workers starvation wages."
"That is morally obscene," he said in a statement. "U.S. taxpayers should not be forced to subsidize some of the largest and most profitable corporations in America."
Sanders noted that the companies have reaped "billions in profits and giving their CEOs tens of millions of dollars a year" while failing to pay workers a "living wage."
Walmart reported more than $5 billion in net income in the last quarter while McDonald's reported more than $1.7 billion during that time frame....The GAO report shows that 70% of the 21 million SNAP or Medicaid recipients work full time.

@AndyJ, the inverted yield curve is dictated by investors who want to get paid in the near term due to the deteriorating economy. Historically it has been a remarkable reliable indicator for the coming recession. Questions are when, severity and duration since every recession is different given their particular situation. Many have suggested this one may be mild and short live, and it may be much better than that of 2008.
FED minutes have suggested they anticipate a recession and they are ready to act (i.e. cut rates) just like they did on March 23, 2020. At that time I invested in BND and it took off nicely for rest of 2020. Many junk bonds fell like stocks and recovered much later. Treasury’s hardly decline and finish the year nicely. I expect VGSH and SHY will do well. So credit quality really made a difference.

@AndyJ, I was responding your comment while commenting on a broader context. Sorry that I should have link to your earlier post. In the last few months, the 1 and 2 yr treasury’s have been volatile, especially in March with the SVB and Signature. There was only 2 days when 2 yr Treasury went over 5.0% in March and it stays below that ever since.
The inverted yield curve makes prediction challenging beyond 2 years. As for fixed income investing, I like these bond funds:
Vanguard short term treasury index, ETF, VGSH, Avg effective maturities -2.0 years, 30 days SEC yield - 4.43%.
Taking on a bit more on credit risk,
Vanguard short term corporate index, ETF, VCSH. Avg effective maturities - 3.0 yr, 30 days SEC yield - 5.22%.
I like your approach for potential cap gain for longer duration bond finds such as BND and BOND. Since the beginning of this year, I have invested back into BND and DODIX on dollar cost verage basis. If the FED is near the end of rate hike, bonds in general will do okay. If the FED starts to cut rate, the intermediate-term bonds will be in good position to have good capital gain.

Intermediate duration is doing pretty well recently ... in funds. And, @Sven, if you were responding to my older post, I think my language wasn't clear enough: I realize 5% in a 2y is not happening. The point is that under more normal circumstances, the 2y runs fairly closely along with the Fed rate, and we are far from normal circumstances.
A 1y in the high 4's (~ 4.8 now), though, is pretty attractive for part of an FI portfolio if you assume short rates will be falling over time, and even 4.02 for a 2y wouldn't be all that bad under those circumstances. A combination of some HTM T's of 1y or longer (including some higher-yielding shorter term T's for current safe yield) with a fund or funds for good yield and possible cap gains, or at least limited risk of loss, wouldn't be a bad approach.

I was personally affected when in 2015 Prospect Medical Holdings ( owned by Leonard Green a PE firm) bought our CT hospital after two previous publicly traded companies "suitors" ( hoping to buy both hospitals in town) had been chased off by the left wing Democratic Governor. The hospital was close to going under.
The two previous offers were to build an entirely new hospital and combine both institutions, so they would not longer undercut each other in our small city. These offers were far superior and could have been much better monitored because they involved public companies and a pension fund. Unfortunately, the CT governor was beholden to our hospital union and threw up all sorts of crazy conditions, so they backed out.
We got all sorts of promises about capital infusions etc from Prospect but none materialized.
We sold our practice to the hospital/Prospect in 2018. At the physician level Prospect was fairly benign, although they refused to buy any new equipment like scanners and computers. I retired, in 2019 after 40 years of practice that I loved, because the electronic medical record required me to work to 9PM just entering data. They refused to pay $20 an hour to hire a scribe to help me. It was apparently far more efficient to make a physician do the work of a clerk. Both of my replacements have quit in less than a year.
Since then, Leonard Green had Prospect to borrow $1.2 Billion in 2019. Prospect paid Green and the chief executive a $675 million dollar dividend. Prospect CEO alone got $90 million. To pay the loan back, Prospect sold all their hospitals to Medical Properties Trust (MPW) and then leased them back. By 2021 they had stop paying rent, and MPW stock is down to $8 from $25.
Two Prospect hospitals in Delaware ( one the only source of care for 80,000 people I think) and three in Texas have closed completely. Rhode Island AG refused to let them sell the two there until they put up $80 million in escrow.
MPW is unloading the CT hospitals to Yale New Haven Hospital for the amount it paid for them in 2020, because Yale doesn't want the other big CT system, Hartford Hospital to get them. The hospitals in Delaware and Texas are closed for good.
As I have posted before, ProPublica has done an excellent series on Prospect documenting the millions Green got, but Prospect didn't have cash to buy gas for the ambulances.
https://www.propublica.org/article/rich-investors-stripped-millions-from-a-hospital-chain-and-want-to-leave-it-behind-a-tiny-state-stands-in-their-way
Another excellent source on the abuses of PE I have found is
https://pestakeholder.org/

Kipplingers
Article tells how you can check on whether your funds own gun manufacturers and lists some gun-free funds. Here’s a few of the gun-free funds listed:
DF Dent Midcap Growth (DFDMX
Parnassus Midcap (PARMX
Baron Emerging Markets (BEXFX
Brown Capital Management International Small Company (BCSVX
Fidelity Select Health Care (FSPHX
T. Rowe Price Global Technology (PRGTX

The SEC writes in its Investor Bulletin "Bank Sweep Programs",

If you have more than $250,000 in cash in your broker-dealer’s bank sweep program, you may want to consider:

• Public Information about the health of the bank.
  You may want to take advantage of the financial and other information available to consumers on FDIC’s website at https://banks.data.fdic.gov/bankfind-suite/bankfind [corrected]. One relevant consideration when assessing the health of the bank may be the percentage of deposits derived from concentrated sources such as brokered deposits or one or more bank sweep arrangements.
• Your broker-dealer’s affiliation with the bank.
  Your broker-dealer could choose not to limit or end a relationship with an affiliated bank that experiences financial difficulties, even if doing so would be in the best interests of broker-dealer’s customers.

Brokers using affiliated banks include among others, Schwab (Charles Schwab Bank, Charles Schwab Premier Bank, Charles Schwab Trust Bank, TD Bank, TD Bank USA), E*Trade (self-directed accounts are limited to Morgan Stanley Bank and Morgan Stanley Private Bank; other accounts also use Citibank), and Merrill (Bank of America, Bank of America, Calif.; qualified Merrill retirement accounts may also use other banks)
Other brokerages do not have affilliated banks. Vanguard is only now beginning to roll out a couple of FDIC-insured products, Vanguard Cash Deposit (sweep account) and Vanguard Cash Plus Account. But those are pilot programs open by invitation only. Fidelity offers a bank sweep program with slightly different banks for its CMA accounts and for its IRA accounts for its IRA accounts.
Fidelity shows that it uses First Republic Bank, but that the bank is now unavailable in its program. According to Fidelity, that means only that it cannot add new money to First Republic (or presumably its successor bank?). This seems reasonable and responsible, as the moneys deposited there are below the FDIC limit and pulling money out would simply exacerbate the run on the bank. (First Republic is also on Merrill's list of banks for qualified retirement accounts.)
Notable also is that Huntington National Bank is on Fidelity's IRA list of banks but not on its CMA list of banks. Recent change? I don't know. Huntington National Bank is the principal subsidiary of Huntington Bancshares, listed a month ago as a vulnerable bank. More recently, the bank said that it was working to shore up its assets and provided figures to substantiate that.
So long as one's cash in a bank is below the FDIC limit, I don't think there's any reason to be concerned about losing money. The 2014 SEC warning about bank risks due to concentrated sources seems prescient.

/4
And:
A defendant in the case, who spoke on condition of anonymity, denies paying bribes—his firm paid Helsinge “consultancy fees”—but says that exchanging information on rival bids and tenders was “the way of doing business” in South America at the time.
Ah, yes, great, great.
But the other part of the Businessweek story is that this story of corruption and bribery — and Morillo’s instant messages allegedly proving it — fell into the hands of David Boies, the famous American lawyer, who saw that Morillo and his clients had stolen billions of dollars from Venezuela and decided to try to get that money for himself:
Excited by the evidence in their possession, various combinations of Boies, [Morillo’s rival Wilmer] Ruperti, Blondie (the private investigator) and [investor Bill] Duker (the moneyman) met over the summer of 2017 in various offices and on Duker’s 230‑foot sailboat, Sybaris, named for an ancient Greek city famous for its excess. …
First they needed to persuade the Maduro administration to let them bring a claim on PDVSA’s behalf. … Ruperti introduced Boies and Duker to Nelson Martinez, Venezuela’s newly installed oil minister, and Reinaldo Muñoz Pedroza, the country’s attorney general. On July 12, 2017, the parties came to an agreement: Blondie, Duker and the lawyers would get 66% of the proceeds, leaving 34% for PDVSA.
So they set up an entity — PDVSA US Litigation Trust — to sue Morillo and his clients in Florida federal court, and to pay any winnings two-thirds to the lawyers and one-third to PDVSA. They sued, and the defendants’ first line of defense was, basically, “look, you say that we stole billions of dollars from PDVSA, but why do you get to sue? You aren’t PDVSA; you’re some weird new trust. If we stole from PDVSA, let PDVSA sue us.”
Back in court in Miami, before the proceedings could turn to the matter of whether Helsinge and its customers had committed any crimes, Boies needed to demonstrate that the trust had standing—the legal right to bring a case. In most lawsuits, an injured party files a complaint and the two sides argue over its merits. Here you had an opaque New York vehicle claiming to represent Venezuela’s state oil company, which itself was controlled by a corrupt dictator subject to sanctions. Beyond that, it was unclear from the preliminary filings who controlled the trust and who stood to benefit. In July 2018 the defendants filed a motion to have the case dismissed on the grounds that the trust was illegitimate.
This defense was helped by the fact that nobody from PDVSA could really come to court to explain that the trust was legitimate, because (1) Venezuela was subject to increasingly strict US sanctions that made it hard for Boies to work with PDVSA and (2) the Venezuelan government didn’t make it particularly easy either:
What followed was a kind of courtroom farce, as Boies Schiller Flexner’s increasingly desperate efforts to demonstrate the trust’s bona fides fell apart under scrutiny. Defense lawyers sought to depose Venezuelan signatories to the litigation agreement among the various parties, but none could be pinned down. One had simply vanished. Another, Martinez, the oil minister, had recently been arrested in Venezuela and charged with corruption. “Jailed? Did I hear jailed?” the judge asked, trying to keep up. When PDVSA’s general counsel did finally commit to going to the US to be deposed, two dozen attorneys booked flights and hotels, only for the witness to pull out at the last minute, apparently under orders from Maduro himself.
The plaintiffs’ position was further undermined by how poorly news of the litigation was going down in South America. As part of the discovery process, Boies Schiller Flexner was ordered to hand over the agreement letter laying out the 66%-34% split. It was pilloried on Venezuelan state television. On April 24, 2018, the National Assembly, home to what remains of the country’s opposition, published a decree describing the trust as “a mechanism to divert the funds and resources” of Venezuela.
Ultimately this defense worked, and the judge dismissed Boies’s lawsuit. I love that a famous US lawyer learned of Swiss companies defrauding a Venezuelan company out of billions of dollars, and his natural first reaction was to go to a US federal court to get it to order those companies to give him the money instead. “If a US lawyer notices anyone stealing any money anywhere in the world, that money belongs to him, and a US court will enforce his rights to it” is not 100% wrong as a description of US law, which explains a lot about the extraterritorial application of US law, the hegemony of the dollar system, and the entrepreneurial American legal culture. But it is not 100% right either, and it did not work out for Boies.
Anyway, elsewhere in euphemisms for bribes, here is the Economist with a helpful collection:
One approach is to talk about something other than money. Some officials, for example, like to keep citizens well abreast of their food and drink preferences. “I really want to drink a Nescafe,” declares an airport security guard six times as he frisks your correspondent in Burkina Faso. In Uganda traffic police find ways to mention their favourite soda. In South Africa such requests are so common that bribes for driving offences are known as “cold drink money”.
I guess if you’re a cop at a traffic stop you can’t really ask for a consultancy fee.
Succession
I have occasionally tried to understand the capital structure, valuation, corporate governance and shareholder base of Waystar Royco, the Roy family’s publicly traded conglomerate on the TV show Succession, but I quickly find myself frustrated by some contradiction that doesn’t make much sense, and then I remind myself that it’s a TV show and nobody cares about the absolute verisimilitude of its corporate bits. (Who is on the Waystar Royco board? Why are there no independent directors? Who cares!) Anyway at FT Alphaville last week Louis Ashworth gave it a go; he got farther than I ever have but he gave up too, and my advice is that it isn’t worth it.
Things happen
SVB’s new owner fights to rebuild brand and stem outflows. Moody’s Downgrades 11 Regional Banks, Including Zions, U.S. Bank, Western Alliance. New Wall Street ‘fear gauge’ to track short-term market swings. The Crypto Detectives Are Cleaning Up. The Impending Fight for Private Equity Buyout Lending. CME plays down rival to LME nickel market. UK Aims to Avoid Repeat of Liz Truss’s Market Mayhem With LDI Reforms. Partner pay at top US law firms hit by dealmaking drought. J&J Consumer-Health IPO Process to Kick Off Key Test for Moribund New-Issue Market. A Schwab Divorce From Bank Could Unlock Value, JPMorgan Says. Gemini’s Plan for Derivatives Exchange Adds to Crypto’s Flight From the US. “The market considers the one-month bill a safe haven. … The three-month is more in the crosshairs.” How Vanuatu allegedly lost its mackerel rights — and fought back. “Afterward we had dinner at Bennigan's; on the menu chalkboard, under Quiche of the Day, Jello [Biafra] scrawled ‘YOU.’”
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[1] This number comes from the company’s first-day declaration (PDF), Document 10 in the bankruptcy docket.
[2] A footnote to this sentence in the declaration cites Money Stuff.
[3] There are also about $1 billion of unsecured bonds outstanding, and talk about nostalgia: They were issued in 2014 to fund a stock buyback, and include about $600 million of *30-year bonds*, due in 2044, with a 5.165% interest rate. They were rated A-/Baa1 when issued. Different times!
[4] Its closest competition is when Hertz Global Holdings Inc. sold stock to meme-stock investors *in bankruptcy*, which was incredible, but (1) the US Securities and Exchange Commission shut that deal down almost as soon as it launched, so it never raised much money and (2) Hertz was trying to reorganize in bankruptcy, not liquidate; it succeeded and the equity actually recovered, so buying (and, thus, selling) the stock was not *that* crazy. To be clear, that is still a possibility here — “Bed Bath & Beyond has pulled off long shot transactions several times in the last six months, so nobody should think Bed Bath & Beyond will not be able to do so again” — and I will feel dumb and amazed if the people who bought Bed Bath stock on Friday at $0.29 end up making a fortune on the trade.
[5] This is a little loose, and there are scenarios where some equity owner might put in more money in a bankruptcy-type situation in order to *keep control of the company*. “An equity owner throws in more money and comes out with zero stake in the company" is … less common.
[6] No, no, it’s still trading; it was at about $0.19 or so at noon today. Really this should say “… and (2) now is even more clearly going to be worthless,” but all hope is not technically lost.
[7] Bloomberg reports: “‘The idea that you can continually support your company even in the face of constant dilution of your investors just isn’t a long-term, viable corporate-finance strategy,’ said James Gellert, CEO of ratings firm Rapid Ratings. ‘Bed Bath & Beyond had a seeming disregard for common equity holders.’”
/4 of 4

hope that anyone interested saw this earlier and similar stomach-turning MLevine writeup, "Money Stuff: Bed Bath Moves Into the Beyond" ...
somehow like an inverse of naked shorting
or something
\\\ Beyond bloodbath
On Jan. 20, Bed Bath & Beyond Inc. had about 117.3 million shares of common stock outstanding; the stock closed that day at $3.35 per share. On March 27, it had about 428.1 million shares outstanding, at $0.7881 each. On April 10, it had 558.7 million shares outstanding, at $0.2961 each. Yesterday, April 23, when it filed for bankruptcy, it had 739,056,836 shares outstanding.[1] The stock closed at $0.2935 on Friday.
So in the last two weeks, Bed Bath & Beyond has sold about 180 million shares to retail investors, more shares than it had outstanding in January. The stock averaged about $0.31 per share over those two weeks, meaning that the company raised maybe $55 million, in those two weeks, as it has been sliding into bankruptcy. Since January, Bed Bath & Beyond has sold about 622 million shares, or almost 50 million shares a week, raising a few hundred million dollars.
Here is Bed Bath’s first-day declaration in the bankruptcy case, which describes what the company has been up to over the last few months. The points that I would highlight are:
In December 2022, “Bed Bath & Beyond triggered multiple events of defaults under its financing facilities” and began its slow move into bankruptcy.
Also in December 2022, its financial advisers at Lazard “commenced a process to solicit interest in a going-concern sale transaction that could be effectuated in chapter 11,” that is, to find someone who was interested in buying the company out of bankruptcy and continuing to operate its business.
They failed: By mid-January, “Lazard had engaged with approximately 60 potential investors to solicit interest in serving as a plan sponsor, acquiring some or all of the Debtors’ assets or businesses, or providing postpetition financing,” but “to date, the Company has been yet to identify an executable transaction.”
So, as of mid-January, it seems that the company’s plan was to file for bankruptcy, close all its stores, liquidate its inventory and hand whatever cash was left to its creditors.
But Bed Bath did have one thing going for it. It was “part of the ‘meme-stock’ movement started and fueled on Reddit boards and social media websites,” because it “checked the two boxes needed to become a meme-stock: (i) a troubled financial situation and (ii) nostalgia value.”[2]
So someone had the bright idea of delaying things for a bit by selling tons and tons of stock to Bed Bath’s retail shareholders at whatever prices they’d pay. “Certain third-party investors expressed interest in providing the Debtors with substantial equity financing in light of the Company’s depressed share price and continued trading volatility. More specifically, the Debtors were approached by Hudson Bay Capital Management, LP” about a weird stock deal that we discussed in January; this ended up raising about $360 million. After the Hudson Bay deal ran its course — basically, after Hudson Bay and Bed Bath drove the stock price from above $3 to below $1 by pounding out about 311 million shares to retail investors — Bed Bath and its brokers at B. Riley Securities Inc. sold another 311 million shares to retail investors, but at ever-declining prices, so they raised a lot less money. Still something, though.
It was not enough, though, and ultimately this weekend Bed Bath & Beyond filed for exactly the sort of bankruptcy it was contemplating in January: Close all the stores, liquidate the inventory, hand whatever cash is left to the creditors. “The Debtors are committed to achieving the highest or otherwise best bid for some or all of the Debtors’ assets by marketing their assets pursuant to the Bidding Procedures, and, if necessary, conducting an auction for any of their assets,” the company says, but it has had like four months to find someone interested in buying the business, and if no one has shown up yet no one is going to. And: “The Debtors estimate that the aggregate net sales proceeds from all Sales will be approximately $718 million,” against about $1.8 billion of debt to pay off. Nonetheless:
While the commencement of a full chain wind-down is necessitated by economic realities, Bed Bath & Beyond has and will continue to market their businesses as a going-concern, including the buybuy Baby business. Bed Bath & Beyond has pulled off long shot transactions several times in the last six months, so nobody should think Bed Bath & Beyond will not be able to do so again. To the contrary, Bed Bath & Beyond and its professionals will make every effort to salvage all or a portion of operations for the benefit of all stakeholders.
/1

https://www.globenewswire.com/news-release/2023/04/28/2657083/0/en/Norsk-Hydro-Robust-results-executing-on-strategy.html
Lots of buying and selling of assets!!!!
This just sounds like musical chairs to me. WTF?
"Glencore will acquire an additional 40 percent stake in MRN which is currently owned by Vale. This 40 percent interest will be acquired by Hydro from Vale and immediately sold to Glencore on a back-to-back basis. After the transactions Hydro will no longer have an ownership position in MRN. The transactions will have a total enterprise value of USD 1.15 billion which shall be adjusted for debt like items and working capital. Closing is expected in the second half of 2023."

First Republic, Part 2:

The other option is “do nothing.” First Republic reported earnings on Monday, and they were legendarily awful:
Across the industry, First Republic’s quarterly earnings report on Monday has come to be regarded as a disaster. The firm announced a larger-than-expected drop in deposits, then declined to take questions as executives presented a 12-minute briefing on results.
But First Republic reported a profit. The problem, for First Republic, is that lots of its low-interest deposits have fled, and it has had to replace their funding by borrowing from the Fed, the FHLB and the big banks at much higher rates. Meanwhile it still has lots of long-term loans made at low interest rates. If you borrow short at 0% to lend long at 3%, and then your short-term borrowing costs go up to 5% while your loans stay the same, you will be losing 2% a year on your loans, and that is roughly the state that First Republic finds itself in. But it is not exactly the state that First Republic finds itself in: It still has some cheap insured deposits, some short-term assets, some floating-rate assets, some fee income, and in fact it has managed to scrape out a profit even as rates have moved against it. Can that last? I mean, maybe not:
The deposit run has forced First Republic to rely on other, more expensive funding. That makes it hard to generate interest income, and at some point it might not be able to.
“They’ve never been super profitable,” said Tim Coffey, managing director and analyst at Janney Montgomery Scott. “Now you’re not growing and you’re layering on really high borrowing and funding costs.”
But a bank can stay in business even with some quarterly losses, as long as it remains well capitalized, and as a technical matter First Republic has enough capital to withstand some unprofitable quarters. And if you muddle along for long enough, the situation can right itself: The long-term low-interest loans will roll off and be replaced with higher-interest new loans, and First Republic’s interest margins will start to expand again. It might work! If you are a First Republic shareholder, “do nothing and hope the business recovers” is clearly the best option.
Of course deposits might keep flowing out, but so what? First Republic is now funded in large part with loans from the Fed and the FHLB, and I suppose they could just lend it some more money. When Silicon Valley Bank failed, the Fed put in place a new Bank Term Funding Program that was designed for more or less this purpose: The BTFP lets banks borrow against their assets without taking into account interest-rate losses, so that they can replace fleeing deposits with loans from the Fed. US regional banks spent years in a low interest rate environment, they were caught out by a rapid rate hiking cycle, and the Fed responded to that problem by lending them money to smooth out the transition.
The advantage of doing nothing is that nobody has to take any losses now. But the regulators seem to want to move. Bloomberg again:
The clock for striking such a deal began ticking louder late last week. US regulators reached out to some industry leaders, encouraging them to make a renewed push to find a private solution to shore up First Republic’s balance sheet, according to people with knowledge of the discussions.
The calls also came with a warning that banks should be prepared in case something happens soon.
And one way for something to happen soon is if the Fed stops lending to First Republic:
As weeks keep passing without a transaction, senior [FDIC] officials are increasingly weighing whether to downgrade their scoring of the firm’s condition, including its so-called Camels rating, according to people with direct knowledge of the talks. That would likely limit the bank’s use of the Fed’s discount window and an emergency facility launched last month, the people said.
Why? Why close a bank and take billions of dollars of losses if you don’t have to? The consequences of doing something are obvious and bad; the consequences of doing nothing are a bit more diffuse.
But let’s talk about some of them. One is that there are legal limits on the Fed’s ability to keep propping up First Republic. I mentioned the BTFP, the Fed’s post-Silicon Valley Bank program that lends to banks at 100% of the face value of their collateral, even if that collateral has lost money due to rising interest rates. But only US Treasury and agency securities are eligible to be BTFP collateral, and First Republic’s assets are mostly loans. Those loans tend to be pretty safe — they are mostly mortgages to rich people — but they are very exposed to interest-rate risk, so they have lost a lot of value. And it can’t use them to borrow from the BTFP.
Meanwhile these loans are eligible collateral at the Fed’s discount window, its more standard lending program, but the discount window lends against the market value of collateral, and these loans have lost a lot of value. If deposits keep fleeing from First Republic, its ability to replace those deposits with Fed loans depends on the market value of its assets, which means it might run out of capacity. If the FDIC is worried about that happening sometime soon, then there is some urgency to do something first.
More generally, the theory of central banking is that central banks should lend to solvent banks, but not prop up insolvent banks. The Fed’s statutes limit its ability to lend to undercapitalized banks. In some obvious economic sense, First Republic is undercapitalized — its assets are worth less than its liabilities, which is why we are talking about this — but legally it is fine and has plenty of regulatory capital.
But at some point, if the regulators conclude that First Republic is not viable, it is at least, like, embarrassing for them to keep lending it money. In the limit case, if all of First Republic’s deposits fled, you could imagine the Fed lending it $210 billion (up from its current $105 billion of Fed/FHLB money) so it could continue to limp along. But that’s bad! You don’t want a bank out there doing business, making loans, paying executive salaries, that is entirely funded by the Fed. You need some private-sector endorsement of the bank for the Fed to keep supporting it.
Also: The losses have already happened. First Republic made loans at low interest rates, now interest rates are higher, and so its loans are not worth what they used to be. As an accounting matter, those losses don’t have to be recognized yet; First Republic’s balance sheet is still technically solvent, and it can muddle along for a while. But economically the difference between “the banking system reports billions of dollars of losses today and then normal profits afterwards” and “the banking system bleeds these losses into lower accounting profits for the next few years” is not that great, and the former is more clarifying.