Talking Stocks 2.0

[huncho]

another fun day for banks

silicon valley bank down ~70% in one day. last week was silvergate now we have another. what happens next? wonder if this is the start of the rate hikes breaking the system

[jaisonline]

Originally Posted by EEpro

Tuttle is hilarious

I got into SARK last year and it helped take the sting out of everything else that was crapping out.

Same here. Trading SARK and SQQQ with very small % trailing stops saved my 2022. Not doing much trading in 2023 except SARK but found myself holding it far longer than 2022 with various % trailing stops.

Let’s see what happens again tomorrow w/ Silicon Valley Bank. Doesn’t look good. Burry tweeted about it (w/o naming it - so I think he was referring to SIVB ) being the next Enron. Then he deleted it.

[jaisonline]

Originally Posted by huncho

another fun day for banks

silicon valley bank down ~70% in one day. last week was silvergate now we have another. what happens next? wonder if this is the start of the rate hikes breaking the system

I must have been reading your mind about the banks. Was typing my last post while you posted. I'm an extremely slow typer on the iPad.

Definitely doesn’t look good.

[7sins]

Originally Posted by huncho

wonder if this is the start of the rate hikes breaking the system

Almost like someone suggested shorting SPY when it was overvalued weeks ago

[EEpro]

Originally Posted by huncho

another fun day for banks

silicon valley bank down ~70% in one day. last week was silvergate now we have another. what happens next? wonder if this is the start of the rate hikes breaking the system

Small bank reserve across the board are nearly gone. I'm rethinking throwing my short term cash in their 4.8% CDs now.

Has the fed ever started a hiking cycle and stopped without breaking something. I assume the break allows them to put on their cape and print freely to blow the next leg up in the market.

[RidingDonkeys]

Originally Posted by huncho

another fun day for banks

silicon valley bank down ~70% in one day. last week was silvergate now we have another. what happens next? wonder if this is the start of the rate hikes breaking the system

SVB and Silvergate are both heavily involved in crypto. It isn't rates, at least with these two.

[7sins]

Originally Posted by EEpro

Small bank reserve across the board are nearly gone. I'm rethinking throwing my short term cash in their 4.8% CDs now.

Has the fed ever started a hiking cycle and stopped without breaking something. I assume the break allows them to put on their cape and print freely to blow the next leg up in the market.

I would look into short-term treasury ladders opposed to a CD. A 6 month treasury yields 5.07% and is state tax free, there is also no penalty to sell early or hold period. I am building a 3month, 6month, 1yr and 2yr ladder for clients, this helps mitigate reinvestment risk. Thus when the 3 month matures, we roll back up the ladder and participate with higher yields if rates continue to climb. If rates decline we locked in rates for a portion of the ladder at 2 years. Win-win all with complete liquidity.

Yes, there has been multiple times the FED has raised without breaking the economy. Look to 15-18 the FED raised 8x for 200bp and the economy was fine, same goes for 04-06 when the FED raised 17x for 425bp the GFC in 08 was not stemmed from these rate hikes. Then alternatively look to 94 and the early 80s where they absolutely destroyed the economy with aggressive rate hikes similar to today.

[EEpro]

Originally Posted by 7sins

I would look into short-term treasury ladders opposed to a CD. A 6 month treasury yields 5.07% and is state tax free, there is also no penalty to sell early or hold period. I am building a 3month, 6month, 1yr and 2yr ladder for clients, this helps mitigate reinvestment risk.

Thanks! I recall fidelity used to have a bond ladder tool at 100k min.

[NYG1121]

Originally Posted by 7sins

I would look into short-term treasury ladders opposed to a CD. A 6 month treasury yields 5.07% and is state tax free, there is also no penalty to sell early or hold period. I am building a 3month, 6month, 1yr and 2yr ladder for clients, this helps mitigate reinvestment risk. Thus when the 3 month matures, we roll back up the ladder and participate with higher yields if rates continue to climb. If rates decline we locked in rates for a portion of the ladder at 2 years. Win-win all with complete liquidity.

Yes, there has been multiple times the FED has raised without breaking the economy. Look to 15-18 the FED raised 8x for 200bp and the economy was fine, same goes for 04-06 when the FED raised 17x for 425bp the GFC in 08 was not stemmed from these rate hikes. Then alternatively look to 94 and the early 80s where they absolutely destroyed the economy with aggressive rate hikes similar to today.

Why not just hold it in a money market fund yielding almost the same rate? Is the major benefit the local tax advantage with treasuries?

[7sins]

Originally Posted by NYG1121

Why not just hold it in a money market fund yielding almost the same rate? Is the major benefit the local tax advantage with treasuries?

Money Market funds also have an expense ratio, IE fidelity's money market fund fee is 42bp. 7 day yield is 4.44%, so your net yield is really 4.02%. That is 100bp lower than a 1yr treasury, excluding tax implications. Then fully taxed federal and state, for those of us in high tax states/tax brackets that brings an after tax yield down to ~2%. This is why I always recommend short-term munis to high networth clients in their non-401k portfolios as they are double tax free.

[NYG1121]

Originally Posted by 7sins

Money Market funds also have an expense ratio, IE fidelity's money market fund fee is 42bp. 7 day yield is 4.44%, so your net yield is really 4.02%. That is 100bp lower than a 1yr treasury, excluding tax implications. Then fully taxed federal and state, for those of us in high tax states/tax brackets that brings an after tax yield down to ~2%. This is why I always recommend short-term munis to high networth clients in their non-401k portfolios as they are double tax free.

Super helpful! Thanks so much

[huncho]

Originally Posted by RidingDonkeys

SVB and Silvergate are both heavily involved in crypto. It isn't rates, at least with these two.

silvergate yes, but SVB fell because they were heavily invested in long term bonds and needed cash. they took massive losses after dumping them because the rates on their bonds were much lower due to the aggressive hiking (someone correct me if i'm wrong)

[EEpro]

Originally Posted by huncho

silvergate yes, but SVB fell because they were heavily invested in long term bonds and needed cash. they took massive losses after dumping them because the rates on their bonds were much lower due to the aggressive hiking (someone correct me if i'm wrong)

Then the fed did break them

[enjoythemusic]

Originally Posted by EEpro

Then the fed did break them

Asked elsewhere, maybe you folks here know.

How is the Fed financing its negative carry costs. Every day the Federal Reserve is paying many millions in interest to other banks for their deposit with the Fed, but the Fed's balance sheet (reserves) is zero.

Where does the Fed get the currency to pay this negative carry?

[m j b]

Originally Posted by enjoythemusic

Asked elsewhere, maybe you folks here know.

How is the Fed financing its negative carry costs. Every day the Federal Reserve is paying many millions in interest to other banks for their deposit with the Fed, but the Fed's balance sheet (reserves) is zero.

Where does the Fed get the currency to pay this negative carry?

Since I spent almost an entire semester in a finance class once, long ago when money was printed on rocks, I'll take a stab... the Fed "prints" money at will. And really, there is no money when it comes to the Fed "paying" interest, it's just bits in an electronic ledger.

I bought some SOFI and JPM today. Wish me luck.

Both are short-term trades, although JPM could stay long-term since it's more of a conventional bank. I'm not going to be happy holding SOFI until the student loan debacle gets settled.

[superdog]

Originally Posted by enjoythemusic

Asked elsewhere, maybe you folks here know.

How is the Fed financing its negative carry costs. Every day the Federal Reserve is paying many millions in interest to other banks for their deposit with the Fed, but the Fed's balance sheet (reserves) is zero.

Where does the Fed get the currency to pay this negative carry?

Why not just tell us?

Personally, I’d love to know. And currently have no idea, but have wondered.

[enjoythemusic]

Seth, I honestly don't know. Currency creation is via congress and the Fed fulfills the 'order'. But the Fed is right now paying their bank partners for 'reserves' being held. I think it adds up to hundreds of millions daily in payouts due to ~4.75% interest rate.

Where is the Fed getting the currency? Technically, the Fed is losing currency daily.

An honest question, where is this currency coming from to pay for the interest held in reserves?

[330ci]

Originally Posted by superdog

Why not just tell us?

Personally, I’d love to know. And currently have no idea, but have wondered.

I took a stab at it knowing I was wrong and hoping he'd provide an answer for me to research further.


Instead I continue to look stupid and am clueless as well


NGL my initial thought was "they just print it, Duh" but that seemed too naive.


WE WANT ANSWERS STEVEN! secrets don't make good friends

[330ci]

Originally Posted by enjoythemusic

Seth, I honestly don't know. Currency creation is via congress and the Fed fulfills the 'order'. But the Fed is right now paying their bank partners for 'reserves' being held. I think it adds up to hundreds of millions daily in payouts due to ~4.75% interest rate.

Where is the Fed getting the currency? Technically, the Fed is losing currency daily.

An honest question, where is this currency coming from to pay for the interest held in reserves?

Well damn...

My next best guess is they keep asking Chewy for short term loans then(off the books, questionable interest rates, payable in decommed equipment)

Or crypto is really just a government black project.

[EEpro]

Originally Posted by enjoythemusic

Every day the Federal Reserve is paying many millions in interest to other banks for their deposit with the Fed, but the Fed's balance sheet (reserves) is zero.

Is it included in this net sheet?



I think this was Ron Paul's frustration. One cannot audit the fed.

[7sins]

Originally Posted by enjoythemusic

Seth, I honestly don't know. Currency creation is via congress and the Fed fulfills the 'order'. But the Fed is right now paying their bank partners for 'reserves' being held. I think it adds up to hundreds of millions daily in payouts due to ~4.75% interest rate.

Where is the Fed getting the currency? Technically, the Fed is losing currency daily.

An honest question, where is this currency coming from to pay for the interest held in reserves?

Remember that the FED also lends money to banks, that is really the point of the creation of the FED. The majority of their income is derived from interest earned on US gov securities the FED buys through open market ops, they also make fees for misc services, foreign currencies, loans etc. Any excess income the FED creates is sent to the US Treasury. There is a primer on how the FED works on their website if you want a deep dive, https://www.federalreserve.gov/newse...s-20230113.png.

[enjoythemusic]

^^^ yes and agreed, but I think they're now hitting up against more payment out versus fees/etc in. Yes for the past decade-ish the Fed had enough surplus to give a trillion-ish back to the Treasury, but the current interest payment to banks who've parked funds may be causing overall losses.

Originally Posted by 330ci

NGL my initial thought was "they just print it, Duh" but that seemed too naive.

Technically Congress has to authorize the 'printing'. All joking aside, and yeah yeah I get it guys, yet... Am just saying have a look at the Fed's balance sheet and their payouts versus 'income'.

PS: Just for giggles, look at FDIC 'reserves' versus the currency quantity they insure. Guess that's more topical for today's news cycle.

[superdog]

Originally Posted by 330ci

I took a stab at it knowing I was wrong and hoping he'd provide an answer for me to research further.


Instead I continue to look stupid and am clueless as well


NGL my initial thought was "they just print it, Duh" but that seemed too naive.


WE WANT ANSWERS STEVEN! secrets don't make good friends

[superdog]

I mean how is all that getting paid for. The debt increase by billions. It’s nuts!!!

[EEpro]

Originally Posted by superdog

I mean how is all that getting paid for. The debt increase by billions. It’s nuts!!!

It won't. USD is going to zero like all currencies do.

[huncho]

and here we go :

JUST IN: $ROKU discloses 26% of its cash is in now-collapsed Silicon Valley Bank $SIVB.

https://twitter.com/WatcherGuru/stat...192086016?s=20

[enjoythemusic]

Originally Posted by 330ci

....secrets don't make good friends

Oh my, how did I miss this opportunity.... I sing this to my wife on occasion.

[330ci]

Originally Posted by enjoythemusic

Oh my, how did I miss this opportunity.... I sing this to my wife on occasion.

This is pure gold. No context necessary

[RidingDonkeys]

Originally Posted by enjoythemusic

Seth, I honestly don't know. Currency creation is via congress and the Fed fulfills the 'order'. But the Fed is right now paying their bank partners for 'reserves' being held. I think it adds up to hundreds of millions daily in payouts due to ~4.75% interest rate.

Where is the Fed getting the currency? Technically, the Fed is losing currency daily.

An honest question, where is this currency coming from to pay for the interest held in reserves?

Short answer, the government lends to itself. It carries as part of the national debt.

On a loosely related note, Paul Simko addressed it while also breaking down US debt Crayola style here. Simko is a smart guy, professor at Darden. He just seems to be able to explain things in simple terms unlike many other academic types.

https://www.barrons.com/articles/fed...nding-21676988

[huncho]

lol