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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.

State Farm halts new home policies in California due to wildfire risk, rising costs
Thanks for the news. This will impact California’s housing market significantly. Correct me if I am wrong, carrying home owner insurance is a requirement by the mortgage providers. Who is going to cover wildfire hazard now?
Next natural disaster to consider is hurricanes. The frequency and severity are getting worse in recent years. Truly a mess for both homeowners and the insurance business.

Sven May 2023 in Other Investing
Making the switch to Fidelity this week
Crocker Bank - for which Paul Williams and Roger Nichols wrote We've Only Just Begun.
https://www.cheatsheet.com/entertainment/bank-commercial-inspired-the-carpenters-weve-only-just-begun.html/
The Crocker commercial, performed by Paul Williams:

Years ago, when we tried to open a Wells Fargo account, WF insisted that one of our SSNs was wrong. That they already had a customer with that SSN. They wouldn't open the account until we proved that the SSN was legit.
Ironic, given WF's excessive zeal in opening accounts.
It turned out that for three years, WF had been reporting mortgage payments (deductible) with the wrong SSN.
And it's been downhill for Wells Fargo ever since.

msf May 2023 in Other Investing
Making the switch to Fidelity this week
Fido was my best brokerage experience, and I remain with them. Vanguard became really terrible.
Also, I would not leave a dime in any Wells Fargo accounts. That bank has a poor history, and I'm not convinced that the culture there has changed. If a bank is opening accounts that customers didn't approve, you don't deal with that bank.
Never had that experience with Wells Fargo. At one time they sold us on an account to segregate funds from fraud online. Said account came with no charges on trades on mutual funds through their brokerage. At some point we said "What's this account all about?" And then we got rid of it. I still got the breaks for a few years after that. But I wish we had kept that account
We did have two positive mortgage experiences with them. One was a refinance of Fort Knox on the Marin-Sonoma border. The other was our house in Arizona that we decided to pay off.
These days, the ETF trades are free, and they charge less for non-NTF funds than Fido. But they don't have near the selection universe.
The funny thing--to us--is that when we attended college in Minnesota. we both had bank accounts at the bank that bought Wells Fargo
When we got to San Francisco in October 1979, our first bank account was with Crocker. They were bought by somebody, who was eventually bought by Wells Fargo. Old Joe might remember.

WABAC May 2023 in Other Investing
Barrons article on How to Sneak into Closed Funds
@MSF The nature of omnibus accounts at outside brokers provides limited information to fund managers, so they don't know generally who owns the funds individually, although I think there are circumstances when there is suspicious trading activity, like the market timing scandal many years ago when they can request more info

LewisBraham May 2023 in Fund Discussions
Wellesley . Government and Agency Obligations 12.3 % Note rate & maturity
Even with no change in market rates, bond prices change. This is most obvious with zero coupon bonds. They are sold at a discount and one gets yield from price appreciation.
As bonds get closer to maturity, their prices gradually converge to par. If the coupon is below current market rate based a bond's remaining maturity, a bond will be priced below par. If the coupon is above current market rate a bond will be priced above par. This is true regardless of when a bond was sold or why it was sold with a particular coupon rate.
The 0.625% bond is a discount bond. That coupon is so low, it's almost like a zero, that trades below par for its entire lifetime. You need to know Wellesley's acquisition price before you can say whether the fund has a mark-to-market loss or gain. All one can tell from the current price and coupon is the YTM.
The march toward par is not linear. A disproportionate amount of price gain of a discount bond comes early. If a 10 year bond is sold at a discount, then five years later the bond price will have gone up more than half (assuming no change in market rates). That's because it is now a 5 year bond and 5 year bonds yield less than 10 year bonds (usually).
So one can pick up some yield by continually selling bonds and buying longer term bonds rather than holding bonds to maturity. This strategy is often called "rolling down the yield curve".
https://corporatefinanceinstitute.com/resources/fixed-income/rolling-down-the-yield-curve/
The 0.625% bond

msf May 2023 in Other Investing
Making the switch to Fidelity this week
Both Schwab and Fidelity have local offices close to me, which is a big draw for me. I know others have said the local office isn't important to them because computer and phone service is adequate, but I will always prefer the 1:1 sit down with a real person or a phone chat with a person I know. I'm not presently a Fidelity customer so I can't compare the two.
To bee's point, I have had a TD Ameritrade Roth IRA account for close to 20 years. I, contrary to bee, am looking forward to the TDA conversion to Schwab. I find the CS trading tools and web site as a whole more to my liking. I guess I've never felt like a product "of" CS. Contrarily, with the switch there are many more financial products open to me.
Prior to the switch, I was tempted to transfer that TDA account to Fidelity just to have a comparative experience between CS and Fidelity. I still might. Just been lazy.

MikeM May 2023 in Other Investing
Wellesley . Government and Agency Obligations 12.3 % Note rate & maturity
Those are older Treasuries nearing maturities. Coupon shown is that at the time of issue.
For example, 10-yr T-Note issued almost 10 years ago would be nearing maturity now, but will show coupon from 10 years ago. Current price would reflect a change in rates.

yogibearbull May 2023 in Other Investing
Making the switch to Fidelity this week
@hank
Over the last few years I have been bought by Schwab twice… and counting. I was sold by USAA to Schwab 3 years ago. Instead, I moved to TD. Recently sold again.
In a world where big (Schwab) eat little (USAA), I should appreciate the added value these efficiencies create. I was as unhappy with USAA, maybe more so. At USAA, the $1.6B (corrected) (what Schwab paid) went to improve shareholder experience at USAA. Hmm, I have heard that one before.
Now, this time, big (Schwab) eats big (TD). Not sure who benefited from these sale proceeds, but it wasn’t me. I was the product.
Being a Fidelity customer may have its own drawbacks, but it appears I am a bigger risk to them… being sold.

bee May 2023 in Other Investing
Making the switch to Fidelity this week
Been a Schwab customer for about 30 years. I stay for the service. Whenever I have a question or concern I can always reach someone who actually seems to care about my problem. Today I got a follow up call from yesterday’s question about POA on our multi accounts. The rep didn’t have an answer but his manager will be taking the question to customer concerns meeting next week. At least they are trying.

larryB May 2023 in Other Investing
Making the switch to Fidelity this week
I would have kept our TRP account except they wouldn’t let me invest in PRWCX even though I had been a customer more than 30 years, so I moved those accounts to Fidelity and haven’t looked back.
+1
That firm (TRP) is almost unrecognizable from what it was in the 90s. And not all for the better.

hank May 2023 in Other Investing
Making the switch to Fidelity this week
When I first started investing 30+ years ago, I was considering Vanguard, Fidelity and TRowe Price. Vanguard’s minimum investments were too high, and I opted for TRP because they were friendly to small investors. I later started an account with Fidelity for a rollover IRA because they had so many investment options, and never regretted that decision. A few years ago, I moved all of our investments to Fidelity because their customer service is so good, expenses are reasonable, and they have much more options than TRP. I would have kept our TRP account except they wouldn’t let me invest in PRWCX even though I had been a customer more than 30 years, so I moved those accounts to Fidelity and haven’t looked back.

Tarwheel May 2023 in Other Investing
Barrons article on How to Sneak into Closed Funds
@MikeW’s question about an ETF to be managed by Giroux reminded me that more and more mutual fund providers are getting into ETFs, sometimes creating very attractive vehicles managed by successful OEF PMs. @TheShadow keeps track of a lot of these new funds for us, a great service. I don’t know of specific ETFs that might be clones of closed MFs.
Unfortunately, the proliferation of ETFs in the last few years makes it hard for an amateur like me to keep track. Some of the more interesting new ETFs have been created by American Century (Avantis), PGIM, Van Eck, Pacer, Cambria, Harbor, and Franklin-Templeton, to say nothing of all the house funds offered by Fidelity and Schwab. I think I would have to subscribe to one of the ETF dedicated web sites and spend way more time than I want in order to closely follow developments.

BenWP May 2023 in Fund Discussions
new deep-dive swr math
At one time when working & doing my taxes, advisor fees could be itemized. Thus cutting drag. With 401-k I never paid much attention to drag when account was smart, but as the years went bye & account grew the pain became noticeable !!
Enjoy your weekend, Derf

Derf May 2023 in Other Investing
new deep-dive swr math
For those who pay an advisor to manage their money, those advisor's management fees need to be accounted for as well. These fees represent an additional "withdrawal" to your SWR rate.
The two largest fees are your fund's expense ratios (mutual fund or ETF management fee) and your independent advisor's management fees. If you employ a portfolio manager often they will withdraw 1% of your portfolio yearly. That kind of a 1% "drag" on your SWR can reduce a very significant amount of your wealth over long periods of time (30 - 40 years in retirement for example).
To illustrate this, I will use a highly efficient mutual fund (VFINX...low ER) and run a simulation through Portfolio Visualizer. I set the withdrawal rate of 1% over the life of the simulation to see what the impact of just the management fee would be on the portfolio's ending value. I used $1,000 as the starting Portfolio value.
https://portfoliovisualizer.com/backtest
Time frame: 1985 - 2023 (38 years)
Paying management fees of 1% (withdrawn yearly) on a portfolio starting value of $1K in 1985, this portfolio would have grown to $38K by 2023. The Inflation adjusted value of that $1K in 1985 = $13K in 2023.
Removing the 1% withdrawal the during this same time frame, $1K(1985) grew to $56K (2023), with and adjusted inflation value of $19.5K.
This means that the a retiree, who paid a 1% management fee throughout retirement (1985-2023), had a portfolio that was 33% less than the same retiree who self managed their retirement portfolio.
Another way of looking at this is that your advisor made $18K (the difference between $56K-$38K) advising you over these 38 year. You made $27K. If you need advice...pay for it hourly, not as a percentage under management.
If there is one thing we all can do to improve our success with SWR in retirement it would be to reduce the fees that we pay on both the funds we invest in and advisor fees we pay others.

bee May 2023 in Other Investing
Matt Levine / Money Stuff: Ugh! The debt ceiling...
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.

Old_Joe May 2023 in Other Investing
In case of DEFAULT
@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.

larryB May 2023 in Other Investing
In case of DEFAULT
@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

fred495 May 2023 in Other Investing
just noticed re:BRUFX
Patience sometimes pays off, eh, @hank? I've been tracking Brother Industries out of Japan. BRTHY.
https://www.stockrover.com/research/insight/summary/quotes/BRTHY
Thx @Crash. I rarely sell something that’s down. (But occasionally head for the exit if nauseated. :))
I think some foreign holdings non dollar-hedged is a good diversification tool in a risk averse portfolio. Just keep the commitment light. As my prior post indicated, the FX (foreign exchange markets) can sink even the mightiest ship. Patience for sure where currencies are in play. Grantham mentioned Japan about 2 years ago as one area where there might still be some value in an inflated global market. I took his lead. Of course, they’ve risen a lot over those 2 years. Buyer beware at this late stage.

hank May 2023 in Fund Discussions
just noticed re:BRUFX
@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

bee May 2023 in Fund Discussions
just noticed re:BRUFX
Just from general reading, Buffett is high on cash - apparently leery of valuations. That would be in line with @Crash’s comment re BRUFX. As noted previously, Buffett’s been buying in Japan. ISTM the S&P is inflating due to a handful of stocks. Elephant chasing his tail comes to mind. But could be wrong. Perhaps it’s heading for a permanently high plateau.
Personal note - Have had a small hold on Japan stocks thru an index fund for couple years. Because it isn’t dollar hedged against the yen I took a clubbing last year even as Japanese stocks rose. Happily, I’ve gotten that back this year as the dollar has weakened against the yen and Japanese stocks have continued to rise.

hank May 2023 in Fund Discussions