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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.

Grandson in a quandry
The other question, which is more personal and Bobpa does not have to answer is does he need an emergency fund? While I worked hard to wean my kids off my checkbook, and they happily followed thru when they had jobs, in a true financial emergency involving several thousands of dollars, we would gladly help.
It is important at young ages to adapt responsible budgeting, a savings plan and to be able to swing emergency car repairs for example, but a new roof might be beyond that funds capacity.
I would agree with paying off student loan.
Having received similar equity inheritances, I would also suggest keeping a little bit of at least one position as a sentimental reminder of someone else’s largesse.
I have a few shares of Exxon that “were” originally my grandfathers in 1920s. They are only electrons but they are still a reminder of his life and career.

sma3 July 2023 in Fund Discussions
Bank of America to pay $250 million for illegal fees, fake accounts

The following is a current NPR report:
Bank of America, the nation's second largest bank, has been ordered to pay more than $100 million to customers for double charging insufficient fund fees, withholding reward bonuses and opening accounts without customers' knowledge or permission. The bank is also on the hook for an additional $150 million in penalties for the same violations.
The Consumer Financial Protection Bureau announced Tuesday that an investigation found that Bank of America harmed hundreds of thousands of customers across multiple product lines over a period of several years through a series of illegal practices. As a result, Bank of America was ordered to pay over $100 million to customers and another $90 million in penalties. A separate $60 million fine has been ordered by the Office of the Comptroller of the Currency for violating laws around overdraft fees.
CFPB Director Rohit Chopra said in a news release that Bank of America's double-dipping on fees, opening accounts without customer consent and withholding rewards "are illegal and undermine customer trust," practices he said the CFPB will put an end to across the banking system.
Bank of America's "double-dipping scheme"
According to the CFPB, Bank of America utilized a "double-dipping scheme" to "harvest junk fees" from customers. It did so by charging people $35 whenever they didn't have enough funds available, but repeatedly charged customers for the same transaction, which the CFPB said generated "substantial additional revenue".
Chopra told NPR Business Correspondent David Gura, "Building a business model by double dipping on fees is simply not legal, and that's why we've sanctioned Bank of America and ordered them to pay back the customers they cheated."
The OCC said it found that the bank charged "tens of millions of dollars" in fees in resubmitted transactions, in violation of Section 5 of the Federal Trade Commission Act, which prevents financial institutions from using unfair or deceptive acts and practices.
"Overdraft programs should help, not harm, consumers," Acting Comptroller of the Currency Michael J. Hsu said in a news release. "Today's action demonstrates the OCC's commitment to protecting consumers and promoting fairness and trust in banking. We expect banks to conduct their activities in compliance with all applicable laws and standards, and when they don't, we will act accordingly."
Bank of America Senior Vice President of Media Relations Naomi R. Patton told NPR that the bank voluntarily reduced overdraft fees and eliminated "all non-sufficient fund fees" in the first half of 2022. She said the changes have resulted in a drop in revenue from these fees of over 90%. The bank also dropped the overdraft fee from $35 to $10 in May 2022.
Withholding credit card cash and point rewards
The CFPB said Bank of America targeted potential-customers by offering special cash and point rewards if they signed up for a credit card, a common signing bonus used by competing credit card companies. However, according to the CFPB, Bank of America illegally withheld those bonuses from tens of thousands of customers.
Chopra said Bank of America has been ordered to follow through on those promises.
"We know in the U.S. many people are really closely scrutinizing which credit card they sign up for based on rewards, whether it's cash, bonuses at enrollment, or airline points, or other proprietary point systems," Chopra said. "The fact that Bank of America advertised these signup bonuses and then did a bait and switch completely undermines the the fair market and consumer choice."
Bank of America employees opened accounts without consumers' knowledge
As far back as at least 2012, Bank of America employees illegally applied for and enrolled consumers for credit cards without their knowledge or permission to reach sales-based incentive goals and evaluation criteria, according to the CFPB. Employees illegally signed up customers by using or obtaining consumers' credit reports and completed applications without their permission, which resulted in unjust fees and negative impacts to customers' credit scores.
"That's essentially taking over someone's identity and exploiting it financially, and it's totally improper," Chopra told NPR. "It's totally inexcusable. So, whether it is happening to just a handful to thousands or to millions, we find this extremely serious."
Bank of America is a repeat offender
This isn't the first time the bank has been penalized for conducting illegal practices. Bank of America shelled out $727 million to the CFPB in 2014 for illegally deceiving roughly 1.4 million customers through deceptive marketing products. The bank was also ordered to pay a $20 million civil money penalty for charging 1.9 million consumers for a credit monitoring and credit reporting services they never received, according to the CFPB.
The bank was also slapped with two other penalties in 2022 totaling $235 million: a $10 million civil penalty for unlawfully processing out-of-state garnishments--removing customer funds for debts--against customer bank accounts; a $225 million fine for automatically and unlawfully freezing customer accounts with a fraud detection program during the COVID-19 pandemic.
"Bank of America is a repeat offender. Being a household name that has been punished before didn't stop it from allegedly cheating customers out of tens of millions of dollars in fees and credit card rewards and opening up accounts without their authorization," U.S. Public Interest Research Groups Consumer Campaign Director Mike Litt said in a statement Tuesday. "The Consumer Financial Protection Bureau's strong enforcement action shows why it makes a difference to have a federal agency monitoring the financial marketplace day in and day out."
Comment: B of A must be trying to catch up with Wells Fargo in the "screw the customer" department.

Old_Joe July 2023 in Other Investing
CD Renewals
@MikeM- Hi there Mike- For a U.S. bank the main difference would be FDIC coverage for a CD vs the lack of coverage for a bond. I'm uncertain as to insurance for Canadian bank deposits, but it would likely be the same for a Canadian bank bond.
Given that the financial situation in banking can sometimes be very volatile (look at what just happened to First Republic here in the U.S.), personally I wouldn't be interested in bank bonds, especially with the world now facing an uncertain financial situation because of Central Banks trying to dial down inflation.

Old_Joe July 2023 in Fund Discussions
Wall Street Soothsayers Bewildered
(This Article First Appeared in Bloomberg)
“UP AND down Wall Street, forecasters were caught flat-footed by how the first half of 2023 unfolded in financial markets. That seems to have rattled their faith in what the winning playbook for the rest of it should be. Heading into the year, a handful of predictions dominated strategists’ annual outlooks. A global recession was imminent. Bonds would trounce stocks as equities re-tested bear-market lows. Central banks would soon be able to stop the aggressive rate hikes that made 2022 such a year of market misery. As growth stumbled, there’d be more pain for risky assets.
“However, that bearish outlook was shattered as stocks rallied even as the Federal Reserve continued to ratchet up interest rates in the face of stubbornly elevated inflation. And what was supposed to be the year of the bond fizzled: US Treasuries have nearly wiped out their tiny gain for the year as yields test new highs and the economy remains surprisingly resilient in the face of the Fed’s monetary policy onslaught. As a result, financial soothsayers have rarely disagreed more about where markets are headed next.
“There’s a 50 per cent difference between the most bullish one from Fundstrat (which sees it rising nearly 10 per cent more to 4,825), and the most bearish call from Piper Sandler (down some 27 per cent to 3,225), according to those compiled by Bloomberg. The mid-year gulf hasn’t been that wide in two decades. “
https://www.businesstimes.com.sg/wealth/wall-street-soothsayers-have-rarely-been-so-bewildered-about-whats-next

hank July 2023 in Other Investing
Larry Summers and the Crisis of Economic Orthodoxy
Quote from the article linked by @LewisBraham:
"Unless Congress can find a way to agree on an extension of the expanded child tax credit — and cost is a big concern for many of its critics — the policy now reverts back to its previous iteration.
This also means much of the progress achieved with the monthly benefit, including dramatic reductions in child poverty and food insufficiency, could be just as short-lived as the policy itself."
Well we can't have that now can we. I mean what if we need those funds to bail out more banks and financial institutions, or cut corporate taxes, or help millionaires and beyond not pay their fair share of taxes. Those kids, our kids in the land of America should just go out and get a damn job if they want to eat or not live in poverty.

Mark July 2023 in Other Investing
"the dash for trash"
James Mackintosh today warns of investors' "dash for trash."
...the riskiest part of the bond market has performed the best. The CCC-rated borrowers closest to default have returned 10% this year. The worst-performing are safe investment grade borrowers ... Just as junk-bond investors like the trashiest investments, big stocks with the weakest balance sheets ... are beating those with stronger balance sheets ...
Why? No recession which kept the marginal firms afloat and forced continuing high interest rates which plagued investment-grade borrowers. Even without a recession, refi is going to knife many of those companies which will ripple out. Mr. Mackintosh identifies three tiers of likely victims, starting with "the obvious disasters: super-speculative also-rans that financed themselves in the final stages of the post pandemic boom, mostly using SPACs, plus some debt-financed zombies that should have gone bust but were saved by zero interest rates."
A companion article, by Jon Sindreu, walks through the size and timing of the debt threat. Two special notes. First, ratings firms have not kept up with re-rating issuers in light of interest rate changes (some "marginal" firms might, in light of higher rates, below in the "dumpster fire" box). Second, the poop will hit the propeller in 2025 with the peak of the refinancing wave. ("Higher-for-Longer Rates are Debt Threat")
Debt investing makes my head spin but these struck me as useful yellow- or red-flags for prudent long-term investors.
On a marginally related note, Mr. Sherman's CrossingBridge Pre-Merger SPAC ETF (SPC) is a top 25% performer YTD in Morningstar's calculation, which considers it a financial sector equity fund with a return of 3.55%. Last year it was a top 1% performer when Morningstar called it as small-growth fund, with a 2% gain against its average competitor's 14% loss.

David_Snowball July 2023 in Fund Discussions
CD Renewals
OldJoe:"Absolutely. Lots of stuff to choose from- whatever works best for you. At 84, with wife not into financial stuff, I'm keeping it simple. Just trying to maintain a little income to offset inflation (at least partially). About half in CDs/Treasuries, half in MMKT. Income (from SS & pensions) exceeds expenses. Works for us."
The importance of maintaining a "simple" portfolio for my wife, (both of us are older and retired), is a factor that may not be important for other investors. My wife understands CDs, even brokerage CDs, and MMs, but not much else. I consult with her in detail about CDs maturing, renewal options, rate of return, etc. and she offers her input before the purchase. She does not understand bond oefs, so I quit attempting to talk to her about those investments in the past. At the age of my wife and me, I don't have the luxury of time, to overcome significant portfolio losses, so we are both embracing the relative simplicity of CD investing. If CD rates start falling anytime soon, the ability to do that may not be as feasible.

dtconroe July 2023 in Fund Discussions
CD Renewals
Absolutely. Lots of stuff to choose from- whatever works best for you. At 84, with wife not into financial stuff, I'm keeping it simple. Just trying to maintain a little income to offset inflation (at least partially). About half in CDs/Treasuries, half in MMKT. Income (from SS & pensions) exceeds expenses. Works for us.
Take care.

Old_Joe July 2023 in Fund Discussions
Active Management and Superstars
Good stuff.
The more times I see/hear a PM in the financial pr0n media, the less I want to have money with them. Bob Arnott, Bill Gross, Jeff Gundlach, Michael Hassenstab, Cathie Wood, etc, etc. They all can be 'rock stars' with legions of fawning fans and media coverage -- until they aren't.
TRP's David Giroux is a rock star, but I get the distinct sense that he tends to eschew the media and is very selective with where and how often he's quoted or interviewed -- which I find refreshing. (You might be able to say the same about Buffett, too, maybe.)

rforno July 2023 in Fund Discussions
Changes involving Stuart Rigby and Grandeur Peak Global Advisors
Surprisingly, GP's version of events concerning First Republic doesn't contain so much a shred of admission that they made any kind of error.
"Our very selective approach to investing in Banks led us to own First Republic at portfolio weights that expressed a high degree of conviction in the company’s risk-adjusted return profile. As you are likely aware, over the past month, First Republic experienced a significant crisis, as collateral damage from the Silicon Valley Bank (SIVB US) collapse, which resulted in a severe de-rating of the FRC share price. A fair question for anyone to ask is how to reconcile our very selective approach to investing in banks with a large position in a bank that has experienced a significant crisis. At a very high level, our investment thesis on First Republic was based in its application of a world-class client service model to arguably the world’s most attractive banking client markets (specifically, the high net worth and high-end professional services markets in urban coastal population centers across the United States). That strategy for First Republic had enabled the company to structurally grow earnings while preserving exceptionally conservative underwriting standards. In other words, while First Republic is a bank, we observed that its unique model and exposure profile largely neutralized most of the quality attributes that generally make banks less attractive and more risky. Put another way, an attribute-by-attribute analysis of First Republic, reinforced over its long successful track record, made us comfortable treating First Republic as we would treat best-in-class growth companies we discover in other industries.
"However, after SVB Financial shared its post-close announcement on Wednesday, March 8th, highlighting elevated deposit attrition, the sale of available-for-sale securities at a material loss, and an equity capital raise, we spoke with First Republic’s CFO in order to confirm our knowledge of the company’s exposure to deposits from early-stage companies, net unrealized losses in available-for-sale securities, and other aspects of its capacity to avoid the negative feedback loop that SVB was beginning to experience. We left that balance sheet review confident enough to continue holding our positions. What destabilized our confidence was Friday’s announcement that SVB Financial would enter receivership and the recoverability of uninsured deposit balances at SVB was in question. As these revelations became clear, we concluded that the probability of contagion extending to First Republic depositors had become too high to justify continuing to hold our positions. In other words, we concluded that First Republic had ceased to be an investment opportunity and had instead transitioned to more of a pure gamble on which wagering our clients’ funds was unacceptable. We proceeded to exit our entire investment position in First Republic at the next opportunity (the Monday morning pre-market) as efficiently as we could without further pressuring the share price."
https://secure.alpsinc.com/MarketingAPI/api/v1/Content/grandeurpeakglobal/grandeurpeakglobal-comm-20230421.pdf
If they can't find any mistake in their investment process, then what's to prevent them from making the same mistake again?

chang July 2023 in Fund Discussions
Changes involving Stuart Rigby and Grandeur Peak Global Advisors
My thinking is the more concentrated a fund is in a few stocks, the more managers need a forensic accountant to go over the financial documents of their companies with a fine tooth comb looking for fraud or problematic areas. But for funds with 100 or 200 stocks as many Grandeur funds are, it seems less necessary. There is less individual company risk in a 1% position than a 5% one.
That said, Silicon Valley Bank wasn’t a case of fraud or hidden funny numbers like Enron or Worldcom. These were risks on the balance sheet in plain sight. Maybe managers just didn’t believe rates would rise as quickly as they did and instead thought that SVB would have time to adjust and reduce its rate exposure.

LewisBraham July 2023 in Fund Discussions
Changes involving Stuart Rigby and Grandeur Peak Global Advisors
Think Grandeur Peak was careless with respect how they handle the risk on the stock and their fund levels. The worst part was they did not even apologize for this mistake. I found this data from their 2022 annual report. If you look up these two banks, Grandeur Peak was one their largest investor. My question for GP is how can they concentrate the risk by holding two similar banks. I invested with them awhile back and sold the entire position in mid 2021. They were just too volatile for my taste.
Queen Road Small Cap fund I have did not hold the same kind of bank stock as Grandeur Peak funds did. The annual report even pointed out why a bank it invested in stands out differently from SVB. Clearly, the fund manager knows their financial holdings well.

Sven July 2023 in Fund Discussions
The Next Crisis Will Start With Empty Office Buildings
So many obstacles now to converting empty office buildings including old zoning laws, and the fear of lost equity in nearby homes to be but a few. Interesting read, but will probably be behind a NYTimes paywall. https://www.nytimes.com/2023/07/01/upshot/american-cities-office-conversion.html?smid=nytcore-ios-share&referringSource=articleShare
“There is an aging office building on Water Street in Lower Manhattan where it would make all the sense in the world to create apartments. The 31-story building, once the headquarters of A.I.G., has windows all around and a shape suited to extra corner units. In a city with too little housing, it could hold 800 to 900 apartments. Right across the street, one office not so different from this one has already been turned into housing, and another is on the way.
But 175 Water Street has a hitch: Offices in the financial district are spared some zoning rules that make conversion hard — so long as they were built before 1977. And this one was built six years too late, in 1983.”

Level5 July 2023 in Other Investing
Q: what does it actually MEAN when I see a neg. P/E?
On Averages
Averages are often misused in the financial industry. Almost everything is averaged arithmetically (i.e. simple average) when other averages such as geometric averages (for TR, etc), harmonic ratios (for P/E, P/B ratios, etc) may be more appropriate; in some cases, no averaging method is applicable but simple averages are used anyway (SD, Sharpe Ratio, etc).
BTW, the M* document @msf linked also says (my bolds),
"Morningstar generates this figure in-house, based on the most-recent portfolio holdings submitted by the fund and stock statistics gleaned from our internal U.S. equities databases. (Our U.S. equities department receives prices from ComStock, a division of Interactive Data Corporation. , and gathers earnings information from a company's most-recent annual and quarterly income statements.) Negative P/Es are not used, and any PE greater than 60 is capped at 60 in the calculation of the average." https://awgmain.morningstar.com/webhelp/glossary_definitions/mutual_fund/mfglossary_Price_Earnings_Ratio.html
I think that Stock Rover (SR) also uses harmonic averages for ratios (P/E, P/B, etc), but then goes ahead and uses simple average for SDs - I cannot find a link now. SR was also making some other errors in handling cash, m-mkt funds, yearend CG distributions, and after several back-and-forth communications to get to the right person/team, SR fixed them. https://ybbpersonalfinance.proboards.com/thread/318/stock-rover-sr
As for contacting organizations for errors or data, the worst are Yahoo Finance and Vanguard - either they don't respond, or they don't care and send form letter responses. The best in this respect are Fidelity, Portfolio Visualizer (PV), StockCharts, StockRover (SR).

yogibearbull July 2023 in Other Investing
Record Outflows from TIPS ETFs
Yes, that is my understanding too, @WABAC. People scurrying away after they lost in 2022 while all bond funds lost money with rising rates is likely a good sign for the future of TIPS. I have small holdings in a short and long TIP ETF. Money-wise I'm about even with where I bought a few months ago. The financial environment for TIPS is probably better today than when I bought so I'm holding... but I've been wrong before :).

MikeM July 2023 in Fund Discussions
Twitter is Now Also "Closed"
I agree with @yogibearbull.
I briefly used a financial account aggregator as a test several years ago.
It was nice to consolidate all my accounts in a "single pane of glass."
While I liked this feature, the increased risk wasn't worth it.
All my account passwords were changed after the aggregator trial...

Observant1 July 2023 in Technical Questions
Oakmark Bond Fund OAKCX
@Crash said ”Can't find apples to apples anywhere. Crud”
That’s because bond funds are nearly impossible to compare. Too many moving parts: Credit quality, average duration, average maturity, countries & regions included, dollar hedged or non-hedged (if outside the U.S.) Throw into that sauce the manger’s philosophy, his / her appetite for risk, prior experience and their overall view of the domestic or global macro picture. One big attribute you do have control over is the ER. That’s a bigger factor with fixed income funds than with stock funds generally because the expected return is lower and that ER takes a bigger bite out of the expected return. That .74% doesn’t look cheap on the surface, but I don’t know enough about how the fund invests to say it’s out of line. hedging / short selling / use of leverage / investing in lower quality bonds all cost more (if it so engages). International investing, if included, also increases cost.
Look for a website that shows things like average duration and the dispersion among credit qualities ranging from AAA (government backed) all the way down to C (in default). Tells you a lot about the risk (and is one good way to compare different funds). I think M* will display that if you click the “holdings” tab. And I’m pretty sure Fido’s website will as well.
Past performance? Was that during the 30+ year bond bull market dating back to Paul Volker? Or are we talking about the bear market of the past 2 years when when rates stabilized and than spiked sharply? Or maybe we’re looking at some “combo” performance figure including portions of both the bull and bear markets … :)
-
@Crash said, ”And HARRIS is involved, somehow. Sub-advisors?”
Harris Associates, Chicago, operates the Oakmark Funds. I believe Harris was independent at one time. For many years now it has been owned by the giant NATIXIS of France. Nothing wrong with Natixis. Well regarded, but a bit pricey. Many of their funds are front-loaded. I’ve owned some funds under the Natixis umbrella over the years - most recently GATEX, which I sold more than a year ago.
”Harris Associates L.P. is a Chicago-based investment company that manages $86 billion[1] in assets as of September 30, 2022. Harris manages long-only U.S. equity, international equity, and global equity strategies which are offered through its mutual fund company, the Oakmark Funds, and other types of vehicles. Harris is wholly owned by Natixis Investment Managers, an American-French financial services firm that is principally owned by BPCE. Harris Associates retains full control of investment decisions, investment philosophy, and day-to-day operations.”
Wikipedia: https://en.wikipedia.org/wiki/Harris_Associates

hank June 2023 in Fund Discussions
Larry Summers and the Crisis of Economic Orthodoxy
Back to the original post in this thread. It makes me giggle to read the phrase, "slightly Luddites."
All manner of financial "everything" has been dreamed up and created, in order to devise instruments to be bought and sold in the Markets. Remember Michael Burry? He went to GS to ask them to invent an instrument by which he could short the housing market. Smarter than them all.
He exploited what he was able to see in the statistics. OK. But "everything" needs to be regulated. Because the Market owns no conscience. PEOPLE ought to, but too often don't. And the people who too often don't, have lots of money to put to work. And Larry Summers jumped down the throat of Brooksley Born for pointing out the need to regulate (or more tightly regulate?) credit derivatives. Summers opposed it, vehemently.
(And yes, the Head of the CFTC could not accurately be labeled as just a "staffer.")
That episode with Born in Summers' office goes back a lot of years. Perhaps it is too far back in the rearview mirror to matter anymore? Perhaps uncle Larry can be forgiven? At any rate, regulations, in turn, depend upon humans with a conscience in order to be enforced. Regulations cannot stop greed, but the regulations can prevent particular instances in which naked greed is center-stage and obvious. And we need more regulation, not less. Maybe more precisely, what I want to express is the need for a fundamental overhaul, so that regulations do not need to be created for A, B, C and onward all the way to Z, like continually sticking fingers into holes in the dike. I don't bet we'll ever see such a thing, though: too many vested interests would find their own oxen would be gored.

Crash June 2023 in Other Investing
All Good, 23 Banks
The large projected decline in commercial real estate prices, combined with the substantial increase in office vacancies, contributes to projected loss rates on office properties that are roughly triple the levels reached during the 2008 financial crisis.
Let us hope that 'haircut' doesn't take place.

catch22 June 2023 in Other Investing
All Good, 23 Banks
On CREs,
"The test's focus on commercial real estate shows that while large banks would experience heavy losses in the hypothetical scenario, they would still be able to continue lending. The banks in this year's test hold roughly 20 percent of the office and downtown commercial real estate loans held by banks. The large projected decline in commercial real estate prices, combined with the substantial increase in office vacancies, contributes to projected loss rates on office properties that are roughly triple the levels reached during the 2008 financial crisis."

yogibearbull June 2023 in Other Investing