LTribe today, worth reading:
https://www.nytimes.com/2023/05/07/opinion/debt-limit.html

@rforno
I think that applies to less than a majority of the GOP, maybe 20%. They hold influence because only 50% of people bother to vote
When your bank closes and the ATM is empty and your SS check doesn't arrive, I suspect people will notice.
The GOP will try to blame Biden, but whether this will work remains to be seen.
I still do not understand why the debt ceiling is not unconstitutional.

I agree. It's just another example of 'minority rule' disrupting the good workings of this country.
I don't think that blaming Biden for a default would stick, either. And I've read this morning that the WH hasn't removed invoking the 14th Amendment from the table ... or letting it go into the courts and let SCOTUS ultimately rule that a default is a constitutional violation -- which would also give Biden cover since it's not *him* or the D's that are making the decision here, it's the judiciary, such that it is.

@rforno
I think that applies to less than a majority of the GOP, maybe 20%. They hold influence because only 50% of people bother to vote
When your bank closes and the ATM is empty and your SS check doesn't arrive, I suspect people will notice.
The GOP will try to blame Biden, but whether this will work remains to be seen.
I still do not understand why the debt ceiling is not unconstitutional.

Can't disagree with the primary statement. A short video at page top after 15 second ad.
Text and video, Mr. Buffett

One can live off dollars, one can’t on percentages. Although I understand on an abstract level removed from your actual life, it’s “all about math,” in reality in one’s life, it is not at all. This is especially so if one worked for those dollars, spent the fleeting hours of one’s life earning them.
Psychologically, it’s quite interesting. Think about if you found $100 on the street and lost it versus if you worked eight hours, gave your entire day to earning that $100 and then lost it. Would it feel the same? It’s why when losses eat into the principal you invested instead of just erasing gains you already made on top of your principal it feels worse. And losing $50,000 is always going to feel worse than $100 even if in percentage terms they’re the same, especially if that $50,000 is the equivalent to a year’s salary for many Americans and they now need to live off that $50,000 in retirement.

Mike Wilson, a strategist at Morgan Stanley, has noted the spread between S&P 500 index and RSP index has increased since the beginning of the year. (He is one of the most bearish analyst out there and get ignored often). This implies that only a handful of large cap stocks are pushing the cap-weight index forward and masking the remaining 490 stocks. These are the tech stocks and they are trading at high valuation. This trend IMHO is not healthy as one would like to see a broad-based movement of all stocks that indicates a healthy economy. Earning reporting over the last several weeks is revealing the slowing and in some cases a downward trend.
This reminds me of the internet stocks during the run up of 2000. CNBC was cheerleading the Nasdaz moving passed 5,000 as bubble grew and grew (>800%) Then came October 2000 the dotcom bubble burst, and Nasdaz gave up all its gains during the bubble (740%). Will this time be differs than previous market cycles? I think we are heading into a recession and the severity is unknown.

Covering 11 years of total returns, there is not much different in the 3 you noted. Yes, they will travel slightly different paths during a 6 month or 1 year time frame, but this is the nature of management investment choices and market valuations during such periods. The largest spread over the entire time frame is 5.3% more return for WBALX vs VWINX. As noted previous; have you a serious reason to desire changing funds ?
VWINX , INPFX , and WBALX chart from May 18, 2012 to May 5, 2023.

Hover over the date field and it shows 11/5/22, 1:15 PM.

Rummaging through old posts uncovered this from last November … Never out of date.

“Have you noticed how easy it is to tell yourself that you would be comfortable with a 10% drop in the value of your portfolio until you are seeing it losing $50,000, $100,000 or $150,000 or more . Dollars seem to have a greater impact on your tolerance.”

I decided a long time ago it’s best to view asset allocation in terms of percentages. So, theoretically, it doesn’t make any difference whether you’re managing $50,000, $500,000, or $5,000,000 when designing a portfolio and maintaining the desired allocation among different asset classes. There are some caveats: Fees tend to be higher for lesser amounts invested. And some lucrative investments may not be available for smaller sums. In that sense, dollar amounts may well influence investment decisions.
As @Bobpa correctly notes, looking at dollar sums can be gut-wrenching during falling markets as money seems to be “flying out the door”. More important, this can lead to hasty knee-jerk reactions we later regret. Another thing I noticed is that dollar sums appear to gain in importance once distributions begin. Up until then (during the working years) they’re largely “numbers” on a chart. However, once you begin spending those funds on real goods and services, your perspective changes. Suddenly you’re looking at “real” dollars in terms of what they can buy.
Post is from November 5, 2022, just a few weeks after the S&P dipped below 3,590 on October 12. That was its low for all of 2022 and lower than where it ended 2020. (Thanks @Yogibearbull for helping on the date.)

Last post @Bobpa posted on MFO was back in June 2022.
https://mutualfundobserver.com/discuss/discussion/comment/151173/#Comment_151173
In this post, he talked about his portfolio and holdings where VWINX is one of the larger allocation fund. Bobpa is in his retirement and he is looking for a replacement for some reason that he did not specify on this post. Since everyone’s situation is unique with respect to withdrawal needs., RMD, and investment horizon, the question is more on financial planning rather than a “drop-in” replacement with a different asset allocation fund.

There are several equal-weight ETFs.
https://www.mutualfundobserver.com/discuss/discussion/60546/equal-weight-market-cap-sector-etfs#latest

If it is a concern you might consider the equal weight S&P 500 EFT symbol RSP.

May 5, 2023 Episode:

This week on WealthTrack...Terrence Keeley, CEO, and Chief Investment Officer of 1PointSix LLC, left BlackRock, one of the world’s largest investment managers, in July 2022 to publish his book, SUSTAINABLE: Moving Beyond ESG to Impact Investing.
In his 40-year investment career, Keeley has never advised a client to invest in ESG, and he joins us to explain why ESG investing doesn’t work and what does. This is a rare occasion for a top executive at a major investment firm to go public about a major policy difference.

Link to Podcast Interview:
wealthtrack-1945-keely-05-05-23-1080p

Due diligence here suggests that I should post the entirety of my earlier comment from which @Old_Joe has excerpted and to which he has taken exception.
“PACW + 85% today to $5.85
Believe a lot of money has both been made and lost on this one. Makes one wonder what really moves these (regional banking) markets. And who has access to what information. Simply attributable to Charles Mackay’s “The Madness of Crowds? Pardon my skepticism.”
https://www.mutualfundobserver.com/discuss/discussion/61041/pacwest-falls-50-after-hours-on-report-bank-is-weighing-sale
Not quarreling with Old Joe’s analysis of this issue. Just felt that the full text of the comment by me to which he alludes should also appear in this thread,

I think that I got it. The 1m T-Bill yield has spiked because the market now thinks that 1m maturity will be AFTER the drop-dead date for debt-ceiling. And this expectation changed THIS week.
https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202305

05/05/2023:

Lee and Subramanian are good. I like it when they're on.

May 05, 2023:

None of the "quick yes or no" questions at the end, this time. I do hope it's gone for good.

(Part 2)
The problem with this possibility is that it is a little hard to distinguish it from Possibility 1. If a bank’s stock falls 50% in a day, it’s sort of natural to panic, to read it as more “the market thinks this bank is toast” than “the market thinks that the present value of the residual cash flows to shareholders will be considerably lower than previously expected.”
That’s bad because, again, a bank run is about deposits suddenly becoming information-sensitive. One way for that to happen is that you are a depositor at PacWest, you do not pay very much attention to your checking account, and then you turn on the news and everyone is shouting that PacWest’s stock is collapsing because the market expects it to fail. You might start paying attention! Davies again:

Weaker profits degrade the value of its shares. But the current fear of wider instability has made these problems more dangerous by creating a feedback loop: Falling share prices make depositors more skittish, funding costs rise further, profitability worsens and around it goes again.

This brings us to Possibility 4. Possibility 4 is that stock investors were pushing down the prices of regional banks in order to cause them to fail. Here is a Twitter thread from Bob Elliott stating the case:

Regional bank 'crisis' shifting from deposit runs driving equity declines to speculators engineering equity declines to increase the risk of deposit runs.
This new phase divorced from fundamentals risks creating a metastasizing crisis rewarding speculative attacks. ...
Since last week there has been acute downward pressure across regional banks stocks, particularly focused on $PACW and $WAL.
What has been driving those losses? Short selling & put activity. …
The reality is that it doesn't take much flow at this point to create big moves given the market caps are on the order of $1-2bln. Tiny companies relative to their macro impact right now. ...
Their funding conditions have remained *stable* through this period. Incremental information about fundamentals isn't driving the decline. Looks like speculators trying to engender a panic.

The point here is not just “people are shorting these bank stocks for no good fundamental reason,” but also that this can create fundamental problems. Elliott goes on:

In most industries if this sort of dynamic happened where there was a big hit to the stocks which didn't reflect a change in underlying fundamentals, there wouldn't be much impact on the business. It would keep doing its thing, and eventually the stock would simply reprice.
But banks are a very different sort of business. They are a confidence business more than anything. And big stock price declines are a problem for confidence.
At some point these declines *will be enough* to start to worry uninsured depositors who are paying attention.
And when that happens the fundamentals will deteriorate, which will further reinforce the equity market action. Shorts will get paid for being the very folks inducing the bank run.

I am temperamentally not disposed to believe any theory like “short sellers are dishonestly manipulating this stock in order to cause the company to fail,” but I have to admit that, with regional banks (unlike most companies!), that could kinda work. Banks do rely on confidence, and a plunging stock price that gets a lot of attention is bad for confidence. And people do seem to be taking this theory seriously. Reuters reports:

U.S. federal and state officials are assessing whether "market manipulation" caused the recent volatility in banking shares, a source familiar with the matter said on Thursday, as the White House vowed to monitor "short-selling pressures on healthy banks." ...
"State and federal regulators and officials are increasingly attentive to the possibility of market manipulation regarding banking equities," the source said.
White House press secretary Karine Jean-Pierre said the Biden administration was closely watching on the situation, but any possible action would be taken by the Securities and Exchange Commission.
"The administration is going to closely monitor the market developments, including the short-selling pressures on healthy banks," Jean-Pierre told a White House briefing.
The American Bankers Association on Thursday called on the SEC to investigate significant short sales of banking shares and social media engagement that it said appeared to be "disconnected from the underlying financial realities."

And at Semafor, Liz Hoffman asks, “Should the U.S. ban bank short selling?”

In September 2008, U.S. and U.K. regulators temporarily banned investors from selling short financial stocks. “Unbridled short selling is contributing to the recent, sudden price declines,” then-SEC Chairman Chris Cox said, noting that banks (at the time, investment banks were the problem) are uniquely vulnerable to “panic selling because they depend on the confidence of their trading counterparties in the conduct of their core business.”
Swap depositors for counterparties and you’ve pretty well got the current problem. And investors seem to be getting ahead of customers in their rush for the exits. PacWest and Western Alliance actually added deposits in April, after the collapse of SVB and Signature. Fed Chair Jerome Powell said yesterday that the deposit outflows at regional banks had stabilized.
Depositors are no longer panicking, but investors are. It might be time to consider another temporary ban.

Incidentally there are stronger and weaker forms of Possibility 4. The strong form is something like “dastardly short sellers are knowingly shorting stocks of regional banks with the goal of causing panic and driving them into failure, so they can take profits.” The weak form is something like “rational market participants look at the stocks of regional banks and conclude that they are overvalued, because they honestly (correctly or incorrectly) believe that earnings will be lower or failure more likely than the market thinks, so they short the stocks, which might cause them to fail and generate profits for the short sellers.” The effect can exist with or without the intent.

One way to think about it is that the stock market is supposed to be efficient and the market for bank deposits is not. The point of the stock market is that a lot of well-informed hedge fund managers and hard-working analysts and Reddit-reading day traders are all competing with each other to find out information about each company and use that information to determine the fair value of its stock. The price of a stock changes each second to reflect the information and views collected by the market, and if the market is working well then that price reflects the collective best guess at the long-term value of the company. In practice the market sometimes tries too hard, and stock prices bounce around more than is justified by changes in fundamental information, but this is the goal.
The point of a checking account is that you put your money there and don’t think about it. You don’t compete with a bunch of hedge fund managers to understand your bank’s financial statements; you don’t stay up late reading Reddit for clues about its business prospects; you maybe aren’t even aware of the interest rate that it pays you. A checking account is not a high-risk, high-reward financial instrument that you have spent a long time doing due diligence on. It’s just money in the bank.
Economists say that bank deposits are supposed to be “information-insensitive,” and there is a vast corporate-finance and regulatory apparatus to make that mostly true. Most people’s bank accounts, for instance, are insured (up to $250,000) by the Federal Deposit Insurance Corp., so that even if their bank is just cobwebs and fraud they still get their money back, which means that they truly don’t need to do any diligence on their bank. But also banks have capital and liquidity requirements and prudential regulation and access to Federal Reserve lending facilities, so that even if things go pretty wrong at a bank it will still have enough money to pay out its depositors, because “the depositors don’t need to worry about their deposits” is kind of the whole point of bank deposits. Lots of people — bankers, regulators, economists — think about these things, so that depositors never have to.
Now, this is not always true. The classic story of a bank run is something like “deposits suddenly become information-sensitive, and you don't want that.” One way to tell the story of Silicon Valley Bank’s collapse is that its balance sheet got pretty rickety, shareholders saw that and said “well that’s fine, you can have a bank with a rickety balance sheet as long as it keeps its deposits,” and the stock muddled along for a while. But then depositors noticed that the balance sheet was rickety, they pulled their money, and the bank collapsed instantly. In fact, depositors might have noticed the problem because SVB publicly announced a share sale, which put more focus on its problems. It actually found enough buyers for the stock at a decent price, but then had to pull the deal because so many deposits had vanished: SVB’s shareholders were less information-sensitive, briefly, than its depositors.
But the story of … the second half of this week? … in the US regional bank mini-crisis seems to be that the stocks of some regional banks are very volatile, while their deposits are not. The shareholders are reading the news and alternately panicking and rejoicing; the depositors are not reading the news and just keep their money in their checking accounts. Kind of what’s supposed to happen! Here’s the Wall Street Journal yesterday:

PacWest Bancorp, which has been hit hard since the collapses of several banks, dropped by about 50%. The stock started falling in after-hours trading Wednesday evening, after a report that it was considering selling itself.
PacWest said in a statement after midnight Eastern Time Thursday that its core customer deposits were up since the end of the first quarter, and that it hadn’t experienced any unusual deposit flows since the collapse of First Republic.

And here’s Bloomberg News this morning:

PacWest Bancorp led a rebound across US regional banking stocks after a bruising week of losses, amid signals that some of the selling has been overdone.
PacWest’s shares soared as much as 88% in US trading Friday, their biggest intraday gain ever, after multiple trading pauses for volatility, while Western Alliance Bancorp rose as much as 43%.

And:

Take Western Alliance, the Phoenix, Arizona-based bank whose shares tanked as much as 27% on Tuesday, the day after JPMorgan Chase & Co.’s emergency rescue of First Republic Bank. While the deal failed to quell investor concerns the upheaval would spread, depositors were a little less fazed: Between Monday and Tuesday, they added $600 million of cash to the bank.
“The bank has not experienced unusual deposit flows following the sale of First Republic Bank and other recent industry news,” Western Alliance said in a statement, outlining that deposits had increased to $48.8 billion.
The same was true for rival lender PacWest Bancorp., which said it experienced no “out-of-the-ordinary” deposits flows following First Republic’s sale. Through Tuesday, deposits had increased since the end of March, it said.

The stock market has been pretty panicky about these banks, but their depositors, for the most part, have not been. How do you reconcile that tension? I think there are about four possibilities.
Possibility 1 is that the stock market is correctly reflecting a risk of imminent failure at these banks, and the information-insensitive depositors are ignoring it. This would be somewhat weird. The way for that failure to happen would be through deposit flight, and if the deposits are fine and stable then it is hard to see how the banks would fail now. But one can’t entirely rule it out; the theory here is something like “the stock market knows that depositors will flee before the depositors themselves do,” which kind of is how the stock market is supposed to work.
Possibility 2 is that the stock market is overreacting, because that’s also what the stock market does. After all, these stocks got crushed yesterday and then soared this morning, without much in the way of intervening news; both moves can’t really be right. Investors decided “this is a bad week for regional banks,” and so they sold regional bank stocks, and then they realized that these banks were not particularly close to failure, and then they bought the stocks back. Bloomberg News again:

In a Friday morning note upgrading Western Alliance, Comerica and Zions to overweight, JPMorgan analyst Steven Alexopoulos said that the sell-off had fed on itself. “With sentiment this negative, in our view it won’t take much to see a significant intermediate-term favorable re-rating of regional bank stocks,” he wrote.

And here’s Alexandra Scaggs at FT Alphaville:

If a new challenge to regional banks has surfaced just this week, it’s a tough one to find. …
“The thing I can’t wrap my brain around is that we have zero evidence — and if anything we have contrary evidence — that there is still concerted deposit flight in the system”, CreditSights’ Jesse Rosenthal told Alphaville this week.

Sometimes the stock market just gets too excited, and then walks it back.
Possibility 3 is that the stock market’s fall yesterday correctly reflected, not a risk of imminent failure, but long-term business problems at these banks. The problem for PacWest, on this view, is not that it might get shut down this weekend; the problem is that some of its deposits have left and been replaced with more expensive funding, and other deposits have stayed because it has raised the interest rates it offers, and PacWest going forward will have to pay a lot for deposits and won’t earn that much on its assets and will just not be that profitable. Which is totally fine, for depositors, and for regulators: The money will still be there. It’s just bad for shareholders, and the shareholders noticed and sold the stock. My Bloomberg Opinion colleague Paul Davies writes:

Since mid-March smaller US banks have had to compete ever harder for deposit funding because of the safe-haven attractions of the biggest lenders plus the higher returns already available from money market funds. The result is a sharp rise in funding costs for lenders like PacWest.
PacWest has become more reliant on higher cost consumer and brokered time deposits, which lifted its total deposit cost to 1.98% in the first quarter of 2023 from 1.37% in the previous three months. It has also borrowed more from costlier sources like the Federal Home Loan Banks, the Federal Reserve’s Bank Term Funding Program and capital markets. Taken together these changes helped to slash its net interest margin to 2.89% in the first quarter from a fairly consistent 3.4% last year. Analysts expect it to fall further to about 2.5% on average for this year, according to data complied by Bloomberg.
The squeeze on lending margins hurts revenue and profitability. The last two quarters have produced its lowest pre-tax profits since the third quarter of 2020. Its next two quarters are forecast to be even worse.

This is the most straightforward possibility: This week the stock market noticed, not that the regional banks are failing, but that they are unprofitable, so their stocks went down. (Also they are up today, which could just be “the stock market noticed that a little too hard yesterday,” or “the stock market got a little too optimistic today,” or some combination.)
(Continued)