30-year Tips Article by William Bernstein I think a lack of discipline or psychology plays a role in selling a 30-year TIPS before maturity, but that characterization puts the reason for selling completely on the investor's shoulders as some sort of moral or psychic failing. A lot can happen to one's finances in 30 years that may have nothing to do with discipline and everything to do with unavoidable liquidity needs. I've seen some market commentators point out that if you just bought and held onto stocks through the Great Depression you would've done fabulously. Meanwhile unemployment peaked at 25% in 1933. Many people in such circumstances were understandably afraid and sold after an 89% decline in the Dow from peak to trough, but just as many I imagine had no choice but to sell to stay alive back then. Discipline or a lack of it has nothing to do with selling for unemployed people who have to pay their bills. That is is the unseen personal 30-year risk in holding such a long-term bond. Today, I would think unforseen health risks, might be a more likely reason for selling before maturity, as uncovered medical bills are still a large cause of bankruptcy in the U.S. But recessions, job loss, and selling of securities do tend to go hand in hand.
I would add just from a market history perspective, that leverage plays a really terrible role in the above recession/depression scenario. A recession hits, people lose their jobs, stocks fall and suddenly investors are getting margin calls on their leveraged bets which they can't pay because they're out of work. That forces them to sell their securities even if they want to hold on for a recovery. Worse, when they sell, that puts further downward pressure on the market and more people who consequently get margin calls. Selling begets selling and you end up in a weird kind of death spiral caused by leverage. My impression is margin levels were really high and easy to get prior to the Great Depression. And we saw just what happened with leverage in the 2008 crash. And now we see what happened with SVB, and seemingly safe Treasury bonds. This is why the FDIC exists, and they label banks too big to fail, although I think there are other ways of addressing these problems that benefit the public more and banks less.
30-year Tips Article by William Bernstein
The Week in Charts | Charlie Bilello Good read. Don’t bet the farm on any particular point. Conventional wisdom. Wish the 10-year would get back up above 4% where I’d plunk a portion of cash back into GNMA. Just a hunch that that’s a more profitable (in & out) trade than at the current rate around 3.5%. Yes, short term rates have fallen dramatically in recent weeks.
The insights into falling commodity prices are of interest (although precious metals / miners have surged this year). Suspect the commodity downturn is normal after a very heady period. Should level off. Checking 3 commodity related funds I’ve owned in the past (but no longer own) …
1-Year Return … 3-Year Annualized
PRAFX -11% …….… +19%
PRNEX - 2% ……..… +26%
BRCAX - 8% ……..…. +22%
*Numbers (rounded) from MarketWatch
FCONX to FCNVX Auto-Conversion That would correspond with the two emails I got from Fidelity 11:4
5PM Friday evening:
(1) FCONX has closed to new investors
(2) FCRDX has closed to new investors
FCRDX shares were likely moved to FMNDX.
Fidelity's web page(s) may be a little slow in making changes, but the filings have been updated (and are available on the website).
Fidelity® Conservative Income Bond Fund/FCNVX
In this summary prospectus, the term “shares” (as it relates to the fund) means the class of shares offered through this summary prospectus.
Fidelity® Conservative Income Bond Fund, a class of shares of the fund, was formerly known as Institutional Class.
Summary Prospectus
October 29, 2022
As Revised April 1, 2023
...
There is no purchase minimum for shares of the fund offered in this prospectus.
Summary ProspectusWith a pretty flat short term yield curve and rates still rising, I haven't paid much attention to this fund (SEC 30 day yield 4.60% after waivers), preferring MMFs like FZDXX (SEC 7 day yield4.66% after waivers). Given that you have under $100 in the fund, it looks like you concur.
FCONX to FCNVX Auto-Conversion A Fido email came on trades when I didn't do any.
On a/c login, I found that Ultra-ST FCONX (formerly, Investor class) was auto-converted into FCNVX (formerly, Institutional class). Fido website doesn't even recognize FCONX ticker now, while other sites still do. Fido FCNVX info isn't updated either as it still shows $1M minimum - that of course isn't true anymore as my current balance is UNDER $100.00.
I was surprised by this sudden change for which there was no prior notification.
FCONX was among the rare Fido funds to which frequent-trading didn't apply. I checked that remains valid for FCNVX.
Another good change was that the new ER for FCNVX is just 2
5 bps.
https://fundresearch.fidelity.com/mutual-funds/summary/316146521
Stable-Value (SV) Rates, 4/1/23 I thought I knew what stable value funds in a 401k were. I used them for years, but what you show looks to me more like an annuity.Stable value fund is available in my 401(K) plan. It is an insurance product that invest in short term treasurys but has the liquidity like money market fund. There's a lot of subtlety in attributes of these products that results in a fair amount of confusion. In a broad sense everything people have mentioned here is a stable value fund. In practical terms, the distinctions don't matter much.
stable value funds and their close cousins, guaranteed investment contracts, together accounted for 21.3 percent of the assets in such plans in September [2006]
...
The stable value funds in 401(k) plans are generally a pool of short-term bonds or other debt-market investments protected by an insurance contract known as a wrapper.... The underlying investments are generally corporate bonds, which yield more than government bonds but are also at a greater risk for loss of principal. He said Treasury bonds were a more secure long-term choice than stable value funds, which may be subject “to the law of unintended consequences."
...
Like other stable value funds in 401(k) plans, [the Trust Advisors Stable Value Plus fund] was not a mutual fund but a collective trust.
https://www.nytimes.com/2006/10/08/business/mutfund/08stable.html"Stable value" can refer to even more varied investment structures. Historically, or "traditionally", these were insurance products - guaranteed insurance contracts like TIAA Traditional issued directly by an insurance company.
TIAA Traditional is a guaranteed insurance contract and not an investment for federal securities law purposes.
https://www.tiaa.org/public/learn/retirement-planning-and-beyond/how-do-traditional-annuities-work "Stable value" evolved into a much broader range of investment structures. The common thread is the use of insurance to provide investment value stability.
https://www.stablevalue.org/stable-value/ (Links in original)
For a brief shining(?) moment, stable value funds were offered in retail IRAs. But SEC concerns about pricing led to their demise:
[Stable value as an] investing option has disappeared for individuals [in 2005] because of questions raised by the Securities and Exchange Commission about how to value the funds, although no formal ruling against them has been made.
...
Stable value funds have been available for many years, and remain available today-although on a much more limited basis-in some 401(k) plans and defined benefit pension plans maintained by employers. These investments come under the jurisdiction of the U.S. Department of Labor, which has strict, but somewhat different regulations, from the SEC. The SEC's questions affect investments by individuals in IRAs ...
Scudder launched the first stable value IRA fund in 1997, offering the funds as Scudder Preservation Plus Income and Scudder Preservation Plus. Others were offered by PBGH, Gartmore Morley, Oppenheimer and other mutual fund managers.
But the SEC began raising questions about how to determine the daily valuation of funds with insurance wrappers, which managers had been pricing at book value. The wrapper agreement, which is what made the stable value fund what it was, was also the part that was raising questions at the SEC. The SEC, which initially approved the funds, will not comment on the situation other than to say that there are no stable value funds now registered with the SEC, although there are some nonregistered ones in existence, says John Nester, an SEC spokesman.
https://www.fa-mag.com/news/article-1120.html?issue=56
Bramshill Income Performance Fund to lower initial minimums
Crisis of HTM - Banks, Brokerages, Insurance, Pension Funds I might have pointed to Larry Summers as the Democratic poster boy for deregulation.
Between 1992 and 2001, Summers held various positions in the US Treasury Department, including that of Treasury Secretary from 1999 to 2001. Summers has described the 1990’s as a time when “important steps” were taken to achieve “deregulation in key sectors of the economy” such as financial services. He has also said that during this period government officials and private financial interests collaborated in a spirit of cooperation “to provide the right framework for our financial industry to thrive.” Summers recommended before he left the Treasury Department that removing policies that “artificially constrict the size of markets” should remain a priority for the US government.
Along with Robert Rubin and Alan Greenspan, Summers brought about elimination of key US financial regulations including the Glass-Steagall Act. He was particularly aggressive in his efforts to block regulations of derivatives, regulations that might have prevented the economic meltdown the US suffered in 2008. According to economist Dean Baker, "The policies he promoted as Treasury Secretary and in his subsequent writings led to the economic disaster that we now face."
https://www.sourcewatch.org/index.php/Larry_SummersThat's some of what Summers did while he was working in the government. In contrast, Barney Frank had left Congress years before attempts were made to weaken Dodd-Frank. As a private citizen, and as the bill in question was reaching the House for a vote, he wrote an opinion piece titled: "Why I would vote 'no' on Senate bill to amend Dodd-Frank".
https://www.cnbc.com/2018/03/01/barney-frank-why-i-would-vote-no-on-senate-bill-to-amend-dodd-frank-commentary.htmlThough while objecting to the bill, he did not excoriate it. One of his objections was that the threshold for subjecting "large" banks to the most stringent level of examination was set too high. He would have preferred $12
5B, as opposed to $2
50B.
Both Dems and Reps voted to loosen regulations. Bags of pusThe opposition to the legislation, though in the minority, was also bipartisan. One Republican voted no.
If calling that bipartisan sounds a bit weird, consider that 83% of the Democratic representatives voted against the legislation, while 99.6% of voting Republican representatives supported it.
https://clerk.house.gov/Votes/2018216
I bonds and tax refund Thanks for your earlier tip
@msf. I put in additional $ by year-end so to ensure the tax refund is over $
5K. Just filed our return and will be getting two $2,
500 I bonds for me and my wife.
I bonds and tax refund You can also hold the paper bonds yourself, perhaps in a safe deposit box.
The mail in process isn't hard, though a tad more tedious than one would like. And you only have to create that second account once.
As I've posted before, the USPS lost one $50 refund savings bond of mine (out of a $5000 total). TD replaced it many months after I reported it as never having been received. Unfortunately the replacement was another paper bond.
So while you might have $1200 to send in, I'm stuck with a single $50 bond to have and to hold (or to mail in). I mailed in (converted) the other $4950 long ago.
Stable-Value (SV) Rates, 4/1/23
Bank Rescue Plan From Bloomberg
The FDIC told First Citizens on Tuesday it was claiming a $500 million profit linked to the increase in that company’s stock, which soared after the acquisition was sealed. The FDIC was entitled to the payment within five business days, the Raleigh, North Carolina-based bank said in a regulatory filing
I bonds and tax refund thanks Seems like a lot of trouble for $1200 refund. I think I will just apply it to estimates.
Maybe if I overpaid by $5000 it would be more worthwhile!
30-year Tips Article by William Bernstein Many writers often over-simply complex subject matter as black and white. Then the absolute terms can mislead their audience. I think the probability of further rate hike is declining since inflation appears to be slowing. This morning the Feb’s PCE increased by 0.5% y-o-y, lower than that of January 2023. The next FOMC meeting is in May. We will see what the Fed would do at that point. Powell has a way to become hawkish and reaffirm their fight against inflation while this inflation remains sticky due to many complex factors such as tight labor market.
As for investment, short- and intermediate-term bond funds/ETFs make perfect sense in this environment. When the Fed announces the end of rate hike, it would be compelling to move to long duration bond.
I bonds and tax refund Lewis is right, I"ve done this. The conversion is easy but a nuisance.
The TreasuryDirect instructions are here:
https://treasurydirect.gov/savings-bonds/manage-bonds/convert-paper-to-electronic/#id-how-do-i-convert-my-ee-or-i-bonds--508815Basically, you create a separate (linked) account for converted bonds. You create a manifest (list) of bonds to convert, including their serial numbers and other info. You mail the savings bonds along with that manifest (printed out), and (these days) a few months later they'll show up in your account.
There's no rush because you can't cash them out for at least a year. And should they get lost in the mail (either coming to you as part of your refund or going back to Treasury Direct), you can request replacements.
The awkwardness is in having to handle the paper bonds and in having a different account number for the bonds at TD. Still a single login, so it's not too bad. And how often do you need to log in to look at these set-and-forget savings bonds?
Top institutional & fund holders - SCHW Seeking alpha had a decent comparison of the business models of SCHW vs IBKR
Former 50% of revenues are investing clients cash balances
Latter revenues comes from fees and managing bid ask spread for clients who want trading efficiency so are willing to pay for it
I am getting adds comparing IBKR rates on their balances (4.5%) to SCHW and FIDO
Bank Rescue Plan I think the proposal to increase the FDIC limit (to say $1,000,000) and prorate the expense to the size of insurance you want makes the most sense
The costs of the insurance should all be borne by the beneficiaries with a reasonable surplus every year to allow for future payouts. The program could run with a 3 to 5 year look back provision, so very large payouts occasionally could be replaced by future payments into the fund
Most people and small businesses would only need one bank account but banks like SVB could continue to force some customers to keep larger accounts with them but pay for insurance. If you don't want to buy insurance, you are on your own.
