OT - US Treasury Direct
As you may have heard, the 2nd largest bank failure in US history occurred today - https://www.reuters.com/business/finance/global-markets-banks-wrapup-1-2023-03-10/
Little tip I learned from my Dad (the real master of coin) - the only entity that's safe enough to hold >= $250K cash is the United States Treasury.
The 1-Month US T-Bill presently yields 4.7% - https://www.cnbc.com/quotes/US1M
You can open a Treasury Direct account and buy the bonds yourself, it's very easy - https://www.treasurydirect.gov/
Just curious why you wouldn’t have that in 4 week T-Bills on a rolling basis, with it split between weekly purchases?
Delete*^^
It has been an insane couple of days in tech land. Yesterday VCs started emailing us to move money from SVB if we had it there, Rippling had issues with payroll. Hopefully they find a white knight during the weekend
Tbh, this is likely what caused the run.
Seems like SVB would have likely remained solvent in the long term, but VCs emailing their portfolio companies led to hundreds of companies trying to withdraw their money all at once, and the FDIC decided to step in quickly to keep the panic from spreading.
It’s a little crazy to me that so MANY startup firms were with this one bank. I read 97% of their accounts were $250k plus, that strikes me as remarkably high (very few personal accounts). Why? What was SVB’s purported competitive advantage?
(I know my previous company, we used SVB, yes we were a smaller venture backed firm)
These companies chose SVB due to pricing and flexibility. SVB was more robust at lending (more willing to underwrite) to start ups and early stage companies than some of the bigger names.
We started with SVB but moved several years ago. Many VCs had a requirement that the $ be deposited at SVB. They also offered great debt products. Very flexible and good customer support. It is sad, they were a great bank that helped a lot of startups when other banks would not.
Yep, and their flexibility is what tanked them. Good intentions, but imprudently concentrated holdings crushed by economic contractions.
Inability to effect a stock offering to raise capital + run on the bank = end of a bank.
The road to hell is paved with good intentions. Oh, yes, and with bad intentions, too. See Vladimir Vladimirovich.
The wolves nursing at the teet of the sheep for 3 decades, turning on the sheep in 36 hours.
Sort of hilarious to see the white knights on twitter shouting "I'll keep my $13M in SVB!"
Meanwhile real money like Thiel is out there telling all his peeps to pull every last penny.
This will get straightened out but as another person said, having money for payroll next week or next month is going to be an issue for a lot of Silicon Valley's younger money.
The only bank I do business with is Coin Star.
Or? Buy T-bills in your brokerage accounts. Ladder them, creating your own "money market" with "guaranteed" assets.
T-bIlls are at an all time high right now. Typically you won't see this kind of return. Ok to ladder them for now, but don't expect it to continue.
March 11th, 2023 at 12:38 AM ^
No expectations for increases past the current period of interest hikes. Just offering a suggestion of where to park $ safely.
User name does not check out.
The only bond I own is one I very recently bought from DTE Energy, a 5.2% coupon rate, bought just a bit over par (like 100.400, or something like that). Matures in 2033. Here's the bright idea I had with that one: I've got a mortgage at 2.5% that I'm in no hurry to pay off, for obvious reasons. However, by the end of the decade I'm going to be in my mid 50s, so I'd like to be out of debt by then. I'll make my usual monthly payment, and when I receive the bond interest, I'll apply that to the mortgage as well. I've run amortization schedules to figure out where I'm going to be at the end of 2030. At that point I'll sell the bond and pay off the mortgage. I don't want to be approaching my 60s with a mortgage hanging over my head. I don't need the aggravation.
The rest of my portfolio consists of S&P 500 index funds (in my 401k), a taxable brokerage that has the above bond and some steady stocks that pay dividends (Clorox, 3M, Coke, etc), and a Roth account that holds dividend growth stocks (Lowe's, Goldman Sachs, Abbvie, etc). The theory is that at some point I'll draw the dividends from the Roth to cover my living expenses. I'm baking in a 25% reduction in Social Security benefits in this plan as well. The taxable brokerage can cover any minor supplementary income, and the 401k is my ICE fund (In Case of Emergency).
The next two decades are going to reveal just how good of an idea this is, either way...
I like your thinking and your odds.
Decent plan! Suggestion of a math trick for your mortgage payments? If your note holder will accept and credit more than one payment per month? Make two 50% payments per month instead of one 100% payment. Your payoff date will arrive much sooner. 👍
It’s a local credit union where I bank. I’ve got a 2.5% rate, so I’m not in THAT big of a hurry to pay it off, but I’m trying to balance that with not holding a mortgage the entire time I’m working. I figure 2030 is about the right balance. Oh, and I do t think they’ll accept partial payments like you suggested.
I’ve chosen to take the excess cash that would go to the mortgage in your scenario and invest it instead. I guess we’ll see how it works, good or bad.
And the website has been updated from 1996 architecture and design to 2007 about 5 months ago. So there's that.
Almost like this one. Ha
So true!
Done!
Humans have evolved for tens of thousands of years from hunter gatherer to agrarian to industrialist to earning a living from fake numbers. Kinda unbelievable when you consider that as a society we think we've gotten smarter.
My company almost used SVB. But I’m at a conference where several companies use SVB and they can’t make payroll!!!
How the fuck has this been upvoted?
As I see it you're at a -1 so I'm not sure what you mean.
Got my net worth locked up in chocolate coins, not worried bout no bank runs
March 11th, 2023 at 10:28 AM ^
Chocolate coins? You've got other runs to worry about .
...until the US government defaults soon...
March 10th, 2023 at 10:15 PM ^
I've got I-bonds and a 6 month T-bill ladder which essentially act as my savings account.
March 10th, 2023 at 10:35 PM ^
Are you getting around 5% on that ladder?
I'm just using a HYSA at 3.75% because laddering just seems like a pain in the ass for maybe 1% more
March 10th, 2023 at 11:10 PM ^
Tbh a lot of target date mutual funds have built in bond ladders. If you have money in an IRA you probably already have exposure to it.
March 11th, 2023 at 12:29 AM ^
I think I was getting about 4.5% when I started. Around 5% with my latest T-bill. It's more work but only in that I have to remember to set it up every month. Only takes about 5 minutes. I'm not dealing with huge sums of money here, <$100k. Part of me thinks I should be putting it in the market, but it's money I see myself needing in the near term and don't want to worry about market being down when I'm ready to buy a new car.
March 10th, 2023 at 10:29 PM ^
Fuck it, invest in Bitcoin and burn the ships!
March 11th, 2023 at 12:41 PM ^
OP, first of all, this is very helpful, thanks! I'm in the investment business, and recently bought T-Bills for my personal account, it's easy and is literally the safest investment in the world. Due to some interesting shifts in the yield curve and equity appetite, it's also a pretty good place to park your money while you wait for stocks to cheapen.
Which may happen soon. The real significance of SIVB's failure to me is the possible end of the YOLO/Free money from the Fed/Gamestop/Stocks only go up investor mindset.
I believe Washington Mutual WAMU's failure in 2008 led to depositors who kept over $250,000 there receiving 50c on the dollar back (above the FDIC guaranteed 250k), as alluded to by MgoArchive above. Between that and Lehman, investor confidence was so eroded that the Fed took unprecedented emergency steps, including QE, (basically printing money). 15 years later the Fed has not drained more than a tiny fraction of that QE from the system, hence, inflation. Investors have been conditioned to believe "the Fed will save the day" for 15 years, and that may finally be ending. Friday's events may be the "black swan" investors fear that turns markets 180 degrees. Or the Fed may just change the market's diaper and give it some more free money. Wish I knew!
It feels like the Fed will hold the line this time. We will know more in a couple of weeks. If they go with a .50 rate hike, they will be messaging that they mean business.
I'm all for it. Rip the the bandaid off all at once. End the endless stream of "Meme stocks are back!" articles. The free money party is over. No, Robinhood and r/wallstreetbets arrogants, this time is NOT different.
Look at I-bonds
Risk free treasury bonds indexed to inflation
Yes, I-Bonds are good. They do have a $10K/year investment limit.