It is time to figure out which financials will go under. It is your bank? Or your stock broker?
This applies to the bank stocks. All savings and checking accounts are protected by FDIC insurance (within the limits) so there’s no need to worry even if your bank folds.
If your brokerage firm experiences financial difficulties and is unable to meet its obligations to its customers, your assets in your brokerage account may be protected by the Securities Investor Protection Corporation (SIPC).
Wendy
2 Likes
@WendyBG WendyBG. true dat
I am talking owning equity in financials.
This is where Weiss bank ratings is useful.
Wendy
1 Like
Missed that link, but it is behind a paywall…mostly. I am not clear on how to get partial results for free.
Instead this link while dated might be clearest.
I am with KeyCorp….next week that will change.
https://www.morningstar.com/markets/which-bank-stocks-are-most-risk-liquidity-crisis
The link you posted is from 2023.
Wendy
This isn’t behind a paywall.
Wendy
1 Like
Interesting. Thanks,
Do we have that for financials, including the likes of Fidelity, Schwab, and Vanguard?
Do we have that for Interactive Brokers, which might be EU?
No, I wish that was possible. But these are not publicly traded companies. Here is the latest 2024 Annual Report but it’s nothing like the detailed financial statement (Form 10-K) filed by a publicly traded company.
Considering that Fidelity Investments has $15 Trillion under management (including the bulk of our household assets) that’s somewhat concerning. For comparison, U.S. GDP is $30 Trillion.
The same is true of Vanguard which is owned by its investors. Not even an annual report.
Wendy
3 Likes
Why would the US wipe out?
We have $37 tr in debt. We are not reinvesting to grow the economy properly. Our country is much more unstable than ever before. If we go into a great depression, we will default on the debt. Regardless of who is in charge, the corporate taxes being so low for 40 years have the chickens coming home to roost.
I am thinking of Interactive Brokers. What is your take on them?
I looked at them a while ago, found their customer portal confusing and didn’t return.
Wendy
They only have $18.5 billion in assets.
The only issue with them is the margin debt they maintain with their clients. I need to look and see how leveraged the company is. Then compare that to Schwab. I need to look at Schwab is possible for their futures and swaps exposure.
adding Google AI result that can’t be pasted, IBKR clients have $65 billion leverage as of 2Q25.
Nix that idea.
All the US brokers offer a lot of margin leverage to retail investors.
I nixed a lot of stuff in this post about the UK. It is too sticky to get money over to the UK and the Irish brokerages are a gamble.
Instead my credit union is best. I need to see if I can buy more than mutual funds.
The “too big to fail” banks all have unwritten US put. Post GFC, until now, the bank regulations ensured the bank balance sheets are robust. Many banks have been slowly shedding more riskier assets, because they can make money without taking too much risk, or the capital requirements for riskier assets were so onerous. However, that could change, but the government put is not going to go away.
As far as the brokers, the way you are looking at it is not the right is my view. Post GFC I have spread my stock holding to IBKR, ETrade, fidelity, morgan stanley, BAC, Wells Fargo. Apart from this I also have bank accounts and treasury direct. Each brokerage provides you something and I have an internal limit above which I move money. They all serve some specific purpose, for ex: IBKR I use for my aggressive trading, even though, many times their commissions are higher, but IBKR margin is much better than ETrade, similarly IBKR and Fidelity pay much better interest on the cash balance you carry.
OTOH, my son exclusively uses Vanguard, because he invests only in indexes which are regular and and any surplus money also goes there. For him, vanguard is the lowest fees and that’s all that matters to him.
2 Likes
Not if the US defaults.
Separately, the credit union’s services only trades in mutual funds. OFW
Remember, in the last 5 years, starting with COVID, to recent April melt-down the stock market has actually gone through steady decline, to sharp 10% decline during yen-carry trade unwind, A sharp 20% decline during April a la flash crash, etc.
We have not seen any brokerage facing any issues due to margin. Frankly, it is not retail investors, but Hedge funds which can cause major losses to the brokerage houses. Retail margins are spread across multiple positions, and generally they don’t carry such high margin and are monitored very well. It is the Hedge funds that have concentrated bets, and complex hedges and when those hedges fail, they periodically do, it causes losses.
1 Like
US will not default. US has the ability to print unlimited USD, and US politicians, FED, market all know how to create trillion $$$ liquidity overnight and inject and stabilize the market. There are lots of uninformed takes, it will be best to ignore them.
That is the same as a default in an all-out situation.
Note, you did not say raise taxes.
Turns out my credit union will allow me to trade stocks. I will need to pay advisor rates to trade. I only want to buy, not sell, so the cost won’t be high.
No. They are not same. If your religion insists you to believe US default is imminent or inevitable, I am not here to convert you. But, if you are interested in realistic to very low plausible situation, the only scenario, which can be quickly fixed is, debt limit not being raised for political theater, and any subsequent market upheaval will immediately see the debt limit lifted.
Don’t worry it is not a belief system or set of beliefs.
It is an innate understanding of proportionality in economics.
Raising the debt limit is not the problem.
The problem: unemployment is rising, sales will go into decline, businesses will shrink and some fail. That is early on. Then the majors will fail. Tax receipts will shrink. The debt will become untenable. That is not a belief that is my thinking.
You won’t be converted. I couldn’t care less.
You have heard for years the debt would get out of hand.
At the bottom, the corporate tax will have to be raised. The reinvestments in the US industrial base will take a long time because the economy will have been crushed first.
I look at the beautiful summer days and greenery. The money makes no difference. … unless you lose it all.