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They have a similar percentage of held to maturity unrealized losses to equity as SVB. So, not good. Charles Schwab $SCHW 4Q22 Held-to-maturity unrealized los

They have a similar percentage of held to maturity unrealized losses to equity as SVB. So, not good. Charles Schwab $SCHW 4Q22 Held-to-maturity unrealized losses $15,580 mln / Tangible common equity $17,439 mln = HTM losses of equity 89% Compared to Silicon Valley Bank $SIVB 4Q22 Held-to-maturity unrealized losses $15,160 mln / Tangible common equity $11,880 mln = HTM losses of equity 128% source: https://twitter.com/hkeskiva/status/1634982958087159809 https://twitter.com/hkeskiva/status/1634982958087159809

paulusthe 4y ago
This is no longer a problem, because the Fed facility created yesterday allows firms to get face value loans against their collateral. So even if Schwab has a 10% asset decline in m2m terms, it can still borrow at full price from the Fed for up to a year. There's no liquidity risk anymore. This is just overreaction
- Scoundreller 4y ago
  What happens after a year? If you’ve locked yourself long-term into a below-prevailing-rates investment, isn’t that going to be a big problem when your competitors can offer higher rates? This kinda happens with fuel cost hedging in aviation: if your airline locks itself into a high rate and prices drop, your competition buying at spot is going to offer better fares and you’ll bleed customers. And vice-versa when you lock yourself into a price that becomes below-market: you’ll be able to offer better fares and gain customers. Then comes down to whether you have enough equity to bleed (or hood enough marketing) to weather the storm created.
  - paulusthe 4y ago
    If it's still a problem in a year, the Fed will either extend it or possibly just buy the assets themselves, in a better-collateral version of QE. There's no harm in holding these assets to maturity. They're fine assets, they're just not paying as much interest as ones you can get today. But buying and holding them will result in a profit, eventually, barring some calamity
  - onlyrealcuzzo 4y ago
    > What happens after a year? More Fed manipulation, if necessary, obviously.

paulusthe 4y ago

This is no longer a problem, because the Fed facility created yesterday allows firms to get face value loans against their collateral. So even if Schwab has a 10% asset decline in m2m terms, it can still borrow at full price from the Fed for up to a year. There's no liquidity risk anymore. This is just overreaction

Scoundreller 4y ago
What happens after a year? If you’ve locked yourself long-term into a below-prevailing-rates investment, isn’t that going to be a big problem when your competitors can offer higher rates? This kinda happens with fuel cost hedging in aviation: if your airline locks itself into a high rate and prices drop, your competition buying at spot is going to offer better fares and you’ll bleed customers. And vice-versa when you lock yourself into a price that becomes below-market: you’ll be able to offer better fares and gain customers. Then comes down to whether you have enough equity to bleed (or hood enough marketing) to weather the storm created.
- paulusthe 4y ago
  If it's still a problem in a year, the Fed will either extend it or possibly just buy the assets themselves, in a better-collateral version of QE. There's no harm in holding these assets to maturity. They're fine assets, they're just not paying as much interest as ones you can get today. But buying and holding them will result in a profit, eventually, barring some calamity
- onlyrealcuzzo 4y ago
  > What happens after a year? More Fed manipulation, if necessary, obviously.