Jeff Layman, CFA

Investors lose $221 million in U.S. bank failure.    Yesterday, Friday April 25th, 2024, shares of Republic First Bancorp fell 60%.  The market capitalization was less than $1 million. It had started the year with a market-cap of $221 million. It was already a “problem institution” at that time. Yesterday, U.S. regulators seized Republic First Bancorp.   Insured Depositors will not lose any money thanks to the FDIC insurance of $250’000 per depositor.   They estimated the failure will cost the Federal Deposit Insurance Corporation (FDIC) around $667 million. The bank and its depositors will be taken over by another bank, called Fulton Bank. The total assets of Republic were around $6 billion so it’s costing the FDIC around 10% of the bank’s assets.   How safe is your FDIC insured Deposit? The Federal Deposit Insurance Corporation (FDIC) was created in 1933 to assure Americans that insured deposits in insured banks are safe.  Since FDIC insurance began in 1934, no depositor has lost a single penny of insured funds due to bank failure.   To meet its guarantees to investors the FDIC holds a Deposit Insurance Fund (DIF).  As of December 31st, 2023, the DIF held $121.8 billion. Republic’s failure will make but a small dent in the DIF.   The total amount of insured deposits across all banks amounted to $10.62 trillion on December 31st 2023. The DIF is thus big enough to cover 1.15% of these deposits.   How many more banks are at risk?     On December 31st, 2023, there were 52 Institutions described by the FDIC as “Problem Institutions”. Collectively they held assets of $66 billion.    In conclusion, with total assets of $121.8 billion, that’s not a problem for the FDIC unless things get a lot worse.

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#hedgefund stockpickers are doing something right this year. Per Goldman Sachs data: - Longs up 30% -- 500 bps ahead of the roaring S&P Global 500 index and 1200 bps ahead of the MSCI Inc. ACWI index. - Shorts only up 12%. Impressive.

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So much for one of the best recession predictors: The Inverted Yield Curve. On Friday December 13, 2024, one measure of this inversion, the 10-year minus 3-month Treasury Yield spread turned positive again after 891 days of being negative. That was the longest period for an inverted yield curve in the past four decades and still no recession. Time to reassess how we predict recessions or might we still be in for a surprise in 2025? #economy #recession #interestrates #markets

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So the BLS prelim benchmark revision is -818k (in line with our 800k forecast). But the 1Q QCEW county data implies a bigger revision of -958k. To put this in context, the typical revision is 0.1% of payrolls…the past year was 0.5%, 5x as large.

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#etf #allocators, help me out here. Hell, anyone interested in #inflation protection, active #etfs or even #fixedincome broadly, please chime in. For accidental reasons, I (sort of) follow two inflation hedge #etfs: $IVOL and $RISR. $IVOL: "inflation hedge" ETF launched in 2019 that is basically #TIPS plus some tricky hedging. AUMS took off like a rocket ship (zero to $3.5 bn in two years). Quadratic Capital Management LLC looked like it would be the ARK Investment Management LLC of #fixedincome ETFs. Today $IVOL looks like a failed experiment: underperformed the BlackRock iShares TIPS ETF by 400 bps per annum at 5x the fees, Sharpe ratio of -0.4, max DD of -28% (more than double $TIP), Morningstar ⭐ (bottom quartile in 2021, 2022, 2023 and ... YTD) . Yet still $700+ mm in AUMS. $RISR: "inflation hedge" ETF from FolioBeyond that was launched in 2021 that buys #mortgage IOs, a straightforward rising rate hedge that's worked for thirty plus years. Up 60% cumulatively since launch with $TIP down 2% (and IVOL down 22%!), Sharpe ratio of 1.05, max DD of 7%, negative correlation to the Bloomberg AGG with 700 bps per annum of #alpha, and Morningstar ⭐ ⭐ ⭐ ⭐ ⭐. Yet stuck at $50 mm today. So here's my question: What causes this stickiness for funds that were marketed with a pitch that, in retrospect, appears to have been wrong? What makes it so difficult for smaller funds to break through when part of the argument for #etfs is accessibility? I have theories but I'm curious to hear from people on the ground. Comments below would be most appreciated. AUMs for reference 👇. NOT INVESTMENT ADVICE. MERELY CONFUSION FROM A NON-EXPERT IN THIS AREA. (Although I did write a decidedly mediocre paper 😬 on the David Askin's MBS #hedgefund blow up at Harvard Business School decades ago, so there you have it...)

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📊 Regional PMI Indexes Continue to Show Inflation ⬆ This week both the Empire State manufacturing index and the Philadelphia Fed manufacturing index are pointing to higher prices paid. While these regional PMIs are volatile, this is consistent with other leading inflation indicators. Inflation seems to be sticking around. What's also alarming is the the future prices paid survey shows continued expectations of companies paying higher prices for input materials 6 months out. We are seeing signs of a continued booming economy. The Fed's life is likely about to become very difficult and a policy mistake is looking increasingly likely. Trend Prophets #etfs #economy #passiveinvesting #quantitativefinance #python Source: FRED

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Most recent blog - ALL Financial Advisors, Registered Investment Advisors and DIY-Investors should take heed from this article. NEVER buy an ETF without learning what its real structure is and how the math behind the product works. In other words, ALWAYS read the summary prospectus before recommending or buying anything you think is an ETF and make sure it is actually an exchange traded mutual fund, not just a structured product that uses the "ETF wrapper." https://lnkd.in/ecdkPsgx Georgia Broker-Dealer Learns Costly Lesson From FINRA This is something that every investment industry reporter should read as well - this is an important story that FINRA needs to address by rule, not just after the fact - IMHO. In this case, the product was an exchange-traded note offered by Direxion and Credit Suisse based on the inverse of the VIX called XIV. The price of the stock associated with the note climbed steadily while market volatility remained low but as soon as the VIX had a sudden spike (Redundant, all spikes are sudden), the value of the product plummeted toward zero causing a ripple effect throughout the industry. Attention: Deborah Fuhr, CFA fellow (who has also been teaching investors about this for years); Peter Shea; Dalia Blass; David Mahle; Bibb Lamar Strench; Michael Greaney; Aaron Lucchetti; Morrison Warren; Edward Baer; Walt Draney; Dimitra D.; Lara Crigger; Dan Mika; Sumit Roy; Aniket Ullal; Sam Stovall; Steve Oh; John Jacobs, MBA, CPA; Rob Ivanoff; Stephanie Dumont; David Smith; Dorothy Hinchcliff; Jerilyn Klein; Paul Henneman; Trish Twining; Rajesh Jain; Gayathiri S.; Patricia Baronowski-Schneider

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The direction of Treasury rates in the next year is poised to be influenced by several key factors. With the Federal Reserve indicating a cautious approach to rate cuts after recent adjustments, and inflation still above the target, Treasury yields might see limited decreases. Analysts suggest that if the U.S. economy continues to show resilience, rates could stabilize or even slightly increase if inflationary pressures persist or if geopolitical events introduce unexpected financial market volatility. However, if inflation cools more than expected or if economic indicators point towards a slowdown, the Fed might accelerate rate cuts, potentially lowering longer-term Treasury yields. Recent posts indicate a market expectation of rates possibly reaching up to 4.9% for the 10-year Treasury yield, reflecting a hawkish outlook. Yet, economic forecasts also predict stabilization around current levels with the potential for slight declines if economic growth moderates, suggesting a complex interplay between inflation, economic growth, and Fed policy that will dictate Treasury rate movements.

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After downgrading Tech in late June prior the July selloff, this week we moved it back to overweight as the sector is coming off its worst 1-month underperformance since 2002. Following the volatility shock we saw earlier this week, we still expect wide market swings to continue, but on a relative basis, the tech sector should hold up well. Find out more about our upgrade rationale from my CNBC discussion this morning with @DavidFaber Morgan L Brennan Truist Truist Wealth #Tech #markets

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Interest costs on the federal debt are already costing the U.S. more annually than spending on defense or the Medicare program. Only Social Security costs the U.S. government more on an annual basis. That interest burden will benefit slightly from expected interest rate cuts, but deficits continue to push up the overall debt burden which needs servicing. Just one of many observations in the sobering look at challenges facing the U.S. and global economies, whichever candidate wins on November 5, covered in our latest Fixed Interests podcast. Join Richard Francis, co-head of the Americas and lead analyst for the USA and head of FitchWire, Justin P., as they look at the implications of the election for credit, in the U.S. and beyond. All of our podcasts are free-to-air, and you can find this one at https://lnkd.in/eQP4i7EZ. For more on the U.S. sovereign, everyone can access our most recent rating affirmation at https://lnkd.in/e7MysV2V, and subscribers can download our May 2024 special report at https://lnkd.in/eH3GRyRB. And for more on our views of post-election challenges globally, we've also published free-to-air summaries and scenario analyses for the U.S., Europe and China – links below. U.S. free-to-air summary: https://lnkd.in/e-3ZTNg8 For subscribers: https://lnkd.in/eNXjda-5 Europe free-to-air summary: https://lnkd.in/eVJUJ9BD For subscribers: https://lnkd.in/etGqVK7p China free-to-air summary: https://lnkd.in/euAnEW-J For subscribers: https://lnkd.in/ewdJn4pK #fitchoncredit #elections #treasuries #markets #investing #donaldtrump #kamalaharris #fixedinterests

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Novogradac released a report last week highlighting how value still remains in Opportunity Zone investments, despite the approaching 2026 deferral deadline on capital gains. Looking ahead to 2025, experts predict a potential uptick in OZ activity, with Alex Flachsbart of Opportunity Alabama noting that “people who are investing now are doing it for the 10-year hold benefits.” On the topic of the Opportunity Zones Transparency, Extension and Improvement Act, Flachsbart remains hopeful that OZ reform will be included in 2025 tax legislation. 

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Citigroup's stock could double in value over the next three years as profits surge, expenses moderate, and the "most significant" reorganization in five decades improves management accountability, Wells Fargo analysts wrote in a note on Friday. The third-largest U.S. lender is the brokerage's "dominant pick" among large-cap banks under almost any scenario, barring a recession. The analysts raised their price target to $110 from $95, while maintaining an "overweight" rating. Reuters story with Niket Nishant https://lnkd.in/gpd9xxtP

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The current account surprisingly posted a surplus of $619 million in March 24,which is the highest surplus since Feb-15. This high surplus is perhaps one-off – due to the Ramzan effect, as remittances and other current transfers were much better – barring the secondary income account, the current account deficit would have been higher as compared to the previous month. The other reason for higher inflows in the home remittances, which stood at $2.95 million – which is highest since April 2022, is slowdown in the capital flight from Pakistan, and perhaps people are not as frantic on moving the savings abroad, as they were last year. This also implies the expectations of any sharp depreciation in PKR are dying. That is good news, and seeing the better inflows, higher current account deficit, tight fiscal policy, and falling non-perishable food items prices, SBP should think about monetary easing soon. https://lnkd.in/g_5ckrQ6

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GS simply not designed for #consumerbanking "Average charge-offs on the Goldman Sachs-originated accounts, which make up roughly one-third of the GM portfolio, surpass 10%, the people said.  In contrast, the annualized #creditcard charge-off rate for commercial #banks in the U.S. was about 4.5% in the second quarter of the year, according to #FederalReserve data.  #payments #fintech #credit https://lnkd.in/e-mCFrmG

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As quoted today by Financial Planning: Robinhood will now compete one-on-one with the likes of #Schwab, #Pershing, #Ameriprise, #LPL and #Fidelity at the institutional level, said Michael Ashley Schulman, founding partner and chief investment officer at Running Point Capital Advisors in El Segundo, California. "Historically, #Robinhood has always targeted the individual or retail do-it-yourself #investor, but with this acquisition, they will now also target professional #financialadvisors and #wealth management firms, as their clients," he said. "This elevates Robinhood to a whole new level and opens up fresh revenue possibilities." ~~ Running Point, “we are your family office”™️ #taxplanning #estateplanning #assetmanagement #future #investing #taxes #wealthmanagement #economy ~~ Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. This is not investment advice and this is not a recommendation to buy or sell a security. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Past performance is not indicative of future results. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-24-191

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