PASSIVE INVESTORS

Got to start my day with a serious belly laugh.
Too funny. Thx for the post.

All these people that moved into Index Funds ……the great “WTF just happened” because they cannot get out of the market until 5pm but are subject to massive moves during the day when it unravels. Then the next day will be worse because the outflows will cause the funds to start selling more stock repeating a domino effect until 60% losses are incurred.

We now have the instant ability to see our 401ks and make changes daily. I remember when people did not even know how to see their 401ks now these self described experts that manage their own money and do zero research will knee jerk react in domino fashion causing the mkt to collapse. Stay out of this market, especially in non liquid positions until the collapse…..

I summarized selected copy/pasted paragraphs from http://www.wallstreetonparade.com

Jelena McWilliams is a Trump appointee who currently serves as the Chairwoman of the Federal Deposit Insurance Corporation (FDIC), the federal agency responsible for insuring the deposits of commercial banks and savings associations in the United States.

McWilliams was in New York this week to give a speech at a commercial real estate conference. Andrea Riquier, a reporter for the Dow Jones news organization, MarketWatch, was able to snag an interview.

Riquier: “Can we talk about the recent flareup in the repo market? What happened? I have a colleague who says when something like that happens, the market is trying to tell us something.
McWilliams: “Yes. (Laughs.) The irony of this is, I have met with large bank CEOs that are in the market and are sitting on, frankly, a trillion plus dollars of cash. I’m wondering why exactly, why didn’t they go into the marketplace, recognizing there was a shortfall and they could have made money. So we are meeting now with their treasurers and chief risk officers to understand exactly the reasons why. If it’s regulations, we need to make sure we understand. If they are holding on to money —cash — and U.S. Treasurys because our rules require them to, and that’s causing liquidity not to be in the marketplace, we should fix that. Because you want a liquid marketplace and it’s supposed to work seamlessly, right? We’re not sure actually that’s the largest component of what happened but once we’re done talking to all the large banks we’ll have a better sense.”

Before we address why this is not a forthright response from McWilliams, allow us to suggest that the heads of federal banking regulators have a history of lying to the American public when a big Wall Street bank is in trouble. Sheila Bair held McWilliams’ job at the helm of the FDIC during the financial crisis. She was one of those rare public servants who felt Americans deserved to know the truth and she wrote a book, Bull By the Horns, to lay out the dirty dealings that occurred during the greatest Wall Street crash since the Great Depression.

It has been more than seven weeks since the liquidity crisis occurred, showing that there is one or more financial firms that Wall Street is backing away from lending to and/or that the big banks sense a need to hold onto what ever liquid funds they have because they anticipate a blowup of some kind coming down the pike.

If you are the FDIC, whose job it is to ensure the safety and soundness of federally-insured banks, and to prevent a panic and a run on a bank – you get on top of this situation within 24 hours – not seven weeks later.

And it doesn’t take seven weeks to have those conversations with treasurers and chief risk officers at a slew of banks because there are only four banks you need to talk to in order to quickly assess what’s going on. As of June 30 of this year, according to data from the FDIC, these four banks held the lion’s share of deposits among the biggest banks in the United States: JPMorgan Chase held $1.6 trillion; Bank of America had $1.44 trillion; Wells Fargo accounted for $1.35 trillion; and Citigroup’s Citibank is home to just over $1 trillion in deposits. Those four banks, as insane as this kind of concentration is, account for $5.45 trillion in deposits.

On October 1, Reuters’ David Henry reported the following:
“Analysts and bank rivals said big changes JPMorgan made in its balance sheet played a role in the spike in the repo market, which is an important adjunct to the Fed Funds market and used by the Fed to influence interest rates…Publicly-filed data shows JPMorgan reduced the cash it has on deposit at the Federal Reserve, from which it might have lent, by $158 billion in the year through June, a 57% decline.”
Any lay person, let alone a federal regulator with the work experience of McWilliams, should know that if a bank with $1.6 trillion in deposits needs to get its hands on a quick $158 billion (thereby raising red flags at its regulators) by grabbing 57 percent of its reserves from the New York Fed, this is no laughing matter. You need to get a squad of bank examiners inside the bank within 24 hours and issue a credible response to the American people in short order.