The default settlement account, Vanguard Federal Money Market Fund, has incredibly low credit risk because its assets are short-term US Federal gov debt and Federal Reserve repurchase agreements. [1] Neither of those entities have substantial default risk. Further, the global financial chaos of significant defaults from either of those entities would likely render FDIC insurance ineffective because too many banks would fail simultaneously due to their assets in those classes.
Or Vanguard could collapse from the inside because some C-level officer was dipping into customer funds to cover some bad investment, and everyone takes a haircut on the holdings. On top of the drop in market value because most vanguard customers invest in vanguard funds, which suddenly become a toxic asset. Your "safe" money market asset is considered equal and paid out pro-rata, sharing the loss of those mutual funds.
Meanwhile the FDIC insured savings accounts at the bank next door are just fine in the midst of this total and complete market meltdown, and those account holders decide it's time to diversify and pick up some cheap stocks.
That's just one scenario. “Low risk” is not the same as no risk, and the difference isn't important until it suddenly is.
I’m very certain that even in the crazy case you have outlined, SIPC insurance would cover up to a half million. Some brokers provide additional insurance beyond the regulatory requirements.
I think everyone recently learned about FDIC because of SVB etc., but I think it’s important that people are also aware of SIPC, and especially to consider that there is no crypto currency exchange that offers any such insurance of any kind, https://www.forbes.com/advisor/investing/cryptocurrency/cryp...
Your example is a poor one, and does not represent the actual risk of money market funds.
Customer assets at brokerage are required to be held by a 3rd party custodian. Customer assets
are not held at the brokerage itself and cannot be touched. An executive cannot merely "dip into customer funds" to cover a bad investment. Brokerage firms are regularly audited for this exact scenario. If your assets were to go missing, the SIPC would liquidate assets of the firm itself as necessary and cover the rest up to $500,000.
The actual risk is of a MMF "breaking the buck" and being unable to return your money. In 1994, a fund went under and was only able to return 94 cents on $1. In 2008 a fund went under because of its toxic Lehman Brothers holdings. This is why you should understand what is inside of that fund before investing in it.
For example, VUSXX is "is required to invest at least 99.5% of its total assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities or cash." These are not unregulated funds either; the SEC has been significantly increasing the scrutiny and regulation of MMFs both recently and historically.
The question you really should be asking is whether you think US treasury bills are sufficiently safe, not whether Vanguard is doing something both obvious and illegal.
That is impossible because each Vanguard mutual fund is a distinct legal entity. Assets cannot be moved between funds. See Vanguard safety for more details: https://www.bogleheads.org/wiki/Vanguard_safety
Vanguard has about 30 SEC registrants (formally, Delaware Statutory Trusts) for all its US mutual funds. But it has a lot more than 30 funds. For example, VMFXX is managed by Vanguard Money Market Reserves, which also holds VUSXX and the former VMMXX.
Homeownership cannot be both affordable and a good investment because a good investment has returns that at least beat inflation. That implies housing costs for new buyers will become increasingly expensive in real terms.
Think about how cars generally depreciate over time such that a used car becomes more affordable. During the pandemic, this trend broke to supply side disruptions and used cars actually started to appreciate. Housing always has supply side constraints to zoning regulations to guard the entrenched interests of existing homeowners, and thereby housing generally appreciates in value.
The closest that we can come to balancing both affordability and investment interests in a growing area is to constantly increase housing density. Then the land itself can appreciate in value as larger buildings are built in a fixed footprint. Yet the price of an individual unit of housing can stay roughly constant in real terms due to the ever increasing supply.
> Homeownership cannot be both affordable and a good investment because a good investment has returns that at least beat inflation.
This is precisely why a house is different. You can't live in a stock certificate but you live in a home. If you buy a stock at $10 and sell it for $10 ten years later you lost money. If you buy a house and sell it ten years later at exactly the same price it was still good value because you got to live in it for a decade.
Exactly! We are all already the beneficiaries and casualties of the unearned rewards and punishments due to the randomized genetic combination we received at conception. Kathryn Paige Harden brilliantly explains this ethical challenge in her book, “The Genetic Lottery: Why DNA Matters for Social Equality”, https://press.princeton.edu/books/hardcover/9780691190808/th...
> In recent years, scientists like Kathryn Paige Harden have shown that DNA makes us different, in our personalities and in our health—and in ways that matter for educational and economic success in our current society.
> In The Genetic Lottery, Harden introduces readers to the latest genetic science, dismantling dangerous ideas about racial superiority and challenging us to grapple with what equality really means in a world where people are born different. Weaving together personal stories with scientific evidence, Harden shows why our refusal to recognize the power of DNA perpetuates the myth of meritocracy, and argues that we must acknowledge the role of genetic luck if we are ever to create a fair society.
As a professor of clinical psychology, Harden is well situated to introduce us laypersons to the overwhelming strong evidence that genes matter. Notably, even biological siblings only share 50% of their genes with each other. Therefore the randomization in genetic combination alone can create differences in innate strengths and weaknesses among children with the same parents. A lottery is the appropriate metaphor for the lack of control any of us have in the genes we’re bestowed at conception.
Genetic engineering may offer an equalizer, but that presents its own ethical challenges. Harden instead argues that we should design a sufficiently robust welfare state to counteract these natural inequities. She presents a Rawlian framework (ie, veil of ignorance) to argue for why we should not accept genetic privileges and disadvantages anymore than we’d accept other injustices.
>Harden shows why our refusal to recognize the power of DNA perpetuates the myth of meritocracy [...]
There's an on-going philosophical discussion about meritocracy. The debate on i2c[^2] is fascinating. I've read both books, but I was leaning towards Sandel from the get-go anyway.
However reading about this topic on the DNA /generic side is equally interesting. Thanks for the link to the book :-)
Yes, and if their banner ads for donations focused on that then many of would be more comfortable donating. Our concern is their deceptive ads that give the impression that Wikipedia is struggling to pay the bills for serving Wikipedia.
I'm generally in favor of unions as a one of many tools for helping workers get a better working arrangement.
Yet I personally don't see the need for this tool in tech. The labor market has been red hot for years with demand exceeding supply and numerous options for each worker. Firms and their management seem exceedingly responsive (sometimes to a fault) with regard to addressing worker requests.
Sure there are still plenty of suboptimal tech employers and no firm is ever perfect for every worker. Yet worker choice seems to be sufficient to let tech workers find a firm that meets their requirements.
Some people are still choosing employers that many of us would reject, yet those workers are likely just prioritizing different things. Some people want to maximize their pay or progress more quickly in their career. Some people might even want to center work in their lives and seek a demanding employer. Whatever; to each their own.
It seems nearly impossible to determine how a company or team operates from the outside. An independent organization that could categorize approaches to software development along different axes (and also share true salary/TC info) would be useful.
Yep, if direct political donations are banned or highly limited, then SBF (and Thiel) will just fund a bunch of media startups that promote their preferred policies and candidates. These firms can appear to be profit seeking ventures while staffed with ideologues who are incentivized to optimize reach and influence.
There's plenty we can do to improve things and therefore fighting a losing war against money in politics is a distraction that simply wastes our limited time and effort.
Universities have mixed incentives at best in terms of certifying graduates. A degree program that routinely failed a high portion of students of the program would soon find few students entering the program. Because universities see students as a customer first, there is a strong incentive to give the customer's the product that they're paying for.
University degree program do care about rankings, which entails some concern about the quality of graduates awarded a degree. But they mainly address that by filtering students at admission time. Some program still have weed out courses to nudge students into alternative programs early on. But once the student is committed to the program, there is a strong incentive to award a degree regardless of their demonstrated capabilities.
> Safe assets are much riskier than risky ones. This is I think the deep lesson of the 2008 financial crisis, and crypto loves re-learning the lessons of traditional finance. Systemic risks live in safe assets. Equity-like assets — tech stocks, Luna, Bitcoin — are risky, and everyone knows they’re risky, and everyone accepts the risk. If your stocks or Bitcoin go down by 20% you are sad, but you are not that surprised. And so most people arrange their lives in such a way that, if their stocks or Bitcoin go down by 20%, they are not ruined.
> On the other hand safe assets — AAA mortgage securities, bank deposits, stablecoins — are not supposed to be risky, and people rely on them being worth what they say they’re worth, and when people lose even a little bit of confidence in them they crack completely. Bitcoin is valuable at $50,000 and somewhat less valuable at $40,000. A stablecoin is valuable at $1.00 and worthless at $0.98. If it hits $0.98 it might as well go to zero. And now it might!
Yes, it is unfortunate that ordinary Russian citizens are being harmed by the sanctions. But that is unavoidable and an acceptable side effect of weakening Putin’s war machine. We need to eliminate his ability to wage an inhuman war of aggression and asphyxiating the Russian economy that power’s his war machine is our best available option.
War, including economic war, commonly involves massive harm to civilians. That includes civilians who oppose the war and are powerless to stop it. If the western powers and their allies could surgically snuff out Putin’s war machine without harm to innocent Russians then they would. Unfortunately that option is not available. So we accept that innocent Russians will suffer as we drain the financial blood from Putin’s war machine.
I disagree. The suffering of Russian people is very avoidable. For example if the US and Germany had the political and economic will to stop buying oil from Russia and thereby directly funding Putin’s war.
Instead they chose broad indiscriminate sanctions that, while politically convenient are absolutely devastating to everyday Russian plebs. The Ruble has collapsed leading to hyperinflation on everyday goods the people need to survive.
Many innocent Russians will die directly because of the actions of the west. Their blood will be on our hands.
They will die because western governments find it politically more convenient to apply broad indiscriminate sanctions against all citizens of the country instead of cutting off funding from the head of the snake by NOT buying Russian oil & gas.
The only crime committed by regular Russians is being born inside an authoritarian regime that pretended to be a democracy for a time. The genie is out of the bottle and Russians know that protesting their government could land them in the Gulag or worse.
Stop playing with people’s lives! Yo have obviously never lived under an authoritarian government. People rising up in a new Arab Spring may sound romantic but it is more likely to end up in many more deaths than overthrowing this givernment.
Elsewhere I advocated for the west banning the purchase of oil along with subsidizing energy prices for affected populations.
You repeatedly ignore my proposal or even explain what is wrong with the idea of de-funding the Russian war machine by no longer giving the Russian government millions of dollars/Euros.
Why won’t you address my core point instead of deflecting and blaming an entire nation’s citizens?
I don’t see how stopping buying oil would be preferable from the perspective of a Russian citizen. Both will be economically ruinous to the Russian states, eventually. One hits innocent European citizens too, so it seems obvious which to choose.
It is pretty simple really, consider the 2 options:
1) Stop buying oil & gas from oligarchs and Russian elites.
The oils stays in Russia and Russians stay warm in winter.
Putin loses billions in foreign currency which he was using to wage war in Ukraine - crippling his war machine virtually overnight.
The elites and government lose 30% of their GDP and this was money that never trickled down to the plebs. It hurts the oligarchs and givernment who receive the revenue and taxes directly.
2) Broad economic sanctions mean everyday Russians can no longer buy food, medicine, clothing, batteries, electronics, shoes, or anything else from abroad.
It hurts the middle-class and working class more than elites.
Did you know for example that the sanctions against Russia include a carve-out protecting Italy’s ability to sell ultra high-end luxury and designer goods?
Do you still think this is about targeting Russian elites?
I thought the Italian luxury stuff had actually gone now. Prada etc are withdrawing.
At this point I don’t blame anyone for sanctioning first then Reviewing later. What is happening in Ukraine is obscene. If there is the smallest possibility that any sanction makes any Russian more likely to protest or question putin it’s worth a go. We can check again in 6 months and see if all are still needed ir likely to be effective.
[1] https://investor.vanguard.com/investment-products/mutual-fun...