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37 Words: Title IX and Fifty Years of Fighting Sex Discrimination

March is the month for celebrating women’s history. Some key events that have occurred in March over time:

  • March 1857: Female textile workers in New York City marched in protest of unfair working conditions and unequal rights for women
  • March 1908:  Women workers marched in NYC to protest child labor, sweatshop working conditions, and to demand women’s suffrage
  • March 1911: First International Women’s Day marked by gatherings in Austria, Denmark, Germany, and Switzerland
  • March 1913: Women’s Suffrage Parade in Washington, DC where more than 8,000 women gathered to demand a constitutional amendment guaranteeing their right to vote
  • 1975: United Nations began celebrating March 8 as International Women’s Day
  • 1978: Women’s History Week started in US
  • 1987: National Women’s History Project successfully petitioned Congress to include all of March as a celebration of the economic, political, and social contributions of women

In recognition of this, I expanded my reading horizon this month and landed on 37 Words: Title IX and Fifty Years of Fighting Sex Discrimination by Sherry Boschert.

An author, journalist activist, and environmentalist, Boschert posts frequently on

Banks Went Bust – What Comes Next?

The fact that the US government acted quickly and in a coordinated fashion gives me a degree of comfort that today’s problematic situation regarding US banks may be reasonably contained. At the root of all financial crises is a widespread loss of confidence. We don’t seem to be at that juncture yet.

However, a lesson learned during the 2008 financial crisis was that it is hard to know what comes next and when the danger has passed.

We are in a period of high uncertainty now where systemic weakness has come to the fore and many banks may be in precarious positions. If losses mount at other banks because of poor risk management practices, regulators may need to do more.

The good news is that regulators understand how to fix liquidity crises at banks. They have a Global Financial Crisis Playbook from 2008 and a Pandemic Crisis Playbook from 2020 as reference guides, along with a willingness to use them.

Fast-acting and knowledgeable regulators can help boost confidence when cracks in the financial system appear.

Also, the US economic machine continues to drive forward.  Jobs are plentiful, wages are growing, and the consumer is spending. While a downshift in the economy is possible, and perhaps even likely, there seems to be enough momentum and resiliency to maintain growth in 2023.

And interest rate increases, which have put pressure on stock and bond prices, may soon be viewed as ‘yesterday’s policy’ by the Federal Reserve. Policy makers meet next on March 21-22 to decide on the direction of interest rates.

While it’s not a foregone conclusion that they’ll change the policy path and hold off on hikes, the Federal Reserve needs to be considering this in light of last week’s developments. A lower interest rate environment would alleviate pressure and should support higher stock and bond prices. 

The bottom line for clients is that maintaining your long-term asset allocation strategy, even when it’s uncomfortable to do so, is a time-tested approach that tends to produce the most satisfactory results.

Banks Go Bust

When well-laid plans didn’t come to fruition, Rooster Cogburn, a US Marshal and fictional character in the Western film True Grit, exclaimed: “Well, that didn’t pan out.”

A financial drama in the West of the US played out last week, where two California-based lenders that took big, mismatched bets got into hot water. Unfortunately, those situations didn’t pan out, either.

Silvergate Bank, a smaller bank catering to the crypto economy, was taken over on Thursday, March 9. Silicon Valley Bank, a much larger lender (19th in the US by asset size) was shut down on Friday, March 10.

The tremor in California was part of a fast-moving, system-wide quake.

Signature Bank, the 29th largest bank in the US was shut down on Sunday, March 12. And First Republic, the country’s 14th largest bank, got support from the Federal Reserve and from JP Morgan.

No other medium- or large-sized banks failed on Monday, March 13. Overall, the stock market remained relatively calm. But Treasury bond prices shot higher – what Wall Street people call “a flight to quality” – and bank stocks tumbled.

The table below (data from the Federal Reserve) presents the 30 largest lenders by asset size in the US as of December 31, 2022. Orange highlights show the banks that recently got into trouble.

Government Steps In

Following government actions on Sunday, March 12, a brief press conference was held Monday morning March 13 where President Biden emphasized the following:

  1. Depositors will be protected
  2. Investors will not be protected
  3. No losses will be borne by taxpayers
  4. The administration will order a full accounting of the situation
  5. More regulation is likely to follow


When compared to the Global Financial Crisis of 2008, the current situation has significant differences.

First and foremost, this time government action has been swift, decisive and coordinated. In 2008, it took months for authorities to develop a plan and to act.

Second, the current problem emerged at deposit taking institutions, the issues are transparent, and depositors are being protected.

In 2008, the problems started with real estate lenders and migrated to brokers, and the issues were largely hidden from view or misrepresented for some time. When trouble finally hit retail deposit-taking institutions, the problem had grown so large that the entire financial system was at risk.

Third, investors who hold stocks and bonds of the troubled banks will not be supported, and management of failed companies will be shown the door.

In 2008, part of the ‘solution’ initially was to try to boost stock prices and work with incumbent management teams that had caused the problems.

What actions has the government taken to stem the current crisis?

After taking over Silicon Valley Bank and Signature Bank, the Federal Reserve designated them as systemic risks to the financial system, which gave the Feds authority to backstop uninsured depositors at both institutions. This means people and companies with bank accounts will be able to get their money back in a timely manner.

The Federal Reserve then introduced a new lending facility, called the Bank Term Funding Program, which allows banks to pledge certain assets, like US Treasury bonds, in exchange for loans of up to one year.

This new Fed-run lending facility allows commercially viable banks to avoid selling assets at a loss and helps banks get cash to meet their customers’ demands for their deposits.


Causes of the Crisis

In basic terms, the seeds of the recent bank failures were sown through rapid growth, concentrated customer bases, and shoddy risk management. If you can recall the bank run at Bailey Building and Loan in It’s a Wonderful Life, then you have a reasonable sense of what happened last week.

In the case of Silicon Valley Bank (SVB) and Signature Bank, though, Sam Wainwright wasn’t available to advance the billions of dollars needed to keep the institutions afloat.

SVB seems to be a victim of its own success. SVB developed a niche focus working with technology companies and individuals involved in the tech space. It claimed to have served a majority of US startups.

Following the pandemic, SVB grew like gangbusters, and plowed a lot of its deposits, which are short-term obligations, into relatively safe, but longer-term assets like US Treasuries. It bought Treasuries when interest rates were very low. As interest rates climbed in 2022, bond prices tumbled, and losses mounted for SVB.

When SVB sold a bunch of bonds and realized a large loss last week, customers took notice. When SVB tried to raise fresh capital through a stock offering, investors declined. As herd mentality took hold of the tech crowd that banked at SVB, many demanded their deposits all at once, and the gig was up for SVB.

In addition to customer concentration, SVB depositors tended to keep a lot of money at the bank. At a well-diversified bank, typically half of the deposits are covered by FDIC insurance – the $250,000 deposit guarantee.

In SVB’s case, more than 90% of deposits were above the limit, and therefore uninsured, which made the bank more vulnerable to a run. For Signature Bank, which had niches in the technology sector and the crypto space, nearly 100% of deposits were uninsured.

February 2023 Recap: Interest Rate Tail Wags Stock Market Dog

The interest rate tail wagged the stock market dog in February. The prospect of still-higher short- and long-term interest rates rattled the stock market.

The 10-Year Treasury bond touched its 2023 low point in yield of 3.39% on February 1, but climbed during the rest of the month and ended at 3.92%. The yield climb translated to a US bond market decline of 2.9% for the month.

By the end of February, intermediate-term bonds had given back most of their January gains.

Concerns about inflation being stickier for longer and rising bond yields weighed on stocks. By the end of the month, the S&P 500 had fallen from its high point of a 9% year-to-date gain in early February back down to a 3.5% year-to-date advance. For the month of February, US stocks slid by about 2.5%.

Below is a summary of February returns.


Gettin’ Chatty: Artificial Intelligence Gets Real

If you were lost in space, having artificial intelligence by your side would be helpful. Will Robinson’s robot, B9, was a form of chatty artificial intelligence imagined in the middle of the last century. B9 was a fiction brought to life by actor Bob May in the Lost in Space sitcom.

Artificial intelligence (AI) in the 21st century is real. For the analogue -inclined, developments in AI can be mind-bending. AI might seem worlds away and you might feel ‘lost in space’ if you’re trying to understand what it’s about.

ChatGPT, which went mainstream in December, provides a window into the world of AI – and is an application that’s available for anyone to use today.

McKInsey’s recent blog post What Is Generative AI? Is a helpful explainer. It describes AI through the lens of content creation, and the disruptive effects it’s likely to have.

Also the New York Times sponsored podcast Hard Fork provides an engaging discussion of the new technology in Can ChatGPT Make This Podcast?

Of course, seeing is believing. You might consider setting up a ChatGPT account and giving it a whirl. I was impressed by the amount of content the application generates in response to questions, as well as with its accuracy and speed.

If you decide to ChatGPT, or have other AI-related experiences, I’m interested to hear your impressions.

The Taxman Cometh – Getting Ready to File Your Return

The IRS set January 23 as the official start to the 2023 tax filing season. Many of us are now busy gathering tax-related documents for tax preparation purposes. The filing deadline to submit 2022 tax returns or to submit an extension to file is Tuesday, April 18.

Even if you go on extension until October 16, you still have to pay any tax you expect to owe by April 18 or the IRS will add penalty and interest charges to the amount owed.

The IRS provides a useful reference page on their website, which includes ‘Tips to Help People with the 2023 Tax Season’ at

Also, you might find this two-page reference sheet of important tax-related numbers for 2023 helpful. The data includes: 

  • Federal Income Tax Brackets
  • Capital Gains Rates
  • Medicare Premiums
  • IRMAA Surcharges
  • Retirement Plan Contribution Limits

Susan and I will also gladly address your tax planning questions.

Here’s wishing you many happy returns!


US Debt Ceiling Developments

The debt ceiling is a cap on the total amount of money that the federal government is authorized to borrow. Congress last agreed to raise this cap to $31 trillion in late 2021.

Lifting the debt limit does not authorize any new spending, it simply allows the government to pay bills already incurred.

Some members of Congress are trying to tie an approval for an increase in the debt ceiling to an agreement for greater fiscal stringency.

In a letter to Congress on Thursday, January 19th, Treasury Secretary Janet Yellen said that the US had reached its debt limit and has begun taking “extraordinary measures” to enable the government to stay current on its bills.

The special measures include suspending investments in government benefits plans, such as the Civil Service Retirement Fund.

The actual moment when the federal government can no longer meet its obligations on time is a function of the Treasury Department’s cash flow, which could change depending on things such as the receipt of tax payments.

Yellen estimates that the government could run out of money, and may have to declare default, sometime in June 2023.

The US has reached inflection points regarding the debt ceiling in the past. In 2011, Congress engaged in a contentious stand-off over spending and the debt that got close to a default situation.

The brinkmanship a decade ago had a negative impact on the financial markets and resulted in a downgrade of America’s credit rating by Standard & Poor’s, one of the main US credit rating agencies.

Last week, Speaker of the House Kevin McCarthy and President Joe Biden held a meeting focused on the debt ceiling issue. The tone following that meeting was constructive, with McCarthy saying “I think, at the end of the day, we can find common ground.”

Given that the government appears to have enough flexibility to stay current on its obligations until June, it’s likely that we’re just at the ‘beginning of the day’ on this issue.

Investors will probably have to suffer through more political posturing, and possibly brinkmanship similar to what occurred in 2011, before the situation is resolved.

The stakes in this political game of chicken are high: Yellen has said that a US debt default would “cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability.”

My sense is that cooler heads will prevail in Washington and the US will avert the worst outcome. But if the impasse on the debt ceiling persists into spring and summer, it will become more problematic for financial markets, and more likely cause bouts of volatility and downside for investment portfolios.


The Real Deal on Real Yields and Bond Funds

By saving and investing today, most investors expect that they will be better off tomorrow. This is a reasonable premise. For this to happen, investments must, at a minimum, outpace inflation.

Stock returns have done a great job at outpacing the rate of inflation over time –generally speaking, by about 6 percentage points per year.

Bond returns also have outpaced inflation over time, but by a significantly smaller margin than stock returns. Treasury bond yields have exceeded inflation by about 2 percentage points, on average, going back to 1958.

Sometimes the relationship between inflation and bond yields gets thrown out of whack.

In high-inflation environments, it’s possible that bond yields might not keep pace with inflation. Today, we are in this type of abnormal environment – illustrated by the chart below, courtesy of JP Morgan Asset Management.

The blue line shows the yield history of the 10-year Treasury bond yield. The peak yield of nearly 16% was reached in 1981, which came during a period of very high inflation.

The average 10-year Treasury bond yield since 1958 has been 5.7% (blue line), and the yield at the end of January was 3.5%. This yield, referred to as the ‘Nominal yield’, is what the 10-year Treasury has paid bondholders in interest before taking inflation into account.

The grey line shows the same 10-year Treasury with its yield adjusted for inflation. The after-inflation yield is called the Real yield, and it has averaged about 2.1% over time.

However, with inflation running north of 5.6% today, and with the 10-year Treasury providing a Nominal yield of 3.5%, the Real (after-inflation) yield is negative, by about 2.1%.

This situation of bond yields failing to keep pace with inflation is unusual and unlikely to persist indefinitely.

Eventually, Nominal yields will move above the rate of inflation. But the adjustment process can be painful for bondholders.

This was apparent in 2022, when the US bond market fell by 13%. The steep decline was a function of the yield / price relationship for bonds. When interest rates move up quickly, bond prices and bond returns fall.

A significant course correction for bonds occurred last year. Even still, the bond markets and the path of inflation remain in flux today. It likely will take time to revert to a normal bond yield / inflation relationship.

Because of this uncertain environment, proceeding with caution in managing bond allocations is advised. 

Emphasizing short-term bond funds, which carry less interest rate risk than longer-term bond funds, and inflation protected bond funds, are two ways to mitigate the negative effects of higher inflation on the bond portion of a portfolio.

Course Correction Under Way for the US Economy

Inflation was a big problem last year and inflation-fighting policies had a big, negative effect on stock and bond prices in 2022. Inflation will continue to be a front-and-center Issue for investors this year. 

Course Correction Needed was the title of the second section of my September newsletter. In that section, I wrote: “Until market participants sense a course correction in the inflation / interest rates / Fed policy dynamic, stocks are likely to struggle”.

I’m pleased to report that a course correction is under way. Inflation gauges are generally improving, longer-term interest rates made a meaningful adjustment, and the Federal Reserve has slowed its pace of short-term interest rate increases.

On February 2, the Fed brought its target for short-term interest rates up to 4.75%, an increase of 0.25 percentage points. This follows a 0.5 percentage point increase in December, and a series of 0.75 percentage point increases last fall and summer.

This indicates we may be approaching the end of the ‘Fed tightening cycle’ that I discussed in my October 2022 newsletter.

Improvements in inflation and a ‘go-slower’ Fed have given a very significant lift to stock and bond prices so far this year. Can this course correction persist in 2023?

The answer is yes, but likely will require the labor market to come off the boil.

The jobs market was hot in 2022. There were 4.5 million new jobs created last year, and millions of job openings remained unfilled.

This supply / demand gap in the labor market was a key factor that drove wages higher, which in turn contributed to inflation.

The hot labor market persisted in January. US employers added 517,000 jobs and the unemployment rate declined to 3.4% – the lowest since 1969. This is good for workers and good for economic growth. But for inflation? Not so much.

We should recognize the improvement in the financial markets in the early weeks of 2023 as a benefit for portfolios.

But we should also realize that the process of course correction is more likely to look like a winding mountain path, with sections of rocky trail and switchbacks, than a straight, paved road back to satisfactory investment results. 


January 2023 Market Recap: Winter Warmer

Punxsutawney Phil, the bushy Pennsylvanian, predicted six more weeks of winter cold by seeing his shadow on February 2 – and right on cue, New England fell into a deep freeze.

The financial markets, however, have been feeling quite summery. In January, bonds became a bit steamy, stocks were sultry, and some parts of the tech sector were a-sizzle.

For the month of January, the S&P 500 index of large company US stocks rose by 6.3%. Foreign stocks climbed even higher, up by 9.0%. The technology-heavy Nasdaq index advanced by 10.6%.

Bonds rose along with stocks. The Bloomberg US Aggregate Bond Index rose by 3.3% last month. 

Below is a summary of January returns.