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Old 26-06-2019, 10:51 AM   #1276
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Thanks BBC. I've heard before buying DCA BRK.B is also counted as investing in an "etf" since there's many companies under its portfolio. How true is this?
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Old 26-06-2019, 11:23 AM   #1277
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I've heard before buying DCA BRK.B is also counted as investing in an "etf" since there's many companies under its portfolio. How true is this?
Somewhat true. Berkshire Hathaway is a conglomerate, diversified holding company, and/or fund, depending on your point of view. It's actively managed, not an index fund.

There are plenty of other nominees in this same broad category, such as 3M (MMM), General Electric (GE), Orix (American Depository Receipts: IX), and Textron (TXT).

None of them are going to be as broadly diversified (including in business management terms) as the broad stock index funds that hold them all, and others.
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Old 28-06-2019, 02:06 PM   #1278
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The Trump White House is considering unilaterally changing the definition of capital gains in U.S. tax regulations, specifically to allow taxpayers to calculate gains in real (inflation-adjusted) terms. This'd amount to a massive tax cut for the wealthiest Americans.

If the Trump Administration actually orders this change, it'll be immediately challenged in court. It seems awfully likely it'd get overturned.

For what it's worth, I'm OK with taxing real capital gains as long as the preferential tax rates for capital gains are abolished. Congress and the President could do that if they wish.

Let's imagine for a moment, just for fun, that the Trump Administration orders this change and the courts uphold it. Naturally every sensible U.S. investor (including me) would then look within their portfolios for assets they've held for at least one year that have appreciated at about the rate of inflation or less. They'd liquidate those assets and then reinvest the proceeds, consistent with the IRS's "wash sale" rules. They'd do this because it would reset the cost basis for those assets and allow them to avoid capital gains tax, before Congress intervenes to fix this revenue sapping nonsense. (The ideal fix in my view would be as I described above.)

Tax rule changes can sometimes move markets, and this one might. However, it's not entirely clear how Wall Street would react. If taxpayers are busy resetting the cost bases of their assets, that'd boost trading volumes but otherwise not have any obvious impacts. Maybe at the margins there'd be a little more consumer demand with this tax cut, but the U.S. economy is already doing rather well. Also, this'd be a tax cut well aimed at the very wealthiest who simply aren't going to adjust their spending much.

Anyway, we'll see what happens, if anything.
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Old 28-06-2019, 05:52 PM   #1279
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Hi BBCWatcher,

If I am looking to buy a treasury bond ETC on IB using existing USD, which Bond ETF would you recommend that has a low expense ratio?
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Old 28-06-2019, 08:56 PM   #1280
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If I am looking to buy a treasury bond ETC on IB using existing USD, which Bond ETF would you recommend that has a low expense ratio?
There are several available choices depending on which maturities you'd like your U.S. Treasuries fund to hold. The biggest Irish domiciled/London traded fund is IBTA. (I'm assuming you're not a U.S. person.) That one holds 1 to 3 year maturity U.S. Treasuries, and it has a very reasonable 0.07% total expense ratio.
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Old 28-06-2019, 09:45 PM   #1281
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Hi,
This (IBTA) is listed on LSE. So I would have to convert my USD to pounds on IB Idealpro forex, before buying this on the LSE?
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Old 28-06-2019, 10:15 PM   #1282
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This (IBTA) is listed on LSE. So I would have to convert my USD to pounds on IB Idealpro forex, before buying this on the LSE?
No, of course not. Plenty of securities are quoted on the LSE in currencies other than British pounds. IBTA is quoted in U.S. dollars, which certainly makes sense for a bond fund that holds U.S. Treasuries.
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Old 02-07-2019, 09:24 AM   #1283
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I’ve mentioned U.S. I Bonds before, and I’ll mention them again since they’re starting to look interesting. I’ll point out up front that this type of U.S. government bond is only available in small U.S. dollar amounts and (practically speaking) only available if you already have a TreasuryDirect account or can open one. To open a TreasuryDirect account you need a U.S. Social Security Number (SSN), a U.S. mailing address, and a checking or savings account at a U.S. bank or U.S. credit union.

An I Bond is a real return bond, similar to TIPS. But it’s the “small saver” variant with a low purchase limit and some interesting, quirky features. I Bond offerings and interest rates are adjusted twice per year: on May 1 and November 1. As with all U.S. federal government general debt obligations they are the safest available place to park U.S. dollars, and because they are real return bonds they are particularly safe since they defend against possible U.S. dollar inflation risks over their 30 year maturities.

You can redeem I Bonds prematurely after a minimum 12 month holding period. It’s more like 11 1/2 months minimum, because if you buy an I Bond near the end of a calendar month you get the full month of interest. Then you can redeem it as soon as the 12th calendar month, or just over 11 months later. If you redeem within 5 years of purchase (actually more like 4.9 years with that timing trick), you lose the last 3 months of interest as a minor penalty.

What is the current interest rate on the current I Bond? It’s 1.90%, which consists of a 0.5% fixed rate (which the U.S. Treasury adjusts from time to time) plus the inflation rate, based on U.S. CPI-U. The inflation rate happened to be a bit low last time around, so 1.90% was the result. And that’s OK, but T-bills are still yielding a bit more.

However, going forward, this I Bond is looking a little more interesting to me. Inflation has picked up a little in the BLS data, perhaps for tariff-related reasons, and added to the 0.5% fixed rate that should be interesting. So you might want to take a fly on this one if you’d like to park a few U.S. dollars for a year or more. Then again CDs are looking pretty good, too.

For non-U.S. persons an I Bond is generally completely U.S. tax free. Buy them (if you buy them) toward the end of the calendar month — 3 or 4 business days before the end of month should be fine — and redeem them (if you redeem them) on the first business day of the month. There are no charges to buy or to redeem I Bonds through TreasuryDirect, except for the 3 month interest penalty I mentioned if you’re redeeming an I Bond before the 5 year mark.
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Old 02-07-2019, 10:53 AM   #1284
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BBCW,

If a US company files for chapter 11.
What does it mean for its employees?
Is there anything the employees should do?
Are they allowed to withhold paying salaries, bonuses , etc...?
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Old 02-07-2019, 11:56 AM   #1285
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If a US company files for chapter 11.
What does it mean for its employees?
Chapter 11 refers to the section of the U.S. bankruptcy code designed for reorganization of a struggling but still at least notionally viable business.

When a company enters Chapter 11 there's not necessarily any immediate impact on employees. Occasionally a company in Chapter 11 gets bankruptcy court permission for retention incentives to hold onto key employees who are deemed critical to the company's reorganization and to preservation of creditor interests. On the other hand, part of the reorganization often involves workforce reductions and/or spinoffs of business units.

One possible negative factor is that a company entering Chapter 11 is often tempted to pull back from its international (non-U.S.) expansion efforts, especially if it's recent and/or unsuccessful -- to beat a retreat, similar to a retreating army that's losing a war. Sometimes that can work out well, for example if the company sells its Singapore-based unit to an acquirer that's looking to expand and grow in Singapore. Sometimes not. You presumably know your multinational/U.S. headquartered company, its industry and the dynamics within that industry, and its posture in Singapore.

Is there anything the employees should do?
Yes, I'd recommend the following:

1. Avoid incurring personal debt that should properly be company debt, such as unreimbursed "corporate credit card" charges. Get all your expense reports filed and keep filing them in timely fashion, if applicable. If you travel for the company then stay in the cheapest hotels, be flexible with air travel and find the cheapest fares, and otherwise spend as little as possible on business travel (and only when video conferencing isn't enough). Your company will appreciate that anyway, and you'll reduce your personal risk of being left as a big, unsecured creditor if something really bad happens.

2. File any outstanding claims for company-provided medical insurance reimbursement as quickly as possible, if applicable.

3. Discontinue any employee stock purchase plan participation if you have any. If you hold company shares you're likely already wiped out (for those). It's likely the company has already done this for you (ended the ESPP), but just make sure.

4. On the other hand, if you're participating in a U.S. 401(k) plan -- Chapter 11 is a U.S. bankruptcy code construction, so maybe you are -- then you should continue doing that, and try to collect as much company match as soon as you can, if applicable. Defined contribution retirement plans are well protected. Obviously don't buy your own company's stock shares via the 401(k), but you shouldn't have been doing that anyway.

5. Explore other job opportunities more actively and aggressively, especially if you are pessimistic about the company's prospects and your ability/position to make positive change.

6. Take a look at your emergency reserve fund and take steps now to bolster it if you can, if you feel it's too weak given your industry's overall job climate. Likewise, look at your household budget and keep discretionary expenses under tight control, especially if you are concerned about your industry's overall job climate.

7. Continue doing your job and doing it well, as long as you're getting paid exactly as promised and as long as you remain with the company. Act legally and ethically, and keep careful records (as you should be doing anyway), such as payslips, etc.

8. Pay attention to what your management says, and give it a fair assessment. That doesn't mean you have to trust or to believe management, but that also doesn't mean you should dismiss management's views out of hand. I suggest being "reasonably skeptical," meaning that you should respect not soothing words but concrete, positive deeds. For example, if there's a talented, "plugged in" manager (or two) you trust who leave(s) the company, you may wish to do the same.

9. If you are in a precarious immigration status in Singapore (i.e. not a citizen, PR, or a dependent of one working via a LOC) and wish to remain in Singapore (or at least try), there's probably not much you can do if you lose your job on short notice. However, one possibility available to some on Employment Passes is to apply for a Personalised Employment Pass (PEP). You get only one PEP per lifetime, if you get it, and it lasts for up to 3 years. The advantage with a PEP is that you can remain in Singapore for up to 6 months between jobs if necessary instead of the 30 days EP holders get.

Another possibility if you're married to a citizen, PR, or EP/PEP holder (with sufficient income), and if you currently have your own individual work permission, is to attempt to switch to a LTVP or DP (as applicable) with Letter of Consent (LOC)-based permission to work. If you're currently counted against your employer's foreigner worker quota then that switch would be helpful to your employer, if you can pull it off.

On the other hand, if your current employer is going to let anyone go first, it'll probably be "flex" workers such as temporary contractors and highly "replaceable" workers (in their view), especially if they're counting against foreign worker quotas and incurring levies. But the company might also choose to cull certain highly compensated employees. Those employees tend to be older, on average, but on the other hand employers in Singapore get some incentives to hang onto older citizen workers, in particular. Anyway, know your place in the company, basically -- including these status-related dynamics.

Are they allowed to withhold paying salaries, bonuses , etc...?
In most cases you are an "at will" employee, and the company can unilaterally decide, going forward, that you'll either be compensated differently (usually lower, but possibly with an approved retention incentive if you're deemed key) or let you go. That was true before Chapter 11, and that's still true after Chapter 11.

Very, very rarely a company fails to pay promised compensation for work already performed. But that's company suicide. Lose the workforce, and that's the end. I don't think this is a serious risk generically for Chapter 11 filings.

I think you should assume that promised future benefits that aren't vested -- aren't actually yours, or in a safe custodian's care as with 401(k) plans -- won't materialize. For example, if the company promised you a Rolex watch when you reach 20 years of service with the company, and you're now at 19.5 years and waiting for that Rolex watch, don't count on getting that Rolex. Don't bank on it, in other words. As another example, don't count on your company following through on its "promise" to move you to the U.S. next year for a 2 year international assignment. Indeed, it's likely your company will prematurely end any IAs they can as soon as they can, because they're "expensive."

Last edited by BBCWatcher; 02-07-2019 at 12:04 PM..
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Old 02-07-2019, 01:18 PM   #1286
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What happens below $2k?

I always thought as long as you don't hit the $10 min comm or 100k min balance./ total account
0 to 99k shouldn't matter.

Total account value counts, so yes. But those stocks can and do wobble in value, so don’t cut it too close.

Last edited by foozgarden; 02-07-2019 at 01:27 PM..
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Old 02-07-2019, 01:24 PM   #1287
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Wow. Thanks for the detailed explanation!

There are some overseas colleagues who have delayed bonuses. Hence we think that it might be due to cash flow.

Not participating in ESP. But there is an equal contribution (employee and employer) to an external investment firm.

Are these funds ring fenced against the employer?
So they are not able to retrieve these monies from the fund in any circumstances.
Fyi, The account is under my name. Just that it's US based investment firm
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Old 02-07-2019, 02:36 PM   #1288
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What happens below $2k?
IB doubles the Monthly Activity Fee for not meeting minimum commissions to US$20 when your total account value is under US$2,000. So, to avoid that, keep the total account value at or above US$2,000.

There are some overseas colleagues who have delayed bonuses. Hence we think that it might be due to cash flow.
Probably. It's reasonable for your colleagues to question whether the bonuses will be paid. If you read the "fine print" associated with the vast majority of bonus programs, they're almost always non-guaranteed anyway.

Fortunately, slavery is illegal. If they're upset about the potential or actual loss of their bonuses, they should seriously consider whether they ought to stay with the company. If there's a voluntary redundancy program that's still operable then that could be worth taking.

To be clear, I don't know if they'll get their bonuses or not. There's simply much greater bonus uncertainty with a bankruptcy filing. Lehman Brothers, the famous (or infamous) Wall Street firm that filed for Chapter 11 bankruptcy reorganization in late 2008, ended up paying US$50 million in bonuses in 2013 and another US$44 million in 2014. And probably more than that, but that's some available data I could find quickly. They got bankruptcy court approval to pay those bonuses, in cash, to retain key talent to chop up what was left of Lehman Brothers, to parcel out the bits to surviving financial institutions. But Lehman also lost lots of talent (quickly), some employees never got their bonuses, and some got their bonuses but in the form of stock options and grants that became worthless.

I saw an interview with one Lehman employee in September, 2008. He joined the firm as a fresh graduate, he had been on the job a week, and then he was fired. Probably after buying lots of suits, getting a lease on a new apartment, etc., etc. Maybe he got a signing bonus of some kind, but even so, that must have been somewhat tough/rough anyway.

The quick loss of talent was well documented in TV news reports at that time, with reporters interviewing the many employees who carried their few personal belongings out of the office in cardboard boxes the same day or the day after the Chapter 11 bankruptcy filing. The company dismissed many employees right away, and some even months before the filing. It turns out Lehman knew it was in trouble, but basically it counted on a government bailout or some other white knight. That obviously didn't happen.

But there is an equal contribution (employee and employer) to an external investment firm.

Are these funds ring fenced against the employer? So they are not able to retrieve these monies from the fund in any circumstances. Fyi, The account is under my name. Just that it's US based investment firm
Yes, that account should be well protected. Double check your plan documents, of course.

The employer match is still obviously valuable as long as it's being paid, so it'd be in your financial interest to max out all employer matches for as long as you're allowed (and the company is paying). If you can boost contributions to collect the same matching funds sooner rather than later, I would, provided you feel comfortable with your emergency reserve. Some plans let you do that.
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Old 02-07-2019, 03:01 PM   #1289
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Every bankruptcy filing is a little different. There are some Chapter 11 filings -- including in the airline industry -- that are practically non-events for employees.

Eastern Air Lines was a really interesting historic case in certain respects. Eastern filed for Chapter 11 bankruptcy reorganization on March 9, 1989. That was mainly so Eastern's corporate parent, Texas Air, could break union contracts, which obviously affected employees greatly. That doesn't work well in a customer service-oriented business. In late 1990 the bankruptcy court appointed Martin Shugrue as Eastern's trustee to oversee operations. What was left of Eastern's marketing department evidently ran out of ideas, and Eastern aired some very strange TV ads:

Example 1
Example 2

Contrary to Shugrue's forecast, Eastern didn't survive well into 1991. It stopped flying on January 19, 1991. But that was nearly two years after Eastern's Chapter 11 filing, so even full collapses can sometimes take a long time.

Eastern's employees' traditional defined benefit pensions were/are guaranteed by the U.S. Pension Benefit Guaranty Corporation, a U.S. government agency. There's a monthly cap on the government insurance per pensioner, and it varies based on a pension/age-related formula. Oversimplifying only slightly, some Eastern pilots lost some (but nowhere near all) of their promised pension benefits, but other Eastern employees were generally well protected. Vested, defined contribution schemes tend to be even safer (arguably) because that money is portable, under the custody of an independent plan administrator, and has left the company balance sheet.
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Old 02-07-2019, 03:37 PM   #1290
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Here's another example: the first Chrysler "bankruptcy." That one was a big success, although it was government aided. The U.S. federal government extended a loan guarantee to Chrysler (headed by then new chief Lee Iacocca), and the company emerged as "The New Chrysler." Iacocca also became the new face of Chrysler.

It worked, although employees endured some burdens in making it work. Sales rebounded, and by 1983 Chrysler had fully paid off all its government guaranteed loans, with interest. Chrysler funded investments into new products, including their lineup of smaller "K cars" built on a common platform. With hindsight, the K cars were mediocre cars but value priced and backed by an industry leading warranty. And mediocre cars were a lot better than Chrysler's previous terrible cars. Chrysler also essentially invented the minivan, and that proved a big success for the company, too. And there was a little luck involved: lower oil prices in the 1980s, and a fairly strong U.S. economy.

This was not a bankruptcy in the technical sense. However, Chrysler would have certainly filed for bankruptcy if not for the government loan help. In 2009 Chrysler did file for Chapter 11 bankruptcy protection, but that too was a "managed" bankruptcy (or pseudo bankruptcy), with Fiat taking quick control of the company under court supervision. Chrysler had acquired American Motors (AMC), most famous for its Jeep vehicles, in 1988. So Fiat Chrysler Automobiles (FCA) now owns the Jeep vehicle range, too. Some employees lost their jobs through these various machinations, and some didn't.
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