Official Shiny Things thread—Part III

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razoreigns

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Why would you want to diversify brokers like IBKR?

Sent from HUAWEI VOG-L29 using GAGT

My intention to diversify brokers was to multiply the 500k insurance protection. I was thinking more of other US low cost brokers rather than SCB, which would not be protected at all, like what was pointed out by BBCW. However, what is now clear to me is that this would not work as well since the 500k protection is combined total for your individual name accounts, across US brokers. To multiply the protection, I need to use joint accounts and this can be done using the same broker.
 
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BBCWatcher

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I only have iwda in the IB account so US estate tax shouldn’t be a concern?
Only if you’re a U.S. person, or (in some cases) a former U.S. person who is a “Covered Expatriate.”

Can I have more than 1 joint account to multiply the SIPC coverage?
Account 1 - individual
Account 2 - joint with my spouse
Account 3 - joint with my child
You can, but any/every joint account holder must agree and must be an adult (18 or older I think that means). As an aside, Interactive Brokers offers accounts for minors but only to U.S. residents. That’s an arrangement called UGMA/UTMA. With that type of account the child’s parent or guardian is the account custodian on behalf of the child, and the child solely controls the account starting on the child’s 18th birthday. It operates under U.S. laws that provide for this sort of arrangement. This type of account gets its own separate US$500,000 worth of SIPC coverage. And actually, come to think of it, this arrangement probably allows the choice of just about any child, such as a niece, nephew, grandchild, etc. There are some U.S. gift limits, though, which is why they aren’t too popular.

My intention to diversify brokers was to multiply the 500k insurance protection. I was thinking more of other US low cost brokers rather than SCB, which would not be protected at all, like what was pointed out by BBCW. However, what is now clear to me is that this would not work as well since the 500k protection is combined total for your individual name accounts, across US brokers. To multiply the protection, I need to use joint accounts and this can be done using the same broker.
Well yes, technically (maybe), but the probability of one SIPC insured broker failing is low. The probability of two SIPC insured brokers failing at about the same time is even lower. The probability that these two failed brokers happen to be your two brokers is even lower than even lower. And the probability you don’t make a full recovery of even over the limit assets is even lower than even lower than even lower.
 
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decibel.

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I can understand in the abstract why some degree of custodial diversification makes sense, but at ~22% of household wealth and with SIPC coverage for some big chunk of that, I don’t think it makes sense to shift assets to another custodian that’s lacking any SIPC coverage or anything comparable. Account retitling makes a little sense to multiply SIPC coverage, but it isn’t super urgent.
Agree. I don't think there's anything comparable with IB at this stage. I would just leave it till retirement drawdown. By then, probably there will be new players.
My intention to diversify brokers was to multiply the 500k insurance protection. I was thinking more of other US low cost brokers rather than SCB, which would not be protected at all, like what was pointed out by BBCW. However, what is now clear to me is that this would not work as well since the 500k protection is combined total for your individual name accounts, across US brokers. To multiply the protection, I need to use joint accounts and this can be done using the same broker.
Oh, so it works for joint accounts? Why not push the remaining to your spouse's name or your kids?

Sent from HUAWEI VOG-L29 using GAGT
 

cassowary18

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Hmm, good point. It just seems rather odd that on DBS RSP, the tracking error is much greater than what was shown on nikko am website. As a reference, here's what I found on nikkoam website:
ReSGsBR.jpg


So if what you said were right, then it means that their definition of return are in fact quite different (DBS considers monthly DCA and takes 0.82% platform commission into account; whereas tables we see on nikkoam or iShare does not). At first sight, the information provided by DBS kinda gives an impression that it isn't tracking effectively.

Initially, I thought it might be related to the way price is determined (which can be different from the traded price on market), as illustrated at their FAQ:
OrPnRXb.jpg

2. Could POSB Invest-Saver be buying these ETFs on the open market, and thus could there be some slight "big whale" effects in their monthly purchases? Or is DBS/POSB buying directly from the fund manager at a closing price? I'd have to dig into the mechanics of how they operate, and I'm not curious enough, frankly. ;)
Based on what loackerc mentioned, I suspect DBS just does a unit creation (at end of day NAV) with Nikko AM and sells them to the customers.

Also, DBS owns a minority stake in Nikko AM (which might explain why Invest Saver only offers Nikko AM managed ETFs, including G3B and not ES3) https://sbr.com.sg/markets-investin...quires-725-interest-in-nikko-asset-management
 

longfart

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Hi ST, I noticed my IBKR reports for the past 2 mths have a line that reads "Sales Tax". May I know what this deduction is for?
 

Shiny Things

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Dunno whether to dca this month. Tiagong it is the fed buying and pushing up the price despite 1 in 4 americans being unemployed. :(

Let's talk about this, because it raises an interesting point. In short: the Fed just saved us all, whether you're in the US or Singapore or wherever, from a much worse crisis than the one we saw.

There was a really excellent episode of NPR's Planet Money podcast a few weeks back that talked about all the things the US Federal Reserve has done to, quite literally, stop an oncoming financial crisis in its tracks.

This is going to be a bit US-centric, but whining about "the Fed is pushing up the price!" is US-centric as well. (Which is another reason to ignore people who complain about the Fed.)

Firstly: why has the Fed been so gung-ho about propping up markets and the economy? Here's the thing: it's the Fed's job to keep inflation and unemployment down. Despite whatever Donny Two Scoops might be tweeting on any given day, the Fed has exactly two KPIs: "keep unemployment as low as possible", and "keep inflation below, but close to, 2% p.a." "keep inflation low but positive".

When the 'rona hit, the global economy pretty much stopped in its tracks. Businesses suddenly had no money coming in the door; lots of people got laid off so they didn't have any money to spend; it was looking like we were going to tumble headlong into an economic abyss that would make the Great Depression look like the Slight Case Of The Mondays. Unemployment was skyrocketing and inflation was collapsing toward deflation; so the Fed was empowered to act.

It's the Fed's job to stop that from happening (in the US at least, though the spillover helped prop up every country around the world). In the Great Depression, the Fed screwed up; they withdrew their support for the banking sector too early and turned a recession into a wholesale banking-sector-led meltdown.

In the 2008 GFC, Ben Bernanke wanted to avoid those mistakes. Even after Lehman hit the skids, at which point things were pretty darn bad, there was about a three-day period where things could have gotten worse. AIG was sucking wind from multi-billion-dollar losses in its AIGFP division, which, if it had collapsed, would have stuck surviving banks with those losses. The banks that were still around—mine included—were cutting our exposures to MS and Goldman, because we thought they would be the next to fail. And all the banks that lent to corporates in the short-term "commercial paper" market were calling those loans back in, which meant that huge non-financial companies like GE or Boeing or J&J (OK, GE wasn't really "non-financial" at the time) wouldn't have been able to make payroll.

Ben Bernanke smartly realized that if banks stopped lending, everything would seize up—so he said "OK, do whatever you need to do in order to get the banks lending again". And it worked; it took six months for the stock market to finally reach its lows, but he staved off a much broader collapse of the economy.

It's central banks' job to be the "lender of last resort"—the bank that steps in to keep money moving when nobody else wants to. Mario Draghi saved the eurozone by taking this role in 2011.

And in March, Jerome Powell did it as well. He said "OK, we're staring down the barrel of another 2008. Let's do the same thing that worked last time—but faster, and bigger." And it worked! The banks weren't the problem this time around; there wasn't going to be another Lehman, because banks are so much better capitalized now than they were then. The problem was, again, that banks were pulling back on lending, pulling back on risk, pulling back on everything, so the Fed stepped in to do what the banks wouldn't.

The playbook for central banks has changed. The days of non-interventionist central banks, where they set monetary policy based on the price of gold and just let it rip, are over. CBs now have a much bigger toolkit to stave off recessions and crashes, and they're not afraid to use them.

What does this mean for you? It means that on average, crashes will be shorter and less severe when they happen; and in most economies (except ones where the central bank takes a hands-off currency-board approach, AHEM), economic downturns will probably be milder.

And the Fed isn't stupid. The vast majority of this support came in the form of loans, which will be repaid eventually, so there won't be much effect on the money supply and there won't be much effect on inflation (so ignore anyone screaming "but hyperinflation!" Hyperinflation will not happen. I will bet against it in whatever size you like). And they'll be careful about withdrawing this support; they won't do it until the economy's ready, and they'll only do it slowly, like they did in 2015-2016. Everyone had a big ol' freakout (remember the taper tantrum?); but the end result was that everything was OK.

One last note to the people screaming "the Fed is manipulating markets!": would you have preferred they didn't step in, and the entire global economy ground to a shuddering halt? I think we can all agree that would be a Bad Thing.

Hi ST, I noticed my IBKR reports for the past 2 mths have a line that reads "Sales Tax". May I know what this deduction is for?

Which markets are you trading? IBKR has to charge sales tax on brokerage in some countries.

Hi all,

Quick question, I know we're only supposed to buy one counter with IBKR every month, but what is the rule if you're making your first lump sum investment?

I've split my lump sum over 2 months, but say I want my portfolio to be 90% the stock ETF and 10% the bond ETF, does that mean I invest 90% of my lump sum in the first month to buy the stock ETF counter and 10% the next month?
This isn't a hugely common situation, so just do whatever works. For a lump sum you could buy 90/10 in both months, or 100% the stock ETF in month 1 and 80% in month 2. Don't get too hung up on this.
 
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razoreigns

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Oh, so it works for joint accounts? Why not push the remaining to your spouse's name or your kids?

You will want to consider issues such as ownership and control before doing it. Also your kids need to be adults to open joint accounts. Weigh the pros and cons. If you plan to leave the shares in IB as inheritance to your spouse/kids, joint accounts might fulfill both objectives including multiplying SIPC protection.
 

highsulphur

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You will want to consider issues such as ownership and control before doing it. Also your kids need to be adults to open joint accounts. Weigh the pros and cons. If you plan to leave the shares in IB as inheritance to your spouse/kids, joint accounts might fulfill both objectives including multiplying SIPC protection.

Do you know if one can transfer positions from individual account to one's joint account? I'm still buying using my ind account. Need some time to open joint account...
 

gazar1

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Hi I have $30k cash to invest.

Is putting everything in to Maybank FD at 2.05% a good choice?

Since it’s 0% risk
 

converse2010

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Hi Shiny, I have started building my portfolio since start of this year. But via SCB instead of IB for IWDA component.

Would it be wise to transfer it to IB considering I'm buying for long term and currently I'm investing S$1k monthly and plan to increase yearly? While my G3B and MBH is in POSB.

Thanks
 

BBCWatcher

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Despite whatever Donny Two Scoops might be tweeting on any given day, the Fed has exactly two KPIs: "keep unemployment as low as possible", and "keep inflation below, but close to, 2% p.a.".
The latter is not part of the U.S. Federal Reserve's mandate. The Federal Reserve's primary mandate is maximum employment (correct), and the Fed's secondary mandate is "stable prices." There is no specific inflation target in the statute, and there's no actual consensus backing for 2% as a target (cap or average). The 2% figure is a figure some central bankers pulled out of their asses.

Moreover, many, many central bankers have been miserable failures in managing inflation at or even near 2%. Do you want to discuss the German central bank...oh, excuse me, the European Central Bank? ;)

And they'll be careful about withdrawing this support; they won't do it until the economy's ready, and they'll only do it slowly, like they did in 2015-2016. Everyone had a big ol' freakout (remember the taper tantrum?); but the end result was that everything was OK.
No, it really wasn't, and 2015-2016 is not aging well in Fed history. The Federal Reserve screwed up that time. There was no danger of inflation, but the Fed tightened anyway. The tightening delayed/stalled employment and wage recovery, and consequently Pennsylvania, Michigan, and Wisconsin narrowly voted for Donald Trump in November, 2016. "Ooops."

No, that wasn't one of the Fed's shining moments. There are parallels with 1936-1937.

Hi I have $30k cash to invest.
Is putting everything in to Maybank FD at 2.05% a good choice?
If you have a big (~$30K) bill to pay about 25 months from now -- a wedding, university tuition bill, home outfitting, or something else -- yes, that's a pretty good choice. That's called saving, not investing. Is that your situation, or is some or all of this $30K available for long-term investing?
 

limster

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I only do USD.SGD conversions and buy IWDA. The sales tax thingy only started appearing in my report 2 months ago.

IBKR sent an e-mail to Singapore clients on 17 Jan 2020. The question to ask is: why are you paying for data unless you are a trader?
 

longfart

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IBKR sent an e-mail to Singapore clients on 17 Jan 2020. The question to ask is: why are you paying for data unless you are a trader?
No, I'm not a trader and I do not subscribe to any data. Could it be due to the snapshots (which turned out blank) of IWDA?
 

beefjerky

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Shiny:

For a credit/debit spread options trade, if we set the limit price to somewhere in between the bid/ask, how does the platform know when to execute the trade? Eg. a bull put spread. Does it just wait the higher strike put bid + lower strike put ask equals the limit price I'm asking for before simultaneously executing?
 

limster

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No, I'm not a trader and I do not subscribe to any data. Could it be due to the snapshots (which turned out blank) of IWDA?

yes you are right, snapshots are also subject to GST even though IBKR subsequently rebates you the snapshot fees, they don't rebate the sales tax on the snapshot fees.

the sales tax applied appears to be 7% of the snapshot fees.
 

longfart

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yes you are right, snapshots are also subject to GST even though IBKR subsequently rebates you the snapshot fees, they don't rebate the sales tax on the snapshot fees.

the sales tax applied appears to be 7% of the snapshot fees.
Finally, mystery solved. Thank you limster.
Do you happen to know why my IWDA snapshots turned out blank, even after clicking refresh?
 

oAkEn86

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