The I-fund - 2023

[TommyIV]

The I-fund is still outperforming the C-fund for the year by nearly 2% coming into today. But the I-fund ETF EFA is in the shadows of the U.S. stock indices in today's action. The S&P 500 is currently up more than 1.4% while the ETF EFA (I-fund) is down around 0.15%. The gap is closing between the two.

EFA was up early in the day but a turnaround in the dollar put pressure on the ETF.

 

[tsptalk]

The dollar is up 0.55% today so that doesn't help the I-fund, but yes, the difference is eye opening. Is it a change in trend?

 

[TommyIV]

Looking at the ETF EFA (I-fund) chart, the price has been tangled up around the 20-day Exponential Moving Average (EMA) and the Simple moving Average (MA) for the last eight trading sessions. Are these moving averages able to provide support for much longer? So far today it has. The ETF opened below the simple moving average but has come off its lows to rise back above it.

 

[TommyIV]

An overreaction to the Credit Suisse selloff? Or a correction in a failing banking system?

The ETF EFA (I-fund) is down more than 3.5% this morning and opened below its 200-day EMA.

 

[Boghie]

TommyIV,

If by 'the banking system' you mean banks that use Federal Treasury bonds as their backstop then understand that there are many NATIONS that use Federal Treasury bonds as their backstop. Hopefully, that is not the reason for the I-Fund dump.

SVB used longer term US Federal Treasury notes as their backstop than appears to have been prudent. Maybe Credit Suisse did the same. Maybe MANY others. Remember, short term Treasuries were netting you close to 0% for the longest time. Many entities likely reached out further in the maturity timeline to get better returns. Now, the increases in the short term rates imposed by the FED are causing longer term bonds to be sold at fairly significantly higher rates. Nobody wants to buy the old bonds unless they get a steep discount on the purchase price. I mean, why buy a bond/note from 2019 earning 0.75% when you can buy a bond/note from March 2023 earning 4.75%? And, there we go.

However, if we think the FED will stop increasing interest rates then I have a bridge to sell you. Until the FED gets inflation under control they will raise rates. And, if our Federal government continues implementing inflationary policies then the FED will always be behind the curve. And, there we go.

Fun for the whole family. Stagflation II

 

[Khotso]

An overreaction to the Credit Suisse selloff? Or a correction in a failing banking system?

The ETF EFA (I-fund) is down more than 3.5% this morning and opened below its 200-day EMA.

View attachment 57508

Some of both.

 

[TommyIV]

If by 'the banking system' you mean banks that use Federal Treasury bonds as their backstop then understand that there are many NATIONS that use Federal Treasury bonds as their backstop.

Yes, I wrote that post in a hurry so I wasn't careful with my words, but you're picking up the details.

SVB used longer term US Federal Treasury notes as their backstop than appears to have been prudent. Maybe Credit Suisse did the same. Maybe MANY others. Remember, short term Treasuries were netting you close to 0% for the longest time. Many entities likely reached out further in the maturity timeline to get better returns. Now, the increases in the short term rates imposed by the FED are causing longer term bonds to be sold at fairly significantly higher rates. Nobody wants to buy the old bonds unless they get a steep discount on the purchase price. I mean, why buy a bond/note from 2019 earning 0.75% when you can buy a bond/note from March 2023 earning 4.75%? And, there we go.

However, if we think the FED will stop increasing interest rates then I have a bridge to sell you. Until the FED gets inflation under control they will raise rates. And, if our Federal government continues implementing inflationary policies then the FED will always be behind the curve. And, there we go.

Very well put, and its important to point out that these low interest rate long term bonds that have fallen in market price would not be a problem for the banks who hold them if they could hold them to maturity. So, it is also a problem of keeping depositor calm so these banks aren't forced to sell these bonds for realized losses.

Then investors dumping these bank stocks adds another problem. Share prices of banks has an effect on their company and how they handle all of this.

 

[tsptalk]

The dollar vs. I-fund...