All we heard about over the last decade plus was how well Schwab was positioned to profit when rates started to rise. Now we hear Schwab is taking huge losses because of rising rates
How does this happen when they were prepared for it? How is this firm so poorly run at the top?
It obvious how this happened. Schwab did use a bond ladder. They went all in on the 10 year and 20 year treasuries, using the deposit sweeps. They needed to gradually build up, doing 3 months, 6 months, 9 months, 1 year, 18 months, 2 years, and some 5 and 10 yearers. But noooooooooo. They went all in when the 20 year was a 2.5%. And as the interest rates rise, like the ever high tide rises, the UGL sunk in. Now if they can hold till maturity in 20 years, then as Arnold would say, "no problemo". But they were getting called by the withdrawals. So big problemo. All of a sudden the UGLs became RGLs.
Dunno. But Schwab changes directions every two or three years it seems. One of the biggest problems with Schwab is the constant hiring of executives and MDs from places like amex and PayPal, only to have them fire a bunch of people and bring in their buddies from the other companies they worked for. Then they go on about changing culture only to leave in a few years and back to square one we go. This is a very difficult company to drive change in because of the constant shifts in strategy.