Investors wondering why Charles Schwab Corp. is in the news for all the wrong reasons may find clues in Japan.
The idea that Charles Schwab might hit a wall adds to paranoia that the global capitalist system is stumbling, and fast.
Schwab, like SVB, loaded up on longer-dated bonds at bargain-basement yields in 2020 and 2021. As the Fed accelerated its rate hikes since last year, Schwab found itself with mounting paper losses in a short period.that by March 2022, Schwab had more than $5 billion of such paper losses. By year end 2022, that figure jumped to more than $13 billion.
Bank of Japan Governor nominee Kazuo Ueda went out of his way to signal to parliament that the status quo, QE, will remain.Any thought that the BOJ might “taper,” never mind a pivot toward an actual rate hike, tends to shake the political and corporate establishments. Look no further than December 20, when outgoing BOJ leaderIt didn’t go well. Kuroda’s move to let 10-year yields rise as high as 0.5% panicked world markets. The yen skyrocketed and U.S.
This explains the financial minefield into which Ueda steps on April 8, when he assumes the governorship. It may explain, too, why Ueda, in appearances before parliament, went out of his way to signal that the status quo, QE, will remain.again. And the turmoil since then at SVB, Credit Suisse and now questions about Schwab will likely extend the BOJ’s current QE era.
Either way, Schwab’s travails suggest the U.S. suffers from more of a Japan-like addiction to low rates than investors may realize.
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