Schwab Bankruptcy Vs Vanguard And Fidelity

Ltssharon
  |     |   133 posts since 2020

Well is anyone switching out of Schwab because of their bankruptcy rating,

? I have read that their probably of going bankrupt is over 46 percent, whereas for vanguard and fidelity each is below ten percent



Answers
alan1
  |     |   742 posts since 2015
I suspect you read this piece, or something similar:
https://www.macroaxis.com/invest/ratio/SCHW/Probability-Of-Bankruptcy

The way they use "Probability of Bankruptcy" is unrelated to probability of bankruptcy. Here are some snippets:

"The Probability of Bankruptcy SHOULD NOT be confused with the actual chance of a company to file for chapter 7, 11, 12, or 13 bankruptcy protection. Macroaxis simply defines Financial Distress as an operational condition where a company is having difficulty meeting its current financial obligations towards its creditors or delivering on the expectations of its investors. Macroaxis derives these conditions daily from both public financial statements as well as analysis of stock prices reacting to market conditions or economic downturns, including short-term and long-term historical volatility. Other factors taken into account include analysis of liquidity, revenue patterns, R&D expenses, and commitments, as well as public headlines and social sentiment."
(Screaming caps in original)

"Based on the latest financial disclosure, The Charles Schwab has a Probability Of Bankruptcy of 50.0%. This indicator is about the same for the Financial Services average (which is currently at 49.93) sector and 14.03% higher than that of the Capital Markets industry. The probability of bankruptcy for all United States stocks is 25.53% lower than that of the firm."
planxy
  |     |   92 posts since 2013
Financial Economist and Long Time Investor here. Bad methodology. Capital Markets businesses are really RISKIER than Brokerages generally by virtue of their operations depending on fluctuating flows of deals and tying up own funds in them. Capital Markets firms have no insurance. Brokerages have SIPC coverage for customer accounts. Sometimes a business can be both, look at the status of your accounts carefully when in doubt.
CTM
  |     |   162 posts since 2010
I rarely take other posters to task, but this is an example of where a little moderation of the forum would go a long way.

According to MacroAxis (as linked by alan1) ...

Three of the NRSROs (Nationally Recognized Statistical Rating Organization) are wrong with an affirmed "A" rating (or better).

If you are moving your money, don't move it to ...

JP Morgan Chase, as they have a 49% chance of going bankrupt.
Bank of America / Merrill, as they have a 48% chance of going bankrupt.
Morgan Stanley / E*Trade, as they have a 48% chance of going bankrupt.
Interactive Brokers (a huge clearing broker), as they have a 43% chance of going bankrupt.

And, in a call from 2014, MacroAxis was confident that Sony had a 78% chance of going bankrupt in 2 years.
beecia
  |     |   20 posts since 2019
I just signed up with Schwab, which will soon merge with TD Ameritrade.
Is anyone seriously going to leave them based on this news?

Is Merrill Edge any safer per MacroAxis?
CTM
  |     |   162 posts since 2010
First, the original post is not news.

No one is leaving Schwab because of some joke of a rating system devised by MacroAxis (IMHO). Does anyone believe the 7th largest financial institution and one of the "Big 4" brokerages has an ~ 50% chance of bankruptcy in the next two years? What about Chase and B of A, the 1st and 2nd largest banks? According to MacroAxis, they also have an ~ 50% chance of bankruptcy in the next two years.

This is why just a little moderation of the forum would be a good thing.
beecia
  |     |   20 posts since 2019
Thank you, CTM! Much appreciated.
twinlabs
  |     |   27 posts since 2022
Well, no one expected Bear Stearns or Lehman Bros to go belly up either back in '08/'09
Infinityy
  |     |   79 posts since 2020
Brokerages aren’t like banks, in which uninsured depositors face a real risk of loss in the event of insolvency.

Every brokerage is legally required to separate its clients’ assets from the brokerage’s own assets. In the event of a bankruptcy, 100% of your assets will be transferred to another brokerage firm.
me1004
  |     |   1,109 posts since 2010
Big doesn't mean impervious to bankruptcy. Have you already forgotten about Lehman Bros. bankruptcy, and others, in the 2008 recession?
CTM
  |     |   162 posts since 2010
No, no one has forgotten about Lehman, Long Term Capital Management, Berine or many others. One again, these types of posts about Schwab = Lehman (et. al.) are from the alternate reality.

Schwab is a retail broker. Not an investment bank. Not an over leveraged commodity trader. Not a ponzi scheme.

Read and understand alan1 and Infinityy's posts.

One more thing to ponder, Schwab bought TD Ameritrade's brokerage assets. The FTC, SEC, FDIC, 50 state attorneys general and every other alphabet soup agency in the US and Canada approved the merger. This group had access to material non-public information related to the merger. I find it amusing that Macro Axis, a shop (I believe) smaller than a typical Schwab office, with access to only public information and "social sentiment", can determine the the "Probability of Bankruptcy" for huge firms like Schwab, Chase and B of A.

And, for good measure ... Sony is still in business!


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