SVB is Now In the Hands of the FDIC

[Weather Man]

Crypto -- A bond like asset that pays nothing backed by nothing = Rat Poison

 

[Klaus]

it would not surprise me if fed cuts rates next week.

they will have to take some sort of emergency action.

the good news is that eggs are about to get cheaper. The bad news is that you will not be able to afford them because your company cannot make payroll due to systematic bank failure.

voters are not very receptive to this.

 

[BlckBox04]

this whole deal is a lot more serious than people are understanding

 

[tistan]

it would not surprise me if fed cuts rates next week.

they will have to take some sort of emergency action.

the good news is that eggs are about to get cheaper. The bad news is that you will not be able to afford them because your company cannot make payroll due to systematic bank failure.

voters are not very receptive to this.

That is okay the voting machines don't give a ****.

 

[Klaus]

...

 

[tistan]

Will there be a panic at other banks? As soon as fear of losing more than the $250k insurance starts to build, I can't help but think people will at least pull money to diversify into more stable banks.

 

[MG0h3]

I will shut up after this one but:

as soon as you understand the concept of duration you will realize that you are long duration across your portfolio.

every asset has duration. every single one.

thumbnail explanation:

the less cash flow an asset generates during its life the more duration

and

the longer the hold the more duration.

so

if you hold a stock that does not pay a dividend you have a shitload of duration. A tiny move in cash rates results in huge fluctuations in value.

this is why tech stocks and bitcoin were destroyed by the move in fed funds. they are perpetual securities with no cash flow.

similarly as rates fall these assets will increase in value.

to contrast a short dated security that pays a lot of CF will not be affected by moved in fed funds.

what has the shortest maturity and greatest cash flow of all? cash.

similarly what performs the worst as rates are falling? cash

once you truly understand duration you will realize the only actual risk you have is duration risk.

go on youtube and search for "bond duration" to learn more.

Great explanation. I feel even better about having @65% in equities paying @9% dividend at my purchase price last year.


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[MG0h3]

it would not surprise me if fed cuts rates next week.

they will have to take some sort of emergency action.

the good news is that eggs are about to get cheaper. The bad news is that you will not be able to afford them because your company cannot make payroll due to systematic bank failure.

voters are not very receptive to this.

I’m still betting they won’t.

Powell has been so adamant about seeing certain metrics over at least a full quarter before hikes stop, then maintaining high rates for as long as it takes until they hit targets for CPI, unemployment, etc. for at least a quarter or two.

Part of my bet against any cuts in the immediate future is based on my belief that the FED feels it has some sort of a reputation to maintain. “Can’t cut rates to save a bank and some millionaires!” While this may cascade and be the event that we look back at as the first true sign of impending doom, FED also won’t typically react to micro events. But who knows. This could be the sign of a systemic fault again.

Only thing I’m not taking into account is LGBTQ.

Is SVB itself Trans? If so, I’d lean towards rate cuts and Bank of Courage award.


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[q6543]

I have been working through understanding all of this yesterday.

“TECH BUBBLE 2.0”
Unfortunately I have to think this is it now.

If the FED really wanted to kick off a big recession, they hit the perfect target.

Contagion, knock on effects… it’s all here.

 

[Klaus]

I’m still betting they won’t.

Powell has been so adamant about seeing certain metrics over at least a full quarter before hikes stop, then maintaining high rates for as long as it takes until they hit targets for CPI, unemployment, etc. for at least a quarter or two.

Part of my bet against any cuts in the immediate future is based on my belief that the FED feels it has some sort of a reputation to maintain. “Can’t cut rates to save a bank and some millionaires!” While this may cascade and be the event that we look back at as the first true sign of impending doom, FED also won’t typically react to micro events. But who knows. This could be the sign of a systemic fault again.

Only thing I’m not taking into account is LGBTQ.

Is SVB itself Trans? If so, I’d lean towards rate cuts and Bank of Courage award.


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The current interest rate cycle ended on Friday 9am. The fed is done raising rates.

the 2yr fell 50bps yesterday. this is the biggest move since 2008 and the 4th largest on record.

the only question is when the fed begins to cut, which I expect will happen sooner than most expect. CPI rolled over 6 months ago. The fed is way behind the cycle.

 

[VegasMichael]

yesterday was battle stations for me.

SVB was big in many markets that people did not realize.

First Republic and Pac West are in a similar position.

The cliff note version is that they were long duration and did not have to mark their book until now. They had more liabilities than assets.

This applies to plenty of other banks and insurance companies.

Let the games begin.

I read there's about 20 or so in positions similar to SVIB.
The big boys like B of A, Wells Fargo, Citi, JP Morgan, etc. seem to be pretty well-capitalized though. Be interesting to see what Powell does.

 

[Weather Man]

The current interest rate cycle ended on Friday 9am. The fed is done raising rates.

the 2yr fell 50bps yesterday. this is the biggest move since 2008 and the 4th largest on record.

the only question is when the fed begins to cut, which I expect will happen sooner than most expect. CPI rolled over 6 months ago. The fed is way behind the cycle.

If the Fed cuts the market is gonna roar.

 

[Klaus]

If the Fed cuts the market is gonna roar.

the economy is about to hit a wall so it will be short lived.

the reason the fed will be cutting is vecause the economy is hitting a wall.

 

[Klaus]

I read there's about 20 or so in positions similar to SVIB.
The big boys like B of A, Wells Fargo, Citi, JP Morgan, etc. seem to be pretty well-capitalized though. Be interesting to see what Powell does.

BofA is ****ed.

As a percent of market cap their unrealized losses are second highest behind SVB. they will need equity.

but the fed is not going to let them fail.

 

[Weather Man]

the economy is about to hit a wall so it will be short lived.

the reason the fed will be cutting is because the economy is hitting a wall.

I agree with you, but the unemployment situation is a head scratcher.

 

[Weather Man]

BofA is ****ed.

As a percent of market cap their unrealized losses are second highest behind SVB. they will need equity.

but the fed is not going to let them fail.

If B o A needs helps, then the stress tests are laughable.

 

[VegasMichael]

BofA is ****ed.

As a percent of market cap their unrealized losses are second highest behind SVB. they will need equity.

but the fed is not going to let them fail.

But won't they make up for that by getting more equity from Nervous Nellies transferring their funds from smaller institutions to big ones that are too big to fail like B of A?

 

[MG0h3]

The current interest rate cycle ended on Friday 9am. The fed is done raising rates.

the 2yr fell 50bps yesterday. this is the biggest move since 2008 and the 4th largest on record.

the only question is when the fed begins to cut, which I expect will happen sooner than most expect. CPI rolled over 6 months ago. The fed is way behind the cycle.

They’re always behind the cycle. Not usually measured in single digit months either.


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[MG0h3]

If B o A needs helps, then the stress tests are laughable.

I recall the BofA CEO or Pres stating they were increasing liquid assets mid year 22’ in anticipation of increased consumer defaults.

Maybe that was their hint hint to the Treasury to get the bailout checks ready again lol.




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[Klaus]

But won't they make up for that by getting more equity from Nervous Nellies transferring their funds from smaller institutions to big ones that are too big to fail like B of A?

good point. yes.