Silicon Valley Bank Collapses, Causes Concern Within Tech Industry, Roku Divulges its SVB Investments

[John Ransom]

First Republic Bank and PacWest Bancorp cratered

Couple of things on this just for everyone's SA.
1. JPMorgan opened a 70bil credit facility to first republic.Link
2. The banks are going to crater stock wise almost regardless if they are not jpm/boa/wells. The reason is: if they hit the discount window, they start a one year loan. They have to then go on the market and sell equity (stock) to make up the whole in their balance sheet unless the fed lowers rates. So if you know a company you hold stock in is being forced to make another offering your goign to get out if you can.

 

[Fresch]

Liquid cash flow problem, plenty of assets.

 

[lopoetve]

I should have been a bit more clear, my post was partially intended to be funny, as I was referencing the MBS specifically because they had the former Lehman CFO in their C-suite.

In any case, yes, I understand the government backing, but there was duration risk, clearly. Bad timing to go heavy into these kinds of assets before the interest rates ripped (obviously , which is an indication that they underestimated the amount of tightening that would go on, although to be fair, they're not alone in that). Obviously, the present value of bonds drops as the interest rates increase, but despite the fact we know this, it's definitely weird to see a bank getting absolutely crushed partially due to having to take a write-down on Treasuries and MBS they had to sell at a loss to cover a short term cash-crunch. I don't think anyone had that on their bingo card for 2023, which is also probably why everyone's freaked out about the banking sector again.

Gotcha, and agreed >_<

Having to spend a LOT of time correcting family members who don't understand the details (and one who's just a low-level accountant) that I keep reading "serious" into facetious comments. Duration risk is the right term

You're dead on with the analysis though - it's literally hilarious in some ways, as this was them ~hedging~ high-risk for the low-risk option... and getting burned in a totally new and unique way.

 

[DukenukemX]

S&P futures went up more than 100 handles earlier on and now stands around 85 handles because of the recent "good" news. Let see what the Fed will do the week after next (Mar 22) when the CPI for Feb is published on Mar 14. If it prints hot, my bet is that the Fed will have no choice but to stay on course to fight inflation where this impacts almost everyone. The Fed should also realizes that by guaranteeing all the depositors (via printed money) and if the depositors decide to use the returned uninsured money, this will add into the inflation. The money (created out of thin air) comes from the discount window rate provided by the Federal Reserve Bank of New York.

If the Fed does give them all their money, then they prove that the rules do change... if you have a lot of money.

incorrect, the large portion of their customer base was start up's/small business.

With enough money to go well beyond the $250,000 limit. Maybe next time they won't put their money where all the large big boy corporations also put their money.

 

[cjcox]

Wonder where Mattress Mike stores his money....??

 

[Red Falcon]

Wonder where Mattress Mike stores his money....??

 

[socK]

That's why the USA is only experiencing massive inflation under Biden's administration.
Ok.

have you forgotten that the rest of the world exists

 

[Red Falcon]

have you forgotten that the rest of the world exists

It does, that's why the rest of the world is currently feeling the ripple effects of this bank failing.
Globalism does not work.

Also, way to dodge my question.

 

[FrgMstr]

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