Edaw
Banne̶d
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I agree with
Sanrith Descartes
, it'd be nice to get an opinion from people here what is going on so we know what is good info or not.No idea what is bullshit or not.
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Investing General Discussion
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Guest, it's time once again for the massively important and exciting FoH Asshat Tournament!
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Sanrith Descartes
, it'd be nice to get an opinion from people here what is going on so we know what is good info or not.No idea what is bullshit or not.
Asshat wormie
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I agree with
No idea what is bullshit or not.
View attachment 462778
I don’t understand this. Who doesn’t know that their deposits are uninsured above $250k?
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Furry
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It seems they were dumping lots of money into MBS, basically betting on interest rates being low forever. With interest rates going up, smart people with huge piles of cash in the bank noticed this imbalance and started a bank run to safer places, forcing SVIB to fire sale those MBS below what it paid. FDIC steps in, as they realize SVIB will go to 0 $ and they'll be on the hook for the insured people if they don't.
It seems from everything we've seen that FDIC acted pretty fast. Some rich people will lose a % of their money, but I don't think this will be all that horrible a blow in the grander scheme of things, but we're likely to see similar examples as time goes on. There is a shitload of MBS out there.
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Lambourne
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Everyone knows this but finding a place to put hundreds of million dollars for a large business isn't the same as parking $50k in personal savings, there is no way to park that much money 100% risk free. Best you can do is spread it around. I think the point Ackmann is making is that even if act sensibly by spreaading your business accounts over multiple banks, any one bank failing can cause a share of the business' millions to be at risk (or at best, become temporarily inaccessible) causing businesses to move all their money to the large TBTF banks least at risk of collapse, causing the very collapse of smaller banks they want to avoid.
If you want my tinfoil hat theory, it is that this is a good way to pave the way for a "permanent solution" to banks failing, that being CBDCs.
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Blazin
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"Betting on" Da fuq you on about
Furry
? Do you not know how financial institutions work? People are talking about MBS rather than the majority being treasuries because you get your jollies off thinking it's 2008 and you want to show how in the know you are because you totally know some financial lingo you heard about in a youtube video. SVB did not make some crazy ass bet that went sideways. What they did wrong was to be too close to net debt, which for a bank becomes a tightrope, especially if holding any kind of duration. Management fucked up, this is not a systemic issue. Human fear/bs contagion is the only real threat, FDR was right in that regard. This bank could have easily been bailed out by a larger player, it only wasn't so far because of greed. It's far cheaper to buy assets than companies.
Spackman is being hyperbolic, but he isn't wrong the public views banks in a general sense, putting little thought into the strength of one vs the other. Regional banks are going to take a reputational hit here because they can fail too easily. It's unfair to assume they are all in the same financial position, this whole thing is ironic because there is current heat in washington over regulation of mega banks vs regionals. Regionals simply can't operate under the same rule set but they are also more vulnerable and so far regulators are struggling to find the appropriate way to handle it outside of two entirely separate systems of rules
Furry
? Do you not know how financial institutions work? People are talking about MBS rather than the majority being treasuries because you get your jollies off thinking it's 2008 and you want to show how in the know you are because you totally know some financial lingo you heard about in a youtube video. SVB did not make some crazy ass bet that went sideways. What they did wrong was to be too close to net debt, which for a bank becomes a tightrope, especially if holding any kind of duration. Management fucked up, this is not a systemic issue. Human fear/bs contagion is the only real threat, FDR was right in that regard. This bank could have easily been bailed out by a larger player, it only wasn't so far because of greed. It's far cheaper to buy assets than companies. Spackman is being hyperbolic, but he isn't wrong the public views banks in a general sense, putting little thought into the strength of one vs the other. Regional banks are going to take a reputational hit here because they can fail too easily. It's unfair to assume they are all in the same financial position, this whole thing is ironic because there is current heat in washington over regulation of mega banks vs regionals. Regionals simply can't operate under the same rule set but they are also more vulnerable and so far regulators are struggling to find the appropriate way to handle it outside of two entirely separate systems of rules
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Furry
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You're welcome"Betting on" Da fuq you on about
Spackman is being hyperbolic, but he isn't wrong the public views banks in a general sense, putting little thought into the strength of one vs the other. Regional banks are going to take a reputational hit here because they can fail too easily. It's unfair to assume they are all in the same financial position, this whole thing is ironic because there is current heat in washington over regulation of mega banks vs regionals. Regionals simply can't operate under the same rule set but they are also more vulnerable and so far regulators are struggling to find the appropriate way to handle it outside of two entirely separate systems of rules
Sanrith Descartes
.And this is obviously nothing like 2008, never said that it was. MBS are losing some value cause their interest is so low, so banks don't quite want to pay face value. That's nothing like the shitstorm that happened in 2008.
ShakyJake
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A YouTuber I watch daily, who I have a lot of respect for and really don't believe he's blowing smoke up your ass, has suggested that the best option trading strategy is a straddle but you do it ITM and with a year of time. That's expensive as hell though, doing that with an index like QQQ or SPY. But the odds of either of these just trading sideways for a whole year is highly unlikely.
What I'm curious about is if one can use technical analysis to determine when the best time to enter a straddle position. For example, some of these bank stocks right now --and I might try this with WFC -- it's extremely beaten up and is due for a snap back more than likely, OR more downside. you don't know. As long as the IV isn't crazy high on the CALL or PUT, this seems like it would be a no-lose scenario.
Blazin
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SVB is directly tied to VC/IPO machine. Post COVID the rise in capital was intense. SVB receives a 200% increase in deposits. These deposits are received at the same time that interest rates are super low. SVB doesn't "Make a bet" it does the safest possible thing that it can do, and purchases government risk free debt. It's easy to say herp derp didn't they know interest rates wouldn't stay low forever?! Of course they knew that, they only have so many choices available to them. Banks hate idle cash. Idle cash is a primary mechanism of bank regulation. Banks can adjust to interest rate changes if they are slow enough. In this case we just had the 2 yr treasury make one of the largest moves in all of their history. Now this is what stress testing is about. However small banks are not subject to the same strict guidelines the mega are in regards to outlier events.
So now with huge balloon of new money, 12 months ago rates begin to rise and rapidly so. This puts pressure on the bank. This bank unlike consumer facing banks has large depositors, who began to look at those juicy rates that could be had elsewhere and began to see outflow of deposits. This began to force the bank to sell holdings to increase cash but those "risk free" holdings are discounted against higher rates. The bank attempt to raise cash to offset balance sheet loss. So far none of this is a major concern until we add nitrous of contagion. Some VCs started telling their clients to move their money out as the rumor mill spreads more and more begin to do so. Now what was a manageable problem becomes untenable. As some clients holding a several hundred mill a piece begin withdrawing funds.
Now the Fed is there for the bank to get liquidity, it simply need go to the discount window say here is my collateral can I have some cash and the fed would say "sure!" Problem is the outflow couldn't be stemmed in time to right the situation.
This is a double edge sword, if we do what Spackman wants then it incentives banks to take more risk because of backstops which is weighed against firms failing for no other reason than they are being stressed. Our goal with any healthy capitalistic system is have malinvestment punished and good investment rewarded. What the Fed is doing with interest rates begins to stress out entire financial system, that is what any CHANGE does. The weakest links are going to have problems. This bank needed to take a less profitable more conservative position. It didn't and was burned for it.
Profiteers are ratcheting their propaganda to 10 in an attempt to leverage the situation, not surprising that is what profiteers do. I believe certain individuals who understand this entire dynamic more intimately than me saw the blood in the water and used their influence to push it over the edge. Several major players could have stopped this entire thing had they chose to, made a choice not to. I'm sure there are lots of reasons for why, just know that this bank is not a "normal" bank, there is a lot of power and ego in this sphere and more at play then what will ever be known to us. But take note as the same old names pop up.
So now with huge balloon of new money, 12 months ago rates begin to rise and rapidly so. This puts pressure on the bank. This bank unlike consumer facing banks has large depositors, who began to look at those juicy rates that could be had elsewhere and began to see outflow of deposits. This began to force the bank to sell holdings to increase cash but those "risk free" holdings are discounted against higher rates. The bank attempt to raise cash to offset balance sheet loss. So far none of this is a major concern until we add nitrous of contagion. Some VCs started telling their clients to move their money out as the rumor mill spreads more and more begin to do so. Now what was a manageable problem becomes untenable. As some clients holding a several hundred mill a piece begin withdrawing funds.
Now the Fed is there for the bank to get liquidity, it simply need go to the discount window say here is my collateral can I have some cash and the fed would say "sure!" Problem is the outflow couldn't be stemmed in time to right the situation.
This is a double edge sword, if we do what Spackman wants then it incentives banks to take more risk because of backstops which is weighed against firms failing for no other reason than they are being stressed. Our goal with any healthy capitalistic system is have malinvestment punished and good investment rewarded. What the Fed is doing with interest rates begins to stress out entire financial system, that is what any CHANGE does. The weakest links are going to have problems. This bank needed to take a less profitable more conservative position. It didn't and was burned for it.
Profiteers are ratcheting their propaganda to 10 in an attempt to leverage the situation, not surprising that is what profiteers do. I believe certain individuals who understand this entire dynamic more intimately than me saw the blood in the water and used their influence to push it over the edge. Several major players could have stopped this entire thing had they chose to, made a choice not to. I'm sure there are lots of reasons for why, just know that this bank is not a "normal" bank, there is a lot of power and ego in this sphere and more at play then what will ever be known to us. But take note as the same old names pop up.
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Blazin
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I am very curious to the details of the HTM portfolio not just being put up as collateral with the Fed. The size of the "paper" loss of their holdings vs the capital position was certainly not something new. Talking about a stock that was down 50% before last week. When you are stuck holding mountains of cheap rate paper when rates go up 300-400% in one year, you're going to be in for a hard time, but there was/is absolutely nothing wrong with the assets. I will be very surprised if a single dollar is lost by any depositor, which is why the sky is falling people carrying on about FDIC insurance limits doesn't make much sense. The money wasn't lost, still the main part of this that I think is missed in all the silliness.
I'm not a bank regulator and doesn't interest me enough to get too deep into it but just spitballing the idea that HTM portfolios being marked to market is a little bit contradictory. Banks shouldn't want to be in the business of timing markets. They don't hold a bond for the same reason a speculator might, it's market value at any given moment is largely irrelevant. The credit risk of being paid is what matters. The imbalance of purchasing long duration assets against completely liquid liabilities (the deposits) is why our banking system is fundamentally flawed without backstops. The functioning of the system requires a power like the Fed to exist to backstop the process to avoid the flight of that liquid money. No matter what we do, the system is fucked if depositors fear for their money. Full Stop.
edit..Some money was "lost" by them not only marking to market but actually realizing the loss on some of the HTM. This seems to me to be the biggest mgmt fuck up, and them not seeing that a capital raise was a bad fucking idea. THe sequence of events doesn't make sense, which is why there is more to this story then we know so far. I'm talking out my ass, in that I know the Fed is there for them to speak to but I have no idea in real world application the dynamics involved to call the Fed and say "hey umm we fucked up" my life experience normally has taught me it's hubris, people always think they can somehow pull the rabbit out of the hat.
I'm not a bank regulator and doesn't interest me enough to get too deep into it but just spitballing the idea that HTM portfolios being marked to market is a little bit contradictory. Banks shouldn't want to be in the business of timing markets. They don't hold a bond for the same reason a speculator might, it's market value at any given moment is largely irrelevant. The credit risk of being paid is what matters. The imbalance of purchasing long duration assets against completely liquid liabilities (the deposits) is why our banking system is fundamentally flawed without backstops. The functioning of the system requires a power like the Fed to exist to backstop the process to avoid the flight of that liquid money. No matter what we do, the system is fucked if depositors fear for their money. Full Stop.
edit..Some money was "lost" by them not only marking to market but actually realizing the loss on some of the HTM. This seems to me to be the biggest mgmt fuck up, and them not seeing that a capital raise was a bad fucking idea. THe sequence of events doesn't make sense, which is why there is more to this story then we know so far. I'm talking out my ass, in that I know the Fed is there for them to speak to but I have no idea in real world application the dynamics involved to call the Fed and say "hey umm we fucked up" my life experience normally has taught me it's hubris, people always think they can somehow pull the rabbit out of the hat.
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Friend of mine (guild leader back during WOTLK) has been doing this with KO stock and making a shitload of money. Making >20% returns every two weeks. Really really insane.
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The government wouldn't just be handing out money in this case, it's not a bailout. It would just be taking control of the underlying assets to ensure that most depositors can get most of their money back. The management/board/shareholders of the bank would still be SoL.
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Blazin
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What does making 20% mean? I make infinity return on every put I sell that expires worthless.
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Sanrith Descartes
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I believe
Gravel
is referring to calls for the gubmint to make whole "all" accounts and not just to the cap of $250k. And yes there are already of lot of rich people calling for the other rich people who chose to put millions into accounts that aren't insured to be covered because they are above the cap.
Sanrith Descartes
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Sanrith Descartes
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A MBS is "normally" a safe and solid investment instrument. 2007/08 was an aberration brought about by greed and corruption.You're welcome
And this is obviously nothing like 2008, never said that it was. MBS are losing some value cause their interest is so low, so banks don't quite want to pay face value. That's nothing like the shitstorm that happened in 2008.
There is zero wrong with a bank owning MBS for long term interest. Combined with treasuries (which they had in abundance) this is how banks "should" function. As
Blazin
mentioned, management for some unknown reason cut their operating funds too close and as interest rates ballooned their continued borrowing costs continued to explode while their long term income from bonds/MBS was static.Investors saw they we getting sub-par returns compared to competitive banks and they left. SVIB had to borrow more to cover withdraws and they ended up in a downward spiral. The selling of bonds for a big loss to gain liquidity spooked too many depositors and they began to flee in droves. Death spiral accelerated.
Edit: Just saw Blazin's explanation after I posted this. His is a lot better than mine. This should be of no surprise to anyone.
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Blazin
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Govt normally does too much, not too little. Shareholders NEED to be whipped out. Unless people are currently robbing the coffers which I don't see how with govt already taking over people are going to get their money the question is how long does that take? I would think they are going to move quickly and try to resolve by end of next week. I think the powers that be like to flaunt their power in these type situations. Compared to FED intervention with COVID this is such a nothing burger we really need some other saying than nothing burger, a drop in the ocean. The Fed has a 6T balance sheet this is a rounding error.I believe
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20% of what's reserved in margin for the spread, from what I understand. That is the point at which I start getting lost so maybe it's all bullshit but this guy went from nearly broke, surviving off a shitty dog-walking business to having nearly infinite money and effectively retired in the past 3 years so idk. He pretty much just does these KO calendar spreads and SPY puts and has just made unreal money.