https://twitter.com/TheStalwart/status/1633933482664640518 After bankruptcy of Silvergate Bank, yesterday Silicon Valley Bank falling more than 60% in the stock market, JP Morgan, Morgan Stanley and Bank of America plummeting. Bitcoin too. Systemic risk in the world economy, sharp rises in interest rates starting to break things in the economy. In 2008 the same thing happened, chain bank defaults and collapses, as everything is interconnected. Do you think this is it? yes or no? why? https://www.bloomberg.com/news/articles/2023-03-09/bank-stocks-sink-most-in-nearly-three-years-as-sentiment-sours?sref=vuYGislZ
Crypto bros brought down at least one bank lol
Crypto bros had nothing to do with it. SVB is falling for the exact same reason
Guys the recession began a year ago. We are well into it. But we are nowhere near a banking collapse. Primarily bc the Fed Reserve is not dependent on crypto.
Also the major banks are capped to the gills after 08. SIVB maybe should have been considered a more strategically important bank in retrospect
SVB is not insolvent - it's merely illiquid. They might see a bank run but it's not some big systemic risk.
To be fair AIG was bailed out for liquidity reasons. But SVB’s mistakes are unique to SVB and a couple of smaller banks. Concentration of their clients in tech and terrible asset liability management did them in. Since they aren’t a a large bank they don’t have the same capital requirements as a JPM for example and they also don’t have to run the liquidity ratios like LCR and NSFR and the liquidity stress testing that the large banks have to do
Correct, there is a run on SVB for the reasons Bloomberg cites.I well remember AIG. I was convinced it would come back, invested in it when the shares hit bottom and then lost 100% of the investment. Oops.
Not comparable to 2008. This is primarily due to 20% losses in bonds since pandemic in combination with customers ( startups, individuals who need money to fight inflation, layoffs and slowing demand ) drawdown. If companies and individuals fail to pay their debts to the banks then God save us. Next 1 year is going to be really volatile with bias towards downside.
Zoom out
Eh SVB is a very special case.
Those who are saying SVB is an isolated case don’t under how banking system works. This is just a beginning of a huge catastrophic event coming up. It will be mother of 2000 and 2008 crisis.
Untrue. An explainer on what is going on with Silicon Valley Bank: - In 2021 SVB saw a mass influx in deposits, which jumped from $61.76bn at the end of 2019 to $189.20bn at the end of 2021. - As deposits grew, SVB could not grow their loan book fast enough to generate the yield they wanted to see on this capital. As a result, they purchased a large amount (over $80bn!) in mortgage backed securities (MBS) with these deposits for their hold-to-maturity (HTM) portfolio. - 97% of these MBS were 10+ year duration, with a weighted average yield of 1.56%. - The issue is that as the Fed raised interest rates in 2022 and continued to do so through 2023, the value of SVB’s MBS plummeted. This is because investors can now purchase long-duration "risk-free" bonds from the Fed at a 2.5x higher yield. - This is not a liquidity issue as long as SVB maintains their deposits, since these securities will pay out more than they cost eventually. - However, yesterday afternoon, SVB announced that they had sold $21bn of their Available For Sale (AFS) securities at a $1.8bn loss, and were raising another $2.25bn in equity and debt. This came as a surprise to investors, who were under the impression that SVB had enough liquidity to avoid selling their AFS portfolio. (Not my words).
So buy the dip?
After 2020 banks have the infinite money glitch. Mere lack of liquidity will cause a domino affect soon. Go and try taking out just 5k$ cash these days, you’ll be disappointed
Nah only affecting tech and crypto this time. Rest of economy is still hot, hence inflation
Not really.