stock market was up today...

#13,851
#13,851
red butler said:
Did they really take their eye off the ball... or is it possible that all banks are in the same situation? From what I've seen, the main driver for SVB's failure is it took massive losses in US Treasuries. US Treasuries are supposed to be the lowest risk investment you can possibly make. All the banks that bought treasuries during ZIRP are going to take massive losses if they can't hold until maturity. It appears to me the reason SVB went first is because of the nature of their clientele. While I enjoy seeing a woke bank fail... I'm not sure there was much the executives could do.
Click to expand...

Banks are levered at the Yang right now. All of them have liquidity problems.
 
#13,852
#13,852
red butler said:
Did they really take their eye off the ball... or is it possible that all banks are in the same situation? From what I've seen, the main driver for SVB's failure is it took massive losses in US Treasuries. US Treasuries are supposed to be the lowest risk investment you can possibly make. All the banks that bought treasuries during ZIRP are going to take massive losses if they can't hold until maturity. It appears to me the reason SVB went first is because of the nature of their clientele. While I enjoy seeing a woke bank fail... I'm not sure there was much the executives could do.
Click to expand...

The root cause of the SVB bank failure was poorly managing their risk exposure. They bought over the last year a bunch of govt bonds and mortgage backed securities, both tied to interest rates, with nothing to hedge against the inevitable interest rate increases that have happened over the last year.

They didn’t manage their risk and liquidity properly. In addition to their unfocused management, look also at their board of directors to understand how this could have happened.
 
  • Like
Reactions: marcusluvsvols and NorthDallas40
#13,854
#13,854
DC_Vol said:
The root cause of the SVB bank failure was poorly managing their risk exposure. They bought over the last year a bunch of govt bonds and mortgage backed securities, both tied to interest rates, with nothing to hedge against the inevitable interest rate increases that have happened over the last year.

They didn’t manage their risk and liquidity properly. In addition to their unfocused management, look also at their board of directors to understand how this could have happened.
Click to expand...
What should they have used to hedge against the interest rate increases?
 
  • Like
Reactions: marcusluvsvols
#13,855
#13,855
Biden And Schumer Took Money From Silicon Valley Bank Affiliates Before Company Imploded

Individuals and political action committees associated with defunct financial institution Silicon Valley Bank have donated extensively to leading politicians.

Federal election data compiled by Open Secrets indicates that Sen. Mark Warner (D-VA) received $8,300 from Silicon Valley Bank affiliates, including $5,800 from individuals and $2,500 from the company’s political action committee during the 2022 midterm election cycle. Senate Majority Leader Chuck Schumer (D-NY) also received $5,800 directly from Silicon Valley Bank CEO Greg Becker, the maximum allowable individual contribution, according to more data from Open Secrets.

Biden And Schumer Took Money From Silicon Valley Bank Affiliates Before Company Imploded | The Daily Wire
 
#13,856
#13,856
GroverCleveland said:
Not if significant members of executive and management leadership were distracted by and focused on crap like that instead of running business properly.

Plenty of businesses have gone under when they failed to keep the main thing the main thing.
Click to expand...

They were more concerned about hiring virtue signaling, stylish wokesters instead of competent, hard working bankers.

Berkshire-Hathaway takes an opposite approach. They don’t do feel good at their corporate headquarters. Their website is vanilla and looks like it’s 2003. The building in downtown Omaha is something that would get pulled down as not being attractive enough in most large cities. When they hire executives, if the most qualified individual is a straight, white guy it doesn’t matter. All they do is focus on growing capital and shareholder wealth.

BFFB41BB-8E69-4DBB-A490-941B69BAD08E.jpeg
 
  • Like
Reactions: marcusluvsvols, SpaceCoastVol, VolStrom and 1 other person
#13,860
#13,860
Kevin O’Leary grilled on why he kept money at SVB if management were ‘idiots’

“Shark Tank” star Kevin O’Leary faced a grilling Tuesday night for allowing his companies to do business with Silicon Valley Bank – despite repeatedly referring to doomed firm’s management as “idiots” this week.

During an appearance on Fox News Channel’s “Hannity,” O’Leary admitted that “many companies” in his private equity portfolio had deposits in SVB prior to its collapse.

That included the crypto firm Circle, which had a whopping $3 billion tied up in the bank.

Kevin O'Leary grilled on why he kept money at SVB
 
  • Like
Reactions: marcusluvsvols
#13,861
#13,861
NorthDallas40 said:
Kept liquidity on hand to cover a short term run (this is one of the stress test models) instead of buying more depreciating long term maturing assets to juice their profits.
Click to expand...
The majority of the long term assets were bought at the height of the venture capital tech bubble in 2020/2021. Remember, the Fed was still telling everyone there was not inflation risk or worst case it was transitory. As the bubble deflated, they tried to increase liquidity by selling off the depreciating assets at a loss. But that just fueled the bank run. I just don't think any of the other banks are any better off. SVB just got hit first because the tech VC bubble was the biggest bubble and that's their clientele.
 
#13,863
#13,863
red butler said:
The majority of the long term assets were bought at the height of the venture capital tech bubble in 2020/2021. Remember, the Fed was still telling everyone there was not inflation risk or worst case it was transitory. As the bubble deflated, they tried to increase liquidity by selling off the depreciating assets at a loss. But that just fueled the bank run. I just don't think any of the other banks are any better off. SVB just got hit first because the tech VC bubble was the biggest bubble and that's their clientele.
Click to expand...
There has been lots of reporting that SVB was over weighted in long bond positions. Additionally they had no Chief risk officer on the payroll for over a year whose only focus is navigating this landscape. While I’m sure all investors in gov bonds have some exposure it’s fairly widely accepted SVB went full retard on the situation.
 
#13,864
#13,864
red butler said:
I don't know why anybody would by a 20 year bond at low interest. That never made sense to me. Are banks limited on what they can invest in though?
Click to expand...
Treasuries are given preferential treatment by the regulators on risk and require less liquidity held to hedge their investment. Since the regulators are the freaking government they of course want people to buy the governments debt. That doesn’t absolve the bank from being smart in what maturity of bonds they should buy however.
 
  • Like
Reactions: marcusluvsvols
#13,865
#13,865
NorthDallas40 said:
Treasuries are given preferential treatment by the regulators on risk and require less liquidity held to hedge their investment. Since the regulators are the freaking government they of course want people to buy the governments debt. That doesn’t absolve the bank from being smart in what maturity of bonds they should buy however.
Click to expand...
I don't disagree on the bolded and I really don't want to defend a bank (I loathe the fractional reserve banking system). I just think it's a red herring to paint the executives as idiots, when the issue is likely systemic.
 
  • Like
Reactions: marcusluvsvols
#13,866
#13,866
red butler said:
I don't disagree on the bolded and I really don't want to defend a bank (I loathe the fractional reserve banking system). I just think it's a red herring to paint the executives as idiots, when the issue is likely systemic.
Click to expand...
Agree to disagree I guess. There are indeed systemic pressures on all banks. SVB appears to have chosen poorly in how to deal with them.
 
  • Like
Reactions: marcusluvsvols, 85SugarVol and DC_Vol
#13,868
#13,868
red butler said:
Did they really take their eye off the ball... or is it possible that all banks are in the same situation? From what I've seen, the main driver for SVB's failure is it took massive losses in US Treasuries. US Treasuries are supposed to be the lowest risk investment you can possibly make. All the banks that bought treasuries during ZIRP are going to take massive losses if they can't hold until maturity. It appears to me the reason SVB went first is because of the nature of their clientele. While I enjoy seeing a woke bank fail... I'm not sure there was much the executives could do.
Click to expand...
No.

They took their eye off the ball. They were oblivious to what was unfolding before them in real time.

What the hell were they looking at?
 
  • Like
Reactions: marcusluvsvols
#13,870
#13,870
85SugarVol said:
No.

They took their eye off the ball. They were oblivious to what was unfolding before them in real time.

What the hell were they looking at?
Click to expand...
The same thing all the other banks were looking at. The federal reserve suppressing interest rates while telling everyone inflation was non-existent, then transitory, then out of control so we have to jack up interest rates.
 
  • Like
Reactions: marcusluvsvols
#13,873
#13,873
red butler said:
As did Signature Bank and possibly Credit Suisse. We'll see how many more as this unfolds.
Click to expand...
So go read up on Credit Suisse a bit. It’s been circling the drain for about 15 years now. Not a very good example honestly. SVB doubled in size almost in a little over a year. Oversight clearly didn’t keep up with growth.
 
  • Like
Reactions: marcusluvsvols
New posts
You must log in or register to reply here.

VN Store



Back
Top