Silicon Valley Bank SIVB - $270 to $30 in 48 hours

[disneysteve]

I’ve been hearing about Credit Suisse issues for a long time now.

I haven’t read in detail but the issues affecting them are totally unrelated to what happened at SVB. The fact that they’re occurring at the same time is an unfortunate coincidence.

 

[rodi]

I'm still convinced this will shake out with a lot less drama than the 2008 subprime mess... but the difference there is I was still working/acquiring. It does feel different in my decumulation phase.

I just remind myself that I have more assets than when I retired and I'll be ok, regardless. My quarterly check to see if I need to rebalance is at the end of the month... will have to see if this moves things enough to cause some reallocations.

 

[audreyh1]

I haven’t read in detail but the issues affecting them are totally unrelated to what happened at SVB. The fact that they’re occurring at the same time is an unfortunate coincidence.

Sure. And the Credit Suisse issues have been generally known for a long time. Not a surprise to many like SVB. These kind of market panics will pull anything down for a while.

I'm still convinced this will shake out with a lot less drama than the 2008 subprime mess... but the difference there is I was still working/acquiring. It does feel different in my decumulation phase.

I just remind myself that I have more assets than when I retired and I'll be ok, regardless. My quarterly check to see if I need to rebalance is at the end of the month... will have to see if this moves things enough to cause some reallocations.

I have deposits scattered over a wide variety of accounts and short-term securities and I have made sure that all bank accounts are jointly titled and within FDIC/NCUA limits. So I just sit on my hands.

 

[W2R]

I have deposits scattered over a wide variety of accounts and short-term securities and I have made sure that all bank accounts are jointly titled and within FDIC/NCUA limits. So I just sit on my hands.

Yeah, me too.

That said, I'm a "nervous Nellie" at heart. It's hard for those of us who went through the 2007-2009 mess to just sit back and remain calm rather than screaming "OMG OMG, AAAAAAGH, NOT THIS AGAIN!!!" But really, back in 2007-2009 I did nothing and saw no long term adverse effects on my portfolio. Everything ended up being quite satisfactory.

So, in the very unlikely event that this should turn into another economic crisis, I'll do the same.... absolutely nothing.

Besides, this time I'm better off because I have SS and pension going. In 2007-2009 I was on the verge of retirement but didn't yet have all that in place.

 

[MichaelB]

Sure. And the Credit Suisse issues have been generally known for a long time.

And to top it off, their Chairman‘s name is Lehmann . Talk about bad vibes…

 

[W2R]

And to top it off, their Chairman‘s name is Lehman . Talk about bad vibes…

I had no idea! That's hilarious.

 

[frayne]

Is this really much ado about nothing more than the chickens coming home to roost after more than a decade of cheap money and loose fiscal policies ? Still looks like the Fed. is bailing everybody out so where's the worry ?

 

[Freedom56]

The worry is for small and mid-sized banks. Money will continue to flood into the largest banks. It's happening already. Customers with uninsured money don't want to get wiped out because of a bank failure. They see the "too big to fail banks" as safe havens as they have more liquidity and they are better regulated than smaller banks and that is a fact. A customer with uninsured money is going to choose safety over any past political ideology over regulation.

 

[NW-Bound]

My energy and basic material stocks got hammered today. Alcoa down -12% today.

It looks like the market is pricing in a big world-wide recession.

I am down big today, and turn negative YTD.

 

[GravitySucks]

I’ve been hearing about Credit Suisse issues for a long time now.

Logged into Fido to buy a two year bond today and saw an A rated bond with 19% yield, Clicked through and it was, of course, Credit Suisse.
I always assumed rating agencies kept up on things. Turns out they rate at bond issue and update not very often.

 

[Running_Man]

https://apnews.com/article/signatur...licon-valley-6ad86262d9945675a42d735b66ace4f2

“Former U.S. Rep. Barney Frank said Monday that he believes the state officials behind the action were trying to make an example of Signature Bank in takeover that he said was the wrong move. Despite a wave of withdrawals, the bank’s situation was under control before regulators swooped in, he said.

“This was just a way to tell people, ‘We don’t want you dealing with crypto,’” Frank said in an interview.”

Signature Bank is under criminal investigation running money for drug dealers illegally through crypto on the SEL network that they were forced to close down. They wired money through accounts they knew were in ficticious names.

These bank runs are not twitter fueled runs, they are banks that changed models from lending at higher long term rates and borrowing short term to make money on the margin to get deposits with 0% and buy 2% 30 year bonds and when they went under water they did not need to disclose they were bankrupt. Instead in January and February the CFO and CEO started selling their shares because they knew the bank was in an impossible situation where they would have to offer depositors 4-5 % when their assets were generating 2% and they were margined 3-1 on that. Twitter merely let people see the lies SBV was promoting.

 

[Freedom56]

Goldman Sachs bought the SVB bond portfolio that led to the $1.8 loss. With yields falling, Goldman Sachs is already making money on the deal. They also received a $100M fee for assisting SVB shore up their finances.

https://markets.businessinsider.com...vb-goldman-sachs-bought-bond-portfolio-2023-3

 

[marko]

Yeah, me too.

That said, I'm a "nervous Nellie" at heart. It's hard for those of us who went through the 2007-2009 mess to just sit back and remain calm rather than screaming "OMG OMG, AAAAAAGH, NOT THIS AGAIN!!!":

For me, 2008 ended up giving me great calm in times like this. It taught me to just "don't just do something, stand there"....it all works out in the end.

It wasn't fun going through it, but the 'learning experience' has provided me with a much better perspective on such downturns.

As a result, I saw 2020 as an opportunity and went crazy buying up low hanging fruit.

 

[Sunset]

I woke up late today when market trading was already on the way. Logged into my brokerage account to see my shares of Bunge (BG) jumped up 14% from $91 at close yesterday to $104. What gives?

A quick look on the Web showed that this soybean distributor will replace SIVB in the S&P 500. Buy, buy, buy!

The good news is that I have 200 shares of BG. The bad news is that I already sold 1 April contract at $97.5. So, 1 lot is considered sold and my gain is limited. Dang!

Your contract is safe right now. That pop seems to be settling down.

 

[NW-Bound]

Your contract is safe right now. That pop seems to be settling down.

Yesterday, I looked at the remaining 100 shares of BG, and thought about selling another April option at 105. The option would fetch $4, which means I effectively sell the lot at $109.

But alas, I did not because April 21 is a loong time away, and I was greedy and wanted to wait for the stock to go up some more and maybe I could sell at the strike price of 110.

Nope. When you get greedy, you go empty-handed.

See how greed and fear can keep you from making more money?

 

[jazz4cash]

Maybe it’s just the mismanaged banks so far, but almost any business could be victimized by social media. Look at the meme stock debacle. Stunning how fragile the banking system is. FDIC is designed for regular folks because depositors with more than $250k are too sophisticated to participate in a run<sacasm>. After all they have the resources to work around these issues. I’d like to see various tiers of FDIC up to $1M with stiff premiums for small business owners. It should be OK to restrict withdrawals for 30 days for large business accounts.

 

[captain3d]

I think FDIC has enough money to cover around 1.5% of deposits.

Nothing to worry about then.

 

[pb4uski]

I think FDIC has enough money to cover around 1.5% of deposits.

Nothing to worry about then.

[mod edit]

Deposits have priority over everything else in receivership, so you would have to blow though all a banks assets, including assets backing debtholders and shareholders' equity, plus the 1.5% of FDIC assets before an insured depositor would lose a dime. Plus you have a backstop of the full faith and credit of the United States government

 

[Ready-4-ER-at-14]

Regarding the bank failures and the government stepping in and possible costs ongoing payable in FDIC rate increases:

I find the numbers a bit daunting and needed to do a few calculations to understand the significance of what happens as to how it will affect me.

The first think I asked myself how many dollars worth of CDs are sold in the USA annually? Per a google search I found an article dated may of 2019 that said 154Billion annually.
I used the following search words: how many dollars of bank CDs are sold each year in the United States
Careful of your wording or you get the value of audio CDs.

Assuming current sales are similar a $1 fee per 1000 cd (0.001 a mill) would bring in 154 million.

if each CD sold got 4% annually we would be talking 154billion x 0.04 whic equals 6.16 billion. So it would seem that to raise 6.16 billion for a year for the FDIC it would consume all interest to the investor.

If the entire 154 billion was spent they would have to charge a $1000 FDIC fee for every $1000 cd sold for an entire year.

I hope my math is wrong or the source I found wrong about the annual sales.

I realize banks have other revenue sources such as loans and service fees and such but i don't see much room to take the savings rates lower for savers.

Would FDIC fees tap other income sources of surviving banks?

Please point out the error of my logic or my math as the numbers bother me.

 

[marko]

What am I missing here? The FDIC has guaranteed all deposits of all sizes. So why are 11 banks contributing $20 billion to Federal Republic? Why do that if the Feds have them covered?

As is often the case, I'm sure I'm out in the weeds.

 

[Gumby]

What am I missing here? The FDIC has guaranteed all deposits of all sizes. So why are 11 banks contributing $20 billion to Federal Republic? Why do that if the Feds have them covered?

As is often the case, I'm sure I'm out in the weeds.

Apparently, only for two specific banks SIVB and SBNY (under the "systemic risk exception" to the normal limits) not generally. Although one could be forgiven for believing that there was an implicit guarantee for all banks.

 

[Montecfo]

What am I missing here? The FDIC has guaranteed all deposits of all sizes. So why are 11 banks contributing $20 billion to Federal Republic? Why do that if the Feds have them covered?

As is often the case, I'm sure I'm out in the weeds.

They are trying to keep the bank from failing, so others do not fail.

 

[marko]

Apparently, only for two specific banks SIVB and SBNY (under the "systemic risk exception" to the normal limits) not generally. Although one could be forgiven for believing that there was an implicit guarantee for all banks.

Oh! I thought ALL banks were protected beyond the $250k deposit, essentially all deposits at all banks.

This makes sense now

 

[Gumby]

Oh! I thought ALL banks were protected beyond the $250k deposit, essentially all deposits at all banks.

This makes sense now

Here's an explanation. https://www.yahoo.com/lifestyle/svb-triggers-return-fdics-systemic-050000214.html

 

[Winemaker]

What am I missing here? The FDIC has guaranteed all deposits of all sizes. So why are 11 banks contributing $20 billion to Federal Republic? Why do that if the Feds have them covered?

As is often the case, I'm sure I'm out in the weeds.

The billions put into First Republic are "deposits" to keep FR's ratio in the green. I understand that if the sell their Hold to Maturity portfolio, it the gets marked to market, and that creates a cascading collapse.

I'm sure just about every bank in the country has losses in their HTM portfolio. If a nationwide run on banks materializes, a real SHTF will occur, as I see it.


As an aside, I read that, Peter Thiel, did not take his own advice, and had $50 million in SVB.