You are right of course.....Smokie. In any panic there is always collateral damage. There will be some small banks that were WEAK to begin with that will have issues. One thing that people and especially business can and should do right now is to use this little event to evaluate the format for their deposits. I saw one little comment in an article that I posted a day or two ago regarding the best vehicle for deposits....especially for business. That article mentioned MONEY MARKET FUNDS that are required by their charter to ONLY invest in short term US TREASURIES. That is something that I used when I was in business. I held all cash funds in a US TREASURY Money Market fund that allowed check writing. Back in those days Money Market funds were the rage and used much more than now. My concern was having money in a Money Market fund that invested in non-government corporate bonds and other non government securities. I wanted the great interest rates on my money.....but was very paranoid of the lack of FDIC coverage on Money Market funds and the impact of having more money in the banking system than was covered by the FDIC. SO......I had a US TREASURY......"ONLY".....money market fund at Schwab. What is happening now should be an IMMEDIATE WAKE UP CALL......for anyone in business.....large or small. Take some time this week to evaluate your banking services and what guardrails are in place for your money.
CLASSIC......the American way. California Powerball winner purchases $22.5M Hollywood Hills mansion: reports Three-story California mansion reportedly includes a movie theater and infinity pool https://www.foxbusiness.com/money/california-powerball-winner-purchases-hollywood-hills-mansion My COMMENT Obviously this guy won enough to afford this home.....but......he is being sued contesting his win. it will be interesting to look at this story in a few years.
Yeah, we see a lot of banks coming out with releases saying "we are fine, we are in great shape, we are different", and some folks are looking at that and responding with "that's what the last guy said 12 hours before they sunk." They just aren't believing it today and maybe justified in some areas. The SIVB is likely not the only one out there doing dumb things. The whole premise and operation of SIVB is a lost point when panic begins to seep in even though many banks are operating differently and with sound fundamentals. We are just going to be subject to swings and events until we get further down the road in my opinion. "W" touched on that uncertainty factor a few posts back. We now have added a bit more of it than we even had a month or so ago. We need some time and we need some things to become clearer or possibly resolved to a certain point. In this type of environment things can change in short order. There will be setbacks I'm sure, but I'm not really surprised by any of it. Now, I am not doing anything differently. My plan continues as it has for quite sometime.
Having just checked.....I see that I am nicely POSITIVE so far today. I have 9 stocks UP and a single stock down.....TSLA. I did not do a calculation but mentally can see that I am......right now.....+7.5% to about +8% year to date. One thing about investing.....if you can stand it........you will always live in interesting times. Sometimes....too interesting. Some times having too much awareness of what is actually happening is a bad thing. I once lived in a city where over the years I got way too much awareness of what was happening behind the scene. it started to drive me crazy. I ended up moving about 45 miles away....to a different county.... and NEVER got into politics or behind the scenes "stuff" in that area. It was a good move anyway since the schools and other environment was much better in the new area. Of course my business was still in the old city. At that time it was an old school "machine controlled" city. There was a huge disconnect between the story in the paper and the REAL story of why something was happening.
Well said Smokie. Yes.....I continue to be fully invested for the long term as usual. I did hear one of those......"DUH"....comments on one of the TV business shows this morning. The commentator was wondering why SVB did not have any sort of HEDGING in place. Of course....this is basic business common sense. Good old.......hindsight common sense.
One article headline was "Silicon Valley Bank had more red flags than a CCP meeting." I got a good chuckle out of it.
In the end DISREGARDING inflation, and everything else. The current little event......"could"....end up as a good thing for stock investors. It has certainly pushed back short term......2-10 year.....rates on Treasuries. It might take some of the trash-talking HUBRIS out of the FED. It is also a distraction from the intense irrational focus on the day to day economic data. As an investor.....I am NOT concerned with "today". My focus is where we are at year end and beyond.
Yeah Smokie I saw that article on FOX and considered posting it. BUT....I try to avoid using that site as a source on here since it triggers political thinking. I did happen to agree with the content of that article. I also agree with the view that what is happening now is directly related to out of control government spending and stimulus that continues to be pumped into the economy. It is as though the government is INTENTIONALLY tying to sabotage the FED. I know they are not......but their hyper-spending on all their favorite goodies and constitute groups....is having that impact. It was nice to actually see the government PRAISING....free market capitalism this morning....when the President said...... "Investors in the banks, however, will not be protected, the president said, and management will be fired. "They knowingly took a risk, and when the risk didn't pay off, investors lose their money. That's how capitalism works," Mr. Biden said." YES.....that is how capitalism is...."supposed"...to work. AND.....not that government has the right or power to "FIRE" management at a private company.
Checking back on some of those earlier banks from this morning....WAL (Western Alliance), FRC (First Republic), PACW (PacWest Corp), and ZION (Zion Bancorp) continue to re-start and then get halted continuously. They are having a rough go. I don't know anything about their background, but they seem to not be getting much traction out of the hole.
Yes. I seen another article yesterday which had some very decent info about how some policy makers had pushed back against some of the regulatory things which would have likely prevented some of the SIVB fall out. Obviously, they got their way and here we are. I didn't post it due to it diving too deep into the political side of things. I am not one for a bunch of government intervention with things. However, we need to maybe do a reset on some things regarding some of these banks. Another area is probably the crypto space. We need to define some of this space a bit. And no, I don't have the answers to solve it, but we need to be careful in these areas....somehow find a balance.
Nice markets today. AND....actually I am good with what is happening this week. it is a POSITIVE to identify bad and problem businesses and either let the markets weed them out......or....have stronger more secure businesses take them over. Where we get into all sorts of problems is.....propping up failing companies and allowing them to linger on and on. I see this as a....."problem"....that is particularly inherent in the banking business. Since the Great Depression.....any mention of a bank failure.....is a signal for PANIC. In addition this will hopefully be a wake up call to the regional FED offices to keep better track of the banks and financial companies in their region........and actually do their primary job.....NOT all the other "social" BS that they are focused on these days.
It is interesting that BOTH of the banks that have failed SVB and Signature Bank are......."niche"....banks. As to Signature: "Signature served clients in the cryptocurrency world and had been trying to reduce its exposure. Like Silvergate Bank, another crypto-friendly bank that said last week it would voluntarily wind itself down, it suffered from a deposit outflow in the aftermath of the collapse of crypto exchange FTX. Deposits dropped 17% in the fourth quarter of 2022 as compared to the year-earlier period." "Signature tried last week to restore confidence in its position as investors punished regional bank stocks, releasing a filing that stated it had "a strong, well-diversified financial position" and reiterating the company's intent to reduce its exposure to cryptocurrency customers." "It acknowledged in its most recent annual report that "our depositor base is more heavily weighted to larger uninsured deposits than many other banks" and noted that "the loss of our deposit clients or substantial reduction of our deposit balances could force us to fund our business with more expensive and less stable funding sources." "More recently the bank courted crypto firms by offering SigNet, a blockchain-based payments platform that allowed clients to move money to each other outside of regular banking hours." https://finance.yahoo.com/news/regu...-third-largest-us-bank-failure-231404695.html MY COMMENT If I was a bank stock investor......I would not be looking for "niche" banks to invest in. Like any investment.....I would want to stick with the most DOMINANT, BIG CAP.....company with good growth potential that I could find. Same with doing banking business as a CUSTOMER. In addition if I was a business CUSTOMER at one of these "niche" banks I would definately want to have my own EXTRA insurance that was IRON CLAD and extremely financially secure. From the article above....... "Stablecoin issuer and trust company Paxos said in statement shared with Yahoo Finance that the company currently holds $250 million at Signature Bank and "holds private deposit insurance well in excess of our cash balance and FDIC per-account limits."
EXTRAPOLATING what is going on in banking to business in general......there is a reason that I want my money invested in BIG CAP, DOMINANT, ICONIC PRODUCT, WORLD WIDE MARKETING, GREAT MANAGEMENT....types of companies.
OMG....I cant believe it.....say it isn't true. For Most, Money Actually Can Buy Happiness https://www.newsmax.com/health/health-news/happiness-money-buy/2023/03/10/id/1111876/ MY COMMENT DUH.
This topic was BEAT TO DEATH about a day ago.....so this is probably (no promises) my last post on the topic. BUT....I do like the style of this little article and the writer. The Real Reason Silicon Valley Bank Collapsed https://www.nationalreview.com/2023/03/the-real-reason-silicon-valley-bank-collapsed/ (BOLD is my opinion OR what I consider important content) "The fall of Silicon Valley Bank should not be minimized, even by those of us who believe contagion will prove limited or nonexistent. Idiosyncratic events like this still have knock-on effects. There are parts of what has happened to Silicon Valley Bank that could only happen to a, well, “Silicon Valley” bank, but there are other elements hardly as isolated. A little unpacking is in order. We now know the catalyst that set this chain of events in motion. Moody’s, reportedly responding to the mark-to-market losses in the value of SVB’s bond portfolio, had notified the bank of a pending credit downgrade. In response to that news, the bank began a mad-dash search to raise equity capital. But when the word hit the street that SVB was attempting a rushed capital raise, depositors began their own mad dash of withdrawing money. This is the first truly idiosyncratic part of the story. The depositors in question were almost entirely start-ups, and they were being encouraged in this bank-run-fueling activity by their capital partners, namely, the who’s who of Silicon Valley venture-capital funds. So the deposit base that SVB lived off of began eroding quickly, and any hope that they would raise equity capital now was a fantasy. Part of the bank’s plan to limit the impact of the Moody’s downgrade was to raise liquidity with a sale of assets SVB held on its balance sheet. The bank initially sold more than $20 billion of bonds, but did so at a $1.8 billion loss. The bonds had been purchased in a lower-rate environment; the present higher-rate environment had caused downward pressure on the marketable value of the bonds; and that downward pressure translated to realized losses in this sale. So far, so not good, but certainly not fatal. (Anyone holding bonds purchased at 2 percent yields is underwater on the value, but there is no credit impairment whatsoever and holding to maturity generates a return of par value.) Needing to raise capital to deal with some funding issues, only to lose depositors at the word of your needing to raise capital, and in turn losing the ability to raise capital at word of losing depositors, is obviously a vicious cycle. It can only be offset by one thing: an antidote that is truthful, not hopeful. In SVB’s case, no such antidote was forthcoming. Its bond portfolio held a larger share of long-dated (therefore, underwater) maturities than expected. Worse, there appears to have been no hedges on the books whatsoever — no interest-rate swaps to hedge that rate risk they were clearly carrying. The duration on the hedged and unhedged portfolio was the same. Now, did some BASEL or Dodd-Frank–style restriction on how derivatives are treated in Tier 1 Capital (a bank’s core equity assets) disincentivize the use of swaps as a hedge in this case? We may never know the answer to that. But one can only hope that the risk-management “A teams” at other banks have a better feel for matching duration of assets and liabilities than this banks’ team did. Wall Street is certainly hoping that’s the case. Another idiosyncratic aspect of SVB’s failure is the level of assets and risk positions the bank had in and tied to tech start-up equity. Silicon Valley Bank’s balance sheet was, shall we say, not your grandmother’s bank’s balance sheet. Its long-dated mortgage-backed securities will get a lot of attention, but again, there was no credit impairment whatsoever. How in the world does a bank fail without a credit impairment, such as an asset that failed to perform? No assets go bad, and the bank goes under? The prospect is stupefying to even think about. But to understand why what happened to SVB happened, you have to also factor in the equity side of its balance sheet, where it was accumulating assets (as one macro-analyst friend of mine put it) “as if Dave Portnoy ran it.” As of press time, we do not know if a “white knight” will surface to play a similar role for SVB that JP Morgan played for Washington Mutual in 2008, in taking over certain obligations to depositors. The FDIC is far less likely to accommodate such a thing now with backstops, aid, and guarantees, because they are well aware that the systemic risk is nowhere remotely near what the world financial system was dealing with then. The FDIC’s mandate is to guarantee depositor health and well-being, not systemic health and well-being. A company taking on the entirety of this balance sheet in these circumstances is not going to be easy absent Fed, Treasury, or FDIC interventions that would be politically toxic. So we will likely go into the week ahead unsure of what the wind-down of SVB will entail. The fact that not many banks could possibly have been so tethered to the geography and sector that Silicon Valley Bank was is a great argument for the idiosyncratic nature of this situation. It also vindicates Alexander Hamilton’s argument for why a bank should not be tethered to one geography and one industry. It is always great for a bank to have more and more deposits, but when your growing deposit base is limited to one group of depositors that are highly likely to need to withdraw their deposits in the future, you simply do not have the deposit funding mechanism that a traditional bank would have. Silicon Valley Bank appears to be the depositor haven of the “shiny objects” I have been bemoaning for three years now. Crypto. Tech start-ups. SPACs. IPOs of companies not yet profitable. We are talking about a buffet of shiny-object depositors, and while 2022 decimated their equity value in the marketplace, apparently the actual cash-deposit level of these over-capitalized shiny objects was never considered until it began eroding at the speed of light. And here we are. In terms of knock-on effects of SVB’s collapse, speculation is likely to be less about other banks’ lending hand over fist to VC-backed tech start-ups and more about the bond portfolios of these banks. Did they get their LGBTQ hires right but somehow forget to hedge interest-rate risk? At this time, no one knows what the state of bond portfolios on smaller bank balance sheets means for their capital positions. The politics of this are tough, too, because the Fed and FDIC and Treasury simply cannot state with any credibility that they will (or should) do anything other than enforcing the basic legal backstops already in place. I don’t believe that many banks are backing all the Pets.coms of 2023, so I don’t believe this becomes “systemic.” But I wouldn’t say that I want to work for the FDIC right now. As the SVB fallout continues, too much focus will be on the Fed’s raising of interest rates over the last nine months and its impact on the market value of SVB’s bond portfolio. Yes, that puts the Fed at the scene of the crime, but what about the Fed’s first involvement in this sordid affair? Namely, the maintaining of the zero-interest-rate world for so long that it enabled and facilitated the shiny-object mess that became the bread and butter of Silicon Valley Bank’s business model? You cannot get a shiny-object depositor orgy without the Fed’s enabling it, try as you may. No Fed action justifies this colossal failure of risk management or even basic banking competence, but on both the way up (rates down) and the way down (rates up), the Fed is there, pouring kerosene on a fire. As is the case with most episodes like this, there is not one story at play, but many — there is not one lesson, but many. Here’s what I see those lessons as so far: Shiny objects are just as bad for banking as they are for risk-asset investors, and when those two things get inter-mixed, the results are usually FDIC suits coming into your office. Long-dated assets don’t match well to short-dated liabilities, and banking 101 calls for some form of risk management that transcends the woke and diabolically incompetent. Panics become self-fulfilling prophecies very easily in a leveraged financial system, and the best way to avert such a thing is to have truth on your side, when that truth is actually good news (i.e. capital strength, etc.). Aggressive interventions into the cost of capital distort our financial system, both with excessive accommodation and excessive tightening. The Fed’s role in SVB’s failure is not insignificant, and yet it will either be missed, or will be discussed incompletely. Their insistence on over-tightening now is a major policy mistake, but we must never forget that their first policy mistake was the “too low, too long” era. It was that era that gave us Silicon Valley Bank."" MY COMMENT I like the analysis above. BUT......we have now progressed to where some of the content regarding what will happen to the bank and the depositors is now resolved. Unless something comes up that I can simply.......NOT RESIST......I am done beating this dead horse.
OK....I got my nice medium size GAIN today in my account. I had 8 of 10 stocks making money for me today......and 2 not. My losers today were NKE and HON. A nice big beat of the SP500 for me today......by 0.89%. Another day, another dollar. We now move into the rest of the week as the markets and investors will slowly get off the focus on "niche" banks and poorly funded/managed regional banks. YES......the sun IS going to come up tomorrow just like always.
You know.....posting on here while IGNORING the politics and social/insane aspects of society right now is like investing with one hand tied behind your back. BUT......for sanity that is how it must be on here. There are certain BASIC and CORE aspects of investing....especially long term investing....that cut across all politics and short term social policy events. That is what I try to focus on here.
We obviously saw weakness at the close. I am sure the DOW and SP500 reflect the fear that is out there in the public on current issues. It also reflects lingering fear on the part of some investors with holding during the time that the markets are closed. I actually had some people.......that are NOT investors or have any knowledge of money or business......seek me out over the weekend and ask about the SVB bank news and what was going on. The level of FEAR and PANIC got to the extreme that it started to infect the general population....the media PUSH on this issue was that severe. Anyway...here is the market close today: Stock market news today: Stocks mixed, bank stocks routed as SVB fallout ripples through markets Here's what's moving markets on Monday, March 13, 2023. https://finance.yahoo.com/news/stock-market-news-today-live-updates-march-13-2023-114351107.html "U.S. stocks finished Monday mixed as volatile trading gripped Wall Street after federal banking regulators took aggressive actions to stem the fallout of Silicon Valley Bank's failure. The S&P 500 (^GSPC) declined 0.1%, while the Dow Jones Industrial Average (^DJI) ticked down 0.3%. Contracts on the technology-heavy Nasdaq Composite (^IXIC) rose 0.4%. Bond yields plunged. The yield on the benchmark 10-year U.S. Treasury note dipped to 3.54% Monday. Traders are also repricing short-end bonds pushing the front end of the yield curve, as two-year yields dropped to 3.9%. The moves came after stocks got smoked on Friday, rounding out their worst week so far this year. Federal regulators closed tech-focused lender Silicon Valley Bank in the biggest U.S. bank failure since the 2008 financial crisis. President Joe Biden addressed the nation Monday morning regarding the turmoil in the financial sector. Biden said that “no losses will be borne by the taxpayers” and he assured customers that they would be protected. The president also vowed to ask Congress and regulators to strengthen rules for banks. His remarks came after regulators took extraordinary action Sunday to stem the fallout in the baking sector. Treasury Secretary Janet Yellen, Fed Chair Jerome Powell and FDIC Chairman Martin J. Gruenberg announced that depositors of the failed Silicon Valley Bank would be able to access all their money starting Monday. The saga of Silicon Valley Bank has had a rippling effect on a second bank: Signature Bank (SBNY) was closed Sunday, the second bank failure in three days. Among the measures, the Fed said depositors would be made whole. It created a new “Bank Term Funding Program” (BTFP) facility that enables other banks to obtain quick cash in exchange for collateral. Meanwhile, the sour bank sentiment spread across regional banks Monday, as the KBW Bank index (^BKX) fell nearly 12%, while index members including Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) all traded down. JPMorgan analysts led by Marko Kolanovic said in a note to clients that the stock plunge for larger banks was "overdone," but they did point to "emerging cracks" dating back to banks' fourth-quarter earnings that painted a daunting picture in the nearer term. "While we do not believe there is a banking crisis in the making and the SVB situation is somewhat unique, we do expect increased investor scrutiny of banks," the analysts said. Other regional bank stocks including First Republic Bank (FRC) plummeted more than 60% after JP Morgan lent the bank a hand. The California-based bank secured funding from the Wall Street giant that gives it more than $70 billion in unused liquidity. PacWest Bancorp (PACW), Zions Bancorporation (ZION), Regions Financial (RF), and Western Alliance Bancorporation (WAL) stocks were halted Monday morning, triggered by volatility. The stocks ended the day down 20%, 26%, 7%, and 47%, respectively. Paul Hickey, co-founder of Bespoke Investments Group, wrote in a note Monday morning that the turmoil in the banking sector is not necessarily "a repeat of 2008, but these types of comments almost never have their intended purpose of providing comfort to investors." Meanwhile, in the UK, British officials worked throughout the weekend to find a buyer for the U.K. subsidiary of Silicon Valley Bank, with HSBC stepping in. The turmoil on the banking front overshadowed February's job report, which blew past expectations once again, as the U.S. economy added 311,000 jobs, a slower pace from January's blowout number, and compared to consensus estimates from economists for job gains of 225,000. The unemployment rate edged up to 3.6%, and wage growth rose 4.6% over the last year, slower than expected. Economic releases will dominate the conversation this week as Wall Street pays attention to two data prints as the Federal Reserve’s next meeting rapidly approaches. At the same time, investors will be glued to the latest headlines over the collapse of SVB Financial Group and the implications for the banking sector. Tuesday's Consumer Price Index (CPI) kicks off the action in data on Tuesday. Economists expect inflation to rise 6% over the last year on a headline basis, while on a “core” basis the call is for 5.5%. Meanwhile, February’s retail sales read rolls out Wednesday morning. The upshot in the reading of those reports will weigh in on the Fed’s next policy move. The collapse of SVB has also sparked the debate among traders betting on a forced Fed pause to its cycle of rate hikes. Economists at Goldman Sachs (GS) said it “no longer expects” the Federal Reserve to hike interest rates later this month, while economists at Barclays reconfirmed their stance for a 50-basis-point hike next week. Data from CME Group shows that over 60% of market participants are expecting a 25-basis-point-rate hike at the Fed's March meeting, while nearly 40% anticipate rates unchanged. In other single-stock moves: Roku (ROKU): The company said that SVB held 26% of its cash and cash equivalents, per its filing to the Securities and Exchange Commission (SEC). Credit Suisse (CS): The Swiss lender hit a new record low Monday morning on the fears of the European bank's ability to hang onto deposits amid the collapse of US lender SVB. Charles Schwab (SCHW): The stock took a nosedive, marking its biggest daily drop despite defending its portfolio. Roblox (RBLX): The gaming platform company said in a filing only 5% of its $3 billion cash and securities balance as of February 28, 2023, were held at Silicon Valley Bank. "Thus, regardless of the ultimate outcome and the timing, this situation will have no impact on the day-to-day operations of the Company." Rocket Lab, USA (RKLB): The space company announced on Friday that it had $38 million in cash or 7.9% of its cash as of Dec. 31 with SVB. Vimeo (VMEO): The video platform company said its account balance was under the $250,000 threshold. Etsy (ETSY): The online marketplace said in a statement Friday that there would be a delay with their deposits in the wake of the SVB fallout. Elsewhere, in the crypto market, Bitcoin (BTC-USD) soared over 16% to over $24,000 in the past 24 hours as the government plans to protect depositors of SVB and Signature Bank. On the earnings front, FedEx (FDX), Adobe (ADBE), Dollar General (DG), and Lennar (LEN) will report quarterly results this week." MY COMMENT I think now any chance that the FED will raise rates by 0.50% is TOAST. I expect they will do most likely 0.25% or.....at worst...... 0,00%. Hopefully the FED will now continue to raise rates up to their little 5.50% to 6% goal in a more reasonable and rational basis without all the TRASHING of the economy and markets in the media.
