Is the stock market going to tank?

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Originally Posted by MultiVerse

Banks fail all the time. It's normal. It's typically handled quietly and everything turns out fine. This really does appear to be a case of elites agitating over the possibility of a systemic collapse to protect themselves.




This is the wrong thread for this discussion, but that really is a terrible analogy. Anyway you slice it, include all the accidents in the history of the industry versus just one year of any alternative and it's not even close, nuclear power is orders of magnitude safer than any other energy source. It's ridiculously safe by comparison with everything else.

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Orderly resolution of this bank failure would have greatly impacted the investments of these “elites”. Your startup shitco with no revenue doesn’t have the same levers to pull or ability to weather the disruption

Yeah, that was a real problem. This still could have been handled quickly and quietly. Not to mention the depositors brought it on themselves by panicking. The bank was in trouble, no question, but it wasn't on the verge of collapse until the bank run. There are no good options here:

- Let depositors take losses which ends up consolidating the banking sector into To Big To Fail only
- Guarantee deposits and also expand regulation to the point where the shadow banking sector not subject to regulatory oversight becomes much bigger

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Originally Posted by MultiVerse

To put a number on it the Treasury just backstopped $20 trillion of deposits.

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But that’s a given. A bank being a safe and secure home to place deposits is hardly a part of the calculus, is it? Deposits are not equity. Deposits are not assets. Whether a bank loses $500B or $500 in deposits doesn’t make a hill of beans of difference. Both are failures and they both impact investors virtually the same. They impact the economy in very different ways though.

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Originally Posted by LeeLau

It also protects reputations and confidence. Confidence gives liquidity. Can't put a price on that. IMO that's what Mr Market sees

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Confidence aids efforts to aid liquidity. But when you’re $80B deep in illiquid underwater assets it doesn’t do much.

But maybe. I really don’t know. If we’re talking irrational Mr Market I back away from the discussion. That guy’s weird and I don’t understand him well.

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Originally Posted by dschane

According to Bloomberg, “in late 2020, [SVB's] asset-liability committee received an internal recommendation to buy shorter-term bonds as more deposits flowed in,” to reduce its duration risk, but that would have reduced earnings, and so “executives balked” and “continued to plow cash into higher-yielding assets.”

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This. Also though, NIM have been compressed forever and every exec was looking for some yield SOMEWHERE. Not to be an apologist at all, but this is the core of the problem. Rates weren’t gonna go up until the FRB was allowed to go bananas since COVID got canceled. Nobody predicted that. Not really.

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Originally Posted by MultiVerse

Yeah, that was a real problem. This still could have been handled quickly and quietly. Not to mention the depositors brought it on themselves by panicking. The bank was in trouble, no question, but it wasn't on the verge of collapse until the bank run. There are no good options here:

- Let depositors take losses which ends up consolidating the banking sector into To Big To Fail only
- Guarantee deposits and also expand regulation to the point where the shadow banking sector not subject to regulatory oversight becomes much bigger

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Fair synopsis.

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Originally Posted by JimmyCarter

With the top down, screaming out “MONEY AINT A THANG”

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now SVB is what the fuck I call a chain reaction

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Originally Posted by MultiVerse

Banks fail all the time. It's normal. It's typically handled quietly and everything turns out fine. This really does appear to be a case of elites agitating over the possibility of a systemic collapse to protect themselves.




This is the wrong thread for this discussion, but that really is a terrible analogy. Anyway you slice it, include all the accidents in the history of the industry versus just one year of any alternative and it's not even close, nuclear power is orders of magnitude safer than any other energy source. It's ridiculously safe by comparison with everything else.

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I’m referring to the idea that anything is fool proof. Especially financial models.

As far as nuclear power I agree with you. Even if someone will spill their coffee in the control panel once every 100 yrs.

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Originally Posted by Mustonen

But that’s a given. A bank being a safe and secure home to place deposits is hardly a part of the calculus, is it? Deposits are not equity. Deposits are not assets. Whether a bank loses $500B or $500 in deposits doesn’t make a hill of beans of difference. Both are failures and they both impact investors virtually the same. They impact the economy in very different ways though.

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That goes to the heart of the debate. Should depositors with more than $250,000 differentiate between good banks and bad banks? It matters because if you guarantee bad banks as well as good banks the United States Government is liable for unsound bad banking,

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Originally Posted by MultiVerse

That goes to the heart of the debate. Should depositors with more than $250,000 differentiate between good banks and bad banks? It matters because if you guarantee bad banks as well as good banks the United States Government is liable for unsound bad banking,

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Interesting. I mean, they already are. That’s what that FDIC logo means at every teller station. At the end of the day any well capitalized bank can make a compelling case that they’re a safe place to sock a few million bucks, and they should be. We expect them to be.

I’ll spend some time cogitating on that though.

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Originally Posted by MultiVerse

That goes to the heart of the debate. Should depositors with more than $250,000 differentiate between good banks and bad banks? It matters because if you guarantee bad banks as well as good banks the United States Government is liable for unsound bad banking,

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Ok, but:

Attachment 451873

https://twitter.com/mattyglesias/sta...sR_NcRK2VkCfkg

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Originally Posted by J. Barron DeJong

Ok, but:

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It's an interesting take. In the past a bank run required people show up in person to withdraw their deposits, now all it requires is a rumor and a phone. So per Yglesias's point, if depositors hadn't panicked there's a good chance everything would have worked out fine. It begs the question whether this was a classic run based on a rumor or something more fundamental. Because there's a human psychology element to this too. How do you stop a panic from becoming a self fulfilling prophecy?:

https://mobile.twitter.com/bfcarlson...99355245543425

FWIW, Peter Theil was worried about SVB's failed capital raise. That's how this all started.

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Originally Posted by MultiVerse

That goes to the heart of the debate. Should depositors with more than $250,000 differentiate between good banks and bad banks? It matters because if you guarantee bad banks as well as good banks the United States Government is liable for unsound bad banking,

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The FDIC explicitly doesn’t differentiate between good and bad banks. Risk ratings are, indeed, strictly confidential and if they want to piss off a regulator, they can go ahead and share a camels rating. The system isn’t designed for gradations of risk as places to keep deposits and I wouldn’t argue that it should be.

Insuring less than the full deposit is less a measure of how much and when depositors should embark on additional due diligence and more about underwriting the risk exposure of the fund to a level than ensures solvency but falls below the attention of the average depositor. $250k isn’t a reasonable level above which deposits are not guaranteed for a business with substantial cash needs, and I think that’s broadly recognized.

It's been alleged that someone bought $96 puts on SVB for $.01 each recently. Maybe enough to make some real money at $2xx per, or maybe not.

But that looks like a profit motive (apparently risk-free) for creating a bank run to drive down the stock price. Gather some bored apes (and just a couple VC guys), make some deposits, wait for the bank to invest too much for too long and start buying the puts.

What stops this?

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Originally Posted by dunfree

Orderly resolution of this bank failure would have greatly impacted the investments of these “elites”. Your startup shitco with no revenue doesn’t have the same levers to pull or ability to weather the disruption

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This

And it's pretty funny no other bank is excited to take up their assets for pennies on the dollar

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Originally Posted by MultiVerse

That goes to the heart of the debate. Should depositors with more than $250,000 differentiate between good banks and bad banks? It matters because if you guarantee bad banks as well as good banks the United States Government is liable for unsound bad banking,

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And explicitly the program has since inception only guaranteed deposits to a certain amount - originally $2,500 almost immediately increased to $5,000, now $250k because regulators and lawmakers have wanted people to care. Times have changed - in like 193x ~90% of bank deposits were insured - and verifying this might be hard, but the contrary- explicit backstopping of billions in cash for a single depositor in a shit bank has some problems. Businesses with substantial cash needs are supposed to have to care about their counterparty risk and be big girls and boys.

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Originally Posted by jono

It's been alleged that someone bought $96 puts on SVB for $.01 each recently. Maybe enough to make some real money at $2xx per, or maybe not.

But that looks like a profit motive (apparently risk-free) for creating a bank run to drive down the stock price. Gather some bored apes, make some deposits, wait for the bank to invest too much for too long and start buying the puts.

What stops this?

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Some WSB entertainment

+400,000% SIVB puts options increase

https://www.reddit.com/r/wallstreetb...t=share_button

$96 into $617,184
aka a +642,900% gain

https://twitter.com/AlphaTrader00/st...bYgXlIidQ&s=07

I cannot wait for weekly options to trade on FRC and WAL. Then WSB will start humming

Yep, the precedent has been set that good or bad the fed will backstop all deposits. I don’t know how this impacts fdic funding and the trickle down. But should all deposits be guaranteed anyway? Probably?

If the deposits are guaranteed all the other bitching and oh my god is just 1. Not knowing shit or 2. Grandstanding. Or for certain MA senators both.

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Originally Posted by Mustonen

The FDIC explicitly doesn’t differentiate between good and bad banks. Risk ratings are, indeed, strictly confidential and if they want to piss off a regulator, they can go ahead and share a camels rating. The system isn’t designed for gradations of risk as places to keep deposits and I wouldn’t argue that it should be.

Insuring less than the full deposit is less a measure of how much and when depositors should embark on additional due diligence and more about underwriting the risk exposure of the fund to a level than ensures solvency but falls below the attention of the average depositor. $250k isn’t a reasonable level above which deposits are not guaranteed for a business with substantial cash needs, and I think that’s broadly recognized.

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I think that's right WRT FDIC not to mention the 80s era S&L failures show regulators can be asleep at the wheel. I guess the question is whether it's unreasonable to ask businesses with payrolls to meet to also consult with professional money managers to evaluate the safety of banks...

Because I don't think anyone is asking households with insured deposits to shop around for a safe bank. It's striking how unsophisticated these large Bay Area firms were. We're talking about depositors in an abstract sense — in reality these guys were placing barrels of money deposits, earning low interest rates no less, all of it, all together, all at the same bank. It's just a complete failure to learn from history on the part of everyone involved.

I did a bunch of reading and decided I couldn’t let Lee have all the fun. Bought 20 shares of FRC this morning at $48.74. It started falling soon after I bought so I followed it down, 10 more at $42.50, 10 more at $41, and 10 more at $39. That puts me in 50 shares at $43.99 per.

At that point it started to rise again, I had an order for 10 at $38 and canceled it. Checked options and ended up selling a put, Mar 17 $35 strike for $4.40.

I’ve read enough to see that it was overvalued for the last year, trading in the $170-$120 range, the price the last couple days seems like an overreaction. If I’m wrong and it tanks at least I’ll have my $440, lol.

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Originally Posted by BobMc

I did a bunch of reading and decided I couldn’t let Lee have all the fun. Bought 20 shares of FRC this morning at $48.74. It started falling soon after I bought so I followed it down, 10 more at $42.50, 10 more at $41, and 10 more at $39. That puts me in 50 shares at $43.99 per.

At that point it started to rise again, I had an order for 10 at $38 and canceled it. Checked options and ended up selling a put, Mar 17 $35 strike for $4.40.

I’ve read enough to see that it was overvalued for the last year, trading in the $170-$120 range, the price the last couple days seems like an overreaction. If I’m wrong and it tanks at least I’ll have my $440, lol.

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And if it assigns you get to sell a call at fat IV. 400+% for a bank! If it goes tits up at least you'll have that cash from the call sale proceeds

What is the catalyst to send a stock like SCHW higher? It’s trading at a 16 pe whereas JPM trades at 12. SCHW was a $30 stock pre pandemic.

I like the idea that AAPL could become a startup banker like SVB. With their cash reserve it would be easy. Get buffet to advise

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Originally Posted by MultiVerse

It's an interesting take. In the past a bank run required people show up in person to withdraw their deposits, now all it requires is a rumor and a phone. So per Yglesias's point, if depositors hadn't panicked there's a good chance everything would have worked out fine. It begs the question whether this was a classic run based on a rumor or something more fundamental. Because there's a human psychology element to this too. How do you stop a panic from becoming a self fulfilling prophecy?:

https://mobile.twitter.com/bfcarlson...99355245543425

FWIW, Peter Theil was worried about SVB's failed capital raise. That's how this all started.

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Reminds me of It's a Wonderful life. Only this bank was not heavily invested in Mortgages and Business loans they have a shit ton of Treasury Notes

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Originally Posted by Mustonen

This.

Those guys don’t work there anymore.

But nobody was punished for trusting the US banking system. IMO they shouldn’t be. However, if and as this increases FDIC exposure the banking industry can expect additional oversight and regulation.

Good times to be had by all….

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Banking industry absolutely needs more oversight and regulation. Every time either breaks down, banks crumble and average people pay the price while the fat cats skate free

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Originally Posted by MultiVerse

It's an interesting take. In the past a bank run required people show up in person to withdraw their deposits, now all it requires is a rumor and a phone. So per Yglesias's point, if depositors hadn't panicked there's a good chance everything would have worked out fine. It begs the question whether this was a classic run based on a rumor or something more fundamental. Because there's a human psychology element to this too. How do you stop a panic from becoming a self fulfilling prophecy?:

https://mobile.twitter.com/bfcarlson...99355245543425

FWIW, Peter Theil was worried about SVB's failed capital raise. That's how this all started.

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You know that dickwad somehow made a bunch of money on this whole failure

Is Governor Newsom a client of FRC or WAL? Then I’d say give it a go.

If treasury had allowed destruction of capital rates would go lower and stay lower. Had fed not raised so fast and just did QT we’d be a lot better off.

WTI to $67. Still think it goes to $50. Around a 2year low now. Gasoline is peskier probably due to transition to summer blend

Jez. Oil service stocks look like they’ll be in the dumpster for ever.

Gld poised for new highs

Mkt testing bottom of bracket.

My money is still on dow 23500

Doubled down on FRC, bought 50 more shares at $32.50. Have an order to sell an April 21 call at a $45 strike for $8.00.

Can’t hit a home run without swinging once in a while.

I would say the DOW is getting a mild bitch slap today. If it goes quadruple digit down day, then it's a kick to the groin, a double eye poke to the face, and a punch in the gut for good measure.

This is quarterly expiration week. Kolanavic been writing about volmageddon and option skew.

Come to think of it. I don’t think any of the action this week is anything other than derivative skew

https://www.reuters.com/article/usa-...-idUSKBN2UP235

2008 GFC was triggered by Fed tightening and derivative failure

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Originally Posted by BobMc

Doubled down on FRC, bought 50 more shares at $32.50. Have an order to sell an April 21 call at a $45 strike for $8.00.

Can’t hit a home run without swinging once in a while.

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Heh - i just sold more puts

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Originally Posted by MultiVerse

That goes to the heart of the debate. Should depositors with more than $250,000 differentiate between good banks and bad banks? It matters because if you guarantee bad banks as well as good banks the United States Government is liable for unsound bad banking,

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Originally Posted by Mustonen

At the end of the day any well capitalized bank can make a compelling case that they’re a safe place to sock a few million bucks,

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Originally Posted by MultiVerse

It begs the question whether this was a classic run based on a rumor or something more fundamental. Because there's a human psychology element to this too. How do you stop a panic from becoming a self fulfilling prophecy?:

https://mobile.twitter.com/bfcarlson...99355245543425

FWIW, Peter Theil was worried about SVB's failed capital raise. That's how this all started.

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I dare say this was almost 100% psychological, or at least due to some basic misunderstanding. No? There seems to be a false equivalency afoot between depositor and investor. They aren’t really the same thing….

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Originally Posted by dunfree

Businesses with substantial cash needs are supposed to have to care about their counterparty risk and be big girls and boys.

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I might agree with that, except how? SVB was well capitalized and their balance sheet was extremely conservative. The FDIC put their seal of approval at every location and on every page of their website that discussed deposits. Risky loans? Hell no… we just put it in these nice safe treasuries to keep your money safe because so safe. Unrealized losses went through the roof….as it did for every FI with investments on the balance sheet. ROA was getting pinched by a weakening net interest margin…as it was for every FI, and earnings are still positive with a strong capital position so just wait a year or two and we’ll get back on track. Except that’s where they made a mistake; they wanted to tune up earnings by taking a loss now to reinvest at higher yields. And that put a slight damper on their capital position that they didn’t like a lot, so they tried to raise capital and ran into an illiquid market, and then they told everybody to not panic.

Very smart people in this thread don’t really understand ALM at a financial institution; shit, very smart people who are members of ALCO at financial institutions don’t really understand ALM at financial institutions. I fail to see how it makes sense or is reasonable for an unrelated business to have to worry about understanding it.

The artificially low manipulated VIX was ripe for reversion

600 banks/financial institutions failed during GFC. How many have failed so far this year? 3? If 100 fail no big deal compared to 2008

There are 750 publicly traded banks. Why? Where’s the profit in a slowing economy and competition for deposits.

That doesn’t even include private banks and credit unions.