Is the stock market going to tank?

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Originally Posted by MultiVerse

Just spitballing here, let's all agree hardly anyone can independently determine the safety and soundness of a complex bank. I think that makes sense. You're right, Yglesias is right, everyone making this point is right. Does that even matter?

Most average people can't independently asses most things. And yet people figured out Yale and and Stanford are better than Utah state. Most people can't wrench on their own cars but they know a Toyota is more reliable than a Fiat. Few people can evaluate individual doctors but they know the Mayo Clinic is better than a small community hospital.

Unlike schools, cars, and medical care, nobody pays attention to bank safety because they don't have to. As a result banks can be more reckless because the average person isn't paying attention.

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I don’t think bank failures are anywhere near as common as schools, automakers, or medical facility failures. But I didn’t do my own research and may well be wrong. And it’s hard to be reckless in that space, not that you can’t make bad decisions.

But yeah, people assume that the regulators are all up in their shit so they don’t have to be. I’m not sure I agree that it allows the banks to be reckless, because the regulators mostly are all up in their shit.

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Originally Posted by MultiVerse

On average, most people can't independently asses most things.

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[sic]

Hah, must be running low on the letter 's'

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Originally Posted by Mustonen

I don’t think bank failures are anywhere near as common as schools, automakers, or medical facility failures. But I didn’t do my own research and may well be wrong. And it’s hard to be reckless in that space, not that you can’t make bad decisions.

But yeah, people assume that the regulators are all up in their shit so they don’t have to be. I’m not sure I agree that it allows the banks to be reckless, because the regulators mostly are all up in their shit.

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Fair enough. FWIW, in the 80s and 90s it was on average one bank failure every couple of days and since 2000 one failure every week.

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Originally Posted by MultiVerse

Just spitballing here, let's all agree hardly anyone can independently determine the safety and soundness of a complex bank. I think that makes sense. You're right, Yglesias is right, everyone making this point is right. Does that even matter?

On average, most people can't independently asses most things. And yet people figured out Yale and and Stanford are better than Utah state. Most people can't wrench on their own cars but they know a Toyota is more reliable than a Fiat. Few people can evaluate individual doctors but they know the Mayo Clinic is better than a small community hospital.

Unlike schools, cars and medical care, nobody pays attention to bank safety because they don't have to. They used to. But now, as a result of people not worrying about it any more banks can be more reckless because the average person isn't paying attention.

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I think the issue with DYOR instead of having a guaranteed backstop is that it’s going to lead to runs.

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Originally Posted by J. Barron DeJong

it’s going to lead to runs.

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I understand now why he said "asses"

If you look at a 5y chart of CS I think that’s going to happen to a lot of banks. A grind lower on profitability reserves.

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Originally Posted by J. Barron DeJong

I think the issue with DYOR instead of having a guaranteed backstop is that it’s going to lead to runs.

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It’s not the assessment that leads to bank runs, it’s the conversion into a binary yes/no, and the coordination of that. It’s avalanche risk independent of terrain, party, route planning, condensed to yes/no, for a whole ski resort

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Originally Posted by J. Barron DeJong

I think the issue with DYOR instead of having a guaranteed backstop is that it’s going to lead to runs.

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Right, resulting in a flight towards the safety of mega-banks. It has already started to happen. Maybe most of us, including me, have too much “It’s a Wonderful Life” collective nostalgia for smaller regional banks?

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Originally Posted by dunfree

It’s not the assessment that leads to bank runs, it’s the conversion into a binary yes/no, and the coordination of that. It’s avalanche risk independent of terrain, party, route planning, condensed to yes/no, for a whole ski resort

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Maybe, but the deposit guarantee acts as a necessary circuit breaker so things don’t become self-fulfilling.

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Originally Posted by MultiVerse

Right, resulting in more mega-banks. It's already started to happen. Maybe most of us, including me, have too much “It’s a Wonderful Life” collective nostalgia for smaller regional banks?

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I had a small bank (6? branches at the time) who had a parrot as a logo. BITD, the parrot would tell the owner to approve the loan. They’ve since changed to have a massive atm network, more branches, and the average age of their customer has dropped substantially below 71

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Originally Posted by J. Barron DeJong

Maybe, but the deposit guarantee acts as a necessary circuit breaker so things don’t become self-fulfilling.

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the deposit guarantee wasn’t the issue, explicit or implicit, the issue was the SV podcast dildii want an implicit continuity guarantee. They want always on guaranteed banking. Most bank failure depositors get their money bake, sometimes with minimal interruption (I banked with wamu)

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Originally Posted by dunfree

I had a small bank (6? branches at the time) who had a parrot as a logo. BITD, the parrot would tell the owner to approve the loan. They’ve since changed to have a massive atm network, more branches, and the average age of their customer has dropped substantially below 71

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The argument is the old 6 branch bank grew large enough to become systemically significant but not large enough to be closely regulated like mega-banks. If we're going to backstop all deposits and therefore need to regulate all systemically significant banks like mega-banks then it makes more sense to just have mega-banks.

Bank of America has $113 Billion of unrealized losses on its balance sheet

This represents >60% of tangible book value

BAC stock is unchanged since 1997.

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Originally Posted by 4matic

Bank of America has $113 Billion of unrealized losses on its balance sheet

This represents >60% of tangible book value

BAC stock is unchanged since 1997.

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They’ll only be realized if they’re forced to sell, and they’ll only sell if it makes financial sense to do so OR if they have to liquidate investments prior to maturity, and they’ll only have to liquidate investments if they have an issue with liquidity, and they’ll only have an issue with liquidity if their ample cash reserves and other sources of liquidity are inadequate to cover operations and deposit outflows. Except the BTFP will make that unnecessary anyways.

Unrealized losses in the system are off the charts, and are no longer the easy or attractive source of liquidity they were always considered. That’s what a sustained record low rate environment plus rapid rate hikes does.

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That’s what a sustained record low rate environment plus rapid rate hikes does.

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So fucked up that the Fed in trying to use the traditional approach to tamping inflation causes this and worse, never seems to have seen it as a possibility.

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Originally Posted by Mustonen

They’ll only be realized if they’re forced to sell, and they’ll only sell if it makes financial sense to do so OR if they have to liquidate investments prior to maturity, and they’ll only have to liquidate investments if they have an issue with liquidity, and they’ll only have an issue with liquidity if their ample cash reserves and other sources of liquidity are inadequate to cover operations and deposit outflows. Except the BTFP will make that unnecessary anyways.

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But that’s exactly what happened to SVB, right? They had Treasuries marked as hold to maturity, no plan to sell, but were all of a sudden forced to take a loss on them due to a liquidity crunch?

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Originally Posted by Bunion 2020

So fucked up that the Fed in trying to use the traditional approach to tamping inflation causes this and worse, never seems to have seen it as a possibility.

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As long as liquidity is managed and capital is adequate to bridge a low earnings environment it’s ¯\_(ツ)_/¯.

Nobody was giving anybody credit for substantial unrealized gains on the balance sheet heading into COVID. But an unrealized loss gets us all a flutter. Whatever. The story is panic and small number of non-diverse large depositors and all the juice getting pulled out of the market by the fed. Shit’s awful dry around here.

Could use some lube.

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Originally Posted by J. Barron DeJong

But that’s exactly what happened to SVB, right? They had Treasuries marked as hold to maturity, no plan to sell, but were all of a sudden forced to take a loss on them due to a liquidity crunch?

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Sorta. Unclear to me if they had to or just saw an opportunity to chase profits, I’m sure liquidity was a part of the discussion either way. $80B at 1.8% for ten years with prognosticators indicating sustained high interest rate markets. Take $1.8B in losses to turn $20B into 6% assets for ten years or ride it out for ten years and maybe let them crater further? You do the math.

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Originally Posted by mcski

It’s not just the cliche tech bros tho. Somethjng like 50% of startups had there money in svb. If they go under that will set back a lot of tech innovation which will domino into economic set backs

Peter Thiel tho has just cemented his rep as pos if that wasn’t clear before now

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So fucking what? Socializing the losses and private profits capitalism can fuck right off. 2008 should have been a full on armageddon but instead the gamblers walked away unharmed.

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Originally Posted by 4matic

Bank of America has $113 Billion of unrealized losses on its balance sheet

This represents >60% of tangible book value

BAC stock is unchanged since 1997.

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Interesting.

https://www.bloomberg.com/news/artic...er-svb-failure

Someone should start a twitter thread and reverse that $15 billion inflow of deposits.

But short the stock before you hit send.

My call sold at about 2:00 when the underlying moved up to $33. I set an order to buy it back at $6.50, figured if I could make $150 in a couple hours I’d take it. It tailed off going into close and my buy it back order filled at six minutes till close, it then closed at $31.16.

After hours FRC has moved to $32.38. I know I lost $6.50 of downside protection by moving out of the call but I’m going to see what happens pre-market and hopefully I can sell an even juicier call tomorrow.

I’m hoping to make about 2k on this trade if things go marginally well. Of course I could lose about 7k if everything goes tits up all of a sudden.

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Originally Posted by Lvovsky

So fucking what? Socializing the losses and private profits capitalism can fuck right off. 2008 should have been a full on armageddon but instead the gamblers walked away unharmed.

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socializing what?

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Originally Posted by Toadman

Interesting.

https://www.bloomberg.com/news/artic...er-svb-failure

Someone should start a twitter thread and reverse that $15 billion inflow of deposits.

But short the stock before you hit send.

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I’d tend to be a buyer of the mc banks from here.

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Originally Posted by Brock Landers

socializing what?

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Bailing out failed businesses with tax payers money is called socializing the losses

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Originally Posted by Lvovsky

So fucking what? Socializing the losses and private profits capitalism can fuck right off. 2008 should have been a full on armageddon but instead the gamblers walked away unharmed.

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exactly

Guys, guys, guys. This is not just any bank. Calm down, we are never doing it for anyone else.

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Originally Posted by Lvovsky

Bailing out failed businesses with tax payers money is called socializing the losses

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SIVB didn't get bailed out. Equity and bondholders got wiped out.

I was curious what happens…

https://investorplace.com/2023/03/so...tock-now-what/

Edit.

I’m kinda regretting my Mar 17 put I have out there. Reading that it appears everything is halted, options won’t be assigned. You get the premium from the option immediately, can’t lose that. I’m thinking a longer term option would be a better play in a situation where the underlying could be halted. I’ll own 100 shares on Friday if it doesn’t go above $35. Longer term option I’d get the premium and not have the risk of holding the possible worthless shares. If my put goes positive tomorrow I’m going to buy it back and sell another for a longer term.

Not that I think they’re going tits up, but can’t be too careful.

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Originally Posted by BobMc

I was curious what happens…

https://investorplace.com/2023/03/so...tock-now-what/

Edit.

I’m kinda regretting my Mar 17 put I have out there. Reading that it appears everything is halted, options won’t be assigned. You get the premium from the option immediately, can’t lose that. I’m thinking a longer term option would be a better play in a situation where the underlying could be halted. I’ll own 100 shares on Friday if it doesn’t go above $35. Longer term option I’d get the premium and not have the risk of holding the possible worthless shares. If my put goes positive tomorrow I’m going to buy it back and sell another for a longer term.

Not that I think they’re going tits up, but can’t be too careful.

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You sold that March 17 put right?

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Originally Posted by LeeLau

You sold that March 17 put right?

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He wrote it.

Bob I think you’re fucked?

Yup, I sold it. $35 strike, got $4.40. I’m to the plus down to $31.60. It really doesn’t matter anyways as I don’t think they’re going under. I don’t think the stock gets back to $120 for quite a while but at $35 I’m way below book value.

Getting assigned will give me another tranche to sell calls on, premiums are pretty high right now.

Rumors that FRC is exploring sale opportunities, which might help you out

Pretty sure Bob sold a put in FRC not SIVB.

10y yield is the same as it was 10 months ago and same as it was 6 months ago.

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Originally Posted by 4matic

Pretty sure Bob sold a put in FRC not SIVB.

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Bob if you sold a FRC put and it gets assigned then that's fine.

If you sold a SiVB put then that's not good. Options can be assigned independently of the underlying stock trading

Credit Suisse gets a bailout. What a surprise

https://finance.yahoo.com/news/credi...012622362.html

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Originally Posted by Mustonen

They’ll only be realized if they’re forced to sell, and they’ll only sell if it makes financial sense to do so OR if they have to liquidate investments prior to maturity, and they’ll only have to liquidate investments if they have an issue with liquidity, and they’ll only have an issue with liquidity if their ample cash reserves and other sources of liquidity are inadequate to cover operations and deposit outflows. Except the BTFP will make that unnecessary anyways.

Unrealized losses in the system are off the charts, and are no longer the easy or attractive source of liquidity they were always considered. That’s what a sustained record low rate environment plus rapid rate hikes does.

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I’m a dumbass electrician but aren’t you describing exactly what happened with svb? And the general public only sees rich fucks getting a free ride, where as they’re fucked and homeless if they miss a payment. I understand the underlying complexities. But optics are everything.

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Originally Posted by LeeLau

Credit Suisse gets a bailout. What a surprise

https://finance.yahoo.com/news/credi...012622362.html

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Of course they did.

I have a generally positive view of the Swiss, but I've also met several Swiss people with a massive superiority complex about their financial institutions and their perceived elevated worldview on and international relations.

I kinda have some schadenfreude going watching them have a banking failure.

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Originally Posted by LeeLau

Bob if you sold a FRC put and it gets assigned then that's fine.

If you sold a SiVB put then that's not good. Options can be assigned independently of the underlying stock trading

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Give me a little credit, lol. That is what I was wondering about, whether an option could be assigned even with a halt on trading? If so then I’m not going to change my strategy.

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Originally Posted by BobMc

Give me a little credit, lol. That is what I was wondering about, whether an option could be assigned even with a halt on trading? If so then I’m not going to change my strategy.

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Heh. Figured it was FRC.

Yup...the options market can operate independently of the stock market