Is the stock market going to tank?

[Cono Este]

Gld poised for new highs

Mkt testing bottom of bracket.

My money is still on dow 23500

[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.

[Toadman]

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.

[4matic]

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

[4matic]

2008 GFC was triggered by Fed tightening and derivative failure

[LeeLau]

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.

Heh - i just sold more puts

[Mustonen]

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,

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,

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.

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….

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

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.

[4matic]

The artificially low manipulated VIX was ripe for reversion

[4matic]

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

[4matic]

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.

[LeeLau]

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….

------

Totally agree its psychological. Totally agree its herd mentality. My bet is that FRC WAL ZION PACW etc revert somewhat back to the mean but with a valuation haircut now that investors at large recognize the new interest rate risk for assets held.

However, because the market can remain irrational longer then your positions can remain solvent yada yada it may take time for the herd to realize the risk is overblown, isn't systemic and that an '08 style contagion isn't pending. Therefore my gut tells me to scale in a position over time; perhaps 1 to 2 weeks at least

[4matic]

“The fundamentals of the economy are strong”

[jono]

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….

But they can be. Which means a single party (or group) by being both can use the leverage of one to make money from the other.

I'm still trying to find out what's to stop short sellers from igniting bank runs by using their own deposits (risk free!) to push the bank into an untenable position?

[4matic]

The entire financial market is psychological. Why should stocks trade at a 20 multiple vs a 10? “Historical valuation?”

[Truckee Joe]

In the end we will all bank with J.P. Morgan...
There has been a loss of 10,000 local banks over the last 30 years. This trend shows no signs of changing. The consolidation is accelerating. 15b of deposits have moved from smaller banks to the "too big to fail" banks over the last 3 days.


Sent from my iPhone using TGR Forums

[Mustonen]

“The fundamentals of the economy are strong”

Right.

Rapid rise in rates has definitely stressed the system more than has been broadly appreciated. Pairing those rate increases with sources of liquidity makes a lot of sense, as does broadly reinforcing the stability of the financial system (and their deposits) to depositors.

Also when you move fast and take chances shit breaks, so that shouldn’t surprise anybody. But here we are.

[Brock Landers]

I'm still trying to find out what's to stop short sellers from igniting bank runs by using their own deposits (risk free!) to push the bank into an untenable position?

By taking their money out?

[4matic]

We’re not that far from another “no short list”.

[Mustonen]

But they can be. Which means a single party (or group) by being both can use the leverage of one to make money from the other.

I'm still trying to find out what's to stop short sellers from igniting bank runs by using their own deposits (risk free!) to push the bank into an untenable position?

They aren’t the same thing, but you’re right that they can be both.

What stops it? Reasonable ALM that recognizes the instability of large and/or homogenous accounts and maintains ample liquidity to manage it. It’d be quite the long game, and a bunch of subterfuge, to deliver on that premise.

[MultiVerse]

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….

From an investor standpoint shareholders, bondholders, and senior management all paid a price. There was no government rescue, no moral hazard, so the government or the system or the free market, whatever anyone wants to call it, worked.

From a depositor standpoint there was a lot of herd concentrated risk in tech demand deposits so the psychology here is somewhat unique. SVB tried to raise capital to fix their balance sheet and its depositors punished them for it. The risk SVB undertook wasn't just a bad bet on interest rates, they also bet on risky depositors.

So instead of letting banks like SVB fail we're punishing shareholders for systemic problems created in part by its depositors. What that means is more punitive regulation, more capital requirements, more short-term bond requirements, fewer risky borrowers and depositors — all of which will make banks less profitable making it harder for them to raise equity.

I don't know if that's a good thing, maybe it is, but it's also circular in the sense even though depositors and investors are not equivalent they are interdependent.

[LeeLau]

I'm still trying to find out what's to stop short sellers from igniting bank runs by using their own deposits (risk free!) to push the bank into an untenable position?

As a former buy-side short seller let me try to answer this question.

In theory - nothing. BUT that carries a lot of risk

1 - you'll need your funds to have enough size to trigger a bank run by asking for withdrawal
2 - if you have that much money in one bank then you have risk in being an uninsured deposit
3. - if you don't have that much money in one bank but are colluding with others to trigger a withdrawal then you'll almost certainly attract regulator scrutiny (SEC, banking etc) by the act of collusion. It's under a basket of anti "short and distort" laws.
4. If you're colluding there's too much risk that one of your gang of short and distort crew will backstab you and take a counterparty position to break your campaign.

TLDR - there's easier ways to make money. Either on the long or short side

[Mustonen]

…

So instead of letting banks like SVB fail we're punishing shareholders for systemic problem created by its depositors.

…

Maybe that's a good thing, but it's also somewhat circular in the sense depositors and investors are not equivalent but they are interdependent .

Oh interesting.

Where on the spectrum of sympathetic figures do bank investors rank, especially in relation to bankers themselves? I think it’s safe to say both are a ways further down the list than depositors, even VC depositors who need to make excessive payroll or bankroll crazy parties with exotic pets and shit.

[MultiVerse]

The main point is not who is more sympathetic or whatever, rather how do banks raise equity and find shareholders in this environment? We don't want depositors or banks to take risks but we do want investors and shareholders to take risks?

The crypto crowd likes to argue banks can create credit "out of thin air" only we've seen first hand that's not true. As intermediaries, they need credit markets too.

[Mustonen]

That was mostly tongue in cheek.

They might have to raise equity the old fashioned way, through retaining earnings….

[4matic]

The main point is not who is more sympathetic or whatever, rather how do banks raise equity and find shareholders in this environment? We don't want depositors or banks to take risks but we do want investors and shareholders to take risks?

This is why there are too many public banks. Not enough risk opportunity to go around to satisfy stakeholders