svb - financial crisis or nothingburger?

[mogger123]

@Crusile @Chinacurry

thoughts?

 

[Deleted member 23399]

it's half cuz of rising rates and half because they financed shit tech bros with no cashflow and had so many insolvencies.

 

[Chinacurry]

Not necessarily SIVB is a main part of the problem, but for sure corrections needed, which I been saying for as long as I been here.

Finance caps to fall 30% further, overall market to correct 15 to 20%, rates to rise through the year

 

[Octavian_Augustus]

Second biggest bank failure in US history.

It's very early but I wouldn't under-estimate the risk of contagion and an '08 situation. Bank stocks already got pummeled today which shows how panicky investors are (this whole situation is caused by panicking companies causing a run on the bank) so this could spread to other financial institutions too if the right conditions arise. Once things are in motion and panic sets in spirals can occur.

Not to mention other banks will probably have some type of exposure to SVB through lending, derivatives, securities. SVB liquidating its assets might also pummel the market which could cause a death spiral, more run on banks, more insolvency issues. etc. A lot of banks are also holding assets on their balance sheets that have been pummeled by interest rate increases. This situation is not unique to SVB although they are unique in that their depositors were shitty tech companies burning through a lot of cash. Hopefully other banks won't have this issue.

Obviously this case will have particularities and perhaps post 08 regulatory measures and capital requirements will mitigate the damage caused by any form of contagion but I'm just saying this could be bad. That's what the official line is trying to say in order to calm people down but hopefully it's not lip service this time. I mean the fed's predictions have been wrong time and time again so wouldn't always believe the technocrats.

 

[Deleted member 22354]

Its nothing, and especially not as bad as the GFC 2008, bc there is no 1. interconnectedness btwn banks and 2. no risky shit in their books. Most banks have gov rel bonds now (the new great shit with 0 risk (jfl)), they just lost in value. So everything will be fine.

 

[Octavian_Augustus]

Its nothing, and especially not as bad as the GFC 2008, bc there is no 1. interconnectedness btwn banks and 2. no risky shit in their books. Most banks have gov rel bonds now (the new great shit with 0 risk (jfl)), they just lost in value. So everything will be fine.

1. Yes there is significant bank inter-lending and interconnectedness...

2. A lot of banks underwrote debt that have been pummeled by increasing interest rates. Banks are in the business of loaning to businesses and underwriting debt offerings... so yes they have more than gov regulated bonds. They still have it on their BS and can't get rid of it. There are idiosyncracies that indicate this could just be an SVB issue given their depositors were shitty tech companies with no cash flows that raised in 20-21 and were burning through a lot of cash. Other banks should have a more stable deposit base so hopefully that will help out but again too early to say.

The tech world will be hurting badly and this will be felt.

Hopefully not an 08 situation but I wouldn't call this nothing.

 

[Deleted member 22354]

1. Yes there is significant bank inter-lending and interconnectedness...

Not as significant as in 08 bc of more capital/liquidity buffers + dodd frank act. Only the short-term funding through the interbank lending market is worth mentioning. This wont cause the same domino effect as lehman brothers.

2. A lot of banks underwrote debt that have been pummeled by increasing interest rates.

They may have underwritten debt which could lead to losses on their balance sheets, BUT they can get rid of it through selling or trading debt securities in the secondary market, they just have to accept a lower price than what they paid for the securities.

The tech world will be hurting badly and this will be felt.

Not really, imo the SVB will be quickly acquired by another bank, short term it will only hurt vc. But remember even lehman bond holders had a very high recovery rate

 

[Octavian_Augustus]

Not as significant as in 08 bc of more capital/liquidity buffers + dodd frank act. Only the short-term funding through the interbank lending market is worth mentioning. This wont cause the same domino effect as lehman brothers.


They may have underwritten debt which could lead to losses on their balance sheets, BUT they can get rid of it through selling or trading debt securities in the secondary market, they just have to accept a lower price than what they paid for the securities.


Not really, imo the SVB will be quickly acquired by another bank, short term it will only hurt vc. But remember even lehman bond holders had a very high recovery rate

First point: Correct, there is significantly more regulation and more stringent capital requirements since the GFC. The interbank lending market might have a slight impact although nothing like 08 but it's worth keeping in mind. This is a positive. Also banks still trade derivatives etc with each other post 2008 it's just more regulated. Domino effects can also arise from overall panic (as illustrated in the stock market and falling bank stocks), asset being held by multiple banks being driven down in value by sell-offs to pay back depositors at SVB, companies going under or laying off their employees which would cause a more general macro-economic downturn etc. The financial sector and economy are whole webs of entanglements and thinking we can get through this cleanly is a bit fanciful.

Second point: Getting rid of it through selling debt securities in the secondary market is what caused this whole mess. SVB took a huge loss because of it which caused the bank run. In this scenario you keep it on your books until interest rates decrease and the price of the asset is acceptable for you to sell it without posting massive losses (or you keep it until maturity and get principal back). Banks that underwrote Twitter, Citrix and other loss making deals are keeping the debt in their books otherwise they would post massive losses. The fear is that these losses will be realized if they are forced to sell to pay back deposits or meet capital requirements if a bank run occurs due to panic.

Third point: That's already out of the question. The regulator has taken over and only a partial sale is possible at this point. It's uncertain what creditors and customers will get back. This is a developing story with a lot of uncertainty. Hopefully they can recover a good %. Also not only VC will be hurt a lot of established tech companies might lose some of their deposits and with tight capital markets that could lead to bankruptcies.

 

[mogger123]

Not necessarily SIVB is a main part of the problem, but for sure corrections needed, which I been saying for as long as I been here.

Finance caps to fall 30% further, overall market to correct 15 to 20%, rates to rise through the year

the market has already corrected about 20%

do you not think these rate hikes have been priced in?

 

[Chinacurry]

the market has already corrected about 20%

do you not think these rate hikes have been priced in?

No, I think the hikes amd their micro impacts are priced in, not the macro.

Could be wrong but I still see sp500 below 3400 this year maybe even 3200

 

[mogger123]

No, I think the hikes amd their micro impacts are priced in, not the macro.

Could be wrong but I still see sp500 below 3400 this year maybe even 3200

I might be coping but I still think anything under 4k is oversold

 

[Crusile]

Economics is made-up om the go, dont believe anything. Its fake as fiat, you need gold + etherem + bitcoins, now. NOT fake bank money