It's Wednesday, March 15, 2023, and the banking crisis has crossed the pond, after three U.S. banks, including the #2  biggest bank collapses in U.S.history, in the last week. Now Credit Suisse in Europe is on the ropes, gasping for air.
It has been widely reported, including this report on CNBC, that London-based bank HSBC bought Silicon Valley Bank U.K., for the sum of...get this... one British Pound, or about $1.22, if you round up. This deal allows the deposits of U.K. depositors of the bank to get their deposits covered, so they won't lose money. The equity in Silicon Valley Bank has been reported to be about 1.4 billion pounds, or $1.7 billion U.S. Not a bad deal, $1.22 for a business with $1.7 billion in equity. The madness continues...
In this 32 minute video, Daniella Cambone of Stansberry Research interviews Dr. Nouriel Roubini, often referred to as "Dr. Doom." He is the author of Megathreats, most recently.
"There will be massive disruptions in the next decade"
-Nouriel Roubini, in the interview above
Daniella Cambone not only does a lot of investment and economic related interviews, she does some of the best interviews. Dr. Roubini is known as "Dr. Doom" because he looks at all the potential risks lying ahead as we move forward in this world. At this point in time, as they talk about here, we're in a world of far too much debt, there are major economic shifts happening, major technological disruptions coming, and major geopolitical risks as well. Dr. Roubini does a great job of explaining how the Silicon Valley and other recent bank crashes fit into the big picture, and where things are likely to go from here. He speaks to the simple facts and risks that most people want to ignore. If you really want a Big Picture look at where we are, as nations of people in today's world, watch this interview.
It was a really long, scary weekend for the banking world. Now it's just after noon on Monday, PDT. First Republic Bank stock has been tanking all morning (down 69% in 5 days) and Zion Bancorp is down 36% in 5 days. One report said First Republic is getting funding from J.P. Morgan. Meanwhile, it appears tens of billions of dollars have been flowing into U.S. Treasuries (huge drop in 10-year T-bill yield, 3.97% to 3.55% since 3/7, which signals rise in price due to high demand), and Bitcoin, Ethereum, gold, silver, as well as platinum and paladium (so for all the tweekers out there, it's time to sell those catalytic converters you stole). Where is all that money coming from? Banks, apparently, out of bank deposits and into "safer" investments. The Big Boys (and Girls) are spooked on banks, it seems. It's a traditional flight to safety, it appears, for businesses, major investors, and individuals alike. But there no reports of actual lines of people at banks, that I've seen. So things seem to be calming down, for now.
There was a Fed closed door meeting this morning, no word on that. The Fed's FOMC meeting, where they decided interest rate hikes, or a pause, is next Tuesday and Wednesday.
Silicon Valley Bank collapsed and was taken over by the FDIC a little over 48 hours ago. They are auctioning off (or trying to) the assets, to pay back depositors, as I write this. Tech start-ups around the world, people in the U.S., and many large businesses, are all trying to figure what just happened, and how safe their own money is in whatver bank or banks they use. That's legit. Three banks have collapsed in about four days. Silvergate, Silicon Valley Bank, and Signature Bank.
Disclaimer- check the link on the right for the Disclaimer for this blog
This video above, by Heresy Financial, has the best overall look at what's happened, what it means, and where we go from here, of anything I've seen at this point. It's under 20 minutes long, and I, personally, just sent the link to every business owner I could think of on my social media list. Watch this video, and do your own research to figure out the best course of action in your own circumstances.
I've been watching The Money GPS since about October or 2019, nearly every day. This is more actual data on the SVB collapse, and more solid info, in addition to the video above.
Here's what else I've learned, as of 8 pm PDT Sunday evening (3/12/2023).
One- There IS a Federal Reserve meeting tomorrow, Monday, 3/13/2023, in Washington D.C. at 11:30 am EDT. The info is on their website (link in the last post).
Two- The FDIC has been trying to auction off Silicon Valley Bank, or its assets, since yesterday, and that auction was still going on last I checked. Any proceeds are supposed to go to SVB depositors as soon as possible.
Three- All the depositors of SVB are supposed to get access to the $250,000 that's insured by the FDIC tomorrow, Monday, 3/13/2023. I've heard that 85% to 95% of the deposits WERE NOT insured, they were over the $250,000 amount, since these are businesses, many who had millions of dollars in SVB. So many tech companies MIGHT still have issues with day to day business operations, like payroll, paying suppliers, and everyday operating expenses. No one seems sure just how much money business depositors will have access to tomorrow. Maybe just $250K, maybe more. It depends on the auction to some extent.
So tomorrow morning, Monday, 3/13/2023, could still be pretty sketchy in the financial world, depending on what happens overnight. Time will tell.
In this CNBC report, still less than an hour old, The Fed, The Treasury, and the FDIC have said they will allow Silicon Valley Bank and Signature Bank (also closed over the weekend) depositors access to all their money on Monday. They aren't bailing out the banks, but they are bailing out the depositors. Since most of the SVB depositors are good sized businesses, from Roku and Shopify, to tech start-ups, many have multiple millions in the bank. But the FDIC only insures each depositor up to $250,000, as I understand it. So about 95% of the deposits in SVB were not insured by the FDIC.
Because of this action (by the very people and agencies that caused the fucking inflation and interest rate crisis in the first place) those businesses will be able to make payroll, pay suppliers, and keep functioning as businesses. That's good. If this step had not been taken, it would be like telling U.S. businesses, "Yeah, you're money may not be safe in your bank." That's not cool, and there would have been a major banking meltdown. Check the article linked for the details on the plan to wind things down.
There will still be a lot of other issues in the financial world in coming months, due to high interest rates, bad debt and unrealized losses (low yield treasuries, MBS, CMBS, ABS, CLO's, maybe SLABS) on the books of banks, hedge funds, and othe institutional investors, but this particluar crisis, providing things go pretty much as planned, should calm down, and the business world keeps functioning. That's good.
Well known ans respected financier Bill Ackerman has tweeted that he expects potential bank runs starting Monday (March 13) morning, if the FDIC is not really clear about when Silicon Valley Bank customers will get access to their funds that are over the $250,000 FDIC insured limit. Why he sees the chance of multiple bank runs, and his idea of a solution to stop them, are in this article on thestreet.com.
A "Statement of Support" has been signed by more than 100 venture capital firms and investors, according to this article.
A closed meeting of the Federal Reserve Board of Governors has been scheduled for Monday, March 13, 2023, at 11:30 (EDT) in Washington D.C. It is expected that the meeting will be held under "expedited circumstances," according to this notification on The Fed's website.
Last year, maybe mid-June, as The Fed got serious about raising interest rates, I went looking for a good source of timely real estate information. Reventure Consulting is the best, overall, national U.S. real estate info I've found. He's made unpopular calls for months, since I've been watching, and they are pretty much all coming true. He
Nick looks at the latest data, has a long term perspective, and has done a lot of research on the history of real estate and economic markets in the U.S.. Even more impressing, he's spent part of the last 2-3 months (winter of 2022-23), actually driving around parts of the U.S., seeing with his own eyes what's happening in several regions. This is an incredibly well done (if depressing) look at the Silvergate and Silicon Valley Bank collapses, and how they fit into the economic timeline of history. I believe this video is well worth 20 minutes of your time, if you run a business, have any investments, or just want to better understand why a couple of bank collapses in other parts of the country matter.
