Silicon Valley Bank: Crisis Over?

The failure of Silicon Valley Bank (SVB) took just a few days and the response from regulators has been just as quick. But what have they done, is the banking system now safe and should we buy the dip?

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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.

[yiguanas]

Great to see you putting out more videos when there's a crisis, Ramin.

[simony]

I really like the bail in idea, just include the management in the group who lose everything along with shareholders to reward their incompetence.

[anthonyferris]

The CEO of SVB sold 3.6 million of stock in the bank, days before the collapse. Which was lucky. 😆

[guantou]

I read this morning that SVB bankers received the highest bonuses of all global banks, probably indicating they were pushing the boundaries of legal/ethical banking.
Likewise a Chinese bank have been issuing 25 year mortgages to 80 year olds. Signs that all is not well in banking are always discovered too late.

So much value in one channel. Can't thank you enough Ramin 👍

[finnwheatley]

Great content as ever, although the VC isn’t (just) posthumously awarded

[Incognito-vcwj]

Taking rich people’s games seriously will be the downfall of this country. At the end of the day, these are rich people who pay a group of employees to increase their riches even further. They don’t add any value to this world yet we treat them like we can’t survive without them. F them all, let the lose their money like millions of other people do in real life.

[baconbits]

Do not be fooled by one day equity moves- or even 1 week, equities are fickle. The S&P dropped 9% the first trading day after Lehman failed, and then rose 3 out of the next 4 days (with another nasty down day on Wednesday) and finished the week 4% higher than that 9% close down. It was still holding a hair above that low 2 weeks later on the close of the 26th (another friday) before collapsing on the following monday. It would not permanently retake that post Lehman low out for more than 3 years.

[Andrew-dpkf]

JPow should still press on with a 50bps hike to progress the inflation problem.
The issue with SVP was very poor rusk management, the underlying issues with low yield treasuries is already done. There’s nothing anyone can do there, hike or no hike the price damage is done.

[Carlos-imhn]

Very clear and lucid. You shine a light on the banking system. Thank you.

[boxcar]

“The fund will recoup any losses by assessing more premiums on the banks”

Would love to know how all banks would pay these higher premiums, I’m guessing it’s not by lower premiums and fees on depositors.

[FlatRent]

I'm 0.18 in and Ramin says "should we buy the dip"... Too late 🙂

[chopsandarchie]

Ramin, as you should know, a Victoria Cross is rarely awarded and when it is it for outstanding valour. Sadly, many acts of bravery are by way of sacrifice. This is a bit different from retrospective bailing out of bank depositors. It is not the act of dying that makes a soldier qualify for a VC, but the his heroism. All SVB had to do was fail to qualify for a bailout.

[Geronimo]

Isn't Capitalism great? Yeah, like who needs government and their stupid regulations, telling us what to do? Gimme a break!

[AmareAmable]

How come you didn’t see this crisis coming and give us a heads up 😭

[robertlazorko]

"Mug shots" - LOL. Ramin: you know what you did there :)

[jmitterii]

It just front runs crappy long maturity treasuries... crappy because they're stuck in a low yield thus below par on the open market to dump it for cash.
To me this makes perfect sense to do. But it should be noted to other banks to not put so much in long dated treasuries... but ladder their stuff like they're supposed to do.
Their liquid reserve needs to be more short dated. This shouldn't happen. We're not even talking about bad loans that are likely to happen at some point.

[petermorris]

Just a slight correction - Sailors and Airmen can, and have, won the Victoria Cross too.

[georgeorwell-ilwz]

Ramin on damage limitation duty for the Financial Investment Industrial Complex.

Let's look at the facts. 'A further run on the bank is highly unlikely'. I disagree. The Fed backstop is only for $25bn. There are currently well over $650bn in unrealised loses in asset portfolios across the banking sector, that's much higher than during the GFC.

Are deposits safe? Have you looked at how much the FDIC actually has in reserves to cover such loses? Nowhere near what's required.... so where is the money coming from?

'Banks are now safe'. Well, no. Deposits are allegedly covered, but not the investors. That's because the Fed simply cannot afford the scale required for another bail in.

Which would be an indication of the size of the risk and its probability....

[privat]

Thanks for sharing your knowledge!
Question: Why do people or institutions invest in long government bonds in times when the yield is very low? Which means that the price of the bond is very high. And if the interest rate rises, the price of the bond falls. It's more likely that the yield/interest rate will increase over time and lower the bond's value. So, what is the incentive to invest in times like this? For example, if banks invest in long term government bonds with low yield that will lead to a mismatch in duration between borrowing and lending.

And How can banks hedge against higher interest rates without selling their long-term government bonds and make a loss? We have seen recent example of this regarding SVB, Silicon Valley Bank and Signature bank.