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People Are Waking Up To The Gravity That This Was One Of The Biggest Financial Euphoria Episodes

A weekend topic starting with the Epoch Times. “The Federal Reserve adopting a loose monetary policy—slashing interest rates and buying Treasurys—for an extended period can lead to ‘financial turmoil’ several years later, the central bank stated in a new paper. Economists at the Fed Bank of San Francisco published a new study, titled ‘Loose Monetary Policy and Financial Stability,’ (pdf) trying to determine whether accommodative conditions can lead to financial turmoil in the future. The researchers assessed long-term data to figure out if expanding money and credit can birth rampant speculation, raise household debt, and initiate an investment boom and ‘capital overhang.'”

“This was the first comprehensive study to extend the evidence that ‘monetary policy has implications’ for the stability of the U.S. financial system, authors noted. The study considered the dangers of ‘lower for longer monetary policy’ that can lead to the consequence of financial crises. ‘Are periods of persistently loose monetary policy more crisis-prone? This section argues that the answer to this question is in the affirmative. We see significant estimates in the medium term, that is around horizons of 5 to 10 years. Financial crises are predicted by loose monetary policy several years ahead.'”

From Worth. “Cenote Sagrado was a sacred pit, geologically a sinkhole in the ancient Mayan city of Chichen Itza Mexico. There, human sacrifices to the rain god Chaac were made. There is a direct connection between these ancient Mayan sacrifices and the Fed’s setting higher interest rates today. In Chichen Itza, the gods had to be appeased. Today it is the evil of inflation. Financial markets are our current gods. They must be kept happy. By raising interest rates in quick succession (to around 4.5 percent), the Fed is attempting to stamp out the rampant rise in asset prices, which they caused by lowering rates (to near zero) after the 2008 financial crisis and then again in 2020, to ward off a COVID recession or worse.”

“These moves spurred speculation in everything from used car dealer Carvana and meme stocks to multimillion-dollar Bored Ape NFT’s and Miami condos. This massive money supply dose also affected grocery store basics and rents nationwide, causing real pain to real people. It destroys savings and lowers the living standards of everyone whose income is from wages. No longer seized by agents of the Mayan chiefs, today’s sacrificial lambs are notified by emails from Meta, Alphabet, Microsoft, Amazon, Salesforce, and a hundred other companies hurling employees out of their office towers or work-from-home living rooms… into the sinkholes of unemployment.”

From The Hill. “How should Congress assess the Federal Reserve’s track record as an investor in residential mortgage-backed securities (MBS)?  Regardless of Fed spin, it merits a failing grade. The Fed’s COVID-era intervention in the mortgage markets fueled the second real estate bubble of the 21st century. The bubble ended when the Fed stopped purchasing MBS and raised rates to fight inflation. While time will tell whether recent increases in home prices are reversed, the end of the bubble has already cost the Fed over $400 billion in losses on its MBS investments.”

“In a radical ‘temporary’ policy response to the 2008 financial crisis, the Fed began intervening directly in the mortgage market. Through a series of MBS purchases, the Fed’s MBS portfolio ballooned from $0 to $1.77 trillion by August 2017. The Fed subsequently altered policy and slowly reduced its MBS holdings. By March 2020, it held about $1.4 trillion in MBS.”

“When the COVID crisis hit in March 2020, the Fed decided to reinstate its 2008 financial crisis rescue plan. It resumed purchasing MBS as well as Treasury notes and bonds. By the time it stopped its purchases in the spring of 2022, it owned $2.7 trillion in MBS. The Fed had become the largest investor in MBS in the world. By spring 2022, it owned nearly 22 percent of all 1-to-4 family residential mortgages in the U.S. By Sept. 30, the date of the last available quarterly Fed consolidated financial statement, the Fed had lost $438 billion on its MBS investments. These losses will increase if the fight to subdue inflation requires still higher interest rates.”

From Business Today. “Industrialist Uday Kotak on Friday said that an accident like the recent Silicon Valley Bank (SVB) crisis was waiting to happen ‘somewhere.’ On Thursday, US-based Silicon Valley Bank shares dropped by 60 per cent, following which investors lost around $80 billion in value from bank shares. This triggered a market collapse not just in the US’s Wall Street but also in India. Kotak reacting to the development said: ‘Overnight developments in US banking: markets, analysts, investors underestimate the importance of financial stability for the balance sheet of a bank. When interest rates move up 500 bps from zero in a year, an accident was waiting to happen somewhere.'”

The Globe and Mail. “Silicon Valley Bank, a mainstay financier across the tech world, including a presence in Canada, was shut Friday by California’s Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver. The bank will reopen Monday and depositors will have access to insured deposits, though the amount is capped at US$250,000 per account. The shutdown of SVB stemmed from its decision in 2021 to pull back on lending and instead stash tens of billions into long-term, low-interest-rate mortgage-backed securities. But as interest rates rose, bond values fell, saddling SVB with a paper loss, which it crystalized when it was forced to sell some bonds for a US$1.8-billion loss.”

“‘It’s a sobering reminder that a financial institution is built on trust and confidence, not deposits and loans,’ said John Ruffolo, managing partner with Toronto-based technology financier Maverix Private Equity. ‘When that confidence drains away, the speed at which the organization falls is like a dam bursting.’ Mark McQueen, former head of Canadian Imperial Bank of Commerce’s innovation banking group, said ‘it’s such an unnecessary chain of events. I can’t believe it. It’s tragic.'”

From Forbes. “The broad sell-off was ‘undoubtedly an unwelcome reminder’ of the 2008 financial crisis, says Sevens Report analyst Tom Essaye, noting SVB scrambled and ultimately failed to stay afloat after it was forced to sell a bond portfolio at a $1.8 billion loss because higher interest rates pushed bond prices ‘far below’ where they were when purchased. ‘In [this new] interest rate environment, business models matter, profits matter and unrealistic projections of profitability 5 to 10 years down the road won’t cut it,’ says Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. ‘There are a lot of companies and speculative bubbles that aren’t coming back from this round of Fed intervention.'”

The Associated Press. “Silicon Valley Bank, the nation’s 16th-largest bank, failed after depositors hurried to withdraw money this week amid anxiety over the bank’s health. It was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008. ‘This is an extinction-level event for startups,’ said Garry Tan, CEO of Y Combinator, a startup incubator that launched Airbnb, DoorDash and Dropbox and has referred hundreds of entrepreneurs to the bank. ‘I literally have been hearing from hundreds of our founders asking for help on how they can get through this. They are asking, ‘Do I have to furlough my workers?’”

“As part of the seizure, California bank regulators and the FDIC transferred the bank’s assets to a newly created institution — the Deposit Insurance Bank of Santa Clara. The new bank will start paying out insured deposits on Monday. Then the FDIC and California regulators plan to sell off the rest of the assets to make other depositors whole.”

“Bill Tyler, the CEO of TWG Supply in Grapevine, Texas, said he first realized something was wrong when his employees texted him at 6:30 a.m. Friday to complain that they did not receive their paychecks.TWG, which has just 18 employees, had already sent the money for the checks to a payroll services provider that used Silicon Valley Bank. Tyler was scrambling to figure out how to pay his workers. ‘We’re waiting on roughly $27,000,’ he said. ‘It’s already not a timely payment. It’s already an uncomfortable position. I don’t want to ask any employees, to say, ‘Hey, can you wait until mid-next week to get paid?’”

“Ashley Tyrner, CEO of FarmboxRx, said she had spoken to several friends whose businesses are backed by venture capital. She described them as being ‘beside themselves’ over the bank’s failure. Tyrner’s chief operating officer tried to withdraw her company’s funds on Thursday but failed to do so in time. ‘One friend said they couldn’t make payroll today and cried when they had to inform 200 employees because of this issue,’ Tyrner said.”

The New York Post. “Building managers at Silicon Valley Bank’s Manhattan branch reportedly called the police Friday morning after a group of tech founders showed up and attempted to pull out their cash. Police responded after a group of ‘about a dozen founders’ went to SVB’s Manhattan location on Park Avenue, journalist Eric Newcomer said in a Substack post. One of the founders was former Lyft executive Dor Levi, who provided Newcomer with text updates from the scene.”

“The incident was the latest indication of growing panic among investors linked to the tech lender, which warned of a cash crunch this week that sparked a run on the bank. SVB blocked Levi and others who gathered from entering the building. By around 9:20 a.m. ET, building officials ‘called the police’ and a pair of NYPD vehicles had arrived. Levi reportedly added that there were ‘more founders coming every minute’ before the police response. Similarly, dozens of clients lined up to empty their accounts from a SVB branch in Menlo Park, California — an area populated by venture capitalist offices — video posted to Twitter shows. The long line of founders stretched around the block, leaving the founders to wait in the sidewalk-less streets and in the pouring rain.”

From Business Insider. “‘This is the first sign there might be some kind of crack in the financial system,’ Bill Smead, the chairman of Smead Capital Management, a $5.5 billion asset manager, told The Wall Street Journal. ‘People are waking up to the gravity that this was one of the biggest financial euphoria episodes.'”

“A common denominator for Silicon Valley Bank and Silvergate — and indeed banks across the world — is that a series of interest-rate hikes from a hawkish Federal Reserve has drastically cut the value of the long-term bonds they bought before rates went up. Veterans of the 2007-08 financial crisis may remember the term ‘mortgage-backed securities.’ There are parallels with the situation facing banks today. This time the concern for banks isn’t risky mortgage-backed securities but the bonds they bought in the wake of the financial crisis.”

“Interest rates have shot up from their postcrisis lows, meaning lower-interest bonds bought before 2022 are worth less than they paid for them. Indeed, on Monday, the Federal Deposit Insurance Corporation said US lenders were sitting on about $620 billion of unrealized losses on securities such as low-interest bonds. The problem is, banks need to sell bonds to raise cash if customers decide to withdraw money en masse — the so-called bank run. And that was the crux of the problem for Silvergate and Silicon Valley Bank: They were forced to meet customer withdrawals by selling off low-rate bonds at a loss.”

“‘Lots of banks hold large portfolios of bonds, and rising interest rates make these less valuable,’ Russ Mould, an investment director at the stockbroker AJ Bell, said. He added that the situation at Silicon Valley Bank was ‘a reminder that many institutions are sitting on large unrealized losses’ on bond holdings. Mould said the ‘fire sale’ of Silicon Valley Bank’s bond portfolio raised broader concerns. ‘In a heavily interconnected banking industry,’ he said, ‘it’s not so easy to compartmentalize these sorts of events, which often hint at vulnerabilities in the wider system.'”

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This Post Has 189 Comments

  1. ‘By around 9:20 a.m. ET, building officials ‘called the police’ and a pair of NYPD vehicles had arrived. Levi reportedly added that there were ‘more founders coming every minute’ before the police response. Similarly, dozens of clients lined up to empty their accounts from a SVB branch in Menlo Park, California — an area populated by venture capitalist offices — video posted to Twitter shows. The long line of founders stretched around the block, leaving the founders to wait in the sidewalk-less streets and in the pouring rain’

    Open the gates, save the A shares!

    1. Schadenfreude at its finest to see these fat-cat financiers who have been the Democrat-Bolsheviks’ financial mainstays falling victim to the corrupt system they’ve been enabling with their rabid support to the Brandon regime & DNC.

        1. https://twitter.com/The_Real_Fly/status/1634033402440458243?cxt=HHwWhoCx-ZquoK0tAAAA:
          Last year this time SVB was receiving awards for social responsibility $SIVB

          https://twitter.com/The_Real_Fly/status/1634034338139439104?cxt=HHwWgIC8udbkoK0tAAAA: WOKE SILICON VALLEY BANK SVB WAS ALL ABOUT EQUITY AND INCLUSION. NOW THEY’RE ALL ABOUT FULL F@#KING COLLAPSE ### $SIVB

          https://twitter.com/The_Real_Fly/status/1634036330035281921?cxt=HHwWgoCwnc_Yoa0tAAAA:
          Head of Diversity at $SIVB

          https://twitter.com/The_Real_Fly/status/1634039311141142528?cxt=HHwWgIC8mZKGo60tAAAA:
          LET’S TALK ABOUT WHY ⁦@BillAckman MIGHT WANT A GOVT SPONSORED BAILOUT OF A COMPANY WHO PLACES VIRTUE SIGNALING AHEAD OF RESPONSIBLE BANKING. $SIVB

          https://twitter.com/The_Real_Fly/status/1634039628754833409?cxt=HHwWgsC-zdCYo60tAAAA:
          OMG 67% OF SVB ARE DIVERSE. HOW CAN I SEND MY TAX DOLLARS TO SAVE THEM?

      2. Unfortunately the money they are lining up to withdraw was originally invested by money managers of pension funds and 401K’s. IOW regular Americans.

        It’s a siphon.

        1. “Ugh! Now I’m worried they will get a bail out.”

          Funny, but correct observation.

          They will be bailed out. If not uncle Jerry, Aunt felon will make sure they get bailed out somehow.

          3. Fresh call after yer last prediction:

            Butters has been wrong in everything he’s said for over a year straight, yet he keeps saying the same thing.

  3. It’s funny that Jerry and the girls sit right at the heart of another fiasco.

    ‘Bill Tyler, the CEO of TWG Supply in Grapevine, Texas, said he first realized something was wrong when his employees texted him at 6:30 a.m. Friday to complain that they did not receive their paychecks’

    Not at 8 AM, 6:30.

    2. Something tells me that the complacent, oblivious sheeple are going to start taking a more active interest in our rotten-to-the-core financial system and the collusion between the banksters & the Republicrat duopoly uni-party.

          1. Or research “our rotten-to-the-core financial system and the collusion between the banksters & the Republicrat duopoly uni-party.”

  4. ‘This was the first comprehensive study to extend the evidence that ‘monetary policy has implications’ for the stability of the U.S. financial system, authors noted. The study considered the dangers of ‘lower for longer monetary policy’ that can lead to the consequence of financial crises. ‘Are periods of persistently loose monetary policy more crisis-prone? This section argues that the answer to this question is in the affirmative. We see significant estimates in the medium term, that is around horizons of 5 to 10 years. Financial crises are predicted by loose monetary policy several years ahead’

    Barn door still wide open Jerry. Heck of a job!

    1. “‘Lots of banks hold large portfolios of bonds, and rising interest rates make these less valuable,’

      I read the book “liars poker” long ago and it had something to do with banks having low interest rate mortgages in a high interest rate world and all the tricks they played to stay solvent. This isn’t a new thing its just the new kids in charge forgot history being so much smarter now…

      2. This isn’t a new thing its just the new kids in charge forgot history being so much smarter now…

        They started printing money like they found some magic money tree where you get something for nothing. Now everybody’s going to pay.

          1. What comes after a massive decades long inflation (credit expansion) ends? More of the same? I suppose you might be right, I’ll just go fishing.

    2. Financial crises are predicted by loose monetary policy several years ahead’

      IIRC, we were saying that here as early as 2008, when the zirp insanity got started.

  5. ‘People are waking up to the gravity that this was one of the biggest financial euphoria episodes’

    Paying people to deposit yer money didn’t do it. Hundreds of money hemorrhaging ‘unicorns’ didn’t do it. A minor respiratory illness supposedly kicks off the biggest blow off top in global shack prices ever seen. And now they ‘wake up’?

    A sure sign was when these ‘temporary measures’ weren’t temporary.

  6. ‘The Fed’s COVID-era intervention in the mortgage markets fueled the second real estate bubble of the 21st century. The bubble ended when the Fed stopped purchasing MBS and raised rates to fight inflation’

    One by one, it’s another bubble! IMO we now use the term too casually. A financial mania means pain. Suicides, lost decades. Something to be avoided, no?

        1. Just wait until it comes to light how deep into craptocurrency the us banking system is. That’s when the brown goo will firmly impact the rotating blade.

          1. All of the supposed “smartest guys in the room” – the billionaire set – charged into crypto at high prices. Now they’re sitting on massive losses. Chasing yield never ends well.

        2. So, holding Treasuries brought down the bank. The financial expert says the takeaway is you should hold treasuries. This debt juggling stuff is complicated!

          1. This debt juggling stuff is complicated!”

            Probably not too smart to buy long treasuries at 1% during a MMT period of mass stupidity. How many other big banks or pension funds are holding big bond losses ?

          2. “So, holding Treasuries brought down the bank.”

            Same goes for holding stacks of loans issued at low interest rates for assets that are sinking in value. Sure, inflation hurts Joe Sixpack, but it hurts his lender even more.

            All of this accounting nonsense was conjured up to conceal the off balance sheet $7 Trillion spent in the middle east over the last two decades. Ever notice that not one politician ever mentions that spending as if it was compulsory, our unspoken obligation.

          3. Probably not too smart to buy long treasuries at 1% during a MMT period of mass stupidity.

            “We’re not even thinking about thinking about raising rates.”

            ~Jerome Powell

            That’s what lured them in.

          4. the off balance sheet $7 Trillion spent in the middle east over the last two decades.

            Except as you well know it goes right back into the pockets of the US “elite.” Raytheon, Haliburton, etc. are looting the US Treasury with the help of corrupt, entrenched Congresscritters who keep the sheeple at each others’ throats with their divide and conquer sideshow.

          5. All of this accounting nonsense was conjured up to conceal the off balance sheet $7 Trillion spent in the middle east over the last two decades. Ever notice that not one politician ever mentions that spending as if it was compulsory, our unspoken obligation.

            Yes. And then there’s the minor matter of the $96 Trillion in unfunded liabilities of Social Security and Medicare, that we somehow “have” to pay.

    2. “IMO we now use the term too casually.”

      Also too frequently, in reference to something that happened in the past but has ended, a convenient segue to, ‘real estate can only go up from here.’ Nobody in the REIC wants to acknowledge the painful multiyear hangover ahead to work through the bubble overhang.

      1. “While time will tell whether recent increases in home prices are reversed, the end of the bubble has already cost the Fed over $400 billion in losses on its MBS investments.”

        How many times has the bubble ended by now over the course of the last two decades?

  7. “This was the first comprehensive study to extend the evidence that ‘monetary policy has implications’ for the stability of the U.S. financial system, authors noted.”

    I guess nobody ever got around to determining whether the Roaring Twenties created ripe conditions for the Great Crash of 1929 and Great Depression of the 1930s? Or was it different that time?

    1. ‘In the spring of 1927, Montagu Norman and other governors of European Banks asked the Federal Reserve to ease their monetary policy and they agreed, reducing the rediscount rate from 4 to 3.5%, a move that Lional Robbins described as resulting “in one of the most costly errors committed by it or any other banking system in the last 75 years”. The funds released by the Fed became available to invest in the stock market and “from that date, according to all the evidence, the situation got completely out of control.”’

      https://en.m.wikipedia.org/wiki/The_Great_Crash,_1929

        1. It ssems obvious thanks to someone’s hard work to provide a cogent, memorable account.

    3. I guess nobody ever got around to determining whether the Roaring Twenties created ripe conditions for the Great Crash of 1929 and Great Depression of the 1930s? Or was it different that time?

      Bernanke did, remember? He’s supposedly the resident expert on The Great Depression. His takeaway was that they didn’t print enough. So now here we are after Bernanke’s printing (and his Nobel Prize). Helluva fookin’ job, huh?

  9. today’s sacrificial lambs are notified by emails from Meta, Alphabet, Microsoft, Amazon, Salesforce, and a hundred other companies hurling employees out of their office towers or work-from-home living rooms… into the sinkholes of unemployment.”

    Few things are more heartwarming than watching the creepy Orwellian tech giants that are adjuncts of the Brandon regime & DNC casting their “woke” special snowflake employees into the outer darkness of our oligarch-looted economy to fend for themselves.

    1. Thanks to the federal reserve there’s a generation or two that have no idea of what a recession is other than a textbook term.

    2. There, human sacrifices to the rain god Chaac were made.

      Unlike Chaac Mol, who does not exist, soaring monetary supply and a raging CPI are quite real. And they ravage everyone.

      Many people are in complete denial over this. They believe that the soaring CPI is because of “corporate greed” and has nothing to do with money supply or artificially low interest rates.

  10. Mark McQueen, former head of Canadian Imperial Bank of Commerce’s innovation banking group, said ‘it’s such an unnecessary chain of events. I can’t believe it. It’s tragic.’”

    No, it’s a natural consequence of greed, hubris, & regulatory capture.

  11. “There is a direct connection between these ancient Mayan sacrifices and the Fed’s setting higher interest rates today. In Chichen Itza, the gods had to be appeased. Today it is the evil of inflation. Financial markets are our current gods. They must be kept happy.”

    What about Joe Sixpack, watching the value of the dollars in his savings account rapidly shrink due to inflation? Does he have to be kept happy?

    1. As I mentioned above, the Mayan gods are make believe. Inflation, on the other hand, is quite real, and it hurts the poor the most.

    2. Does he have to be kept happy?

      Thanks for the concern, but I am doing just fine! My utility costs are way down. Gas is down. Eggflation is over. Steaks are just a tad high still, but as I mentioned I found a work around to get the best for less. I don’t buy most of what’s in the fake CPI basket. I am making more money on savings than has been imaginable in over a decade. I’ve had some nice orders to work on in my studio. The water level in the Great Lakes looks right on.

      These cascading defaults in the funfantasy tech finance world will only benefit me. It looks like a great year ahead.

      1. I am making more money on savings than has been imaginable in over a decade.

        Hear hear! I have read and marveled at the ‘CD Laddering’ concept as an anachronism. Maybe I’ll build one of those up if things continue in this direction.

  12. “By the time it stopped its purchases in the spring of 2022, it owned $2.7 trillion in MBS. The Fed had become the largest investor in MBS in the world. By spring 2022, it owned nearly 22 percent of all 1-to-4 family residential mortgages in the U.S.”

    Financial historians may implicate the Fed as a primary driver of the late stages of the Great Housing Bubble, which began when Bill Clinton was in the White House, by the way.

    1. “By Sept. 30, the date of the last available quarterly Fed consolidated financial statement, the Fed had lost $438 billion on its MBS investments. These losses will increase if the fight to subdue inflation requires still higher interest rates.”

      They are between a rock and a hard place.

      1. Let’s say the Fed quietly burns all the MBS paper they hold and pretend that that did not own any. Do they book a loss? Does the Treasury book a loss. Is this similar to making the 1 trillion dollar coin? Me thinks that the Fed burning MBS is akin to flooding more money into the financial system. Just like the peeps that got money for sitting at home during covid-19, PPP and what not. This is why I think UBI will not happen.

        1. Me thinks that the Fed burning MBS is akin to flooding more money into the financial system.

          They are not “burning MBS,” they are just allowing them to roll off. And the “losses” are just based upon the asset values backing the MBS which have declined in market value. They are not taking an actual loss, they are actually earning a small amount of money. The only time they would incur an actual loss is if they openly sold them into the marketplace at a price less than they paid, something they have not even begun to talk about.

          2. Is this why they are loath to reduce the MBS on their balance sheet?

            I certainly don’t know the answer, but I think they are well aware of how badly housing is already crashing, and they probably don’t want to be blamed even more if they suddenly started offloading all of their MBS, which would certainly accelerate things and draw more criticism.

  13. “‘In a heavily interconnected banking industry,’ he said, ‘it’s not so easy to compartmentalize these sorts of events, which often hint at vulnerabilities in the wider system.’”

    I thought the banking industry had learned its lessons about systemic risk in the 2007-2009 episode and had put in place appropriate safeguards? Next thing you know, someone will trot out the ‘too-big-to-fail’ rhetoric, as a prelude to bailouts.

  14. Only 2 choices left for Jerry:
    1. ‘Fight’ inflation or
    2. Save the corrupt financial system

    I think we know based on their past actions. But how long can they prop-up something that can not go on like this forever?

    1. I am still leaning towards them fighting inflation. But we are living in Heinlein’s Crazy Years.

    2. You don’t seem to understand what’s going on, butters. If the FED were to pivot in a period of high inflation, and actually lower rates much less start QE, we would quickly “pivot” to hyperinflation which would destroy the US dollar, lead to a complete economic collapse, and be the end of the FED. Use your noggin’, butters.

  15. “Mould said the ‘fire sale’ of Silicon Valley Bank’s bond portfolio raised broader concerns.”

    If lots of other banks suddenly started dumping bonds the way SVB did, would that tend to make bond yields go higher or lower?

    2. If lots of other banks suddenly started dumping bonds the way SVB did, would that tend to make bond yields go higher or lower?’

      A good question. Lower at first and higher later ? I don’t know is this a simple thing ? am I just confused ?

      1. To entice a buyer the price of the bond has to be lowered, discounting the yield at maturity. Considering the current interest rate trajectory, a rational buyer wants to be compensated for the difference in the yields and the expected interest rate. IMHO, since there will a glut of bonds on the market at reduced prices, new bond yields need to go higher.

  16. ‘This is an extinction-level event for startups,’ said Garry Tan, CEO of Y Combinator, a startup incubator that launched Airbnb, DoorDash and Dropbox and has referred hundreds of entrepreneurs to the bank. ‘I literally have been hearing from hundreds of our founders asking for help on how they can get through this. They are asking, ‘Do I have to furlough my workers?’”

    Good riddance!

    2. ZH: “Expect Mass Layoffs…” – The Real-World Impact Of SVB’s Failure

      Brad Hargreaves explains in a brief thread how SVB’s closure & receivership is going to have a massive impact on the tech ecosystem.

      SVB was not just a dominant player in tech but were highly integrated in some nontraditional ways.

      A few things we’ll see in the coming days / weeks…

      One, SVB was incredibly integrated into the lives of many founders. Not just their startup’s bank & lender, but also provided personal mortgages and other financial services. A whole mess for FDIC (or the eventual buyer) to unwind.

      Two, any “uninsured” balances at SVB – those above $250K – are in jeopardy. FDIC plans to pay them out “as it sells the assets of SVB”. Lots of startups exclusively banked with SVB as *this was a covenant of their debt*!

      CEOs yesterday faced a hard choice: Pull your deposits and go into default on your venture debt or risk losing everything if the bank failed. Many chose to hold tight as SVB’s outright failure seemed outlandish.

      Now they may not be able to make payroll next week.

      Unpaid wages pierce the corporate veil, so boards are *incredibly* sensitive to employing workers they may not be able to pay.

      Expect mass layoffs later today, Monday at latest.

      And given the weak fundraising environment, a number of startups have been reliant on venture lenders – e.g., SVB – not aggressively pursuing amortization of debt or triggering default for covenant foot faults (e.g., cash balances). How will the FDIC handle this? Mass defaults?

      Having run a startup through the GFC, this is the first thing I’ve seen since that is even vaguely reminiscent of that time. Total clusterf@#k.

      One more thing: SVB also offered *wealth management services* to many of its founders. So your corporate lender, corporate bank, personal mortgage lender, and family’s wealth manager is… all one bank, which is now in FDIC receivership. Fun.

      JPow got his f@#$ing debt crisis alright

      1. 10,000 employees (with the help of the law firm of Bendover LLP) piercing the corporate veil to bankrupt the CEO is schadenfreude on steroids.

      2. Listen to the VC in the CNBC Halftime Report tweet. “Treasury management” is what should concern us.

    3. What a fortuitous selection of three companies to mention. None produce anything of value.

      1. I’ve been wondering the same thiiing! Does Sam Bank-Fraud and his P.A.C. parents bank at SVB? If so…. Karma got ’em good.

  21. A reader sent these in:

    U.S. household net worth -2.7% year/year in 4Q22, which is among worst declines on record back to 1950s … a year earlier, it was +15.3%, which was among strongest increases on record

    https://twitter.com/LizAnnSonders/status/1634176087499350020

    SILICON VALLEY’S BIGGEST PROBLEM IS THAT 95% OF ITS DEPOSITS ARE UNINSURED

    https://twitter.com/MaxfieldOnBanks/status/1634064290302038016

    The reason traders are worried about contagion in the banking sector: financial firms have big stockpiles of “held to maturity” bonds that don’t end up on their financial statements, but are losing market value and flag regulators’ attention if sold in bulk.

    https://twitter.com/lisaabramowicz1/status/1634001087999950852

    US bank stocks tumbled by the most in almost three years, with the KBW Bank Index sinking about 7%. “Is this the dam that has burst with regards to more banks raising capital? Is there more to come?”

    https://twitter.com/lisaabramowicz1/status/1633933309628633088

    Silvergate Capital, November 2021 peak to today…Share price: $222 –> $2.82 (-99%) Market Cap $5.9 billion –> $89 million

    https://twitter.com/charliebilello/status/1634043964276736002

    “Our liquidity position is strong, we are adequately capitalized.”
    Alan Schwartz, Bear Stearns, March 2008

    https://twitter.com/Convertbond/status/1633929370283769858

    Yeah. My view is this is largely an asset price bust turning into an old fashioned balance sheet bust. So, you’ve got:
    1) crypto price collapse
    2) private equity price collapse
    3) bond price collapse
    4) maybe a real estate price collapse?
    This could unfurl for a long time.

    https://twitter.com/cullenroche/status/1633998617546723330

    There are plenty of fintwit folk with huge followings who are too young to have seen a full market cycle. They really only know the post-QE period. Some of what they tweet is nonsense. Caveat emptor

    https://twitter.com/simon_ree/status/1634062345629736960

    Am i understanding it right that dumb f*ck VCs and dumb f*ck startups had their cash in Silicon Valley bank and are now for the first time googling counterparty risk? HAHAHHA

    https://twitter.com/ebitdaddy90/status/1633994138898268161

    Bill Ackman is already talking about a tax-payer funded bailout for SVB!😂 For what? You don’t get a govt bailout because you made a shitty MBS investment…You just blowup. Learn from it.

    https://twitter.com/Stephen_Geiger/status/1634032911564386304

    📍Brampton, ON 🇨🇦 “The savage losses keep coming in. This one JUST closed $800K lower than March 2022; when the market decline was already in full swing” #ToRE 👇

    https://twitter.com/ShaziGoalie/status/1634046927573483520

    Never forget

    https://twitter.com/GRomePow/status/1633891470557200384

    Submitted a withdrawal for all of our cash at SVB, client rep said our request would be honored in-kind and just left this???

    https://twitter.com/NickatFP/status/1634003995915177984

    An Airbnb residence in Omaha’s Benson neighborhood sustained more than $2,000 in property damage after a guest allegedly hosted a “fight night” party in late January.

    https://twitter.com/OWHnews/status/1633930818442887169

    Of course

    https://twitter.com/CramerTracker/status/1634020002767544321

    No. Companies need to learn that the era of taxpayer funded bailouts is over. Normal rules of capitalism should apply for all, not just the lower/middle classes.

    https://twitter.com/AvidCommentator/status/1634040219573039104

    Looks like the $150b of their deposits are uninsured. That means those people could lose everything if it goes under. They have an incentive to RUN.

    https://twitter.com/FedGuy12/status/1634038788468113408

    🤡🤡🤡🤡🤡🤡🤡

    https://twitter.com/INArteCarloDoss/status/1634179651001090049

    omg… 3 days ago…

    https://twitter.com/INArteCarloDoss/status/1634246104857321499

    SVB is not unique. Other small/regional/specialist banks will come under pressure because they have been much more aggressive in lending than GSIBs in this cycle. As asset quality deteriorates and cost/availability of funding becomes more problematic, they will be squeezed.

    https://twitter.com/INArteCarloDoss/status/1634244080241655837

    Where is Powell? Where is Yellen? Stop this crisis NOW. Announce that all depositors will be safe. Place SVB with a Top 4 bank. Do this before Monday open or there will be contagion and the crisis will spread.

    https://twitter.com/DavidSacks/status/1634292056821764099

    Ladies and Gentlemen ! David Sacks and the VC Clowns !

    https://twitter.com/INArteCarloDoss/status/1634310919755816962

    Greg Becker, the CEO of Silicon Valley Bank, was a director of the Federal Reserve Bank of San Francisco from 2019 until today

    https://twitter.com/NickTimiraos/status/1634362423124672512

    More bad news for office landlords in that neck of the woods.

    https://twitter.com/ArtemTepler/status/1634357654553350150

    BREAKING: $ROKU had 26% of total cash and cash equivalents held with now collapsed Silicon Valley Bank, per Bloomberg.

    https://twitter.com/unusual_whales/status/1634317682089803777

    The entire Valley is scrambling over SVB. Crazy 👇

    https://twitter.com/MenthorQpro/status/1634329485897023492

    Looks like SVB held $120b in securities but basically didn’t hedge their interest rate exposure. That’s totally crazy. No wonder they failed.

    https://twitter.com/FedGuy12/status/1634360773555388416

    BREAKING: Nearly half of all US venture capital-backed startups were involved with Silicon Valley Bank, per Bloomberg.

    https://twitter.com/unusual_whales/status/1634336485443862529

    Builders started construction on a bunch of apartments during Covid.

    https://twitter.com/JeffWeniger/status/1634307053299593216

    Remember when Rabois tried to mansplain that they were profitable, all you had to do was ignore expenses……And she had NONE of it.

    https://twitter.com/GRomePow/status/1634302902767616000

    My mortgage just came off a 2.08% fixed interest rate to a 5.05% variable rate (and will go higher again) A 150%+ increase in interest costs for my household this year compared to the past 2yrs. But I don’t think I will cut back other spending.

    https://twitter.com/DrCameronMurray/status/1634020038851334150

    BlockFi’s crypto bankruptcy had $227 million at Silicon Valley Bank. 😳

    https://twitter.com/WallStreetSilv/status/1634320392964784130

    Circle’s USDC, the second largest stablecoin with $43 billion market capitalization, held an undisclosed part of its $9.8 billion cash reserves at failed Silicon Valley Bank.

    https://twitter.com/CoinDesk/status/1634277243487768579

    The FDIC has set up a bridge bank to handle the failure of SVB. That is exceedingly rare. The last one I remember was IndyMac in 2008.

    https://twitter.com/robblackwellAB/status/1634239459557294091

    All of a sudden I’m very curious about this point: Where does Airbnb keep their deposits for future bookings? (Please don’t tell me in a $5BN checking account at SVB 😩)

    https://twitter.com/rohindhar/status/1634271208165474305

    The housing supply narrative is a mirage. Americans have more houses per person than at the height of the 2008 housing bubble. The problem is allocation, not supply.

    https://twitter.com/ValuablOfficial/status/1633792247643914252

    “Among the questions: What other firms are saddled with low-interest bonds that can’t be divested without big losses? Are US banks in a costly fight to keep depositors happy? And the big one: Why didn’t anyone see this coming?”

    https://twitter.com/m3_melody/status/1634252219011694592

    Redfin: U.S. Luxury Home Purchases Sink By 45% in 1Q

    https://twitter.com/DeItaone/status/1634178044154769411

    It took two years for @evictionlab to register 1M cases. We added the second million in a year.

    https://twitter.com/ps_hepburn/status/1633923891222532096

    Not a single sell rating from any wall street firm covering SIVB. Says everything you need to know about the value of analyst recommendations and price targets.

    https://twitter.com/PeterMallouk/status/1634303552943190017

    “Rising interest rates are good for banks.”

    https://twitter.com/charliebilello/status/1634205572676370433

    There were zero US bank failures in 2021 and 2022. The last time we had 2 straight years with no failures: 2005/2006.

    https://twitter.com/charliebilello/status/1634200557656109057

    How is it this bank escaped stress test requirements even if they are systematically important to one of the biggest drivers of the US economy? They failed to file SEC docs stating they did not have a risk officer on staff for 8 mos while the CEO was on SFO Fed? DUH?

    https://twitter.com/pjanram/status/1634367379604946945

    Dick Fuld, CEO, was on the Board of New York Fed during and just prior to Lehman Collapse. Bad optics, to say the least. As of the latest filing, SIVB had maxed out their borrowings at the SFO Fed’s of yesterday. Something very wrong here. Taxpayers are being misled by our gov’t.

    https://twitter.com/pjanram/status/1634366094059208705

    Danielle DiMartino Booth

    HEADLINE ALERT; “SVB Is First FDIC-Insured Institution to Fail in 2023” The “tell” is the word FIRST

    https://twitter.com/DiMartinoBooth/status/1634234564687036416

    Imagine losing your job b/c your dying start up has its working capital stuck at SVB. So you’ll have to put your $2mil SF house up for sale at a 35% loss b/c you can’t make the mortgage payment. Will you rent at $6k/mo or move out-of-state? There are folks dealing with this now

    https://twitter.com/menlobear/status/1634364840218357761

    Shades of 1930’s. This is my bank in Wellesley this morning. Boston Private Bank, recently acquired by Silicon Valley Bank. Ruh, roh.

    https://twitter.com/LawrenceLepard/status/1634275111204421632

    SVB collapsed because Tech startups are bleeding cash so fast they ran down the bank’s deposits.

    Uninsured deposits (> $250k) are wiped out which will cause more Tech failures: They survived Y2K but not this mega bubble.

    https://twitter.com/SuburbanDrone/status/1634345866776420352

    Startup: “All our money is in SVB we can’t make payroll next week” FDIC:

    https://twitter.com/ParikPatelCFA/status/1634368614043389952

    Idiots at ROKU rather have half a billion at a bank w no insurance than in Tbills fully guaranteed earning 5%. That’s negligence

    https://twitter.com/highyield6/status/1634347400465637376

    2. Am i understanding it right that dumb f*ck VCs and dumb f*ck startups had their cash in Silicon Valley bank and are now for the first time googling counterparty risk? HAHAHHA

      Great reply: Just now I’m learning that not all VCs and startup founders are polyglot geniuses and in fact a large portion of them are unsophisticated grifters that were attracted to a space that lionized style over substance. This is shocking

      2. Unsophisticated grifters – see Alex Mashinsky from Celsius. One could argue he was in fact sophisticated with the grift but not business.

    3. No. Companies need to learn that the era of taxpayer funded bailouts is over. Normal rules of capitalism should apply for all, not just the lower/middle classes.

      Interesting reply: I agree however this has thrown up something rather interesting. It seems the Fed reduced the banks’ reserve requirement to 0 during the pandemic! Did you know this? I missed it in all the fun.

    5. (H)Ackman whining that other start-ups will withdraw from their banks and cause a run.

      Me: “So the f*ck what!”

    6. “SVB collapsed because Tech startups are bleeding cash so fast they ran down the bank’s deposits.”

      Seems like tech startups bleeding cash is nothing new.

      The problem, which by the way is not unique to SVB, is that withdrawals have to be covered from the proceeds of bond sales. Since bonds historically CR9Red last year, there aren’t quite enough liquid assets to cover unusually heavy withdrawal demand.

    7. Imagine losing your job b/c your dying start up has its working capital stuck at SVB. So you’ll have to put your $2mil SF house up for sale at a 35% loss b/c you can’t make the mortgage payment. Will you rent at $6k/mo or move out-of-state? There are folks dealing with this now

      Imagine it’s been less than 24 hours and this is your reaction. Hysterical much?

    8. “Idiots at ROKU rather have half a billion at a bank w no insurance than in Tbills fully guaranteed earning 5%. That’s negligence”

      To be fair, I wouldn’t trust T-bills either. After the truckers’ protest in Canada, I wouldn’t trust *anything* with counterparty risk. If you can’t lay your hands on it, then either pull it out or consider it stolen.

  22. Markets
    Crypto Traders Suffer Over $300M of Losses in Liquidations Amid Market Crash
    The largest long liquidation in at least a month suggests Thursday’s crash in crypto prices has caught traders off-guard. Bitcoin traders suffered the most losses, some $112 million in the past 24 hours, while ether liquidations surpassed $73 million, per data from CoinGlass.
    By Krisztian Sandor
    AccessTimeIcon
    Mar 9, 2023 at 3:53 p.m. PST
    Updated Mar 10, 2023 at 1:26 p.m. PST
    …
    https://www.coindesk.com/markets/2023/03/09/crypto-traders-suffer-over-300m-of-losses-in-liquidations-amid-market-crash/

        1. “Wait a minute…you didn’t pay for them.”

          rms

          There has been an addition to the hammer drill / Patriot Missile conversation from March 10, 2023

  26. 𝗕𝗲𝗹𝗹𝗶𝗻𝗴𝗵𝗮𝗺, 𝗪𝗔 𝗛𝗼𝘂𝘀𝗶𝗻𝗴 𝗣𝗿𝗶𝗰𝗲𝘀 𝗖𝗿𝗮𝘁𝗲𝗿 𝟭𝟳% 𝗔𝘀 𝗦𝗲𝗮𝘁𝘁𝗹𝗲’𝘀 𝗦𝘂𝗯𝗽𝗿𝗶𝗺𝗲 𝗠𝗼𝗿𝘁𝗴𝗮𝗴𝗲 𝗗𝗲𝗯𝗮𝗰𝗹𝗲 𝗔𝗰𝗰𝗲𝗹𝗲𝗿𝗮𝘁𝗲𝘀

    https://www.movoto.com/wa/98225/market-trends/

    𝘈𝘴 𝘰𝘯𝘦 𝘭𝘦𝘯𝘥𝘦𝘳 𝘤𝘰𝘯𝘤𝘦𝘥𝘦𝘥, “𝘉𝘰𝘳𝘳𝘰𝘸𝘦𝘳𝘴 𝘩𝘢𝘷𝘦 𝘣𝘦𝘦𝘯 𝘨𝘦𝘵𝘵𝘪𝘯𝘨 𝘣𝘪𝘭𝘬𝘦𝘥 𝘧𝘰𝘳 𝘵𝘩𝘦 𝘣𝘦𝘵𝘵𝘦𝘳 𝘱𝘢𝘳𝘵 𝘰𝘧 20 𝘺𝘦𝘢𝘳𝘴.”

  27. Marisa Phan, the managing director at SVB, wrote this on LinkedIn just three weeks before the bank collapse “Feeling inspired and energized after hosting an extraordinary group of pioneering and dynamic women in Silicon Valley Bank’s Female Founder and VC Tahoe Ski Retreat.”

    I think the silicon valley is mostly full of 💩 good at out sourcing and stealing ideas.

  28. Silicon Valley Bank customers left in the cold and the dark
    KPIX CBS SF Bay Area
    Mar 10, 2023
    Customers of Silicon Valley Bank with deposits greater than the FDIC-guaranteed $250,000 wondered if they would be made whole after SVB was closed by regulators.

    https://www.youtube.com/watch?v=8NEqxgv86UA

    5 minutes.

    1. And the dominos are lining up…

      Stablecoin USD Coin (USDC) lost its dollar peg and slumped to an all-time low on Saturday after Circle, the US firm behind the coin, revealed some of the reserves backing it were held at Silicon Valley Bank.

      Circle has $3.3 billion of its $40 billion of USDC reserves at collapsed lender Silicon Valley Bank, the company said in a tweet Friday.

      The coin broke its 1:1 dollar peg and fell as low as $0.88 early Saturday, according to market tracker CoinGecko. It recovered slightly to trade around $0.90.

      https://www.cnn.com/2023/03/11/business/stablecoin-circle-silicon-valley-bank/index.html

  30. CNBC’s Jim Cramer urged viewers to buy Silicon Valley Bank stock last month

    By Ariel Zilber
    March 10, 2023

    CNBC analyst Jim Cramer is once again being pilloried on social media after a clip resurfaced showing the “Mad Money” host recommending viewers buy shares of Silicon Valley Bank’s parent company, which owns the tech-driven commercial lender that swiftly collapsed on Friday.

    “The ninth-best performer to date has been SVB Financial (the bank’s parent company). Don’t yawn,” Cramer told viewers during a Feb. 8 episode of “Mad Money.”

    Cramer listed SVB Financial among his “biggest winners of 2023 … so far” alongside blue-chip stocks such as Meta, Tesla, Warner Bros. Discovery, and Norwegian Cruise Line.

    https://nypost.com/2023/03/10/cnbcs-jim-cramer-touted-silicon-valley-bank-stock/

  32. Hodgetwins
    @hodgetwins

    This is the #1 song on iTunes right now from the Jan 6 Prison Choir and President Trump

    https://twitter.com/hodgetwins/status/1634558244214435841?s=20

    Jan 6 Prison Choir Song Featuring President Trump Hits #1 on iTunes
    Infowars.com

    March 11th 2023, 12:23 pm

    As of Friday, the song was at the top of the iTunes national song chart, ahead of songs by Miley Cyrus, Morgan Wallen and Tim McGraw.

  33. Billionaire Bill Gates dismissed the possibility of people making significant changes to their lifestyle, like giving up meat and becoming vegetarians for the sake of countering the alleged effects of climate change.

    “I don’t think we can count on people living a impoverished lifestyle as a solution to climate change,” Gates said at an event in India on March 1. “You know, meat consumption in India will be less … That’s wonderful. Will all Indians become vegetarians? Will all Americans become vegetarians? I wouldn’t want to count on it. Anybody who wants to evangelize that, they’re welcome to. I won’t resist in any way.”

    Gates had earlier pushed for rich nations to adopt 100 percent synthetic beef that is made from plant proteins like beans or peas, carbs like potato starch, fats like canola or coconut oil, minerals, and flavorings.

    In an online interaction on Reddit in January, Gates pushed for the widespread adoption of plant-based meat products.

    At the India event, Gates also talked about energy consumption. He pointed out that if governments are willing to implement tough laws, air conditioning can simply be banned, which would be “good for the climate.” However, he admitted that this would not happen as a warmer climate will keep raising the demand for cooling.

    Last year, Patrick Moore, one of the founders of Greenpeace, claimed that climate change is based on false narratives. In an email obtained by The Epoch Times, Moore, who left the organization back in 1986, said that Greenpeace was “hijacked” by the political left when they became aware of the money and power involved in the environment movement.

    “The ‘environmental’ movement has become more of a political movement than an environmental movement,” Moore stated. “They are primarily focused on creating narratives, stories, that are designed to instill fear and guilt into the public so the public will send them money.”

    In June last year, the independent foundation Climate Intelligence (CLINTEL) received signatures from over 1,100 scientists and professionals worldwide for its World Climate Declaration (WCD) stating that there is no climate emergency.

    In an interview with The Epoch Times, Marcel Crok, the founder of CLINTEL, said that even if it is accepted that carbon dioxide is the main driver of current climate change, there still is no “climate emergency”

    “We simply state that all evidence so far indicates that the increase in CO2 and the increase in temperature [are] not harmful for us or for nature and therefore the climate hysteria surrounding the topic is totally unjustified [and] that the ‘cure’—getting rid of fossil fuels asap and replacing them with renewables—probably will be worse than the ‘disease’ [climate change].”

    https://www.theepochtimes.com/people-will-not-abandon-lifestyle-for-the-sake-of-climate-change-bill-gates_5113739.html

    3. +1 for an Epoch Times link.

      I see a lot of that fake meat with markdown stickers at the local grocery. Nobody wants to buy it, nobody wants to eat it.

    4. Billionaire Bill Gates dismissed the possibility of people making significant changes to their lifestyle, like giving up meat and becoming vegetarians for the sake of countering the alleged effects of climate change.

      He did a complete 180 the moment he was being asked about his private jet travel and his own carbon footprint. He doesn’t want to give up the luxuries and walk the walk.

      1. I thought he claimed to be exempt, because he is doing very important work to save the world or something.

        2. I thought he claimed to be exempt, because he is doing very important work to save the world or something.

          He did. But his recent comments show he’s having a hard time explaining the hypocrisy, so he’s walking it back.

      2. Gates’ inference: We need clean renewable energy, which will be an easier solution than modifying personal behavior.

  34. I haven’t seen anyone mentioned it yet, so just wanted to say: the SVB failure is a classic Borrow Short, Lend Long liquidity trap.

    It takes a pretty clueless and incompetent set of banksters to set that up for themselves, and then walk right into it.

    2. It was a perfectly reasonable business plan in the Modern Monetary Theory era, when unlimited money printing, borrowing and spending had no effect on inflation or interest rates, and indefinitely low interest rates were a certainty.

        1. Modern Monetary Theory: Reality Check – OpEd
          March 10, 2023
          Comment
          By Claudio Grass

          I’ve written extensively over the past years about the rise of Modern Monetary Theory (MMT) and all the terrible dangers it entailed from its very birth, not just for our economies, but for our societies too. Although it captured media interest and monopolized a lot of “expert” debates at the time, one wouldn’t be blamed for thinking it was merely a “flash in the pan”, just another crazy idea that the establishment entertained for a while to appease the most left-leaning elements in their ranks, but one that thankfully, quickly fizzled out.

          Indeed, it’s been a long time since we saw any mention of it in the mainstream financial press. Most likely, the unsuspecting news consumer would reason, it just fell out of favor, it was simply too ridiculous to try and seriously defend. Regrettably, that assessment is as wrong as can be. This is because MMT instead of finding its way where it belongs, namely the dustbin of history, it is still being defended as a legitimate “alternative” to conventional thinking. It is even being put forward as a way to get us out of the inflationary mess it put us in in the first place.

          For those readers who might fail to recall the tenets of this inspired theory, its main points are that “deficits don’t matter” and neither does debt, while taxation should not be used as a source of government revenue, but just as a way to cool the economy when it gets overheated. MMT teaches us that revenues are generally unimportant and unnecessary, since governments, as the issuers of the currency, can just basically print as much money as they need, hence the theory’s nickname “Magic Money Tree”.

          Even if you have the patience to explore its arguments on a deeper level, MMT is still precisely as unhinged as it looks at first glance and it makes zero sense mathematically, economically or indeed rationally. But then again, in my view at least, it was probably never meant to make sense in any of those ways, because as I have repeatedly argued, it is merely a political strategy disguised as an economic theory. And if you look at it from this perspective, it is really great. It allows us to have our cake and eat it. We can literally make money, as in physically, magically manifest it. We don’t have to actually create or produce anything, or borrow money from someone who did all these tedious things. It’s a nearly perfect theory, and its only flaw is that it doesn’t actually work in real life.
          …
          https://www.eurasiareview.com/10032023-modern-monetary-theory-reality-check-oped/

      1. Even a highly woke individual of whatever pronouns has to acknowledge that is some comedy gold.

  36. One potentially good thing about any SVB bailout.

    I don’t believe your average Woke, student loan holding, Democrat lever puller will appreciate being second in line.

    What is Joe to do? 😂

  39. Is every recession preceded by a chorus of experts insisting that this time is different and a soft landing is underway?

    1. Yahoo Finance
      Workers worried about a ‘looming recession’ pick up more side hustles
      Vera Gibbons
      Sat, March 11, 2023 at 10:04 AM PST·3 min read

      Taylor Beal has a full time job in education and also works not one, not two, but three side hustles. In addition to being a property manager, Beal runs a travel blog, and also takes on gigs as a consultant for school curriculums.

      “I would love to be able to step back from one of my side gigs at some point, but our costs keep going up, and our daycare, which is 30% of our take-home [pay], is about to go up as well,” said the 32-year-old from Townsend, Delaware.

      Zach VanderGraaff, who works full-time as a digital marketer, echoes that sentiment. VanderGraaff, a tuba player by trade, works three side gigs and even takes on the occasional fourth giving private music lessons.
      …
      https://finance.yahoo.com/news/workers-worried-about-a-looming-recession-pick-up-more-side-hustles-180455684.html

      1. I have more side gigs than time. You’ll know the recession has arrived when those dry up.

        1. I seriously saw this happen in the 2007-2009 Great Recession. Both my wife and I found ourselves in many cases facing a choice between replacing formerly paid work with volunteer service, or just discontinuing our services.

    3. ECONOMY
      Economists keep saying there’ll be a recession in six months. It hasn’t happened
      Elisabeth Buchwald
      USA TODAY

      When I was a kid I saw a sign in a restaurant reading “free beer tomorrow.” I anxiously told my parents they could get free beer tomorrow but they rolled their eyes. Then they broke the news to me that tomorrow it’ll be free beer tomorrow.

      The same thing is going on with the economy right now. Only instead of free beer tomorrow, it’s “there’s a recession coming in six months.” Once six months go by, economists again forecast a recession in the next six months.
      …
      https://www.usatoday.com/story/money/economy/2023/03/09/recession-six-months-away/11434858002/

      1. Another genius who jumps off the 50 story building and says “so far so good” as they pass the 25th floor. We heard plenty from these towering intellects in 2005-2007, followed of course by “no could have seen this coming, where’s muh bailout?”

      2. Once six months go by

        When your debt increases just to keep everything running, you are in a recession and simply lying about it.

    4. Yahoo Finance
      Key recession indicator sends investors sharpest warning in 42 years
      Myles Udland
      Wed, March 8, 2023 at 8:02 AM PST·4 min read
      In this article:

      The Treasury market is sending its sharpest warning about recession risks since 1981.

      On Tuesday, the difference in the yield on 2-year and 10-year Treasury notes further inverted, with the yield on the 10-year falling 103 basis points, or 1.03 percentage points, below the yield on the 2-year yield. This dynamic has preceded each of the last eight U.S. recessions.

      By this measure, the yield curve has been inverted since July of last year as investors bet aggressive interest rate hikes from the Federal Reserve to combat inflation would tip the economy into recession.
      …
      https://finance.yahoo.com/news/key-recession-indicator-yield-inversion-treasury-160255114.html

    5. 5 Predictions For An Economic ‘Soft Landing’ That Were Totally Wrong
      Matt Novak
      Contributor
      Feb 7, 2023,12:52pm EST
      Headline from the September 3, 1973 cover of the New York Times about a ″soft landing.″

      If you listen to financial news these days, you’re bound to hear one term over and over again: soft landing. That’s the hope shared by many economic forecasters that the Federal Reserve’s interest rate hikes—an attempt to slow inflation by throwing people out of their jobs—won’t push the economy into a brutal recession.

      The term “soft landing” was first coined by Professor Herman I. Liebling in 1973. Liebling worked at Lafayette College and was a top forecaster at the U.S. Treasury when he predicted a soft landing in the mid-1970s, which turned out to be horribly wrong. The recession of 1973-1975 saw unemployment peak at a whopping 9% and there was a 3.2% decline in GDP.
      …
      https://www.forbes.com/sites/mattnovak/2023/02/07/5-predictions-for-a-soft-landing-that-were-totally-wrong/?sh=177a649217b5

      1. ‘I decided to look through newspaper archives to see just how common the term “soft landing” has been in recent history. And it seems like many experts are always predicting a soft landing, no matter how turbulent that landing actually turns out.’

        As suspected…all landings are soft, until they land.

      2. “5 Predictions For An Economic ‘Soft Landing’ That Were Totally Wrong”

        5 since 1973-1975!?

        I take that is a perfect 5/5 = 100% soft landing prediction failure rate? That’s quite an impressive track record.

    1. A top real estate economist explains why a housing rebound is coming as rising sales and lack of supply look poised to lift home prices
      Phil Rosen Mar 11, 2023, 6:30 AM

      – Nadia Evangelou, senior economist for the National Association of Realtors, sees a rebound coming.
      – Easing inflation will bring mortgage rates down, and tight supplies will send prices higher.
      – In her view, the US will avoid both the recession and housing crash that others have forecasted.
      …
      https://www.businessinsider.in/investment/news/a-top-real-estate-economist-explains-why-a-housing-rebound-is-coming-as-rising-sales-and-lack-of-supply-look-poised-to-lift-home-prices/articleshow/98567264.cms

      1. It’s difficult to notice the steadily rising inventory of homes for sale, the looming recession, the nontransitory above-target inflation rate and the persistently high interest rates until they all hit you on the head like a ton of bricks.

        1. Bloomberg
          Markets
          SVB Fallout
          Traders Brace for More Market Shocks After Week of Wild Swings
          – As one threat recedes, another takes its place, says Bianco
          – At Morgan Stanley, recession trade was widespread with clients
          By Vildana Hajric, Katherine Greifeld and Lu Wang
          March 11, 2023 at 2:32 PM PST

          Bank runs. Stiffening Federal Reserve resolve against inflation. Credit risk, and the risk of recession. Investors absorbed a lot of shocks the last few days. Shaking them off all at once may be impossible.

          For harried traders, the problem is that as one threat recedes, another takes its place. The economy is too hot — or at risk of being gutted by financial stress. One day bond yields surge as inflation anxiety spirals, the next they plummet as the travails of lenders convince everyone the Fed will step back.

          The result has been increasingly wild moves across the spectrum of asset classes, swings that may persist over another news-packed stretch.

          “Next week is impossible to position for,” said Jim Bianco of Bianco Research. “What stocks want is no contagion and the Fed to back off the hiking. They will get one or the other, not both.”
          …

          1. “What stocks want is no contagion and the Fed to back off the hiking. They will get one or the other, not both.”

            That’s a brilliant observation, and one that bodes poorly for Ms. Relitter Economist’s rosy prediction. If contagion happens, a recession follows, killing off what is left of housing demand. And if hiking continues, rates keep climbing, putting last year’s mania prices ever further out of reach for this year’s buyers.

            It’s a checkmate situation for the housing sector.

  41. I had a gander at my meager risk asset HODLings this afternoon, to see how they reacted to last week’s Oh Shit moment, and what I saw was pretty interesting:

    – US stocks down

    – International stocks up

    – Bonds up

    Not sure what you all do with your matress money, but this might not be a bad time to be somewhat diversified away from US stocks.

  42. Federal officials faced growing pressure Saturday to bail out even the biggest customers of the collapsed Silicon Valley Bank, igniting a ferocious political debate over Washington’s role in tamping down potential threats to the broader U.S. financial sector.

    Tech executives, former government officials and at least two Democratic lawmakers called for safeguarding depositors with money at stake in the collapse if a buyer for the bank’s assets isn’t found by Monday, arguing that it’s the only way to limit a cascade of bigger problems.

    1. “Federal officials faced growing pressure Saturday to bail out even the biggest customers of the collapsed Silicon Valley Bank, igniting a ferocious political debate over Washington’s role in tamping down potential threats to the broader U.S. financial sector.”

      I guess those biggest customers knew they were too-bog-to-fail, so that free bailout insurance protection would be available for them if ever needed.

  43. https://twitter.com/peruvian_bull/status/1634622748294275072:

    Let me get this straight:

    SVB’s Chief Administrative Officer was the CFO of Lehman Brothers’ Investment Bank when it collapsed.

    SVB’s Chief Risk Officer was the Managing Director at Deutsche Bank during 2008 AND led credit ratings in 2007.

    The CEO was a director at the San Francisco Fed from 2019 to the present.

    You can’t make this sh!t up ….

    1. Sounds like a bunch of systemic risk experts were in charge?

      Perhaps it slipped their minds that Lehman Brothers turned out not to be too-big-to-fail?

      And given where things headed after Lehman Brothers collapsed, they might reasonably believe themselves to qualify for bailouts this time. Never mind the future mushroom growth of systemically risky financial institutions.

      1. Pinkerton: Green, Woke, and Now Broke — How SVB Became the 2nd Biggest Bank Failure in U.S. History

        JAMES P. PINKERTON11 Mar 20231,683

        Go Woke, Go Bust

        Oh so woke, oh so green, oh so diverse Silicon Valley Bank (SVB) just went bust.

        One can go to its website—still up for who knows how much longer—and see that it claims assets of $212 billion. But as they say, the bigger they are, the harder they fall; and SVB makes for the second largest bank failure in U.S. history.

        Remarkably, 93 percent of the bank’s $161 billion in deposits are uninsured by the Federal Deposit Insurance Corporation (FDIC), which only covers accounts up to $250,000. And Roku, to name just one whale, had $487 million in Silicon Valley Bank. So, just for starters, a lot of CFOs—the folks in charge of handling a company’s money—are gonna have some ‘splaining to do.

        For instance, here’s an SVB headline from January 10, 2022: “Silicon Valley Bank Commits to $5 Billion in Sustainable Finance and Carbon Neutral Operations to Support a Healthier Planet.” Sounds green! But was that the best use of funds? All we know for sure is that CEO Greg Becker chose not to address the fiduciary matter when he said, “Our ability to make a meaningful difference for people and the planet, and to address the systemic risk that climate change presents, is magnified by the outsized impact our innovative clients make.”

        1. $5 Billion in Sustainable Finance and Carbon Neutral Operations to Support a Healthier Planet.

          I wonder who cashed that check.

        3. “Silicon Valley Bank Commits to $5 Billion in Sustainable Finance and Carbon Neutral Operations to Support a Healthier Planet.”

          Seems like FTX was a big donor to all things woke, just before it collapsed. I think I notice a pattern…

  45. Can someone remind me again why people will gladly pay a million bucks for a California shack?

    1. The Financial Times
      Silicon Valley Bank
      Uninsured Silicon Valley Bank depositors seek fire sale of assets
      Customers with more than $250,000 in accounts face anxious wait to learn if they can recover funds
      Vehicles are parked outside a Silicon Valley Bank branch in Wellesley, Massachusetts
      Silicon Valley Bank will reopen on Monday for insured depositors under the newly formed Deposit Insurance National Bank of Santa Clara
      Joshua Franklin and Sujeet Indap in New York, Colby Smith in Washington, and George Hammond in San Francisco 3 hours ago

      US customers of Silicon Valley Bank which are not covered by a government-backed insurance scheme have been rushing to sell their deposits to pay salaries and other operating expenses after the lender was shuttered by regulators.

      SVB will reopen on Monday for insured depositors under the newly formed Deposit Insurance National Bank of Santa Clara, but it is not yet clear whether or when customers with more than $250,000 in their accounts will be able to access all of their money.

      Some are trying to sell at steep discounts to raise cash. On Friday, uninsured SVB deposits were being quoted at a price of between 55 and 65 cents on dollar, according to Cherokee Acquisition, a claims trading platform in bankruptcy cases. Other deposits were being offered for between 70 and 75 cents on the dollar, according to a person familiar with the situation.
      …

    2. The Financial Times
      Silicon Valley Bank
      Crypto group Circle admits $3.3bn exposure to failed Silicon Valley Bank
      Stablecoin’s value drops as crypto market reels from US bank failures
      US exchange Coinbase said it was temporarily pausing conversions between USDC and the US dollar
      Scott Chipolina in London March 11 2023

      Circle, the operator of one of the world’s largest stablecoins, has said $3.3bn of its reserves are trapped in Silicon Valley Bank, triggering a fall in the value of its token as the crypto market reels from the failure of two US banks this week.

      The announcement from Circle overnight on Friday prompted the company’s USDC crypto token to lose its peg to the dollar.

      US exchange Coinbase said it was temporarily pausing conversions between USDC and the US dollar. Rival exchange Binance also said it would pause automatic conversions of USDC to BUSD, a stablecoin that carries the Binance branding.
      …

    3. Will US regulatory authorities be forced to bail out crypto now?

      I hate to sound like a clueless grandpa, but why do we even need stablecoins? Isn’t the good ole dollar stable enough, for the most part?

      1. Arijit Sarkar
        4 hours ago
        Do Kwon had the right idea, banks are risk to fiat-backed stablecoins: CZ
        Given Silicon Valley Bank’s direct involvement in destabilizing USDC prices, CZ blamed banks for increasing the risks of stablecoins.
        Collect this article as an NFT

        The death spiral of the Terra (LUNA) and TerraUSD (UST) ecosystem served as a catalyst to the 2022 bear market — causing losses in the millions, damaging investor sentiment and intensifying the regulatory spotlight over cryptocurrencies. However, the recent depegging of Circle’s USD Coin (USDC) led Binance CEO Changpeng ‘CZ’ Zhao to believe that traditional banks are a risk to stablecoins that are usually pegged 1:1 with fiat currencies, like the US dollar.
        …
        https://cointelegraph.com/news/do-kwon-had-the-right-idea-banks-are-risk-to-fiat-backed-stablecoins-cz

    1. Signature is one of the main banks to the cryptocurrency industry. It had a market value of $4.4 billion as of Friday, according to FactSet. The stock had fallen nearly 40% this year after its crypto banking peer Silvergate Capital liquidated its bank. 

      As of Dec. 31, Signature had $110.4 billion in total assets and $88.6 billion in total deposits, according to a securities filing.

      To stem the damage and stave off a bigger crisis, the Fed and Treasury created an emergency program to backstop deposits at both Signature Bank and Silicon Valley Bank using the Fed’s emergency lending authority.

      While depositors will have access to their money, equity and bondholders at both banks are being wiped out, a senior Treasury official said.

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