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2021 - Is inflation finally back in the conversation?

Reagan1k

By Reagan1k
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52-80
52-80
Bateshorn
Bateshorn

The only thing more predictable than the GOP running up huge deficits on tax cuts and military spending, is each one suddenly becoming horrified by deficit spending 5 mins after a Democrat is sworn in

PilotsError
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52-80

52-80 19101

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23 minutes ago, 52-80 said:

Its just a cheeky term. Tracy Alloway often injects a little bit of fun into finance. Shes a good commentator

Btw her bloomberg partner in crime Joe Alloway is a longhorn alum. Hes much more annoying though

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Neonmoon

Neonmoon 38127

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12 minutes ago, jimmyjazz said:

Since SVB came up, what's behind their collapse?

My previous company took small amounts of money from them.  They didn't seem flaky or overly risky at the time.

Higher interest rates hurt tech bros and startups. They pulled money out 

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bernorange

bernorange 8348

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13 minutes ago, jimmyjazz said:

Since SVB came up, what's behind their collapse? ...

I just now posted this in the markets thread:

Quote

...
If you’re just catching up, here’s what happened: Silicon Valley Bank lost $1.8 billion in the sale of U.S. treasuries and mortgage-backed securities that it had invested in, owing to rising interest rates. The bank is also contending with shrinking customer deposits, given that its customer base of largely startups has far less money right now to park at a financial institution.

Because it’s in this spot, it decided to raise a bunch of money to safeguard its business. The plan was to sell $1.25 billion of its common stock to investors, $500 million in convertible preferred shares, and $500 million of its common stock in a separate transaction to the private equity firm General Atlantic. The apparent goal was to project that the bank was being conservative and raising this money to stabilize itself.

Oh, though, how it backfired, and who can be surprised, given it issued its announcement about these plans just as the crypto bank Silvergate was announcing that it was winding down operations.

You might imagine that someone at Silicon Valley Bank would have paused to think: “Hmm, maybe today is not the right time to declare that we’re shoring up our balance sheet.” Evidently, they did not. Instead at the end of the market close yesterday, they put out a convoluted press release that was received so badly that it was almost comical. Except that Silicon Valley Bank is a trusted financial partner to many startups and venture firms that are now nervously scrambling to figure out what to do.
...

https://techcrunch.com/2023/03/09/silicon-valley-bank-shoots-self-in-foot/

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52-80

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SVB’s problem was not any wanton bad-doing. It was poorly-timed asset management, triggered by cascading withdrawals. I.e. liquidity, but not insolvency crisis. 
 

They received a shit load of deposit from all that VC cash floating around. The deposits are invested in safe securities, mostly US Treasuries. Each tranche is designated to be tradeable, where it its value is constantly marked-to-market, or held long term to maturity, where book value is (practically) irrelevant. 

They bought a shit load of treasuries back when the yields were shit. Current yields are way up in 2023, so their bond holdings have a ton of unrealized/unmarked losses.

They cant “afford” to sell those bonds because it would force a rerate of their entire balance sheet.  They already sold the tradeable bonds and it incurred a $2b loss. That news caused people to panic and withdraw….so now they can afford even less to sell those other bonds.

Its just a shit cascade.  Their deposits wasnt put into anything toxic like beanie babies or argentine commercial paper or texas headcoach salaries….its simply illiquid

 

 

 

 

 

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52-80

52-80 19101

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6 minutes ago, washparkhorn said:


 

Shitty engagement-farming twitter account

1. The management of the banks deposits was not malfeasance.  They essentially went long treasuries with terrible timing.

2. The executives’ stock sales is not unusual or suspicious. (a) he sells his PSU/RSU/options awards regularly (b) actually held more as of last week than in years past

https://www.sec.gov/edgar/browse/?CIK=1259867
 

 

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DalTxHornFan

DalTxHornFan 3085

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Posted
36 minutes ago, 52-80 said:

SVB’s problem was not any wanton bad-doing. It was poorly-timed asset management, triggered by cascading withdrawals. I.e. liquidity, but not insolvency crisis. 
 

They received a shit load of deposit from all that VC cash floating around. The deposits are invested in safe securities, mostly US Treasuries. Each tranche is designated to be tradeable, where it its value is constantly marked-to-market, or held long term to maturity, where book value is (practically) irrelevant. 

They bought a shit load of treasuries back when the yields were shit. Current yields are way up in 2023, so their bond holdings have a ton of unrealized/unmarked losses.

They cant “afford” to sell those bonds because it would force a rerate of their entire balance sheet.  They already sold the tradeable bonds and it incurred a $2b loss. That news caused people to panic and withdraw….so now they can afford even less to sell those other bonds.

Its just a shit cascade.  Their deposits wasnt put into anything toxic like beanie babies or argentine commercial paper or texas headcoach salaries….its simply illiquid

 

Weird.  I would have expected a $200 Billion bank to have an active ALCO committee.  Apparently not.

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HamsterHookah

HamsterHookah 112

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Few other banks have as much of their assets locked up in fixed-rate securities as SVB, rather than in floating-rate loans. Securities are 56 per cent of SVB’s assets. At Fifth Third, the figure is 25 per cent; at Bank of America, it is 28 per cent. 

For most banks higher rates, in and of themselves, are good news. They help the asset side of the balance sheet more than they hurt the liability side. … SVB is the opposite: higher rates hurt it on the liability side more than they help it on the asset side. As Oppenheimer bank analyst Chris Kotowski sums up, SVB is “a liability-sensitive outlier in a generally asset-sensitive world”.

But there is another, subtler, more dangerous exposure to interest rates: You are the Bank of Startups, and startups are a low-interest-rate phenomenon. When interest rates are low everywhere, a dollar in 20 years is about as good as a dollar today, so a startup whose business model is “we will lose money for a decade building artificial intelligence, and then rake in lots of money in the far future” sounds pretty good. When interest rates are higher, a dollar today is better than a dollar tomorrow, so investors want cash flows. When interest rates were low for a long time, and suddenly become high, all the money that was rushing to your customers is suddenly cut off. Your clients who were “obtaining liquidity through liquidity events, such as IPOs, secondary offerings, SPAC fundraising, venture capital investments, acquisitions and other fundraising activities” stop doing that. Your customers keep taking money out of the bank to pay rent and salaries, but they stop depositing new money. 

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B00M

B00M 6280

Posted
Posted
2 hours ago, Neonmoon said:

Higher interest rates hurt tech bros and startups. They pulled money out 

Higher interest rates that regional banks can’t match means investors pull money out. Eventually the banks will have to sell the old easy money era bonds they desperately need to hold to maturity. At huge losses… This problem will not be limited to SVB.

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52-80

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pet food delivery app companies will get their fdic insurance next week.  a bunch of wall street folks are probably working the entire weekend, finding out how to best to profit from the assets or remaining receivership certificates at distressed values.  those companies will get their cash and run lean for a bit.  and the world will go on.

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Captainant

Captainant 27479

Posted
Posted (edited)
3 hours ago, DalTxHornFan said:

This is a pretty good analysis of SVB. (Of whom, KPMG issued a clean opinion on their financial statements the Friday before last.)

https://www.zerohedge.com/markets/300-billion-reasons-why-svb-contagion-spreading-broader-banking-system

You do know that zerohedge is a kremlin propaganda outlet, right? And also lulz that KPMG could lend credibility - they were part of the auditors asleep at the wheel that let the fraudulent risk profiles of 2008 happen. 

Edited by Captainant
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DalTxHornFan

DalTxHornFan 3085

Posted
Posted
1 minute ago, Captainant said:

You do know that zerohedge is a kremlin propaganda outlet, right? And also lulz that KPMG could lend credibility - they were part of the auditors asleep at the wheel that let the fraudulent risk profiles of 2008 happen. 

Nice.  Do you think that they just made up that data?  Ad hominem attacks are always so persuasive!  Thanks. 

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HamsterHookah

HamsterHookah 112

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30 minutes ago, 52-80 said:

pet food delivery app companies will get their fdic insurance next week.  a bunch of wall street folks are probably working the entire weekend, finding out how to best to profit from the assets or remaining receivership certificates at distressed values.  those companies will get their cash and run lean for a bit.  and the world will go on.

To all founders, investors, and startup employees following the Silicon Valley Bank crisis: Five reasons to take a deep breath right now.

1. On Monday morning, every SVB customer with $250K in their account will get access to that $250K. I know that's not everything, but it's something.

2. Next week, the FDIC will pay an advance dividend to all depositors with >$250K in their account. Not sure how much this will actually be, and it won't be everything, but it's something.

3. Based on SVB's balance sheet, I'd expect the FDIC (or an acquirer) to pay upwards of 90 cents on the uninsured dollar.

Why? They have the assets, they are just tied up and slightly discounted. So IMO customers should not fear getting wiped out.

4. Contagion should be limited. SVB is unique in three ways:
a) 55% of their assets were in securities, more than any other major bank
b) 47% of those securities were long-dated (5+ yrs), more than any other major bank
c) 97% of SVB accounts held >$250K, more than all but BNY Mellon

5. It's going to be a rough next few weeks. Lots of fear, uncertainty, doubt. Ripple effects will come to light. Take it one day at a time.

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52-80

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This is going to make just terrible fodder for more insufferable politically-charged populist rhetoric. 

Its already trickling in: Blah blah silicon fat cats, no bailouts for evil capitalists, etc.

This isn’t plugging in a blackhole of toxic assets with taxpayer money. Bank equity is going to zero and “investors” are rightfully getting wiped out. This is now just making the depositors whole (as much as possible)

 

 

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8 hours ago, DalTxHornFan said:

Nice.  Do you think that they just made up that data?  Ad hominem attacks are always so persuasive!  Thanks. 

People getting reflexively mad at a finance/bloomberg squawk service will never be not funny. 

Like, yeah, CNBC also has a certain editorial tone because of their parent group….but sometimes they just post dry, numerical content ?

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Snake Diggity

Snake Diggity 4614

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41 minutes ago, Neonmoon said:

Let them fail 

SVB was already allowed to fail.  They’re not being bailed out.  The only talk now is whether or not to make the uninsured depositors whole, either thru govt management of SVB’s former assets or thru selling SVB to a larger bank.  And if you’re suggesting SVB’s depositors be “allowed to fail”, then what do you propose be done with all of SVBs assets?

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52-80

52-80 19101

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4 minutes ago, Snake Diggity said:

SVB was already allowed to fail.  They’re not being bailed out.  The only talk now is whether or not to make the uninsured depositors whole, either thru govt management of SVB’s former assets or thru selling SVB to a larger bank.  And if you’re suggesting SVB’s depositors be “allowed to fail”, then what do you propose be done with all of SVBs assets?

This whole thing is happening as exactly it should in a fair and just world.

Depositors are getting their insured $250k for emergency use. The remaining uninsured balance belongs most to them as senior claimant on the assets.

The owners of the bank - shareholders - will have an empty carcass to pick from. Their (speculative) investment failed. But thats not enough to satiate the pitchforked mob?

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Neonmoon

Neonmoon 38127

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1 hour ago, Snake Diggity said:

SVB was already allowed to fail.  They’re not being bailed out.  The only talk now is whether or not to make the uninsured depositors whole, either thru govt management of SVB’s former assets or thru selling SVB to a larger bank.  And if you’re suggesting SVB’s depositors be “allowed to fail”, then what do you propose be done with all of SVBs assets?

No, I was proposing the government not bailout the bank other than the FDIC limit of $250,000

SVB will be sold or the assets divided up. That's fine. 

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Mullet Free

Mullet Free 40

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15 hours ago, Captainant said:

You do know that zerohedge is a kremlin propaganda outlet, right? And also lulz that KPMG could lend credibility - they were part of the auditors asleep at the wheel that let the fraudulent risk profiles of 2008 happen. 

Their financial posts are pretty data driven with a doomer slant. They’re followed by pretty much everyone with a pulse in finance.
 

I would agree it’s not worth taking too much from their political posts.
 

 

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B00M

B00M 6280

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Posted
On 3/10/2023 at 12:43 PM, Mullet Free said:

 

thereitis.gif

Liesman is Fed mouthpiece  

 

was only a matter of time. Get ready for some easing at elevated inflation levels. 

Lol

I love that like 3 days ago the fed had made it clear the next hike would be 50 bps … based on lagging indicators … then they get the first of many failed banks and they’re like, wait! Maybe we went too far too fast! 
 

Banks failing when you still need to raise rates at least another full percentage? Bodes well

 

 

 

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Mullet Free

Mullet Free 40

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Posted
8 minutes ago, B00M said:

Lol

I love that like 3 days ago the fed had made it clear the next hike would be 50 bps … based on lagging indicators … then they get the first of many failed banks and they’re like, wait! Maybe we went too far too fast! 
 

Banks failing when you still need to raise rates at least another full percentage? Bodes well

 

 

 

 

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Wulaw Horn

Wulaw Horn 18984

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On 3/11/2023 at 10:10 AM, Mullet Free said:

Their financial posts are pretty data driven with a doomer slant. They’re followed by pretty much everyone with a pulse in finance.
 

I would agree it’s not worth taking too much from their political posts.
 

 

Zero hedge has correctly predicted 50 of the last 2 recessions. 

20 minutes ago, Neonmoon said:

Mostly shelter costs 

 

Shelter is a lagging indicator. It should be coming down. 

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StassneyHorn

StassneyHorn 6540

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https://www.cnbc.com/amp/2023/03/14/cpi-inflation-february-2023-.html

"Housing costs are a key driver of the inflation figures, but they are also a lagging indicator," said Lisa Sturtevant, chief economist at Bright MLS. "It typically takes six months for new rent data to be reflected in the CPI. The quirk in how housing cost data are collected contributes to overstating current inflation."

 

The only REAL tidbits that matter according to internet posters

Eggs in particular tumbled 6.7%, though they were still up 55.4% from a year ago.

Used vehicle prices, a key component when inflation first began surging in 2021, fell 2.8% in February and are now down 13.6% on a 12-month basis.

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B00M

B00M 6280

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Posted
2 hours ago, Mullet Free said:

Thought I’d put here since it’s referencing money supply. 
 

 

 

I am mildly encouraged that we’re basically 100 years more advanced than the last time it happened. Our financial system has come along way since we transferred money via unreliable telegraph… it’s funny how important the human element and time is in bank runs. There are certainly more tools available today to backstop failing banks. Recession instead of depression! bullish af

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