The Rokslide Stock Traders Thread

[Kilboars]

I've got the land covered. I am just thinking along the lines of a safety net. If you wanted a rainy day fund/safety net that you can actually see and touch, which would be the best?

Fatten up your mattress.

Maybe gold or silver coins. Something you can easily trade or sell in smaller amounts.


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[MattB]

You can also find a bank that participates in CDARS. Basically CD sharing. The money has to be put in CDs (which don't look too bad at the moment). But "your" bank will have you sign some paperwork and make a deposit. Then they will spread the funds out on the CDARS system making sure accounts are at separate banks. This system shares deposits back and forth between banks so your bank can still show you have "access" to your funds, but they are spread across multiple banks, your bank just accepted some of the other banks deposits on a swap to balance out the funds of yours they sent out.

Technically CDARS is not an obligation of your bank but rather an obligation of a 3rd party with the transaction facilitated by your bank.

 

[MattB]

By sheep I think you mean start ups pulling money to make payroll. Particularly the ones running a deficit. That's the underlining piece of this people are missing. A lot of companies are likely running on fumes at this point.

No, I don’t. If companies only pulled funds sufficient to make payroll, SVB is still going strong. The companies that started the run pulled every dollar they had at SVB and then told all their friends who did the same. The cascade effect brought down the company.

I did tech banking in the valley for 20+ years and SVB was our major competitor, so I know more about this than just reading articles on the internet.

 

[BBob]

Credit Suisse to borrow up to nearly $54 billion from Swiss National Bank

Credit Suisse announced it will be borrowing up to 50 billion Swiss francs ($53.68 billion) from the Swiss National Bank under a covered loan facility and a short-term liquidity facility.

www.cnbc.com

ZeroHedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com

07-23


Update. Bailout bounce.

 

[Beendare]

By sheep I think you mean start ups pulling money to make payroll. Particularly the ones running a deficit. That's the underlining piece of this people are missing. A lot of companies are likely running on fumes at this point.

Exactly…SVB not only screwed the pooch on their TNotes…… they had all kinds of sketchy loans out there to companies that relied on VC funding to stay afloat…and that funding is-poof- gone.

So now SVB is carrying a bunch of those shakey loans on their books along with them being undercapitalized from their T-bond strategy- a double whammy.

To blame the very smart guy who realized all this before anyone else….or depositors that took their money out because they wanted it somewhere solid is disingenuous.

 

[MattB]

Exactly…SVB not only screwed the pooch on their TNotes…… they had all kinds of sketchy loans out there to companies that relied on VC funding to stay afloat…and that funding is-poof- gone.

So now SVB is carrying a bunch of those shakey loans on their books along with them being undercapitalized from their T-bond strategy- a double whammy.

To blame the very smart guy who realized all this before anyone else….or depositors that took their money out because they wanted it somewhere solid is disingenuous.

SVB’s core business over the past 2+ decades has been to lend (usually with equity kickers) to VC-backed tech companies and they did it very profitably for a long time. Those are the “sketchy” loans you are referring to. Do you really think that their core business was a significant contributor to this situation? It wasn’t.

One thing SVB was very good at - better than anyone else in the market- was developing relationships with the VC’s. As a result, they did well at getting out of bad situations. Probably better than any other lender in the space. The VC’s needed them as much or more than SVB needed the VC’s.

Add to that the fact that VC-backed tech companies generally seek funding for a year or more at a time - not doled out in drive and drabs - so short-term funding is generally already in the bank. That is exactly why such a high % of SVB’s deposits were not FDIC insured - they had lots of clients with 7, 8, and even 9 figure deposit balances.

And on the bond front - the thing about bonds is that, when you hold them to maturity, you get paid par. Meaning you do not take a loss. It was the loss on the bond portfolio that was SVB’s undoing.

It is only when a bank is upside down AND forced to liquidate the portfolio prior to maturity that a loss occurs. Had there not been a run on deposits, SVB would not have had to liquidate at a loss which is what broke the bank. The bonds otherwise would have matured at various future dates and the bank would have received par.

The low yields cause by investing too long during a time of interest rate volatility would have adversely impacted profitability in the interim (and I do agree that was a strategic mistake by SVB’s corporate treasury), but that at most should cause a decrease in the stock price.

But in this case irrational fear among a couple of very well-known VC’s and group think within the industry became a self-fulfilling prophecy by causing a run on deposits and forcing the early liquidation of the bond portfolio at a $1.8Bn loss, and it killed the bank.

As a friend of mine in the banking industry said “this was the stupidest bank failure ever.” because the bank’s clients inflicted it upon themselves. I agree.

 

[MattB]

And one other thing, just because some SVB clients got their money out doesn’t mean all is well. Most of the VC-backed clients don’t have relationships with other banks (stipulation in lending arrangements). In the current compliance environment, it takes weeks and more likely a month or more to run compliance/KYC to open accounts at a new bank. Some of these start-up’s have moved funds out of SVB and into newly opened safe harbor accounts at other banks, but can’t use or move those funds until compliance is completed. Meaning, they may very well still be in a pickle over the next payroll.

 

[2531usmc]

With this line of question, I think you might be crossing over into the prepper mindset. When SHTF actually happens, cash or gold won't do anyone much good. You need useful stuff that will sustain & protect you along with stuff others will want / need to barter with. Food, ammo, etc. But that's a deep rabbit hole that is best served on a thread separate from this one.

I wouldn’t say, so much, that I’m crossing over into the prepper mindset as much as I’m simply curious.

In looking to protect yourself from depreciating fiat currencies, all of the seemingly good options (physical gold/silver, real estate, bitcoin) have significant real world downside.

Maybe just a better option is buying common stock in gold miners eg barrick or even oil companies eg XOM

Buffet is buying large chunks of Occidental and that may be his way of reacting to a world of fiat

 

[Kilboars]

And one other thing, just because some SVB clients got their money out doesn’t mean all is well. Most of the VC-backed clients don’t have relationships with other banks (stipulation in lending arrangements). In the current compliance environment, it takes weeks and more likely a month or more to run compliance/KYC to open accounts at a new bank. Some of these start-up’s have moved funds out of SVB and into newly opened safe harbor accounts at other banks, but can’t use or move those funds until compliance is completed. Meaning, they may very well still be in a pickle over the next payroll.

So basically we all are private lenders once we deposit our money in the bank? The money is lent out and we can’t necessary expect it’s to be sitting there doing nothing when we want it.
Not to over simplify it.


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[String&stick]

Technically CDARS is not an obligation of your bank but rather an obligation of a 3rd party with the transaction facilitated by your bank.

Correct but does help you achieve more coverage while primarily dealing with 1 bank.

 

[String&stick]

This is interesting. But doesn’t this mean the POD accounts are only insured if you die (and are not insured if the bank fails while you’re alive)?

No they are insured in the event of a failure due to the beneficiary. Now the caveat is if you die, that money instantly becomes your beneficiaries property. Doesn't matter what your Will says, doesn't matter that your son promised he'd shar with your daughter, it's the beneficiary's money and skips other processes.

 

[ez_willie]

So basically we all are private lenders once we deposit our money in the bank? The money is lent out and we can’t necessary expect it’s to be sitting there doing nothing when we want it.
Not to over simplify it.


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Yes basically, it’s there doing nothing but if you want it in cash form in a larger amount you might be waiting a bit.

 

[Beendare]

SVB’s core business over the past 2+ decades has been to lend (usually with equity kickers) to VC-backed tech companies and they did it very profitably for a long time. Those are the “sketchy” loans you are referring to. Do you really think that their core business was a significant contributor to this situation? It wasn’t.

One thing SVB was very good at - better than anyone else in the market- was developing relationships with the VC’s. As a result, they did well at getting out of bad situations. Probably better than any other lender in the space. The VC’s needed them as much or more than SVB needed the VC’s.

Add to that the fact that VC-backed tech companies generally seek funding for a year or more at a time - not doled out in drive and drabs - so short-term funding is generally already in the bank. That is exactly why such a high % of SVB’s deposits were not FDIC insured - they had lots of clients with 7, 8, and even 9 figure deposit balances.

And on the bond front - the thing about bonds is that, when you hold them to maturity, you get paid par. Meaning you do not take a loss. It was the loss on the bond portfolio that was SVB’s undoing.

It is only when a bank is upside down AND forced to liquidate the portfolio prior to maturity that a loss occurs. Had there not been a run on deposits, SVB would not have had to liquidate at a loss which is what broke the bank. The bonds otherwise would have matured at various future dates and the bank would have received par.

The low yields cause by investing too long during a time of interest rate volatility would have adversely impacted profitability in the interim (and I do agree that was a strategic mistake by SVB’s corporate treasury), but that at most should cause a decrease in the stock price.

But in this case irrational fear among a couple of very well-known VC’s and group think within the industry became a self-fulfilling prophecy by causing a run on deposits and forcing the early liquidation of the bond portfolio at a $1.8Bn loss, and it killed the bank.

As a friend of mine in the banking industry said “this was the stupidest bank failure ever.” because the bank’s clients inflicted it upon themselves. I agree.

Since you directed this at me….
I realize you were part of the Silicon Valley banking in its heyday When making longshot bets with VC guys was a big payoff. Companies that had no earnings were doubling and tripling every year or more On pure speculation. money was being splashed on crazy speculative stuff and the stock market would just suck it up.

Those days are over.…or cut way back….at least for now. In fact many of those high flyers with no earnings are going to go under. My bet is that when the list of - Yes- Sketchy loans comes out that SVB is holding, it will be an eye opener.

We cannot just gloss over fundamentals…this is a bank…not some speculative high tech fund where folks realize their money is invested in higher risk assets. Depositors in banks use that money, many need it liquid and available …and they EXPECT to get their money back…not have it hanging out there.

The bank can’t hold a 30 year note paying +/-2% to maturity…they have to mark to market…those bonds dropped like a rock leaving them under capitalized….the regulators would have had to step in…though in this political environment…all bets are off.

If one is invested in a Cathie Woods ETF, they understand there will be risk. This bank was in deals with startup companies incurring huge losses that were far riskier than even her investments.

My bet- and call me if you want to make a friendly wager- grin….
Is that when the list of risk assets that SVB was carrying comes out, the legit finance publications like WSJ will essentially blast them for those Risky loans.

Maybe lunch at our half way point? I have to warn you I’m a big eater. Grin

 

[BBob]

Update. CS Bailout bounce.

 

[Crowmangler]

There are way too many idiots running way too many institutions & wreaking havoc on the rest of the country & the world by focusing on make believe bull shit instead of basic truths of nature, humanity & economics.

“You can avoid reality, but you cannot avoid the consequences of avoiding reality.”

 

[aftriathlete]

I wouldn’t say, so much, that I’m crossing over into the prepper mindset as much as I’m simply curious.

In looking to protect yourself from depreciating fiat currencies, all of the seemingly good options (physical gold/silver, real estate, bitcoin) have significant real world downside.

Maybe just a better option is buying common stock in gold miners eg barrick or even oil companies eg XOM

Buffet is buying large chunks of Occidental and that may be his way of reacting to a world of fiat

I've played the gold miner stock game this last three years. I don't recommend it to anyone. It has been the most damned illogical, painful trade to be in. It is literally the reason I'm so averse to all this risk and averse to "trading" in general now. Gold stocks look for every reason to fall -- good day for the stock market, miner stocks go down; bad day for the stock market, miner stocks go down.

Oil stocks are what I'm watching now, I'm just very tentative still at the moment which I summed up in my previous posts. More power to everyone that has played the oil stock / PR game this long though.

 

[BBob]

Oil stocks are what I'm watching now, I'm just very tentative still at the moment which I summed up in my previous posts. More power to everyone that has played the oil stock / PR game this long though.

I've been adding, more today. Still in some for the long haul and some have been sold and bought back. No way oil isn't going to be relevant for quite some time and once the yahoo's get out of the way.......
Also: If oil was a loser why the heck would Buffet be in so deep and still be buying?

 

[Forestryguy]

I'm a complete amateur, so this might not be worth much. Right now I am looking at more oil and NG companies. Oil runs everything in this country, and pretty much every country. Without it everything stops and fails. Especially if we are on the verge of another world conflict. Even the current administration knows this, despite the campaign talking points of all energy being green in 10 or so years. They just approved expansion of drilling in AK.

So Im looking at oil and other raw goods, plus Coca-Cola.

 

[MattB]

So basically we all are private lenders once we deposit our money in the bank? The money is lent out and we can’t necessary expect it’s to be sitting there doing nothing when we want it.
Not to over simplify it.


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Essentially yes. Banks hold reserves to meet their client’s expected short-term liquidity needs, but much of the rest is either lent out or invested. No bank could withstand its clients withdrawing a substantial portion of its aggregate deposits in excess of its reserves in a 1-2 day span.

 

[MattB]

Correct but does help you achieve more coverage while primarily dealing with 1 bank.

Absolutely, we referred to that as a brokered CD program to keep it simpler for clients. But even that has limitations as only so many banks participate (~40 if memory serves, but that could just be the number my institution had agreements with).