31–40 of 226 posts
Although, strictly speaking the answer should be no, this is not the start of a new financial crisis, it is a continuation of the 2008 crisis.
No, I remember 2007-2008 pretty clearly. That felt much more precarious. Right now it seems pretty clear that if your bank fails you're going to get your money. That's not to say that this isn't the start of some kind of a financial crisis. But it could be very different from 2008. In this case I think the risk is more towards high inflation - for example, if enough banks were to fail (hypothetically - I doubt this w…
https://marginalrevolution.com/marginalrevolution/2023/03/ba...
No, I remember 2007-2008 pretty clearly. That felt much more precarious. Right now it seems pretty clear that if your bank fails you're going to get your money. That's not to say that this isn't the start of some kind of a financial crisis. But it could be very different from 2008. In this case I think the risk is more towards high inflation - for example, if enough banks were to fail (hypothetically - I doubt this w…
The vibes are similar to early 2008. But the financial structure is different. Banks are not overleveraged. Housing is not all adjustable rate. That being said, easy to see weakness. Commercial real estate is a big one. I'm somewhat concerned about non-bank Financials. Some large foreign banks (CS(dead) , DB, HSBC) I'm skeptical of. And a recession feels imminent (felt to me this way even before SVB). To sum up, I do…
I suspect if things do go, it will be in CMBS. I don’t think office assets are being fairly marked-to-market right now and I want to better understand mortgage performance on office real estate. Subsequent derivatives likely explode this risk and how they are intertwined across private money is unclear.
I am also generally worried about normcore middle market, the diesel engine repair franchise, regional fast casual chain, etc…they are really getting squeezed from several angles. Best guess, the rapid reduction in fuel prices bought a temporary reprieve but that things are coming.
As others have said here, the failure mode will probably be novel but seek leverage to find the arming switch.
The vibes are similar to early 2008. But the financial structure is different. Banks are not overleveraged. Housing is not all adjustable rate. That being said, easy to see weakness. Commercial real estate is a big one. I'm somewhat concerned about non-bank Financials. Some large foreign banks (CS(dead) , DB, HSBC) I'm skeptical of. And a recession feels imminent (felt to me this way even before SVB). To sum up, I do…
Banks are holding $600+ billion in currently worthless bonds.
https://www.google.com/search?q=620+billion+dollar+bonds+ban...
No, I remember 2007-2008 pretty clearly. That felt much more precarious. Right now it seems pretty clear that if your bank fails you're going to get your money. That's not to say that this isn't the start of some kind of a financial crisis. But it could be very different from 2008. In this case I think the risk is more towards high inflation - for example, if enough banks were to fail (hypothetically - I doubt this w…
This is 2006
SVB, Credit Suisse, and Signature Bank aren't outliers. These are just the first banks to get hit by the crisis. It's almost certain that most other banks have been playing exactly the same kinds of games and betting on a low interest rate environment. Now that the inflation has risen to unacceptable levels, the Fed has no choice but to raise rates. This will translate into further chaos in the banking system.
If the rates don't go up then we'll see inflation keep climbing, and this will cool investment because it's practically impossible for companies to produce any meaningful returns in high inflation environment. A company right now has to show consistent 6% growth simply not to lose money right now.
Furthermore, 64% of Americans are now living paycheck to paycheck [1]. 37% of people are working two full time jobs [2]. And typical debt is around 100k [3].
So, over half the population has no savings and can barely makes ends meet while nearly 40% of people are already working as much as humanely possible. If cost of living keeps climbing a huge chunk of population will become insolvent, we'll see large numbers of people defaulting on their debt. Banks are the ones who are holding a lot of this debt, and as people start defaulting the banks will start failing.
Meanwhile, overall economic activity will cool with people cutting discretionary spending in order to afford necessities. This will make companies go out of business creating mass unemployment, and further feeding into the debt crisis.
Incidentally, we're right on schedule for a crash in the boom/bust capitalist cycle [4].
[1] https://www.cnbc.com/2022/03/08/as-prices-rise-64-percent-of...
[2] https://www.denver7.com/news/national/more-americans-report-...
[3] https://www.firstrepublic.com/insights-education/average-ame...
[4] https://www.investopedia.com/terms/b/boom-and-bust-cycle.asp
No, I remember 2007-2008 pretty clearly. That felt much more precarious. Right now it seems pretty clear that if your bank fails you're going to get your money. That's not to say that this isn't the start of some kind of a financial crisis. But it could be very different from 2008. In this case I think the risk is more towards high inflation - for example, if enough banks were to fail (hypothetically - I doubt this w…
We have a gigantic housing bubble and banks are holding the bag.
Same here - there are bubble signs everywhere (SPACs, startup valuations, joke money called Dogecoin with market cap of 10B$ !), banks are sitting at >600B$ of unrealized losses - this is all public knowledge.
A 166 years old Swiss bank was bailed out this weekend.
So yeah, it definitely feels like a big crisis ahead. Gradually then suddenly !
I think it's more like 2000 when there was a significant over-investment in tech, then Greenspan increased interest rates quickly and all the companies had to adapt to non-free money. I think the housing market will correct (crash) and tech jobs will be harder to come by for junior folks and people who aren't that great at it. Not a great time to job hop. It won't be horrible like 2008 but it won't be great. Should b…