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A SVB short seller explains red flags he saw months ago

fortune.com

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Re: A SVB short seller explains red flags he saw months ago

#131

Post by CodesInChaos »

mym1990 wrote: post #47
pid-1 wrote: post #44

My company has seen quite a few sell side analysts talking about SVB earlier this year, so I guess the risks were not unknown to financial markets. Problem is, we are in a scenario of great macroeconomic uncertainty. That can make borrowing costs (needed for shorting something) quite high, because everyone and their moms want to protect themselves from market downturns. So even if you guess correctly that some compan…

“Markets can remain irrational longer than you can remain solvent“. This was also the case with Burry and others shorting in 2008.

And then there are central banks which can pump literally unlimited amounts of money into the market.

Re: A SVB short seller explains red flags he saw months ago

#132

Post by gmiller123456 »

What other predictions has this short seller made in a verifiable manner?

It's really pointless to find someone who just guessed correctly once and take their advice. Particulalrly if their failed predictions are never made public, or are too abtract to be verifiable.

I used to invest in gold and silver, expecting them to be stable investments. Back in mid 2008, I noticed a lot of large price swings. I made a few trades to exploit the swings before realizing the whole point of me investing in them was because I expected them to be stable. So I cashed out everything, and a few weeks later the economy (and the gold and silver prices) tanked. I don't consider myself a savy investor at all, I just got really lucky that one time.

Re: A SVB short seller explains red flags he saw months ago

#133

Post by croes »

dustedcodes wrote: post #115
croes wrote: post #22

Isn't it some kind of survivorship bias to ask the winners of such bets afterwards?

Not really, because people who didn’t short SVB probably didn’t look at them in more depth, so it’s not survivorship bias. It’s just a case of we looked where others didn’t look so we discovered something, and this article is about that something.

I'm thinking of the times they short other companies because of the same red flags but lost in the end.

To make a silly example, if I short every company when it's CEO wears a red tie and than one of these goes down I get interviewed and can explain my great red flag I used.

Re: A SVB short seller explains red flags he saw months ago

#134

Post by gmiller123456 »

kklisura wrote: post #83
notafraudster wrote: post #42

Earlier quoted context omitted.

When you buy a stock, you pay money and someone else gives you a stock. Once you have it, you can hold it for as long as you want. Its value can go up or down. When you sell, you get money, which might be less or more than what you paid. If the value goes to zero, you can no longer sell and you will never get any money. When you short a stock, you are basically selling a stock you don't have. Thus you get money and o…

Thanks for the explanation! What happens when someone shorts a stock and then the company goes under? In this case of SVB, you short a stock, company gets taken by FDIC, trading is halted and I'm assuming the company will be sold/dissolved? So what happens with the shorts? Edit: Answered already by someone in other thread https://news.ycombinator.com/item?id=35107107

At that point, the stock is worthless and the borrower doesn't have to return it. They keep all of the money from the initial sale.

Re: A SVB short seller explains red flags he saw months ago

#135

Post by marckhoury »

ta988 wrote: post #129

So when you short like that there is no risk for you as a borrower other than if the assets go higher? Do you need to have enough assets to cover a x-times the price of the stocks to insure your position?

There’s actually a lot of risk and costs when shorting. You need to pay borrow fees to borrow the stock, you need to post collateral that can be liquidated in the event that your position gets too risky, you need to post more collateral as the price of the a stock increases to cover the increased risk, and you can in theory lose an unlimited amount of money. You have to be right both about the stock decreasing in value, and the timing around when it will decrease in value. Otherwise your position might get liquidated before you can realize your possibly correct directional prediction. This is what the phrase “the market can remain irrational longer than you can remain solvent” refers to. Shorting is really hard.

Re: A SVB short seller explains red flags he saw months ago

#136

Post by nico »

mym1990 wrote: post #47
pid-1 wrote: post #44

My company has seen quite a few sell side analysts talking about SVB earlier this year, so I guess the risks were not unknown to financial markets. Problem is, we are in a scenario of great macroeconomic uncertainty. That can make borrowing costs (needed for shorting something) quite high, because everyone and their moms want to protect themselves from market downturns. So even if you guess correctly that some compan…

“Markets can remain irrational longer than you can remain solvent“. This was also the case with Burry and others shorting in 2008.

This was also the case throughout 2020-21. And we are now seeing the effects.

Re: A SVB short seller explains red flags he saw months ago

#137

Post by wolfi1 »

dctoedt wrote: post #102
DeathArrow wrote: post #60

Earlier quoted context omitted.

In the case you short a bank, why not borrow the money from the same bank?

> In the case you short a bank, why not borrow the money from the same bank? To short a company's stock, you borrow the stock — although you do use money to pay interest on the value of the borrowed shares. [0] [0] https://www.investopedia.com/terms/s/shortselling.asp

there is also naked short selling, if I got it right you need to have the stocks within 3 days of the closing date of the short, seems to work most of the time, the only failure in recent times was when Porsche shorted Volkswagen and and had to pay enormous amounts when the shorts were due (they shorted too much of them and had to buy them at any price to close the deal)

Re: A SVB short seller explains red flags he saw months ago

#139

Post by VirusNewbie »

supernova87a wrote: post #59

Isn't the question though, if you acted on the set of companies/banks that were showing these signs, how often would you be right and saved your money (or made money)? The analyses that tell you what led to a particular crash are hard to stomach as a reliable bet for the next time. I just saw this story: https://www.morningstar.com/news/marketwatch/20230310718/20-... ("20 banks that are sitting on huge potential secu…

Ally focuses on consumers. My wife has an account there with less than 250k fdic limit. So if we hear it may be insolvent, we will just wait.
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