I think the major short sellers already built their positions and are gradually covering by making noises on social media.
A SVB short seller explains red flags he saw months ago
141–150 of 186 posts
Re: A SVB short seller explains red flags he saw months ago
#142Earlier quoted context omitted.
for anyone else suffering with poor sight, if you paste this in your console it should help. document.querySelector('.paywallActive').style='filter: none' of course reader mode also helps
Is it not easier to select the paywall element in the inspector and delete it? Well, not easier than reader mode, of course, but easier than fiddling with styles.
For the HTML-savvy, perhaps. But one-liner copy/paste/enter is an easier to instruct and practically apply for many.
Re: A SVB short seller explains red flags he saw months ago
#143So basically the rapid increase in interest rates combined with lack of diversity in the bank’s clientele and investment choices quickly turned SVB into a collapsing inadvertent pyramid scheme?
It's not a pyramid scheme. A pyramid scheme can only continue it people keep putting money into it. SVB didn't need more money coming in, they just couldn't handle money coming out.
Startups have expenses. SVB had a customer base that was net unprofitable. This means outflows, and tons of it. SVB depended on a continuous stream of new venture capital being shoveled into the ecosystem to compensate for these outflows.
They needed new startups to bring in new cash to make up for the cash burn of their current startup customers.
This is a textbook Ponzi structure. Not criminal, just a totally irresponsible bet on interest rates staying close to 0 for another 10 years.
Re: A SVB short seller explains red flags he saw months ago
#144Earlier quoted context omitted.
I am not from US, what is the story? Does that guy consistently make bad predictions?
The background on Jim Cramer is less about his accuracy and more about his tv show. He has this show where he just goes off on what to buy and what to sell, on a major news network, from before YouTube, and it's enthralling. If we were to do a montage scene of America and capitalism, he'd be in it, yelling BUY! SELL! BUY! it's just so over the top! if you haven't seen it before here's a recent one https://youtu.be/RK…
That was significantly more idiotic than I expected. God bless America.
Re: A SVB short seller explains red flags he saw months ago
#145My 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…
Timing is exactly the challenge! The share price of $SIVB actually climbed pretty significantly since the prediction back in January before collapsing this week.
You don't need to look too hard to see examples of share prices doing weird things despite reality ($BBBY most recently)!
Re: A SVB short seller explains red flags he saw months ago
#146Earlier quoted context omitted.
I mean I can give you that strategy right now: go buy index funds. You can be right 99% of the time and still lose money because the market always rewards based on risk. Conversely you can be right 30% of the time and make billions. With market timing you don't need to predict the instant something will happen, your time horizon really should depend on what your drawdown is. The predictions don't have to be single ev…
If you are short via options you have limited risks but you pay the premium
Most people buying options don't primarily buy one side. They exercise some sort of inverted position as well to cover. Those who play one sided, short term, options can often be referred to as gamblers.
Re: A SVB short seller explains red flags he saw months ago
#147So 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 val…
Missed a couple:
1. Even if the price has not moved against you, your broker can decide the stock has become more volatile, and therefore a higher collateral ratio is required.
2. Regulators can halt trading, making it at least temporarily impossible to buy back the shares and book your profit on the short sale.
Hence FTA: “You never short something thinking it will go into receivership,”
Re: A SVB short seller explains red flags he saw months ago
#148What 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 tra…
The guy isn’t asking people to believe in him because he is a prophet. They are saying, “this is some things I found suspect, and was right about so maybe this can help you make your own inferences later.”
Re: A SVB short seller explains red flags he saw months ago
#149>>>don’t know how it all shakes out, or at the end of the day where that money ended up and where it went,” he says. I'm going to take a stab - the money ended up at the issuer tbill or mbs, that has been funding the profligacy of the feds with very low interest rates. In the meantime, fed stakeholders will declare a dividend and pay themselves for the priviledge of keeping musical chairs going
The federal reserve dividends are set by statute and are an unvarying 6%/yr and have been since 1913. So, in this case, the 'fed stakeholders' are the US Congress. Moreover the amount of stock owned by member banks is also set by statute at 6% of the bank's capital plus surplus with the share price set at $100/share also by law. Banks are required by law to buy a certain amount of stock and they can't buy or sell the stock or loan the value of the stock as an asset (hypothocate), except to the fed as their capital goes up and down. All of this makes much more sense if you think of the Federal Reserve Banks as legally mandated bank run insurance providers. See here: https://www.federalreserve.gov/aboutthefed/section5.htm
So yes, the whole purpose of the fed is to ensure that we don't have a systemic, cascading bank failure (keeping musical chairs going). Banking panics and ensuing failures were a widespread problem in the 1800s and early 1900s. The Fed was established after the particularly nasty 1907 banking panic which threatened to bring down most large banks in the US and destroy the national economy. https://en.wikipedia.org/wiki/Panic_of_1907
Re: A SVB short seller explains red flags he saw months ago
#150So basically the rapid increase in interest rates combined with lack of diversity in the bank’s clientele and investment choices quickly turned SVB into a collapsing inadvertent pyramid scheme?
It's not a pyramid scheme. A pyramid scheme can only continue it people keep putting money into it. SVB didn't need more money coming in, they just couldn't handle money coming out.
Doesn't it seem like the definition of "pyramid scheme" is in the middle of expanding to mean roughly "any finance-related issue that seems a little shady to me"? I see it being applied so broadly when it's by rights a pretty specific and identifiable concept.