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SVB Financial: Blow Up Risk (2022)

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Re: SVB Financial: Blow Up Risk (2022)

#31

Post by therealcamino »

toomuchtodo wrote: post #18
pixl97 wrote: post #16

Earlier quoted context omitted.

>Hopefully sophisticated investors who should’ve known better. You mean like your retirement fund manager?

“Sophisticated” doing a lot of lifting in this case. Very aspirational. If you’re buying single named securities without any due diligence, you deserve the returns you encounter. That’s your job! No one index investing is going to feel this in a material capacity. Depositors will be made “whole enough”, and an irresponsible bank got blown out and dismantled. The system worked. If there was fraud, regardless of crimin…

When you say "the system worked" because depositors will get back some as-yet-undetermined percentage of their deposits, that's not relevant to an insider trading discussion -- that's shifting the topic from whether investors in SVB were harmed, to whether depositors were harmed.

I don't quite understand your position on insider trading. The idea behind making it a crime is that no matter how "sophisticated" an outsider is, they don't have insiders' non-public information. Insiders can profit from the information gap between them and the people they sell their shares to. There's certainly disagreement about how to ban insider trading while making it possible for officers of the company to trade at all, but the basis of the law is that no amount of due diligence can undo that imbalance in information.

It sounds like you're saying that one might decide, as an individual, that the system is unfair or imperfect or corrupt, and decide to diversify. That's probably good advice. But that is a practical measure that doesn't really address the problem being discussed.

Re: SVB Financial: Blow Up Risk (2022)

#32

Post by therealcamino »

latchkey wrote: post #30

Two more followup articles from the same author that are good reads as well (along with a bit of well deserved gloating)... https://seekingalpha.com/article/4586033-svb-financial-blew-... https://seekingalpha.com/article/4586342-svb-financial-today...

I have to say, the articles in Seeking Alpha are so uneven that I never read the when they pop up in a news feed. The original article is pretty startling in how accurate it was (even if it was more concerned about the loans than the mortgage-backed securities.)

Re: SVB Financial: Blow Up Risk (2022)

#33

Post by therealcamino »

toinewx wrote: post #5

The author had a short position. You can find it at the end of the article: Disclosure: I/we have a beneficial short position in the shares of SIVB either through stock ownership, options, or other derivatives.

Yes, but the author was also completely correct about their financial situation. The disclaimer doesn't mean "I'm making this up."

Re: SVB Financial: Blow Up Risk (2022)

#34

Post by hef19898 »

toomuchtodo wrote: post #14
hn_throwaway_99 wrote: post #11

Wow, how prescient. Articles like this are especially damning to the execs that sold stocks just a few weeks ago. This was not some huge surprise. They may not have anticipated the ferocity with which there would be a run on the bank, but they absolutely knew they were in deep shit and would need to do a capital raise. And I hope nobody tries to defend this with "those stock sales were from 10b5-1 plans!". Those can…

Who got hurt by execs selling stock into the market? Hopefully sophisticated investors who should’ve known better. For over a year there were indicators SVB was not healthy. “We are selling to willing buyers at the current fair market price.” Edit: if you don’t like the 10b5-1 rules as they stand, feel free to submit a comment to Gensler and Co at the SEC. If you can’t trade on positive material non public informatio…

Well, in case of those SVB execs we talk potential insider trading. Margin Call is fiction, and MBSs or MBS based CDOs are not shares in the company you run.

Re: SVB Financial: Blow Up Risk (2022)

#35

Post by adhesive_wombat »

eloff wrote: post #29
adhesive_wombat wrote: post #15

Earlier quoted context omitted.

> They may not have anticipated the ferocity with which there would be a run on the bank Bank runs are pretty much always ferocious because 1) that's what a run is, rather some euphemism for the prelude like "temporary liquidity processing anomaly" and 2) they're positive feedback loops that end up ferocious as soon as someone responding to the "TLPA" gets noticed by someone else.

A more charitable interpretation of what the OP is saying: the execs may not have anticipated how fast the shit would hit the fan. I doubt they believed there would be a run on the bank this month, not even the short sellers were predicting that. They did know they were in trouble, but I think everyone, even those being against SVB, was surprised by the speed and ferocity with which this played out.

You might be validly surprised by the short time between "uh.." and a full-on run, but the run itself is no more ferocious than people responsible for avoiding one should have been thinking of.

It's like a airline blaming the ground for being unexpectedly hard and the crash happening so soon and it's not their fault why there were no survivors and not because of the deferred maintenance of the aircraft under a loophole in the FAA regulations.

Re: SVB Financial: Blow Up Risk (2022)

#36

Post by PaulHoule »

hn_throwaway_99 wrote: post #11

Wow, how prescient. Articles like this are especially damning to the execs that sold stocks just a few weeks ago. This was not some huge surprise. They may not have anticipated the ferocity with which there would be a run on the bank, but they absolutely knew they were in deep shit and would need to do a capital raise. And I hope nobody tries to defend this with "those stock sales were from 10b5-1 plans!". Those can…

At least so far the story is that SVB got in trouble because it invested in bonds that went down in value, not because of its loan portfolio. We’ll see if that is true or the whole story, but if it is true, the scenario is entirely different from what that article is suggesting.

Re: SVB Financial: Blow Up Risk (2022)

#37

Post by darkerside »

stefan_ wrote: post #19
hn_throwaway_99 wrote: post #11

Wow, how prescient. Articles like this are especially damning to the execs that sold stocks just a few weeks ago. This was not some huge surprise. They may not have anticipated the ferocity with which there would be a run on the bank, but they absolutely knew they were in deep shit and would need to do a capital raise. And I hope nobody tries to defend this with "those stock sales were from 10b5-1 plans!". Those can…

We don't need to assume the execs knew their held to maturity MBS scheme would blow up when they are selling weeks before announcing a loss (which they would definitely be acutely aware of).

If they're regularly selling securities, there is no good time to make the announcement

Re: SVB Financial: Blow Up Risk (2022)

#38

Post by oarabbus_ »

toomuchtodo wrote: post #18
pixl97 wrote: post #16

Earlier quoted context omitted.

>Hopefully sophisticated investors who should’ve known better. You mean like your retirement fund manager?

“Sophisticated” doing a lot of lifting in this case. Very aspirational. If you’re buying single named securities without any due diligence, you deserve the returns you encounter. That’s your job! No one index investing is going to feel this in a material capacity. Depositors will be made “whole enough”, and an irresponsible bank got blown out and dismantled. The system worked. If there was fraud, regardless of crimin…

>No one index investing is going to feel this in a material capacity.

Over what timeframe are you making this claim? A week? A year? 10?

The entire index dropped, driven by a selloff in the Financial Services sector after FDIC placed them on the failed bank list, so in effect it has already affected the index.

Re: SVB Financial: Blow Up Risk (2022)

#39

Post by anonymousiam »

hn_throwaway_99 wrote: post #11

Wow, how prescient. Articles like this are especially damning to the execs that sold stocks just a few weeks ago. This was not some huge surprise. They may not have anticipated the ferocity with which there would be a run on the bank, but they absolutely knew they were in deep shit and would need to do a capital raise. And I hope nobody tries to defend this with "those stock sales were from 10b5-1 plans!". Those can…

The executive stock sales were only for a few million dollars, and a relatively minor percentage of their holdings. I doubt there will be any criminal charges.

Re: SVB Financial: Blow Up Risk (2022)

#40

Post by darkerside »

dboreham wrote: post #26

After reading this article my take on the situation substantially changed from the typical (here) "idiot bankers put all their assets in HTM instruments". ianab but I get the impression that when you're operating a bank you think of depositors and loans like a SaaS service would view subscribers. You want more deposits same as we want more subscribers. Having got more deposits you set about lending the money in order…

Surprising similarity to the 2008 crash in that there was systemic risk that wasn't detected or fully understood based on there being events that were entirely predictable (housing prices drop, or Fed rate increases) but happening at unpredictable rates of speed.
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