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SVB Financial: Blow Up Risk (2022)

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Re: SVB Financial: Blow Up Risk (2022)

#41

Post by lotsofpulp »

pixl97 wrote: post #16
toomuchtodo wrote: post #14

Earlier quoted context omitted.

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…

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

If you are investing in actively managed funds, then you chose that agency risk.

Re: SVB Financial: Blow Up Risk (2022)

#42

Post by eastbound »

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…

No bank can bet the deposits will stay the same: Through the short-term economic cycles, people will accumulate for 6 months, 2 years, 10 years, then deplete. Covid hits? Everyone needs 3 grand at the same time. Government gibs money? Everyone has 3 grand extra for a few weeks. Everyone gets paid on the 1st of the month. You can average, but everyone will hit the low at the same time.

Re: SVB Financial: Blow Up Risk (2022)

#43

Post by stametseater »

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…

> If you can’t trade on positive material non public information,

In America you can, if you're not an insider and didn't get the information from an insider in violation of their duty of trust. For instance, it is legal for a trader to use satellite LIDAR/SAR data to estimate the fill level of oil storage tanks and trade on that obviously material non-public data.

Re: SVB Financial: Blow Up Risk (2022)

#44

Post by rufus_foreman »

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.

I believe this is called "talking your book" and it should be your default assumption of investor behavior.

Re: SVB Financial: Blow Up Risk (2022)

#45

Post by bcrosby95 »

mikeyouse wrote: post #27
steveBK123 wrote: post #23

Earlier quoted context omitted.

This is also why small, concentrated merchant banks like this are risky. Deposit base is too homogenous.

It was one of the 15 largest banks in the country.. if depositors lose money here, every bank in US better be ready Monday morning as every company moves all of their funds to one of the top 3.

Yet still small enough to not need to undergo stress tests after changes to Dodd frank in 2018.

Re: SVB Financial: Blow Up Risk (2022)

#46

Post by paulddraper »

adhesive_wombat wrote: post #15
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…

> 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.

That's true, though most bank failures aren't bank runs. IDK if there's been a bona fide bank run in the U.S. since the 1930s.

The reason this was a bank run is that FDIC insurance meant approximately nothing, as opposed the the usual situation where a huge amount of depositors are fully insured.

Re: SVB Financial: Blow Up Risk (2022)

#47

Post by paulddraper »

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…

> Articles like this are especially damning to the execs that sold stocks just a few weeks ago.

You mean the reverse, right?

You can't insider trade if it's not insider information!

This article supports the execs, not damns them.

Re: SVB Financial: Blow Up Risk (2022)

#48

Post by paulddraper »

> The company should be able to sell its AFS with minimal losses and about $2-3 billion of the portfolio pays down every quarter. The company also has some borrowing capacity. So, right now it looks unlikely the losses on the HTM portfolio will get triggered, it is a risk.

In an alternate dimension, it played out exactly like this.

Re: SVB Financial: Blow Up Risk (2022)

#49

Post by IrnBru »

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…

Borrowing short term and lending long is what all banks do. The problem here is a lack of diversification.

Re: SVB Financial: Blow Up Risk (2022)

#50

Post by IrnBru »

eastbound wrote: post #42
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…

No bank can bet the deposits will stay the same: Through the short-term economic cycles, people will accumulate for 6 months, 2 years, 10 years, then deplete. Covid hits? Everyone needs 3 grand at the same time. Government gibs money? Everyone has 3 grand extra for a few weeks. Everyone gets paid on the 1st of the month. You can average, but everyone will hit the low at the same time.

Not true. Imagine there was only ONE bank.
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