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Startup lender Silicon Valley Bank to sell stock to cope with cash burn

reuters.com

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Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn

#71

Post by [deleted] »

nostrademons wrote: post #55
Octokiddie wrote: post #21

More context from another article: > The big losses experienced by the bank are directly related to the surge in interest rates over the past year, as the company's US Treasury holdings were bought at a time when interest rates were still relatively low. Bond prices fall as yields rise. https://markets.businessinsider.com/news/stocks/silicon-vall... More general context: - Banks are required by law to buy US Treasuri…

Unpopular and pretty far-out opinion: 2023-2024 is going to be a bigger financial crisis than 2008-2009, and is potentially a civilization-ending event. The brewing crisis is that the Fed needs to trigger a recession (with job loss) to bring down inflation, because the root cause of the inflation is that there are too few workers for the available roles in the current structure of the economy, and so the economy need…

[deleted]

Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn

#72

Post by WJW »

toomuchtodo wrote: post #70
WJW wrote: post #69

Earlier quoted context omitted.

Perhaps, but probably not. Just doing some napkin math, to get to ten billion in withdrawals (ie only 5% of total assets of SV bank) you would need a million wall street bets subscribers to withdraw 10k each. Not a million to deposit it first and then retract it, a million retail subscribers who already had at least 10k deposited in this bank that mainly serves startups. I don't think it's very likely. Also, it would…

While it’s unlikely we’re going to see a meme stock moment, a bank run by a collection of risk adverse founders already facing a challenging macro pulling their deposits is entirely possible. And those cash balances are likely much more than 10k assuming runway liquidity. https://news.ycombinator.com/item?id=35086853 https://news.ycombinator.com/item?id=35086888

Yes but people rationally pulling money from a failing bank is very different than a subreddit banding together to kill the bank on purpose.

Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn

#73

Post by nostrademons »

JohnFen wrote: post #68
nostrademons wrote: post #55

Earlier quoted context omitted.

Unpopular and pretty far-out opinion: 2023-2024 is going to be a bigger financial crisis than 2008-2009, and is potentially a civilization-ending event. The brewing crisis is that the Fed needs to trigger a recession (with job loss) to bring down inflation, because the root cause of the inflation is that there are too few workers for the available roles in the current structure of the economy, and so the economy need…

> is potentially a civilization-ending event. Civilization-ending? How is that even remotely in the realm of possibility?

These banking failures and mass unemployment would come right as interest rates are spiking. They also go hand in hand with banks dumping Treasury Bills for liquidity, which would cause a sharp decline in T-bill prices and a rise in T-bill rates.

The government finances its operations by issuing T-bills. If nobody is willing to buy T-bills, the government can't get cash to pay government employees, including the FBI, CIA, military, etc. It's unlikely that people are going to continue working if they don't get paid. Historically, governments that don't pay their soldiers, police, intelligence forces don't remain governments for long.

Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn

#74

Post by JohnFen »

nostrademons wrote: post #73
JohnFen wrote: post #68

Earlier quoted context omitted.

> is potentially a civilization-ending event. Civilization-ending? How is that even remotely in the realm of possibility?

These banking failures and mass unemployment would come right as interest rates are spiking. They also go hand in hand with banks dumping Treasury Bills for liquidity, which would cause a sharp decline in T-bill prices and a rise in T-bill rates. The government finances its operations by issuing T-bills. If nobody is willing to buy T-bills, the government can't get cash to pay government employees, including the FBI,…

Perhaps we have different definitions of "civilization-ending". Even if what you describe here actually happened, I wouldn't characterize that as a civilization-ending event. it would just be the passing of another nation. Civilization would continue, just as it has when nations have fallen in history.

Although, I do need to add, while your scenario is technically possible, I do think it's vanishingly unlikely. The US has been down that road before and survived, as have many others.

Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn

#75

Post by jldugger »

hn_throwaway_99 wrote: post #49
jldugger wrote: post #40

Earlier quoted context omitted.

> UST prices fall as interest rates rise Just to underscore the point here, in the past year, the fed has raised rates a ton, and counterintuitively, AGG, an ETF tracking a bond index fund heavily weighted towards US gov debt (by necessity) is down 15 percent over the past 2 years[1]. You might naively assume a bond fund values would reflect interest rates but there is a lag as you wait to roll over old bonds into ne…

> counterintuitively, AGG, an ETF tracking a bond index fund heavily weighted towards US gov debt (by necessity) is down 15 percent over the past 2 years. Is that counterintuitive? "Existing bond prices fall when interest rates rise" is pretty common knowledge I thought, and it seems quite intuitive to me. If I have a bond that matures in 2 years that only pays 5%, and I can buy a new bond, with the exact same charac…

For financiers no, for random engineers on HN, maybe.

Anyways, I intended my main point to be that bonds are down 15 percent, but maybe obscured that in my haste to press send before bouncing for a meeting.

Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn

#77

Post by airstrike »

Octokiddie wrote: post #21

More context from another article: > The big losses experienced by the bank are directly related to the surge in interest rates over the past year, as the company's US Treasury holdings were bought at a time when interest rates were still relatively low. Bond prices fall as yields rise. https://markets.businessinsider.com/news/stocks/silicon-vall... More general context: - Banks are required by law to buy US Treasuri…

Reading the tea leaves in comments and general reaction elsewhere, I think this tale will have the unfortunate side-effect of people jumping to the wrong conclusion that SVB is getting slaughtered because of defaults in VC debt when in reality this appears to be attributable to poor asset management on the bank's fault by buying into mortgage-backed securities and being long duration in a rising interest rate environment

It's like everyone reads "tech layoffs" in one news article an then "VC bank default", conclude everything one is directly causing the other and there's a new dotcom crash

Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn

#79

Post by selimthegrim »

nostrademons wrote: post #62
nradov wrote: post #59

Earlier quoted context omitted.

There have been plenty of recessions and depressions so far and none of them have ended civilization. Another recession is certainly possible this year, but some people are always predicting those. Do you have a record of making accurate recession predictions without false positives?

Predicted 2000, 2008-09, and 2020. Predicted growth from 2003-2007. Falsely predicted a double-dip in 2011. Predicted growth from 2012-2020. Correctly predicted that 2015 and 2017-2018 would not result in recessions at a time that media and some friends were saying they would. Incorrectly predicted that 2020 recession would last longer than it did - I reversed opinion in early 2021, which was a little late to capture…

Civilization ending because it affects ability to respond to climate change?

Re: Startup lender Silicon Valley Bank to sell stock to cope with cash burn

#80

Post by nostrademons »

JohnFen wrote: post #74
nostrademons wrote: post #73

Earlier quoted context omitted.

These banking failures and mass unemployment would come right as interest rates are spiking. They also go hand in hand with banks dumping Treasury Bills for liquidity, which would cause a sharp decline in T-bill prices and a rise in T-bill rates. The government finances its operations by issuing T-bills. If nobody is willing to buy T-bills, the government can't get cash to pay government employees, including the FBI,…

Perhaps we have different definitions of "civilization-ending". Even if what you describe here actually happened, I wouldn't characterize that as a civilization-ending event. it would just be the passing of another nation. Civilization would continue, just as it has when nations have fallen in history. Although, I do need to add, while your scenario is technically possible, I do think it's vanishingly unlikely. The U…

I was torn on what to call it - debated using the term "state failure", which I think is more accurate but few people truly know what that means. Basically, I'm referring to an event that breaks our conceptions of what it means to be "civilized" - basically, that you follow laws, adhere to contracts, respect government authority, have a well-defined political process, pay with a stable currency, can count on your personal property rights and past savings being respected, etc.

You can have civilization-ending events that don't involve everyone dying - the fall of the Soviet Union in 1991 was one. It was still hugely disruptive to everyone who lived in the Eastern Bloc. The U.S. Civil War is another one, though plenty of people died then too. It's not the end of all civilization, just the civilization we're in.

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