All Forum Posts by: Michael Wooldridge

HE didn’t just tell his portfolio to pul out. he told some of the other firms too who also told his portfoilio to pull out. There are emails all around the tech industry about how to handle explaining to customers that they got out before the closure. It’s amazing how all of them pulled out on thursday….. 
 

Yep I bought in 08. Still deals to be had. 75% reductions, in home values, which I think is realistic if you break the banking system, not to mention all the systemic industries hit from tech to insurance to manufacturing. 

08 wasn’t even that scary or bad. This would be. People need to look at how massive the big 4 are, compared to every other bank but also compared to the pain we saw with tiny collapses in 08. And I don’t mean just pure assets but % of assets compared to the whole system. If they were too big to fail in 08 - the too big to fail in 2023 has a whole other meaning.
 

The context is actually simple. We are talking about a recession. We are talking about 75% drops in housing. Mortgage product disappearing, credit disappearing. You are essentially talking about a total business meltdown.

So my question is why would you be ok with that? I’ve got no homes with less than 50% equity in them except one new one that is cash flowing massively. SO I’m technically fine but the reality is every single one of us would be hit if home prices drop 75%.

So no I’m rather confused. ON why you are ok breaking the system. It’s not a correction but a break. They are very different thigns. 

Inflation hasn’t changed and won’t change. I’m not saying flood the economy with cash. I’m saying we don’t want it to stop flowing the way it is. Hold rates keep it high so there is low volume and much lower leverage being used. Which is whats happening. 

 I agree with you the banks can crash. I’m saying that if we do we will kill housing. Would you like to go back to median values of about 125-140k? And wealth being destroyed across the nation. BECAUSE that is what that would do. 

You don’t have to like it but the financial system runs off this model. No bank can handle whats going on. And thats my point either we completely change the banking model (not just regulation) but product changes, rate changes, everything which will depress trillions in wealth. Or we can’t let certain elements fail. As far as I’m concerned the big 4 essentially are consumer extensions of the Fed Reserve.

As to regulation. Of course it will stick. For awhile. Just like it did after 08 and then people will loosen the regulations up as it slows down growth. Pendulum always swings hard - in both directions. 

 So Not arguing on the long term benefit. What I’m saying is a buyer is getting a bank that has assets to cover debts (about 12 months to get there) so even the traditional side doesn’t matter.

And the investments - yes it will bounce and i don’t see it taking 5-12 years. There are plenty of data/ai/security start-ups that are still growing nicely. INdustyr may be down but some key areas are donig very well. Even a few that are ready to IPO but held off due to the macro conditions. So there are tons of assets. 

Which makes me more annoyed everybody is ok with PE/VC buying this. Especially since they crashed it on purpose.

 And thats the problem with it. already hearing rumblings in VC/PE world that a lot of them would like to step up. Some of them tied to Thiel crashing it. It’s a joke. I’d rather see govt hold it then do that or give it to a traditional big bank.

So SVB is a good buy because it actually has the assets to cover this. It wa sa timing issue. 

That said SVB had something like 220billion in assets. JPMC has:
$2,690.905B

Not comparable and nobody is saving it except maybe the Federal govt. but probably not even them.  If they go under it rill ripple across the globe. And that’s sort of the problem the ripple will be tsunami. Not the dinky little wave we saw this past week.
 

Quote from @James Hamling:

Quote from @Michael Wooldridge:

Quote from @Carlos Ptriawan:

Quote from @Michael Hutchinson:

Quote from @John Carbone:

Quote from @Carlos Ptriawan:

Quote from @Jason Malabute:

The following are my thoughts on the collapse of Silicon Valley Bank and any thoughts of upcoming bailouts. As an advocate for responsible financial practices, I believe that the government should not bail out banks that collapse due to their own risky investments. Such bailouts not only create moral hazard but also set a dangerous precedent that banks can engage in reckless behavior with little or no consequences.

Depositors should not be bailed out for savings over the $250,000 FDIC limit because they should share the risk of banking with a particular institution. When depositors place all their cash in one bank, they are essentially placing all their eggs in one basket, which can be risky. Therefore, it is important for depositors to diversify their savings across multiple institutions to mitigate risk. Additionally, depositors should consider investing their money in assets like real estate, which can provide long-term returns and mitigate the risks that come with being too liquid. Ultimately, depositors should take responsibility for their financial decisions and not rely on the government to bail them out in the event of a bank failure.

When the government bails out a bank, it sends a message that the bank's risky investments were acceptable and that taxpayers should bear the cost of the bank's mistakes. This creates a moral hazard, where banks are encouraged to engage in risky behavior with the knowledge that the government will bail them out if things go wrong. This, in turn, puts taxpayers at risk and undermines the integrity of the financial system.

Moreover, when the government bails out a bank, it effectively rewards poor financial management and risk-taking. This sends the message that there are no consequences for engaging in such behavior, which can ultimately lead to a culture of complacency and a lack of accountability in the banking sector.

In addition to the moral hazard, bailing out banks can also be costly for taxpayers. The funds used to bail out a failing bank are typically drawn from the public coffers, meaning that taxpayers foot the bill.

As a real estate investor, I am aware that financial distress in the market can create great buying opportunities. An economic downturn can create great buying opportunities in commercial real estate for savvy investors. When the market is down, sellers are more flexible on price and terms, and may be more willing to negotiate seller financing or other creative financing options. Additionally, there is likely to be less competition from other buyers as money may be less accessible. This can be particularly beneficial for real estate investors who have preexisting relationships with investors who have cash, creativity, and resourcefulness, allowing them to take advantage of market opportunities that others may miss. Ultimately, an economic downturn can be a great time for investors to acquire high-quality assets at a discount and position themselves for long-term success in the real estate market. With that said, as a real estate investor I would be extra careful with what banking institution I do business with and put my reserve money in moving forward.

In conclusion, I strongly believe that banks and depositors should not be bailed out over the FDIC amount. Bailing out banks creates moral hazard, sets a dangerous precedent, and can be costly for taxpayers. As a society, we should encourage responsible financial practices and hold banks accountable for their actions, rather than rewarding them for their mistakes.

 Hello, the SVB doesnt make risky investment, they only purchase MBS bonds in 2020, but the gov. choose to crash those bonds.
I bet it's Powell intended consequence to rise the rate that high that fast for nothing. 

nobody questioning powell LOL

But they did make risky bets. They were heavily invested in longer dated maturities which forced them in a box they could not get out of. If they were Investing in 3 months instead of 5-10 year tbills they wouldn’t have had so much exposure. They were gambling that the yield curve wouldn’t invert like it did, but then it did, and hard. Can’t blame Powell for bad risk management by the banks when he telegraphed what he was going to do in advance. This is like a patient eating fast food every day and a doctor telling them they will get diabetes, then it finally happens. 

SVB had no Chief Risk officer from April 2022 - January 2023 ... the role was not backfilled until 2 months ago.   No one was managing the systemic risk created by rising rates and their asset allocations.   People that say they weren't managing their asset portfolio in a risky way many not understand what they were doing.   No Chief Risk Officer Backfill

- Heavily weighted asset portfolio on long term debt
- As interest rates rose, these because unrealized losses if they had to be sold.  Dodd Frank let them hide the losses in a footnote as they didn't have to be realized unless sold.
- Poor liquidity made them realize the losses and created the run


SVB had an extremely risky set of positions in a rising rate environment and had no one at the wheel to manage it for them.   They built a poor business trying to capture slightly higher yield and got burned.

Now ... did the Fed pack barrels full of gun powder, roll it under them and light it on fire?  Sure.   However, if they managed their asset allocation better they would have been able to manage it better.   Eventually the Fed was going to wreck the economy again with their policies, but SVB built a house of cards to be blown over. 

next is Schwabb, Ally Bank, First Republic , Signature Bank and what else, it's just the circumstances would be slightly different. 

but theoretically, a country can't have 30 Y Fixed Mortgage products and then the private banking sector is the baggage holder.... 

it's known in any country, any gov. action could make a bank/lender gone in second if the gov. changes the interest rate in another way around. Bank run in other countries happened because of currency devaluation and/or tightening monetary condition as well, so it's not really a unique issue but a well predictable outcome. 

The fact that Fed is able to save CreditSuisse but not SiliconValley bank (and Ukrainian people) , that's beyond me LOL

And this right here is the problem. People hoping for the crash of Citi, Wells, BOA, JPMC - are crazy. Any of those banks would pull the entire financial system down. 

Now on top of the banks crashing all the systemic issues from SMB (people seem to forget it’s half of employers in this country and believe me they need credit) to insurance industry and other products. It’s not just the US that would fall apart but the globe. 

On top of that. Where do people think housing values are going to go? Every single one of us on this board would be devastatingly impacted.

It might be fun to ask for it (i guess although odd) but nobody here would like the results.

On top of that people are little Thiel off too easy. Already PE / VC are jumping to buy up SVB. Why? Well one reason govt was so happy to jump in is because they actually have the assets to cover everythign. It might take 9-15 months but the money is there. 

Which begs the question why everybody is ok with Thiel. BTW it wasn’t just his companies to pull out he told more than a few of the big PE/VC in tech. I know of more than a few that got phone calls and Wed/Thursday money got out.

Sorry but I’m not cool with playing with fire like this. It’s one thing to short stocks but this is downright dangerous. Schwab is actually fairly conservative / well capitalized. Meanwhile massive hit initially to their stock. Was nice buying at the 18% drop though….. 



 

 Every time the Government steps in and inserts artificial support for a PRIVATE BUSINESS, they are feeding the beast of BAD actions. 

The U.S. Economic system is DESIGNED for business's, ALL businesses, to FAIL if actions come of such. 

This is THEFT plain and simple, Gov. sanctioned theft as they have said don't worry tax payer you won't pay for it, no other banks who DIDN'T screw up, who DIDN'T take the risks, they will pay. T-H-E-F-T. 

Again, YES, LET IT BURN! The system is SUPPOSED to have a few good burns now and then, just like forest management. You want healthy growth, you must let the old diseased over-grown suffer there own undoing and BURN. 

Nobody is talking about the countless masses of banks who DIDN'T screw up, and are just fine. No, all that matters is a handout for the F'd ones because God forbid there be any negative consequences ever. THIS IS INSANE! 

IF any one of the big banks - Citi, Wells, JPMC, or BOA fail. You and I both know it won’t end there. And NO the system is not designed for that. 

Any one of them would likely collapse the us financial system. So it’s not that simple and you shouldn’t be acting like it is. 

 

Well it's a lot of of correlation. but we know regional banks are losing depositors and big banks gaining billions. For example: 

https://www.bloomberg.com/news...

Also there have been a number of articles out there about CIti and JPMC changing sign-up process to get people on in days instead of weeks previously. 

 Which has been shown to be happening already. To a degree.