All Forum Posts by: Michael Wooldridge

Agreed thinking that business's should only keep 250k in each bank is ridiculous statement on so many levels. What about companies that have payrolls of millions a month they going to have 25 separate banks to deal with ?? And Should syndicators and other investors that are pooling money for a deal and say are raising 5 million in cash they should go out and get 20 separate accounts.. Growing up in Cupertino ( Silicon Valley) Always thought SVB to be a good institution catering to high tech. Maybe they needed more real estate loans tied to prime on their books..

so SVB business model is bit different, they have special loan program for the tech/startup founder but the rule is that they have to invest in SVB.

This problem actually happened because Peter Thiel is saying to everyone in VC world that they should withdraw their fund from SVB.

Btw last time I checked all the big VC has large $$$ in SVB, I guess we will see catastropic changes in bay area in next few month. If bank and Gov cant be trusted what can we do :) lol

All depositors are going to be kept whole. This is an unintended consequence of rapid rise in rates. They'll be taken care of.

The thing is most of the "deposit" in SVB is "corporation" account, for example payroll account.

Guy in roblox and roku can't be paid because thei bank is gone after stupid goverment action :-) even the SVB CEO is not at fault here....

SVB leadership is partially at fault (along with the Fed). SVB put a large portion of their assets in long term instruments like treasuries and MBS. One of those instruments in MBS was declining in value because of the Fed raising rates which was public knowledge. Sure it is a paper loss that doesn't even have to be recognized if they hold the paper for 10 years or more, but clearly their liquidity mix was incorrectly calculated. Their leadership had two issues:

- How they allocated capital (this is just stupid, but not criminal)

- The lunacy of doing things like selling stock and paying large bonuses days and hours in some instances before the Feds took over (I hope they go to jail for this as it was likely criminal)

Now the question will be the long term changes in banking with the Fed. They blew a hole in FDIC insurance now as they backstopped all deposits, not insured deposits, to quell a bank run. What is the new moral hazard created by the Fed for banks now that they will feel ALL deposits are guaranteed going forward? It would seem that banks are impowered to take on more risk knowing they have a larger backstop. If the Fed doesn't clearly make its actual policy actions known for future events, they have increased risk in the market over the long term IMO.

they are not at fault.

The whole US bank this time has 620 billion unrealized losses because the gov. is intentionally crashing their bond value by increasing the rate.

It's powell mistake.

This is why, outside US banking system, 30 year fixed rate mortgage is non existant, because the bank is taking too much risk from holding people debt.

So I agree with you about Thiel (our own company yanked out Thursday also). And that caused a lot of pain and the failure. But SVB is partially at fault for being stupid in how thye setup laddering on their treasuries. The timeline for maturity should have been much better.

Ultimately though people need ot be more concerned about how Thiel essentially caused a viral panic. Also since SVB went down the number of posts/discussions on social/reddit about removing money from their bank has skyrocketed. My concern is panic in the masses who have no understanding of what is going on.

1 Vote

Quote from @Nate Marshall:

JPM. BofA, Goldman, Morgan etc would get bailed out. But I doubt they would ever fail. Lehman Brothers made really dumb mistakes they didn't. They had exposure in 2008 but not Dick Fuld created at Lehman.

Silicon Valley really needs to pay a price IMO. They are too loose and have too much risk. Plus they need to pay that price for Theranos and WeWor etc.

They were definitely stupid in their treasury approach. But the bigger concern is how one person - Thiel - was able to stat that run. FRC, Schwab are getting pounded this morning. Anymore fear in the system could cause a hit with a real bank - which we can’t afford.

The ~20% drop on Schwab today is concerning. FRC was expected but Schwab starts to make it more real with the assets they manage.

And if one of the the big 3 - Wells, BOA, JPM go down. Well it hardly matters anyway because it means whole system is dead.

0 Votes

Quote from @Chris Martin:

In pre-market, First Republic Bank (FRC) is down 62%, off $52 to $30, in an apparent 'run on the bank.' This is becoming a crisis of confidence and has the smell of contagion. Banking in Silicon Valley is under a lot of stress.

FRC isn’t a surprise. What is concerning to me is the 18.5% drop on Schwab. That’s actually a sizeable bank and one that is really conservative. Kind of surprised and concerned about wat is going on there.

2 Votes

Quote from @Dan H.:

I see agent say buy now. I see investors say never buy a bad deal, cash flow is hard to find, etc.

Here is the reality. On high LTV properties the month P&I has almost doubled since the start of 2022. This is without an associated increase in the RE value. I would argue that in some ways it would be better if the RE had doubled in value and rate was the same as a year ago as at least you would be purchasing a higher valued asset.

The reality is I have been in RE a long time and have never found it harder to find RE that meets my current purchase criteria. This is 1) because I am a big fan of leverage 2) I do not forecast rates declining 3) I am conservative in any appreciation or rent increase forecast 4) I am cognizant of the level of effort and risk involved with residential RE 5) I am cognizant of other investment options.

If I can effortlessly and with virtually no risk have money market or CD return near 5%, what sort of return do I need from residential RE to make it worth the effort and risk. Note money market/CDs are not the only choice but I use them as a single reference point. 10% is not nearly sufficient. I need approaching 20%.

If you can find an RE that with conservative underwriting projects the return that justifies the effort and risk compared to other investment options, it could be worth pursuing. My issue is that I have not and therefore I have not purchased since Dec 2021 (but I did purchase $4M that month). In fact, I have only offered on a single property since then and my offer was not close to the accepted offer (the accepted offer was apparently willing to accept a much lower return than I was willing to accept).

Good luck

Interesting comment. My last purchase was October 22. Interesting enough even in year 1 (STR) we are on track to do 22% CoC and judging by bookings for next year wouldn't be surprised if closer than 30%. So I would say deals are out there but like you I've gone more conservative - and I absolutely have to have a decent return up front in cash flow - I don't buy just for appreciation because it's too risky.

That said while I lean more towards RE vs liquid - I'm curious about your needing 20%. Are you talking CoC? Or are you talking about overall? 10% CoC between tax write offs, appreciation, and long term value - in my experience it's hard to even beat that in the market when you factor in all benefits.

or are you just deeming the investment not worth the risk at that point?

0 Votes

Columbus, Ohio

Quote from @Greg R.:

Looks like rent growth has slowed quite a bit as well...

Also, Minneapolis saw the biggest rent decline in the nation

Of course rent growth has slowed. But unlike home values it won’t go negative.

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Dallas, Texas

Quote from @Greg R.:

Looks like Dec numbers just hit. @Carlos Ptriawan haven't had chance to evaluate them fully, but Dallas median home price is now at the lowest point since Jan 2021

Not a surprise since Dallas and Austin are in line with CA changes. Actually Dallas looks to be on track to do worse than CA. That said it might be close to Jan 2021. But it's not far off from Jan 22 etc.. Dallas has been one of those markets I pointed out had a very unusual jump March - May 2022 and you can see it in that chart. And despite us talking about COVID / 21 type jumps it doesn't match rest of country.

Meanwhile here are a few other East Coast markets:

https://www.redfin.com/county/... (PA Suburbs of Philly)

Charleston SC: https://www.redfin.com/city/34...

NYC: https://www.redfin.com/city/30...

Atlanta: https://www.redfin.com/city/30... - one of the bigger drops in a major east coast market but still pretty flatlined. January will be interesting though.

Jupiter, FL https://www.redfin.com/city/91...

Fort Meyers FL: https://www.redfin.com/city/62...

Dallas is getting hit. Some of the west coast is but as @Carlos Ptriawan pointed out some of that is evening out. but there are plenty of flat markets across the East. Cali also drove a lot of the national decline. Those big markets have a big hit on median home prices. If they continue to level future cuts will be slower. 10-15% is what I've been expecting though. I have been planning for it actually.

Ultimately FED will have a big impact. They are sort of pissed at the markets right now for lowering their pricing on products. Hopefully they don't get in a pissing contest.

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Dallas, Texas

Quote from @Greg R.:

Quote from @Michael Wooldridge:

@Greg R.I'm starting to fully agree with James here. You are trolling at this point. He's posted multiple times, I've posted a dozen times that nobody ever thought that 2021-2022 inventory would remain. Nobody has ever said that. you can't find a single example of it. EVERYBODY has said inventory will remain, keyword now, historically low. And it has. And in fact the charts James are posting are showing that.

Even in your charts we are still at the lows of covid that we saw the end of 2020 and 2021. It's low, historically low. Which is all everybody has predicted and there are quite a few of those posts in this thread. Now when it gets back to 2015-2016 levels you might have something....

You are entitled to your own opinion. I never said that was your stance, but it is a stance that people have had. You are saying that nobody ever said that inventory wouldn't increase? That's simply not true.

A stance that I've seen repeatedly is that inventory levels will remain low & not increase. The argument is that rather than lower costs and meet the buyers where they are (due to rate increases and increased P&I payments), that sellers would simply pull out of the market and wait for selling conditions to improve to maximize their earnings.

Again, I never said that inventory levels weren't historically low. I said the opposite if you look at my post. I don't understand why the statement "inventory is rising" is being confused for "inventory levels are historically high". Those are two completely different things, and I never stated the latter.

I have repeatedly stated that we are heading up in regarding to inventory, not that we're there. We obviously have a ways to go when we're looking at historical norms, but the trend is up, not down.

I totally get that James would get these topics confused and not be able to differentiate. A bit surprising to hear this from you.

It’s not being confused.My point is just that I’ve been here for over 70 pages very active. And I’ve never once seen “anybody” say inventory won’t rise. We’ve also it will remain low because people will sit on their homes where they can. And that’s pretty much what we are seeing.

So confusion, no. You just keep saying people said it would never rise. I’ve asked for one single example of that and it’s too much work. So yes thats why i’m begining to agree with him. You are making claims about people but can’t even reference it.

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Dallas, Texas

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Dallas, Texas

Quote from @Greg R.:

Quote from @James Hamling:

Quote from @Greg R.:

According to James, the trend line below shows dropping inventory over the last year. 😂😂🤡🤡

Hey look at that Greg the liar supreme yet again using selective data to FRADULENTLY make FALSE statements and FLASE accusations, YET AGAIN.
Here is the REAL and COMPLETE data.

Thanks again for demonstrating to everyone your inability to read and understand posts that you respond to. You also lack the ability to comprehend the difference between a year and a decade. Have fun arguing with your self about data from 2010 and 2017. You are the only person in this chain talking about datasets from 6-13 years ago.

Actually no. As I said earlier nobody said inventory wouldn’t go up from the all time low it has ever been. We all said inventory would remain historically tight. And it has as the chart shows.

But every time I call this out you say you don’t want to dig through hundreds of posts.

And inventory is light which is why costs still haven’t changed much despite the high rates (outside of a few key markets).

1 Vote

Dallas, Texas

Quote from @John Carbone:

Quote from @Michael Wooldridge:

And look at that. 2022 was the second best year on record for job growth (only behind 2021) and boomers are retiring finally which is creating more pressure. Things are going to conitnue to be fun but the job market is going to continue to be strong.

Real nice article on this trend here: https://www.nytimes.com/2023/0...

Why are real wages down then?

People tend to not get pay raises until the beginning of the year/q1. Even then November was only 1.9% down after a fair amount of growth. Inflation is fun. Whats also fun if job market is tight and boomers keep retiring then employers will offer more or diff benefits.

regardless inflation will hurt low wage employees but even those are much higher look at taco bell hiring at like $18 an hour.

0 Votes

Dallas, Texas

All Forum Posts by: Michael Wooldridge

Michael Wooldridge has started 0 posts and replied 481 times.

Post: MY THOUGHTS ON SILICON VALLEY BANK COLLAPSE

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