Silicon valley bank which banks nearly half of the US tech industry was down 60% yesterday and is further down 20% from yesterday’s close after the bank raised nearly 2 billion dollars in equity and debt and also sold their 21 billion dollars mortgage backed securities (nearly 25% of their portfolio at a 1.8 billion loss)
Nearly 80 billion dollars wiped out from the bank’s market capitalisation in a day. (80 billion dollars = SBI)
Yeah, its really intriguing that banks failed just due to interest rate risk ( no scandal, no high bets on risky asset ,no NPAs etc).
I feel in todays world any thing can happen how fundamentally strong company may be. ZEEL with no debt of there own ( one small line in fine print don’t even know if that exist) leads to NCLT.
Equity is riskier than ever !! In two days bank is taken over by fdic, funds blocked.
Unlike India where deposit amounts are usually below insured amt threshold period, the amount of uninsured amount is huge and govt of US says they will not bailout the bank.
SVB collapsed shortly after being featured in Forbes America magazine best banks list. What 2008 taught me that has again been affirmed is that the reality does loose touch with what we see and what we hear at alarming frequency and impact.
I think people will move from banking and will starting placing in surplus cash in money market or GSeC funds.
I also feel with so much risk involved any bank can fail any time better divide money in multiple bank or keep it in overnight funds or medium duration funds.
This is first time banks are closed due to duration risk in Interest rates(never think of scenario )
Ease of accessing the money and doing transactions will be key for successful migration to money markets. We never know if government may incentivize investors to invest in them in future.
But, one more possibility is migration to PSUs from private banks in our country.
Busy counting the money from shorting Adani, good for them.
Seriously, do you expect a company like them to research anything and everything ? What is ‘own’ here ? Do they own these banks ?
As traders you don’t try to trade every move. You trade where your edge is. Same applies to them.
Surprising in how quickly this happened. But this is also not a new problem. Mismatch of duration of deposits vs investments is a an old vice. People get greedy during good times and reaper comes calling during bad times.
