Silicon Valley Bank Collapses, Causes Concern Within Tech Industry, Roku Divulges its SVB Investments

[the54thvoid]

Check out the date of this article and look at #20 on that list.

America's Best Banks 2024

Forbes’ 15th annual America’s Best Banks list looks at 10 metrics measuring growth, credit quality and profitability for the 2023 calendar year, as well as stock performance in the 12 months through March 18, 2024.

www.forbes.com

Paywall? Won't load. Basically, it's a run, and once it started, everybody scrambled. Problem is, when you have tens of millions to withdraw, it causes seismic jitters.

 

[trparky]

Check out the date of this article and look at #20 on that list.

America's Best Banks 2024

Forbes’ 15th annual America’s Best Banks list looks at 10 metrics measuring growth, credit quality and profitability for the 2023 calendar year, as well as stock performance in the 12 months through March 18, 2024.

www.forbes.com

And to think that Jim Cramer of Mad Money over at CNBC was singing praises a month or so ago.

 

[dragontamer5788]

Paywall? Won't load. Basically, it's a run, and once it started, everybody scrambled. Problem is, when you have tens of millions to withdraw, it causes seismic jitters.

I'm seeing people suggest Thursday's bank run alone was $46 Billion. Yes, in a singular day.

This isn't a "10s of millions" kinda issue. This is 10s-of-billions.

 

[trparky]

Oh, this is rich. The Chief Administrative Officer at SVB Securities is Joseph Gentile who served as the CFO of Lehman Brothers' Global Investment Bank when it collapsed.

Seriously, you can't make this shit up.

 

[Why_Me]

And then there's this ...

https://twitter.com/i/web/status/1634555021487480834

 

[trparky]

Insider trading.

 

[TumbleGeorge]

Yes, a completely common and random occurrence. According to Probability Theory. Nothing is organized on purpose.

Joseph Gentile

Hmm the last name is quite famous.

 

[dragontamer5788]

Insider trading.

Yes. That's why it was reported, especially the amounts, when and where they did these trades. Insider trading is legal, as long as you report your trades in the public. Stock traders know that paying attention to SEC Form 4 filings is very important, because insiders often trade with inside knowledge. Furthermore, these Form 4 filings allow us to look back a month, or 6 months back, and see if there's any fishy behavior when these incidents occur.

There are also regulations with regards to where, when, and how often you can trade if you are an insider.

Without getting too political: the "insider trading" issue most commonly talked about in political circles is that the "definition of insider" isn't sufficient. That a lot of people with inside knowledge aren't considered insiders as the law is written right now.

I'd argue that the fact that we can easily grab SEC Form 4 over SIVB over at Edgar is the system working as intended.

 

[skizzo]

Why does this remind me of this sketch, honestly idk.

I was thinking more like this clip but close enough lol.......Annnnnnd it's gone!

 

[erek]

New SVB: cough

 

[Icon Charlie]

Please say that this is not due to crypto "currency" operations and that there is no evidence of criminal siphoning through Ponzi schemes.

To put it bluntly. As a Venture Capitalist, I balked doing business with them @ 2013. And yes they are involved in the coin and other high risk ventures. It has been reported to me about 93% of their investments were considered "High Risk, non FDIC insured".

This is another example of Greed in the industry and the under belly of Silicon Valley (and other wealth hubs) mindset OF short term profits and risky financial foundations vs long term financial growth with a solid foundation.

I expect more in the Banking industry overall as IMHO as many are doing similar things of packaging toxic investments and selling it globally to get their money back.

The abusive Greed that you been seeing of late, coming from AMD, Intel, Ngreedia, Apple, and all of the FineTech companies is normal here in Silicon Valley and blatant.

I have seen this first hand and I really don't like dealing with their mindset at all. I know my finances are solid because of my long term financial foundation.

We are already in a form of a recession. IMHO it is going to get much much worse for many people in my region.
Because they lack the understanding and ignore the facts of what happen just a few years ago when the Great Recession started to wind down in 2012.

And to all of those investors who took that risk in dealing with SVB. You had a full year of financial warnings to get your sh!t together and you did not. If I could see the warnings so could have you. In this world that is based on Tangible Assets if you are not able to govern your own Assets wisely then you deserve everything that is coming to you.

A perfect example of GREED.

Roku says 26% of its cash reserves are stuck in Silicon Valley Bank

Around $487 million of Roku's cash reserves are stuck at Silicon Valley Bank, the streaming media company said Friday.

www.cnbc.com

Unless the Government does a full bailout, greedy companies like Roku are screwed. And that is their own damned fault.

 

[Why_Me]

SVB was probably one of the most ESG focused banks in America. Their carbon footprint will soon be zero so I guess that's a plus.

 

[the54thvoid]

SVB was probably one of the most ESG focused banks in America. Their carbon footprint will soon be zero so I guess that's a plus.

There's nothing wrong with being ecologically focused or trying to remove glass ceilings, but when banks talk about this, I agree with your sentiment; it's all greenwashing BS.

 

[Why_Me]

There's nothing wrong with being ecologically focused or trying to remove glass ceilings, but when banks talk about this, I agree with your sentiment; it's all greenwashing BS.

These so called 'focused banks' are making this ESG thing a requirement on who does and who doesn't get loans as far as businesses go so yes I see a problem with it.

 

[dragontamer5788]

I was thinking more like this clip but close enough lol.......Annnnnnd it's gone!

Personally speaking, I feel like Mary Poppins is the best scene for this situation.

 

[RJARRRPCGP]

Why does this remind me of this sketch, honestly idk.

Go to 4:17-4:20, LOL!

 

[trsttte]

It's because SIVB was a venture capital / tech startup focused bank.

Tech startups got billions of dollars in 2021 as the pandemic hit and work from home accelerated the consumption of computer services and equipment.

Startups then used Silicon Valley bank to hold their deposits. It's looking like $100+ Billion in deposits flooded into Silicon Valley bank at this time.

For reasons unknown, SIVB put a huge chunk of that money into 10Y or 30Y treasuries, as well as mortgages around Silicon Valley.

Two years later, in 2023, on Thursday, the tech startup ecosystem undergoes a collective panic attack and withdraws $46 Billion from SIVB. This has likely forced SIVB to sell those 10Y or 30Y treasuries and mortgages on the open market.

Note: long dated bonds are worth 20%+ less today than they were worth in 2021. That is, SIVB needs to sell $1200 worth of mortgages and bonds to make $1000 of customer withdrawals.

Come Friday, yesterday, FDIC was forced to take over the bank. They are suffering from a classic bank run and have collapsed.

The most impressive thing is that what did them over was the good and safe bet on bonds and not the investment on startups.

True, but it's still not a good sign. I don't want to go all doom and gloom here but this is a sign of some very bad things to come. And to be honest, I've been predicting this kind of thing for the last ten years.

Does anyone remember the Great Housing Bubble of 2008? Yeah. We learned NOTHING!!! And here we are repeating the same damn mistakes. Those who do not learn from history are doomed to repeat it and here we are folks, repeating history. Alright everyone, time to stick your head between your legs and kiss your ass goodbye because man, we're in for a rough road here.

This has nothing to do with the housing bubble. They weren't doing synthetic products with insane leverages without any account for possible risks. They were dumb but not nearly that dumb. Completely different things.

Well, Elon Musk has allegedly said he's possibly interested in buying it

Better than buying twitter. I heard ramblings of people (no one from inside, just random people throwing guesses) suggesting one of the big techs - google, apple, amazon, microsoft - could have an interest. If someone buys the bank and holds the bonds to maturity they won't loose any money, pretty good deal actually. Just needs to be someone with a strong balance sheet to do it and the likes of amazon or apple would love a shortcut into a full banking license.

Unless the Government does a full bailout, greedy companies like Roku are screwed. And that is their own damned fault.

The political ads write themselves, but this wouldn't be a bailout. The share holders get nothing, the government can hold the assets to maturity and get every penny back and just shore up whatever depositors depend on the bank.

Why is it their fault though?

 

[dragontamer5788]

The most impressive thing is that what did them over was the good and safe bet on bonds and not the investment on startups.

Safe according to regulations. Absolutely not "safe" according to common sense, given the high rate of inflation (starting in 2021 nonetheless!) and threats of the Federal Reserve to forcibly raise interest rates for damn near a year.

That being said: all these startups withdrawing money at the same time is 100% risk management that they also should have accounted for. Silicon Valley bank lost money in Q4 2022 because so many startups did poorly and were unable to raise capital. Its like Silicon Valley bank completely forgot about 2001: a "tech crash" that could affect startups and force everyone (erm... everyone in tech at least) to withdraw their money at the same time.

The political ads write themselves, but this wouldn't be a bailout. The share holders get nothing, the government can hold the assets to maturity and get every penny back and just shore up whatever depositors depend on the bank.

That's literally the deal US Government made with AIG, aka a bailout. It was also called TARP.

US Government forcibly took over various banks, in effect becoming the sole shareholders. (And minority owners of the banks that didn't fall apart). Using their new power as major shareholders, US Government assigned a CEO to handle finances for a few years, before selling all the shares + bonds + assets for a profit by 2014.

Perhaps it was politically incorrect to call this plan a bailout in 2008. But... that's the name that got stuck for whatever reason.

 

[trsttte]

Safe according to regulations. Absolutely not "safe" according to common sense, given the high rate of inflation (starting in 2021 nonetheless!) and threats of the Federal Reserve to forcibly raise interest rates for damn near a year.

That being said: all these startups withdrawing money at the same time is 100% risk management that they also should have accounted for. Silicon Valley bank lost money in Q4 2022 because so many startups did poorly and were unable to raise capital. Its like Silicon Valley bank completely forgot about 2001: a "tech crash" that could affect startups and force everyone (erm... everyone in tech at least) to withdraw their money at the same time.

Even with interests rates those bonds are still good if they're able to keep holding them. Bad risk management and the capital requiments don't seem have worked if they fell so easily to a bank run.

That's literally the deal US Government made with AIG, aka a bailout.

I guess, but i'd see this one as a "good" bailout, not the usual bullshit of helping millionares out

 

[dragontamer5788]

Even with interests rates those bonds are still good if they're able to keep holding them. Bad risk management and the capital requiments don't seem have worked if they fell so easily to a bank run.

The herd-mentality and skittishness of Silicon Valley Tech-types caused a $46 Billion bank run on a bank with $200 Billion in assets... in a single day.

Lets not underestimate the scale of the stampede we just witnessed two days ago here. This is a sector that has been hit with mass layoffs for months-after-month, a sudden loss of capital (2022 was the smallest year for capital raises for tech startups in decades). The people were skittish from already weakening economic conditions and were ready to stampede on the slightest sign of trouble.

The money will be there and is still good.... But it will take 10 to 30 years, because of the insane decision of Silicon Valley bank to choose such long-dated bonds. But they needed all that money on Thursday this past week, exactly Thursday, and no later.

I guess, but i'd see this one as a "good" bailout, not the usual bullshit of helping millionares out

For now, I'm optimistic enough to test out how good these Dodd-Frank era "Stress Tests" have been for the past 15 years. I'm willing to give this a few weeks and see if the Dodd-Frank protections can hold up the financial system and prevent this from spreading.

I'm hoping that no bailout will be necessary (be it a "good" bailout, or a "bad" one), and that this entire event can remain isolated. After all, that's what we've been preparing for the past 15 years as a country.

I obviously see the problems that can occur if things start to get out of hand. But... we're not in a 2008-era like event yet. Lets wait and see what happens, and have at least a little bit of trust in the safety nets we've installed over the past decade.

 

[Why_Me]

I guess, but i'd see this one as a "good" bailout, not the usual bullshit of helping millionares out

I'm sorry but I fail to see the difference. In the end it's the US taxpayers who will foot the bill.

 

[dragontamer5788]

I'm sorry but I fail to see the difference. In the end it's the US taxpayers who will foot the bill.

In regards to TARP, US Taxpayers made a profit from it. So .... yeah. Lets... make more money as a country? I'm not really against that. That's why IMO, that was a "good bailout".

The theory of Federal Reserve Banking is that one bank (IE: US Government) is so big, that they are willing to take any bet (no matter how big that bet is), and risk it if they think it still has a chance to be profitable. If there's no chance for profits, let the thing collapse. But if there's a chance for profits, why destroy good money? Someone ought to pick up the tab and make a profit 5 years later. US Government playing that role is a-okay in my eyes.

--------

EDIT: The thing that bothers me about this SIVB situation, is that 10Y and 30Y Treasuries have lost 20% of their value in the past year. As a tax-payer, I don't want to take on that kind of hit. It just doesn't look profitable to me. So TARP / 2008 == money maker. SIVB == money loser, probably. If its a money-loser, then we're basically forced to liquidate. We as a country / bank of last resort should NOT taint our good money with their bad money, so to speak.

 

[Tomgang]

So one bank collapses and 10 banks are in bad shape. I am not expert or know very much about it. But it sounds bad in my ears.

I have not forgotten the 2008 crisis. It was nasty.

So I guess we will have see how bad this turns out to be. Avoid a big financial crash only local trouble or is it financial crisis 2.0 or even worse. Hold on to your hat and glasses, this can potentially be a wild ride.

 

[Why_Me]

Breaks my heart /sarcasm

Crypto firm Circle reveals $3.3 billion exposure to Silicon Valley Bank

Traders have been watching this week for signs of contagion in the financial sector from developments surrounding startup-focused Silicon Valley Bank and Silvergate.

www.cnbc.com

Meanwhile in the UK ...

https://twitter.com/i/web/status/1634341093616541699

 

[trsttte]

10Y and 30Y Treasuries have lost 20% of their value in the past year

I think you're more worried than it's worth about this. They lost the value as interest rates increased and will get it back once they start to come down in about a year or so