Posted on 03/10/2023 1:26:58 PM PST by nickcarraway
If you looked at the performance of the financial sector over the past week or two you’d be excused for feeling a bit of panic. The deterioration in share prices slowly accelerated into a crushing run on two banks in two days. Given the way markets have been fluctuating over the past 18 months and the pressure the Fed has been putting on the market, we can understand how some people might jump to conclusions and think the financial system is finally cracking under the pressure of rate hikes and inflation.
We’re going to dive into this deeper, but lets start this reaction piece off by pressing pause on any panic you might be feeling.
Why Is The Financial Sector Under Pressure
The financial sector has been under pressure as rate hike expectations have come back into focus. While we’ve had plenty of speculation around rate hikes over the past 18 months, the past week or two has seen the 2s – 10s spread expand rapidly. The 2s-10s spread is the gap between 2 year treasury yields and 10 year treasury yields. In normal markets conditions, longer maturity yields are typically higher than short maturity yields – governments or companies who issue debt have to pay more for investors to feel comfortable locking their money up for longer periods of time. However, in the current environment where rapid rate hikes are expected to be temporary, the yield of treasury bonds with shorter maturities is higher than the yield on treasuries with longer maturities.
This spread is important because the spread between long term and short term maturities can have a significant impact on bank profitability. Banks fundamentally operate in the business of borrowing short term money and lending it out to people for longer term projects.
(Excerpt) Read more at forbes.com ...
VIDEO FEB 2023, Jim Cramer urges investors to buy Silicon Valley Bank stock $SIVB at over $300 per share , saying it was “still cheap” and has “room to run.
https://rumble.com/v2ci6mo-feb-2023-jim-cramer-urges-investors-to-buy-silicon-valley-bank-stock-sivb.html
The author’s general point about the current fundamentals of banking is correct.
Need to put this in the category of the “Mostly peaceful protest”
We have a caustic combination of demons and psychopaths running the country right now. I have been fighting it, but obviously not making much of a dent. Will keep fighting until they put me in the ground. We are up against pure evil.
Re: 2 - Annnd????
He’s one analyst. Who happens to also have a TV show.
He’s has some good picks.
And he has some really bad picks.
Forbes is correct in that this bank specialized in funding tech startups - which are in the tank now. But also part of the problem which is endemic to the system is that banks have no reserves. Also endemic is bank assets - like bonds - are getting major haircuts.
What started this SVB fire was people got spooked when they started selling their bonds (assets) at a loss.
SVB is a large bank - 15th in US. Over 90% of their clients are over the 250k FDIC threshold... so that’s bad.
I heard there were lines of depositors withdrawing at other banks - Wachovia etc.
See.post 6.
Also, banks are becomming VERY vulnerable in CMBS and consumer credit.
Solyndra is coming back! Invest now.
At one time my wife and I owned a Travel Company, one day two Eastern Airlines pilots came in on a PR tour telling everyone not to worry about Eastern Airlines because they were here for the long run and weren’t going anywhere.
Less than a week later they filed for bankruptcy and quit flying.
I could be mistaken but one time Lehman Brothers said their financial condition was strong, soon after they closed the door and got rid of everyone.
Indeed and Enron is too.
I knew some people who worked there and had a lot of family money invested. Poof.
The System Isn’t Broken But The Players are.
Systems work for those who make the rules huh Joey.
Federal Reserve announced a closed door meeting. Scheduled when? Monday.
Whatever Cramer recommends... do the opposite.
Alberta’s Child, you said “The author’s general point about the current fundamentals of banking is correct.”
The New York Times called it a “small” bank
SVB is the 16th largest bank in the country...
My recommendation... buy dirt or gold...
The rate increases are putting all bank assets underwater.
Didn't Silicon Valley Bank cease to exist today? But you're right - the author’s general points have merit... but it seems things are worse than he's saying.
Didn't Silicon Valley Bank cease to exist today? But you're right - the author’s general points have merit... but it seems things are worse than he's saying.
Everything’s fine. No...really,
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