Investing Thread

[ZiggysFryBoy]

This

Profound

[TSmith34, Inc.]

Bond prices fluctuate.  So depending on many factors, including risk and market volatility, the price of a bond thats worth $100 at maturation might not be currently worth $100.  It could be worth $90 or $105.  So by now borrowing at par, they are borrowing at actual maturation (par value) of the bonds as opposed to the current market value.  For the treasury bonds in question, that basically means they are not subject to fluctuation based on the potentials of Fed rate hikes/cuts.

Apparently neither the Executives nor BoD understood duration risk. Or they chose to ignore it. Either way, how were these people running a bank?

[forgetful]

Apparently neither the Executives nor BoD understood duration risk. Or they chose to ignore it. Either way, how were these people running a bank?

Well one of their C-suite execs was the CFO at Lehman brothers right before it crashed, and their risk manager came from Deutsche Bank overseeing many things there when they were found to have lied to investors about its mortgage-backed securities.

Which highlights two things. 1) You can suck at your job at those high levels and walk right into another sweet high paying gig. 2) They apparently don't know how to do background on the people they are hiring.

[jesmu84]

Bond prices fluctuate.  So depending on many factors, including risk and market volatility, the price of a bond thats worth $100 at maturation might not be currently worth $100.  It could be worth $90 or $105.  So by now borrowing at par, they are borrowing at actual maturation (par value) of the bonds as opposed to the current market value.  For the treasury bonds in question, that basically means they are not subject to fluctuation based on the potentials of Fed rate hikes/cuts.

As for the second question, I'm sure people like Burrow will disagree or the people Ive seen online who scoff at the idea that the companies did not spread their money over many banks to prevent this.  But I don't think so.  Thinking why not as a small business owner... (speaking generally, not specifically about those with SVB)

1) Hassle.  We have 3 banks accounts.  Our primary, an HSBC account in HK we use primarily for Chinese operations, and a seldom used BNP account we set up for something in Belgium years ago.  Even that is a headache, even just a deposit account.  We used to business bank with both Chase and a regional bank and we ended up closing Chase and consolidating for the reduction in hassle.  More accounts means more paperwork, more implications at tax time, money movements (cause of course you still can't move funds within a day or two without wire fees), etc...  And we're 20+ years old.  Not a startup that wants convenience/ease of use to draw down on their VC money as they worry about making their business work.

2) Service.  The more money you deposit with a bank, the better service you get.  Whether loan rates, deposit rates, refinancing, etc...  Thats the reason many smaller businesses prefer local or regional banks.  Cause their $500K in cash reserve or the in and out of revenue from a business that does $1/2/5MM a year is meaningful.  Whereas a big bank like Chase or Citi wouldn't care as much as those values are a rounding error to many of their corporate clients.

People tend to view this kind of stuff as they think of their personal banking.  Other than loans, who cares.  Hell, I used to have 5 checking accounts in my 20s.  It was a convaluted way of keeping my money organized and not tempt myself.  One for my student loan payments, one for my rent, one for my cash that would go to my CCs, etc...  But with business, its different. There is just so much more reporting and other things that go into everything that its just not worth it.

Also placing culpability on businesses for being attracted to favorable interest rates like its rolling the dice on options or emerging markets is ridiculous.  Its not like SVB was offering a 10% interest rate

Thanks for the explanations.

I believe this bond thing is new, right? What institution is guaranteeing those rates/money? Does any other business or person get access to the same "at par" valuation?

[TSmith34, Inc.]

Well one of their C-suite execs was the CFO at Lehman brothers right before it crashed, and their risk manager came from Deutsche Bank overseeing many things there when they were found to have lied to investors about its mortgage-backed securities.

Which highlights two things. 1) You can suck at your job at those high levels and walk right into another sweet high paying gig. 2) They apparently don't know how to do background on the people they are hiring.

So they fall into the "chose to ignore it" bucket.

[Goose]

Skatastrophy

I am guessing you may be pointing at me on the political part of this discussion, and I can assure you my comments are 100% economic in nature. I think we have been living an historic time in history in terms of our economy in many ways. In addition, you will never find anyone that believes more that the market and the economy are two very different things. For the record, I am not a fan of any politician at the moment and think both sides have screwed things up.

Every post I have been on the SVB topic is more looking for intelligent conversation and not convince anyone of anything. IMO, SVB is likely the sucker at the poker at the table in this mess and many more regional, or bigger banks, are scrambling around to save their ass. They left SVB be the guy to take the fall and see what happens.

I think you have brought very good insight on this topic and hope others can add to this as well. I very possibly could be wrong, and hope I am, but I think this is going to turn into something bigger than just SVB.

[Hards Alumni]

Skatastrophy

I am guessing you may be pointing at me on the political part of this discussion, and I can assure you my comments are 100% economic in nature. I think we have been living an historic time in history in terms of our economy in many ways. In addition, you will never find anyone that believes more that the market and the economy are two very different things. For the record, I am not a fan of any politician at the moment and think both sides have screwed things up.

Every post I have been on the SVB topic is more looking for intelligent conversation and not convince anyone of anything. IMO, SVB is likely the sucker at the poker at the table in this mess and many more regional, or bigger banks, are scrambling around to save their ass. They left SVB be the guy to take the fall and see what happens.

I think you have brought very good insight on this topic and hope others can add to this as well. I very possibly could be wrong, and hope I am, but I think this is going to turn into something bigger than just SVB.

Welcome to late stage capitalism.

[rocket surgeon]

Welcome to late stage capitalism.

 

  once again, the "experts" are under educated AND corrupt to the core. those who don't know what they don't know(narcissists) are seemingly in control.  corporate america is being run by what they "feel" and trying to avoid negative social media as opposed to sound business decisions=capitalism.  this equity(not equality) crap is going to be one of our downfalls.  another aspect people are naive about an economy is that socialism doesn't spread anything around except depression.  take note of the  "rich" to "poor"  ratio in say, cuba, north korea, etc?  not too much of a level playing field unless you count the downtrodden and forget about the "leaders"

 when there are no consequences to bad behavior...bohica

[jesmu84]

 

  once again, the "experts" are under educated AND corrupt to the core. those who don't know what they don't know(narcissists) are seemingly in control.  corporate america is being run by what they "feel" and trying to avoid negative social media as opposed to sound business decisions=capitalism.  this equity(not equality) crap is going to be one of our downfalls.  another aspect people are naive about an economy is that socialism doesn't spread anything around except depression.  take note of the  "rich" to "poor"  ratio in say, cuba, north korea, etc?  not too much of a level playing field unless you count the downtrodden and forget about the "leaders"

 when there are no consequences to bad behavior...bohica

Sir, this is a Wendy's

Edit: where did you get the information on the "equity crap" having anything to do with SVB?

Your post is filled with conservative headlines and cliches. It's filled with boomer cold war mentality.

If you're going to bring up "socialism" and associated countries, I noticed you forgot to mention any of the Nordic countries. How depressed are those citizens?

[The Hippie Satan of Hyperbole]

 

  once again, the "experts" are under educated AND corrupt to the core. those who don't know what they don't know(narcissists) are seemingly in control.  corporate america is being run by what they "feel" and trying to avoid negative social media as opposed to sound business decisions=capitalism.  this equity(not equality) crap is going to be one of our downfalls.  another aspect people are naive about an economy is that socialism doesn't spread anything around except depression.  take note of the  "rich" to "poor"  ratio in say, cuba, north korea, etc?  not too much of a level playing field unless you count the downtrodden and forget about the "leaders"

 when there are no consequences to bad behavior...bohica

Too woke to hedge their interest rate risk.

[rocket surgeon]

Sir, this is a Wendy's

Edit: where did you get the information on the "equity crap" having anything to do with SVB?

Your post is filled with conservative headlines and cliches. It's filled with boomer cold war mentality.

If you're going to bring up "socialism" and associated countries, I noticed you forgot to mention any of the Nordic countries. How depressed are those citizens?

disprove any of it and show me where i'm wrong. have you run a business?  if i fail in mine, there is no one running to bail me out except myself. 

  the nordic countries?  with the exception of norway, the nordic models are a mix with quite a bit of privately owned business.   i'm not sure about you, but i don't want to be norway.

    btw, these aren't "talking points" cliches nor "headlines"  these are facts about not just why these banks failed, but why it may continue to occur throughout our economy in other business models as well.   businesses have to work, some will succeed and some will fail.  the faults of the failures should lie with the people who are running them just as the success stories the same

[forgetful]

 

  once again, the "experts" are under educated AND corrupt to the core. those who don't know what they don't know(narcissists) are seemingly in control.  corporate america is being run by what they "feel" and trying to avoid negative social media as opposed to sound business decisions=capitalism.  this equity(not equality) crap is going to be one of our downfalls.  another aspect people are naive about an economy is that socialism doesn't spread anything around except depression.  take note of the  "rich" to "poor"  ratio in say, cuba, north korea, etc?  not too much of a level playing field unless you count the downtrodden and forget about the "leaders"

 when there are no consequences to bad behavior...bohica

I don't understand most of what you said. But if we are talking about countries that suffer from depression, only Ukraine has a higher rate of depression than the US.

So it would seem we are doing pretty damn bad in that department.

[ZiggysFryBoy]

disprove any of it and show me where i'm wrong. have you run a business?  if i fail in mine, there is no one running to bail me out except myself. 

  the nordic countries?  with the exception of norway, the nordic models are a mix with quite a bit of privately owned business.   i'm not sure about you, but i don't want to be norway.

    btw, these aren't "talking points" cliches nor "headlines"  these are facts about not just why these banks failed, but why it may continue to occur throughout our economy in other business models as well.   businesses have to work, some will succeed and some will fail.  the faults of the failures should lie with the people who are running them just as the success stories the same

Jesmu learns economics and finance from YouTube.  Giver her a break.

[Skatastrophy]

Skatastrophy

I am guessing you may be pointing at me on the political part of this discussion, and I can assure you my comments are 100% economic in nature. I think we have been living an historic time in history in terms of our economy in many ways. In addition, you will never find anyone that believes more that the market and the economy are two very different things. For the record, I am not a fan of any politician at the moment and think both sides have screwed things up.

Every post I have been on the SVB topic is more looking for intelligent conversation and not convince anyone of anything. IMO, SVB is likely the sucker at the poker at the table in this mess and many more regional, or bigger banks, are scrambling around to save their ass. They left SVB be the guy to take the fall and see what happens.

I think you have brought very good insight on this topic and hope others can add to this as well. I very possibly could be wrong, and hope I am, but I think this is going to turn into something bigger than just SVB.

Not at all. You've just talked a lot about the economy in a thread about investing, and I've been trying to let it go. I think most of the economic discussion is moot wrt how the market reacts to SVB fallout. I'm not mad I just tend to get snippy.

Next should be the Credit Suisse debacle. Stay tuned for that one, they're a big boy

[Goose]

Skatastrophy

You are correct that I have talked the economy a great deal in an investing thread. I guess that is because I do not believe that the stock market has been a reflection of the economy in some ways. Free money from the Fed altered our economy in a way I have never seen before and quite possibly covered up a lot of cracks in the economy. Truth be told, I have zero idea on how the economy works anymore and even less on where to invest money today.

Feel free to highlight "I have zero idea" and agree that I do not any idea.

[Skatastrophy]

Yeah I think you're parrotingb stuff that has nothing to do with SVB at all and failing to draw a line between the two things. Can't help how you feel, though.

Regarding Credit Suisse - I bet they get sold in pieces to global banks before they fail. And I think that needs to happen in the next week. (This is a wild ass guess on my part, Goose and I are both caught up in our feelings now lol)

UBS offer to acquire Credit Suisse. 6 week consultation period may be moot, they requested the deal get fast tracked.

[Hards Alumni]

 

  once again, the "experts" are under educated AND corrupt to the core. those who don't know what they don't know(narcissists) are seemingly in control.  corporate america is being run by what they "feel" and trying to avoid negative social media as opposed to sound business decisions=capitalism.  this equity(not equality) crap is going to be one of our downfalls.  another aspect people are naive about an economy is that socialism doesn't spread anything around except depression.  take note of the  "rich" to "poor"  ratio in say, cuba, north korea, etc?  not too much of a level playing field unless you count the downtrodden and forget about the "leaders"

 when there are no consequences to bad behavior...bohica

Dumb as a rock

[Hards Alumni]

Jesmu learns economics and finance from YouTube.  Giver her a break.

And rocket just spews random shiiet.  Why you dick ride so hard?

[TSmith34, Inc.]

Dumb as a rock

Not fair to rocks

[TSmith34, Inc.]

$54B loan capital influx for Credit Suisse

[Goose]

I agree with rocket that much of corporate America is run by narcissists, all of them well educated, but not all equal in intellect. I do think that many top executives in corporate America (very, very big companies) have lost touch with reality and know the worst thing that can happen is getting fired from a mega paying job, only to resurface down the road.

I have no doubt they are afraid of social media or bad press, but not agree that is why they do not always make sound business decisions. IMO, many companies or banks ignore the elephant in the room and hope it is never discussed. These guys are not stupid, yet they sure seem to feel they can survive any decision they make regardless of outcome.

[rocket surgeon]

I don't understand most of what you said. But if we are talking about countries that suffer from depression, only Ukraine has a higher rate of depression than the US.

So it would seem we are doing pretty damn bad in that department.

  it's not that difficult forget, but the highlighted part of your question re: depression, i mean the people are depressed in numerous ways-emotionally and in potential to succeed.  opportunity if you will.

[rocket surgeon]

And rocket just spews random shiiet.  Why you dick ride so hard?

good thing you don't run any companies/businesses if you do, just another example of crash and burn

[JWags85]

good thing you don't run any companies/businesses if you do, just another example of crash and burn

I'm pretty sure he does tho...

I don't agree with Hards on a lot, but making incorrect claims or trying to knock his situational intelligence instead of his points is a bad look, my man.

[MUBurrow]

Jesmu learns economics and finance from YouTube.  Giver her a break.

This conversation got infinitely dumber when someone joined in - and that someone wasn't Jesmu.