It sounds like a big part of what went wrong with Silicon Valley Bank was that SVB has so many sophisticated depositors that they actually noticed SVB has been broke for awhile on a mark-to-market basis. A bank with fewer CFOs among its depositors could possibly have bumped along OK because all this accounting arcana makes retail depositors’ heads hurt. Dumb money like me doesn’t pay much attention, which is why it’s safer for a bank to have lots of dumb money deposits
But the smart money noticed, which set off this panic.
And yet, why was the smart money putting its own cash in a ticking time bomb bank? E.g., Roku, which makes some highly useful devices, had $500,000,000 in SVB uninsured.
According to Michael Cembalest of JP Morgan, Silicon Valley Bank ran a highly risky strategy:
While capital, wholesale funding and loan to deposit ratios improved for many US banks since 2008, there are exceptions. As shown in the first chart, SIVB was in a league of its own: a high level of loans plus securities as a percentage of deposits, and very low reliance on stickier retail deposits as a share of total deposits. Bottom line: SIVB carved out a distinct and riskier niche than other banks, setting itself up for large potential capital shortfalls in case of rising interest rates, deposit outflows and forced asset sales. …
It’s fair to ask about the underwriting discipline of VC firms that put most of their liquidity in a single bank with this kind of risk profile.
But then why was the smart money keeping its money in a bank that chose a strategy that was arithmetically obviously risky?
This isn’t like Washington Mutual failing in 2008 due to the credit risk posed by its borrowers not being aware of their own interest rate risk. Whenever WaMu would host focus groups of its new adjustable rate mortgage borrowers obtained in its huge expansion into Southern California, its researchers would report back that its new SoCal borrowers appeared to be morons who had no clue how much their monthly mortgage payment would go up when interest rates finally rose.
So WaMu stopped holding focus groups and told its brokers to explain as little to borrowers as possible about the terms of its complex Option ARM in which borrowers only paid one percent interest for five years. Trying to explain what happened after five years just confused them and left them with a vague sense of impending doom without actually dissuading them from taking out the loan. Let them enjoy their happiness. (Granted,
No, Silicon Valley Bank went down because of its own interest rate risk. It chose a strategy that would be highly profitable if interest rates stayed at historically minimal 2020 levels. But how was it supposed to know that the Fed was going to raise interest rates? It’s not like the Fed has been signaling it’s going to raise interest rates, now has it? What do you expect SVB to do: pay attention to what the Fed chairman is saying by subscribing to the Wall Street Journal? That’s like $500 annually.
Seriously, a big question is whether SVB also has credit risk due to its loans to tech start-ups. Are they overpriced?
But a big reason they are so high is because the the huge tech firms (Apple, Google, Facebook, Microsoft, and Amazon) are ungodly rich, and they hope to be acquired by them.
I could imagine a scenario in which a lot of former unicorns are bought for thoroughbred prices.
It is truly over for Korean men.
Jewish billionaires are demanding that U.S taxpayers bail out all the Jewish billionaires by tomorrow morning or the sky will fall! It’d almost be like another, well, you know.
Truncated sentence, vestige of a cancelled thought, or rephrased in the next paragraph?
Either way, inquiring minds would like to known what, if anything, was granted.
Isn’t there a personality type at play here?
It’s seems to me that the big players in financial markets – banking, get off on the “risk” as much as the dollar signs in their eyes.
It’s high stakes poker on steroids. Only these people have so much wealth, they can’t get a dopamine hit off of the high stakes poker game going on in the secret VIP back of room of a Las Vegas casino anymore. In other words, why would ostensibly smart people, who were smart enough to make the right decisions with their money to get to that level of wealth take such stupid risks with said wealth?
These guys are gamblers! Yeah they want the winnings, but clearly they get off on the game itself. The higher the stakes should they win, the greater the satisfaction. When you have that much wealth and you can have anything you want in the world… houses, cars, women, private jets, exotic vacations… been there, done that, what’s left?
Or they go the other way and use their wealth to meddle in world affairs ala Bill Gates.
Rumor mill has it that Oprah and the Harry formerly known as a Prince had large amounts of their respective personal fortunes in SVB, so not all the news is bad.
History repeats itself
There was a lot of schadenfreude when Washington Mutual failed because of their racist commercials featuring about 20 evil old white guy bankers and one good young black guy banker. But the SVB failure may be every bit as delicious, because it goes straight to affirmative action hiring policies and the practice too many businesses have of focusing on bullshit Woke initiatives over keeping their eyes focused on the bottom line.
SVB’s chief risk officer in Europe, Jay Ersapah, was a Woke leftist minority lesbian who apparently spent more time focusing on diversity than on doing her actual job. SVB lost its American CRO, Laura Izurieta, about a year ago. Ersapah filled in until they finally replaced Izurieta in January with yet another woman, Kim Olson.
If you look at Laura Izurieta’s LinkedIn page one of the most recent posts she liked was by Karen Gilbertson, the head of “Risk & Process Integration” at Silicon Valley Bank. Here’s the text of Gilbertson’s post, dated just two months ago:
What are the odds of having three female CRO’s in a row, unless they were insisting on hiring a female in that role to fill a quota?
To be fair, the top 12 executives at SVB all appear to be basically white, and nine of them are men. But historically speaking, 25% female executives is actually pretty damn high. And in line with NASDAQ’s increasing demand for boardroom “diversity,” at least 50% of its 12 board members, including the chairman, were female or minority – five women and at least one person of color.
um and everybody get vaxed against the Wu-Flu or else it will take all of our heads off ….
John von Neumann’s father was a banker.
Here’s an interesting video interview with Edward Teller explaining why in his opinion Von Neumann had an almost superhuman mind. Interesting.
So much for those manosphere bloggers, and their “just go get yourself a good, untouched by feminism, virginal, old fashioned oriental wife from the East” b.s. I’m a totally red pilled guy, but all I could do is laugh whenever I’d see that.
In the age of globalism and the internet,
feminism, like wokeism is an unstoppable plaque of locusts swarming the planet!
Didn’t those grass eater males in Japan or whatever they are called beat these Korean banshee’s to the punch?
You gotta love how when women pull this type of crap, and the men shrug their shoulders and say “ok”, and walk away, they go batshit crazy! Male attention is oxygen to women regardless of what they say.
And then you have these governments panicking about replacement level fertility and what not and they created the whole mess in the first place by handing women the keys to the kingdom.
I think this is just Level 1 of what’s going on and there’s a Level 2
What that Level 2 is (government forcing them to buy these precise long-term bonds?) will be revealed in a few weeks
If there is no Level 2…then wow…
At least for once it’s not ‘pure evil’ but more ‘pure incompetence’
Don’t expect some kind of comeuppance, because you’re only going to be disappointed. Angelo Mozilo lives on a $20 million estate in Montecito. When you’re filthy rich, and the only penalties you face are fines, you can pretty much do whatever you want.
And the real reason for the collapse:
The words competence or numerate appear nowhere.
I looked at a recent bank merger that produced a thing calling itself “TRUIST”.
I stayed well away.
I found an excellent site last week that examines and scores corporate wokeldom.
I checked a few. I was a bit surprised when I compared Lowes to Home Depot and will makes changes to where I buy.
My biggest purchases are Car and Home Insurance, both renewed last month. I will be checking and changing next time.
It could be a bit more nefarious than just being over leveraged. Jamie Dimon and Peter Theil are being accused of what amounts to yelling “fire” in a crowded theatre. Contact was made with several large clients telling them to rapidly pull their funds from SVB, it’ll be particularly interesting to see how JPM and Dimon profit from the fallout, as their stock was one of the few that actually saw an increase on Friday. The way I see it, it just seems like bigger sharks smelling blood in the water and going in for the kill.
Prince Harry and Oprah can rebound somewhat.
Can you imagine if Scott Adams had his money in SVB?? It seems like something he would do and think he’s a genius for doing so.
….HEY! ,wait a minute , do you you want Oprah and Megan and Harry to lose a bunch of money?, why shouldn’t the working people in places like East Palestine ,Oh. bail out the wineries in Napa……..just remember all you Richies with money sunk in SVB, think of how die-verse ,inclusive and anti-racist you have been as you fondle your FDIC pay off.
Excellent! They will have no children, will be evolutionary dead ends, and their defective feminist-producing genes will vanish forever. White woke females in the US should do the same protest.
It chose a strategy that would be highly profitable if interest rates stayed at historically minimal 2020 levels
Not really. They would have made 100 basis points on the spread between deposits and assets. I don’t think there’s a whole lot of hubris or greed involved here, so much as somebody not modeling risk properly–or someone in risk management missing the 2021 strategy meeting.
The “systemic” effects however might be real. From the VC world:
Small business depositors at Silicon Valley Bank should be made whole. Regulators need to conduct a backstop of depositors. We are not asking for a bank bailout.
They don’t want a bank bailout. They want a bailout of themselves. I don’t think I’ve observed gall quite so clueless. But the desperation points to a fact: A lot of companies can’t make payroll, and since they are revenue-free startups, they can’t get business lines of credit to make payroll, and because of legal requirements to make payroll, they can’t exist as going concerns much longer.
I’m hoping for no special bailout beyond the FDIC required minimum, so that the woke vermin will be wiped out. This being the Biden administration though, unlimited bailouts for their Woke Co-religionists will come through. I’d like to see what would happen under President De Santis or Trump.
A minor quibble.
Affirmative action applies to “thee, not to me”. I have never, encountered a white executive who voluntarily resigned his position in order to make room for a diversity hire.
30 years ago, the Operating Engineer’s union (heavy equipment operators) which historically had excluded blacks, was forced into a consent decree to remedy their past transgressions. Of course none of the current members, who had benefited from nepotism and racism had to leave. It was the new white kids, mostly ex-military, had to score like a Professional Engineer on the exam to get a place over anyone else. So a bunch of army and marine trained backhoe operators had to find fulfillment flipping burgers.
The only remedy to past discrimination is current discrimination. The only remedy to current discrimination is future discrimination.
To the larger point, Go Woke, Go Broke, yes a feeling of schadenfreude .
CRO, or company-wide risk management at a financial firm is a tough, thankless job. Well, that’s if you do it properly. If instead you devote most of your time to DEI activism and let all the risk-takers run amuck, it’s probably dreamy. Until things explode, that is.
Well that’s good news for us Western men, because Korean women are easily the most beautiful in the world, with even average Korean women looking better than Western models. Time to go West, young man… Until you end up in the east.
“When you have that much wealth and you can have anything you want in the world… houses, cars, women, private jets, exotic vacations… been there, done that, what’s left?”
Um… the fires of Hell?
We can just say whatever we want know, can’t we? As long as the point being made – diversity is our strength – is the right one, then, sure, having a few idiots in the meeting can only help us get shit done.
These days it’s de rigeur to claim that diversity enhances the performance of any type of organization, yet I never see anyone highlight an actual example of this. You’d think there would be a least a few companies with the full spectrum of protected classes and alphabet people that has a sound and growing business that is respected by their peers, and we’d be treated to lots of NYT or similar articles about it, so the lack thereof is pretty telling.
All-In with Chamath, Jason, Sacks & Friedberg
E119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
Wagers Mr. Ackman is talking book.
Anonymous on 4chan: Get your money out of the bank. Buttigieg levels of competency are on their way to save the day.
Commenters on the Wall Street Journal: Get your money out of the bank. Buttigieg levels of competency are on their way to save the day.
Also: one guy says this may persist for four years, but on the other side liquid cash will still be worth something.
Several WSJ commentators: What was SVB? It was venture capital for tech. Something like that should never have been allowed to get as big as it got. Yellen did a photo op in Kiev and Bai Dien is chortling about overdraft protection.
As with all our other disasters, this was completely preventable.
Indeed. Any chance we can claw back some of these millions? Becker cashed in $3.6M on that one day alone.
Given that depositors are covered for at least their first $250K per account, this would be a sterling opportunity for the Biden Administration to demonstrate its progressive bona fides and let the millionaires and billionaires get their hair cut. And it’s not an election year. Hmm.
This is definitely a major theme of Michael Lewis’s book Liar’s Poker.
I suspect Harry has Spencer and Windsor trust income whose principal he does not control. The principal would not be invested in bank deposits anyway. Don’t know why he’d use SVB for his household account; SVB has no branches in Santa Barbara County.
The degenerates solve themselves by not having children: they will be replaced by less degenerate people who had kids.
[Hand-rubbing intensifies, only this time it’s actually good because it’s a quiverfull Haredi.]
I’ve never seen any indication that the jabber about ‘diversity’ was anything but a mantra. It’s a remarkably persistent fad.
Indeed. If diversity was a success, they’d be slamming success stories down our throat 24/7. Good observation.
So what I’m getting here is the bank had 97% deposits that are uninsured, and also its strategy was high risk, which is completely unsurprising as the CEO was the CFO of lehman brothers, and the bank run was a result of highly networked and also informed customers doing a run.
What percolates below the surface here, but isnt openly said is that major banks depend on small scale normal folks within the government backed FDIC coverage range, who are also too stupid, slow, or uninformed and uninterested, as a hedge against risky bank investment behavior. But that wasnt the case here, as all these people all went to the same ivy league schools and all go to burning man together.
Time to raise the FDIC insurance limit to $6 million.
In the Hall of the League of Democrats …
All those cute Kpop girls and racing models must be utterly hideous on the inside.
Because there aren’t any.
Yes, if DIE worked, it would by now have become the new normal without any need for legislation. The same is true for the so-called gender pay-gap. If firms could get the same or better work from women while paying them less than men, they would.
Thats why. Family businness.
I’m not sure it’s so much about “the patriarchy” as it is narcissism. When I’ve been traveling, I’ve seen young Japanese or Korean women tourists, always a small group of three or four together, no men present. They’re attractive, dress expensively, and are made-up, manicured, and coiffed to perfection. They take selfies everywhere they go. I get the feeling their efforts are not for the purpose of attracting men but for their own satisfaction and the approval of their friends. They’re in love with their own image. Granted, I’m referring to a select group of young women with money who are perhaps not representative of most women in their countries, but it has struck me.
‘…One article estimated 50,000 adherents; others have put the movement’s numbers at under 5,000. ..’
The author wants this to be a statistically significant movement; whether it is would be another matter.
That’s not new. A long time ago, a girlfriend asserted that women dress to impress other women, not men.
I think that’s true. It was probably true a hundred years ago. It explains a lot.
It will be interesting to see if SVB is considered “too big to fail” and a bank “bail-in” is employed to recapitalize the bank.
From the comments:
LOL. As though women could and do really “provide for themselves”. Women’s ignorance about how the world works is boundless. They can only indulge in these illusions because the State is their Sugar Daddy. And who or what, Sweetie, supports the modern, wealthy, technological State upon which your “independence” depends?
Korea needs to give the boot to these traitors. Let them “provide for themselves” elsewhere. Africa, maybe? That would be fun to see.
> Are they overpriced?
Yes. Dijkstra called software engineering “the doomed discipline” because its very existence depends on draconian intellectual property laws and enforcement. (If you aren’t aware, Dijkstra is kind of a big deal in the computing world, comparable to Feynman in Physics.)
> In many of his more witty essays, Dijkstra described a fictional company of which he served as chairman. The company was called Mathematics, Inc., a company that he imagined having commercialized the production of mathematical theorems in the same way that software companies had commercialized the production of computer programs. He invented a number of activities and challenges of Mathematics Inc. and documented them in several papers in the EWD series. The imaginary company had produced a proof of the Riemann Hypothesis but then had great difficulties collecting royalties from mathematicians who had proved results assuming the Riemann Hypothesis. The proof itself was a trade secret. Many of the company’s proofs were rushed out the door and then much of the company’s effort had to be spent on maintenance. A more successful effort was the Standard Proof for Pythagoras’ Theorem, that replaced the more than 100 incompatible existing proofs. Dijkstra described Mathematics Inc. as “the most exciting and most miserable business ever conceived”. EWD 443 (1974) describes his fictional company as having over 75 percent of the world’s market share.
The takeaway is that software engineering is a grift. There’s no money in writing new code, which takes very smart people a very long time (because it’s like coming up with new theorems. Only researchers do this, and it’s not profitable and never can be. All the money is in copy/pasting existing code that researchers came up with. But that only works if you don’t enforce IP laws.
So again, all software engineering is a grift.
(Full disclosure: I’ll be graduating with a software engineering degree and looking for a job this year.)
I think you’re just confused. Asian women are so much more attractive than non-Asian women that it just ‘seems’ like they must be frauding somehow, when in reality they hadn’t done anything that other women don’t do. All women have manicures and style their hair. Asian women just look better.
The reason so many startups had their day to day working cash, ie their funds from capital fundraising rounds is that the firms had lines of credit from SVB. SVB required them to deposit their operating cash in SVB as part of the terms of their line of credit. A firm with a cash crunch could normally weather a short term crunch by accessing a line of credit. In this case, these firms have no cash and no credit on Monday morning.
Who knows how many VC firms held their short term assets in the bank, so no telling where the cash will come from to provide liquidity for these firms. My guess is that the smart guys on Sandhill Road got their money out two weeks ago, and are ready to scoop up their competitors assets.
There will be some great deals for the well positioned.
People are going to have had the weekend to think about the implications of this.
What’s going to be the reaction Monday morning? What sort of precautions are people going to take, and what will be the consequences?
“ut then why was the smart money keeping its money in a bank that chose a strategy that was arithmetically obviously risky?”
This is a total wildly out of left field guess but tax dodge and or laundering op?
It’s a pity that Yellen has demonstrated herself to be a shameless liar. Otherwise, this might be reassuring.
There were some structural reasons why startups kept all of their money at SVB. A friend of mine works at a startup that had it’s deposits at SVB.
One of the reasons so many startups banked with SVB was they were startup friendly – good customer service and they offered credit lines at better rates. With startups concerned following the crash in valuations last year, no one with a credit line was looking to leave SVB because it wasn’t likely they would get as good a deal elsewhere.
What made things complicated was that, in order to have a credit line at SVB, they generally required that all of a companies cash (except for a nominal amount) be kept at SVB.
And the idea of spreading out multiple millions of dollars over a bunch of accounts to keep the balances below $250k in each isn’t practical given the number and size of transactions. it would be a logistical nightmare to do, especially for an early stage company that doesn’t have much of a finance department,
IT’S A WOKE ARTICLE OF FAITH AND DIVERSITY TENET. … duh.
One would have to know how she defines “productive”. What is productivity for her? Having lots of meetings? Everyone feeling empowered? When organizations fall into the hands of people who don’t even understand what the organization is supposed to do, and/or don’t even particularly like that function, they are likely to fail.
Who will think of the poor billionaires?
Perhaps “Think of the billionaires!” will replace “Think of the children!” as a catch-all justification.
Or it could be something like this.
So the banker want’s to be given taxpayer money so he can make money lending the taxpayer his own money?
You’ll notice that the focus on diversity tends to be on already established companies and other institutions. You never see or hear much concern about the diversity of startups. How diverse was Facebook in its early days? Or Apple, Google, Microsoft, Intel, ad infinitum?
There’s a famous picture of Microsoft’s first employees, and all of the ~12 people in it are white. Two are women, but neither are programmers. Both of the women eventually left the company, and one of them sued for sexual discrimination.
Apple was slightly more diverse than Microsoft, in a manner. It had one woman among its first ten employees – the CEO’s secretary. All ten of them were basically white, though many have the distinction of being something other than Northwest European or Jewish, with the half-Syrian Steve Jobs, and guys with names like Wozniak, Chris Espinosa (who looks about as Hispanic as Robert Redford), and Bill Fernandez (who looks slightly darker, but still very Conquistador-American).
Lots of people claim to cite studies of diversity at existing large businesses, but none have ever presented any proof that diversity does a damn bit of good helping startups succeed. That’s interesting, because it would be much easier to set some basic parameters for startup success (a successful IPO, perhaps) and determining how diverse they are. I would’t be surprised if some venture capital firms have tried to measure that, and it would be interesting to know if they’ve ever published their results.
All the examples you gave of success were companies doing sciencey things.
That’s called a clue.
When was the last time you negotiated a vendor agreement with a publicly traded company or governmental entity? This “fad” has been going strong since at least 1992.
When the US is majority non-white in another generation, is that when you’re counting on all the Diversity to say, “A’ight, we good now!”
I meant to add Facebook’s numbers. Of its first 20 founders/employees: 10-11 non-Jewish straight white men, five Jewish white men, two white women, one or two Asians, and one non-Jewish blonde gay white man. We know that all the people shoving diversity down our throats don’t think that Asian counts as “diverse.”
Reading comprehension isn’t your strong suit. Neither is decorum.
I’ve never seen any indication that the jabber about ‘diversity’ was anything but a mantra.
Having been there, doing that, I can assure you it’s policy, not just a mantra.
Neither is decorum.
Who died and made you Chief Toastmaster of iSteve?
Good point. I think that it is very unlikely that Harry deposited a significant amount of money at SVB.
Anyone who has as many haters as Harry will be the subject of a lot of ridiculous rumors.
There is no Level 2.
They bought the bonds, because they were too stupid to expect that the Fed would raise rates in response to persistent inflation.
It has nothing to do with communism, or wokeness, or diversity (both the CEO and CFO are white guys).
(Hand rubbing intensifies)
“ And the idea of spreading out multiple millions of dollars over a bunch of accounts to keep the balances below $250k in each isn’t practical given the number and size of transactions. it would be a logistical nightmare to do, ”
If you really want all your money fdic insured, there are money managers who specialize in this. I know one affiliated with Morgan Stanley and this is half his business. He makes sure there are always some CDs rolling off and maturing, and if there’s a sudden need for cash you can just tender them early and pay a pretty small
Lots of tiny banks some with just a single office have a niche of taking 250k deposits and parking them in safe investments.
I realised that link works fine if you have the Spotify app but might be “problematic” and “inappropriate” otherwise. I don’t want to gaslight your bodies so here’s the same talk on YouTube:
E119: Silicon Valley Bank implodes: startup extinction event, contagion risk, culpability, and more
Four libertarian grifter crypto and SPAC shills begging for federal bailout money because they might lose 2% of their 100 million net worths.
Hope they lose big.
They lately have been spreading rumors about other banks like First Republic because they realize that if it is just SVB, the chance of a bailout is tiny.
Yes, they are trying to cause a general bank panic to increase the chance their favorite failed bank gets bailed out.
Re: you and muse on this point, it was much, much worse than that. A VC ecosystem cabal developed which required funded companies to put their money from the VCs in to SVB, which gave the ecosystem great visibility into what the companies were actually doing.
Although it should be added that for any debt they took on from SVB, the standard I’m sure covenant was that that money stay banked at SVB. So the companies had a terrible choice last week, withdraw the borrowed money and be in default, or let it stay and lose all of it.
See a bit more in my next comment on the top dog of YC, very much part of this conspiracy.
They make clear the shareholders in SVB should get no bailout but people with bank accounts should.
Here’s a more recent one, published an hour ago. “Enjoy!” as Trump says:
To each his own in the looks department, but that horrid squealing and squelching like a stuck pig when they get all hot and bothered just kills it for me.
WRT to the petition, to repurpose some text I wrote yesterday for the Fediverse:
This Tweet that started all that is cute:
This is stupid as noted by someone who replied “Politicians don’t care about no-revenue startups. VCs and donors are better influencers.”
Tan is the current top dog of the Y Combinator [YC] startup incubator which as part of that runs Hacker News. As an Asian of Singapore descent he’s not all bad and doesn’t list preferred pronouns, but he’s an integral part of the conspiracy that resulted in this debacle for YC and other startup companies.
So, yes, a bailout is needed because the cabal I was instrumental in constructing was stupid in its obsession with control which forced “my” companies into a fragile single point of failure. Which I hysterically claim to fear is an “extinction level event for startups and will set startups and innovation back by 10 years or more” [TL;DR: most YC companies are webshit.]
Oh, yeah, I was in so many words telling “my companies” to join the Friday bank run said to have tried to withdraw $40+ billion Friday before California and the FDIC ended the bank midday instead of the normal end of business day.
And no longer putting words in Tan’s mouth, this century’s VCs are by definition C grade with the SarBox end of big IPO payouts, if they were A-B they’d be making a lot more money on “Wall Street.” Stupid micromanagers, one reason the very smart Zuckerberg avoided them like the plague.
You are wrong. It is policy. And will soon be coming to medical school admissions:
Rich people allowing their greed to overcome their common sense? Whoda thunk it?
The last big collapse of banks occurred when they were under pressure from the federal government to loan to unqualified borrowers–especially to black borrowers. That things we go south was predicted by astude observers. But the banks were cavalier about it as long as they could sell off the loans in the secondary market.
I think it was Hegel who said that history always repeats itself. Karl Marx added that the first time is tragedy, the second time is farce.
One would have to know how she defines “productive”.
Probably productive like Women’s Studies classes were productive*. Where all they ever did was carp and whine about the grievance of the day and the eternal enemy (YT).
No real thought or knowledge was produced, discussed or consumed.
My sister went to Mills for a time so ask me how I know….no really ask me!
I find it hard to label using public information to yell fire in an acutally burning building! as nefarious. Only if Theil was part of the conspiracy which sounds iffy given how much he goes against the grain of that VC ecosystem, but maybe he banked with SVB for a long time and they hadn’t fired him as a customer. Dimon is doing what’s best for everyone, including having his people put in long hours setting up accounts and doing Know Your Customer (KYC) at speed instead of the usual week or so.
Note for the people kvetching about the stock sales of the SVB CEO and CFO Feb 27: when you’re principles of a public company, you don’t just get to wake up one morning and decide to sell some of your stock. You’ve got to publicly declare planned sales and there’s a delay of around a month per a Bloomberg Law article beginning, which said the SEC wants to make this a mandatory four months.
Anyone using public information could have seen SVB was in dire danger of shutdown from a classic bank run, especially as new VC money dried up and startups had to draw down their existing VC money and any debt to continue until an exit or profitability. No secret … well, all banks are based on maturity mismatches between their liabilities AKA deposits and their investments and after centuries of this game no one’s about to stop it….
Just how much money left SVB in the last few days? I’ve heard an attempted $40+ billion on Friday, that’s around half of the top figure I’ve heard for the 1.5% government guaranteed but ten year maturity MBS buy they made when the deluge of money during the COVID years didn’t allow them time to make normal loans, plus I’m sure there was a paucity of suitable companies, even ones wanted to borrow money.
They screwed up, depending on a continuation of zero interest rate policy (ZIRP) and of course being overly focused on serving one subsector of businesses. But these intimations of criminality have yet to come with any evidence except for issuing bonuses Friday? unless again that was per an already established schedule.
Yeah, I have had a few opportunities to ask when someone stated how diversity was a huge strength how they explained how Google, Apple, Boeing, etc. ever got to be where they were without it? Usually silence follows that query.
Likewise, some white lady on Twitter – cannot recall if she works for the Dems or is a journalist, although that’s essentially the same thing – recently posted that if she had VC support she’d found a company staffed by 100 black women that would show everyone just how incredible the talent is. There were a lot of dubious responses to that, and obviously if that was a layup of a business model it would have happened already.
As far as startups, I have had the opportunity to see up close some new ‘minority led’ enterprises that were supposed to be showing us all just what black excellence looks like if it’s given a chance, and they all follow the same format: the black faces of the organization don’t really know anything but look fashionable and say the right things, and there are a bunch of white consultants behind them that do the real work and keep them from totally wasting their grant money. I have worked with one small essentially all black business and they were OK at getting deals, not great on the execution, and tended to screw their financial partners.
That is demonstrably untrue. Software engineering is generally not copy/paste, as there are enough variations and unique problem sets that it requires original code. Not the least of which is that platforms, languages, and architecture change significantly over time.
We don’t use Mainframes anymore, for most businesses. Thus mainframe solutions are no longer applicable to computer systems that are interactive rather than batch oriented. That is leaving aside real-time operations like sensors, distributed computing, IoT, etc.
Then there are the plethora of glue-code, designed to wire together disparate APIs to make systems that were never designed to work together to function in an acceptable manner. APIs change significantly, in the type of responses they send back and the structure within, not to mention the structure they demand for changing or updating data on their systems. An example of this is the ongoing deprecation of REST based interfaces for GraphQL, or cost-based queries to retrieve data from a remote system or modify said data. There are significantly different code bases, libraries, and code approaches to each.
Or for example, the ongoing effort to replace (slowly) the C/C++ code with buffer overflows and other memory management errors (hence things like Heartbleed with OpenSSL) with Rust. The Linux kernel for example is slowly incorporating Rust into that project. And as computers even lower level ones become more powerful the software language itself changes. Few write in Assembly any more, far more in Python.
By blood, not upbringing. His birth mother and adoptive father were (or are) Wisconsin Germans, so there’s that coïncidental continuity.
Jobs met his father once, unwittingly. His (full) sister Mona Simpson would have had more contact with their common sire. Some Assyrian nurture to add to the Assyrian nature.
If these “sophisticated depositors” accepted the fact that fractional reserve banking is in the end just an elaborate fraud, then economic well being and society in general would not be always sitting on foundations of sand. But of course “sophisticated” (and “nuanced”, “complex”, etc) just means legalising unethical behaviour and perpetuating an ever more degraded society. This will 100% get a mega bailout, because you can’t have “sophisticated” people losing their hard earned money.
As much as I’m all broken up like the rest of you about these poor “TECH’ entrepreneurs’ money, there’s a point that a lot of people might be missing here or just not explaining. I know my wife is missing this (but she doesn’t comment here, I think … Corvinus, is that really you, Honey? Every time you’re doing your hair a Corvinus comment pops up… hmmmm…)
Even if all these and other depositors had their money split in many accounts, each maxed out to $250,000, the FDIC ain’t covering you all. That insurance can cover some small full failed bank bank of depositors or a few of them. Their isn’t the money obviously to cover everyone’s accounts
On this FDIC spreadsheet, there’s a figure of $23.6 Trillion in assets that the FDIC “covers”. Yeah, well, the FDIC doesn’t have stacks of Benjamins sitting in a vault that add up to $23.6 Trillion, or even the amount that is the total of all savings/checking/CD accounts that are $250,000 or lower. The Feral Gov’t would have already seized it for welfare, reparations, and to send to the Ukraine.
Where is that money? It’s in other banks, as “assets” of the FDIC somehow. Those banks, well, they can fail too, and they will if the FDIC is supposed to get the money out of them to pay off the other people whose banks failed. It’s bank failures all the way down …
… like the way flood insurance won’t be able to pay for all the beach houses next 40-day flood. Go long arks…
“These guys are gamblers! Yeah they want the winnings, but clearly they get off on the game itself. “
They also get off on the fact that governments will bail them out if their bets don’t come off, as proven after the 2007-8 crash.
So they’re not THAT much gamblers. If I could guarantee the house would let me keep my wins AND restore my losses, I’d be a gambler too.
You do realize that if Oprah lost enough money, she may have to…
….dare I say it?….
…bring back her show?
(Gasp! Point! Sputter!)
Regarding Washington Mutual and what Steve said about not having much money in the bank in that previous post: Unless it’s a real SHTF, in which case it’s buh-hye money, spreading it around in multiple banks can help. It would be easier to take out or transfer to one of your others on short notice.
I had a few thousand in a Washington Mutual account at the time in question. I took out some but also paid my landlord 2 or 3 months rent in advance. I trusted him more than I did the bankers. As it turned out, Washington Mutual got bought by Chase Bank.
There was a cartoon ‘Silicon Valley Bank’ which also crashed, in a 1994 episode of The Simpsons
clip 34 seconds
I’ve got a deal for them. Stop the immigration insanity. Show even an once of loyalty to your–fellow Americans. Then … we’ll talk. The power and wealth and reputation of America–built by our ancestors not yours–is properly ours to use and distribute, not yours.
But sadly, while I keep waiting for my fellow pitchfork people to rise up … we have become a quiescent bunch who seem indifferent to being slapped around. (Heck, I don’t even have a pitchfork down here in Florida–would be kind of pointless.)
And they’ve got their “Biden” Administration, so getting what they want–with lots of verbiage about how getting what they want is critical–could well happen. Whether it does or does not will be entirely the result of power struggles among elite interest groups, and have jack all to do with what is in the interests of Americans.
This chart is awesome!
By my knowledge of these banks, the lower your score, the more inherently spiritually evil you are, and I mean this personally, for all executives, down to the janitors of these banks.
That is, if your employer is on this chart at all, you’re an evil wretched human being.
BUT… if you go below six, you’re dancing naked, covered in flaming pig excrement, with Satan.
Oh, and every single person who chose them as their bank, deserves everything bad that’s coming to them:
Yes they will.
Accounting wise it’s its own thing–a separate legal entity. But ownership wise this is the feds, and backed by the feds. That’s the whole “full faith and credit” thingy.
Obviously, like anything else there’s political risk. Congress could suddenly vote to screw depositors. The odds of that are zero. They will issue debt, sell it to the Fed which will print $$$ to cover it.
What happens with unsecured depositors highly political question. We’ll see in this case. But what happens to all the average Joes and Janes out there with their 100K CD in some failed bank is pretty much guaranteed. If the politicians vote to screw them, they are begging for lamppost duty and we are in a different world.
Addenda to previous threads
1. ChatGPT solves the Trolley Problem
2. DST the Movie
Banking seems like a lucrative business to get into if one doesn’t need to worry about losing money.
My wife once complained that I hadn’t commented on how nice her nails looked
after she had them done. I had always assumed that as long as they aren’t disgusting or unkempt, men could give a shit about what women’s nails look like, and that they had them done to impress other women.
“Lots of people claim to cite studies of diversity at existing large businesses, but none have ever presented any proof that diversity does a damn bit of good helping startups succeed.”
I think the way it works is
That doesn’t mean all diverse people in business are window-dressing btw. I assume someone like Mohamed el Erian (Mohammed the Aryan?) is where he is because he’s clever, connected and hard-working.
When I first heard SVB I immediately thought ‘Scott Adams!!!’
They CAN’T back up the value, though. I mean, sure they could bring to life that much currency via the FED, as you say, but the value of the dollar will go down accordingly. Double the money supply, and the dollar goes to half its previous value. 50% inflation will bring the end of this Ponzi scheme of an economy.
The way they’ve been doing it is by backing up the big TBTF banks so that those banks can be relied on to backstop the smaller ones. I don’t think that’ll work at some point …
I’m not much for insects, but to each their own
A brief standalone item in John Ellis’s News Items newsletter:
The 2008 voluntary crisis proving that experts knew nothing, but also crime (and especially anti-police crime), and federal pursuit of pretty much innocent people, and neocons starting unwinnable forever wars and crowing about how they were about to nuke Iran. On every one of these issues we’re back to square one with depressingly predictable results. If Republicans can figure out ballot harvesting, it ought to be a walk.
Another unanswered question here: Where were the bank examiners??
SVB was supervised by the Fed. (FDIC is just doing the cleanup.) Quick quiz, what have been the top priorities of Fed supervision staff over the past 2 – 3 years? (Pick any two.)
that’s exactly why Lehman Bros went down in 2008. Big Wall St. Barracudas decided time was right to eat the lesser predators. Now my investment brokerage is JPM….I did give some thought to pulling the money out tomorrow AM, thus triggering JPM collapse, but am thinking the tx hit would be too high.
“…All the money is in copy/pasting existing code that researchers came up with. But that only works if you don’t enforce IP laws.”
This ignores the existence of a large ecosystem of free software that anybody can use.
“The girls all walk by dressed up for each other…” Van Morrison “Wild Night”
Stupid comment. South Korea is number one in the word for plastic surgery.
I guess they’ll just have to emigrate to the U.S. (or Australia) and marry white women. 😉
From a CNN article: “Shalanda Young, Biden’s director of the Office of Management and Budget, assured Americans that the banking system was “resilient” amid the collapse of the Silicon Valley Bank (SVP).”
Are you comforted by the fact the Joe Biden searched high and low across America, looking for a stolid, intelligent, reasonable person to run the OMB, and settled on someone named “Shalanda?” I am.
You don’t have to wait long. Treasury Secretary announced jointly this afternoon with the Fed Chairman and FDIC Chairman that SVB “depositors” (read, Silly Valley venture capitalists) will be bailed out by Uncle Sugar. And they emphasized they are NOT bailing out the Bank or its shareholders!
And, cue the market index futures are up 1.5 to 2% as of right now (7:15 p.m. EDST)
It’s not my line of work. If I’m remembering correctly, subprime and Alt-A borrowers had abnormally high delinquency rates (18% and 12%, or some such, when 2.5% is about normal), but that about 3/4 of the delinquency by value was derived from loans taken out by prime borrowers. Giving loans to sketchy applicants was a vector in putting the banks in the soup, but there were other forces at work, e.g. the price collapse leaving borrowers underwater, interest-rate resets, and borrowers thrown out of work.
Something Megan McArdle called attention to at the time was that the FDIC was designed to act as a receiver for ordinary deposits-and-loans institutions. Of the notable institutions under stress, only Wachovia and Washington Mutual were deposits-and-loans banks. Citigroup was a ‘universal bank’ with a complicated trading book and with most of its deposits domiciled abroad. Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Stearns were securities firms with a half-dozen lines of business. AIG was an insurance company. Fannie Mae and Freddie Mac were secondary mortgage maws. Countrywide was a finance company.
Of course, when did it stop Officially being transitory? Also when did they buy the bonds, I keep hearing 2021. Per this month graph May 2021 was when inflation took off to 4.2%. But June to September it plateaued at 5%. Peaked at 9.1% in June 2022, that’s about when … OK, the SPR was being drained, but the summer driving season ends about then, and it was imperative for the 2022 election gas prices wouldn’t be too high.
So predictable when they are said to have bought these ten year maturity government backed 1.5 MBS bonds, but not predicted by many. And especially with COVID disruptions and wealth (business) destruction,. the timing of exactly when wild government spending would translate into monetary inflation was unpredictable.
2021 was also a year of people coming out of lockdowns and thus increased demand, some of this inflation is supply side, even some from freaking avian flu. OK, another factor is “Biden” trashing the oil and gas industry starting on his Inauguration day, and, yeah, crude prices rising even faster after the Russian invasion of the Ukraine. See also things produced by natural gas, especially fertilizer (crisis level in the U.K. in September 2021), as well as direct use of it, heating and electricity. Etc.
And how many of these people running SVB were aware during the 1970s? Especially the latter half but a start with the shocking 1971 Nixon shock is best.
That piece is ten years old. European women were going to places like Haiti, Jamaica, and Cuba for the same thing for many years.
I think we’ve covered this ground already. There is no such thing as “supply side inflation.” Inflation has a technical definition; it’s not just a snazzy term for “prices going up.” Inflation is an increase in the money supply, period. If prices are rising due to a supply-demand mismatch, that’s a whole different thing.
Sure, the “smart” money always puts millions uninsured into smaller banks with executives who have already crashed large banks, dodgy accounting and a “risk assessment” woman with no qualifications who is obsessed with Gay Pride parades…IQ 80 or below I would guess…
Curious who was the worst offender Lowe’s or Home Depot. I’ll take a shot in the dark and say Lowe’s. Around my parts they have signs all over in Spanish, Home Depot doesn’t. Im in the north east. Few hispanics in my local.
There’s another layer to this. Mortgage rates were at all time low levels for about a decade before rates hiked.
So not only are most of the MBS held by banks trading at a discount– their expected maturity also extended.
If you have a 3.5% mortgage, you aren’t going to refinance any time soon; or if you were going to move, you might reconsider.
So not only are those MBS devalued, their interest rate risk (duration in finance terms) to the bank also increased.
Lmao… We can only hope brother!
It’s not likely a collapse is going to be limited to just this one bank. A number of banks and companies were making their business decisions based on the belief that low interest rates would continue. This was never going to happen. What finally pushed the country over the edge was printing up five trillion dollars to try to offset the negative economic effects of the Covid lockdowns. This created so much inflation the Fed had to raise interest rates.
The Covid lockdowns and the negative economic effects resulting from them could have been avoided. Florida didn’t lock down and, adjusted for age distribution, had a death rate at about the national average. The Florida economy thrived, and DeSantis is now considered a major presidential candidate. Over in Europe, Sweden was widely criticized for not locking down. It ended up having the lowest excess mortality rate of any European country for the last three years.
Our governing elites made one bad decision after another during that epidemic. They engaged in economically destructive lockdowns. Six states with 20% of the population had 60% of Covid deaths because they took Covid patients out of hospitals and put them in nursing homes. They threatened doctors trying to develop and implement early home treatment programs using Ivermectin and HCQ. They waited until Covid patients were really sick and then put them in hospitals where they suffered iatrogenic deaths from ventilators and Remdesivir. They tried to force the entire population to get an inadequately tested vaccine, claiming it stopped transmission of the disease when it turned out it didn’t.
I’ll have to check that out thanks!
Third world wikipedia editor fantasy map.
No, nordic women are not traveling to Ecuador and Indonesia to sleep with skinny 5 foot 5 men who live with their parents and make under USD 5,000. (The rare taller and richer ones have better options than ugly tourists).
IMHO this misses the point. As Jimmy Stewart explained, all those deposits were locked up in long term loans made years ago. They can’t just liquidate all those loans on a moments notice. Besides once Fed tightening is expected by the Wall Street journal it’s already price into the market value of asset values and interest rates, and it’s too late to avoid the risk.
What is a bank supposed to do to avoid interest risk and liquidity risk? I guess they could take cash deposits from customers and just hold them as cash, or deposit them in another bank — but that literally defeats the whole purpose of commercial banking.
As I mentioned on the last thread, the whole point of a commercial bank is to borrow at low short term variable rates and lend at higher long term fixed rates. However, the only reason long term loans have higher interest rates is because long-term loans are subject to interest risk and liquidity risk. (Default risk pales by comparison as a risk factor in mark-to-market value of long term loan instruments — and it was no factor at all for the T-Bonds that SVB had stocked up on).
There is no such thing as a risk-free lunch in finance (absent inside knowledge). To get higher returns you have to incur higher risks. That’s kind of the iron law of investing. A bank could fully hedge its loan portfolio against the effect of interest rate increases. But the cost of hedging would necessarily wipe out the very risk premium that is the whole source of their profit — i.e., getting higher returns for incurring the risk premium of holding long-term loans.
Basically, all the banks are underwater right now — meaning they couldn’t cover all deposits if they had to liquidate their long term assets. Deposit insurance is the only glue holding the banking system together at the moment.
Uh… I was at my local mini mall this afternoon. There’s an Ameritrade office there that I pass by all the time. The place is usually closed, with nobody there on Sundays.
When I passed by late this afternoon, the place was LIT!
It didn’t appear to be open, but all the lights were on, and I could see a number of brokers in there. Bizarrely, one gal there was even washing the windows.
It’s almost as if they’re expecting a lot of people there tomorrow. Like they’re preparing a surprise party or something.
Wow, that’s like The Simpsons episode in 2000 that predicted a Trump presidency.
As everyone knows all Asians look the same. So if you like that look, then they are all better looking to you.
I believe the new term of art is “systemically important financial institutions”: “SIFI”.
It’s all in the semantics. Old Yeller says they won’t be using any taxpayer funds for the bailout, yet that hum in the background is the money printing machine being cranked to 11 right now. Technically they’re not using taxpayer funds, they’re just diluting the money pool by hundreds of billions of more dollars created out of thin air. However, her explanation will be good enough for a 10 second news clip, right before the March madness team announcements, and 99% of Americans will smile and move on.
Tomorrow (Monday) and Tuesday will be extremely nerve racking to watch. Likely Monday through Friday will be precarious, as people may make a run on the banks as they learn about this.
I am not joking when I say we may see mobs rushing banks like something out of a 1930s movie. Let’s pray it doesn’t happen.
Heck, Russian-China may try to cause a run just because of our interference with Ukraine and Taiwan. Yes, the Deep State’s lie about Russia “interfering” in the U.S. might actually come true.
Keep your powder dry and hit the ATMs tonight (Sunday) if you can, especially if you live around Northern California or any other major tech area (Maryland-suburbs of DC, Rte 128 corridor, etc.). Don’t pull everything — the feds will look to scapegoat people who do it — but enough to last 2-3 weeks in cash-only payments (not rent/utilities, but food/gas).
Zerohedge article explains how SVB just did exactly what the Fed wanted and incentivized but got whipsawed by the schizo swing from ZIRP and money-printing, to sky-high inflation and interest rates hikes (which the Fed intended as a corrective the effects of the Fed’s ZIRP/Money Printing). https://www.zerohedge.com/markets/silicon-valley-bank-followed-exactly-what-regulation-recommended
They also stated that taxpayers will not be on the hook for the non-bailout bailout. So how does that work? Money is being transferred to the SVB depositors from…………..where exactly? From whom exactly?
This was a legitimately alarming scenario:
In terms of contagion,
– For tech, it would begin with startups, then flow into large cashflow-positive companies, like Stripe and Amazon AWS, then into the wider economy. Likely over 2-6 months. It would start as a depression in tech-heavy cities, then a severe recession in others. After that, who knows.
– A subtle distinction between 2023 and 2007, is that more people are on fixed incomes now. Very rapidly, you would see boomers doing bank runs, regardless of whether they were under FIDC limits. All of this seems abstract or around bailing out the 1% (overwhelmingly boomers), until it comes down to protecting your life’s savings in regional banks.
– Alarm would be raised for anyone who was using payroll software affiliated with SVB, like Rippling. Immediately, employees would wonder, “Why am I not receiving my paycheck?”
In terms of SVB, it provided two distinct advantages that other banks do not:
– Access to Chinese startups for American investors.
– The ability for startups to take on loans. Startups, even if highly profitable, do not have the same type of collateral, compared to say a manufacturing company, or even a restaurant. It makes taking on a loan from traditional banks borderline impossible. SVB actually provided a need in this space.
Uh, what about Global Systemically Important Banks (GSIBs)?
Some are arguing SVB is potentially the beginning of an effort to herd capital into GSIBs to ease the CBDC rollout.
I’m not sure I totally agree with that because TPTB seem a bit freaked by SVB. As if they didn’t know that Big Tech is the product of low rates and easy lending standards.
MMT is dumb and can’t work, as described in the Zerohedge story Hypnotoad posted above.
Globally Important Banking Systems
Both banks that failed, SVB and Signature, are specialty banks serving high end markets: start-ups and law firms. I don’t know what Signature did wrong, but SVB placed a big bet on interest rates and got burned. Presumably, having more sophisticated depositors hurt them over having a lot of sticky dumb money. Here’s the question: why do banks that build expertise at serving unusual clienteles need to fly so close to the sun betting on interest rates. Why can’t they say, sure, you can find banks that will pay you a higher interest rate on your deposits, but we make your life easier in a dozen other ways.
Affirmative action came to medical school admissions the same year it came for every job and profession. The year was 1968.
SVB didn’t fail because it was paying too high interest on its deposits. It failed because it invested too much of its deposits in US Gov. Bonds which were supposed to be very safe. The very definition of safe. Until Joe Biden unleashed inflation like we hadn’t seen in 40 years and cut the value of their bond portfolio by 30%. Then when their sophisticated clientele figured out that the bank was under water they all started pulling their money out all at once, which no bank can withstand.
BTW, although the depositors are going to be covered, all the shareholders and all the debt holders of the bank itself are going to lose their investments.
Eventually, the story will come out on this. So I don’t objectively know. If I had to guess, SVB developed expertise in what they did — startup lending, making life easy on VC’s/startups and increasingly, providing a gateway into China (aided by a large Chinese population in the Bay Area). They did this exceptionally well. For their clientele, they did make life easy. If they didn’t do this, we wouldn’t be talking about them right now. Additionally, it’s not a low 2010’s interest rate thing. They did this for 40 years.
I think the most plausible story is that when 2021 came along, they were suddenly flush with deposits, needed to find an outlet for deposits, and didn’t realize the gradual exposure of interest rate risk. Perhaps some of this was self-deception. Some of it could be cultural or being stuck in a VC echo chamber — “Don’t be like stodgy Northeast banks. Stay lean.” Then abrupt rate hikes came along, and they didn’t appreciate the burn rate of startups (their depositors) or drying up of VC dollars.
This may also be naive, but SVB were led by traditional bankers. They likely thought their relationships with major VC firms meant something, likely buying them some time. Obviously, it didn’t.
Steve, that is actually the opposite of the case. The big mega-banks generally pay lower interest rates than the smaller niche banks for providing supposedly better, more convenient service. In any case SVB seems to have been run exceptionally badly and did not take even the most standard of hedging precautions:
Speaking of Spooks, Wakanda was not pleased that tonight was Asian and White People Night at the Oscars:
I guess after the all-black version of the Oscars turned into World Star Hip Hop (who could have seen THAT coming?) , Hollywood decided to turn the blackness meter down from 11. Sure, it’s never going back down to zero but we can keep it at say 5 or 6. After all, blacks are no more than half of all Americans, right?
Hollywood goes in for fads – always has. 3D movies, dog movies, cowboy movies. Next year look for lots of Asian movies. So you just knew that Peak Negro could not last, had to move aside for the next fad.
As Jack said, I don’t think they were chasing a few extra basis point on interest rate, they were just being lazy.
A lot of their depositors were compelled to keep their money at SVB by the depositors’ VCs. In exchange the VCs get some kind of unusual visibility via SVB into their clients’ accounts, as I understand the arrangement. So SVB was sort of the company store of Sili Valley VC finance: they hold your pay and issue you scrip. The depositors were mostly a captive market for the SVB-VC cartel.
The depositor profile is that the depositor’s VC makes the only actual deposit (a 7- or 8-figure funding), which the “depositor” then burns through until hitting zero or getting rich. Most hit zero. So SVB has all these big wedge-shaped deposits: a big initial deposit which steadily declines toward zero.
To be fair to SVB, that’s a lot of money that they have to put someplace. But given that they knew most of the money is gonna get spent in the not too distant future, low-interest long bonds is a poor place to put it. Not because low interest doesn’t pay much (though it doesn’t), but because even a slight increase in interest rates radically impairs the market value of the bonds, which then makes the bank technically insolvent, which then makes the bank actually insolvent. That’s one of those financial quirks that might surprise the average citizen, but it should have been elementary for a super-duper Risk Management Exec. And maybe it would have been if she weren’t so focused on her pudendum.
Also, for what it’s worth, SVB’s key financial advantage was that they knew how to value profitable, early-stage software startups with loan-based models, basically, venture debt. For banks, this is incredibly rare. Even large “smart money” investment banks — like Goldman Sachs — can’t do this now.
Due to their connections with the VC industry, SVB could perform financial, and indirectly tech, due-diligence, which put them 5-to-10-years ahead of the competition. Similar to say, a Venetian bank that could understand both the actuarial and seafaring aspects of trade.
Of course, the thing that appears to have done SVB in is basic risk management, which most banks their size understand — hopefully. The unpredictable macro environment of 2020-2022 likely pulled SVB into uncharted waters, which they didn’t seem to fully grasp. They likely used 2001 as reference point, which didn’t apply.
Correction: Similar to say, a Venetian bank that could understand both the actuarial and seafaring aspects of trade…and who knew all the best captains.
If a VC gives you 10M on your big idea, it’s a fair ask for you not to spend 2M on your extended international kin. If SVB could aid that transparency, then so be it. That’s a long way from a scrip-based economy. Nobody was beholden to SVB.
What’s worrisome to me is that this seems like a pretty good enterprise with a lot of useful expertise, and then it went under due to what seems like a stupid unforced mistake. Was this just a random error, or is this something that’s going to continually pop up in similar banks. Or is it saying something about Silicon Valley in general?
Basel III rules really killed the markets in 2008. Mark-to-marked is a fine rule, unless there is a bubble.
I was following econ closely that year. In summer crude oil reach $150 a barrel, with no underlying demand or for economic necessity. It was clear investors and/or speculators was chasing returns. Chasing returns from something else.
Then in August the Bush administration announced a multi-billion bail-out for Fannie-Mae and Freddie-Mac, and I knew the jig was up. Fannie had been soaking up every mortgage given by banks, but now it stopped. I was left to wonder how deep the fall would be. Some banks failed, but not very deep, as it turned out.
There is no bubble here.
One theory I’ve heard for why gasoline got so expensive in June 2008, which may have helped kill new home prices in distant exurbs, insuring the mortgage crisis, is that the Chinese were buying up oil to burn during the August 2008 Olympics instead of coal to reduce air pollution.
I like Olympics-related historical theories, such as that Putin grabbed Crimea in return for the US meddling in Ukraine disrupted his expensive 2014 Sochi Winter Olympics. This after US ally and NATO candidate Georgia invaded South Ossetia to set off a particularly stupid war at the beginning of the 2008 Summer Olympics.
Because they want both. That’s why your office is a closet, and their office is The Jetsons.
I see where Home Depot founder Bernie Marcus said the failure was due to woke business practices. I think that is about right. Get woke, go broke.
It’s distressing that in response to 2008 there wasn’t provision in law made for an automatic debt-for-equity swap. A couple of prominent financial types were promoting the idea in 2009. The extant shareholders lose their investment while holders of bonds, commercial paper, and uninsured deposits receive equity pro rata, with the number of shares equal to the sum of the face value of the bonds, the face value of the commercial paper, and (say) 10% of the uninsured deposits. Every depositor sees the value of his uninsured deposit reduced by 10%. The bank opens again on Monday recapitalized without injections of public money.
Mark-to-marked is a fine rule, unless there is a bubble.
The complaint I’ve seen from financial types in the magazine press is that mark-to-market confounds liquidity and solvency, so is inadvisable for that reason.
What bothers me in retrospect is that an outside consultant produced a plan for a debt-for-equity swap to recapitalized Fannie Mae and Freddie Mac and Paulson and his staff rejected the plan.
Charles Calomiris, a finance professor at Columbia, was sharply critical of Paulson et al at the time. He said there’s a well understood script for getting out of a financial crisis and they tossed it aside and took to mad improvising.
Mark-to-market can result in unrealistic valuations in illiquid markets, i.e. difficult to value derivatives, private equity, etc. In effect, you need to find a real bid for the position (i.e. someone who would actually buy the asset at the mark for the quantity offered if you said “done” to their bid) to verify MTM.
That’s not a problem for U.S. Treasuries, the most liquid securities on the planet, and the only real reason *not* to mark Treasuries to market is to hide something.
Some may say “but if you hold them to maturity, you’ll certainly get all the interest payments and your principal back”. Yes, that’s true, but it’s only true if *you* decide if and when to sell. If your business model can force you to sell “Held To Maturity” securities to raise cash, they should not be marked as HTM.
Not. The birthrates of non-degenerates isn’t outpacing the number of people who become degenerate. Anywhere.
South Korean women lead the world in plastic surgeries, so check the original equipment (and mileage) before buying!
Can you really call “gambling” with Other People’s Money and expecting a bailout when you lose an all-in bet gambling?
Right. That’s why VCs do it and startups agree to it.
I used “scrip” as a metaphor for clarity because if SVB were literally issuing scrip things would not be much different. The startup is compelled to do most of its financial activity through the “company banking window”.
No, the startups are beholden to their VCs, who compel them to use SVB because of its advantages to the VCs.
The usual suspects.
And now Russia is more or less permanently banned from the Olympics – under the pretext of PED’s – and DGAF about pleasing the west or trying to fit in. We completely removed the carrot and they aren’t going to accept the legitimacy of the stick anymore. Heck of a job, Brownie.
These theories are fascinating and have more than a ring of truth to them.
The thing about mark-to-market is that it can become self-referential and then self-reinforcing. You can use over-inflated asset valuations as collateral to become even more over-inflated in an exponential spiral. This has happened multiple times in multiple ways over the last century and probably before too.
Of course mark-to-market can also puncture a bubble as it did with SVB when they had to mark-to-market their book value bonds and suddenly became insolvent.
From a policy point of view, the obvious solution to prevent bubbles is to prohibit mark-to-market accounting for appreciated assets but permit or even require it for depreciated assets, which has been the rule in certain circumstances, but it’s far from uniform and there are ways around it.
Instead it’s a policy hodge-podge, which makes work for accounting firms, and means your risk managers (and everyone else in the CFO’s office) have to be on their toes.
Every diversity promotion is a 10X source of “random error”. As long as diversity promotion keeps popping up, expect proportional levels of randomness.
What does Sili Valley say about diversity in general?
Not a field I’ve studied, but I’ve seen a comment which throws some of this into doubt. To focus on SVB as I understand it (did not watch the videos), due to financial repression they were earning 1.5% on the HTM government guaranteed MBS ten year bonds that they had up to $80 billion worth of.
What would it have cost them to hedge the interest rate risk on those bonds? What would have happened as, for the small peek I just made at T-Bills, one month ones are now yielding almost 5%?
Not saying they weren’t stupid, they were obviously chasing high for the time returns in very uncertain times with inflation starting to rise way above baseline in early-middle 2021. Although would they have lost a lot of business from non-VC investment deposits if they hadn’t chased returns? Saw a claim that a lot of the money that flooded in was from other things like IPOs.
Although I suppose the VC cabal would in many cases still have had a lot of control and continued to insist on putting the money into SVB. And that was the bank specializing in such companies for many decades, the one the people running those companies were very familiar with. And unless such companies had a savvy and not compromised from being part of the VC cabal CFO (very, very doubtful) they likely wouldn’t have noticed the sector concentration danger.
C level VCs are not going to put better than C level CFOs (that is, their friends) into that position. Also an industry of the young compared to for example myself, with my early Silent Generation parents who started growing up in the Great Depression/WWII era (also pre-antibiotics) who taught my siblings and myself a lot about what that was and the uncertainty of life, or who remembered the 1970s well. Anyone who’s formative years started no earlier than the early 1980s doesn’t know a lot of this stuff in their bones, Official inflation for example being “controlled” until “Biden.”
I would have thought that even a simple Value At Risk model would have shown a large exposure to rising rates. Either they didn’t run a VAR model (doubtful), cooked the model to show less risk (possible), or ignored the risk altogether until the losses were no longer sustainable (probable).
Bonuses paid before seizure.
No I call it malfeasance. But the dynamics of the game are the same. The players of the game still know who the winners and losers are… as the old ABC sports intro used to say… “The thrill of victory, and the agony of defeat.”
Bragging rights go to the winner as well as the spoils!
South Korean women lead the world in plastic surgeries, so check the original equipment (and mileage) before buying!
Lmao. We need a Carfax type of system for this!
Later in the replies Rep. Massie says the reply was, “we get back to you on that.” Interesting that he said Senator, as Mad Max would have been an obvious choice.
Are you fucking daft? Your link doesn’t say South Korea is “at the top of the world” for plastic surgery, it says South Korea performs 24% of all plastic surgeries. It also says that 40-50% of plastic surgery patients in Korea are foreigners, and about 25% of those foreigners are Western women getting their noses shaved off or their cheeks filled.
The country at the “top of the world” for plastic surgery is of course the United Snates.
The fact that South Korea is a popular destination for plastic surgery doesn’t mean Korean women have more plastic surgery than Western women. Brazil and Greece are also #3 and #4 in the world for plastic surgery yet most people there haven’t had it. Non-Asian women are just as likely as Korean women to have plastic surgery and even without it Korean women would still be more beautiful.
When I first heard SVB I immediately thought ‘Scott Adams!!!’
Hasn’t Scott suffered enough?
Uncle Samantha sez:
““[SVB] depositors will have access to all of their money starting Monday, March 13… We are announcing a similar systemic risk exception for Signature Bank… all depositors of this institution will be made whole.”
So, so, so many galaxy brains round here, including Karl Denninger on his blog, spilling so, so many pixels about the sophisticated intricacies of monetary high finance whilst li’l old Omar here told y’alls Friday that Uncle Samantha gonna mash Ctrl-P like a monkey on crack and make the zeroes go brrrrrrrrrrrrrr.
Always feels good to be proven right, it never gets old 😎
Generally speaking, under accounting principles, assets are valued at the “lower of cost or market”. You should mark assets DOWN when they are worth less than what you paid but never mark them UP on your books until you actually sell them and realize the gain. That prevents asset bubbles from being used as collateral as you describe.
The answer is quite simple: they kept their money there because they know they will be bailed out.
See all the demands (demands!) that they be made whole, regardless of the law.
Where is that money coming from? Your pocket.
inflation is its own form of taxation. But the Dems and mainstream GOP must protect/reassure their suburban PMC supporters.
“They also stated that taxpayers will not be on the hook for the non-bailout bailout. So how does that work?”
Uncle Samantha is not lying. Your 2023 Form 1040 will NOT have a new line called ‘Multiply AGI by .05, this is your Shared Responsibility Payment for 2023 bank bailouts’. No, as the Ctrl-P goes brrrrrrrrrrr, the value of your income/savings is reduced by an additional 5% on top of the current official 9% [sic] inflation rate and this extra inflation impacts non-taxpaying welfare leaches as well. Cuz Orpah ain’t abouts a lose a penny, nuh uh UH!
Yeah, these “end of men” stories actually always describe “the end of tiresome feminist women”.
But there are two problems with simple glee:
1) The feminists kill lots of normie women.
While the culling is taking out feminist genes, the plain reality is women are just very conformist, so lots of normal women with normal genes, who are good breeding stock and should be mothers to the next generation are breeding much less as well. Which is a huge problem in Korea and across the West.
And most importantly ….
As I’ve outlined we would get the “breeder” led recovery in all these nations in a few generations. But we don’t have a few generations because the “immigation! immigration! must have immigration!” bleaters–including your basic cheap labor goons–never stop.
South Korea is already getting seriously immivaded. Some SE Asian wives for the Korean guys who can’t find wives.
South Korea badly needs a strong pro-natal, pro-eugenic fertility policy–right now.
And it’s the same story across the West. Native populations in decline and instead of the next generation being allowed to enjoy the relaxing in pressure–enjoy higher wages and cheaper housing–the immigrationist scum are avidly destroying these nations with immigration.
Laughing at feminists taking themselves out of the gene pool is good fun. But unless the immivasion in stopped and reversed … the normies will be dead as well.
No, they’re hiring teenagers by the week, or hour. Then going home. German-speaking countries are more into this than Scandinavian. There was an Austrian film, Paradise:Love, about a decade ago.
Here’s a report from the Southern Hemisphere:
As the article says, nobody has the numbers, though Reuters claims to.
At almost 30% Christian, they have one available now. They just have to use it.
It reminds me of the SouthPark laundry gnomes, where they say “phase 1: collect the underwear, phase 2:… , phase 3: profit!”
We’ll give them the money they need, the money will come from…, and don’t worry taxpayers won’t be on the hook!
Yeah, generally speaking that is the way they teach it in accounting class, and for good reason: it is the principle most likely to tamp down on irrational exuberance (to the extent accounting can accomplish that). But it always turns out that at certain times and places, there are exceptions.
In the 1920s stock market run-up banks were using appreciated shares as collateral in their capitalization ratios to acquire even more shares. In the 2000s housing market bubble, you could get a loan against an absurdly appreciated house to buy another overvalued house, etc. In those cases bubble transactions have a way of feeding on themselves, so “lower of cost or market” doesn’t help because your cost was already over-elevated by the frothing market.
SVB’s case was kind of the reverse, where they followed banking guidance and held a bunch of bonds at “cost”, but then due to poor oversight and Fed tightening, they suddenly had to mark them to “market” at what turned out to be a stiff discount. And hey presto! Insolvency.
I don’t have any first-hand knowledge of this, but my second-hand knowledge is that places like Bali, Thailand (The Beach), maybe parts of Latin America are hangouts for Western sun-worshipping surfer dudes (from California, Northern Europe, Australia, South Africa, etc.). Those are the guys that female sex tourists are after. Of course, those guys have other options, so the sex tourists have to be at least semi-attractive, otherwise they’re stuck with the skinny 5-foot-5 shanty dweller or the lecherous beach gigolo.
I know a rather robust fellow who has a hang gliding or parasailing or whatever you call it school in the Alps. Endless streams of young East Asian lady tourists sign up for this, some portion of whom have more than gliding/sailing on their mind. That probably sounds pretty good to a lot of guys, and he keeps doing it so I guess he likes it too, but OTOH he’s entering his fifth decade with no wife or kids. Another decade and he’ll be too old for the schooling+extracurriculars and too old for a family. Priorities vary…
Finance speak: “Unicorns” = startups initially valued by investors @ > $1 billion.
A lot of them, now, will be bought at bankruptcy auctions for pennies on the original dollar. Some actually own their own office furniture. When Meta, Google and Apple don’t return your phone calls, it’s over.
The better comparison is “dead horse in the street hauled away for dog food.”
Yes, SVB was actually put out of business prior to bankruptcy by bank regulators actually doing their job, eventually.
Banks in particular need to be careful about “mark to market” since lending is based upon collateral and they can legally only lend so much percentage of that. When it goes down, loans are called.
Holding bonds even good ones, also has downside risk due to interest rate effects, which the Fed has now been amping up. So “good bonds” are now worth less, and banking rules don’t let them get away with “holding to maturity” which is often many years later.
Fun fact: England (or the UK) used to issue bonds called “consuls” which never repaid any principal. Instead, based on the amount “lent” to the government, the government repaid interest only, in perpetuity. So they were interest only, forever. I don’t know if they still issue these or not.
Sadly the last ones were redeemed in 2014.
News just in
The Institute for the Study of Finance, a Russian think-tank, estimates that the USA only has enough solvent banks left to last two weeks 😉
The Dodd-Frank law was written by lobbyists holding bull sessions in his office. In 2005, he rallied Fannie and Freddie patrons in Congress to sabotage efforts to improve accounting practices at these firms. His butt-buddy at the time was one Herb Moses, a high mucky-muck at Fannie. This guy is as bad as it gets.
That was the Arabs (OPEC) cutting production to get rid of Bush (or rather his R successor)
(They did the same in ’99 to get rid of Clinton/Gore)
In a just world, Barney Frank and Chris Dodd will still be in jail. Just for a start.
Rich bankers against whom fees are assessed by the FDIC. Don’t anyone dare mention that these government assessed fees will be recouped via increased fees these rich bankers will charge their customers.
“Over in Europe, Sweden was widely criticized for not locking down. It ended up having the lowest excess mortality rate of any European country for the last three years.”
First of all, Sweden vaccination rates were anomalously high. Strange how you avoided mention of that in your twisted little just-so tale about who did things right. Secondly, their per capita death toll was certainly NOT lower than Norway or Denmark or other Nordics who did lock down. If you want comparable statistics, that’s how you should compare them.
To the extent Sweden’s excess mortality rate “ended up” low (and what’s that supposed to mean, anyway?) on anything other than some COVID truther’s tortured dat-mined Facebook memes, it’s only because they killed off more of their elderly early on with their botched policy (that even they subsequently admitted was an error), and therefore had fewer of them around later, thereby depressing excess mortality. You could have done an even better job with that trick had you simply killed off everyone over 30 in Logan’s Run fashion early on in the epidemic — I guarantee your overall mortality stats would look great today if you had managed that simple little switcharoo — but it doesn’t mean you’ve won anything.
That was why some other just-a-flu-bros were around here earlier claiming a few months ago — I kid you not — Bulgaria and Romania were somehow the COVID winners (when in fact, they, too, had killed off even of their old people during COVID with their me-no-worry approach (as indicated by the chart in the first link) that it likewise meant there were fewer of them around today to mess up the excess mortality scores.
I do have such first hand knowledge! Never did I have so many lovely ladies so easily as when I was an early 20s backpacker in Europe and Asia. Australian girls far away from home on their gap year… oh my.
For Europe, send your sons on a Contiki tour. It was about a 50/50 sex ratio and they really are this hot:
The museums were nice too.
There’s an Ameritrade office there ..
The Charles Schwab brokerage bought TDAmeritrade brokerage back in 2020. Schwab continued to operate TDAmeritrade under the name TDAmeritrade.
No recent bad news about TDAm., but Schwab is troubled:
Why Is Charles Schwab Plunging on Monday?
By Matthew Frankel, CFP® – Mar 13, 2023 at 11:02AM
Apparently, the TDAmeritrade part of Schwab isn’t hurting.
TDAm. workers may have in the office last Sunday, March 12, in anticipation of a busy, high volume day on Monday. That office may have been taking customer inquiries on Sunday because of all the unhappy financial news. Lots of customer handholding and trading orders at all the brokerages today.
“I don’t know what Signature did wrong,”
Produce stupid videos ????
The Unz men of culture are so predictable. Lots of comments to a thread-hijacking article, likely only because it might have something to do with hot Asian women.
Short-term, it’s a loss to innovation. The fact that other banks could not see this, reiterates that other banks — along with the feds — could not give accurate valuation to profitable startups. It’s not in their models. They don’t have the know-how to do it. Now, four-dimensional chess with derivatives, the other banks have that covered, or so their statistical models tell us. Trust them.
Long-term, hopefully, SVB execs will trickle into other banks, taking their know-how with them. The question is how long will that take, if ever.
So why did SVB blow itself up in pursuit of a slightly higher ROI when it had a long-term defensible advantage over other banks?
It’s post-hoc vs a priori.
In retrospect, SVB blew themselves up for a marginal advantage. But, in the moment — in 2020 — SVB saw it as a golden opportunity, in which the rules of physical commerce had fundamentally changed. It wasn’t a terrible assumption considering restrictive COVID policy and the fed’s policy of the last decade. Every tech and non-tech CEO did the exact same thing, albeit with less exposure to interest rate risk. Most non-SV investors did the same thing as well, with even worse outcomes. Massive overhiring and bad investments.
SVB likely overindexed on their relationships in Silicon Valley and their experience in 2001 dot-com bust.
In retrospect, their risk management sucked. In the moment, more complicated.
I don’t know how many times you can be shown this and not get it, Silly valley is the dumb money. They take on much more risk than the stock market and have lower returns than the Russell 2500. Other than the ’90s speculative bubble, where they got everybody whipped up over the potential of the internet, they have consistently lost money over time.
No, he may be wrong in calling some supply-driven price rises “inflation,” but so are you to say it has to be tied to money supply growth.
The technical definition is just “an increase in the general price level of goods and services in an economy,” ie all goods and services go up in price, including goods that are not tied to those non-monetary supply constraints. It is generally agreed that money supply growth is the most common cause, based on Milton Friedman’s seminal research showing those historical correlations, but even Friedman in his later years admitted it often wasn’t the cause anymore.
Another cause is market exuberance, eg people got excited by the internet in the ’90s and started spending a lot more money, ie monetary velocity went up, not supply.
Why didn’t they do it in 2004 if they didn’t like Bush/R? The R ticket was pretty much cooked by 2008 no matter what.
And why not do it to Clinton/Gore in 1996 instead of waiting?
I had never heard of this, so I checked the Contiki website only to be greeted by a banner image of an obese mulatta. “Damn that Pixo!” I growled. Despite the retina damage, I risked your link from 2013, where there was this image
over this caption:
Ah, 2013, it was a different time, you understand ….
The number of women who are sex tourists are few compared to their male counterparts.
And they are quite different: the women generally just can’t find a male partner in their homeland. This would be their preference.
The men just want uncomplicated nookie and plenty of it.
Well, that’s my observation after visiting a number of these so-called sex hotspots.
Shouldn’t you be out on a ledge somewhere ..
… apologizing to all of us through a bullhorn?
She was bullshitting you
The early 2010s pics reflect my even earlier 2000s happy memories. The more recent ones the girls seem fatter and 20% asian.
It looks like the Megan’s List convention
How old were you when you figured out you were gay?
Plus using mark-to-market on government bonds is besides the whole point of government bonds. You are guaranteed to get your principal back when the bond expires, plus the interest payments as per the schedule. They aren’t designed to be bought and sold on the open market.
In New Jersey, many towns require that when a utility digs up a street for work, they hire an off-duty police officer as security and to direct traffic. Since this is considered overtime for the hard-working men in blue, they are paid at overtime rates. When the citizenry complains about the high pay, they are told that it isn’t coming out of taxpayer money; the cost is being born by PSEG, United Water, and their brethren. However, this ignores the salient feature of utilities: We are all required to use them. If I pay police overtime through my property tax or through my PSEG bill, it is all the same to me in the end.
I guess your history of businesses doesn’t include the period when it was genuinely Silicon Valley? Or back to HP and then WWII?? Your first link doesn’t go back before 1990 and shows serious money made through a good part of the 1990s, your second is an irrelevant piece on one company that was in jeopardy due to the SVB failure. A company that has actually shipped tangible, I hear very useful products for a decade and a half. A Netflix spinoff with two billion dollars in cash, I suspect they’re pretty successful at making money, certainly not a webshit company.
Something really freaking amazing happened when the traitorous eight decamped from Shockley Semiconductor Laboratory to found Fairchild Semiconductor and among other things invent the practical integrated circuit and many many subsequent companies. Something that could happen in no other state except for what IBM did under a punched card machines era consent settlement that required them to FRAND license their patents. Because non-competes are by long standing public policy unenforceable in California, and developments were so fast patent cross licensing was big.
This eventually matured into microprocessors good enough to do real work, and Silicon Valley become the biggest concentration of companies based on those like Apple (who’s open architecture and use of standard parts had to have influenced IBM) and Sun. The latter killed by bad management … and Intel CPUs getting so good. Chips today … we wouldn’t be talking here without both those phases of Silicon Valley.
“… it’s only because they killed off more of their elderly early on with their botched policy (that even they subsequently admitted was an error), and therefore had fewer of them around later, thereby depressing excess mortality. You could have done an even better job with that trick had you simply killed off everyone over 30 in Logan’s Run fashion early on in the epidemic — I guarantee your overall mortality stats would look great today if you had managed that simple little switcharoo ..”
This makes no sense. You can’t reduce excess mortality over a three year period by killing people off early in the period. They still count as dead. At best you break even if they all would have died within 3 years anyway.
Another major bank failure today: Credit Suisse.
Not sure we can say Credit Suisse has quite “failed” yet, and it’s very different from SVB, we’ve been waiting years for this, there’s no surprise for anyone paying attention. Of course it being a genuine Systemically Important Financial Institution the impact could be a lot greater, but the first phase should not be the sort of thing that’s out of the blue and that results in deadly increases in the perception of counterparty risk.
Of course, the same was said when Lehman Brothers was allowed to fail hard in September 2008 like Bear Stearns had been in March. As in, we don’t know how much hidden and un-hedged exposure other financial institutions might have to it, despite, again, years of warnings, claims they’re being conservative, etc. etc.
Obviously not, as my data only goes back to 1990, so I’m only talking about the last 30 years of internet startup waves. However, given the much smaller sums involved back then, how most of those past successes like HP, 3Com, or SGI are now mostly gone, and the always low startup success rate, I suspect overall returns were even lower in the earlier hardware-driven periods you highlight.
As for the good returns in the ’90s, almost none of those companies exists today, whether AOL or Netscape, so they clearly made that money in a wave of hype during the dot.com bubble. Mark Cuban made billions selling Broadcast.com during that bubble to a now-defunct Yahoo, but nobody takes him seriously as a tech investor today.
Yet, they were so stupid that they parked half a billion with SVB, not a ringing endorsement.
Those guys were real pioneers, that’s all gone now. SV is the new Detroit, it’s all downhill from here.
In Re Home Depot v Lowes, My assumption was yours.
I was wrong.
Turns out the collar and cuffs don’t match, to use an Ian Flemming line.
give it three days.