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With SI and SIVB falling off, this is no surprise.
by irjustin 4y ago
With SI and SIVB falling off, this is no surprise.
- moneywoes 4y agoMore details?
- chank 4y agoA lot of news about problems with Silicon Valley Bank.
- londons_explore 4y agoWhen Silicon Valley bank closes its doors, there will still be plenty of assets to give to account holders. I would guess nobody will lose more than 5-10% of what they had deposited. So it is interesting that it is causing such panic.
- prasadjoglekar 4y agoThe panic is always due to duration mismatch. A startup won't survive if cash is locked up for 90 days and you can't make payroll. unless a large benevolent buyer steps in, (remember Bear Sterns and JPM?), SiVB is toast. In fact both SI and SiVB are in trouble because they have long duration assets and short duration liabilities.
- londons_explore 4y agoYes, but the duration mismatch shouldn't be an issue here. I would happily loan money to a startup to make payroll, if that loan was 80% of the value of deposits they had in the collapsing SiVB, as long as the loan was secured with those deposits - that way I can be pretty certain I'm getting repaid, even if the startup goes bankrupt in the meantime.
- prasadjoglekar 4y agoBank balance sheets are the opposite of a general busibess. SiVB's deposits are their liabilities. Their MBS portfolio is their asset, which has been hammered by rising rates. The correct haircut on that is not 20%, it's more like 90%. The stock market is betting that equity holders of SiVB are going to get wiped out.
- hluska 4y agoLosing 5-10% of runway because your bank went belly up should give any reasonable founder cause to panic.
- sbuccini 4y agoMatt Levine, as always, has a good primer: https://www.bloomberg.com/opinion/articles/2023-03-09/crypto-bank-had-a-boring-collapse https://www.bloomberg.com/opinion/articles/2023-03-09/crypto...
- neom 4y agoOne thing I can think of is there are possibly crypto tech companies with reserves/and/or opex runway there + general market jitters.
- senttoschool 4y agoIt has a lot to do with SI, nothing to do with SIVB (other than crypto trading with Nasdaq). It also has to do with expectations of higher interest rates.
- extheat 4y agoIt’s both. The S&P 500, Nasdaq, Dow all are suffering and even the 10 year is down because of fears the Fed is breaking something with the bank shocks. People are fleeing stocks (including cryptocurrencies) to hold USD.
- brianshaler 4y ago> People are fleeing stocks (including cryptocurrencies) to hold USD. This is a really wild thought in a high inflation environment. Not that I disagree. Equities can lose dollar value on top of the dollar itself losing value. Some portion of it has to be going back to risk-off assets that were not worthwhile in a zero-rate environment.
- rm_-rf_slash 4y agoVolatility can be more damaging than inflation. Cash is king.
- senttoschool 4y ago>People are fleeing stocks (including cryptocurrencies) to hold USD. People have been doing that for a year now. It's not new. It didn't start happening because of SI and SVB.
- extheat 4y agoYes, it’s not new, but big fluctuations between day to day can be big news. Until recently actually the stock markets have been doing pretty good YTD.
- 4y ago