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That’s not an investment loss though. It’s really not the same thing. If I can claim inflation as a loss I need to go redo my taxes…
by twblalock 4y ago
That’s not an investment loss though. It’s really not the same thing.
If I can claim inflation as a loss I need to go redo my taxes…
- zamnos 4y agoIt's material here because the reason Tbills are paying 5% is because inflation is roughly 6.5%. (I used a fixed inflation rate of 3% to get 74% above.) Usually they're down at like 0.05% or so, which is what SVB was holding, which is what sank them.
- twblalock 4y agoIt’s not material. What matters is that principal is returned in full when bonds mature, but if you can’t wait until maturity you might have to sell them for less than the principal. That is exactly what happened to SVB.
- kfrzcode 4y agoSounds like they needed more diversity in their overall capital portfolio; based on significant risk of these long-term bond rate increases -- is this a common tactic that would be employed at other banks, but it's just that SVB had a "special" system where customers would hold more money there or something? What's stopping my Local Bank from crashing this week?
- twblalock 4y ago> What's stopping my Local Bank from crashing this week? Enough consumer confidence to prevent a bank run is the only thing that prevents a run on any bank, including the largest banks in the world.
- subsistence234 4y agowhy do you think those bonds are worth only 80% now, if you believe they should be worth 100%? is it a market inefficiency? do you think you could make risk-free 25% profit by buying them?