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Why is that?

JumpCrisscross 4y ago
Our equity markets have always been weird, but they’ve gotten weirder in recent years. For most businesses, that volatility is fine. Customers of e.g. Nike aren’t checking its stock price before buying sneakers, and it mostly has enough cash on hand to conduct business if creditors get spooked. Banks are different. A random drop in their stock price will lead to a perceptions failure that trigger run conditions. This is how Signature and Credit Suisse were, at least proximately, done in. We’re practically seeing it play out again with Deutsche Bank. Public ownership lets these banks access cheaper capital. But the operational effects of volatility make it seem a bad deal. For the largest banks, if closely supervised, I can see the risks balancing. But for mid-sized banks I don’t.
- drexlspivey 4y ago
  > Banks are different. A random drop in their stock price will lead to a perceptions failure that trigger run conditions. This is how Signature and Credit Suisse were, at least proximately, done in. You have the cause & effect wrong, the stocks tanks because the bank is failing. Tons of banks that are not publicly traded fail too.
  - JumpCrisscross 4y ago
    > stocks tanks because the bank is failing In this cycle, Signature and Credit Suisse's stock slides preceded their banking panics. The proximate causation flowed from equity prices, to CDS, to deposits. (The ultimate causation stemmed from a general insolvency. But that's not unique to Signature over its privately-held counterparts.)
  - cm2187 4y ago
    Credit Suisse had a 14% CET1 ratio, higher than JPMorgan. The stock price was depressed because it wasn't turning a profit but it was nowhere near a level of losses where it would be a concern from a creditor point of view.
    - drexlspivey 4y ago
      There were a series of news before investors started panicking, it’s not like people randomly decided to dump the stock without any reason. > (March 9) Credit Suisse shares drop as annual report delayed following SEC call > Postponement comes as regulator weighs in on 2019 cash flow statements > (March 14) Credit Suisse finds ‘material weaknesses’ in financial reporting controls > Swiss bank says it lacked effective processes to identify risk of misstatements
      - cm2187 4y ago
        Yeah. No restatement to the numbers already published. Doesn't look good but should hardly move the stock price, let alone the credit worthyness (two distinct things).
- blitzar 4y ago
  > Our equity markets have always been weird, but they’ve gotten weirder in recent years Never has is been so easy to shit talk a stonk online and have it matter. We are in the meme stonk phase of capitalism. The real pros at the grift create SPACs and become stock market influencers.

Why is that?

Our equity markets have always been weird, but they’ve gotten weirder in recent years. For most businesses, that volatility is fine. Customers of e.g. Nike aren’t checking its stock price before buying sneakers, and it mostly has enough cash on hand to conduct business if creditors get spooked. Banks are different. A random drop in their stock price will lead to a perceptions failure that trigger run conditions. This is how Signature and Credit Suisse were, at least proximately, done in. We’re practically seeing it play out again with Deutsche Bank. Public ownership lets these banks access cheaper capital. But the operational effects of volatility make it seem a bad deal. For the largest banks, if closely supervised, I can see the risks balancing. But for mid-sized banks I don’t.

drexlspivey 4y ago
> Banks are different. A random drop in their stock price will lead to a perceptions failure that trigger run conditions. This is how Signature and Credit Suisse were, at least proximately, done in. You have the cause & effect wrong, the stocks tanks because the bank is failing. Tons of banks that are not publicly traded fail too.
- JumpCrisscross 4y ago
  > stocks tanks because the bank is failing In this cycle, Signature and Credit Suisse's stock slides preceded their banking panics. The proximate causation flowed from equity prices, to CDS, to deposits. (The ultimate causation stemmed from a general insolvency. But that's not unique to Signature over its privately-held counterparts.)
- cm2187 4y ago
  Credit Suisse had a 14% CET1 ratio, higher than JPMorgan. The stock price was depressed because it wasn't turning a profit but it was nowhere near a level of losses where it would be a concern from a creditor point of view.
  - drexlspivey 4y ago
    There were a series of news before investors started panicking, it’s not like people randomly decided to dump the stock without any reason. > (March 9) Credit Suisse shares drop as annual report delayed following SEC call > Postponement comes as regulator weighs in on 2019 cash flow statements > (March 14) Credit Suisse finds ‘material weaknesses’ in financial reporting controls > Swiss bank says it lacked effective processes to identify risk of misstatements
    - cm2187 4y ago
      Yeah. No restatement to the numbers already published. Doesn't look good but should hardly move the stock price, let alone the credit worthyness (two distinct things).
blitzar 4y ago
> Our equity markets have always been weird, but they’ve gotten weirder in recent years Never has is been so easy to shit talk a stonk online and have it matter. We are in the meme stonk phase of capitalism. The real pros at the grift create SPACs and become stock market influencers.