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🦧 when rising rates make you go bankrupt

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🦧 when rising rates make you go bankrupt

Ape of Omaha
Mar 17
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🦧 when rising rates make you go bankrupt

www.wiseape.fyi

StockAlgos

"one of the best, affordable stock research platforms that hosts stock picking competitionsā€

šŸ¦ SIVB 0.00 (silicon valley bank group) - who were they?

  • "svb" was a regional bank headquartered in california (also the 16th largest bank in the us)

  • simply put, it’s where all the ā€œtech money / depositsā€ were on

    • specifically, it started off being a bank lending to small businesses and tech startups but later changed to giving out loans to venture capital firms

 
 

šŸ’€ dead in 48 hours

  • svb announced last wednesday that the bank needed to raise $2.25b rather unexpectedly and it spooked the market

  • that triggered a massive digital bank run (aka pretty much everyone wanting to withdraw their deposits all at once)

    • customers withdrew a total of $42b by the next day

  • svb’s stock price declined 60% in a day

 
 

šŸ¤” why tho?

  • one big reason is that interest rates were at an all time low during the pandemic for almost two years – this was a time when svb had consistently large influx of cash as money

    • at the time of failure, ~70% of its $76bn in outstanding loans were dependent on private equity or venture capital for repayment

  • with all that idle cash (more than it's ever had a hand on), svb decided to invest in longer term bonds (i.e. mortgage securities, 10-year-or-longer us treasuries)

  • but the fed soon began raising rates and the fed's been raising rates fast, which caused extreme losses for the bank (bond prices fall as rates rise)

imo: it could’ve been a great opportunity (increased deposits led by low interest rate environment) used wisely, but the human aspect (of course, always the unexpected factor) of the business kinda ruined it

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šŸ’” something im thinking about

google pixel's "magic eraser" is coming back, but with a price (click image)

as always, i’m no financial advisor! (i’m no substitute for professional financial services)
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🦧 when rising rates make you go bankrupt

www.wiseape.fyi
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