Down goes the Dow

So basically if you held a lot of short term T bills, you could’ve sold today and then put your principal+profit in a HYSA - then wait to buy more in a few days or weeks?

in theory, sure. But if the CPI numbers come in cool tomorrow the prices of your Tbills could continue to rise, making you wish you hadn't sold.

Not really. Keep in mind that SVB took like a $15B loss on their 10Ys.

Based on what I've read on SVB, they're actually somewhat solvent and have like $70B in outstanding loans. There books aren't total trash like we saw in 2008.

As for the rest of it all, the Fed is stepping in as a buyer of last resort, which is a big part of their mandate.

SVB filing last week: “Excluded from the tables above are unfunded commitment obligations of $164 million to our managed funds of funds and other fund investments for which neither the payment, timing, nor eventual obligation is certain . . . we make commitments to invest in venture capital and private equity funds, which in turn make investments generally in, or in some cases make loans to, privately-held companies. Commitments to invest in these funds are generally made for a 10-year period from the inception of the fund. Although the limited partnership agreements governing these investments typically do not restrict the general partners from calling 100% of committed capital in one year, it is customary for these funds to generally call most of the capital commitments over 5 to 7 years; however in certain cases, the funds may not call 100% of committed capital over the life of the fund.”

Ratings agency Moody’s on SVB leverage: “Moody’s believes this double leverage exposes SVB holding company creditors to higher credit risk, including increased structural subordination and the holding company’s greater reliance on common dividends from its bank subsidiary to service its holding company debt obligations. If this double leverage is not reduced, it could result in wider notching of holding company ratings.”

I found this rather quickly, which is amazing for a 75 IQ.

No wonder:

Off balance sheet obligations reminds one of Enron.

On regional banks via Bloomberg:

It's actually over $62 Billion, plus we're discussing Silicon Valley Bank, not the BHC, SVB Financial.

OK, but how come nobody at this point is interested?

Because they weren't used. Looks like there was over $100B available to PEs and VCs and $41B ( Global Banking ) was drawn. That is on the balance sheet. Just like a HELOC or Line of Credit.

OK, that explanation makes sense. How come the folks looking over the books last weekend couldn’t figure that out? I would assume they could have called on the accounting department for help.

Cryptic chart time, in regards to why smaller banks are being hit and why Fed's new funding facility may not help them ( hint, they have the wrong collateral ). I'm also looking into the mysterious case of Schwab.

Small banks ratio of loans and leases; treasuries and GSEs; and cash; to deposits.

Now the large banks.

A piece of the Schwab puzzle.

Image:substackcdn.com/image/fetch/w_1456,c_l...

Time for bed, got to rest up, I'll be partying with the little people later this week. Maybe they'll tell me where they hid their pot of gold.

Also, if it is like a line of credit or HELOC, and the value of the asset securing the line goes down, it would be less than the $60 Billion available? To me, it would be like the accounting of a HELOC when a residential mortgage defaults. So you would be back to asset values under stress.

I'm tired so I'll try to make this quick. Say I get a HELOC for $100,000, the bank doesn't set aside $100,000 in case I use it. It's recorded ( off balance sheet ) as an unfunded credit commitment. Say I want to use $50,000. That goes into my checking account. The $50,000 enters the bank's balance sheet as an asset ( the loan ) and a liability ( the deposit ). The remaining $50,000 is still off the balance sheet as an unfunded credit commitment. The CRAs know this, the bank examiners know this, most professional bank investors should know this.

Problems being solved. Inflation cooling steadily.

US CPI since Jan 2022:
2022:
—Jan: +7.5%
—Feb: +7.9%
—Mar: +8.5%
—Apr: +8.3%
—May: +8.6%
—Jun: +9.1%
—Jul: +8.5%
—Aug +8.3%
—Sept: +8.2%
—Oct: +7.7%
—Nov: +7.1%
—Dec: +6.5%
2023
—Jan: +6.4%
—Feb: +6.0%

(Fed Inflation Now predicts just 5.4% for March 2023)

Got that, but if I default on the original loan, the value of the underlying security determines the worth of the credit. Actually something like this happened to my neighbor during the GFC. Bank had original plus HELOC of $330,000 owed and borrower walked away on a house now valued at $125,000. Using your example. Anyway, got the original point, so thanks.

Good thing I cut my shorts in half. Think I’ll drop the rest and buy ARKK.

IAT, a regional bank ETF, is up 9% in the premarket.

Apparently Burry has said he doesn't think this crisis has staying power.