Phew. hey there. This is Phil Rosen, Senior Reporter. Before we get into the newsletter, let’s do a quick analysis of what’s new as the Silicon Valley Bank story continues to unfold.
this morning’s big story: HSBC bought bankrupt SVB’s UK arm at the last minute for £1 ($1.21). The British government and the Bank of England have facilitated the private sale, UK Prime Minister Jeremy Hunt said on Twitter that “deposits are protected without taxpayer assistance”.
Also, for those who don’t know, yesterday’s signing bank became the third bank to fail in the past week. Silvergate closed bank spontaneously.
The Treasury Department, Federal Reserve Board, and FDIC Joint statement On Sunday evening, all depositors at SVB and Signature Bank were fully restored, effective when a new facility, the Bank Term Funding Program, was created to provide liquidity to companies under stress. said to
“The losses associated with the Silicon Valley Bank resolution will not be borne by taxpayers,” the policy official added.
Meanwhile, with two banks under regulatory control, First Republic has issued a message to customers to ease tensions, saying liquidity remains high.
In any case, some people on Wall Street believe that we do much of the confusion. Escape from the easy money era.
After more than a decade of near-zero interest rates, firms borrow money freelyand what we’ve seen so far is just the tip of the iceberg as far as impact is concerned.
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1. Collapse of SVB and signatories This means that the Fed’s aggressive rate-hiking regime is now taking quite a toll.
The turmoil is a by-product of the central bank’s 1,700% interest rate hike in less than a year, pushing once-stable financial institutions even further. Turned inside out in the coming months.
“If interest rates rise sharplyAfter 15 years of overstimulating the economy with near-zero interest rates, it would be wise not to imagine that all parts of the stressed society would be ineffective. naive imaginationWeiss Multi-Strategy Advisors Lundy Wright told me.
Analysts at Deutsche Bank said the new interest rate cycle would bring a “perfect storm”, telling clients last week that it epitomized the SVB. All risks worth worrying about An era of policy change.
In a Sunday Note to Clientsa Goldman Sachs research team downgraded its forecasts for Fed policy after this weekend’s bank failures.
“Given the recent stress in the banking system, we no longer expect the FOMC to raise rates at its March 22 meeting,” analysts said. I have.”
Either way, the risk of infection may not be as highas my colleague Matthew Fox writes, banks Very well capitalized since the Great Financial Crisis.
And according to Tut Fuller, chief executive and founder of Capra Bank, if policymakers keep their promises and protect depositors as they say, people will restore trust.
“We are looking forward to the government’s approach. Intervening and protecting depositors doesn’t bail out a failing management team or board, it actually builds trust,” Fuller told me near midnight last night. Responsible for leadership. ”
Here is Deutsche Bank again:
“What do you get when you see Biggest hiking cycle on recordalongside one of the most inverted yield curves in history, at the same time Biggest tech bubble in history bursts, coupled with the runaway growth of the private market? ”
The answer looks like what happened this weekend.
What surprised you the most about two banks going bankrupt in three days?@philrosenn) or email (prosen@insider.com)Please notify me.
In other news:
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2. Wall Street’s Battle for Direction SVB’s failure fueled concerns among banks. First Republic Bank shares fell 60% before the market after he tapped a $70 billion backstop to boost liquidity for US lenders. Click here for the latest market trends.
3. Earnings on deck: Carlsberg, Getty Images Holdings, and more report.
4. Morgan Stanley recommended this batch of stocks to benefit from an investment strategy that produces a 100% chance of positive returns. Here’s the approach the strategists have deployed – including their current favorite 19 names.
5. A $15 billion venture capital firm warned startups about a Silicon Valley bank red flag months ago. Bloomberg reports that GreenOaks Capital Partners told clients in an email in November that SVB and other firms could also run into trouble in a high-interest-rate environment. These customers withdrew more than $1 billion from banks before the disruption.
6. Veteran investor Jeremy Grantham said the stock market bubble is still deflating. The market won’t bottom out until 2024, and investors shouldn’t be fooled by the uptick, said the GMO co-founder. He called the Fed’s monetary policy a 36-year “horror show.”
7. The banking crisis will force the Fed to cut interest rates by 100 basis points to prevent contagion. According to market guru Larry McDonald, He said it was the Fed that effectively caused last week’s dramatic bank run.
8. This real estate investor owns over 1,250 units. Retired at the age of 36 by utilizing the cash flow of the owned properties. Here are his five pillars that he says will generate wealth and how investors can combine them to increase their income and achieve financial freedom.
9. Investment professionals who say “cash is king” think now is not the time to enter the stock market. Lauren Simmons recommends putting your money in Treasuries, CDs, and high-yield savings accounts instead.
market insider
10. Bitcoin and other risky assets stumble amid bank woes. As Silvergate prepares to downsize and other financial institutions face problems, the crypto industry is going through new pains. Bitcoin dipped below $20,000 last week, but now he’s above $22,000. This is what caused Friday’s drop.
Curated by Phil Rosen of New York. Feedback or tips?Tweet @philrosenn or email prosen@insider.com.
Edited by Max Adams (@Max Radames) New York and Hallam Block (@hallam_bullock) in London.
