I don't feel as dumb as 2008 when I saw "mortgages are going to adjust and these people won't be able to pay them" didn't result in me connecting the dots and shorting bank stocks. It's simple to understand "massive defaults bad, also drives down home prices at which point more defaults occur"
"Wow, the banks lent out a lot of money at super low interest rates and someone had to be buying all those 1% treasuries" - the dots are there but less easy to connect, the first glance is "welp, you locked in a bad rate, but hey only 10 years to maturity on those T-bills!" but the reality is that marked to market, the banks have zero flexibility because they can't sell the assets, they have to hold to maturity or they can't meet deposits.
And how can the banks attract any deposits now? If the 2 year treasury is yielding 4%, then to compete, the banks need to offer the same amount, but they have huge amounts of 1-3% yielding debt in their portfolio. If they don't offer 3-4% on CD's, people will pull their money even if they aren't afraid of bank liquidity, just to find more attractive yields. It was such an obvious problem, but think the ship has sailed on shorting the banks.
I just saw a CNN clip of some startup founder who "got their money out of SVB". But then what the hell do you do with it? Put it into another bank? That has the same exact issues with their balance sheet but is just has more liquidity based on sheer size? Take delivery of dollar bills and put it in your mattress? Crypto? (no - not crypto, please)
Does feel like interest rates and yields have to drop now - if the banks start to wobble, the place to put your money is in treasuries. The risk is if rates go further up, you are stuck HTM just like the banks so you aren't liquid, but it feels like rates have to come down. Do you buy straight treasuries (not as simple) or a bond fund?
Awaiting our finance ninja Q97 to weigh in.
RecentWTF is up with this Clown... by illiniray
The PGA Tour/Golf thread
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