Tag Archives: Silicon Valley Bank


UPDATE JULY 27, 2023 – 2nd Quarter came in at a whopping +2.4%. Far exceeding expectations that were below +1.5%. So, we have an economy that has expanded, not contracted, this year! The stock market told us this would happen. For anyone you know that has been predicting a recession in 2023, please ask them if they admit they have been totally wrong. People need to admit their errors and stop being broken clocks. If they don’t, they have no credibility. As I note in my original post below, it is likely the current forecast of +0.5% and 0.0% for the remaining two quarters will change to the upside as the year carries on. Will the economy slowdown from +2.0%-2.4%? Yes. The stock market has said it will be stagnant the remainder of the year. But, will we see two negative figures in a row? The odds are near zero. Plan accordingly.

JULY 22, 2023 – It is all but guaranteed that the recession mongers will be wrong about such occurring in 2023. As I forecast earlier in the year, by Summer (i.e. now) those people would begin to move their prediction to a recession occurring in 2024. Enough time wasted on the large group of media and economists that are broken records.
So, what does the future hold. The past 12 months have been very easy to predict for the economy, housing, and inflation. IF you just read what the stock market (i.e. Dow 30) is telling us. Yes, it is that simple. And, yet, 99%+ of the public and pundits don’t do it.
The Dow 30 peaked in December 2022 after bottoming in October 2022. That told us to expect weakness thru April 2023. Sure enough, the Silicon Valley Bank collapse and the associated bank panic occurred in March and April.
Since December 2022, the stock market trended sideways for 8 months. Just this past week the Dow finally broke thru the 35,000 level after about 7(!) failed attempts. So, what does this tell us? It tells us that the economy is expected to be stagnant for the last 6 months of this year. And, based on this upside breakout, the economy should see an uptick in the 1st Quarter of 2024. This is a very early interpretation as the breakout just occurred this week and is only a small amount above the December 2022 high.
Is the stock market, and thus smart money, correct? Yes. As usual. 1st Quarter GDP was +2.0% (revised from the initial report of 1.3%). 2nd Quarter GDP is project to be +1.3%-1.4%. But, 3rd and 4th Quarter GDP are expected to be barely in positive territory. Exactly what the stock market has told us would be the case for the past 8 months – a stagnant Dow 30 forecasts a stagnant economy 6 months out.
Forecasts obviously vary. I have seen most to be around +0.5% for the 3rd Quarter and 0% for the 4th Quarter. But, I think those forecasts are trending up due to the strengthening housing market (that will be my next post, so please come back:) ).
The recession mongers will be screaming they told us the economy was caving. One, they have been calling for a recession for over a year (right after the actual recession just ended!) and GDP has come nowhere two negative quarterly figures in a row. Two, the stock market has forecast the ups and downs with 100% accuracy. It hasn’t been a broken record.
Based on my forecast that the CPI will trend up the remainder of the year, I suspect the market will tell the Fed to raise the Fed Funds Rate several more times. Note, the public is wrong to blame Powell for raising rates. He is simply doing what the Fed has done forever – following exactly what the market has told it to do. So, the market has obviously priced in all Fed actions ahead of the Fed meetings because the market told them what to do at the meetings!!!
But, I digress…..my point is the recession mongers will remain a broken record as they will continue to say that the Fed’s raising of interest rates is going to push us into a recession. As of today, the stock market says they are wrong and a recession is not going to happen. I put my money on the stock market instead of all of those economists that have been 100% wrong for the past year (and longer).
I believe my forecast of the housing market will be my next post. I will probably combine it with a brief discussion on banks.
The Mann


UPDATE MARCH 15, 2023 – An interesting investment class. Over the past 10 years, this is how this asset class has moved. From June 2013 to July 2016 it went up 26%. A simple annual increase around 8.5%. From July 2016 to October 2018 it declined 21%. A simple annual decline around 10%. From October 2018 to July 2020 it went up 33%. A simple annual increase around 18%. From July 2020 to October 2022 it went down 34%. A simple annual decline around 15%. That is a sum of 114% in moves up and down, which equates to about 11%/year. If you could have only timed those moves, you would have made a killing. As an investor, how would you rate this asset class? Low risk? Moderate risk? High risk? The point is the next time someone says U.S. Treasuries are a ‘safe’ haven, tell them about the above data. The next time someone says U.S. Treasuries represent a ‘safe’ rate of return, tell them about the above data. The above movements were made by the 30-Year U.S. Treasury Bonds. With the yield over the past 10 years probably averaging around 3%, that means you either gained or lost 3x-4x that simply due to the movement of yields!!!! Our government made treasury bonds act like a risky asset. It is not a low-risk asset. It is doubtful it ever will be again.

UPDATE MARCH 14, 2023 – We will see if Monday’s low in the SPDR S&P Regional Bank ETF (Symbol: KRE) at $41.92 is the panic low for banks. If you want to see a neat chart of an index slowly going over the waterfall and then collapsing look at KRE for the past month. You can see people were bailing out well before last Thursday when the news about SVB became a headline. As an aside, for those curious about this, I heard that depositors at SVB had requested $42 Billion in withdrawals. As many banks loan out over 100% of their deposits, SVB obviously didn’t have the funds available without selling their unhedged, unrealized losses 30-year treasury bonds. BTW, KRE declined 46% from its all-time high in late 2021. That is when the market predicted interest rates would increase significantly. It declined 36% in the past few months. This is into the low on Monday.

The pundits are predicting the next sector to get hit hard will be commercial real estate (CRE). And banks with a large portfolio of CRE loans may be the next to go under. So, for those interested in the banks with the highest CRE Loans/Total Assets ratios they are as follows. The only one above 50% is Valley National Bank. Home Bancshares and Glacier Bancorp are just below 40%. Signature Bank was at 30%. EastWest Bank is at 30%. Those between 20% and 30% include Webster Financial Corporation, First Citizens Bancshares Inc., M&T Bank Corp, Prosperity Bancshares, Western Alliance Bancorp, and Central Pacific Financial Corp. That doesn’t mean these banks will go under. Many other factors come into play. Most importantly, how large on their reserves. What are their Tier 1 Capital Ratios. That said, history shows that banks with the highest CRE Loan ratios are more likely to fail in a significant economic downturn. I have not looked at their stock prices. But, I wouldn’t be surprised these stocks are down the most already. It isn’t like this is new news to investors. If any of the above close down, you at least knew about it as of today:) FYI, SVB was down near 0% for this ratio. That wasn’t their weakness obviously.

UPDATE MARCH 13, 2023 – Total deposits in American banks is about $18 Trillion. I heard that about 1/3 of those deposits are NOT insured. Thus, about $6 Trillion in deposits at financial institutions are at risk if banks close in mass. If those deposit holders decide the risk of losing 100% of their money is too real and start withdrawing their funds, there simply is no way our banking industry can survive. To return those funds, banks would have to sell their treasury bonds and realize the unrealized losses (about 30%-40% of the original purchase price) they have – that is what was happening to SVB in its last days. Somehow the FED has to convince the holders of the $6 Trillion in uninsured bank deposits not to move their funds elsewhere. If they fail, the 2008 Crisis will look minor in comparison. I think they will succeed…for now. Afterall, where would the $6 Trillion move to that would be any safer than where it is now? Fun times eh:)

MARCH 13, 2023 – I have long said that the simplest solution to prevent financial institutions from making bad loans, poor policy decisions, etc., is to eliminate FDIC insurance for deposits. That simple.
If the public knew that every dollar they put in a bank or credit union could be lost, they would be extremely careful where they deposited their money.
Financial institutions would have to be beyond 100% transparent and show convincingly they were 100% safe. There would be no liar loans, 120% LTV loans, etc.
The companies that deposited more than $250,000 in SVB deserve to lose their money. How can an unnamed company put $480 million of cash in one bank? That CFO wouldn’t have a job if I were in charge. All of these startups are crying about their deposits at SVB. Did they overlook the FDIC Insurance print on every SVB document? $250,000…hello…$250,000 maximum. What is it you don’t understand about that!
I seriously doubt we will get rid of FDIC deposit insurance in my lifetime. But, it would solve alot of problems if we did.
Lastly, SVB was unique in that it had less than 10% of its deposits from retail customers and chose not to hedge its interest rate risk. The data does not suggest any other banks in America are like it. Signature Bank of NY was closed over the weekend and it also had less than 10% of its deposits from retail customers. But, I do not know if it refused to hedge its interest rate risk. The only remaining bank with less than 10% of its deposits from retail customers is Citigroup. But, they have probably been like this for 40+ years as they mainly deal with governments around the world.
I do not expect any other banks to go under from a run on their deposits. As usual, we shall see.
The Mann