|
Saturday 7th April 2023
Silicon Valley Bank ... The Case Study Out Now ...
|
| “Whenever the Fed hits the brakes,
someone goes through the windshield. You just never know who it’s going
to be.”
Michael Feroli,
Chief Economist J.P. Morgan
Hi Friend, Well now perhaps we know.
The Silicon Valley Bank Case Study is a collection of notes,
articles, comments, spreadsheets, charts and photographs relating to the
rise and fall of Silicon Valley Bank. Articles and comments are
included from Wikipedia, New York Times, The Seattle Times, The
Washington Post, Bloomberg, The Brookings Institute, John Mauldin of
Mauldin Economics and and Simon Taylor of Fintech Brain Food.
The
series includes our own analysis of summary and conclusions, together
with a chapter on risk analysis, Fed rate movements and the Reality
Stress Testing of the SVB balance sheet in 2022. Teaching Notes are also
available on request. Twenty slides are available in PDF format as a download. The slides are also available as a keynote file.
In our research, we have warned frequently of the
dangers of live on Planet ZIRP, the world of zero interest rates policy.
In November 2015 we wrote "Over the medium term, we expect bond yields to reflect a hedge against inflation plus a real risk
return. Hence we consider the normalized yield on ten year gilts to be
between 4% to 4.5% if the plausible inflation target is 2%. There is a
real risk of capital collapse as bond yields rise and capital prices
fall as yields return to normalized values."
In December 2021 investment securities in SVB had increased to $130 billion. Less than 20% were in cash and assets for sale. Just under half were assets held to maturity, principally in mortgage related securities.
In a period of rising rates, the HTM assets were illiquid and vulnerable to capital loss. The Fed had suggested in December 2021 rates would rise to around 0.9% in 2022. So what could possible go wrong ...
Don''t miss our latest case study ... it is indeed a story of our times ...
Have a Great Easter Break,
John
|
| | Our Latest Case Study : Silicon Valley Bank : The Bank from Planet ZIRP ...
John |
| | | To understand the markets, you have to understand the economics ... and we do
|
| |
© 2023 John Ashcroft, Economics, Strategy and Financial Markets, experience worth sharing.
______________________________________________________________________________________________________________
The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The receipt of this email should not be construed as the giving of advice relating to finance or investment.
______________________________________________________________________________________________________________
If you do not wish to receive any further Saturday Economist updates, you can unsubscribe or update your details, using the buttons below or drop me an email at jkaonline@me.com. If you enjoy the content, why not forward to a friend, they can sign up here ...
_______________________________________________________________________________________
We have updated our privacy policy to address Europe's General Data Protection Regulation (GDPR). The policy changes include explaining in more detail how we use your information, including your choices, rights, and controls. We have published a GDPR compliance page about the regulation and the steps we have taken as part of our compliance process. Your privacy is important to us.
For details of our Privacy Policy and our Terms and Conditions check out our main web site. John Ashcroft and Company.com
_______________________________________________________________________________________________________________
Copyright © 2023 The Saturday Economist, All rights reserved. You are receiving this email as a member of the Saturday Economist Mailing List or the Dimensions of Strategy List. You may have joined the list from Linkedin, Facebook, Google+ or one of the related web sites. You may have attended one of our economics presentations. Our mailing address is: The Saturday Economist, Centurion House, 129 Deansgate, Manchester, M3 3WR.
|
| |
|
|
