How do you guys invest?

[jstar]

Very very rare for an actual bank to go bankrupt in a western country

From a European investment site:

Silicon Valley Bank (SVB) reported on Thursday it had sold a package of US Treasury bonds at a loss of $1.8 billion. The sale was necessary because customers withdrew their money from the bank after reports that the bank was in trouble. Investors consequently dumped the share and the price plummeted by 80%.

But that was not the end of it and it did not end the fears among investors. The major US banks lost $52 billion in market capitalization in one day. Bank share prices also fell sharply in Asia and Europe.

A problem could be the rapidly rising interest rates. Banks and insurers have many government bonds in their portfolios. When interest rates rise what they currently do, the price of a bond drops. The government bonds are therefore worth less than the price at which they were purchased. A recent study calculates that US banks have $620 billion in unrealized losses on their balance sheets.

Also, there is uncertainty about the credit portfolios of the banks. Many companies and individuals borrowed heavily when interest rates were low. With interest rates rising, they may run into problems if the loan has to be renewed at higher interest rates.

 

[jstar]

Very very rare for an actual bank to go bankrupt in a western country

And then…..

Financially troubled Silicon Valley Bank (SVB) has been shut down by California authorities after failing to raise money through the issue of new shares. As a result, the bank was no longer able to meet its financial obligations. The federal public service FDIC has been appointed as administrator.

The bank was mainly active as a banker of American technology companies. After she announced that she wanted to raise $ 2.25 billion in capital to prop up the finances, the stock plunged on Thursday. Trading in the stock was subsequently suspended on the Nasdaq. The problems at SVB reflected on banks and stock exchanges worldwide on Friday.

SVB had taken out loans when interest rates were low, but now that interest rates have risen sharply in recent months, the bank has struggled to refinance its loans. As a result, the important lender for, among others, start-ups in the tech sector ran into financial problems.

FDIC will open SVB's headquarters and seventeen branches in California and Massachusetts on Monday and customers will also have access to their money. Balances up to 250,000 dollars (235,000 euros) are insured. At the end of last year, SVB managed more than 175 billion dollars (164 billion euros) in assets.

The last time a bank in the United States (that was covered by the FDIC insurance system) failed was in October 2020. Then the Almena State Bank of Almena, Kansas went under.

 

[jstar]

The sudden fall of the American bank Silicon Valley Bank (SVB) on Friday has major consequences for other companies. Although the US government has taken over the bank and guarantees deposits of up to $250,000 (about €235,000, 3,9M IDR), the vast majority of the deposits at the bank were much higher. The bank did a lot of business with tech start-ups.

Roku for instance. The producer of TV smart boxes for streaming services, reported having a lot of money in their SVB account. This is just over 1/4 of all cash they had. Roku said it did not know how much of that money it could recover, but indicated that it still had enough money to last a year. Other tech companies may also run into similar problems. Not being able to access their money will complicate things like paying salaries, for example.

But the crypto world has also been affected. The well-known crypto USD Coin is also getting into trouble. Circle, the company behind that digital currency, announced that it has $3.3 billion (€3.1 billion) in credit balances with SVB. Circle needs that money to guarantee the value of USD Coin. The crypto coin is a so-called stablecoin, the value of which is guaranteed by the equivalent value in a regular currency. Now Circle had to let go of that connection to the dollar and the value of a USD Coin is under pressure. Various crypto exchanges such as Binance and BlockFi have halted trading in the currency.

Crypto exchange Coinbase fell 8%. Bitcoin fell below $20K for the first time since January. In the case of crypto there is obviously no central bank (as the Federal Reserve) that can bail out the industry.

 

[jstar]

And of course with Silvergate there’s another example of a recent bank collapse. Well, at least it was ‘an orderly’ dissolution and all customers should get their money (back). The bank was a traditional, federally insured lender that positioned itself as a gateway to the digital world (read: mainly crypto currencies).

 

[snpark]

In uk there's a compensation scheme but not sure in USA have? If bank goes bankrupt you just lose it all

 

[jstar]

Don’t know about companies with their obviously much larger credits but private account holders in the United Kingdom will receive up to £85,000 (€96,000 euros) right? That’s £170,000 (€192,000) for joint accounts. In the US the FDIC insurance covers $250,000 (€235,000).

 

[pantaiema]

The sudden fall of the American bank Silicon Valley Bank (SVB) on Friday has major consequences for other companies. Although the US government has taken over the bank and guarantees deposits of up to $250,000 (about €235,000, 3,9M IDR), the vast majority of the deposits at the bank were much higher. The bank did a lot of business with tech start-ups.

Roku for instance. The producer of TV smart boxes for streaming services, reported having a lot of money in their SVB account. This is just over 1/4 of all cash they had. Roku said it did not know how much of that money it could recover, but indicated that it still had enough money to last a year. Other tech companies may also run into similar problems. Not being able to access their money will complicate things like paying salaries, for example.

But the crypto world has also been affected. The well-known crypto USD Coin is also getting into trouble. Circle, the company behind that digital currency, announced that it has $3.3 billion (€3.1 billion) in credit balances with SVB. Circle needs that money to guarantee the value of USD Coin. The crypto coin is a so-called stablecoin, the value of which is guaranteed by the equivalent value in a regular currency. Now Circle had to let go of that connection to the dollar and the value of a USD Coin is under pressure. Various crypto exchanges such as Binance and BlockFi have halted trading in the currency.

Crypto exchange Coinbase fell 8%. Bitcoin fell below $20K for the first time since January. In the case of crypto there is obviously no central bank (as the Federal Reserve) that can bail out the industry.

SVB is not contagious, this is not canary in the coal mine said this strategists. IMO It is different with Lehman Brothers Collapse causing 2008 stock market trouble.
Why SVB isn't a canary in the coal mine for regional banks, according to top analyst Gerard Cassidy CNBC Television Mar 9, 2023.
Contrarian strategist:
"the time to buy is when there's blood in the streets."
"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." — Warren Buffett.

 

[R Cameron]

In uk there's a compensation scheme but not sure in USA have? If bank goes bankrupt you just lose it all

The US government through the FDIC guarantees accounts up to $250,000, and those accounts will be available for withdrawal Monday morning. SVB had a lot of accounts, mostly corporate, in excess of that amount which are not insured by the FDIC:

data submitted to the FDIC by the bank at the end of 2022 showed that 89% of its $175 billion in deposits were uninsured

After Silicon Valley Bank's shutdown, uninsured depositors face tense wait

Silicon Valley Bank's high level of uninsured deposits helped kick off the run that led to the bank's closing down, and now any of those depositors will need to hold their breath to see if bank regulators can recover enough to make them whole.

www.reuters.com

I have seen much speculative reporting that the uninsured accounts will lose 0-20% of their balance.

 

[fastpitch17]

Hours before the feds took over everyone received their bonuses. A few days before corporate officer sells s few million in shares.

 

[jstar]

SVB is not contagious

Well, according to the investors it was, see the results last Friday. Also, perhaps the consequences are not so much for the other (traditional) banks but many companies parked their money there.

For instance the biotech company Pharming, from Leiden in The Netherlands. It has a total of $45 million in accounts at SVB. That is about a quarter of all their cash. Due to the uncertain situation, Pharming has no idea how much it will see back from that money and when. You can imagine that -besides the management- the investors of these kind of companies get somewhat nervous too.


Ah, I just read that the US government will give account holders of SVB access to all their assets as of today. The FDIC, Ministry of Finance and the central bank declared this in a joint statement on Sunday evening (local time). According to their own words they want to nip a possible contamination of the financial system in the bud.

 

[jstar]

In uk there's a compensation scheme

private account holders in the United Kingdom will receive up to £85,000 (€96,000 euros)

The British government has indicated that it will come up with an emergency support package for start-ups that have lost their assets with SVB which also has a British branch. This should allow them to continue to pay wages and other ongoing costs.

 

[Balifrog]

The British government has indicated that it will come up with an emergency support package for start-ups that have lost their assets with SVB which also has a British branch. This should allow them to continue to pay wages and other ongoing costs.

Seems HSBC is going to buy over the SVB U.K. branch.

 

[snpark]

Janet said everyone can access all their funds again Monday at no cost to the US taxpayer

Have to keep confidence and stop a run on the banks

 

[make_batik_great_again]

Janet said everyone can access all their funds again Monday at no cost to the US taxpayer

Have to keep confidence and stop a run on the banks

They are very afraid of bank runs in the US now. So they did everything they could to strengthen the trust into the banks, especially the regional banks, on the weekend.

To help the banks, banks are also allowed to borrow money for one year and to deposit their bonds as security with the bonds being rated at 100% now. Although many of their bond investments are quite far under 100% at the moment after the meltdown last year. This shall help the banks with their liquidity without having to realise unrealised losses by bond investments.

 

[make_batik_great_again]

Yeah you get all this suitcase for free crap but some offer cash(back). I don’t see a problem with banks like this or an alternative as Jenius from BTPN, that belongs to Sumitomo Mitsui Banking Corporation (SMBC), a large Japanese bank. They are recognized by BI so there’s LPS (with restrictions).

What kind of restrictions to LPS are they? You mean the maximum amount that is insured?

 

[jstar]

What kind of restrictions to LPS are they? You mean the maximum amount that is insured?

Ya, following the standard regulations.

Lembaga Penjamin Simpanan - F.A.Q.

 

[make_batik_great_again]

Those 7% p.a. on a time deposit seems really attractive. But I wonder how they are able to offer that. Even Indonesian government bonds probably do not offer such a high yield at the moment, or do they? And since there is LPS, the time deposit seems, at the same time, less risky. Higher yield with less risk...

 

[Helpful Herbert]

I used to work with the guy who is / was no 2 at SVB earlier in his career when he was starting out. Definitely the smartest guy in the room, but probably lacking a bit in common sense and empathy.

 

[pantaiema]

Those 7% p.a. on a time deposit seems really attractive. But I wonder how they are able to offer that. Even Indonesian government bonds probably do not offer such a high yield at the moment, or do they? And since there is LPS, the time deposit seems, at the same time, less risky. Higher yield with less risk...

LPS - Lembaga Penjamin Simpanan

Lembaga Penjamin Simpanan (LPS) adalah lembaga independen yang berfungsi menjamin simpanan nasabah perbankan di Indonesia.

www.lps.go.id

IMO 7% in Indonesian Banks, although stretching above the limit, might still be affordable, not highly insensible, as based on LPS own calculation they will still guarantee up to 6.75%. Highly likely the next quarter in June 2023 that LPS limit might increase again considering inflation forcing central bank to keep increasing the interest rate.

Certainly those banks who give this interest might be lending their money to riskier Creditors therefore riskier for savers/depositors. In Europe there are still Banks, Building societies are giving interest of 7% and they are still protected under government deposit guaranteed schemes. But typically that is just an eye catcher, advertising gimmick as they will limit the amount you could save with those interest rate.

When people could get guaranteed yield of 7% risk free, not many sensible investors would want to throw money in the stock market in the bear market with the current climate.

 

[jstar]

VW is currently almost cheap

Over the next five years, the Volkswagen Group will be investing no less than €180 billion into the development of electric cars and software, among other things. Wow. Now 68% of the €180 billion is intended for what Volkswagen calls 'digitization and electrification'.

A significant portion is also earmarked for expanding its activities in North America. In 2026, Volkswagen's new Scout brand will start its sales adventure there. (They own that old brand name.) Every year, more than 200,000 cars will be produced in the factory in South-Carolina.

In addition, Volkswagen wants to improve its competitive position in China and, of course, the brand wants to expand its model portfolio. After dieselgate, the car manufacturer has completely gone for electrification.