Click here for the PDF: The Weekly Beacon March 31 2023

We will be giving some macro economic market updates on a weekly basis. No equity recommendations will be given in this commentary, and we encourage you to contact us if you have questions regarding any observations.

Feel free to send in your pictures of lighthouses to be featured in our weekly commentary.

This weeks issue: Silicon Valley Bank, SVB, SIVB Stock, Banks, Financial sector, Credit Suisse, First Citizens Bank, Regional Banks, FDIC, Bank Sale, SVB Insiders, Banking bonuses, Insiders sell at the right time, Insider loans at SVB, Binance, Crypto, SEC, CZ, FTX, Crypto Exchange Risk, Rate Cuts, Interest Rates, FED Policy, Inflation, FED Funds Rate, Market expectations, ARKK, Tech stocks, Alibaba, China Government, Alibaba split up, Alibaba Revenue by business unit, Tech monopoly, Debt, Government deficits.

Silicon Valley Bank (SVB) finds a buyer

Two weeks ago, we went into great depth explaining the situation involving Silicon Valley Bank, Credit Suisse, and the entire banking sector. Market volatility has been led by financials as investors rushed to sell their holdings due to contagion fears. Fast forward to this week and a lot more has happened, so buckle up.

March 2023 was not kind to the banking sector, balance sheets were exposed, bank runs were conducted, U.S. regional banks were influx, bank shares traded like cryptocurrencies and suddenly the global economy looked like it was about to break. After all, the financials sector is historically a low-risk trade and what most consumers would see as a safe, and passive long-term investment with limited downside. If you don’t believe us, ask a friend, or family member what they hold in their retirement portfolio and we guarantee they will barely mention the banks they hold as they see those holdings as boring, and essentially risk-free (we never saw holding financials or bank stocks as risk-free).

After our update two weeks ago, where we let you know SVB had a bank run where depositors demanded their money and SVB did not have enough liquid assets to cover said withdrawal requests. To cover these withdrawal requests, they were forced to sell long-term assets at a loss. Some customers figured this out and demanded their money. This all eventually led to the bank run and the bank’s eventual collapse.

SVB purchased long-term debt assets (bonds and mortgage-backed securities) when interest rates were low in 2021. As interest rates rose, SVB had major unrealized losses on its balance sheet (when rates increase, bond prices decrease). Due to their liquidity crunch, they were forced to sell these securities before their maturity date and realize a massive net loss. SVB purchased over $80 Billion in these long-term debt securities due to an exponential growth in their customer base in 2020 and 2021…………………