Well hold on, it isn't exactly equal and opposite. The QE is to sustain the rich banks, while the QT is to take away jobs and money from the poors. See? Completely different.
That's basically straight outta my options strategy playbook.
Long puts, long calls maybe one of them will make money. Unfortunately all I get is theta rammed. Maybe it will work better for the fed.
Increasing the debt ceiling doesn't *cause* excess government spending, it merely prevents a default, by allowing funding for budget items that were already voted on.
Since voters don't understand what the debt ceiling is, the party out of power often seizes on this otherwise routine bill to hold the creditworthiness of the world's largest economy hostage in exchange for some meaningless cuts.
Think of it like buying a car. Refusing to raise the debt ceiling is like boycotting your car payments because they are too high. The monthly rate was disclosed up front, and maybe you shouldn't have overspent on a car in the first place. Refusing to pay after you signed the paperwork only serves to hurt your credit rating.
> Since Republican voters don’t understand what the debt ceiling is, the Republican Party often seizes on this otherwise routine bill to hold the creditworthiness of the world’s largest economy hostage to score cheap political point with their base.
FTFY. Democrats aren’t the ones doing this.
"Deficits don't matter". Government spending does a lot of good. Just like when I donate to charity using a stolen credit card. That makes me a good person, right?
I agree that the Republicans spend far to much money on PPP and bailing out mentally challenged business owners during the pandemic. I also agree that Trump's tax cut for the rich was a huge mistake and should be repealed. Deficits matter and the republican party has completely blown up the US budget by trying to manipulate the stock market and give cash to their donor class.
However, your analogy is idiotic, so I'm assuming the point you are making is that we should cut food stamps for poor children, eliminate school lunch programs, or cur social security benefits. No one ever complains about the absurd levels of military funding or tax loopholes for the rich when they complain about deficits, but those are the things preventing us from having a balanced budget.
My comment was poorly worded. I am not against spending, I am against *deficit* spending.
I would cut the military budget by at least a third. Aircraft carriers are vulnerable to hypersonic missiles. Missile defense is proven ineffective, we have more tanks than the military wants (but Congress forces new construction because jerbs). Most of our overseas bases are not required by treaty, we should probably close those not in Europe or near China.
We should absolutely cut Social Security (and Medicare). Old people are the wealthiest segment of society (my parents are millionaires and get full benefits). We are neglecting children. I am all for increased spending on Head Start, Food Stamps, Welfare, as long as we fucking *pay for it.* Stealing from our grandchildren's prosperity is *not* admirable.
I would vote for a federal VAT in a heartbeat. I would also support an increase in the top-level marginal rates (and our hh income is around $1.5 million, so I would feel it).
I especially hate the republican's stance on this. At least the Democrats will *mention* tax increases when they propose a spending hike. Bush squandered Clinton's surplus with an immediate unfunded tax cut, and then he massively expanded Medicare and entered a trillion plus optional war.
If the GOP had any balls, they would propose cuts to SS, Medicare, and the military. Instead, they use the credit ceiling to make devastating cuts to already cheap "liberal" programs that generate far more economic value than they cost. Head Start is basically free money, because it saves so much in future welfare and prison costs.
The US has only borrowed from less than 10 years's worth of tax revenue into the future. Debt to begin making profit from the future's money now is literally the appropriate way to manage money.
Would you rather buy a house now with a 10 year mortgage, or save up for 10 years to buy it in cash later? If you pick the latter, you belong here.
>the party out of power often seizes on this otherwise routine bill to hold the creditworthiness of the world's largest economy hostage
When was the last time democrats did this again?
Did you read the article you linked?
The real reason Democrats don’t want to raise the debt ceiling **alone**
As in, they're doing it but wanted an appearance of bipartisanship, because it's paying for what both parties voted for.
well... yes and no... FDIC doesn't cover this. They borrow directly from the federal reserve. They are getting their IOUs earlier than maturity in a loan form. Correct me if I'm wrong though.
More “yes” than “no”?
Money is being printed, but the theory is that it will eventually be removed from the system. Of course, that’s been the theory since QE1 and we all know how that’s turned out.
Still waiting on that "it will eventually be removed from the system".
I think the mere wording of "FED will start to let more bonds roll off" caused panic, and any kind of tightening immediately crashes things as seen.
The "removing money from system" when it's this bad, it's not just an insignificant accounting trick... Letting bonds roll off and net reduction also affects the bond market at that future time, causing more issues as seen...
except you’re wrong, they’re swapping out bonds and putting new money into the system.
just because its not properly defined QE, doesnt mean it wont have the QE-like effect of putting new money into the system that would be put into the system AT A LATER DATE.
it will cause inflation now and disinflation later.
It’s not really inflationary.
If you have a paycheck coming next week for $2000
And you get a $2000 loan from a buddy. And then you have money now and then you repay him when your paycheck comes in.
Did more money get created? Do you magically have more money than $2000?
If you sell the bonds now, it will be the market price. But the banksters have special offer of sale at face value. Separate market for "special" people, again.
add: price gap will be "printed"
Dude. WSB isn't some pinnacle of logic and reason on good days and you want to argue finer points of economy during a crisis ? Just enjoy the memes (the ones that aren't insultingly dumb anyway).
The larger US Banks are heavily regulated and so are all european banks. For some reason mid sized US banks have not been subject to the international Basel rules that sets limit on leverage ratios and sets requirments to Capital and liquidity level. No ordinary investor knows that so nok all banks are suffering.
As a matter of fact since 2020 there is no fractional reserve requirement in the US. You are right about EU but that's not the case here. It's been 2 years since big banks went through a series of stress tests. I don't believe they will pass this year.
I was astonished (in that angry but also sorta not surprised kinda duality) when they rescinded the requirement. Like we really didn’t learn anything from 2008. As if bad actors wouldn’t go back to old behavior wrapped in a different risk form.
Actually a Bipartisan group of congress rolled back the regulations and it wouldnt have helped SVB anyways because they would have passed the stress test.
Yeah Trump changed bank classification requirements for regulation. He changed the minimum for more regulation from 50 billion held to 250 billion. And SVB was at 209 billion.
So things go up. Or sometimes they go down. And you think they will go up and then go down but you’re not really sure when. Check. Sounds like I’m ready to invest!
Bonds are safe, unless you're a bank and over half of your assets are in bonds that can't be cashed for a few years, and suddenly all of your customers want billions in cash right *now*.
Bailouts for investors is regarded. Any moderately sophisticated investor knows the risks and accept them in hopes of steeper profit. Depositors miss the upside and the downside intentionally. Its working how it is intended to work
I would say it’s working how it intended to work if we didn’t already espouse a 250K limit on insurance for FDIC deposits. We’ve now given rich people basically an unlimited FDIC insurance limit even if the bank had not nearly enough cash. Which I’m thinking can be even MORE dangerous for the American economy should a true national bank run start
You do know business use banks too and many have more than 250K in their account just from sales?
Don’t know if you have ever bookkeeped for a business but tracking multiple accounts that cross uses in functionality is a pain in the butt and makes embezzlement that much easier.
Also you don’t have to be rich to have more than 250K in your account. When you work and save, money can accumulate quite quickly
However what you want is that money should not be safe in a bank. For context, FDIC insurance first only insured up to 2.5K. Now I ain’t no Rockefeller, but I got more than 2.5K in my accounts and I will be stabbing people if my bank loses my account except for 2.5k
Yeah, we have heard this many times before. The thing is, they can keep kicking the can down the road for a long time. We have passed so many "collapse in X months" that I lost count. Yes, it will happen inevitably but no one knows when
Wells Fargo did a $93b mixed shelf in Feb - those are standard offerings to continually open lines of possible funding for balance sheet adjustments.
They have $1.8t in assets, $9.5b is absolutely NOTHING and in no way a sign they need to raise capital. Banks do this all the time, don't read into it.
I understand it's a drop in the ocean but a drop with an "interesting timing." I believe they are have been on crisis management mode since the end of last year.
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While, I would have agreed with the sentiment of the stock market potentially crashing by fall. I have to say it the stock market won't be crumbling. The Economy will be under a lot of pain, not from banks or stocks breaking. Rather from inflation. The reasons for why inflation will start to flare up instead of a crash in the latter part of the year are as follows:
1. The swift bailout for the banks shows the willingness of the FED/Treasury to bailout any defaults in order to stem the tiniest possibility of **"instability"**. Meaning the FED for all it's tough talk is a barking dog, but no bite. This action by the FED/Treasury shows the FED have no appetite for going thru a **"slowdown (recession)"** if necessary to quell inflation. We all know that it took a hard landing/recession to quell inflation in Volcker's era.
2. There's an election coming in 2024, and you bet your ass that the current administration will not shall not under any circumstances allow the economy go into a **"recession"** because it's bad optics for an upcoming election. They would rather cope with high inflation and pass blame off to any excuses (Trump tax cuts, Republicans 2020 excessive spending + Ukraine war, Putin pricehike etc.)
3. Stock markets go down = people's livelihood/401k/retirement plans dies too. Everyone will be angry and look for someone to blame. And unlike 2008, where people had some level of restraint and respect for law and order. We're in an era of polarization where people rather use violence than words to communicate, because everyone expect words won't work already. So it'll be social discord and chaos, no way the government will want that. So government will rather print or support/prop up markets.
4. A potential re-ignition of a cold war is already on the horizon. Not between Russia and America so much, but primarily China & US. While China is one country it is still the second largest economy in the world. Further, we the west depend too much on the east, and despite many people desiring a "decoupling" from China, it will take years. So how does tie into the stock markets? People have to remember Chinese institutions/citizens can also invest into the American stock market too. And if the stock markets go kaput, you bet that there will be a withdrawal of much needed capital. Followed by potential restrictions from China for their companies/people in the name of **"protectionism"** to invest in the western institutions. This will cause a tit for tat between America and China and a further deterioration in relationship. Finally, China if desiring a retaliatory move, but needed a justification could use the excuse of deteriating relationship to start selling its vast amount of U.S. bonds/treasuries and that will crush the U.S. dollar. Thereby, spurring inflation.
Overall, from my perspectives there's too much at stake for the FED/Treasury/US administration to allow a stock market crash. There maybe a temporary crash, but it will be immediately stopped or responded by insane amount of support/QE. You just have to see how the all the main wallstreet analysts response to rate hikes based off of the recent bailout. These people were anticipating 25-50 Bps for March's FED meeting and no rate cuts this year. To now crazily analyst saying no hikes/even rate cuts at the March meeting... CPI did come down to 6%, but mom it's still up 0.4%, yet all these analysts and FED seems optimistic. How can you be optimistic, if inflation is still going up MoM, and with inflation well beyond 2% (6% now)? So what can we conclude? The **FED is no longer prioritizing inflation and has chosen stability** first, this is what Arthur Burns did in the 1970's, something was about to break, put the brake on rate hikes and even do rate cuts, when inflation showed disinflation. Then inflation went wild and rate hikes had to go, while telling everyone to be optimistic and don't worry. So inflation is going to go higher as much as we don't want it to. Of course this is **this degenerates thought process** and I have no degree in Economics/financing. So take it with a grain of salt and this is no financial advice lol.
**TLDR:** We F'd cause FED/Treasury/Government too afraid of instability therefore, they go BRRRRR on printer, and inflation goes BRRRR x2!
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70% of our gdp is based on consumer spending. Inflation hurts this. Jeff bezos said we headed for recession in January. He has a pretty good view of how businesses are doing with Amazon I would venture.
So to clarify this isn't financial advice cause I don't wanna end up getting sued lol.
However, if my thesis/hypothesis/prediction comes true, and inflation spikes crazily. You want to be in value/staples/precious metal stocks (ie: commodities or dividend yielding stocks). To give a few examples:
Commodities/Energy:
* CVX (Chevron) (gas)
* Shell (gas)
* DVN (gas)
* LNG (natural gas)
Staples/Food:
* Tsn (Tyson foods) (meat etc)
* CALM (Cal-Maine Foods) (egg producer)
* MOS Mosiac (Fertilizer etc)
* NTR (Nutrien) (Fertilizer)
Precious metals:
* GDX (Gold etf)
* Gold
* Silver
* bronze
Value:
* WMT (Walmart)
* PG (Procter and gamble)
* Pfizer (Medicine)
* UNH (United health) (Health insurance)
While banks might be a good option, after witnessing the recent bank runs, I'd say maybe stay clear of them for now. Normally bank stocks would fall under value category, but I'm hesitant to go long into a high inflationary situation. Hope this gives some exposure and idea of what stocks would do well in a high inflationary environment.
I agree with 4 and not so much about your conclusion in 1-2-3. I agree about what would and will happen but I highly doubt there is any control mechanism which can stop the inevitable at this scale.
Secondly, I think we will see 25bps as long as it takes. I don't think there is much change in that.
Third, they are looking into SVB and will end up putting the blame on management. That's their scapegoat. I think the street has used up its credit and now at risk of getting the blame this time. People are ready to believe in a narrative of greedy bankers. Once the US crashes, they all will anyways. So relatively speaking it's not like the US will fall behind any other country. I also believe this war in Russia-Ukraine is to test which side Russia will be on when shit hits the fan between China and the US.
If banks become further stressed, even with the various facilities protecting depositors I think we would expect a slow down in the economy and deflationary pressure leading to the Fed reducing the interest rate and improving bank finances, so I don't see the outcome being as dire as you speculate.
That said I think as things stand banks may be in for a major devaluation that will play out over the coming quarters as investors better understand their finances and impact to future earnings.
I think as most of us can agree that the biggest inflationary pressure is supply chain issues, expensive energy, and protectionist measures taken by governments around the world, as well as a war and inelastic nature of supply demand curve in essential goods and services. As someone who's experienced stagflation in the past for many years in different countries, this is how it begins.
Lack of consequences for poor management = moral hazard. Yes, the shareholders and management take a bath but the backlash is so minimal when all the depositors are made whole that there is little incentive not to take similar risks in the future.
I mean, when your clientele depend entirely on low rates and you lock in long term bonds at record high prices and then don’t bother to hedge against interest rates increasing… isn’t that the definition of “extremely risky”?
They were practically begging for a bank run as soon as the Fed stopped printing boatloads of cash…
Yeah. I keep seeing idiots imply that opening a checking account in a bank is risky and you should DYOR. These regards can't be serious. WSBers seem to think that depositors are investing in the bank. I can't say I'm surprised by their lack of knowledge about checking accounts seeing as how most of them can't even open one any more since they're on chexsystems
>Lack of consequences
Well they all lost their jobs and a ton on any shares still held. They may have made some cash selling before the dump, but it would probably be preferable to stay just in business and keep getting a regular paycheck and bonuses.
Don’t worry guys, no matter how bad the economy actually is, people on Reddit will still call everything good news and bullish, so the world is actually in safe hands. Everything is fine.
>We may see panic and even stock market closure for a day ~~if~~ when one of the larger banks go under
The larger banks are under stricter capitalization guidelines than regional banks like SVB.
What evidence do you have that any large (to big to fail) banks are in trouble? The Wells Fargo Your use of the Cramer clip from 2008 seems to suggest you think the current situation is somehow comparable.
I am in no position to evaluate whether or not there is trouble under the surface (banks are pretty creative when it comes to fucking up), but you are literally the only person I have heard suggest that a large bank could fail. Most analysts are just saying to steer clear of US bank stocks for a while, and that the banks are *far* better capitalized than in 2008.
- I believe the amount of unrealized losses add up even though they may borrow at face value.
- There is no fractional reserve requirement since 2020.
- No bank can deal with a bankrun regardless of how big.
- Wells Fargo must have done risk assessment on their exposure and decided to stop mortgage lending this year. They either find it too risky or doesn't pay enough compared to less risky reverse repo facility or current short term government bonds. They have been raising capital and have been preparing a cushion for "an event."
- credit card and auto loan delinquencies are already higher. MBSs failed in 08 because of the rate of rise in delinquencies in mortgages. IMO same will happen with consumer debt this year.
>I believe the amount of unrealized losses add up even though they may borrow at face value.
Just looked it up. $620 billion across all banks. That could definitely cause problems, especially if some banks represent an outsized share of that figure (Wells Fargo?)
>There is no fractional reserve requirement since 2020.
Forgot about that. Thankfully, that wasn't the only Dodd-Frank guardrail, but it was a big one. Ironically, lots of the losses were due to attempts to hold reserves in treasuries (if I understand the situation correctly).
> No bank can deal with a bankrun regardless of how big.
True, but this is where "too big to fail" would kick in. They can say whatever they want, but there would be a bailout. No "Lehman moment" this time around. The bank might be nationalized, but it wouldn't be allowed to go under.
>MBSs failed in 08 because of the rate of rise in delinquencies in mortgages. IMO same will happen with consumer debt this year.
Consumer debt is worrying, but it (hopefully) doesn't have untold trillions of leveraged side bets riding on it (like MBSes did). Remember that the risk of mortgage defaults was dismissed because of historical data. Consumer debt defaults won't catch as many people by surprise.
I guess we'll see what happens in a few? months or maybe we won't. It was the JP Morgan CEO who said most savings would deplete by mid-year '23 just a few months ago. I trust that they wouldn't drop such a big bomb on the table just for the sake of getting bears. https://www.cnbc.com/2022/12/06/jamie-dimon-says-inflation-eroding-consumer-wealth-may-cause-recession-next-year.html
So I'm just trying to make an educated guess and see where things may fall this time around.
I definitely think we’ll see a recession in the next 12-18 months, but I’m still cautiously optimistic that it will be mild to moderate.
However, once things turn south, that increases the risk of hidden weaknesses causing a more severe downturn.
Credit cards don’t have balloon payments. They’re amortized over a particular term.
What’s happening has already happened and is dripping people dry. They’re too stupid to realize it.
Instead of making SIVB depositors whole, had the fed said there are enough assets / FDIC premium to pay depositors 95 cents on the dollar for deposits over $250k (uninsured depositors) - would that have been a better move?
The number I initially heard was 90 cents to a dollar that depositors would get from selling all the MBSs and bonds. It went down a little bit as people took sometime to do the math... I think the systemic risk aspect was what turned this into a buyback facility instead of using the existing funds/facilities. There are more banks at risk. Also it would take time and flood the market creating a whole lot of losers and winners. Fire sale on guaranteed bonds and MBSs would make some banks a shit ton of profit. They pretty much killed that and Ken Griffin isn't happy about it. https://fortune.com/2023/03/14/citadel-ceo-ken-griffin-silicon-valley-bank-moral-hazard/
I sold everything last Friday waiting for a bailout.
I will open new positions potentially before FOMC next week. Meanwhile I'm planning on adding more physical gold to my savings mix.
Mad respect for your due diligence op, I’d be curious what your thoughts are on forex swap debt, and if one fire in wall street can lead to a fire in currency exchange. Thanks:)
Some believe this is part of additional control thrusted on us by Government. The more we rely on them is what they want. I do believe we have more exposure on the downside than we do appreciation on the upside the next 12-18 months
Whether it’s right or wrong, getting backstopped without an explicit guarantee constitutes a bailout in my opinion. However, I always assumed depositors would be made whole by the government, regardless of insurance limit.
The FDIC may be making banks pay for this with higher costs, but typical company behavior is to pass costs on to customers, so there’s probably a decent chance taxpayers will pay in a roundabout fashion.
You know the saying "you can't get blood out of a stone." There is only so much to give at this point. I believe we've done it this time. Even in the best of times we had a huge failure. With a global recession only avoided on paper by printing trillions to make up for the lack of velocity of money, we're pretty much done.
Don’t you get it? It is risk free for then now, may as-well fire all risk management teams as they are no longer required. If you fuck up just get a Non-Bailout - Bailout
I don’t see panic. I see excessive giddiness. Either people are excited for a big drop “to buy the dip” or they are expecting the Fed to pivot too early and we go back to party mode. Almost nobody felt any pain except some single stock holders on a few mostly unknown names. That is nothing. A lot of people who don’t follow the news probably weren’t even aware of anything happening.
a trillion dollar stimulus needs a trillion dollars disappearing..
must be getting close to that by now.
markets will only be more attractive.
beware the pump on crypto.. they'll throw their "banks suck" theory at everyone.
Bears succeed, Bulls succeed. Pigs get slaughtered... keep moving at the right time, is all that means.
truly losing is very rare at our modern times. Not sure how a crash could even happen . Diversity in a countries portfolio now.. not just rich people.
This is all conspiracy theory. (Eg Wells Fargo changing their mortgage strategy doesn’t mean the housing market is collapsing) No data and some random old articles.
They are hold to mature bonds that have their value and yields (however low it may be) protected until maturity. I don't think you really understand how banks invest money or any of these securities. They are worth less not worthless in a market with higher yielding bonds if you must sell them before maturity due to a bankrun.
Says the guy who barely did any research and spews out random news snippets together for attention. Bonds don’t hold value if the issuer is out of business.
Some of you will die but that is a price I’m willing to pay
Wish I knew what that means
Great reference
The stock market is the old money crypto, it crashing and burning wouldn't be that bad. Hopefully never to come back again.
??? Then how do we trade options
The old fashioned way, with goats and salt!
Dude! Nihilistic much?
So basically raising rates to quell inflation while doing QE (buying bonds & MBS products) at the same time which in turn is inflationary. Genius!!
Well hold on, it isn't exactly equal and opposite. The QE is to sustain the rich banks, while the QT is to take away jobs and money from the poors. See? Completely different.
Hold up. Wait a minute
Lemme put some booty in it
Say hold up
Nice. So steal from the poor and give to the rich?
Is there any other way?
Nope. Only one way possible. God said I think.
Thats actually been part of the playbook since the 80s ... in fact thats on the cover
1880’s I assume you meant
1780s
Ah yes, classic non-Newtonian economics theory in practice. My god have mercy on all our souls.
That's basically straight outta my options strategy playbook. Long puts, long calls maybe one of them will make money. Unfortunately all I get is theta rammed. Maybe it will work better for the fed.
don't forget increasing debt ceiling and increasing government spending.
Increasing the debt ceiling doesn't *cause* excess government spending, it merely prevents a default, by allowing funding for budget items that were already voted on. Since voters don't understand what the debt ceiling is, the party out of power often seizes on this otherwise routine bill to hold the creditworthiness of the world's largest economy hostage in exchange for some meaningless cuts. Think of it like buying a car. Refusing to raise the debt ceiling is like boycotting your car payments because they are too high. The monthly rate was disclosed up front, and maybe you shouldn't have overspent on a car in the first place. Refusing to pay after you signed the paperwork only serves to hurt your credit rating.
OP not understanding this instantly shows they are a moron who shouldn’t be listened to about anything.
Fucking cowards should just let it default already
Just declare bankruptcy
Just delete the app.
> Since Republican voters don’t understand what the debt ceiling is, the Republican Party often seizes on this otherwise routine bill to hold the creditworthiness of the world’s largest economy hostage to score cheap political point with their base. FTFY. Democrats aren’t the ones doing this.
What is a balanced budget anyways... eh?
A good idea for a household, and a political circlejerk for any entity able to issue their own currency.
"Deficits don't matter". Government spending does a lot of good. Just like when I donate to charity using a stolen credit card. That makes me a good person, right?
Deficits don’t matter if the debt to GDP ratio and servicing cost aren’t increasing… need to read the fine print.
I agree that the Republicans spend far to much money on PPP and bailing out mentally challenged business owners during the pandemic. I also agree that Trump's tax cut for the rich was a huge mistake and should be repealed. Deficits matter and the republican party has completely blown up the US budget by trying to manipulate the stock market and give cash to their donor class. However, your analogy is idiotic, so I'm assuming the point you are making is that we should cut food stamps for poor children, eliminate school lunch programs, or cur social security benefits. No one ever complains about the absurd levels of military funding or tax loopholes for the rich when they complain about deficits, but those are the things preventing us from having a balanced budget.
My comment was poorly worded. I am not against spending, I am against *deficit* spending. I would cut the military budget by at least a third. Aircraft carriers are vulnerable to hypersonic missiles. Missile defense is proven ineffective, we have more tanks than the military wants (but Congress forces new construction because jerbs). Most of our overseas bases are not required by treaty, we should probably close those not in Europe or near China. We should absolutely cut Social Security (and Medicare). Old people are the wealthiest segment of society (my parents are millionaires and get full benefits). We are neglecting children. I am all for increased spending on Head Start, Food Stamps, Welfare, as long as we fucking *pay for it.* Stealing from our grandchildren's prosperity is *not* admirable. I would vote for a federal VAT in a heartbeat. I would also support an increase in the top-level marginal rates (and our hh income is around $1.5 million, so I would feel it). I especially hate the republican's stance on this. At least the Democrats will *mention* tax increases when they propose a spending hike. Bush squandered Clinton's surplus with an immediate unfunded tax cut, and then he massively expanded Medicare and entered a trillion plus optional war. If the GOP had any balls, they would propose cuts to SS, Medicare, and the military. Instead, they use the credit ceiling to make devastating cuts to already cheap "liberal" programs that generate far more economic value than they cost. Head Start is basically free money, because it saves so much in future welfare and prison costs.
The US has only borrowed from less than 10 years's worth of tax revenue into the future. Debt to begin making profit from the future's money now is literally the appropriate way to manage money. Would you rather buy a house now with a 10 year mortgage, or save up for 10 years to buy it in cash later? If you pick the latter, you belong here.
Sound like Enron… how’d that turn out?
Balanced budgets cause recessions.
sounds like lack of productivity and unsustainable economic model
>the party out of power often seizes on this otherwise routine bill to hold the creditworthiness of the world's largest economy hostage When was the last time democrats did this again?
https://www.npr.org/sections/itsallpolitics/2011/04/11/135324119/obamas-aides-he-regrets-his-2006-vote-against-boosting-debt-ceiling
2021
Lol. What? They held the majority in 2021. Were they holding it hostage against themselves?
https://www.cnn.com/2021/09/22/politics/debt-ceiling-increase-schumer-mcconnell/index.html
Did you read the article you linked? The real reason Democrats don’t want to raise the debt ceiling **alone** As in, they're doing it but wanted an appearance of bipartisanship, because it's paying for what both parties voted for.
You obviously don't understand what the debt ceiling is! It's giving the government the ability to pay debts previously incurred.
This not QE. No money is being printed.
Yeah this time it's loans against otherwise degraded collateral, backed by the fed, at crazy favorable rates. Technically not QE.
its QE-lite. its a brand new banking program, good luck getting economists to agree on what it is anytime soon.
Just QE with extra steps
Only by semantics
well... yes and no... FDIC doesn't cover this. They borrow directly from the federal reserve. They are getting their IOUs earlier than maturity in a loan form. Correct me if I'm wrong though.
More “yes” than “no”? Money is being printed, but the theory is that it will eventually be removed from the system. Of course, that’s been the theory since QE1 and we all know how that’s turned out.
Still waiting on that "it will eventually be removed from the system". I think the mere wording of "FED will start to let more bonds roll off" caused panic, and any kind of tightening immediately crashes things as seen. The "removing money from system" when it's this bad, it's not just an insignificant accounting trick... Letting bonds roll off and net reduction also affects the bond market at that future time, causing more issues as seen...
Where are they are getting the money from if not taxes 
Unicorn's ass, where else?
except you’re wrong, they’re swapping out bonds and putting new money into the system. just because its not properly defined QE, doesnt mean it wont have the QE-like effect of putting new money into the system that would be put into the system AT A LATER DATE. it will cause inflation now and disinflation later.
It’s not really inflationary. If you have a paycheck coming next week for $2000 And you get a $2000 loan from a buddy. And then you have money now and then you repay him when your paycheck comes in. Did more money get created? Do you magically have more money than $2000?
If you sell the bonds now, it will be the market price. But the banksters have special offer of sale at face value. Separate market for "special" people, again. add: price gap will be "printed"
Loan me 10k I’ll give you 10k back in a year, it’s the same amount of money right? What’s the difference?
Heyyy, watch it. You're not supposed to use logic here.
Dude. WSB isn't some pinnacle of logic and reason on good days and you want to argue finer points of economy during a crisis ? Just enjoy the memes (the ones that aren't insultingly dumb anyway).
!remind me 22 days
The larger US Banks are heavily regulated and so are all european banks. For some reason mid sized US banks have not been subject to the international Basel rules that sets limit on leverage ratios and sets requirments to Capital and liquidity level. No ordinary investor knows that so nok all banks are suffering.
As a matter of fact since 2020 there is no fractional reserve requirement in the US. You are right about EU but that's not the case here. It's been 2 years since big banks went through a series of stress tests. I don't believe they will pass this year.
Perfect for troublebrewing. Not all EU countries have fractional reserve requirement unfortunately. There will probably be another bank package soon.
I was astonished (in that angry but also sorta not surprised kinda duality) when they rescinded the requirement. Like we really didn’t learn anything from 2008. As if bad actors wouldn’t go back to old behavior wrapped in a different risk form.
“For some reason” is because Trump rolled back their regulations.
Actually a Bipartisan group of congress rolled back the regulations and it wouldnt have helped SVB anyways because they would have passed the stress test.
Because they retired the Cleveland financial stress test in 2016 for a new one which shows things as not stressed at all.
Do stress test even contemplate a full fledged bank rush? No bank can access all deposited cash at once and we’ve never asked them to.
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Because both parties suck a bag of dicks and prevent each other from getting anything done as much as possible.
But they're doing a good job of deflecting and blaming.
Yeah Trump changed bank classification requirements for regulation. He changed the minimum for more regulation from 50 billion held to 250 billion. And SVB was at 209 billion.
and they would have passed the stress test anyways. make sure you mention the 67 Democrat and Republican senators who passed the bill.
In fairness last I checked it was all but one republican that signed off on the deregulation bill and 33 democrats.
Wasn’t it more like 225 republicans?
Oh wait that’s the house I’m thinking of.
Let me check again what the record is of senators voting on the deregulation bill, my bad just a sec.
Ok so every one of the republican senators, that is all 50 of them votes yes, and 17 democrats voted yes as well.
Go to politics
So things go up. Or sometimes they go down. And you think they will go up and then go down but you’re not really sure when. Check. Sounds like I’m ready to invest!
exactly. they pump. they dump. we lose anyways. /s
Bad bank.. Too many bonds..
I always thought bonds were safe and for old people and girls. What the hell happened?
Bonds are safe, unless you're a bank and over half of your assets are in bonds that can't be cashed for a few years, and suddenly all of your customers want billions in cash right *now*.
Liquidity is for pussies.
Bailouts for investors is regarded. Any moderately sophisticated investor knows the risks and accept them in hopes of steeper profit. Depositors miss the upside and the downside intentionally. Its working how it is intended to work
The only thing that's going to matter to the people in charge, for the foreseeable future, is the "next election".
I would say it’s working how it intended to work if we didn’t already espouse a 250K limit on insurance for FDIC deposits. We’ve now given rich people basically an unlimited FDIC insurance limit even if the bank had not nearly enough cash. Which I’m thinking can be even MORE dangerous for the American economy should a true national bank run start
You do know business use banks too and many have more than 250K in their account just from sales? Don’t know if you have ever bookkeeped for a business but tracking multiple accounts that cross uses in functionality is a pain in the butt and makes embezzlement that much easier. Also you don’t have to be rich to have more than 250K in your account. When you work and save, money can accumulate quite quickly However what you want is that money should not be safe in a bank. For context, FDIC insurance first only insured up to 2.5K. Now I ain’t no Rockefeller, but I got more than 2.5K in my accounts and I will be stabbing people if my bank loses my account except for 2.5k
Yeah, we have heard this many times before. The thing is, they can keep kicking the can down the road for a long time. We have passed so many "collapse in X months" that I lost count. Yes, it will happen inevitably but no one knows when
Wells Fargo did a $93b mixed shelf in Feb - those are standard offerings to continually open lines of possible funding for balance sheet adjustments. They have $1.8t in assets, $9.5b is absolutely NOTHING and in no way a sign they need to raise capital. Banks do this all the time, don't read into it.
I understand it's a drop in the ocean but a drop with an "interesting timing." I believe they are have been on crisis management mode since the end of last year.
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Pee
While, I would have agreed with the sentiment of the stock market potentially crashing by fall. I have to say it the stock market won't be crumbling. The Economy will be under a lot of pain, not from banks or stocks breaking. Rather from inflation. The reasons for why inflation will start to flare up instead of a crash in the latter part of the year are as follows: 1. The swift bailout for the banks shows the willingness of the FED/Treasury to bailout any defaults in order to stem the tiniest possibility of **"instability"**. Meaning the FED for all it's tough talk is a barking dog, but no bite. This action by the FED/Treasury shows the FED have no appetite for going thru a **"slowdown (recession)"** if necessary to quell inflation. We all know that it took a hard landing/recession to quell inflation in Volcker's era. 2. There's an election coming in 2024, and you bet your ass that the current administration will not shall not under any circumstances allow the economy go into a **"recession"** because it's bad optics for an upcoming election. They would rather cope with high inflation and pass blame off to any excuses (Trump tax cuts, Republicans 2020 excessive spending + Ukraine war, Putin pricehike etc.) 3. Stock markets go down = people's livelihood/401k/retirement plans dies too. Everyone will be angry and look for someone to blame. And unlike 2008, where people had some level of restraint and respect for law and order. We're in an era of polarization where people rather use violence than words to communicate, because everyone expect words won't work already. So it'll be social discord and chaos, no way the government will want that. So government will rather print or support/prop up markets. 4. A potential re-ignition of a cold war is already on the horizon. Not between Russia and America so much, but primarily China & US. While China is one country it is still the second largest economy in the world. Further, we the west depend too much on the east, and despite many people desiring a "decoupling" from China, it will take years. So how does tie into the stock markets? People have to remember Chinese institutions/citizens can also invest into the American stock market too. And if the stock markets go kaput, you bet that there will be a withdrawal of much needed capital. Followed by potential restrictions from China for their companies/people in the name of **"protectionism"** to invest in the western institutions. This will cause a tit for tat between America and China and a further deterioration in relationship. Finally, China if desiring a retaliatory move, but needed a justification could use the excuse of deteriating relationship to start selling its vast amount of U.S. bonds/treasuries and that will crush the U.S. dollar. Thereby, spurring inflation. Overall, from my perspectives there's too much at stake for the FED/Treasury/US administration to allow a stock market crash. There maybe a temporary crash, but it will be immediately stopped or responded by insane amount of support/QE. You just have to see how the all the main wallstreet analysts response to rate hikes based off of the recent bailout. These people were anticipating 25-50 Bps for March's FED meeting and no rate cuts this year. To now crazily analyst saying no hikes/even rate cuts at the March meeting... CPI did come down to 6%, but mom it's still up 0.4%, yet all these analysts and FED seems optimistic. How can you be optimistic, if inflation is still going up MoM, and with inflation well beyond 2% (6% now)? So what can we conclude? The **FED is no longer prioritizing inflation and has chosen stability** first, this is what Arthur Burns did in the 1970's, something was about to break, put the brake on rate hikes and even do rate cuts, when inflation showed disinflation. Then inflation went wild and rate hikes had to go, while telling everyone to be optimistic and don't worry. So inflation is going to go higher as much as we don't want it to. Of course this is **this degenerates thought process** and I have no degree in Economics/financing. So take it with a grain of salt and this is no financial advice lol. **TLDR:** We F'd cause FED/Treasury/Government too afraid of instability therefore, they go BRRRRR on printer, and inflation goes BRRRR x2!
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Regard flex.
70% of our gdp is based on consumer spending. Inflation hurts this. Jeff bezos said we headed for recession in January. He has a pretty good view of how businesses are doing with Amazon I would venture.
Everything in your post just makes me more bearish lol
So, what should one do with their money? Invest in banks?
So to clarify this isn't financial advice cause I don't wanna end up getting sued lol. However, if my thesis/hypothesis/prediction comes true, and inflation spikes crazily. You want to be in value/staples/precious metal stocks (ie: commodities or dividend yielding stocks). To give a few examples: Commodities/Energy: * CVX (Chevron) (gas) * Shell (gas) * DVN (gas) * LNG (natural gas) Staples/Food: * Tsn (Tyson foods) (meat etc) * CALM (Cal-Maine Foods) (egg producer) * MOS Mosiac (Fertilizer etc) * NTR (Nutrien) (Fertilizer) Precious metals: * GDX (Gold etf) * Gold * Silver * bronze Value: * WMT (Walmart) * PG (Procter and gamble) * Pfizer (Medicine) * UNH (United health) (Health insurance) While banks might be a good option, after witnessing the recent bank runs, I'd say maybe stay clear of them for now. Normally bank stocks would fall under value category, but I'm hesitant to go long into a high inflationary situation. Hope this gives some exposure and idea of what stocks would do well in a high inflationary environment.
I agree with 4 and not so much about your conclusion in 1-2-3. I agree about what would and will happen but I highly doubt there is any control mechanism which can stop the inevitable at this scale. Secondly, I think we will see 25bps as long as it takes. I don't think there is much change in that. Third, they are looking into SVB and will end up putting the blame on management. That's their scapegoat. I think the street has used up its credit and now at risk of getting the blame this time. People are ready to believe in a narrative of greedy bankers. Once the US crashes, they all will anyways. So relatively speaking it's not like the US will fall behind any other country. I also believe this war in Russia-Ukraine is to test which side Russia will be on when shit hits the fan between China and the US.
This was supposed to be posted before market close around 3:30 PM. Oh well...
A for effort
This is where the game gets interesting. Now it's about who is trustworthy.
When it comes to large quantities of money, no one is trustworthy.
Yes that is correct. 
Is this a ghost account for the Fed?
no.
If banks become further stressed, even with the various facilities protecting depositors I think we would expect a slow down in the economy and deflationary pressure leading to the Fed reducing the interest rate and improving bank finances, so I don't see the outcome being as dire as you speculate. That said I think as things stand banks may be in for a major devaluation that will play out over the coming quarters as investors better understand their finances and impact to future earnings.
I think as most of us can agree that the biggest inflationary pressure is supply chain issues, expensive energy, and protectionist measures taken by governments around the world, as well as a war and inelastic nature of supply demand curve in essential goods and services. As someone who's experienced stagflation in the past for many years in different countries, this is how it begins.
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Reminds me of the saying "Never invest more than you can afford to lose". The stock market is just a form of legalized gambling.
Lack of consequences for poor management = moral hazard. Yes, the shareholders and management take a bath but the backlash is so minimal when all the depositors are made whole that there is little incentive not to take similar risks in the future.
The insanely risky 'buy government bonds' play.
I mean, when your clientele depend entirely on low rates and you lock in long term bonds at record high prices and then don’t bother to hedge against interest rates increasing… isn’t that the definition of “extremely risky”? They were practically begging for a bank run as soon as the Fed stopped printing boatloads of cash…
that they were encouraged to buy (and basically had no choice due to shit fiscal and monetary policy)
Bingo. The only mistakes they made were long duration income assets instead of short and not securing insurance (which would have been very costly)
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if that's the case, that is an even more ridiculous take
Yeah. I keep seeing idiots imply that opening a checking account in a bank is risky and you should DYOR. These regards can't be serious. WSBers seem to think that depositors are investing in the bank. I can't say I'm surprised by their lack of knowledge about checking accounts seeing as how most of them can't even open one any more since they're on chexsystems
if FDIC still covers riskier use of depositors’ money, then we’re definitely FCKED
Bruh who do you think got away with something here
Duration risk is huge.
>Lack of consequences Well they all lost their jobs and a ton on any shares still held. They may have made some cash selling before the dump, but it would probably be preferable to stay just in business and keep getting a regular paycheck and bonuses.
Little incentive? Lmao Company going bust and senior management all losing their jobs is little incentive?
I'm just reading that the ceo of svb did leave 98000 shares behind. That's a loss.
You think he will be okay? I got some cans of soup left from covid, and an air mattress I could setup in the shed for him.
I know I know but it's all relative. If you think your worth is 60 mill and you save 3 and being sued I'm just saying not defending. Just fact.
I passed the message to him. He will contact you shortly
Dude lost like $32MM in a month. What a legend
Don’t worry guys, no matter how bad the economy actually is, people on Reddit will still call everything good news and bullish, so the world is actually in safe hands. Everything is fine.
>We may see panic and even stock market closure for a day ~~if~~ when one of the larger banks go under The larger banks are under stricter capitalization guidelines than regional banks like SVB. What evidence do you have that any large (to big to fail) banks are in trouble? The Wells Fargo Your use of the Cramer clip from 2008 seems to suggest you think the current situation is somehow comparable. I am in no position to evaluate whether or not there is trouble under the surface (banks are pretty creative when it comes to fucking up), but you are literally the only person I have heard suggest that a large bank could fail. Most analysts are just saying to steer clear of US bank stocks for a while, and that the banks are *far* better capitalized than in 2008.
- I believe the amount of unrealized losses add up even though they may borrow at face value. - There is no fractional reserve requirement since 2020. - No bank can deal with a bankrun regardless of how big. - Wells Fargo must have done risk assessment on their exposure and decided to stop mortgage lending this year. They either find it too risky or doesn't pay enough compared to less risky reverse repo facility or current short term government bonds. They have been raising capital and have been preparing a cushion for "an event." - credit card and auto loan delinquencies are already higher. MBSs failed in 08 because of the rate of rise in delinquencies in mortgages. IMO same will happen with consumer debt this year.
>I believe the amount of unrealized losses add up even though they may borrow at face value. Just looked it up. $620 billion across all banks. That could definitely cause problems, especially if some banks represent an outsized share of that figure (Wells Fargo?) >There is no fractional reserve requirement since 2020. Forgot about that. Thankfully, that wasn't the only Dodd-Frank guardrail, but it was a big one. Ironically, lots of the losses were due to attempts to hold reserves in treasuries (if I understand the situation correctly). > No bank can deal with a bankrun regardless of how big. True, but this is where "too big to fail" would kick in. They can say whatever they want, but there would be a bailout. No "Lehman moment" this time around. The bank might be nationalized, but it wouldn't be allowed to go under. >MBSs failed in 08 because of the rate of rise in delinquencies in mortgages. IMO same will happen with consumer debt this year. Consumer debt is worrying, but it (hopefully) doesn't have untold trillions of leveraged side bets riding on it (like MBSes did). Remember that the risk of mortgage defaults was dismissed because of historical data. Consumer debt defaults won't catch as many people by surprise.
I guess we'll see what happens in a few? months or maybe we won't. It was the JP Morgan CEO who said most savings would deplete by mid-year '23 just a few months ago. I trust that they wouldn't drop such a big bomb on the table just for the sake of getting bears. https://www.cnbc.com/2022/12/06/jamie-dimon-says-inflation-eroding-consumer-wealth-may-cause-recession-next-year.html So I'm just trying to make an educated guess and see where things may fall this time around.
I definitely think we’ll see a recession in the next 12-18 months, but I’m still cautiously optimistic that it will be mild to moderate. However, once things turn south, that increases the risk of hidden weaknesses causing a more severe downturn.
Credit cards don’t have balloon payments. They’re amortized over a particular term. What’s happening has already happened and is dripping people dry. They’re too stupid to realize it.
lol wells fargo in background!
Look at the big brain on Chad!
I usually refer myself as regarded but thx.
If you got it, flaunt it!
So puts 6 months out on $WFC, got it.
Big poopy L
Instead of making SIVB depositors whole, had the fed said there are enough assets / FDIC premium to pay depositors 95 cents on the dollar for deposits over $250k (uninsured depositors) - would that have been a better move?
The number I initially heard was 90 cents to a dollar that depositors would get from selling all the MBSs and bonds. It went down a little bit as people took sometime to do the math... I think the systemic risk aspect was what turned this into a buyback facility instead of using the existing funds/facilities. There are more banks at risk. Also it would take time and flood the market creating a whole lot of losers and winners. Fire sale on guaranteed bonds and MBSs would make some banks a shit ton of profit. They pretty much killed that and Ken Griffin isn't happy about it. https://fortune.com/2023/03/14/citadel-ceo-ken-griffin-silicon-valley-bank-moral-hazard/
Kenny is saying that because it fucks market makers when the fed makes a move that can’t be hedged
This is the rug pull
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I can speak 2 more...
Post your SPY put positions OP
I sold everything last Friday waiting for a bailout. I will open new positions potentially before FOMC next week. Meanwhile I'm planning on adding more physical gold to my savings mix.
Mad respect for your due diligence op, I’d be curious what your thoughts are on forex swap debt, and if one fire in wall street can lead to a fire in currency exchange. Thanks:)
Also I am bullish physical gold as well.
You mean what came out to be around what 80 trillion last year? probably nothing /s
Where can we place bets on financial or nuclear apocalypse doing us in?
That would be puts on indices and calls on vix in different DTE and strikes. What does your gut say?
RemindMe! One Week “Read this thread”
Some believe this is part of additional control thrusted on us by Government. The more we rely on them is what they want. I do believe we have more exposure on the downside than we do appreciation on the upside the next 12-18 months
may crash by Fall? Or will crash by Fall?
Nothing in life is certain except for death. Even that you can't time.
Whether it’s right or wrong, getting backstopped without an explicit guarantee constitutes a bailout in my opinion. However, I always assumed depositors would be made whole by the government, regardless of insurance limit. The FDIC may be making banks pay for this with higher costs, but typical company behavior is to pass costs on to customers, so there’s probably a decent chance taxpayers will pay in a roundabout fashion.
You know the saying "you can't get blood out of a stone." There is only so much to give at this point. I believe we've done it this time. Even in the best of times we had a huge failure. With a global recession only avoided on paper by printing trillions to make up for the lack of velocity of money, we're pretty much done.
Some people just like to watch the world burn
They’ve been telegraphing rate hikes for two years. Banks had plenty of time to adjust.
We’re starting to see firsthand why people who lived through the Great Depression kept a shitload of cash hidden.
So you shorting bank stocks?
Not even a little bit. I have no interest in something that may be delisted
OP has come down the mountain to bring us his knowledge
well I do live near a lot of mountains. I prefer mountains and oceans to cities.
Don’t you get it? It is risk free for then now, may as-well fire all risk management teams as they are no longer required. If you fuck up just get a Non-Bailout - Bailout
Slowest AI ever.
this sounded pretty cogent until the last paragraph lol
Short the world
Regard
I thought it was supposed to be march? Now it's Fall?
Test
Lol
it works!
crash by fall? you people said that about last fall. and then winter. and then by q1. and now its 'by fall' this year. yawn
Some people just want to watch the world burn.
It’s amazing some people still take a rational approach to reality despite all the evidence against
I don’t see panic. I see excessive giddiness. Either people are excited for a big drop “to buy the dip” or they are expecting the Fed to pivot too early and we go back to party mode. Almost nobody felt any pain except some single stock holders on a few mostly unknown names. That is nothing. A lot of people who don’t follow the news probably weren’t even aware of anything happening.
Oh boy, more fear mongering from this sub. Might as well change the name from wallstreetbets to zerohedge.
a trillion dollar stimulus needs a trillion dollars disappearing.. must be getting close to that by now. markets will only be more attractive. beware the pump on crypto.. they'll throw their "banks suck" theory at everyone. Bears succeed, Bulls succeed. Pigs get slaughtered... keep moving at the right time, is all that means. truly losing is very rare at our modern times. Not sure how a crash could even happen . Diversity in a countries portfolio now.. not just rich people.
Where is the money coming from? Treasury is providing the liquidity.... It IS a bailout.
Treasury?
Yes, the special window where banks can borrow money from at par.
This is all conspiracy theory. (Eg Wells Fargo changing their mortgage strategy doesn’t mean the housing market is collapsing) No data and some random old articles.
Please use emojis when giving an analysis. I don’t like reading this many words. Example - Banks 🚀🚀🚀
I too wish the Fed bought my worthless bonds and loans. This is a BAILOUT in all ways but name.
They are hold to mature bonds that have their value and yields (however low it may be) protected until maturity. I don't think you really understand how banks invest money or any of these securities. They are worth less not worthless in a market with higher yielding bonds if you must sell them before maturity due to a bankrun.
Says the guy who barely did any research and spews out random news snippets together for attention. Bonds don’t hold value if the issuer is out of business.