Quote:
Originally Posted by Slava
I don’t have time at this point to do a full rundown, but you’ve hit on a chunk of the issue here. The banks and financials were pushed buy high quality liquid assets. That’s what SVB did, and from that risk management perspective, they were good. Then rates rose in 2022 and it’s a massive problem because those assets are worth a lot less than last year. The. You have the bank run, where they have to liquidate these assets and obviously that’s not ideal.
My concern isn’t whether the extent of SVB is known, but it’s that they’re not the only one. It’s unfathomable that there aren’t a lot of other banks in this similar situation, where they’re not invested in crazy securities, but the rising interest rate has hammered those prices.
So, what happens next week? Hard to say. But there are some difficult choices to be made on a few fronts, and a lot of uncertainty.
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Agreed. They certainly would have been pushed to buy quality securities, which Tbonds certainly are. However, they could have sacrificed some short term income in 2020/2021 and bought 2 year paper instead of 10 year paper, and then we wouldn't be having this conversation because they'd still be earning a spread on all of Roku's extra corporate cash...
There's also never just one cockroach, so I'd expect to see more come to light in the next little bit. Sometimes that is a self-fulfilling prophecy, as corporate treasurers just got a lot more picky about where they're keeping their extra cash as a result of this.