*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[opendoor]

Originally Posted by Yoho

The guy works in finance, I absolutely think numbers are being under reported.

OK. He either doesn't understand how compounding works or he's a grifter who doesn't believe what he's saying and is just trying to drive views to his channel. I'm assuming the latter.

If the inflation stats he was providing were correct, prices would have risen by about 40-50x since the early '80s and about 8-9x in the last 20 years. No one actually believes that, other than the rubes that these people try to rile up so they can part them from their money (though that guy doesn't seem particularly successful in that regard, as he has a grand total of 2 patrons on Patreon).

Like I said, you can't lie about compounding math over a long period of time. The end result of even small discrepancies (say 5% inflation vs. 3% inflation) over several decades is significant and unmistakable. And this guy is claiming "real" inflation was 5-10% higher than reported every year.

Hard to argue the currency devaluation which was the purpose of the video.

The CAD is down 5% against the USD in the last 5 years and has been basically flat for 8 years.

And again, currency devaluation is largely solved through higher interest rates. Would it really be a good idea for Canada to drive rates higher than necessary, raise everyone's costs, and potentially engineer a needless recession just to keep US imports a few percent cheaper?

[Yoho]

https://twitter.com/user/status/1633215393492762632

[Slava]

Brilliant prognostication. I mean, we were all talking about the BoC and their signaling a pause in January. I thought that Macklem came right out and said as much?

[Yoho]

Originally Posted by Slava

Brilliant prognostication. I mean, we were all talking about the BoC and their signaling a pause in January. I thought that Macklem came right out and said as much?

Are you ok?
It’s just info passing on.

[Slava]

Originally Posted by Yoho

Are you ok?
It’s just info passing on.

haha, I'm completely fine. I think that you and I were the ones talking about it!

[Yoho]

https://twitter.com/user/status/1633483348302766086

[Looch City]

My variable rate likes this.

[Yoho]

https://twitter.com/user/status/1634195332744593413

[opendoor]

And yet bond yields are tanking, dropping from almost 3.7 last week to 3.23 right now.

[bizaro86]

Originally Posted by opendoor

And yet bond yields are tanking, dropping from almost 3.7 last week to 3.23 right now.

Market thinks the BoC is committed to breaking things and will need to drop rates once they do. 30 year is actually only 2.9%, and things are still inverted.

[Yoho]

https://twitter.com/user/status/1634330335675662336

[Firebot]

Massive banking collapse in the US in the past 48 hours with a bank run usually reserved for countries like Argentina, Sillicon Valley Bank was taken over by the FDIC earlier today and has been all over the news in the US. The 16th largest bank in the US and 2nd largest failure ever in the US, just went poof after announcing a loss of 2 billions due to bad bonds. SVB is most notable for lending to tech and healthcare startups, meaning a lot of companies will not survive this collapse.

A sign of a 2008 like collapse, or an outlier? How many banks are at risk and not valuing their bond assets correctly including in Canada? Next few weeks will be quite interesting but one thing is near certain, rates are likely to stay stagnant or go lower at this point.

[GGG]

Originally Posted by Firebot

Massive banking collapse in the US in the past 48 hours with a bank run usually reserved for countries like Argentina, Sillicon Valley Bank was taken over by the FDIC earlier today and has been all over the news in the US. The 16th largest bank in the US and 2nd largest failure ever in the US, just went poof after announcing a loss of 2 billions due to bad bonds. SVB is most notable for lending to tech and healthcare startups, meaning a lot of companies will not survive this collapse.

A sign of a 2008 like collapse, or an outlier? How many banks are at risk and not valuing their bond assets correctly including in Canada? Next few weeks will be quite interesting but one thing is near certain, rates are likely to stay stagnant or go lower at this point.

Sounds like it’s not believed to be a contagion.

[bizaro86]

Originally Posted by Firebot

Massive banking collapse in the US in the past 48 hours with a bank run usually reserved for countries like Argentina, Sillicon Valley Bank was taken over by the FDIC earlier today and has been all over the news in the US. The 16th largest bank in the US and 2nd largest failure ever in the US, just went poof after announcing a loss of 2 billions due to bad bonds. SVB is most notable for lending to tech and healthcare startups, meaning a lot of companies will not survive this collapse.

A sign of a 2008 like collapse, or an outlier? How many banks are at risk and not valuing their bond assets correctly including in Canada? Next few weeks will be quite interesting but one thing is near certain, rates are likely to stay stagnant or go lower at this point.

Worth noting here that their losses were mostly not "bad" bonds per se in that the bonds they bought haven't defaulted. In fact they're mostly US treasury obligations. But when their deposits left they had to raise money, and since interest rates have gone way up the value of their bonds has gone down (bond prices move inversely to interest rates). It's not a big problem if you don't have to sell, but if you need the money to pay back depositors then you have to take the losses and they didn't have enough equity to cover the hole.

All the banks in the US have exactly the same issue, and they aren't required to mark held to maturity bonds to market price unless they sell them. The ones whose deposits are checking accounts and CDs from millions of people are probably safer than the ones whose deposits are all from venture backed startups.

[opendoor]

Yeah, I don't think it's necessarily a harbinger of other banks having issues. Unrealized losses are just a fact of life when you hold bonds in a rising interest rate environment, but they don't necessarily cause an problems unless you have liquidity issues

I think the bigger short-term issue will be the businesses that had significant holdings in there. Roku apparently had 26% of their cash (about $487M) in that bank, and essentially none of it is insured.

[DoubleK]

Originally Posted by opendoor

Roku apparently had 26% of their cash (about $487M) in that bank, and essentially none of it is insured.

Is that necessarily bad? Seems like that it was appropriately risk managed. Can't imagine it would be normal for a corporation to have their cash spread across 10 different banks.

Some of the startups likely had most, if not all, of their cash at SVB. Sounds like that bank was favored in that space.

[Cowboy89]

Originally Posted by DoubleK

Is that necessarily bad? Seems like that it was appropriately risk managed. Can't imagine it would be normal for a corporation to have their cash spread across 10 different banks.

Some of the startups likely had most, if not all, of their cash at SVB. Sounds like that bank was favored in that space.

Not sure if you’re being sarcastic or not, but yes properly run cash management functions at companies would have their cash spread across many banks and have concentration limits based on the bank’s credit risk and exposure to each bank across all other lines of business.

[DoubleK]

Wasn't sarcasm at all.

Are those limits on a dollar amount or percentage basis.

[Cowboy89]

Originally Posted by DoubleK

Wasn't sarcasm at all.

Are those limits on a dollar amount or percentage basis.

A good policy would incorporate both. Times like this should remind corporate Treasury departments that priority #1 of their cash management investments is return OF cash and a secondary priority is return ON cash.

[bizaro86]

Originally Posted by DoubleK

Wasn't sarcasm at all.

Are those limits on a dollar amount or percentage basis.

There are deposit brokers that help large depositors spread their cash across multiple banks. In the US its not a big deal to spread cash among 100+ banks if you want to.