SVB's demise a sign of worry, but limited financial contagion risk: analysts

Limited contagion risk, are you kidding me?!

Every long duration asset in the world's feeling the ravages of inflation, SVB just happened to have exceptional exposure to risk assets, par for the course in tech, plus real estate values that have gone thru the roof there.

What almost nobody's talking about is DEPOSIT RUNNOFF happening at EVERY US BANK, why you ask? Because the commercial banks have not stepped up their payouts on deposits, too busy protecting their net interest margins.

When grandma ask's "should I buy some US T-bills, my banks hardly paying me anything?" Any grandchild will respond HELL YES, you can make 5% or about 10x more have no NO CREDIT RISK for deposits in excess of 250K/FDIC limit.

Just consider for a moment what high inflation's doing to the financial system, the fixed income long duration assets if you look at the broadest global ETFs in dollars sold off about 23% in 2022 ALONE. That in most cases unrealized loss my friends, MANY MANY times larger than the entire Japanese economy!

However, with 'runs' on banks and just aggressive 'grandma' run-off, hardly seems they can keep all these unrealized losses until maturity now does it?

Guess what, it's only picking up steam in 2023 because this madness, the US led NATO war machine conducting a proxy war visa via Ukraine's fueling inflation and the Central Banks are out of ammo, raising rates in most cases as inflation rages. Let's not forget pandemic's not really over, people dying like crazy still, huge co-morbidity factor, so this idea that wage inflation will surely fall is hardly a given. Just check out Lancet, UK medical society, excess death research, inflation's ALWAYS hard to control when the labor force is hard to maintain...

Putin's invasion TOOK ALL OF THE ABOVE HEAVILY INTO ACCOUNT, especially his timing, he knows all too well how soft and fragile our markets and financial system is these days, especially due to the pandemic.

Policymakers and Central Bankers going to have to have an 'inflation chat' with exiled Oligarchs before something REALLY breaks, the scale of this problem makes 2008 GFC look like a walk in the park/peanuts/etc.

There's nothing to worry about. We were reassured in January 2021 that the adults were in charge after four years of turbulence. Just look at Mr. Biden's budget submission - the economy is doing so well that the budget primarily focuses on climate change and equity. Financial crisis? Not on Ms. Yellen's watch!

The risk management at this bank had one job. And it wasn’t diversity, climate change or LGBT rights.

SBV got crushed-why?

Lending to crypto investors is against the wishes of the powers that be.

Never mind that countries around the world are planning to rollout their own in the near future-trounce the competition first though…

Another problem is in the hit to bank bond assets, which decline in value when interest rates increase.

Biden, Yellen, and Powell did this. They are not responsible and accountable?

They are not gonna be bail out,Roku had about Half a billion in the bank

Biden, Yellen, and Powell did this.

Gimme a break. The bank's executives did this. The Fed's policy tightening was clearly communicated from way back amid the very clear shocks from covid and Ukraine. The execs' inability to respond and manage risk in this environment is a testament to their incompetence and/or recklessness.

Increase in volatilty of long duration assets is a function of market conditions. Regarding individual attribution you ask?

1) Powell/Fed was late to the inflation game but hindsights always 20:20 and who could predict the Ukraine Russian war etc. Sure he should have started raising rates earlier, rather than after the 'horse was out of the barn' catchup.

2) Banks are GREEDY/DUH? Customers of all stripes have been moving their bank deposits into other less risky and higher income assets e.g. US T-bills

3) Asset bubbles built up due to lose financial conditions for MANY YEARS, meaning basically free money on an inflation adjust basis.

Consider even today, well-run company with decent balance can still borrow long term money, deduct the expense and thus the borrowing cost is NEGATIVE on an inflation adjusted basis. Hardly 'tight' financial conditions

4) Given global geopolitical chaos, strong dollar, pandemic fallout including MAJOR adverse impact on labor markets. So growing belief that inflation fight will take longer and rates will go higher seems likely..

Naturally, financial crisis with contagion can things FAST