Month: March 2023

First Major Banking Collapse Since 2009 – What Does it Mean?

First Major Banking Collapse Since 2009 – What Does it Mean? March 11, 2023 By Mitchell Anthony     Silicon Valley Bank (SVB) collapsed yesterday as depositors withdrew cash! This is the first major banking collapse since the great financial crisis of 2008.  While the crisis and details of this takeover are still unfolding the early visibility we have reveals that this failure is not part of a systemic problem within the US economy and we are unlikely to see other banks fail in a similar manner.  The problems and circumstances that led to the default seem unique to this highly specialized regional bank that worked almost exclusively with the start-up tech industry in Silicon Valley. At first blush it would appear that the majority of major banks are sound and not subject to the unique circumstances that brought down this highly specialized bank. The problem that we have is the fact that banks are not required to disclose or mark to market their bond portfolios that are being held to maturity or they hope to hold to maturity. There could be significant unrealized losses on these portfolios.  This crisis may force banks to reveal their bond portfolio status and it could certainly require them to start paying higher returns on cash deposits. Investors are obviously bracing for the worst and the stock prices for almost all banks plunged by as much as 20 to 30% over the last few days as the crisis unfolded. We believe the crisis and the plunge in bank stock prices likely represents a value opportunity. We have been underweight banks in our portfolio since the pandemic began for reasons such as this!Read more