The global problem of the Silvergate Bank collapse

This deserves its own thread.

The big problem for the global financial system is crypto did not bring the bank down. US paper did.

We do not yet know the duration of bond holdings at the other banks. The banks have had a year to divest the long end of the curve but may not have done this.

Any of us might be able to look at BoA or Chase and see the bond durations in the financials.

BTC and Eth may rocket here. They have nothing to do with US paper.

Escaping to Schwab or Vanguard could be equally dangerous.

We have a serious crisis and we do not know where this leads at all yet.

Selling now is totally wrong in my opinion. This too shall pass.

Each of you make your own decisions with DD at usual. I will only know something after it happens. As will you.


It is interesting as I read more about this collapse. At least 2 self-inflicted wounds that I can see. One was in having too many assets in long-duration Treasuries, which they did in a feeble attempt to get some yield. The other appears to be a decision in how to shore up funding overnight, part of which included selling new stock which could only be completed the next day. This gave clients time to realize what was going on and start a bank run.

Agree in principle that now is not the time to sell. Besides, what would be a safe haven? I would not put $1-2M of my IRA into a money market right now, for example. Possibly the best place to park would be short term Treasuries or large-cap dividend blue chips.

I am somewhat worried about the big banks however. They also have long term Treasuries on their books, bonds that the expect to hold to maturity and therefore do not mark-to-market (they do not expect to take a loss after all by holding them). This will be a problem if they actually need those funds. Which is what happened to SVB. They needed the funds in those long-duration bonds, which meant they had to be sold at a loss.