What other predictions has this short seller made in a verifiable manner?<p>It's really pointless to find someone who just guessed correctly once and take their advice. Particulalrly if their failed predictions are never made public, or are too abtract to be verifiable.<p>I used to invest in gold and silver, expecting them to be stable investments. Back in mid 2008, I noticed a lot of large price swings. I made a few trades to exploit the swings before realizing the whole point of me investing in them was because I expected them to be stable. So I cashed out everything, and a few weeks later the economy (and the gold and silver prices) tanked. I don't consider myself a savy investor at all, I just got really lucky that one time.
My company has seen quite a few sell side analysts talking about SVB earlier this year, so I guess the risks were not unknown to financial markets.<p>Problem is, we are in a scenario of great macroeconomic uncertainty. That can make borrowing costs (needed for shorting something) quite high, because everyone and their moms want to protect themselves from market downturns.<p>So even if you guess correctly that some company will fail, you might still lose money if you're not lucky with timing. Many short sellers were squeezed in the last months, but we don't hear their stories on Fortune.
Isn't the question though, if you acted on the set of companies/banks that were showing these signs, how often would you be right and saved your money (or made money)?<p>The analyses that tell you what led to a particular crash are hard to stomach as a reliable bet for the next time.<p>I just saw this story:
<a href="https://www.morningstar.com/news/marketwatch/20230310718/20-banks-that-are-sitting-on-huge-potential-securities-lossesas-was-svb" rel="nofollow">https://www.morningstar.com/news/marketwatch/20230310718/20-...</a><p>("20 banks that are sitting on huge potential securities losses—as was SVB")<p>Would you short Ally right now? Hard to make such a bet.
I remember listening to an episode of Odd Lots a couple of months back discussing how someone was using the the Fed Discount Window.<p><a href="https://podcasts.google.com/feed/aHR0cHM6Ly93d3cub21ueWNvbnRlbnQuY29tL2QvcGxheWxpc3QvZTczYzk5OGUtNmU2MC00MzJmLTg2MTAtYWUyMTAxNDBjNWIxLzhhOTQ0NDJlLTVhNzQtNGZhMi04YjhkLWFlMjcwMDNhOGQ2Yi85ODJmNTA3MS03NjVjLTQwM2QtOTY5ZC1hZTI3MDAzYThkODMvcG9kY2FzdC5yc3M/episode/YjU5NTQzM2QtMDgzOS00MjNmLTk2N2UtYWY4ODAxM2JjYTRh?ep=14" rel="nofollow">https://podcasts.google.com/feed/aHR0cHM6Ly93d3cub21ueWNvbnR...</a><p>I'm not finance savvy enough to determine if this fits, but I've been wondering if some kind of event might follow
key grafs<p>As of Dec. 2021, SVB’s interest expense on its deposits was $62 million. By Dec. 2022, it was $862 million. By the end of this year, Wettlaufer was projecting it to be nearly $4 billion.<p>When Silicon Valley Bank posted its annual report at the end of last month, non-interest-bearing deposit levels were clearly deflating. And it seemed like those figures would keep falling. Wettlaufer was projecting non-interest-bearing deposits might go down to $40 billion, from $80 billion, meaning that SVB would have had to come up with $32 billion somewhere else to fill that hole.
So basically the rapid increase in interest rates combined with lack of diversity in the bank’s clientele and investment choices quickly turned SVB into a collapsing inadvertent pyramid scheme?
I couldn't find anywhere in the article where it gave an amount of the short position. Did this guy bet the farm on it? If so, he deserves praise (and the returns) for his insight. If, on the other hand, this was just one of dozens (or hundreds) of small short positions his fund invested in, then not so much.<p>Anyone can bet small amounts all over the roulette table and then only tell their friends about the ones that won while ignoring all the ones that lost.
Of course the underlying issue (maturity mismatch) would be entirely preventable. Why the current banking system is setup in a way that makes regular banking crashes practically unavoidable: <a href="https://news.ycombinator.com/item?id=35106315" rel="nofollow">https://news.ycombinator.com/item?id=35106315</a>
This is all you needed to know to short SVB a month ago: <a href="https://twitter.com/WatcherGuru/status/1634246217226919937" rel="nofollow">https://twitter.com/WatcherGuru/status/1634246217226919937</a>
<i>Bleecker Street Research, of course, has made out quite nicely from the demise of Silicon Valley Bank (The team won’t comment on how much they made off their short bet). </i><p>How much could it be? 60-70%? That is how much the stock fell. The problem with these kind of stories is you don't hear about all the times these firms sold short and or were wrong or lost lots of money before eventually being right and would have been better off with an index fund. It's easy in hindsight to explain what was wrong with the bank or why the trade was a success.
One day from bank run until interception by financial regulators, we live in fast times. Oh man, this Monday will be fascinating from the early morning!
>>>don’t know how it all shakes out, or at the end of the day where that money ended up and where it went,” he says.<p>I'm going to take a stab - the money ended up at the issuer tbill or mbs, that has been funding the profligacy of the feds with very low interest rates.<p>In the meantime, fed stakeholders will declare a dividend and pay themselves for the priviledge of keeping musical chairs going
Short seller seems to have a pretty sober take on the reality of it all.<p>Reminds me of "just don't fucking dance." <a href="https://www.youtube.com/watch?v=7eYcWpgCb7o">https://www.youtube.com/watch?v=7eYcWpgCb7o</a>
So when you short like that there is no risk for you as a borrower other than if the assets go higher?
Do you need to have enough assets to cover a x-times the price of the stocks to insure your position?
I wonder if the pie has been cooked enough and there aren't other vulnerable banks in the same position. Also I wonder if massive short selling most banks now doesn't make them trip over.
Just wondering, why do posts like this consistently have an unpaywalled archive link as the top comment, and it's unreply-able? It almost seems automated except it's a different commenter every time. Is there some system detecting those comments and floating them to the top, then disabling replies? ( @dang )
TLDR:<p>Silicon Valley Bank (SVB), a lender and banker to the startup industry, was closed down by California financial regulators after a bank run triggered by its announcement that it was raising over $2 billion in capital through a share sale. SVB's downfall came as a result of a rapid change in liability composition, as interest rates rose and inflows of non-interest-bearing deposits at the bank fell below outflows. Non-interest-bearing deposits fell by $45 billion in 2022, forcing the bank to replace them with higher-cost liabilities, resulting in the bank being left with an empty bag and leaving the entire startup ecosystem frozen.