Silicon Valley Bank Collapses

[HuronKing]

CNBC's Jim Cramer last month Feb. 8 "Buy SVB!", Buy Signature Bank! , First Republic

Come on. Its Jim Cramer. Everyone knows when he says "Buy SVB" he's just mispronouncing "bye bye SVB".

I wouldn't put any real money towards it... but I've enjoyed a few beers on trades from inversing whatever Cramer says.

At my broker's office, but not in writing, they all believe that trading on the inverse of Cramer's recommendations is a good strategy.

They don't need to keep it so secret anymore I guess - there is an actual Inverse Cramer ETF trading as SJIM that started a few days ago:
https://www.marketwatch.com/investing/fund/sjim

[bdunham7]

At my broker's office, but not in writing, they all believe that trading on the inverse of Cramer's recommendations is a good strategy.

There's actually an ETF for that now.  SJIM (Short JIM) "Inverse Cramer Tracker", and it is real.  I bought a share just so I can track it.  So far it has made a small bit of money.  Fidelity lists it as a 'designated investment' meaning you have to read a disclaimer before buying it and acknowledge that the broker is not recommending it. 

https://www.google.com/finance/quote/SJIM:BATS?sa=X&ved=2ahUKEwj-s5SktOH9AhXhLkQIHZTrAKgQ3ecFegQIChAg&window=1M

[floobydust]

I'll never forget this screencap of the Jim Cramer show from early in the pandemic. It just shows what Wallstreet and him are about. Greedy scum manipulating the masses.
The business press minimizing the SVB failure, is a bit surprising. I thought they would help push for bank regulation to get fixed- although both the Clinton and Trump admin's loosened them up for obvious corrupt reasons.

[Marco]

Global debt is > USD $300 TRILLION

Global paper debt is 300 Trillion, but the economy functions functions quite well regardless.

Internal sovereign debt is not all that important, look at Japan. BoJ just puts whatever the market doesn't want on its balance sheet and bob's your uncle. Demographics are a far greater threat to Japan than debt/GDP ratio. Now of course when that sovereign debt is on bank balance sheets and the interest rates rise, that is a problem ... so what is the solution?

I have a solution, end private consumer banking. Transfer demand deposits to the central bank as well as marked to market assets necessary to cover them (banks without sufficient assets get liquidated). The central bank then provides CBDC, aka. central bank run full reserve consumer banking. The central bank can then slowly auction off the assets to investors once everyone stops panicking.

Fractional reserve banking is more trouble than it's worth. If people want to invest let them invest, don't use demand deposits for it.

[jonovid]

had a look under the bed. just not the space for hoarding more gold and silver.
as for Cramer's recommendations are like re-shuffling deck chairs on the titanic.

[vk6zgo]

had a look under the bed. just not the space for hoarding more gold and silver.
as for Cramer's recommendations are like re-shuffling deck chairs on the titanic.

You can't put it under the bed---that's where the Commies are!

[vk6zgo]

By the way, & completely off topic.
Do you know the difference between a Rich Scotsman, a poor Scotsman & a dead Scotsman?

A rich Scotsman has a canopy over his bed.

A poor Scotsman has a "can o' pee" under his bed.

&

A dead Scotsman cannae pee at all.

[tooki]

Meh.  We've had so many try to make crypto a success and all I see is one scam after another.  Any financial industry would be shaken by a major bank collapsing but effectively from crypto in the space of just a decade we've seen Terra/Luna crash, FTX completely implode, Celsius bankruptcy, Mt.Gox theft, numerous rug pull coins, and many more.  There's a reason banks are regulated, and if crypto is to succeed it will need to be tightly regulated, which kinda defeats the whole point so I'm not sure whether crypto in the current form ever makes any sense except  for criminal activity.

Crypt is a direct threat to governments and their coming CBDC's, they'll take every opportunity they can to shut it down.

My problem with crypto is the massive amount of energy wasted mining it. I am fundamentally bothered by the idea of expending HUGE amounts of electricity to run hardware that does useless busy work, and that alone is enough that I personally would like to see the whole thing shut down. It is far too volatile to be useful as currency, most of the economic activity and profits are from just speculating on the currency itself.

I was just discussing this with a friend last night (who didn’t know about this issue), and I came across the figure of it taking 1200kWh to process a bitcoin transaction. And that the entire bitcoin network uses more power than Argentina.

Apparently, a lot of mining is now done on custom ASICs whose useful lifespan is just 1.3 years before it’s no longer economical to run. So mining a bitcoin also creates lots of e-waste.

I think it’s crazy, when you think that this nonsense has wiped out all of the progress made by e.g. mandating very low standby current on chargers at idle. Our poor little planet can’t handle bitcoin’s future.

[vad]

I was just discussing this with a friend last night (who didn’t know about this issue), and I came across the figure of it taking 1200kWh to process a bitcoin transaction. And that the entire bitcoin network uses more power than Argentina.

Apparently, a lot of mining is now done on custom ASICs whose useful lifespan is just 1.3 years before it’s no longer economical to run. So mining a bitcoin also creates lots of e-waste.

I think it’s crazy, when you think that this nonsense has wiped out all of the progress made by e.g. mandating very low standby current on chargers at idle. Our poor little planet can’t handle bitcoin’s future.

I wonder how this compares to resource wastage and environmental impact of gold mining.

[TimFox]

Back to the SVB failure:
I accidentally posted this comment to another thread, but it belongs here.

Several right-wing American politicians stated that SVB failed due to "wokeness".
The New York Times fact-check department, pooping the party, checked the normal "D&I" and "ESG" scorekeepers for the financial industry and found SVB parked right near the middle/median of its peer group.
Facts are for losers.

Blaming risk management is always easy in hindsight.
In foresight, risk management, like safety, is often considered a cost center, rather than prudent management.
However, there are some risk management algorithms and tools that may not use appropriate statistical distributions:  the risk probability of future not-yet-announced interest-rate changes may not be normally distributed.

[HuronKing]

Adding to what you said Tim - it's also sometimes the case that lack of risk management isn't a bug caused by some other external factor, but a feature for the rich to get richer as quickly as possible before the whole thing comes crashing down while they bail out with golden parachutes and often move on like locusts to the next company to rinse and repeat.

Enron was giving bonuses to executives moments before the whole thing went to hell:
http://www.cnn.com/2002/LAW/02/09/enron.bonuses/index.html#:~:text=The%20list%20of%20so%2Dcalled,to%20give%20them%20severance%20packages.

Enron is one of the rare cases where the perpetrators were punished, somewhat.

Remember Wells Fargo? Coincidentally it's just coming back in the news again.
https://apnews.com/article/wells-fargo-sales-scandal-carrie-tolstedt-guilty-013f744a811b741560b466a7b8e203dc

[Marco]

I wonder how this compares to resource wastage and environmental impact of gold mining.

It would be pretty disastrous to back a major currency with gold again too, yes.

Proof of Work Crypto and gold are negative sum games, proof of stake at least is only a zero sum game.

[james_s]

At least gold is useful. It's a tangible substance, it is in limited supply, it has always had value and it will always have value because people want it. Not only because of scarcity but because it is such useful stuff. It's a good conductor of electricity, a superb reflector of IR radiation, and it is extremely resistant to oxidation and corrosion.

[SiliconWizard]

Some countries have been buying large amounts of gold this past decade (hint: not western countries), while we have done everything to get rid of it.
I'm sure they did it just because they don't know what they are doing.
And my little finger is telling me that whoever is going to be better off in the coming decade is... not us.
Of course if things go really sour in that context, you can guess what's going to happen. It already has, in fact.

[vad]

At least gold is useful. It's a tangible substance, it is in limited supply, it has always had value and it will always have value because people want it. Not only because of scarcity but because it is such useful stuff. It's a good conductor of electricity, a superb reflector of IR radiation, and it is extremely resistant to oxidation and corrosion.

Industrial gold demand is a tiny fraction of overall gold demand. Therefore scale of gold mining does not justify waste of resources and environmental damage.

Bitcoin is also in limited supply and in high demand.

[TimFox]

Adding to what you said Tim - it's also sometimes the case that lack of risk management isn't a bug caused by some other external factor, but a feature for the rich to get richer as quickly as possible before the whole thing comes crashing down while they bail out with golden parachutes and often move on like locusts to the next company to rinse and repeat.

Enron was giving bonuses to executives moments before the whole thing went to hell:
http://www.cnn.com/2002/LAW/02/09/enron.bonuses/index.html#:~:text=The%20list%20of%20so%2Dcalled,to%20give%20them%20severance%20packages.

Enron is one of the rare cases where the perpetrators were punished, somewhat.

Remember Wells Fargo? Coincidentally it's just coming back in the news again.
https://apnews.com/article/wells-fargo-sales-scandal-carrie-tolstedt-guilty-013f744a811b741560b466a7b8e203dc

I never understood what Enron was supposed to be doing.
In the court proceedings, apparently they weren't doing anything except accepting funds.
This is far from novel:  look at the history of Dr. Frederick A Cook, the arctic explorer.
He may have been the best expedition physician of his day, serving on an early voyage of Peary and on the ill-fated voyage of the Belgian antarctic expedition, where he probably saved the crew, including Roald Amundsen.

(Of course, Amundsen is remembered as the first man to achieve the South Pole, beating Scott in a two-expedition race by a month.
Amundsen took unfair advantage, being competent and already knowing how to ski before arriving on Antarctica.
Amundsen remained a friend, even after Cook's imprisonment mentioned below.
However, most of Cook's later exploits, including an announced visit to the North Pole, are no longer believed, along with the alleged visit by Peary.
The only well-documented sled trips to the North Pole are much later, in 1986 [one-way] and 1995 [two-way].  These were after the first genuine surface trip, on snowmobiles, in 1968.)

Cook was convicted in 1923 with a long prison term for deceptive practices in the Texas oil patch, with the Texas Eagle corporation of Fort Worth, including paying dividends from stock sales instead of profits.
Some believe the prosecution was politically biased against him, since there were lots of operations doing much the same thing at the time.
Reference:  R M Bryce, Cook & Peary: the polar controversy, resolved, Stackpole, 1997

[Marco]

I'm sure they did it just because they don't know what they are doing.

Well in retrospect it was a pretty bloody disastrous investment.

They could have many times more gold now, hindsight is of course 20 20.

[coppice]

I never understood what Enron was supposed to be doing.
In the court proceedings, apparently they weren't doing anything except accepting funds.

Enron's basic principal of operation was dynamic pricing of energy down to the consumer level. I was approached about a project for this. They needed ultra low power consumption meters for customer's premises that could operate for long periods from a modest sized battery, providing reliable exchanges of pricing and consumption information with rapid updates. When I enquired whether this was a second generation the answer was basically that it would be the first. When I asked how Enron was currently operating there were crickets. I didn't take it beyond that.

[james_s]

I was just discussing this with a friend last night (who didn’t know about this issue), and I came across the figure of it taking 1200kWh to process a bitcoin transaction. And that the entire bitcoin network uses more power than Argentina.

Apparently, a lot of mining is now done on custom ASICs whose useful lifespan is just 1.3 years before it’s no longer economical to run. So mining a bitcoin also creates lots of e-waste.

I think it’s crazy, when you think that this nonsense has wiped out all of the progress made by e.g. mandating very low standby current on chargers at idle. Our poor little planet can’t handle bitcoin’s future.

Yes we could totally forget about crypto and then we could forget about all the environmental stuff and just go back to the way everything was in say the 90s and it would all be a wash. Kind of a depressing thought isn't it? All of our efficiency gains are just wiped out by some other use of energy, our overall consumption just keeps rising. A lot of the people I know that talk a lot about "green" stuff are also the ones that are into crypto ironically.

[EEVblog]

A lot of the people I know that talk a lot about "green" stuff are also the ones that are into crypto ironically.

There are a lot of crypto systems that don't use much power at all.
I posted the numbers once for LBRY/Odysee. The miners that keep the system running use very little power in the scheme of things.

[EEVblog]

I wonder how this compares to resource wastage and environmental impact of gold mining.

It would be pretty disastrous to back a major currency with gold again too, yes.

Why?
You just have to peg a ratio.
Does mean you can't just print more out of thin air though, and well, they can't give up that magic ability.

[nctnico]

I wonder how this compares to resource wastage and environmental impact of gold mining.

It would be pretty disastrous to back a major currency with gold again too, yes.

Why?
You just have to peg a ratio.
Does mean you can't just print more out of thin air though, and well, they can't give up that magic ability.

The latter is because you need to adjust the amount of money to the size of economy and add some inflation on top. Otherwise everything grinds to a halt. You can't back money with some physical item that is in limited supply (whether it is gold, crypto, sea shells, etc). In the end money represents an amount of work. The more people work, the more money you need and hence the need to being able to print more money.

Imagine a village which has 1kg of gold. Now the population doubles and twice as many people need to buy bread. With only 1 kg of gold it means that the amount of gold that used to pay for 1 bread now has to be worth 2 breads. And the people that have extra gold will sit on it instead of investing their gold into more economic growth so even less is available for use in the economy. Hyper deflation! 'Pegging a ratio' goes flying out of the window!

Bottom line: you really need to let go of the idea that money is actually worth something tangible. It isn't. It is a bartering tool to exchange labour. In the end any value of money is created by somebody doing work.
 

[EEVblog]

The latter is because you need to adjust the amount of money to the size of economy and add some inflation on top. Otherwise everything grinds to a halt. You can't back money with some physical item that is in limited supply (whether it is gold, crypto, sea shells, etc). In the end money represents an amount of work. The more people work, the more money you need and hence the need to being able to print more money.

Gold backed currencies worked quite fine for a long time. You can build some inflation into your ratio peg.
The idea is to stop, or at least put the brakes on the modern theory of just printing your way out of problems instead of actually solving them. e.g. Let's actually cut back on military spening this year to pay for all this covid stuff. Radical thought, I know.

[RJSV]

Yeah, I don't follow the logic, exactly, but seems to make sense, (the above discussion on GOLD based economies).
   However, I DID pick up on the fact that, Janet Yellen etc.al. were warned.  "DON'T do these massive spending, as inflation will, predictably, skyrocket."
But then, Yellen saying "Gee, we had no idea or warning, that this (runaway inflation) could ever happen."

   It all sounds just so fresh-faced and innocent, as she (they) shrug off any responsibility.  It's just "Whoops, must have been something Trump did...
They were warned, plenty.

[nctnico]

The latter is because you need to adjust the amount of money to the size of economy and add some inflation on top. Otherwise everything grinds to a halt. You can't back money with some physical item that is in limited supply (whether it is gold, crypto, sea shells, etc). In the end money represents an amount of work. The more people work, the more money you need and hence the need to being able to print more money.

Gold backed currencies worked quite fine for a long time. You can build some inflation into your ratio peg.
The idea is to stop, or at least put the brakes on the modern theory of just printing your way out of problems instead of actually solving them. e.g. Let's actually cut back on military spening this year to pay for all this covid stuff. Radical thought, I know.

That is a bad idea and exactly why gold (or whatever) backed systems don't work. If you print extra money, you can get people to work on military stuff and improve (increase) the economy which in turns backs the value of the extra money. Government debt is only a problem when people stop to work so there is some carefull planning required (and why we have a limit on the debt versus GDP ratio in the EU). In a way you can even doubt government debt is an actual debt; more likely bookkeeping to show how much money was printed.