and then guess who was #1 recipient of Loan Advances from Federal Home Loan Bank of San Francisco, As of December 31, 2022, having had $0 a year earlier? Only $17 billion. Silver gate just happened to be #6 with $4 billion. First Republic was #2 at $14 billion...
Peter, economics makes my eyes cross sometimes but I try to get the gist of your excellent posts. Does cronyism play a part in how these smart (?) people do this kind of risky business with funds? Winks and nods? Back scratching? Is there some underground message they get that the good old poorer by the minute taxpayer will bail them out or $$ will be printed out by the democrat unicorn? We finally had adequate funds to carry us through retirement (we are in our 70’s). And since Biden we see it slip away. That is the simple version of what so many of us are going through. I am not interested in living in my daughters basement a thousand miles away, even if it does have a full bath down there. This sucks.
Is cronyism a factor here? Absolutely. Keep in mind the bank run on SVB started when VC investor Peter Thiel told all his VC buddies to pull their money out. But for Thiel pushing the mass withdrawal this bank run doesn't happen.
As for moral hazard (i.e., bailouts), that's been a presumption of Wall Street ever since the savings and loan debacle of the 1980s. Even with the post-mortem on SVB just started, we can already see that the bank's problems were almost entirely self-inflicted, Wall Street KNOWS they were self-inflicted, and still everyone just shrugged the obvious problems.
Thanks, Peter. Wonder what we should do. I hear CDs are getting better. Cash? 🤷🏻♀️🤦🏻♀️ I hate to think we’ll be huddling around our fireplace in the family room on blow up mattresses with the rest of the house closed off until they take our 4 bedroom house for the monstrous property taxes we pay or can’t pay. But hey, we have a camper. We could run it into the garage and help heat it with a pellet stove (we live in Northern USA) . Or just start the car up in the garage. No worries then. LOL. Just kidding. 2nd amendment relief is a concept that is no stranger at our house. Lol. Just kidding.
The one thing I would definitely encourage you to do is challenge the yearly assessment on your house--you don't have much say over the property tax rates, but you can challenge the assessed value of your house used for property tax calculations. Push that assessed value as low as you can and keep it as low as you can.
It's a bit of a nuisance, but you probably want to challenge that assessment each year just as a matter of routine. New home prices are starting to decline in most markets, and existing home prices are likely to follow suit--which has direct bearing on the assessed value of your house.
CDs and other interest bearing instruments are still likely to be at best a way to slow the erosion of the purchasing power of your cash through inflation. Right now real interest rates for both debt issuances and savings options are all negative--you're losing money because inflation is shrinking your dollars faster than the interest stream is adding to your dollars. For your excess cash you want to be earning as much interest as you can, just to slow the shrinkage, but all interest-bearing options are at this juncture mainly a defensive investment.
Ultimately--and this is why I don't give specific investment advice--you have to gauge your level of risk and your need to preserve value. Those are not questions I can answer.
What I can tell you is that within your preferred level of risk, you want to become a more involved and activist investor to make sure your assets last throughout your retirement. If there is one takeaway from the SVB fiasco is that no one has the luxury of assuming everything is just hunky-dory, not with your bank, nor with your brokerage account. There is no getting away from doing that due diligence--anyone getting to play with your money needs to demonstrate they're worthy of the privilege.
and then guess who was #1 recipient of Loan Advances from Federal Home Loan Bank of San Francisco, As of December 31, 2022, having had $0 a year earlier? Only $17 billion. Silver gate just happened to be #6 with $4 billion. First Republic was #2 at $14 billion...
Peter, economics makes my eyes cross sometimes but I try to get the gist of your excellent posts. Does cronyism play a part in how these smart (?) people do this kind of risky business with funds? Winks and nods? Back scratching? Is there some underground message they get that the good old poorer by the minute taxpayer will bail them out or $$ will be printed out by the democrat unicorn? We finally had adequate funds to carry us through retirement (we are in our 70’s). And since Biden we see it slip away. That is the simple version of what so many of us are going through. I am not interested in living in my daughters basement a thousand miles away, even if it does have a full bath down there. This sucks.
Is cronyism a factor here? Absolutely. Keep in mind the bank run on SVB started when VC investor Peter Thiel told all his VC buddies to pull their money out. But for Thiel pushing the mass withdrawal this bank run doesn't happen.
As for moral hazard (i.e., bailouts), that's been a presumption of Wall Street ever since the savings and loan debacle of the 1980s. Even with the post-mortem on SVB just started, we can already see that the bank's problems were almost entirely self-inflicted, Wall Street KNOWS they were self-inflicted, and still everyone just shrugged the obvious problems.
You are 100% correct: this totally sucks.
Thanks, Peter. Wonder what we should do. I hear CDs are getting better. Cash? 🤷🏻♀️🤦🏻♀️ I hate to think we’ll be huddling around our fireplace in the family room on blow up mattresses with the rest of the house closed off until they take our 4 bedroom house for the monstrous property taxes we pay or can’t pay. But hey, we have a camper. We could run it into the garage and help heat it with a pellet stove (we live in Northern USA) . Or just start the car up in the garage. No worries then. LOL. Just kidding. 2nd amendment relief is a concept that is no stranger at our house. Lol. Just kidding.
The one thing I would definitely encourage you to do is challenge the yearly assessment on your house--you don't have much say over the property tax rates, but you can challenge the assessed value of your house used for property tax calculations. Push that assessed value as low as you can and keep it as low as you can.
It's a bit of a nuisance, but you probably want to challenge that assessment each year just as a matter of routine. New home prices are starting to decline in most markets, and existing home prices are likely to follow suit--which has direct bearing on the assessed value of your house.
CDs and other interest bearing instruments are still likely to be at best a way to slow the erosion of the purchasing power of your cash through inflation. Right now real interest rates for both debt issuances and savings options are all negative--you're losing money because inflation is shrinking your dollars faster than the interest stream is adding to your dollars. For your excess cash you want to be earning as much interest as you can, just to slow the shrinkage, but all interest-bearing options are at this juncture mainly a defensive investment.
Ultimately--and this is why I don't give specific investment advice--you have to gauge your level of risk and your need to preserve value. Those are not questions I can answer.
What I can tell you is that within your preferred level of risk, you want to become a more involved and activist investor to make sure your assets last throughout your retirement. If there is one takeaway from the SVB fiasco is that no one has the luxury of assuming everything is just hunky-dory, not with your bank, nor with your brokerage account. There is no getting away from doing that due diligence--anyone getting to play with your money needs to demonstrate they're worthy of the privilege.