BILL ACKMAN SAYS GOVERNMENT HAS 48 HOURS TO BAILOUT SVB — ECHOES OF LEHMAN BROTHERS RING LOUD

Maximum fucking happenings this weekend as the world tries to figure out the next bank to fail. We know now the most woke bank in America did many things wrong, one of which was not having a risk officer for 8 months prior to Jan 2023. By that time, the die had been cast and SVB was well on its way towards perdition.

These things happen when confidence is lost. It can quite honestly happen to any bank. If people lose confidence they pull money out and if enough people do it at the same time — IT’S OVER.

A few bullet points until I give some ideas.

Joseph Gentile is batting 1000 in major bank blow ups — current Chief Admin Officer at SVB and was CFO at Lehman at time of its collapse pic.twitter.com/02YKtcvWGG

— The_Real_Fly (@The_Real_Fly) March 11, 2023

SVB POLITICAL DONATIONS LEAN HEAVILY DEMOCRAT pic.twitter.com/X7NNdVN4Ws

— The_Real_Fly (@The_Real_Fly) March 11, 2023

Don’t look now, but the 2 year Treasury is down almost 50 bp in two days. Last two times this happened: 2001 and 2008.

Uh oh.

— Jeffrey Gundlach (@TruthGundlach) March 10, 2023

HELLO $C pic.twitter.com/jL5Ja7NJ6u

— The_Real_Fly (@The_Real_Fly) March 11, 2023

On the issue of bailout — many prominent businessmen are coming out in favor of it. I am not surprised, since SVB is an integral part of the fucking VC scheme that has been perpetuating absurd valuations in Silicon Valley for decades and without that scheme running — the scum in DC would be woefully undercapitalized.

But let’s platy devil’s advocate here and pretend it’s a good idea to bail them out. Here is Bill Ackman’s long form tweet, which I will mildly edit to make it more readable, on the matter.

The gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake. By allowing @SVB_Financial to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank. Absent @jpmorgan @citi or @BankofAmerica acquiring SVB before the open on Monday, a prospect I believe to be unlikely, or the gov’t guaranteeing all of SVB’s deposits, the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ‘systemically important banks’ (SIBs).

These funds will be transferred to the SIBs, US Treasury (UST) money market funds and short-term UST. There is already pressure to transfer cash to short-term UST and UST money market accounts due to the substantially higher yields available on risk-free UST vs. bank deposits. These withdrawals will drain liquidity from community, regional and other banks and begin the destruction of these important institutions. The increased demand for short-term UST will drive short rates lower complicating the @federalreserve’s efforts to raise rates to slow the economy.

Already thousands of the fastest growing, most innovative venture-backed companies in the U.S. will begin to fail to make payroll next week. Had the gov’t stepped in on Friday to guarantee SVB’s deposits (in exchange for penny warrants which would have wiped out the substantial majority of its equity value) this could have been avoided and SVB’s 40-year franchise value could have been preserved and transferred to a new owner in exchange for an equity injection. We would have been open to participating. This approach would have minimized the risk of any gov’t losses, and created the potential for substantial profits from the rescue. Instead, I think it is now unlikely any buyer will emerge to acquire the failed bank. The gov’t’s approach has guaranteed that more risk will be concentrated in the SIBs at the expense of other banks, which itself creates more systemic risk. For those who make the case that depositors be damned as it would create moral hazard to save them, consider the feasibility of a world where each depositor must do their own credit assessment of the bank they choose to bank with.

I am a pretty sophisticated financial analyst and I find most banks to be a black box despite the 1,000s of pages of
@SECGov filings available on each bank. SVB’s senior management made a basic mistake. They invested short-term deposits in longer-term, fixed-rate assets. Thereafter short-term rates went up and a bank run ensued. Senior management screwed up and they should lose their jobs.

The @FDIC gov and OCC also screwed up.

It is their job to monitor our banking system for risk and SVB should have been high on their watch list with more than $200B of assets and $170B of deposits from business borrowers in effectively the same industry. The FDIC’s and OCC’s failure to do their jobs should not be allowed to cause the destruction of 1,000s of our nation’s highest potential and highest growth businesses (and the resulting losses of 10s of 1,000s of jobs for some of our most talented younger generation) while also permanently impairing our community and regional banks’ access to low-cost deposits. This administration is particularly opposed to concentrations of power. Ironically, its approach to SVB’s failure guarantees duopolistic banking risk concentration in a handful of SIBs.

My back-of-the envelope review of SVB’s balance sheet suggests that even in a liquidation, depositors should eventually get back about 98% of their deposits, but eventually is too long when you have payroll to meet next week. So even without assigning any franchise value to SVB, the cost of a gov’t guarantee of SVB deposits would be minimal. On the other hand, the unintended consequences of the gov’t’s failure to guarantee SVB deposits are vast and profound and need to be considered and addressed before Monday.

Otherwise, watch out below.

My take on how we got here:

TIMELINE OF EVENTS

Markets rewarded post 2008 credit crisis via ZIRP and QE

2020 COVID scare shuts down entire economy. No problem — more QE and this time direct payments to everyone as compensation for staying at home

That works out and the market is rewarded.

The $5 trillion in free money coupled with shutting down of economy causes supply chain issues.

The scarcity of goods and increases of asset prices and minimum wage causes runaway inflation.

They blamed Putin for this.

The Fed is forced to fight inflation since traditionally fucking with the cost of food topples governments.

The sharp increase in rates slows the economy and causes job cuts at vulnerable companies.

Persistent inflation, thanks to non stop govt spending (hello Ukraine) forces Fed to remain hawkish in the face of slowing economy.

Since 2008, corporations have stored money in treasuries. Since last yr, rates have gone up from 0 to over 5%, sending the price of those bonds spiraling lower.

Now those corporations are sitting on mammoth losses — all thanks to the credit crisis of 2008 and COVID era policies of free money and plant closures.

We are here now.

The big question everyone is asking is — who is next?

For starters let’s look at some of the companies who have big deposits at SVB. Reminder: $200b in deposits and 98% of them uninsured.

1. Circle: $3.3 billion
2. Roku: $487 million (26% of cash) (ROKU)
3. BlockFi: $227 million
4. Roblox: $150 million (RBLX)
5. Ginkgo Bio: $74 million (DNA)
6. iRhythm: $55 million (IRTC)
7. Rocket Lab: $38 million (RKLB)
8. Sangamo Therapeutics: $34 million (SGMO)
9. Lending Club: $21 million (LC)
10. Payoneer: $20 million (PAYO)
11. Noventa $65 million (NVTA)

Here are the banks Wall Street is saying is in trouble now.
(1 WEEK RETURN)

PACW -55%
SBNY -39%
WAL -35%
FRC -34%
SCHW -25%
AX -21%
STEP -21%
ZION -18%
LNC -18%
PNFP -18%
APO -18%
SOFI -18%
WBS -18%
OZK -17%
BKU -17%
LOB -17%
COLB -17%
BHF -17%
EWBC -17%
NTB -16%
FITB -16%
CFG -16%
SNV -16%
TFC -16%
ALLY -16%
CMA -15%

For anyone who traded the 2008 crisis, you’re having dejavu now looking at the list above. All we need to make the list match perfectly is C and AIG to enter the fray, and perhaps see the autos fail too.

The issue at hand here is interest rates and the losses the banks have as a DIRECT RESULT of Fed hiking. We aren’t even game planning an economic malady yet. This is bank stress due to rates, not a poor economy. If these fucking banks start to get hit with delinquencies — it is 100% over — game.set.match.

Here are the banks with the lowest FDIC protection as a percentage of accounts less than $250k.

ALMOST ALL OF $SVIB’s CASH DEPOSITS ARE UNINSURED — HIGH NET WORTH ACCOUNTS

ALL EYES ON $SBNY pic.twitter.com/dO5qbuHk9j

— The_Real_Fly (@The_Real_Fly) March 10, 2023

Should we bail them out? If you enjoy this version of capitalism yes. If we do not bail them out — many other banks will fail. Look at the plight of CHARLES FUCKING SCHWAB — dealing with an issue called “CASH SORTING” which is basically a run on the bank due to people transferring out of Schwab money markets in favor of higher yielding ones.

HEY — they wanted to give us free trades.

Since Biden is in office, a person who voted for every bailout he has ever seen, we are likely to get some form of government intervention before the market opens on Monday. If not, to quote a once great man “watch out below.”

The 12-14% gains in the IWM have been wiped the fuck out. Whilst I did lose 3% for the week, I’d like to remind the lot of you that my returns are about +26% for 2023. With these immense talents, I shit-post on Twitter regarding Russian military movements and post pictures of Belarusian dictator ALEXANDER LUKASHENKO inside Stocklabs Pelican Room.

I had booked gains of $20k today, but still ended down more than 2% — mostly due to an FORCED 100% long book. Rules are rules. I will liquidate all holdings at the open on Monday and then reallocate into my weekly quant after 12:00pm.

So what exactly is happening?

It appears the Fed rate hikes and the losses in treasuries have caused immense UNREALIZED losses at the banks. But understand, this is all smoke and mirrors. There isn’t any “real” losses unless you feel the US Treasury will not uphold their debt payments 30 years from now. Also, if rates continue higher, price of long dated bonds will crater again — accentuating the issue. This is why banks and others are switching from long dated to short dated bonds and this is why the yield curve is so fucking inverted.

US 1mo bills are yielding 4.72%
US 4mo are yielding 5.2%

US 30yr 3.7%!

This is a key indicator for recession. But not only that, it also spells some real systemic issued with trying to defeat inflation while at the same time staving off a full blown bank collapse.

Nevertheless, the govt will do something and we might rally soon. I kept a massive UVIX and SQQQ position to hedge my longs in the event we see PACW, WAL, SBNY collapse again on Monday. We are at the edge of the precipice and although I do believe the next move is UP, I would never be able to forgive myself for missing out on what might turn out to be a full blown banking crisis. My losses were somewhat avoidable today, had I traded better. I traded poorly and my timing was off. But it wasn’t all that bad for the week — seeing the NASDAQ’s losses were roughly 8% against my rather moribund 3!

The Fly wins, even when he loses.

The NASDAQ is only down 195 and normally it wouldn’t be a big deal. But at the heart of this collapse are the banks. THEY are funded by these banks and they’ll do whatever it takes to save them. Understand something, empires rise and fall based upon liquidity. We are a nation of debt and without the banks to finance our chicanery, the entire house of cards will fall.

Because of this, I expect some sort of government intervention by Sunday night.

Why do I feel this way?

Observe

Again, on the surface — a 10% drawdown in the XLF over the past month isn’t a big deal. But the smaller banks featured in the KRE are down 20% this week alone. What’ll end up happening is big bank will eat little bank and I suppose this was part of the plan all long — OR perhaps they’re just idiots.

Either way, the volatility is extreme, as evidenced by the VIX blowout –now +20%

To be down just 205 on news the second largest bank failure in the history of the US is rather bland. I would expect to see something akin to 2008, whereby bids vanish alongside the money of those who had it coming.

I will have you know, I have recovered some of my losses. I made a series of dumb reactionary trades earlier and already have a 100% long book. I am down about 1%, mostly due to a 14.5% gain in UVIX — which I just closed out. I am presently hedged with 40% weight in inverses.

It’s official. SVB has been placed into government receivorship. All f this occurred, 100%, due to inflation and Fed rate hikes. Without the hikes, SVB would not have incurred billions in losses from their fucking treasury bond purchases.

This is what happened. Their cash reserves placed in treasuries tanked as rates climbed. In an attempt to extricate themselves out of the situation, they began moving from long dated to short dated and as a result realized massive losses.

This is not an issue unique at SVB. All banks have massive losses on their books, as a direct result of Fed hikes. The fact that most of SVB’S assets were uninsured is an entirely different story. But the fact remains: higher rates is causing things to break. Look at Schwab. That stock is tanking due to ‘cash sorting’ concerns aka customers transferring cash out in search for higher yield. This, coupled with stocks cratering, is a modern day bank run.

Bottom line:

Banks are sitting on $300b in unrealized losses in treasuries. That number will skyrocket as the Fed hikes. We all knew this would happen and the Fed most certainly intended for this to occur, or at a minimum knew it would causes failures. What the government is likely to do is create some sort of scheme that will enable banks to hide their losses on treasuries held. This way we can pretend and just keep doing the same old shit — sending money to Ukraine, funding wars, and doing whatever the fuck we want in spite of the rather inconvenient annoyances like bank failures.

SVB halted down 50% plus. I stopped watching. It’s 100% over. Who were these fucking clowns? I’ll show you.

CRAMER REPEATING HISTORY WITH LAST MONTH’S $SIVB CALL
pic.twitter.com/9wMRzqPOGw

— The_Real_Fly (@The_Real_Fly) March 10, 2023

AS SHARES OF $SIVB COLLAPSED, THIS WHAT THE FUCKING LUNATICS AT SVB WAS POSTING ON LINKEDIN pic.twitter.com/hxfdKqjt9E

— The_Real_Fly (@The_Real_Fly) March 10, 2023

ARE YOU FUKIN KIDDING ME !!!! #ACKMAN IS THE #THUNBERG OF #WALLSTREET #WTF $SIVB LET IT FAIL !!! #ICHAN SLAP BILL WITH PATTONS GLOVE #HERBALIFE https://t.co/dL1WXftVrA pic.twitter.com/GXthjfpXrH

— STOCKMASTER2000 (@STOCKMASTERJAY) March 10, 2023

LET’S TALK ABOUT WHY ?@BillAckman? MIGHT WANT A GOVT SPONSORED BAILOUT OF A COMPANY WHO PLACES VIRTUE SIGNALING AHEAD OF RESPONSIBLE BANKING. $SIVB pic.twitter.com/rHQFLXWL5T

— The_Real_Fly (@The_Real_Fly) March 10, 2023

Head of Financial Risk at SVB Jay Ersapah might’ve been busy with more important projects at the bank, such as LGBTQ issues, rather than assessing risk $SIVB pic.twitter.com/LTYWph50Uc

— The_Real_Fly (@The_Real_Fly) March 10, 2023

This was the wokest bank in America — and now they’re broke. Any questions?

The subsequent result of SI and now SIVB collapsing is contagion. Have a look.

Cratering banks pic.twitter.com/inN656LWf0

— The_Real_Fly (@The_Real_Fly) March 10, 2023

How am I playing it?

I closed out my shorts at the open and now I bought back some TZA — but I am extremely hesitant to short into the hole because banks are systemic and the Fed will not sit idle without trying to intervene. There is a 100% chance of government intervention. Even Bill ACKMAN was calling for the govt to bail out SVB last night.

As you know, I keep a 100% long book at all times, so I’m fighting against the current. I’m down 79bps and although I’d love to be up and profiting from the demise of so many, this is the strategem that has worked for me so I’m patient.

My hege is about 20% of assets, so I’m net long. I’m net long because I don’t trust the meddling fuckers and expect chicanery soon.

Listen to me. This isn’t for your benefit — but only for my musing.

I am built to trade in the fires. I long for it. I will sacrifice for it and will not waiver as it crescendos lower. About mid-morning I lamented over the fact I had been distracted and was down 1.6%, with a 100% long only book. What I did next was nothing less than spectacular.

I identified the weakness in the banks and saw the undervalued nature of the VIX and legged the fuck in. I kept my 100% long book and turned that fucker all the way around — closing +24bps for the session. I was up as much as +85bps.

I had $27k in day trade profits. I did close out all shorts around 3:30 in order to book it. I then re-added them into the close — ahead of the jobs report.

I closed 35% weighted in SQQQ and 10% UVIX.

What do I think will happen next? I have my feelings but I’ve always had feelings and they’ve never done anything for me. What I am good at is reacting to things in real time. I averted what was likely to be a 3.5% drawdown in favor of a small gain. I did this, not by panicking or through greed — but merely chasing the rabbit into the hole and applying hedges into the weakest areas of the market during a rout. It wasn’t very hard and I am sure you could’ve done it too.

There are two types of people in this world: those who think about things and those who do it.

We are finally getting some contagion action post BTC collapse. The ramifications of the collapse in Bitcoin are being felt severely today in the shares of SI, SIVB, PACW, SBNY, amongst others. The announcement that Silvergate would wind down operations aka COLLAPSE is sending shockwaves throughout Wall Street today, and for good reason.

I cannot recall the last time banks had been down this much in two days, now off by 6.6% the past week. You would do yourselves great injury by ignoring this. I have placed ample shorts via FAZ and some lotto tickets in UVIX — just in case.

Is this the beginning of a credit collapse? God I hope so.

$SIVB announces $1.75 b common stock and $500 mm preferred stock offerings, as it tries to shore up its balance sheet. It also sold most of its $21 b "available for sale" securities portfolio, resulting in -$1.8 b in after-tax losses for Q1 2023. These were likely necessary… https://t.co/pQonL4vzyj

— Raging Capital Ventures (@RagingVentures) March 8, 2023

My run is over. I fell victim to a vagrant form of identity theft last night and have been consumed by it all morning, tracking down the devil who placed an order for an iPhone under my name. I will find him and cut his head off.

Because of this distraction, my seemingly infallible grip on the stock market has been changed and I am now chasing the dragon instead of leading it. I had a massive short position at the open, which I errantly discarded and now I re-entered an oil short but too late and have been placed in a position of loss to the tune of -1.05%. It’s safe to assume that my recent streak of fantastic luck through skill is over and I will now spend the next 6 months attempting to achieve former glory.

To me, the market had looked good this morning. I was on the phone with TRANS-FUCKING-UNION at he time my fortunes turned from up to down and now I am blackpilled to the point where I cannot think of a method of go green today. As sure as I am sitting here, I will try, and then fail, and then try again.

How can it be defeated? It’s so strong — yet so weak. Rates cannot stop it. War cannot stop it. Humiliating defeat cannot stop it. Riots and social upheaval only embolden it. Every time something dreadful happens, like the entire economy shutting down or some sort of massive credit event — it slithers out from its grave and plants itself elsewhere only to grow stronger. It even changes its gender/race when it suits it best and tricks everyone into feeling sorry for it — just before it knifes you in the back.

From the looks of it, it appears it cannot be defeated. You can profit from it, via QQQ or SPY — since its wealth is intertwined with those indices.

I have tried my entire life to really get behind some sort of PERMANENT CRASHING of the US economy and to bear witness to it being destroyed. Alas, I wait, eagerly, yet with great impatience. I am tired of pretending and playing along with it — for the sake of my own financial security.

I closed down 50bps since I have heavily hedged into a net short position. The final 20 mins of trade saw it ramp stocks straight the fuck up, in what can only be described as an exhausting session of obvious manipulation and handling.

NEVERTHELESS, we eagerly await.

POLITICO BANS THE FOLLOWING WORDS:
Mankind
Man-made
Manhunt
Crack the whip: unacceptable because of origins in slavery
Waiter or waitress: server should be used instead
Biological gender, biological sex, biological woman, biological female, biological man, or biological male… https://t.co/Q70slNRDpG

— The_Real_Fly (@The_Real_Fly) March 8, 2023

In my opinion, markets are setting up for a ruinous leg lower. But I could be wrong and I like to hedge all of my bets, including my opinions — since they might change. All I know is this: everything is rot. everything is scornful. The future is bleak.

That much I am certain about. What the market does from now until then is somewhat of a mystery, in late stage satanic edition of Pax American — under foreign occupation.

I keep vacillating between long and short in my trading — unable to make up my damned mind. I know for some of you losers — seeing Le Fly magnificent and at the peak of his performance is hurtful to you, seeing that you disagree with my Tweets. My little tweets get you so very MAD! Big MAD! You huff and puff and try to blow my house down — but it’s made of stone, ancient stone really, and your teeth will fall out before my house falls.

I reign dominion over this financial internets. All others are either vassals are plebs hiding under my drawbridge. When I am finished pissing into the waters, I will order my crocodiles to eat you.

I am down 19bps for the session, 25% short on top of a 100% long book –+28.4% for the year in a public portfolio.

.