And because of their duration in their hold to maturity portfolio, that - and they also had their available-for-sale portfolio, they had a lot of losses. They went out an extra like eight years or nine years on the duration curve for an extra 40 basis points of yield. And Silicon Valley Bank had made the same mistake that Silvergate had made, and that rather than investing this very quick ramp of deposits into short dated highly liquid securities. ![]() So these were companies that had – there were cash flow, they were loss-making companies or companies that burn cash that their deposits were going to start shrinking just organically. And by the end of 2022, the venture-backed business, venture-backed investment had declined quite a bit. And it went bananas with start-up companies who burn cash. And Silicon Valley Bank’s deposit base went bananas. venture investing between 2000 and call it, the end of 2018 and the end of 2021. And lo and behold, Silvergate Bank - I mean Silicon Valley Bank ( OTC:SIVBQ), I still get those guys confused are - was basically the same thing. So I said, all right, well, let me see if there's anyone else like this. And so with the increase in interest rates that had occurred, by the time FTX blew up, you had quite a bit of loss in that mortgage portfolio, which if they were forced to monetize, was going to create problems because the losses exceeded book value. And not only were they going to lose a deposit from FTX, but I thought that they could lose a lot of deposits coming out of this crypto exchange network.Īnd what they had done with that rapid growth in deposits - when I say rapid growth, I think they've gone from like $2 billion in deposits to $14 billion over the course of like two years or something, like insane growth in deposit base for a bank, is that they bought mortgages, mortgage-backed securities, and they bought duration. So we're actually - I was actually short Silvergate.Īnd I started looking around - and one of the things that was good about Silvergate as a short is that they'd had this very rapid growth in deposits, thanks to that crypto currency exchange network. And Silvergate also had a big network that they call the exchange network for trading cryptocurrencies, which I thought would also decline in value. And I said, okay, that's bad for Silvergate. And I saw that they had a very large account of Silvergate ( OTC:SICP). And when FTX blew up, I was looking for what some of the fallout from that would be. Why don't we do a quick review of that before we move into a whole bunch of other exciting topics? Why don't you breakdown how you had an idea that it was going to have some problems?ĬH: So I was following bitcoin's demise last year pretty carefully. And a lot of people noticed that, especially when it got into the news. ![]() You had a short on SVB about three or four months before it tanked. So I want to jump right in here with banks. How are you doing?ĬashFlow Hunter: I'm doing great. He currently works at a hedge fund, and is sharing his picks and some of his trades with folks in his service, CashFlow Hunter. And I'm here interviewing CashFlow Hunter today, who has had some very interesting calls over the last year. This is Kirk Spano with Margin of Safety Investing on Seeking Alpha.
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