Tom Faranda's Folly

BB: Startling footage of who was behind January 6

"What you are about to see is shocking," Carlson warned viewers before airing the video. "Parties from both inside and outside the government have tried desperately to keep this footage from ever being seen. Now we know why."

Friday wordle

Close.

Starwood Capital CEO - economy will have a hard landing

Barry Sternlicht and this guy is pretty sharp. He was interviewed yesterday on CNBC's Squawk Box. The problem: the banks (if they had to mark their bonds to market many of them would be insolvent) and commercial real estate.

Here's a 4 minute brief excerpt (and he makes the point "the banks were following the rules"). Unfortunately the full 16 Minute interview is for pay only. But you will get the gist.

Short version of Sternlicht interview

Thursday wordle

Good news! Alcohol and dementia

From my MD friend, PN.

From JAMA

 

Alcohol and dementia.

 

 

Conclusions

In conclusion, our analyses indicate that maintaining mild to moderate alcohol consumption is associated with a decreased risk of dementia, whereas maintaining heavy drinking is associated with an increased risk of dementia. Notably, our analyses stratified by the initial amount of alcohol consumption indicate that reduction of drinking from a heavy to a moderate level and initiation of mild drinking were associated with a decreased risk of all-cause dementia and AD.

AD =Alzheimer’s 

Daily intake :

Mild 1/2 drinks 

Moderate 3

Heavy 4 

 

Wednesday wordle

No picture! Forgot to take one. Got it in four lines - can't remember the word.

Donald Trump's attorney speaks

Joe Tacopina - Don Imus used to have this guy on his show and he's a real flame throwing, take no prisoners attorney

 

Tuesday wordle

Pigs Fly. Steve Forbes agrees with Senator Elizabeth Warren

But for different reasons. Three minute video.

 

Monday wordle

Three minutes.

Sunday wordle

"The Chosen" & a young girl with Asperger's

Love this. It's a three year old video done after the first season of The Chosen. Beautiful.

 

Dan Niles - very good record - on the banks, the economy & the markets

This guy has been right for the last 18 months. His prediction for the stock market - in the last half of the video. Niles company is a hedge fund.

 

Saturday wordle

Tough one. Took 11 minutes.

Carl Icahn: "Net worth of median household is basically nothing"

So Icahn (net worth over $50 billion. He is a major philanthropist.) is saying that the bottom 50% of households have no net worth. They may have income, they may own a house, but when you pile on debt, they have nothing. I'm sure he's not too far wrong.

That was Wall Street billionaire investor Carl Icahn, speaking to CNBC’s Closing Bell on Tuesday, in the aftermath of emergency action taken by the government to mitigate the impact of one of the largest bank failures in U.S. history. The co-founder of Icahn Enterprises says that his investment portfolio is set up for more pain in the U.S. economy, which he notes is being buffeted by rapidly rising interest rates and escalating concerns about its overall health, as the Federal Reserve attempts to prevent inflationary pressures from becoming entrenched.

Friday wordle

The Sage of Rehobeth Beach - last name Biden - speaks

On transgender surgery on minors. Thanks to Ed Mechmann.

President Joe Biden criticized Florida’s regulation of transgender medical care for children and ban on gender ideology in the classroom, calling the measures “close to sinful.”

Biden said in an interview with Daily Show guest host Kal Penn: “What’s going on in Florida is, as my mother would say, close to sinful. I mean it’s just terrible what they’re doing.”

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During his interview, Biden added that federal legislation might be necessary to prevent states from adopting certain bills that affect transgender policies related to children.

“It’s not like, you know, a kid wakes up one morning and says, ‘You know, I decided I want to become a man or I want to become a woman,” the president said. “I mean, what are they thinking about here? They’re human beings, they love and have feelings. … It’s cruel. We [should] make sure we pass [federal] legislation like we passed on same-sex marriage. You mess with that, you’re breaking the law and you’re going to be held accountable.”

In Florida, a ban on transgender surgeries and medications for children, issued by the state’s Board of Medicine, goes into effect March 16. Lawmakers have also proposed legislation banning transgender medical procedures.

Florida Gov. Ron DeSantis has signed legislation that prevents schools from promoting gender ideology through discussions of transgenderism and sexual orientation to young children in kindergarten through third grade. The legislation requires such discussions in later grades to be age appropriate.

The President - pretty appalling.

Thursday wordle

Took two minutes.

"Round up your mates" - classic Guinness spot in time for St. Pat's Day

Yeah pretty good. Guinness is the best. The commercial was made ten years ago.

Wednesday wordle

Former CDC Director on why he thinks COVID came from a lab

I excerpted this - left out the first almost 2 minutes where he lays out is credentials.

Tuesday wordle

"Pope Francis: Gender ideology is ‘one of the most dangerous ideological colonizations’"

He has spoken out many times on this over his ten years as Pope. And see the end of the excerpt.

“Gender ideology, today, is one of the most dangerous ideological colonizations,” Francis said in the interview published on the evening of March 10. “Why is it dangerous? Because it blurs differences and the value of men and women,” he added.

Pope Francis has frequently used the term “ideological colonization” throughout the 10 years of his pontificate, particularly to describe instances when aid money for developing countries has been tied to contraceptives, abortion, sterilization, and gender ideologies.

In a conversation with Polish bishops in 2016, Pope Francis said: “Today children — children — are taught in school that everyone can choose his or her sex. Why are they teaching this? Because the books are provided by the people and institutions that give you money. These forms of ideological colonization are also supported by influential countries. And this is terrible!”

The pope told Piqué that he was not currently writing a new encyclical and denied that he had been asked to write a document on the subject of gender.

While he is not writing something on gender ideology, the pope said that he talks about the subject “because some people are a bit naive and believe that it is the way to progress.”

He said that they “do not distinguish what is respect for sexual diversity or diverse sexual preferences from what is already an anthropology of gender, which is extremely dangerous because it eliminates differences, and that erases humanity, the richness of humanity, both personal, cultural, and social, the diversities and the tensions between differences.”

The pope noted that he always distinguishes “between what pastoral care is for people who have a different sexual orientation and what gender ideology is.”

“They are two different things,” he added.

Monday wordle

"Who Killed Silicon Valley Bank?"

Good WSJ article answering the question. Excerpts below the link.

Apparently no one at the firm perceived any risk from the Fed raising interest rates.

That giant slurping sound on Friday was Silicon Valley Bank imploding. America’s 16th-largest bank had some $175 billion in deposits and disappeared by breakfast. It wouldn’t have happened if not for management mistakes. This was a 21st-century bank run—customers tried to withdraw about $42 billion, a quarter of all deposits. But what triggered the collapse?

Let’s go back. In January 2020, SVB had $55 billion in customer deposits on its balance sheet. By the end of 2022, that number exploded to $186 billion. Yes, SVB was a victim of its own success. These deposits were often from initial public offerings and SPAC deals—SVB banked almost half of all IPO proceeds in the last two years. Most startups had relationships with the bank.

That’s a lot of money to put to work. Some was lent out, but with soaring stock prices and near-zero interest rates, no one needed to take on excessive debt. There was no way SVB was going to initiate $131 billion in new loans. So the bank put some of this new capital into higher-yielding long-term government bonds and $80 billion into 10-year mortgage-backed securities paying 1.5% instead of short-term Treasurys paying 0.25%.

This was mistake No. 1. SVB reached for yield, just as Bear Stearns and Lehman Brothers did in the 2000s. With few loans, these investments were the bank’s profit center. SVB got caught with its pants down as interest rates went up.

Everyone, except SVB management it seems, knew interest rates were heading up. Federal Reserve Chairman Jerome Powell has been shouting this from the mountain tops. Yet SVB froze and kept business as usual, borrowing short-term from depositors and lending long-term, without any interest-rate hedging.

The bear market started in January 2022, 14 months ago. Surely it shouldn’t have taken more than a year for management at SVB to figure out that credit would tighten and the IPO market would dry up. Or that companies would need to spend money on salaries and cloud services. Nope, and that was mistake No. 2. SVB misread its customers’ cash needs. Risk management seemed to be an afterthought. The bank didn’t even have a chief risk officer for eight months last year. CEO Greg Becker sat on the risk committee.

As customers asked for their money, SVB had to sell $21 billion in underwater longer-term assets, with an average interest rate around 1.8%. The bank lost $1.8 billion on the sale and tried to raise more than $2 billion to fill the hole.

The loss flagged that something was wrong. Venture capitalists, including Peter Thiel, suggested that companies in their portfolios should withdraw their money and put it somewhere safer. On Thursday the dam broke and there was no way to cover billions in withdrawal requests.

Mistake No. 3 was not quickly selling equity to cover losses. The first rule of survival is to keep selling equity until investors or depositors no longer fear bankruptcy. Private-equity firm General Atlantic apparently made an offer to buy $500 million of the bank’s common stock. Friday morning, I’d have offered $3 billion for half the company. Where was Warren Buffett? Or JPMorgan?

Before they could get a deal together, the Federal Deposit Insurance Corp. took over to protect up to $250,000 for each depositor. Larger, uninsured deposits are frozen (Not anymore. Fed says they will pay off all depositers). Since the bank took a 9% haircut on the $21 billion in bond sales, that could mean uninsured depositors might get 90 cents on the dollar, but it could take months or years. So venture capitalists are getting emergency funding requests.

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Here’s an important lesson for companies in trouble: On Thursday, Mr. Becker told everyone to “stay calm.” That never works, ever since Kevin Bacon’s character in “Animal House” told everyone, “Remain calm. All is well,” as chaos ensued.

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Management screwed up interest rates, underestimated customer withdrawals, hired the wrong people, and failed to sell equity. You’re really only allowed one mistake; more proved fatal. Was management hubristic, delusional or incompetent? Sometimes there’s no difference.

Sunday wordle

Chase Bank CEO on the best & worst states for doing business.

Considering that Jamie Dimon was born in NY City and he's a Democrat ...  The comments to this youtube video are enlightening.

The video is from Dave Rubin (former Democrat) of The Rubin Report, which has almost 2 million subscribers.

Saturday wordle

Silicon Valley Bank failure; 2nd biggest bank collapse in US history

UPDATE: I will be posting more about this probably on Monday. In the meantime you can be sure that bank regulators in Washington DC and California are scrambling all weekend to negotiate a buyer for this mess.

This is bad and will have ramifications.  The bank was noted for funding Silicon Valley health and technology start ups. Parenthetically it's further proof (not that any was needed) that Jim Caramer of CNBC is never worth listening to. Just a month ago he was heavily promoting their stock.

 

This is from the Walls Street Journal -

How did we get here?

SVB Financial is the parent company of Silicon Valley Bank, which counts many startups and venture-capital firms as clients. During the pandemic, those clients generated a ton of cash that led to a surge in deposits. SVB ended the first quarter of 2020 with just over $60 billion in total deposits. That skyrocketed to just shy of $200 billion by the end of the first quarter of 2022.

What did the bank do?

SVB Financial bought tens of billions of dollars of seemingly safe assets, primarily longer-term U.S. Treasurys and government-backed mortgage securities. SVB’s securities portfolio rose from about $27 billion in the first quarter of 2020 to around $128 billion by the end of 2021.

Why is that a problem?

These securities are at virtually no risk of defaulting. But they pay fixed interest rates for many years. That isn’t necessarily a problem, unless the bank suddenly needs to sell the securities. Because market interest rates have moved so much higher, those securities are suddenly worth less on the open market than they are valued at on the bank’s books. As a result, they could only be sold at a loss.

SVB’s unrealized losses on its securities portfolio at the end of 2022—or the gap between the cost of the investments and their fair value—jumped to more than $17 billion.

What else went wrong?

At the same time, SVB’s deposit inflows turned to outflows as its clients burned cash and stopped getting new funds from public offerings or fundraisings. Attracting new deposits also became far more expensive, with the rates demanded by savers increasing along with the Fed’s hikes. Deposits fell from nearly $200 billion at the end of March 2022 to $173 billion at year-end 2022.

How did this come to a head?

On Wednesday SVB said it had sold a large chunk of its securities, worth $21 billion at the time of sale, at a loss of about $1.8 billion after tax. The bank’s aim was to help it reset its interest earnings at today’s higher yields, and provide it with the balance-sheet flexibility to meet potential outflows and still fund new lending. It also set out to raise about $2.25 billion in capital.

Why didn’t it work?

Following that announcement on Wednesday evening, things seemed to get even worse for the bank. The share-sale announcement led the stock to crater in price, making it harder to raise capital and leading the bank to scuttle its share-sale plans, The Wall Street Journal has reported. And venture-capital firms reportedly began advising their portfolio companies to withdraw deposits from SVB.