It’s a matter of opinion whether anything less rational and less useful than a bank panic would add more sparkle to this adorable world right now. Seems the financial sector is rethinking the whys and wherefores of a few regional banks with idiocy problems.
The SVB. Silvergate and related issues are actually a rather sad accumulation of issues accumulated during the Long Holiday for Morons in the low rate days. Of course they built up debt. Of course they crashed into their own equity issues. This is about as predictable as a hammer dropping on your foot.
The market, in its questionable ability to find a sunny day, however, decided to shoot itself in the foot by marking down bank stocks. How helpful. Always another way of sending yourselves broke, and they’re ready to find it for you.
The banks, in their equally selfless way, managed to tidy themselves up with a few rescue packages. Another word for such rescue packages is something that should have occurred to you when the first rate hikes happened.
These were not top-tier banks. They were banks of various weight brackets. The regional banks are a very mixed bag. They’re not cookie cutter scenarios, either, but the markets bashed to sector pretty thoroughly.
The global markets, famous for their good taste and practicality, followed suit. The rest of the world hasn’t quite caught up with it, The Australian ASX rebounded more or less on principle, rather than objective analysis.
The trouble with market psychology is that someone thinks someone else knows something. This is the same market which is prepared to raise the price of oil worldwide on the basis of a pinhole in a Nigerian pipeline, so it’s always fun to watch.
The minor issues muttering in the background are:
No cold-blooded analysis of the regional banks and risk was undertaken. If you guys would stop with the dynamic accounting and focus on facts, proper accountancy, and risk management, it’d help.
It is quite absurd to assume all banks are in identical situations. Risk is specific, not sector-wide. The market as usual assumed the worst. The various regional banks all seem to have sorted out any issues pretty quickly, anyway.
The wider environment of ridiculous price rises and gouging is hardly the place for wiping out whatever market capital people have left with mindless panic. People have little enough money as it is.
Somebody is now talking about “US CPI supporting lower rates”. Believe it when it happens, and not before.
The bottom line is this: All that accumulated low-rate debt is now effectively obsolete. The free lunches are over. Work on that.
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Disclaimer
The opinions expressed in this Op-Ed are those of the author. They do not purport to reflect the opinions or views of the Digital Journal or its members.
