Credit rating firms are completely worthless...

[longandshort]

Mentioning the most respected bank analyst in the world is cherry picking? My point was that hardly anyone saw this coming. If they did with any conviction then I would love to see their positioning in regards to this then shortable name. I read all sorts of research on all sorts of issues but very seldomly hear of someone who speaks with conviction that includes timing, or even better, positioning, to walk the talk.

going into January earnings, half the street was sell or hold:

anyway i don't care to die on a hill here, but my point is just that the information was reflected in the financials and reporting of the company (via conferences, such as that bofa one in Feb). to have called the short, you would have wanted to model out various scenarios and kept track of where markets were pricing in terminal rates.

imo this is a great example of how superficial analysis or price and trends aren't sufficient. the analysts who called SIVBs bluff were rooted in very deep research, understood the narrative, and had a clear idea of what the fundamental bet was.

 

[maxinger]

Credit rating firms are completely worthless...

--->

Credit rating firms are completely useless for traders.
It has never been known to be priceless.

 

[TheDawn]

Silicon Valley Bank’s Distress Wasn’t Reflected in Credit Ratings

https://www.wsj.com/articles/silico...ss-wasnt-reflected-in-credit-ratings-93cd9dff

And then they of course woke up... you would think... but no...

We kinda already know that, @Maverick2608. Didn't you watch the movie "The Big Short"?

 

[M.W.]

Care to repost the screenshot with a date as per Jan? If that's true then the community indeed held a more critical view of svb than I assumed. It does not change the fact, though, that this sudden descent came as a surprise to virtually everyone. Some of the most connected individuals among VCs and tech who are very well connected to wall street as well would not have scrambled to get their deposits out had there been more widespread scepticism about the viability of the svb business model.

To give you credit, I like to ask for clarification, when you said "the information was reflected in the fundamentals". What exact information are you speaking of? Clearly the stock price was trending down for months. But it tanked by many dozen percent once the first large depositors rushed for the exits. So, it's probably import to be precise in what you mean with "information" in this exact context.

Also, you said "imo this is a great example of how superficial analysis or price and trends aren't sufficient. the analysts who called SIVBs bluff were rooted in very deep research, understood the narrative, and had a clear idea of what the fundamental bet was."

I don't get what you try to say here

• What bluff are you referring to? The attempt to raise capital?
• You keep on speaking about bets. Yet, I have to say not heard of a single shop who shorted this name in size. Nobody really showed real conviction until it was too late.

I don't think we are sitting too far apart here. I equally don't believe in price and trends alone as a predictor of the future. Many analysts probably developed a fair picture into svb given the limited information available. I say limited because if a single self respecting analyst saw how the bank kept on lengthening the duration of its investment portfolio such analyst would have sounded the alarm bells loud and clear. I miss such calls, but can openly admit that I retired from the industry 3 years ago and don't follow sell side research anymore.

going into January earnings, half the street was sell or hold:
View attachment 309547


anyway i don't care to die on a hill here, but my point is just that the information was reflected in the financials and reporting of the company (via conferences, such as that bofa one in Feb). to have called the short, you would have wanted to model out various scenarios and kept track of where markets were pricing in terminal rates.

imo this is a great example of how superficial analysis or price and trends aren't sufficient. the analysts who called SIVBs bluff were rooted in very deep research, understood the narrative, and had a clear idea of what the fundamental bet was.

 

[zdreg]

Sad to think anyone is just now figuring this out. What next, someone is going to tell me analysts provide alpha?! Economists can make meaningful economic predictions with any sort of accuracy?

Accurate predictions are unimportant for the reputation of an economist, You make predictions one more outrageous and wrong than the next one. Then one will turn out to be right, Your reputation will skyrocket as the public will forget about all your previous false ones.

 

[TheDawn]

You are not a very good BBS/forum poster.

BBS?

 

[longandshort]

Care to repost the screenshot with a date as per Jan? If that's true then the community indeed held a more critical view of svb than I assumed. It does not change the fact, though, that this sudden descent came as a surprise to virtually everyone. Some of the most connected individuals among VCs and tech who are very well connected to wall street as well would not have scrambled to get their deposits out had there been more widespread scepticism about the viability of the svb business model.

To give you credit, I like to ask for clarification, when you said "the information was reflected in the fundamentals". What exact information are you speaking of? Clearly the stock price was trending down for months. But it tanked by many dozen percent once the first large depositors rushed for the exits. So, it's probably import to be precise in what you mean with "information" in this exact context.

Also, you said "imo this is a great example of how superficial analysis or price and trends aren't sufficient. the analysts who called SIVBs bluff were rooted in very deep research, understood the narrative, and had a clear idea of what the fundamental bet was."

I don't get what you try to say here

• What bluff are you referring to? The attempt to raise capital?
• You keep on speaking about bets. Yet, I have to say not heard of a single shop who shorted this name in size. Nobody really showed real conviction until it was too late.

I don't think we are sitting too far apart here. I equally don't believe in price and trends alone as a predictor of the future. Many analysts probably developed a fair picture into svb given the limited information available. I say limited because if a single self respecting analyst saw how the bank kept on lengthening the duration of its investment portfolio such analyst would have sounded the alarm bells loud and clear. I miss such calls, but can openly admit that I retired from the industry 3 years ago and don't follow sell side research anymore.

That screenshot is from January.

I already posted the screenshot of raging capital ventures who did place a short.

You can see the afs and htm portfolio summary in the 10-k. Short interest for the stock went from 1 to 5% by the end of last year. There was some short covering after Jan’s results because management came off as very optimistic (you can listen to the call and see it in the sell side notes).

The macro driver that busted SVB was that dramatic run up in terminal fed funds rate post-Jan cpi, accelerated the cash need timeline and pushed SVB into the solvency crisis. Credit rating agencies then sent them a letter a week before, which caused management to scramble with the cap raise. Ultimately that chain events led to their collapse, that even short sellers weren’t expecting (most were just saying the stock would take a hit as management sold equity to raise capital).

 

[nitrene]

The auditors along with the thieves known as CRAs should have been sued to bankruptcy after 2009. After admitting that they scammed millions of people by giving phony ratings to worthless CDOs they just paid 1 year's profit and went on their merry way I'm sure thanks to that scamming grandpa that everyone on ET loves -- Warren Buffet.

Its ironic that the last real prosecutions of Wall Street scammers were under Republican Administrations -- Arthur Andersen under Bush II & the Drexel Burnham Lambert mafia aka Milken & his cronies under Reagan.

I'm amazed anyone even takes these thieves seriously.

 

[M.W.]

I find this screenshot being a reflection as of January hard to believe, but have to take your word for it.

I am sure you can find a fund to support any story. A 1 billion fund (peak AUM) probably is not really a good reflection of the claim that this was all baked into financial statement. It basically suggests that everyone else missed the red flags. I don't believe this. What was easily observable was a classic deposit taking bank tripping its stock price. (classic except that the clientele was made up of entrepreneurs and VCs)

What happened was that their bonds suffered accelerated losses Q4 last year and everyone ranking and rating them was, as usual, behind the curve, unable/willing to catch up. Nothing was baked into any financials simply because they did not have to report. They classified those as held to maturity which they are allowed to from a regulatory standpoint, simple as that. You don't shit where you eat is why everyone was, as usual, complacent and shut up. There are probably tons of smaller banks in the US who are teetering on the brink of collapse right now... They are in the exact same situation. Everything now comes down to depositor trust and people not all withdrawing funds at the same time.

That screenshot is from January.

I already posted the screenshot of raging capital ventures who did place a short.

You can see the afs and htm portfolio summary in the 10-k. Short interest for the stock went from 1 to 5% by the end of last year. There was some short covering after Jan’s results because management came off as very optimistic (you can listen to the call and see it in the sell side notes).

The macro driver that busted SVB was that dramatic run up in terminal fed funds rate post-Jan cpi, accelerated the cash need timeline and pushed SVB into the solvency crisis. Credit rating agencies then sent them a letter a week before, which caused management to scramble with the cap raise. Ultimately that chain events led to their collapse, that even short sellers weren’t expecting (most were just saying the stock would take a hit as management sold equity to raise capital).