#53 Banks: The Final Chapter (For Now)
Hi Everyone! Happy weekend. Hoping for calmer times and weeks ahead. đ
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Banks: The Final Chapter (For Now)
Bank news has dominated the headlines and mindshare of VC GPâs, CFOâs, and fund finance professionals over the past week. This is the third and final chapter (for now) of our commentary on banks as we try to get back to our normal programming. đ
We previously shared thoughts from Eddie Duszlak, who runs Virtuent, a systematic, market-neutral hedge fund focused on small-cap banks (#52 Bank Expert Analysis). This all started with the Bank Blockbuster (#51) on March 10th.
As of the market closing on Friday, March 17th at 4pm ET, the WSJ.com headline noted that âStocks Decline Broadly After First Republic (Bank) Cuts Dividend.â Additional bank headlines covered the home page:, including âSVB Financial Files for Chapter 11 Bankruptcy Protectionâ and âBank Failures, Like Earlier Shocks, Raise Recession Odds.â
These capture the broader market sentiment after another challenging week that saw almost all stock gains wiped out from 2023.
Whatâs Coming Next & Things to Consider Next Week
âFed poised to approve quarter-point rate hike next week, despite market turmoilâ CNBC
âTrouble at SVB and other lenders will test the Fed, and banking, business and consumer confidenceâ WSJ
Banking confidence - where does it go from here? âBanking is a confidence trick. You put money in the bank today because you are confident you can take it out tomorrow; to you, a dollar that you have deposited in the bank is just as good â just as much money â as a dollar bill in your wallet. If you show up at the ATM at any time of day or night, you expect it to give you your dollars.â
âBut the bank doesnât just put your dollars in a box and wait for you to take them out; the bank uses its depositorsâ money to make loans or buy bonds, and just keeps a little bit around for people who need cash. If everyone asked for their money back tomorrow, the bank wouldnât have it. But everyone is confident that, if they ask for their money back tomorrow, the bank will have it. So they mostly donât ask for it, so when they do, the bank does have it. The widespread belief that banks have the money is what makes it true.â Matt Levine, Money Stuff
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