Banks are obviously having a rough week. The collapse of Silicon Valley Bank (SVB) and Signature Bank and despite the FDIC saying they would
guarantee all depositors at these failed banks, is what caused the diving stock prices for banks across the board. SVB was the first to collapse and this is essentially why Signature Bank collapsed. The very brief rundown of what happened is as follows; SVB was the go to for Tech Startups and got flushed with cash in 2021 when interest rates were low and tech startups were able to raise funds, a lot of funds, with ease. This was a bit of a problem for SVB because banks typically make money by
lending money, but all its clients had enough cash because of how easy the fund raising was. So SVB decided to invest in long-term bonds. However, when the fed decided to hike interest rates it made the value of bonds plummet and all the tech startup CFOs started talking to each other and decided to pull out $42 billion from SVB all at once. It goes without saying that SVB could not honor the withdraw requests, hence the collapse. FYI…Silvergate Bank failed this past week as well, but they were
not as “big” as the other two.
THE BASICS = SVB didn't
have the cash on hand to liquidate the withdrawal requests because they were tied up in long-term Bonds. They started selling their bonds at a significant loss, which caused distress to customers and investors.
The banks that failed were extremely heavy on tech and crypto and when FTX failed, their demise was kind of inevitable. The FTX ripple effect seems to be continuing for the long haul. Talk about a Crypto winter. All this bad news for banks, cryptos, and tech start-ups even depegged the USD backed stable coin. The USDC, which is supposed to always have a $1 =$1 to the actual US dollar, sank to a low of .87 cents.
A California court just ruled that Uber and Lyft can keep classifying drivers as independent contractors. This means low overhead for the ride share apps
will remain in place. This was a big fear for a good amount of time that put fear in investors hearts.
Chic-fil-A plans to expand their fast-food empire to international grounds. The Chicken sandwich king remains a private company but they plan on using over $1 billion
in capitol to expand outside of the US.
Mortgage Rates fell to 6.5% last week. Though the rates are down from the high of 7% they are still crazy high compared to the past few years. Many analysts are
still divided on whether we are on the cusp of a housing bubble, though most believe that if we are on the verge of a bubble it wont be as serious as the 2008 burst.
A richsession could be on the horizon. A richsession is a term that is being used for a recession that
actually affects the rich in more ways than It does the middle class and poor. The reason for this is that the job market is hot right now for hospitality type jobs like waiters and bartenders, aka middle class and poor workers depending on where you work, and it is cold for high tech earners given all the mass tech layoffs. What it all means is that some luxury brands will have suffering profits, while Walmart and Target will excel.
TikTok is awful, this we all know. But should the government ban it? Most would say yes, given all the horrible things on the platform plus what it does to our minds and souls, not to mention the national
security concerns!! However, if the government does ban TikTok what implications will that
have on future free speech governance? National Security from foreign threats has to be the reason for banning TikTok. If it was just being banned for its immoral and brain killing content, then a slippery slope that leads to government backed cancel culture may be in our future.
