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Banking Problems are Just Starting


               
2023 Mar 22, 12:52am   27,207 views  161 comments

by Misc   follow (2)  

What we've seen so far in problems with the banks is those that purchased long term bonds that went down in value as interest rates went up.

Some mainstream economist crunched the figures and came up with a $620 billion dollar hit to the banks balance sheets if these were marked to market. That is if they needed to be sold.

We haven't even gotten to the fun part yet. That's when borrowers start to not pay back their loans because they ran out of money they could borrow on their credit lines. Credit spreads are widening especially for junk bonds. They are now over a 5% spread to treasuries. That means companies are borrowing at about a rate of 8-9%. Companies trying to roll-over their outstanding debt are gonna find that they just can't pencil in anything except for losses at these new rates. Credit is simply going to dry up for a large swath of corporations.

Good luck to all with your investments.

https://www.axios.com/2023/03/21/high-yield-bond-spreads-show-increasing-recession-jitters

Comments 1 - 16 of 161       Last »     Search these comments

1   clambo   @   2023 Mar 22, 7:13am  

Possible silver lining; if they stop raising interest rates the stock market will like it.
2   Misc   @   2023 Mar 25, 4:54pm  

Collapses start off slow and then kinda go all at once

Here's an update on junk bond. Note the increase in the defualt rate over a 2 week period.

https://www.msn.com/en-us/money/markets/junk-bond-defaults-eclipse-past-two-years-in-3-months-as-wall-street-braces-for-credit-crunch/ar-AA192CJr?ocid=msedgdhp&pc=U531&cvid=2a23142a0da84c1abcd08be76fe781f3&ei=26

There's also about $6 trillion corporate debt just one step above junk. Everyone knows it's a systemic risk with the corporations just playing games with the ratings agencies (once the downgrades happen it will be quite quick).
3   AD   @   2023 Mar 25, 11:51pm  

Misc says


Here's an update on junk bond. Note the increase in the defualt rate over a 2 week period.


Been keeping an eye on one of the big ETF's for junk (or high yield) bonds. Notice the big drop off back during the Great Recession.
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5   RWSGFY   @   2023 Mar 27, 10:41pm  

Patrick says






This is precisely how the coveted "no FDIC" scenario looks like. What's so good about it?
6   gabbar   @   2023 Mar 28, 4:27am  

Misc says

What we've seen so far in problems with the banks is those that purchased long term bonds that went down in value as interest rates went up.

Some mainstream economist crunched the figures and came up with a $620 billion dollar hit to the banks balance sheets if these were marked to market. That is if they needed to be sold.

We haven't even gotten to the fun part yet. That's when borrowers start to not pay back their loans because they ran out of money they could borrow on their credit lines. Credit spreads are widening especially for junk bonds. They are now over a 5% spread to treasuries. That means companies are borrowing at about a rate of 8-9%. Companies trying to roll-over their outstanding debt are gonna find that they just can't pencil in anything except for losses at these new rates. Credit is simply going to dry up for a large swath of corporations.

Good luck to all with your investments.

https://www.axios.com/2023/03/21/high-yield-bond-spr...

Confession: I do keep a couple of dollars hidden my mattress. Is there anything right or wrong with this?
7   GNL   @   2023 Mar 28, 5:00am  

gabbar says

Confession: I do keep a couple of dollars hidden my mattress. Is there anything right or wrong with this?

It depends on your reason for doing it.
8   gabbar   @   2023 Mar 28, 6:22am  

GNL says

gabbar says


Confession: I do keep a couple of dollars hidden my mattress. Is there anything right or wrong with this?

It depends on your reason for doing it.

I don't trust banks, so I figured keeping some in the mattress won't harm anyone.
9   GNL   @   2023 Mar 28, 10:42am  

gabbar says

GNL says


gabbar says



Confession: I do keep a couple of dollars hidden my mattress. Is there anything right or wrong with this?

It depends on your reason for doing it.


I don't trust banks, so I figured keeping some in the mattress won't harm anyone.

Stacking PMs under your mattress might be a better option than cash.
10   HeadSet   @   2023 Mar 28, 2:17pm  

GNL says

gabbar says


Confession: I do keep a couple of dollars hidden my mattress. Is there anything right or wrong with this?

It depends on your reason for doing it.

More convenient to pay hookers.
11   ElYorsh   @   2023 Mar 28, 9:23pm  

The stock market and the economy in general feels like the movie Ocean's 13. The part where they are making the hotel shake withe the "one that dug from the French side"
12   Misc   @   2023 Mar 29, 5:29pm  

The 2 banks that went down took out a hit on the FDIC of about $22.5 billion. The majority of the losses were for amounts over the $250k per account. The fund had $128 billion in assets at the end of last year. The fund was already below statutory limits. The fund only charges fees on the accounts for up to the $250k. The FDIC is wondering how much extra to charge and who to charge for the shortage.
14   fdhfoiehfeoi   @   2023 May 8, 1:30pm  

RWSGFY says

This is precisely how the coveted "no FDIC" scenario looks like. What's so good about it?


FDIC exists to bail out the banks, not the users. Real insurance would be privatized, and would cost more the more leveraged the bank. Under FDIC, banks are incentivized to take as much risk as possible, because the Fed guarantees their bailout.

No FDIC = real insurance = no zombie banks = no bailouts.

Yet another victim of central banking propaganda...
15   GNL   @   2023 May 8, 1:41pm  

NuttBoxer says

RWSGFY says


This is precisely how the coveted "no FDIC" scenario looks like. What's so good about it?


FDIC exists to bail out the banks, not the users. Real insurance would be privatized, and would cost more the more leveraged the bank. Under FDIC, banks are incentivized to take as much risk as possible, because the Fed guarantees their bailout.

No FDIC = real insurance = no zombie banks = no bailouts.

Yet another victim of central banking propaganda...

Makes perfect sense. It's the banks, financial sector and corporations that own the world. Prove me wrong.
16   Booger   @   2023 May 8, 3:12pm  

Misc says

Credit is simply going to dry up for a large swath of corporations.


Which will affect housing prices at some point.

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