I think he bought preferreds in the last GFC when there was trouble.Originally Posted by boneil
I think he bought preferreds in the last GFC when there was trouble.
He bought a ton more of Citibank recently.
In the last few days Buffett has been meeting with banks and whitehouse officials. This may be a good thing, it may not be.
I could be wrong, here's an idea running through my head. It sounds like there's many more banks out there in danger. Buffett meets with the best banks, then the whitehouse. He's gonna buy up the best smaller banks, and then tells the whitehouse to let the others fail. Other banks fail, and close and Buffett's picks, gets the customers. His banks, of course are the "systemic" ones, the ones that will get bailed out if needed. Yellen recently made comments that the reason SVB depositors were bailed out was because it posed a systemic risk to the system. The other little banks, like the ones with no connections, won't get bailed out.
Of course Buffett wins. But, so does bitcoin. As ;more banks fail, bitcoin goes higher.
IF, the Feds comes out and guarantees every deposit with no limits, then the problem doesn't escalate, and bitcoin doesn't go up. But that would take an act of congress, and that'st not happening. And GOD forbid we get a debt ceiling standoff that causes a default.
Thanos was the hero
UBS just agreed to by Credit Suisse. Let the M and A begin.
I think I read over the weekend that the US has 4000 banks and Canada has about 8 banks. We may be headed for major consolidations over the next few years. This may provide some benefits but also have a lot of negative impacts. I remember during the GFC when there were so many fraudulent appraisals and loans. I was talking to an attorney in TN who said this never would have happened back in the day where we had Church Steeple lenders. I asked him what that was and he said the local banker would stand on the steeple of the church and only lend on the land he could see from there. I know those days are gone but there is something to be said for having a loan made by a local bank to someone in the community that lives there because the banker is going to know more about the person, the business and the property than anyone 100 miles away.
CS, Another case of share holders And BOND holders getting wiped out. So if depositors flee the bank, the banks fail. But what happens when shareholders flee, other than share price collapses? Can a bank survive if their share price collapses to ridiculous levels?
Last edited by boneil; 03-19-2023 at 03:49 PM.
Thanos was the hero
$17B in bonds written down to zero. Thats a big ooofda. There is going to be some very angry people.
In possibly funnier news, at the UBS/CS conference call they spoke of Archegos and a social media storm that had huge repercussions. Archegos had a massive short position on Gamestop held in swaps. Credit Suisse took on those swaps when Archegos went under in 2021. Supposedly, something like 250 million shares in those swaps. All of which will now be on UBS's books.
MEME stonks making a comeback?
And another one…NY Community Bank buys Signature Bank. Who’s next?
It looks like bondholders got wiped out but equity holders will get some shares of UBS in exchange for their CS shares. They flipped the capital structure upside down and bondholders are pissed.
Yep, and it isn't the first time. Remember GM?
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Yep. Makes you wonder if corporate bonds are any safer than equities in certain situations. I wouldn't lose sleep owning a bond from JNJ or Apple but some of the lower rated ones might be dicey.
Damn. Dan Nathan may have crossed the line telling Karen that her beloved JPM has the same problems as a regional bank. Like sand through the hourglass these are the days of our lives. I think Karen was right but damn she looked like she was going to jump the table and choke him out.
Damn. Dan Nathan may have crossed the line telling Karen that her beloved JPM has the same problems as a regional bank. Like sand through the hourglass these are the days of our lives
Thanos was the hero
I remembered that the GM deal was done to minimize the hit to unions. I wasn't sure who was driving the CS deal so I did some research. It is complicated.
AT1 bonds—also known as contingent convertible bonds, or CoCos—were introduced after the financial crisis as a way to transfer banking risk away from taxpayers and onto bondholders. They also became a popular investment product that money managers and banks, including Credit Suisse, marketed to clients as a relatively safe way to boost yield on bond portfolios. They are structured so that the debt can be “bailed in” under circumstances laid out in individual bond prospectuses. These can include when a company’s capital ratios fall below a certain level or if regulators deem a bank unviable. Some AT1s convert to equity, while others such as Credit Suisse’s get wiped out. Traditionally, bondholders rank above equity holders in capital structure. But the Credit Suisse bonds were outliers from other European banks, because they provided for a case where regulators could write them down without wiping out equity holders.
Bottom line is that they are very different than those JNJ or Apple bonds. Just be careful if unions hold a bunch of them.
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