Sunday, 19 March 2023

Things can turn bad fast | My thoughts on what is happening so far

I am sure you would be aware of what has been going on these few days or from last week, from Silicon Valley Bank facing difficulties to cover withdrawals due to how they manage the deposits and failing to meet the withdrawals to Signature Bank collapsing and other regional banks like First Republic facing huge amount of withdrawals as fear spread after the news of SVB and depositers worrying about their capital. 


This week, we saw Credit Suisse a global systemically important bank (G-SIBs) facing difficulties as large amounts have been withdrawn from the bank and it's biggest investor saying that they will not be buying more shares as they do not want to be holding more than 10% as it is a regulatory issue which sent their share price on a downward trend.

Last year, Credit Suisse did show some warning signs regarding their liquidity issues as they saw huge amount of outflows however following the SVB and other smaller banks collapse recently, coupled with higher interest rates, Credit Suisse is not looking good at the moment. They did get a $54 billion loan from the Swiss National Bank where the shares did slightly recover but over this weekend, news outlets are reporting that UBS is planning or eyeing on buying over Credit Suisse. 

Nothing is concrete right now on the Credit Suisse situation. Over the past week, we do see a lot of intervention from the bigger guys, from the Fed announcing that SVB depositors will be repaid in whole even if they had deposited more than the FDIC insured $250,000 amount which is crazy if you think about it. The amount is massive and who exactly is footing the bill? 

Next, HSBC bought over the SVB UK arm for £1. From this CNA article, "Asked about HSBC's white-knight role, Hunt said the finance ministry's priority had been to avoid using British taxpayers' money. SVB UK is ring-fenced from the US group, and HSBC said the assets and liabilities of the parent company were excluded from the transaction. SVB UK has loans of around £5.5 billion and deposits of around £6.7 billion, HSBC said, adding the takeover completes immediately. The Bank of England said SVB UK had a total balance sheet size of around £8.8 billion." 

To be honest, depositors would have lost confidence in SVB even if the UK arm is all right and ring-fenced from the US side as the name has already been "tainted", instead, matching it to a stronger and bigger bank like HSBC brings it a backing and support. From reading the article, HSBC seems to have gotten a good deal although I would think there might be other issues but I am not an expert in mergers and acquisitions so I might be wrong. 

My thoughts

It's crazy crazy times, I thought inflation and interest rates coupled with Tech layoffs and declining corporate earnings was all I had to deal with. As I thought that people would be holding more cash during uncertainty and volatility, banks would be considerably safe. Of course, it is my first time hearing of Silicon Valley Bank since I am not in the start-ups industry and I am surprised that the bank services so many start ups and venture capital that when the tech industry is hit, most start ups would withdraw cash as it was more difficult for them to get funding and so the dominoes fall. In my impression, I only know the bigger banks, and not so much on the banks that services a smaller population. 

I have learned more about the banking industry and how trigger events can cascade into bad situations, also how banks handle client's deposit can affect their liquidity. Interesting to know that a buildup of tough macro-environment can trigger events to happen. With this Credit Suisse saga, it does reflect to me that it is more of a see and wait situation, as we see how things pan out.

I can understand the confusion of the depositors whether to withdraw it out or to leave it in the bank especially for those in the US who are using the regional banks, for those whose money is not diversified and all in one bank, it is good to diversify it although currently we don't know how widespread the "damages" are. 

We did see crypto, particularly Bitcoin where the price surged to almost $28,000. I still do not know where exactly is a good place to invest but I am continuing to DCA into index ETFs but also putting aside cash. Viewing the situation now, it doesn't hurt to hold more cash as the economy could get another blow and we just don't know how bad it will get. 
Only time will tell. My strategy so far has not changed but it's tough looking from the sidelines so I haven't really been updating or writing much as I just go about my daily life and not be so involved with the stock market although I do read and watch the news everyday. 2023 will be volatile and exciting, we shall see where we end up at the end of 2023. Wishing everyone the best and stay safe!

Friday, 10 March 2023

Happy Birthday to me! - Not finance related

It’s my birthday today and to be honest, I don’t really pay much attention to birthdays although I am lucky to have people celebrating it with me and it does feel a little different from normal days. I tend to shy away from having it be too celebrated so a nice meal and gatherings with my close family is usually what it is.

Getting older

As I reach the late 20s and very much closer to 30, turning 28 today feels like I have wasted a lot of my time in my 20s especially since time passed so fast. I would say the pandemic has also taken away some time in my 20s as we stay confined and interaction with larger groups were limited. This made me drift apart from some of my friends as I did not put in the effort to stay connected.

A lot more reflections are done during my birthday especially after I entered my mid-twenties. Seeing my peers celebrate their milestones, find their partners in life, having a BTO or property, it does feel like I am lagging behind. I have also realised that we create our own lives unlike when in school where everything is prepared for you eg next year you will all go primary 5 and next primary 6, adult life is very much in your own hands as you can decide how you handle your time. I am very close to my immediate family and usually spend the weekends or free time with them, I love it as I am very comfortable with them. However, thoughts do come about when my parents grow old and my siblings having their own life, will I spend my later years alone?

I have been putting in effort connecting more with my friends although some of them are really occupied but I managed to meet a group of friends whom we haven’t met since the start of Covid and it was a great catchup. They were all married and waiting for their BTOs so wow, the change of topics that we talk about during that gathering was an upgrade from 2 years ago. Many not relatable to me but it was nice and exciting knowing what they were up to and how they were planning their lives ahead.

Living my life

I have a lot of things to be grateful for and I am very very fortunate and privileged. I have my family, friends, a roof over my head, good food and a job that gives me sufficient money to spend. I am grateful for that.

In terms of my progression in my dating life, maybe it’s time for me to use the dating app which I have been deliberating on. This is something that I don’t do as I find it difficult to meet new people, I don’t talk much and tend not to share so first meetings are always tough with introductions and sharing. But I do know that dating apps are now very common even if not using it to find a partner, some do use it to expand their social network. Naturally meeting someone now is also tough as my social circle is small and mostly fixed.

Anyway, my new year resolution is just to create a profile in the dating apps haha, and I will enjoy today with my family and not check the stock market which has been red since the beginning of March. Let’s look forward to the upcoming CPI and interest rate hikes. Also, The Glory Season 2 is out today so gonna be binge watching!