Next Domino – Bank of Spain

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Bank Crisis – The Worst Potential Outcome, Where You Should Put Your Money Now

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  • Easy money over an extended period of time took the financial world to a situation in which rapidly rising interest rates exposed disastrous flaws in risk management in several banks.
  • Need to mark Treasury losses to market combined with overly concentrated clients/depositors made the position of Silicon Valley Bank untenable and left questions about whether to guarantee all deposits.
  • Unsurprisingly, Crypto and Venture Capital triggered the end of cycle decline in February 2021 and all three major bank collapses; cheap money had enabled dubious assets and low quality start-ups.
  • Potential bank investors must now add criteria like concentration of customers and depositors, percentage of uninsured deposits, and the mix of loans and bonds.
  • The rise in rates has made fixed income attractive and revived the 60/40 portfolio. Treasury yields are off their peak, but CDs may greatly enhance safe yields while money market funds have great rates.
See also  “Bank walk”: The first domino to fall?
See also  “Bank walk”: The first domino to fall?


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