SIVB: A Cautionary Tale for Investors Following Stock Bloggers
After SVB has failed, which has raised concerns about the stability of US banks, as recent news reports indicate, I have questions about the reliability of stock bloggers/vloggers. Especially those telling you about “the best growth stock to buy right now”, “this stock is down by 50%, is it a buy now?”
First, I would like to remember these four key events marked in the chart:
1. On March 16, 2022, after the war in Ukraine had begun in February, the fears of rising inflation led the Fed to start hiking federal funds benchmark rate by 25 basis points for the first time since 2018. While FOMC stated that “The implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity.”
2. Additionally, on 13 June, 2022, S&P 500 slipped into the bear market territory by dropping more than 21% from its all-time record on 3 January, 2022.
3. On July 5, the spread between the 10-Year/2-Year US government bonds yield breached the negative area (until present), signaling to a potential recession.
4. Finally, on February 3, 2023, nonfarm payroll employment rose by 517,000 in January 2023, smashing the expectation of 185,000, and indicating the persistence of inflation as well as the possibility of rate hikes for longer periods.
Beyond that, the unrealized losses of the total available for sale securities – which include T-bills and mortgage-backed securities – has nearly doubled during 2022. SVB reported unrealized losses for AFS securities of $2.533 billion as of December 31, 2022, comparing to $1.303 billion at March 31, 2022, with total assets of $220.355 and $211.793 billion respectively. Some of these losses are attributed to the tumbling bond market.
Along that way, SIVB has tumbled so heavily. From my point of view, with my little experience, these losses of SIVB would have not made any buying opportunity, taking into account the previous events and the bank business model. However, many stock bloggers published so many articles advising to buy SIVB as, for example, “one the best growth stocks”, “safest banking stock”, “it is time to buy the dip” and so on, with a deep confidence in the management of the bank and its businesses.
Eventually, SIVB trading is halted and “pending the release of material news.” No one knows now what is coming after. The question is now for those well-known stock bloggers, how did you not see that coming and why are you giving such advice of buying growth stocks in the middle of the rising recession likelihood environment at the first place? One answer that they might give you is that this advice for investors who seek to hold the stocks for 3 to 5 years or more, year after a year.
Stock bloggers won’t stop publishing articles about “the best growth stock to buy right now” even if the great depression itself is back. So, back to the best advice of all time, do your own research and take nobody’s word for your investment decisions – especially those bloggers. If you are unable to do your research properly, avoid making investment decisions based on general ideas and do not buy or sell any stocks without sufficient information.
First, I would like to remember these four key events marked in the chart:
1. On March 16, 2022, after the war in Ukraine had begun in February, the fears of rising inflation led the Fed to start hiking federal funds benchmark rate by 25 basis points for the first time since 2018. While FOMC stated that “The implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity.”
2. Additionally, on 13 June, 2022, S&P 500 slipped into the bear market territory by dropping more than 21% from its all-time record on 3 January, 2022.
3. On July 5, the spread between the 10-Year/2-Year US government bonds yield breached the negative area (until present), signaling to a potential recession.
4. Finally, on February 3, 2023, nonfarm payroll employment rose by 517,000 in January 2023, smashing the expectation of 185,000, and indicating the persistence of inflation as well as the possibility of rate hikes for longer periods.
Beyond that, the unrealized losses of the total available for sale securities – which include T-bills and mortgage-backed securities – has nearly doubled during 2022. SVB reported unrealized losses for AFS securities of $2.533 billion as of December 31, 2022, comparing to $1.303 billion at March 31, 2022, with total assets of $220.355 and $211.793 billion respectively. Some of these losses are attributed to the tumbling bond market.
Along that way, SIVB has tumbled so heavily. From my point of view, with my little experience, these losses of SIVB would have not made any buying opportunity, taking into account the previous events and the bank business model. However, many stock bloggers published so many articles advising to buy SIVB as, for example, “one the best growth stocks”, “safest banking stock”, “it is time to buy the dip” and so on, with a deep confidence in the management of the bank and its businesses.
Eventually, SIVB trading is halted and “pending the release of material news.” No one knows now what is coming after. The question is now for those well-known stock bloggers, how did you not see that coming and why are you giving such advice of buying growth stocks in the middle of the rising recession likelihood environment at the first place? One answer that they might give you is that this advice for investors who seek to hold the stocks for 3 to 5 years or more, year after a year.
Stock bloggers won’t stop publishing articles about “the best growth stock to buy right now” even if the great depression itself is back. So, back to the best advice of all time, do your own research and take nobody’s word for your investment decisions – especially those bloggers. If you are unable to do your research properly, avoid making investment decisions based on general ideas and do not buy or sell any stocks without sufficient information.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.