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Berkshire Hathaway | No More Apple Pie & Bank Bread!No More Apple Pie and Bank Bread | Buffett’s Recipe for Market Caution Berkshire Hathaway has recently disclosed its earnings amid fluctuating around a $1 trillion valuation. A notable update is its continued reduction of stakes in overvalued assets, including a 20% decrease in holdings of Apple and Bank of America, boosting its cash reserves to $325 billion Although Warren Buffett himself isn't favoring share buybacks at present, Berkshire Hathaway stands as a compelling investment option Why Berkshire Hathaway's $325 Billion Cash Pile Signals Market Caution The company's net earnings remain subject to significant fluctuations due to rules requiring valuation changes of investment holdings. However, there was a slight decline in operating earnings, mainly driven by lower insurance underwriting income. Despite this, that segment is historically volatile, and year over year aka YoY, the company has maintained strong performance. Yea2date aka YTD, operating earnings have risen over 10%, totaling just under $33 billion compared to just below $29 billion last year. This points to an annualized earnings estimate of approximately $44 billion, implying a price2earnings aka P/E ratio of about 22, without factoring in over $320 billion in cash and significant investment holdings. Excluding cash and investments, the adjusted P/E ratio is closer to single digits. Share buybacks have paused, reflected in a ~1% decrease in the outstanding shares YoY, signaling Berkshire's assessment of current market valuations. Segment Highlights The various business units within Berkshire Hathaway showcase its robust asset base and earning capacity. Insurance underwriting income saw a sharp YoY drop, but other business areas performed strongly. Income from insurance investments remained solid, and BNSF, its railroad subsidiary, also showed strong results despite a double digit YoY decline. Berkshire Hathaway Energy continues its growth, cementing its position in the utility sector with significant renewable energy ventures. For context, NextEra Energy (NEE), with a market capitalization of $160 billion, posted quarterly earnings around 10% higher. Berkshire's other controlled and non-controlled businesses contribute over $13 billion annually, underpinning its diversification and consistent earnings performance. This strength across segments underscores its formidable financial health. Market Context Currently, market valuations are elevated by historical standards. Excluding periods of earnings dips, market enthusiasm is exceptionally high, with the S&P 500 P/E ratio nearing 30x, approaching levels last seen in 1999. Buffett and Berkshire appear to view a 3% yield from such a P/E as unattractive, especially when bonds offer higher returns. The 2008 Playbook Berkshire's track record of effectively utilizing its cash reserves is notable. Excluding its insurance float, the company still holds $150 billion in cash. During the 2008 financial crisis, Berkshire leveraged its liquidity for strategic investments in companies like General Electric, Swiss Re, Dow Chemical, and Bank of America, as well as finalizing the full acquisition of BNSF in 2010. This proactive use of capital proved advantageous. The current strategic sale of assets suggests Berkshire is preparing for potential market downturns. Given high S&P 500 valuations, reallocating part of an S&P 500 position into Berkshire Hathaway could be wise, ensuring exposure to a cash-rich portfolio capable of seizing future opportunities. Meanwhile, Berkshire’s earnings are valued lower than the broader market, potentially minimizing major downturn risks. Investment Risks A key risk is that timing the market is inherently challenging, with the adage "time in the market beats timing the market" serving as a caution. If Berkshire's market outlook is incorrect, its $300+ billion in cash could underperform while broader markets remain strong, which would diminish its appeal as an investment. Final Thoughts Berkshire Hathaway has taken the bold step of liquidating some of its most significant and priciest holdings, opting to incur capital gains taxes to increase liquidity. This move has bolstered its cash position to $325 billion, $150 billion above its float level. Meanwhile, its strong operational businesses continue generating healthy cash flow. Drawing on its successful strategies during the 2008 crisis, Berkshire appears to be positioning itself for another downturn amid current high market valuations. We advise investors to consider shifting part of their S&P 500 exposure into Berkshire Hathaway for enhanced diversification and potential benefits in a market correction, long story short Berkshire Hathaway remains a robust investment opportunity but wont make millionaire! What do you think moonypto fam?
NYSE:BRK.A
by moonypto
Berkshire Hathaway Testing Crucial Levels: Will the Bulls WIN? Berkshire Hathaway (BRK.B) is approaching key levels that could dictate its next big move! Upside Potential : A break above $465.04 could push the stock toward the next target at $473.18, where bulls are likely to step in for a rally. Watch for increased momentum if price closes above these resistance levels. Downside Risk: If the stock fails to hold the current support around $459, a drop toward the lower support zone at $448.29 could be in play. Bears should be ready for action if the price breaks below this level. Stay sharp, traders—both scenarios present strong opportunities. Keep an eye on price action and volume! Happy Trading Mindbloome Trader
NYSE:BRK.B
by Mindbloome-Trading
Trade Like A Sniper - Episode 19 - BRK.B - (6th June 2024)This video is part of a video series where I backtest a specific asset using the TradingView Replay function, and perform a top-down analysis using ICT's Concepts in order to frame ONE high-probability setup. I choose a random point of time to replay, and begin to work my way down the timeframes. Trading like a sniper is not about entries with no drawdown. It is about careful planning, discipline, and taking your shot at the right time in the best of conditions. A couple of things to note: - I cannot see news events. - I cannot change timeframes without affecting my bias due to higher-timeframe candles revealing its entire range. - I cannot go to a very low timeframe due to the limit in amount of replayed candlesticks In this session I will be analyzing the Berkshire Hathaway ETF chart, starting from the 6-Month chart.
NYSE:BRK.B
by Road_2_Funded
What Did Buffett Say at the Shareholders' Meeting?What Did Buffett Say at the Shareholders' Meeting? Warren Buffett, aged 93, held his first Berkshire Hathaway shareholders' meeting this weekend without Charlie Munger, his longtime partner at Berkshire Hathaway, who passed away at the age of 99. Following the meeting, it was revealed that Berkshire Hathaway's cash reserves are at record levels and continuing to grow, reflecting the challenge of finding stocks for the value investing strategy that has defined billionaire Warren Buffett's success. Cash, cash equivalents, and short-term Treasury bills for Buffett's group totaled $189 billion at the end of March, up 13% from the end of 2023. "It is fair to assume that by the end of this quarter they will probably be around $200 billion," Buffett said. According to the legendary investor: Berkshire sold about 13% of its Apple shares; reduced its stake in Chevron by approximately 2%; Coca-Cola and American Express are "wonderful companies"; the Indian stock market may present "untapped opportunities"; "We only pick those areas that we like." Technical analysis of Berkshire Hathaway stock B (BRK.B) shows that: the price is forming an ascending channel (shown in blue); after forming a historical high (A), the price showed a sharp decline – a bearish sign; attempts to surpass this high were unsuccessful, with peak B ending at a lower level – confirming supply-side activity at price levels around $420 per share of BRK.B; bulls have the opportunity to bounce off the channel's median line to demonstrate their determination – aided by psychological support around $400 per share. However, with each candle on the price chart of BRK.B, a descending channel (shown in red) becomes clearer – indicating a correction within the current upward trend and suggesting potential price decline of BRK.B towards the channel's lower boundary. According to TipRanks, the average price target for BRK.B is $443 over the next 12 months. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
NYSE:BRK.B
by FXOpen
3
Was it Charlie the whole time or does Warren just give up...Was it Charlie the whole time or does Warren just give up... Berkshire Hathaway, Inc. engages in the provision of property and casualty insurance and reinsurance, utilities and energy, freight rail transportation, finance, manufacturing, and retailing services. It operates through following segments: GEICO, Berkshire Hathaway Reinsurance Group, Berkshire Hathaway Primary Group, Burlington Northern Santa Fe, LLC (BNSF), Berkshire Hathaway Energy, McLane Company, Manufacturing, and Service and Retailing. The GEICO segment is involved in underwriting private passenger automobile insurance mainly by direct response methods. The Berkshire Hathaway Reinsurance Group segment consists of underwriting excess-of-loss and quota-share and facultative reinsurance worldwide. The Berkshire Hathaway Primary Group segment consists of underwriting multiple lines of property and casualty insurance policies for primarily commercial accounts. The BNSF segment operates railroad systems in North America. The Berkshire Hathaway Energy segment deals with regulated electric and gas utilities, including power generation and distribution activities, and real estate brokerage activities. The McLane Company segment offers wholesale distribution of groceries and non-food items. The Manufacturing segment includes industrial and end-user products, building products, and apparel. The Service and Retailing segment provides fractional aircraft ownership programs, aviation pilot training, electronic components distribution, and various retailing businesses, including automobile dealerships, and trailer and furniture leasing. The company was founded by Oliver Chace in 1839 and is headquartered in Omaha, NE.
NYSE:BRK.B
by EndlessCode
Berkshire Hathaway - BreakoutHello Traders, welcome to today's analysis of Berkshire Hathaway. -------- Explanation of my video analysis: In 2013 Berkshire stock broke above a key resistance area which was acting as resistance for multple years. This breakout was followed by a +300% pump towards the upside. Last month Berkshire stock then also broke out of a long term triangle formation. If we get a retest back to the previous resistance mentioned in the analysis, I will be looking for long-continuation setups. -------- I will only take a trade if all the rules of my strategy are satisfied. Let me know in the comment section below if you have any questions. Keep your long term vision.
NYSE:BRK.B
by basictradingtv
5
Berkshire (BRK.B) -> Trend ContinuationMy name is Philip, I am a German swing-trader with 4+ years of trading experience and I only trade stocks , crypto , options and indices 🖥️ I only focus on the higher timeframes because this allows me to massively capitalize on the major market swings and cycles without getting caught up in the short term noise. This is how you build real long term wealth! In today's anaylsis I want to take a look at the bigger picture on Berkshire Hathaway. At the moment you can see that Berkshire stock is retesing its previous all time high which is roughly at the $350 area and we might see another short term bearish rejection. However considering that the overall trend is still very bullish I am waiting for a simple break and retest of the current resistance level and then I am looking for a trend continuation. - - - - - - - - - - - - - - - - - - - - I know that this is a quite simple trading approach but over the past 4 years I've realized that simplicity and consistency are much more important than any trading strategy. Keep the long term vision🫡
NYSE:BRK.BLong
by basictradingtv
23
BERKSHIRE HATHAWAY, Massive Bull-Pennant On Huge Earnings Boost!Hello, Welcome to this analysis about the Berkshire Hathaway Stock on the 4-hour timeframe perspectives. As I detected the stock has shown up with great earnings numbers recently with the earnings showing substantial percentages upward, besides that I spotted a main pivotal formation forming here. As when looking at my chart now we can watch there that the stock is building this massive bull-pennant formation with the coherent wave-count within already completed and the stock recently showing up with great bullish volatility penetrating the upper boundary and staying above the 100- and 200-EMA to mark them as support. The whole pennant will be completed when the stock finally breaks out above the upper boundary as it is seen in my chart, this breakout will activate the upper target zone marked in my chart between the 525000 and 530000 level. For now, there is a high likelihood given that this whole formation completes in the near future and once this happened the further volatilities as well as targets will be activated. In this manner, thank you for watching the analysis, all the best! "Good fortune is when opportunity meets preparation." Information provided is only educational and should not be used to take action in the markets.
NYSE:BRK.A
by VincePrince
3
BERKSHIRE UPDATE, Approaching The Critical Range Now!Hi my friends, Welcome to this update-analysis about BERKSHIRE and the recent events, how it is approaching the critical range, what we can expect the next times, and how to handle upcoming situations accordingly. The stock confirmed the before mentioned possible movement and bounced at its lower boundary to move upsides testing the remaining strong resistance-cluster which can lead to a possible bear-flag and its confirmation, if you did not watch this analysis already I highly recommend it to you for having a full-depth-overview about the established situation. As the stock is approaching these important levels there are some meaningful signals I detected determining the further outcomes of the stock and where the journey can head. As the main stock market has decently recovered from the corona-breakdowns this year there are still stock remaining which trading way below the established highs and looking rather weak and bearish then in a good shape to form new highs therefore it is significant to assess these stocks individually and only consider these on the long-side which providing right conditions. Looking at my chart you can watch there that BERKSHIRE is now approaching the huge bearish confluence-cluster marked in red which is also matching with the rising resistance line marked in light-blue, therefore, building up coherent resistance in this structure, in this case there is a high possibility given that the stock also confirms it as resistance to move lower and testing remaining supports on validity. As you can watch marked in my chart the next important support is the middle-line of the channel in blue and the EMA structure consisting of the 800-EMA marked in black and the 100-EMA marked in green where the stock can bounce and confirm as support, this movement is crucial here because it needs to hold otherwise when the stock falls below this level the possibility for more downside increases seriously and should not be ignored as the stock can move on to confirm the huge possible bear-flag-formation marked in my chart but when this does not happen and the stock holds the level this can turn to the upside when bulls are strong enough which can invalidate the bearishness, reaction in range will decide the ongoing movement. In this manner, thank you for watching the analysis, support for more market insight and all the best. "The high destiny of the market is to differentiate rather than to speculate." Information provided is only educational and should not be used to take action in the market.
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NYSE:BRK.B
by VincePrince
6
BERKSHIRE, Weaker Than Rest Market, Provides Possible Bear-Flag!Hello Traders Investors And Community, welcome to this analysis about recent events, the current price-structure and what we can expect the next days and hours from BERKSHIRE one important stock under the 10 biggest in market cap in which I found important and significant signals which will determine the further outcome sustainable. As the overall market recovered from the corona-breakdowns this year a major part of the market is at its all-time-high level which is not the case with BERKSHIRE as we it is providing a weaker picture than the average market this can increase the next times when BERKSHIRE due to expanding possibility for a new corona-wave and the resulting restrictions which can affect the market meaningful therefore we are looking at the 4-hour locally timeframe. As you can examine when looking at my chart is that BRK.B is trading in a huge parallel channel that is marked with the blue lines and since the main average market recovered from the corona-breakdown BRK.B just provided a consolidational phase which can end up in a bear-flag when confirmed properly. As the stock trades below the important 100-EMA which you can see marked in my chart in green, this is a significant local resistance level which will be highly likely confirmed as those when touched in this level as you can see the outcome pronounced in my chart after this scenario has played out we can expect the stock to test the lower boundary of the huge possible bear-flag in which it is trading currently. After the stock has touched the lower boundary a third time we can anticipate that it sets up to form the final wave E of the possible bear flag wave count which will complete the count at the bearish confluence-cluster you can see marked in my chart in red, this level is building a logical resistance with the rising trendline in light-blue, the upper boundary of the channel and the 800-EMA in black. These factors make the zone between 208 and 212 a strong resistance zone and it is within the high likelihood spectrum that it will be confirmed as such one when touched in the area. After this has happened the stock can confirm the bear-flag to the downside when there do not come any bullish signs which will invalidate this scenario further. Overall we have an unstable situation within this stock at the moment as the average other market is near its peaks BRK.B is consolidating far below these price-levels. As we have seen higher volatility to the downside in the market due to new upcoming corona-fears this can increase the next time and provide a more bearish environment also in the rest of the market, therefore, this scenario shouldn't be ignored and kept as the more possible one at the moment when there do not come any other bullish signals which will increase the likelihood for a more bullish environment again. Therefore we should be prepared for a possible continuation to the downside and take proper action when it happens to take profit out of possible opportunities arising out of it. In this manner, thank you for watching, support for more market insight, good day, and all the best! The ambition to transform opportunity into gold remains the most significant tool for a trader. Information provided is only educational and should not be used to take action in the markets.
NYSE:BRK.B
by VincePrince
14
Berkshire Hathaway On The Brink Of Another BreakoutBerkshire Hathaway's stock recently displayed encouraging growth, with a notable bullish surge on August 7th. After reaching its zenith in March 2022, the stock suffered a 28% drop. By October 2022, the stock steadied at $260 and recently made a bullish stride, briefly outdoing its past record. However, this new high was marginal and fleeting, as the stock soon reverted below its former peak. A build-up of momentum led to this breakout, with the stock's inflection point being the $321 resistance, which then became support. This pivotal level has consistently posed challenges for the stock, given its proximity to its all-time high. It took 18 months for the stock to muster the courage to challenge this robust resistance. The stock's recent surge might be attributed to its favorable Q2 earnings report, where it reported earnings of 4.62 against the predicted 3.87. Notably, the daily 20 simple moving average stands slightly under the stock's current $350 price, potentially acting as a vital support. If the stock maintains this position, it may pave the way for future growth, potentially setting new record highs and establishing a lasting bullish trend. If you enjoyed this post, make sure to like, and follow for more quality content! If you have any questions or comments, comment below. We reply to every comment! See below for more information on our trading techniques. As always, keep it simple, keep it Sublime.
NYSE:BRK.BLong
by Sublime_Trading
2
Berkshire Shares Fall after Great ReportWarren Buffett's holdings posted record operating profits last week, pushing Berkshire Hathaway's asset value to over USD 1 trillion for the first time. → Operating income rose 6.65% in the second quarter to USD 10.04 billion, the company's all-time high from USD 9.42 billion in the same period last year. → BRK's earnings per share were USD 4.6 (expected USD 3.7). However, a bearish engulfing pattern has formed on the BRK stock chart near the all-time high of USD 362.1 set in March 2022. The share price fell overall with the US stock market under pressure, including from the rating downgrade by Fitch. At the same time, BRK's share price is stronger than E-mini S&P 500 futures, which are down more than 2% from their August high. Technical analysis of the BRK chart suggests that Berkshire Hathaway's share price may be affected by: → support from the lower border of the ascending channel (shown in blue); → support from the USD 333 level, which served as resistance for the May range; → a bullish gap zone around USD 337, where, by the way, the 50% level of growth from the lows of the May range to the high of the year passes. Analysts polled by MarketWatch have a median target price of USD 384.26 for BRK (about +10% from current levels). This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
NYSE:BRK.B
by FXOpen
Berkshire Hathaway Q1 Earnings Rise on Insurance ReboundWarren Buffett's Berkshire Hathaway reported strong earnings growth in the first quarter of the year, primarily driven by the recovery of the conglomerate's insurance business. Operating earnings, which include profits from Berkshire's wholly-owned businesses, increased by 12.6% year-over-year to $8.065 billion. Insurance underwriting profit surged to $911 million, a sharp increase from $167 million a year ago, while insurance investment income also rose by 68% to $1.969 billion from $1.170 billion. The turnaround in Geico, which saw an underwriting profit of $703 million, was a significant contributor to the overall insurance business success. On the other hand, the company's railroad business BNSF and energy company posted year-over-year earnings declines. However, other controlled businesses and non-controlled businesses saw slight increases from the same period last year. Berkshire's cash reserves also increased to $130.616 billion from $128 billion in Q4 2022. Additionally, the company repurchased $4.4 billion worth of its own stock, the most since Q1 2021, up from $2.8 billion at the end of last year. Berkshire's net earnings, which include short-term investment gains, rose to $35.5 billion in Q1 2023, up from $5.6 billion in the same period last year, reflecting a first-quarter comeback in Warren Buffett's equity investments such as Apple. Nonetheless, Buffett cautioned investors not to pay too much attention to quarterly fluctuations in unrealized gains on investments. These results were released ahead of Berkshire's highly anticipated annual shareholders meeting, known as "Woodstock for Capitalists." Despite lagging behind the S&P 500's 7.7% advance with a 4.9% increase in its Class A shares this year, Berkshire's stock is still less than 3% below its all-time high.
NYSE:BRK.BLong
by FOREXN1
19
Buying Berkshire Hathaway in current range.Berkshire Hathaway B - 30d expiry - We look to Buy at 319.21 (stop at 314.21) Price action continued to range between key support & resistance (320 - 330) although we expect a break of this range soon. The bias is to break to the upside. The primary trend remains bullish. This is currently an actively traded stock. Support is located at 320 and should stem dips to this area. Our profit targets will be 331.21 and 333.21 Resistance: 322.63 / 324.00 / 327.00 Support: 320.00 / 317.41 / 314.00 Please be advised that the information presented on TradingView is provided to Vantage (‘Vantage Global Limited’, ‘we’) by a third-party provider (‘Signal Centre’). Please be reminded that you are solely responsible for the trading decisions on your account. There is a very high degree of risk involved in trading. Any information and/or content is intended entirely for research, educational and informational purposes only and does not constitute investment or consultation advice or investment strategy. The information is not tailored to the investment needs of any specific person and therefore does not involve a consideration of any of the investment objectives, financial situation or needs of any viewer that may receive it. Kindly also note that past performance is not a reliable indicator of future results. Actual results may differ materially from those anticipated in forward-looking or past performance statements. We assume no liability as to the accuracy or completeness of any of the information and/or content provided herein and the Company cannot be held responsible for any omission, mistake nor for any loss or damage including without limitation to any loss of profit which may arise from reliance on any information supplied by Signal Centre.
NYSE:BRK.BLong
by VantageMarkets
Interpreting the Silicon Valley Bank Incident After the COVID-19 pandemic in 2020, the Federal Reserve used monetary policy to fight the pandemic, and household savings deposits reached about $1 trillion, with broad money M2 growing by over 25%. Many people were bullish on the US stock market, believing that these huge amounts of idle cash would one day enter the market as stocks. Obviously, many people forgot the double-entry accounting principle - for every credit, there must be a corresponding debit. For Silicon Valley Bank, with deposits of over $100 billion, all of its depositors are the largest and bluest venture capital companies and technology newcomers in Silicon Valley, including Peter Thiel's Founder's Fund. Since the Federal Reserve interest rate is zero, they bought the world's safest assets - short-term US bonds, and even earned some interest. However, the good times did not last. By the end of 2021, US inflation began to soar, and the Federal Reserve's monetary policy began to lose control, causing short-term US bond yields to soar, leading to the biggest US bond market crash in over 200 years in 2022. Suddenly, the world's safest asset became the storm's eye, and the US bond holdings in Silicon Valley Bank's account began to bleed. Even if they haven't sold yet, accounting requires mark-to-market valuation. The Silicon Valley market price loss has exceeded its total equity. Rating agencies wasted no time in preparing to downgrade Silicon Valley Bank's rating. However, deposit rates remain close to zero. Americans don't want to be harvested like this, so they began to withdraw their bank deposits and buy money market funds that now yield nearly 4%. If Silicon Valley Bank significantly raises its deposit interest rates, its interest margin income will be reduced, and it will have to pay additional liquidity. At this time, Silicon Valley found itself in a dilemma. Investment bank Goldman Sachs saw commission opportunities and began to suggest that Silicon Valley sell part of its US bond portfolio and sell $2.25 billion of its stocks to replenish capital. This idea was really bad: data disclosed during the roadshow showed that Silicon Valley's customers were withdrawing large sums of money, causing a significant loss of deposits. If it weren't for the roadshow disclosure, the market wouldn't know the details. Now, the market believes that Silicon Valley is about to go bankrupt, accelerating the run on the bank. Since Silicon Valley's customers are all big clients with deposits far exceeding $250,000, more than 95% of Silicon Valley Bank's deposits are not covered by the US deposit insurance limit of $250,000. There must be many other regional banks using similar methods for cash management. Today, they are bound to face the same risks as short-term US bond yields soar. This also explains why the market unilaterally believes that the Federal Reserve will soon stop raising interest rates. Their actions determine their fate. Of course, the Federal Reserve's monetary policy must now consider the impact on the US banking industry. Chairman Powell has recently been saying that he needs to "consider the totality of data." Last night, the market hid in the short-term US bonds out of safe haven demand, causing yields to plummet. Many people continue to be indifferent to the historic inversion of the US bond yield curve. In fact, the inversion of the yield curve is a distortion of risk, which is not sustainable. Its reversal will cause a cataclysmic event. Although long-term risks are stable, short-term risks are high. We need to survive the short term to see the long term. "But such long-term predictions are of no use for the present. In the long term, we are all dead. Economists have it too easy, because their work is useless. At the onset of a storm, economists can only tell us that the storm will pass, and that the ocean will be calm again." - Keynes Now, the global market is concerned: Will Silicon Valley Bank be rescued? Many experts believe that if the US regulatory authorities do not intervene, Silicon Valley will become the second Lehman, which will bring down the US financial system. The market needs to see three measures for rescue: 1) Small depositors with less than $250,000 should receive full payment; 2) Depositors with deposit insurance limits over $250,000 should receive partial payment, and it should be ensured that in the future, depending on the sale of Silicon Valley Bank assets, these large depositors can receive most of their payment (such as 80%); 3) Let one of the four major US banks take over Silicon Valley Bank. The problem now is that less than 3% of Silicon Valley Bank deposit balances are below $250,000. Others are large and blue, including Silicon Valley venture capital companies such as Sequoia Capital, Paradigm, a16z, and GGV Capital. Many Silicon Valley companies involve funds ranging from hundreds of millions to tens of billions. No wonder Silicon Valley was squeezed for more than $40 billion before being taken over. Under such pressure, almost no bank can survive. Unfortunately, US law may not allow it. If the Federal Reserve intervenes, the Silicon Valley crisis must meet the definition of "systemic risk" and there must be "broad-based" risks, and it cannot only benefit a particular company. At the same time, the Federal Reserve cannot intervene in bankrupt companies that have already been taken over. The US Treasury cannot use unlegislated funds without congressional approval, and now there is no money left. In the end, it seems that FDIC has to bear the burden alone. The process of selling Silicon Valley assets to pay large depositors has already begun. It is reported that hedge funds have offered to buy Silicon Valley Bank's deposits at 60%-80% of their value. In times of crisis, Silicon Valley assets can be realized for 60%-80% of their value, and after the panic in the US market subsides, the price should be even higher. After all, US Treasury bonds trade up to $650 billion every day. Will the Federal Reserve open the floodgates again because of Silicon Valley Bank? In fact, Silicon Valley's bankruptcy is precisely due to the Fed's unbridled printing of money, which caused a sharp drop in US bond yields and a surge in savings deposits. If money is printed again using Silicon Valley as an excuse, the Fed's only remaining credibility will be gone. When Lehman collapsed, its assets were worth $640 billion, and its associated derivative contract amounted to trillions of dollars. It was indeed a decisive moment. However, the assets of Silicon Valley Bank this weekend were only $220 billion, and it still held a large number of highly liquid US Treasury bonds. Previously, the market believed that the US economy would not decline, but the Federal Reserve's decision to slow down the pace of interest rate hikes, and even stop them soon, made the combination of economic and policy expectations logically hard to convince. During this cycle of rate hikes, Federal Reserve officials maintained a dovish stance until the end of 2021, believing that inflation would be a "transitory, temporary phenomenon." They then changed their tune in 2022, saying that this round of inflation will be "higher and longer." In both recent history and ancient times, the Federal Reserve's forecasting record seems to be lacking. Overnight, the two-year US Treasury yield skyrocketed by more than 5%, the first time since 2007. The degree of inversion of the US Treasury yield curve is the most severe since 1981. Many people mistakenly believe that the inverted US Treasury yield curve is terrifying. In fact, it is more terrifying when the yield curve returns to normal from inversion because this is the moment when the US economy officially enters into a recession. Follow me and you'll get more interesting investment information! Plus, I'll share real-time trading strategies during trading hours, including stocks, gold , crude oil , forex, cryptocurrencies, and more!
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by EagleEyeStrategy
2
SVB: Announces bankruptcy! The situation at Silicon Valley Bank (SVB) is not particularly complicated. In short, they borrowed short and invested long, mismanaged their liquidity, and caused their own demise. The specific steps were as follows: low-interest deposit-taking, overzealous investment in Mortgage-Backed Securities (MBS), short-term liquidity gaps, forced selling of assets, and market panic. Low-interest deposit-taking: Between 2020 and 2021, due to the Federal Reserve's extended period of 0% interest rates, there was a huge financing boom in the tech industry, with a significant portion of cash flowing into SVB. SVB's deposit liabilities surged from $61.8 billion at the end of 2019 to $189.2 billion at the end of 2021, with interest rates on this portion of deposits only around 0.25%. Overzealous investment in MBS: With so much low-interest money, SVB naturally engaged in carry trade. Typically, banks focus on lending, but SVB invested a large portion of its funds in MBS. Their financial statements showed they held $13.8 billion of MBS at the end of 2019, which had grown to $98.2 billion by the end of 2021. In other words, over 65% of the deposits they took in went towards buying MBS. Short-term liquidity gap: Normally, investing in MBS is not a problem because they can be redeemed at maturity. But SVB's problem was that it held too many MBS and had too few short-term liquid assets. In today's high-interest rate environment, tech companies are struggling to survive and are gradually withdrawing money from their deposits, causing SVB's liquidity pressures to soar. Forced selling of assets: To solve the liquidity problem, management chose the cheapest option, which was to sell their MBS holdings. But now, market interest rates had increased from nearly 0 to 5% for 2-year Treasury bonds, and asset prices had fallen significantly in sync. Selling $21 billion of assets resulted in an $1.8 billion loss. Market panic: For SVB, the $1.8 billion loss was still manageable because their shareholder equity was $16 billion. However, the problem was with the $100 billion of MBS that they had not yet sold. If there was a run on the bank, this could result in a potential loss of $15 billion, causing SVB to go bankrupt. Therefore, there was a great deal of panic in the market, causing the stock price to plummet by 60% in a single day. SVB has now declared bankruptcy, and the US government has intervened. It is being managed by a specialized institution. When a bank of this size collapses, there are bound to be chain reactions. The institutions known to be affected include Circle. For those who invest in stocks, they may not have heard of it, but those who invest in cryptocurrencies certainly have, as the most famous stablecoin, USDC, is issued by Circle. The total amount is $40 billion, and in today's announcement, they revealed that $3.3 billion of their assets were stuck in SVB, accounting for almost 8%. This means that those who invest in cryptocurrencies suddenly find that their $100 has shrunk to $92. To say that it's a seismic event is not an exaggeration. There are likely dozens of institutions of a similar scale to Circle that are also trapped, but for various reasons, they are not disclosing their situation. We'll have to wait and see when they come forward. Follow me and you'll get more interesting investment information! Plus, I'll share real-time trading strategies during trading hours, including stocks, gold, crude oil, forex, cryptocurrencies, and more!
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by EagleEyeStrategy
22