SVB was clearly mismanaged. It had so many malpractices that is hard to pinpoint to a single failure: from buying bonds at the height of the peak of the market to not hedging its risks, and offering venture debt. We might still uncover more dirty under the rug, and will learn more in the coming months on how mismanaged was this bank. The whole economy may suffer the consequences of such a blowout. We will see if this is what triggers the next financial crisis. Either way, SVB is patient zero of the next financial crisis. SVB is the canary in the coal mine. The canary is dead.
This week will probably be a defining week to be about what is about to happen next. It is hard to predict if this is the triggering event of the next financial crisis, but may as well it be. What is clear to me is that we are in the middle of a recession, that there will be on event within a year that will cause the FED to pivot, and the FED will have to pivot. This financial crisis may be bad but it will not pop the bubble. The can will be kicked down the road. The FED will have to pivot. When it’s all said and done, the amount of money printed will be immense.
What is different about the next financial crisis is that it is all going to be in the era of social media. So expect a lot of noise. If you are a builder, I would recommend focusing on building. Hype and hysteria are the two sides of the same coin. They are not the way to build long-term value.
The lesson that I think most people should learn from this but I don’t think most will understand is that long-term bonds are the riskiest asset to hold. Just recently, there were 19T in negative yield bonds. That clearly does not make sense. It is the biggest bubble in history. Maybe at some point people will start understanding the value of Bitcoin. One thing that I will remember when all this play out is to be fearful when others are greedy, and to be greedy when others are fearful.