Ben Hammerly

Final year Econ student at University of Central Missouri | CFA candidate

[Ben Hammerly @BenHammerly]

@FightHaven Store loses $100 since the money stolen was used to exchange for the goods.

[Bill Ackman @BillAckman]

The gov’t has about 48 hours to fix a-soon-to-be-irreversible mistake. By allowing @SVB_Financial to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank. Absent @jpmorgan @citi or @BankofAmerica acquiring SVB before the open on Monday, a prospect I believe to be unlikely, or the gov’t guaranteeing all of SVB’s deposits, the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ‘systemically important banks’ (SIBs). These funds will be transferred to the SIBs, US Treasury (UST) money market funds and short-term UST. There is already pressure to transfer cash to short-term UST and UST money market accounts due to the substantially higher yields available on risk-free UST vs. bank deposits. These withdrawals will drain liquidity from community, regional and other banks and begin the destruction of these important institutions. The increased demand for short-term UST will drive short rates lower complicating the @federalreserve’s efforts to raise rates to slow the economy. Already thousands of the fastest growing, most innovative venture-backed companies in the U.S. will begin to fail to make payroll next week. Had the gov’t stepped in on Friday to guarantee SVB’s deposits (in exchange for penny warrants which would have wiped out the substantial majority of its equity value) this could have been avoided and SVB’s 40-year franchise value could have been preserved and transferred to a new owner in exchange for an equity injection. We would have been open to participating. This approach would have minimized the risk of any gov’t losses, and created the potential for substantial profits from the rescue. Instead, I think it is now unlikely any buyer will emerge to acquire the failed bank. The gov’t’s approach has guaranteed that more risk will be concentrated in the SIBs at the expense of other banks, which itself creates more systemic risk. For those who make the case that depositors be damned as it would create moral hazard to save them, consider the feasibility of a world where each depositor must do their own credit assessment of the bank they choose to bank with. I am a pretty sophisticated financial analyst and I find most banks to be a black box despite the 1,000s of pages of @SECGov filings available on each bank. SVB’s senior management made a basic mistake. They invested short-term deposits in longer-term, fixed-rate assets. Thereafter short-term rates went up and a bank run ensued. Senior management screwed up and they should lose their jobs. The @FDICgov and OCC also screwed up. It is their job to monitor our banking system for risk and SVB should have been high on their watch list with more than $200B of assets and $170B of deposits from business borrowers in effectively the same industry. The FDIC’s and OCC’s failure to do their jobs should not be allowed to cause the destruction of 1,000s of our nation’s highest potential and highest growth businesses (and the resulting losses of 10s of 1,000s of jobs for some of our most talented younger generation) while also permanently impairing our community and regional banks’ access to low-cost deposits. This administration is particularly opposed to concentrations of power. Ironically, its approach to SVB’s failure guarantees duopolistic banking risk concentration in a handful of SIBs. My back-of-the envelope review of SVB’s balance sheet suggests that even in a liquidation, depositors should eventually get back about 98% of their deposits, but eventually is too long when you have payroll to meet next week. So even without assigning any franchise value to SVB, the cost of a gov’t guarantee of SVB deposits would be minimal. On the other hand, the unintended consequences of the gov’t’s failure to guarantee SVB deposits are vast and profound and need to be considered and addressed before Monday. Otherwise, watch out below.

[Ben Hammerly @BenHammerly]

@leadlagreport Tail risk can be knowable and unknowable. Pretty much implies nothing is a store of value if you zoom out long enough so you might as well ride the wave in whatever direction it’s going

[Ben Hammerly @BenHammerly]

@leadlagreport God imagine if they dumped their treasuries and the chaos that would cause

[Hindenburg Research @HindenburgRes]

NEW FROM US:

Adani Group – How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History

https://t.co/JkZFt60V7f

(1/x)

[Ben Hammerly @BenHammerly]

@HighyieldHarry Tbh I’m glad you said this because I feel like for a lot of people it is extremely necessary to play with the big boys. Anyone who says it isn’t more than likely has a pretty strong starting hand and either can’t see it or won’t admit it.

[Ben Hammerly @BenHammerly]

@leadlagreport Equity markets not smart enough to catch on? Lol

[Ben Hammerly @BenHammerly]

@PeterSchiff Which is exactly why the dollar will continue to be devalued significantly over time. You have to monetize debt somehow.

[Ben Hammerly @BenHammerly]

@leadlagreport “It’s not what you don’t know that will get you in trouble, it’s what you know for sure that just ain’t so”

Love that quote when it comes to markets

[Ben Hammerly @BenHammerly]

@dose_of_Close @optionattack @zerohedge Time frames are longer than just a couple of years. $80 is well over the long term average no? If companies are in the market for a large block trade to lock in a contract well above long term average prices then someone will do it

[Ben Hammerly @BenHammerly]

@BingBongLLC Aka the minimal AUM is not enough of a threat to cause any significant damage…

[Ben Hammerly @BenHammerly]

@litcapital Watch the companies keep literally every cent in margin and not reduce the price at all

[Ben Hammerly @BenHammerly]

@DownsideCase ROIC

[Ben Hammerly @BenHammerly]

India Bans Wheat Exports as Food Security Comes Under Threat

Looks like ⁦@friedberg⁩ was right… https://t.co/xgBAsJTNyH

[Ben Hammerly @BenHammerly]

@TrungTPhan Sounds like Warren’s type of companies

[Ben Hammerly @BenHammerly]

@Route2FI It’s because market value at any given time is in large part driven by market sentiment (especially when dealing with an asset that lacks cash flows and a long history).

[Ben Hammerly @BenHammerly]

@saxena_puru I’m glad to hear you say this. Hubris loses money. Being sure of anything is impossible in this game.

[Ben Hammerly @BenHammerly]

@_doughnutcat @litcapital 16 year olds when they first learn what compound interest is