Where finance and media intersect with reality


Spot Markets Live Transcript (13/03/23)


Hello Anjuli, Helen here logging in

Anjuli Davies10:59

Good morning all

Welcome to Spot Markets Live #siliconvalleyspecial

As you can see we are joined again by Helen Thomas , she runs https://blondemoney.co.uk/

You were also with George Osborne in 2008 when Lehman was imploding?


Yes that’s right!!

I remember sitting at my desk the morning Lehman went under

I was reading the newspaper (how old school!) and George looked over and simply said “I bet you’re glad you don’t work in banking any more!”


Anjuli Davies11:02

Rishi has done one better this morning and has flown over to the epicentre


haah indeed! How lucky he was already in California of all places for the AUKUS discussion on defence spending

Anjuli Davies11:03

So, we’ve had the much anticipated bailout but we’ve not had the bounce…

Look at bank stocks this morning…

Not to mention Credit Suisse which has hit another all time low but that’s another story…


Ah good old Credit Suisse

Hard to believe it’s still alive

it’s like a cat

9 lives

Anjuli Davies11:04

or 9 lows…



So I think that it’s fair that banking stocks are still taking the brunt, people are figuring out exactly what this means

because interest rates will stay higher for longer and higher rates seem to be hurting banks – even though ironically they’re supposed to help them”

Anjuli Davies11:05

Interesting to see the RNS this morning light up with statements from companies declaring their non impact from SVB



what a list!!

Anjuli Davies11:05

There are a few analysts out there saying rates have peaked and FED will pause on March 22


Amazing stuff

yes I hear that people now think there will be a pause BUT this is where the Fed gets tied up in knots. Because they both have to preserve financial stability AND meet their inflation target mandate

Anjuli Davies11:06

Goldman Sachs’ analysts on Sunday said they no longer expect the U.S. Federal Reserve to deliver a rate hike at its March 22 meeting with considerable uncertainty about the path beyond March, in light of the recent stress in the banking sector.


I disagree for what it’s worth

Anjuli Davies11:06

Is this a bit like the LDI affair where the BoE was doing QE and QT at the same time


Exactly !

The Fed are effectively trying to limit contagion as a bank fails

that’s very different to “cut rates to zero to prop everything up”

they can’t afford to do that this time with inflation where it is

Remember the BOE have already gotten out of their intervention over the LDI debacle – and for a profit too1

Anjuli Davies11:07

@Bruce I note above its -9.41% – any insight?

It all feels really confusing right now

As many below are mentioning, this doesn’t feel like it should be systemic risk to the system and yet the system is screeching


I see that someone is asking about whether all banking stocks should be affected or only the badly run ones

So I think we have to unpick two things here

one, can the bank (or any other company) deal with 400bps of rate hikes in 12 months

what are their hedges, what is their business model

That’s one part

then the second part relates to systemic risk and that is about liquidity

We have had a series of these now, where over leveraged institutions have been caught up in sudden fire sales


the LDI managers


now SVB

Anjuli Davies11:11


that is a crazy chart but it’s a sign of flight to quality – presumably people want to snap up and lock in yields as much as possible

but this isn’t a Fed Put like the one we knew for last 40 years

Anjuli Davies11:12

But was SVB actually that bad ? It seems the doom loop was what killed it ….


the Fed CANNOT backstop an entire system at 5% inflation the way they did at 1% inflation

they have got to keep a lid on inflation expectations and ensure they don’t get embedded into the system

So with regard to SVB specifically

1) on the asset side they had deliberately gone into higher yielding assets and not hedged the interest rate risk

2) on the liability side, they had clients all concentrated into one sector (tech) that are uniquely prone to cash burn and high leverage

and 2b) an industry that benefitted from what has happened during the pandemic. What I call the impaired velocity of people where people now live their lives more online (much as we are doing in this discussion now). So that was great for tech in the “recovery” but then not so good when people returned to work. Even though we do still have an impairment in our velocity it is not the same as under lockdowns in 2020 and 2021

you could say that SVB was uniquely highly correlated to interest rates, monetary and fiscal stimulus, and pandemic habits

I think GK has just made a very good point on the chat

They point out that social media and online banking have conspired to make bank runs happen faster

that is a key difference

Anjuli Davies11:18

But then the irony is that people couldn’t actually get money out fast enough


ha yes !!

well that’s a whole can of worms

Anjuli Davies11:18

I was hearing that the CEO of major rival was calling big funds to offer their services but couldn’t


about how our society now expects everything on demand due to social media / apps / etc

Anjuli Davies11:18

Couldn’t act fast enough because of KYC and admin effectively


Helmholtz has just made a very interesting point on the chat. Asking about other candidates for this issue

Before I get to that, let me address Anjuli’s point


Yes, that’s a very good point about KYC and the increasing bureaucratic burden of banking

Anjuli Davies11:19

You’ve got all the big banks literally rubbing their hands now


I mean I did wonder this morning why it took so long to get a buyer for SVB UK when it’s only £1 and they do actually have some assets left in their portfolio

Anjuli Davies11:20

Apparently also lots of platforms have been set up to get around payroll issues and receivables


This is where blockchain technology could potentially help in the future. We should all have some kind of record on the blockchain of our identities and KYC for our accounts and AML checks etc and then it is only done once and everyone can see it

but apparently we are a long way from that

maybe because tech bros prefer to go on a mission to Mars rather than reinvent banking


Anjuli Davies11:20

It seems like the quickest bank will win in these situations


My brother runs an accountancy practice and payroll is unbelievably admin intensive and complex

Anjuli Davies11:21

Didn’t the UK govt say they’d guarantee UK deposits


So there’s been some quite astonishing statements made by the authorities here and in the US

Anjuli Davies11:21

Well he will definitely know Helen


“No taxpayer funds”

“all deposits safe”

It’s kind of the Draghi “Whatever it Takes” playbook!

haha yes you’re right Anjuli he does know!

Just going back to @Helmholtz

Anjuli Davies11:22

Another point that Izzy raised to me is if HSBC will still be able to walk away if they do their DD and decide it isn’t such a good deal after all


I want to pick up that this yet again is an issue of liquidity mismatch

eg ETFs on real estate funds

there could be plenty of examples these days where people expect to liquidate with a swipe of the phone in the palm of their hand and then confusion when they cannot

Anjuli Davies
Headline RedBox Global

the potential for panic is higher in an age where we expect instantaneous action

ooh thanks for that headline Anjuli

Back to your point from Izzy

I did wonder that


it only cost them £1


by all accounts there are still some decent assets on their balance sheet

They screwed up their hedging, whether by greed or incompetence, or both

but the real problem came when the bank run started

if you can stop the run dynamic, as regulators seem to have done for now, then getting that balance sheet for £1 doesn’t seem a bad bet to me

Anjuli Davies11:26

Have they stopped the run dynamic do we think?

First Republic Bank doesn’t look good still

Shares in First Republic Bank have fallen 60pc in pre-market trading as the US lender tried to calm any concerns about its liquidity following the failure of Silicon Valley Bank.


Roger Francis just made a good point about how this is two bank failures rather than one because of Signature Bank too

regarding First Republic

I think we need to see whether actual withdrawals take place today

But we have seen the authorities draw a line in the sane


if they have to do more, they’ll do more

but it will be to prevent market dysfunction, not to prop up insolvent entities

that’s the message they’re trying to get across

Anjuli Davies11:30

How important now also is the Fed discount window

accepting collateral without haircuts etc


I thought that this new term program mechanism was basically the same thing

Bruce Packard just asked the key Q

“isn’t accepting collateral without haircuts a form of QE”?

Here is where it gets technical

Anjuli Davies11:31

That was the lifeline during the last few crises


It has the same effect as QE

but the way it is structured would allow the central bank to argue it’s not QE

It’s not asset purchases, it’s a loan

yet another example of “QE that is not QE”

we have seen a lot of this since 2020 and will see more

G K is ON FIRE in the comments!!!

nice link to the terms of the program

Anjuli Davies11:32

Fascinating @Mark Snow and a big call

could we see something coordinated again


@bruce packard – yes you’re correct!

and yes youre also correct, QE isn’t exactly money printing

G K asks a good Q

about the length of time for these loans

1 year maturity

so does that mean 1 year to sort yourself out

1 year is also a “short term” security as far as a bank is concerned

Anjuli Davies11:34

And also, if we are now seeing people lean toward rate cuts – we are getting massive moves in treasuries


This call for huge rate cuts today is reminiscent of what happened to the BOE in Sept/Oct gilt crisis last year

on the one hand people screamed for rate hikes to prop up Sterling

on the other they screamed for cuts to prop up the system

But the truth is that the Fed is constrained with inflation where it is

what they have come up with is a clever little package to operate within their constraints

They actually want the markets to get away from “when anything goes wrong, rates go to zero and we solve everything”

Whatever It Takes is dead

‘@Roger Francis, it’s a loan so the Fed don’t keep the collateral until maturity

Anjuli Davies11:36

We have US inflation figures out this week Helen i think


Yes that’s right Bruce, in the long term you still own the underwater assets, presumably there is hope that in a year it won’t be under water any more or you will have hedged your portfolio to ensure you are not#

Anjuli Davies11:37

To reverse thinking a bit, but who if any are the winners here?


The systemically important banks

JPM, primarily

Anjuli Davies11:37

I was hearing that there are already some platforms emerging to buy the deposit IOUs off SVB

but i guess now with the backstop this trade could be dead


Also money market funds

there’s going to be an interesting and rational debate now

where do you put your money

throw it all into JPM at some low deposit rate

or put it into a money market fund but not have the safety of back stop for systemically important institution

Anjuli Davies11:38

I saw an interesting stat, that deposits are actually down 8% and 4% of that decline occurred in the last month – so where do you put your money? US treasuries !


I think we will see the big banks start to offer better rates on deposits

theyr’e now all on standby to ensure their capital ratios are watertight

plus I still think mom and pop businesses will prefer to put cash into JPM than Tsys or money mkt funds

What is so weird about all of this

is that for some reason nobody – not the banks, the customers, the businesses – seem to have realised that short term rates are so much higher

it’s like everyone is only just appreciating that we are almost at 5% rather than at 0

not sure why it’s taken 6 months but this is a tipping point that is overdue

meanwhile the gamma position in the S&P is now negative. Short gamma means more volatility – both up and down

so it will be a wild ride this week#

Anjuli Davies11:42

Even so, why park your money in even a 5% yielding place when inflation is at 10%


and let’s face it, the run up from 3500 to 4100 doesn’t make sense at higher rates

that is a fair point Anjuli but it’s better than 1% in the bank account

actually I don’t know what you get on US bank account

I am only thinking of my own deposit account!

Anjuli Davies
Headline RedBox Fixed Income

good point on the chat about cost of actually making the investment into Tsys, it’s expensive

Anjuli Davies
Headline RedBox Fixed Income


Hello Izabella

Anjuli Davies11:43

Some crypto stats just hit the wire


(those two statements are not necessarily related!!_


so crypto is in a funny position. It’s bad that risky assets are getting repriced. But good because decentralised and away from authorities getting involved


Anjuli Davies11:44

I know some “mom and pop” investors who have switched their ISAs and children’s ISAs all into US treasuries


ha! they’re smart

So if people are going to rush into Tsys that’s nice and helpful for SVB and similar because they are going to be selling them to raise liquidity !

Anjuli Davies11:45

Wouldn’t inflation linked bonds be smarter – i saw that the UK government is trying to drum up deposits this way


I can see a situation where we have big moves in Tsys this week but end up where we started

Izabella makes an interesting point about HSBC

if true then surely that would have to come out !?

why aren’t the assets as good as made out

Anjuli Davies11:45

Apparently UK government will make a statement to parliament today

Anjuli Davies
Headline RedBox Global
Anjuli Davies11:47

Talking of the UK, Helen any thoughts ahead of the budget or has this all completely eclipsed it

11:48Has anybody called Ping An?


on the Budget, it was already going to be a “steady as you go, don’t frighten the horses” budget

Tinkering with small measures

a small hamster rather than multiple rabbits out of hats

and it really can’t be now given volatility in the market

Sunak and Hunt want to burnish their credentials for credibility

We have had a lot of bits and bobs leaked already such as more help with childcare, extension to energy price cap and possible freeze on fuel duty

also possible acceleration of deadline for raising retirement age

but I think the area to watch will be on more generous capital allowances to make up for the rise in corporation tax

in other words it’s going to be a techy budget where the implications might take time to sink in

@izabella – very interesting you sniff something in the air over HSBC

but any Prime Minister and Chancellor, let alone a new pair, would simply be delighted to ensure a banking failure passed off without incident. Not just to the UK markets but also to UK jobs

11:52HSBC certainly has its own issues


but it will just subsume SVB into nothing

Anjuli Davies11:53

Jeremy Hunt is expected to marshal the country’s army of savers to help fund Britain’s borrowing requirements by asking National Savings & Investments to pump out billions of pounds’ worth of products to the public.

In this week’s budget, the chancellor could give the government’s savings bank the remit to sell more investment products — a move that would mean fewer bonds (gilts) would be needed to fund the country’s borrowing needs.

He is expected to announce about £10 billion of bonds to be issued this year.

Izzy mentioned a similar idea a few months back


oh that’s very interesting on National Savings

makes sense

Anjuli Davies11:53

Mark Capleton, an analyst at Bank of America, said: “NS&I has not brought in vast amounts in recent years and so the share of NS&I as a proportion of the national debt is half of what it was in 2000. Then it was 16 per cent of the national debt, now it is 8 per cent. So there is material scope for them to make use of NS&I.”


it’s a good idea

I love NS&I

Anjuli Davies11:53

If they offer a good rate, would be win win


My Mum worked for them back in the day when premium bonds were managed in Blackpool (where I’m from originally) so we were brought up on investing in premium bonds to be in with the chance to be a millionaire thanks to ERNIE!

(that’s a very retro comment)

but in any case that does makes sense to utilise NS&I better given the scale of govt debt

Anjuli Davies
Headline RedBox Global

lots of good comments being made about the advantages of NS&I

I imagine we will get lots of statements from our leaders today

and until things have calmed down a bit

Anjuli Davies11:56

Like you said, it’s going to be a wild ride this week


but overall I think everyone should take away this message

can your investments both withstand and benefit from Higher For Longer interest rates


Anjuli Davies11:57

Interesting G K , i hadn’t even thought of these implications


the financial system is going to creak a lot more in the months ahead

so make sure if you need to get hold of cash, you have a way of doing so


bigger picture

this is merely payback for what happened in 2020

we didn’t cancel the recession. It was merely delayed.

and central banks had to oversteer into the hairpin bend – and oversteer on the way out

so too much stimulus for too long and now raising rates (possibly) too quickly

if you step back and think of how we have had a global shutdown, war, health emergency, massive ballooning government balance sheets… it’s kind of amazing nothing worse has happened

Anjuli Davies11:59

It’s a good point


so – keep being optimistic people! But be careful too

Anjuli Davies11:59

On that note…

It’s been fascinating for us this morning !



Anjuli Davies11:59

Does make things more interesting ….


yes very good to hear everyone’s thoughts

Anjuli Davies12:00

Thanks so much for joining us Helen , see you back again soon


thank you Anjuli!
good luck everyone

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