Cici's Teaching Notes📒What the collapse of SVB tells investors？
$SVB Financial(SIVB.US$SVB's collapse should be another classic case of risk management failure.
1) Not diversified enough, SVB's clients (mainly deposits) were concentrated in startups, too concentrated and when the VC fund cycle went down, the clients as a whole struggled to operate.
2) Duration mismatch, using money that might be used in the short term for long term investments.
3) Insufficient margin of safety, not enough capital to cope with the capital needs that may arise from continued interest rate increases.
The future is never known, diversify your positions as much as possible, do not use short-term money for long-term investments, pay attention to the margin of safety, and do as much as you can (do not exceed your financial resources), these are the things we should always remember.⚠️
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Invest With CiciOP 专割华尔街: Friend, the article doesn't talk about forward bonds; it's about the proper allocation of funds in the short and long term. Also, I would like to highlight the implications for ordinary investors. If there are any unreasonable explanations, civilized communication is welcome, and we will study together.
Invest With CiciOP 专割华尔街: My understanding is that when deposits at Silicon Valley banks have increased dramatically in the past few years, they used the absorbed capital to allocate a large number of assets held until maturity and assets available for sale on the asset side. There was a serious mismatch of terms, and faced huge interest rate risks. Judging from the structure of assets held until maturity and assets available for sale by banks in Silicon Valley, it is mainly products related to housing mortgage securities. The assets themselves have little credit risk, but the yield is very low, only around 1.6%. These assets have a long period of time. Of these, about 80% of financial assets have a remaining term of ten years or more, and interest rates are very risky.
If you have any other opinions, please feel free to share