{"id":2405,"date":"2023-03-14T20:00:23","date_gmt":"2023-03-14T21:00:23","guid":{"rendered":"https:\/\/malvinartley.com\/blog.malvinartley.com\/?p=2405"},"modified":"2023-03-15T23:46:52","modified_gmt":"2023-03-16T00:46:52","slug":"the-silicon-valley-bank-collapse-the-beginning-of-the-end","status":"publish","type":"post","link":"https:\/\/malvinartley.com\/blog.malvinartley.com\/2023\/03\/14\/the-silicon-valley-bank-collapse-the-beginning-of-the-end\/","title":{"rendered":"The Silicon Valley Bank collapse: the beginning of the end?"},"content":{"rendered":"

In the space of just a few days two major US banks collapsed and were shuttered, sowing panic and uncertainty in the financial markets. The first bank was the Silicon Valley Bank (SVB), the 2nd<\/sup>-largest bank failure in US history, and the 2nd<\/sup> bank failure was that of Signature Bank. Other regional banks have since also closed. Was it poor judgement on the part of the banks or is this the start of an engineered failure of the banking system in the West? These events are not isolated, but instead have broader implications. This is an evolving story. We will have a look at the reasons for the failure of SVB here and what lies ahead for the West\u2019s banking systems in the immediate future.<\/span><\/p>\n

We start our investigations with the chart of SVB, primarily to see if poor policy at that bank was baked into its collapse at its conception. The chart for SVB (noon chart) is below (bigger<\/a><\/span>):<\/span><\/p>\n

\"\"<\/p>\n

The first item of note is the Jupiter\/Uranus conjunction, found frequently in the charts of fortune hunters, adventurers and speculators. This automatically tells us the sort of investors attracted to such a bank \u2013 tech start-ups (Uranus), investors, speculators (venture capitalists) and the like.<\/span><\/p>\n

Since this is a noon chart (no time of day) it is set for 0\u00b0 Aries and neither the Moon nor the angles can really be considered in analysis. The only thing we can say with certainty regarding the Moon is it was in Pisces (7\u00b0 at noon), showing the fluid nature of its investors and management, susceptibility to the mood of the financial sector and to external influences. If it was a morning chart or close to noon, then the situation would have been much stabilized by a trine with Saturn. More than that, though, we cannot say at this point regarding the Moon.<\/span><\/p>\n

The Jupiter\/Uranus conjunction was square a Venus\/Mars conjunction, the latter giving the bank \u2018sex appeal\u2019 to investors. That can be a dangerous combination together with the previous conjunction, as people are finding. Hollywood loved SVB<\/a><\/span>. There is a rumor going around now Harry and Megan<\/a><\/span>, along with Oprah<\/a><\/span>, are also caught up in the collapse. Jupiter was at the Venus\/Mars midpoint as well, which gives the following reading: \u201cA strong physical attraction, a rich soul-life and expression of feeling.\u201d This combination is one of the strongest indicators of a healthy (perhaps overly-so) sex life.<\/span><\/p>\n

All the preceding contributed to SVB having large holdings, making it the 2nd<\/sup>-largest bank to fail in the US when it did fail. It was the 16th<\/sup>-largest bank in the US. To look more closely at why, we turn to the Sun in the noon chart (the executives of the organization). The Sun is conjunct Pluto and sextile Neptune, further increasing the allure of the bank. It all looks like a dream-come-true to investors, just looking at aspects. But then we start to probe deeper and look at the midpoints, shown in the next chart, later.<\/span><\/p>\n

The Sun is at a minute of arc from the Mars\/Uranus midpoint, which points to sudden changes in fortune, injuries, accidents \u2013 it is a potentially unstable combination, and given Mars and Uranus are square in the chart, it points to a reckless attitude when not bridled by other aspects. The sextile between the Sun and Neptune is a supportive aspect for finance, pointing to \u2018intuitive finance\u2019, and up until recently the bank had been quite successful. That sextile also points to success in the entertainment\/film industries.<\/span><\/p>\n

Given the Sun\/Pluto conjunction, Pluto is at the Mars\/Node midpoint, giving the record achievements of the bank (16th<\/sup>-largest in the US is nothing to sneeze at), but it is also at the Sun\/Saturn midpoint, pointing to inhibitions in development, or reticence at critical times when such holding back is counterproductive.<\/span><\/p>\n

In total we have a picture here of a very successful bank when managed well, but with management that is overconfident sometimes and with a lack of confidence at others. It is not a stable setup. Add to this the fact that all the major planets are contained within a square (Virgo \u2013 Sagittarius) and you have a bank that is overly-focused on a singular sector \u2013 the tech\/Hollywood sector. This was a West Coast bank with all that implies \u2013 Democrat dominated (in terms of investors), \u2018woke\u2019 and overly vulnerable to public opinion via its investors. Now it is box office poison<\/a><\/span>, to use the Hollywood term. So, what happened? That is shown in the chart below, with transits and directions (bigger<\/a><\/span>):<\/span><\/p>\n

\"\"<\/p>\n

On the day of the collapse (10 Mar 2023) the entire Sun\/Mercury\/Pluto conjunction in Libra was lit up by transits \u2013 Jupiter opposite Mercury (failures through dishonesty, negligence or clumsiness, fraud, calumny), Mars trine the Sun (failures caused by too heavy demands) and Mercury sesquisquare to Pluto (persons who are guilty of fraudulent representation or misrepresentation in speaking or writing). The conjunction itself describes the persuasiveness of the management, their desire for recognition, and prudence and far-sightedness when well-directed (which it had in its earlier days). The transits on the day brought out all the worst qualities of that conjunction. But there was deceptiveness at play in the lead-up to the collapse. The transits brought it all to the surface.<\/span><\/p>\n

The problems at SVB were known to savvy investors. A short seller<\/a><\/span>, William C. Martin made the following observations as early as 18th<\/sup> January, warning his Twitter followers (read the whole thread<\/a><\/span>):<\/span><\/p>\n

\u201cSilicon Valley Bank $SIVB reports earnings tomorrow. Investors have rightfully been fixated on $SIVB’s large exposure to the stressed venture world<\/strong>, with the stock down a lot. However, dig just a little deeper, and you will find a much bigger set of problems at $SIVB…<\/span><\/p>\n

$SIVB’s big problems are with its <\/strong>HTM portfolio<\/strong><\/a><\/span>. The bank basically increased its security portfolio by 700% at a generational TOP in the bond market, buying $88 b[illion] of mostly 10+ year mortgages with an average yield of just 1.63% at Sept 30th. Oops! $SIVB’s HTM securities had mark-to-market losses<\/a><\/span> as of Q3 of $15.9 b…compared to just $11.5 b of tangible common equity!! Luckily, regulators do not force $SIVB to mark HTM securities to market. But the bank would be functionally underwater if it were liquidated today\u2026<\/span><\/p>\n

$SIVB’s mgmt has tried to blame its challenges on its venture-related exposure. However, it is hard to hide from the fact that mgmt bought the TOP of the bond market. Tomorrow’s earnings and this year should be interesting. Caveat Emptor! (Disclosure: I am short)\u201d<\/span><\/p>\n

This guy saw it coming and shorted his stock in SVB, making a tidy profit for himself. Other investors (the majority) were not so savvy. I am not a financial capitalist or economist, but the gist of what Martin was saying is clear enough: The management of SVB made a bad bet, overconfident they could make it work, but didn\u2019t do their homework and blew the lot. But they must have realized it at the last minute because a mere few days before the collapse they received themselves some very hefty bonuses for work done in 2022<\/a><\/span>. Well done (sarcasm). If they were smart they are no longer in the US, in a country from which they cannot be extradited. They should be in jail for fraud. Perhaps it is too late for that, though, because the parent company and SVB\u2019s two top executives are now being sued for fraud<\/a><\/span>. Oops!<\/span><\/p>\n

What of the directions to the chart? What do they tell us? Directed Pluto tells the tale, with Mars activating the direction: conjunction to Jupiter \u2013 the \u2018plutocrat conjunction\u2019, pursuit of fanatical aims, the desire to exploit the masses (by plutocrats), wastefulness; square to Venus \u2013 extraordinary strains in relationships; semisquare to the Sun \u2013 martyrdom, danger to life, separation by Providence (force majeure). There was also a direction of Uranus to the SVB Chiron, showing the sudden and unexpected pain inflicted on depositors and shareholders.<\/span><\/p>\n

That \u2018force majeure\u2019 from the preceding paragraph was the Fed along with a major downturn of growth in the tech sector. The Fed had introduced steep short-term interest rate rises<\/a><\/span> that made investors nervous:<\/span><\/p>\n

\u201cThe Fed has known since before the 2014 taper tantrum that it has kept rates too low for too long. It took Covid-induced supply chain disruptions and labor market tightness and sanctions blowback to generate too much inflation. The government has been unwilling to do the heavy lifting to address at least some of these bottlenecks. We also have the not-trivial problem of companies admitting they are price-gouging because inflation in visible sectors like food makes other price rises look warranted when they aren\u2019t. Jawboning, excess profits taxes, bans on stock buybacks could help but nothing like that has even been attempted, Instead the government has relied on the heavy hand of the Fed. Unfortunately, the Fed will have to really kill the economy to bring demand for workers down enough to make the central bank happy, particularly since the Administration is pulling in the other direction by spending on job-reshoring schemes<\/strong> like the Chips Act and the Inflation Reduction Act.\u201d<\/span><\/p>\n

The Fed rate rises were also a major factor in the crypto implosion. But there is a wider story at work here, neatly outlined by Kim Dotcom in a Twitter thread<\/a><\/span>, parsed:<\/span><\/p>\n

\u201cUS banks were provided with interest free money by the US Govt \/ FED for years to prop up the stock markets and to buy Govt bonds. The undocumented rule is that those banks which buy more Govt bonds get preferential treatment to access free money. The US banking system has become a tool for the US Govt to create the illusion of a strong economy by pumping the markets with Govt printed money and using banks to raise more debt. That only works for a limited time because the more money is printed the higher inflation rises.<\/span><\/p>\n

When inflation got out of control the US Govt \/ FED had to stop the interest free flow of printed money to US banks and increase interest rates. Banks which got used to making big profits by manipulating the market with free Govt money started to struggle without the regular fix. The US Govt bonds that US banks bought, including with depositor funds, to qualify for more free printed money are now toxic assets with the increase in interest rates and the demand for US treasuries drying up globally. That’s what created the current crisis for US banks.<\/span><\/p>\n

In short, US Govt driven market and debt manipulation are to blame. President Biden said today that investors \/ shareholders of failed US banks will not be compensated because it\u2019s their fault for making bad investments. In reality they are victims of the US Govt Ponzi scheme\u2026\u201d<\/span><\/p>\n

Couldn\u2019t have said it better. Dotcom goes on to say the US financial system is in terrible shape. So, do we need to panic? Biden says the US banking system is safe. So, the message from the government?: Remain calm. All is well!<\/span><\/p>\n