What if I were to tell you that two of the biggest bank blow-ups ever to take place literally just happened a few days apart and now we're being told that there's nothing to worry about. The banking sector is safe, taxpayers aren't going to have to pay a dime, and there was totally 100 nothing nefarious going on in the back end. That's this reality that is this simulation we live in right now and it absolutely blows my mind. We're going to be getting into all of that good stuff in this video.

but before we do that and I know it's an annoying reminder. Don't forget to hit the like button if you enjoy it. And don't forget to become a goonie by hitting the Subscribe button With all that out of the way, let's get into this can of worms that is absolutely ludicrous. So as you've probably heard, the banking sector isn't having the best day and this is what the President of the US has to say about it: Americans Can have confidence the banking system is safe.

Well there you go. Absolutely totally 100. nothing to worry about. So I guess that's the video.

Uh, let's just cut it now. Yeah, cut the video. No, we are 100 safe all right now that we can maybe get a little bit back to reality if you look at Svb Silicon Valley Bank ticker symbol S-i-v-b Well, it's been cratering. Year today is down 54 and over the past week it is now down almost 62.

This stock not long ago was trading at 340 and now it's trading not even at 40.. for those of you who need a really quick tldr of the current situation, Svb Silicon Valley Bank is a very, very popular bank the 16th. Well, it was the 16th largest bank and obviously it's out in the Silicon Valley and its clientele was basically a bunch of tech Bros This got very, very popular over the past couple years. It went from deposits around the range of 50 billion with a B all the way up to 200 billion.

So it very quickly became a large Bank especially when we had. we'll call it supportive monetary policy from the FED that allowed for VC evaluations to go Sky High Because as they went up, obviously a lot of these entrepreneurial Endeavors out in Silicon Valley got a lot of money. Now this bank was attractive to this particular cohort because they were able to get loans from this bank that maybe some of your bigger players such as JP Morgan or Bank of America wasn't willing to give them a little bit of higher risk loans. But that's not necessarily why this bank went belly up.

So with the massive influx of money from 2019 to 2022, yes, like a normal Bank Svb made loans, but they also invested quite a bit of that money into bonds and at first this was fine. This is a normal practice. you put money in bonds and you get good, decent interest payments. Nothing too special there.

The issue of this was The timing. Inherently, the thing that made the bank big is also what led to its downfall. The bank was made big by very dovish monetary policy because we were fighting the economy within the Rona period. So you had the Federal Reserve Printing Printing Printing printing.

making a ton of money Into Thin Air Everyone got stimulus checks. All these valuations I mean look at the stock market. It ripped from the bottom left to the top right. So at one point in time this all seemed great.

But this is also the exact same thing that led to the demise of Svb. With all this extra money, it went from 50 billion in deposits to over 200 billion in the matter of three years. Some of this money. A lot of this money went into bonds, and it went into bonds right when interest rates were pretty much zero, and clearly they didn't believe that interest rates were going to be jacked up as soon as they were or as aggressively as they were.

So with all this money in bonds, all of a sudden, the value is going to be dropping and it's going to be dropping a lot as yield go up and up and up. Now at first this is fine. It only becomes an issue if people start to need that money. And at Svb.

whether someone actually needed money, a group of people needed money, or if they just wanted a little bit more breathing room. they ended up trying to sell some to the market and then they took on a pretty large loss. So at one point in time when everything was flying high, it was looking great, but similar to the mythology of Icarus, they flew a little bit too close to the Sun and in all reality, if you were to really break it down, what made this all work so well at first is actually what led to its downfall. I Would strongly argue that so much money came in because of dovish monetary policy and higher valuations in the VC world going nuts.

This has a lot to do with the fact that interest rates were zero. Unfortunately, the party of Funny Money cannot continue forever, and eventually because inflation was ripping to the High Heavens the Federal Reserve had to step in and go from being pretty dovish to actually being pretty hawkish and all of a sudden interest rates started going up earlier and at a higher velocity than Svb ever imagined. And this is why it matters. Svb like a normal Bank did make loans You Could argue they were a little bit higher risk, but the real issue is with all that new, fresh money they were buying a bunch of At first you might have heard of bonds as something that your Boomer parents and grandparents do and just low risk and low reward.

but okay, at least it's some money coming in. they did that. Unfortunately They put a lot of money into bonds when interest rates were essentially zero and the mistiming of that means when the FED decided to jack up interest rates, it means their bonds, at least on paper, value lost quite a bit of value at first. This doesn't really matter, but it does matter if all of a sudden you don't have a new grouping of fresh Capital coming into the bank.

and that's exactly what happened to Svb. They were in the scenario where on paper, they lost a lot of value in bonds because interest rates were going up, but unfortunately because the environment became a little bit more restrictive. If you will not favoring so much more growth, well, they weren't getting all those new fresh deposits to make up for the difference. When someone might come say knocking and be like hey, I need some of my money this Force Svb to sell some of of their bonds to the market at a bit of a loss and I really shouldn't say a bit of a loss because when they did it in reality it was large enough that they said we might have to raise money and then from there the world found out about it.

They got panicked and this created what's referred to as a good old-fashioned Bank Run Now obviously there's a lot more Nuance to this story, but the Tldr of it is with a bunch of new capital. They bought a bunch of bonds on paper. The bonds lost value and that's fine if you keep coming in with a bunch more deposits. but they lost it because the economy hasn't been so great.

and then all of a sudden if you need to sell some to provide liquidity to whoever wants it, you might take in a loss. That's what happened. and people then figure out that maybe they weren't in the best situation. and one thing led to another.

and just because you took money out, maybe I do. And then because the two of us they do, someone else does. And there's a couple other people in this story that maybe ban the Flames of fear a little bit and that's what I want to get into in just one second. But check out this breaking news: Justin Silicon Valley Bank Sivb Sued by shareholders for fraud.

Now obviously when a bunch of money like this seemingly disappears overnight, it's pretty fair that people are going to get mad and I don't think it's one of these things where it's just disgruntled depositors or investors. There's some crazy stuff that went on in the background. In fact, the more I dig into it, the crazier it gets. Kbmg gave Sdb Signature Bank Clean bill of health weeks before collapse Accounting firm Face of scrutiny for audits of failed Banks Uh yeah, How can you audit two of the biggest bank blow-ups a couple weeks before they blow up and be like yeah, no, they completely passed everything Silicon Valley Bank Failed just 14 days after KPMG gave the lender a clean Bill of health Signature Bank went down 11 days after the accounting firm signed off on its audit.

Well, KPMG is gonna have to answer some questions. How can you say both of these banks are quote unquote, healthy and then they blow up two weeks later. What? KPMG Knew about the Tubing's financial situation and when What? Miss was likely the subject of regulatory scrutiny and lawsuits KPMG Signed the audit report for Silicon Valley's Bank parent Svb on February 24th Regulator seized the bank on March 10th after surge of withdrawals threatened to leave it short of cash. Once again, that ties back to the whole Bond thing.

they lost value at first. That's not a real big issue until someone needs money and then obviously the rest is history. Common Sense tells you that an auditor issuing a clean report, a clean Bill of Health on the 16th largest bank in the Us and within two weeks fails without any warning is trouble for that auditor. So I don't think the lawsuits are going to be stopping anytime soon and I definitely don't think they're going to be stopping here because there's even more crazy stuff going on Now just for the point of me not getting sued I'm not a lawyer, these are just my opinions.

I Just want to point out some factual data and you can make whatever assumptions from this information you want. So as previously discussed, we know Svb had a clear, massive drop off in depositors. We also know that on paper they were facing a pretty large loss in their bond investment because interest rates went up faster and more aggressively than they ever thought they would. So all of a sudden you have people in the company knowing that they have an on paper loss with bonds.

We also know that they can't make up for that because the environment means that they're not going to be getting a bunch more deposits Because all of a sudden the dowlings the Silicon Valley aren't looking as shiny as they used to. so internally, things look not so good. Check this out. The CEO and the CFO sold stock in the company at the end of February.

So right after they got cleared by the auditor, but right before it blew up a sold stock, the CEO Gregory Becker on February 27th sold over 3.5 million dollars worth of the stock. Now a lot of you might be looking into it and you're like hey, ma'am I Looked into the SEC filing. it was a 10b51 which means he applied for it beforehand to get it all scheduled. If you look into that, the 10b5 one was figured out in January.

My assumption is that for multiple fiscal quarters, people within the company knew that something was up. Maybe they didn't think it was a sinking ship, but I think they know that things were heading in a very, very negative Direction So very quickly they're like okay in: January we'll set it up to sell in February they sold in February and guess what in March It blew the F up. So clearly something's going on with the Auditors Why did they pass them? Something's going on with the internal team that they were selling stock ever so perfectly, almost with the same timing of Pelosi But in reality it doesn't stop there. It's probably Fair of you to argue that in early March Svb it was teetering on the cliff back and forth but didn't really fall and it wasn't a gradual fall.

When it did, it was teetering and then a few people came up and absolutely drop kicked it off of the cliff. It was yeeded into the Grand Canyon as if it was Hulk mode mad type of a situation. It was bad and the name of that aggressor or potential aggresses. Peter Thiel and Bill Ackman There should be more scrutiny of Peter Thiel and Bill Ackman for yelling fire in a crowded theater in the Svb collapse right when the murmurs really started to break.

All of a sudden we got the very dramatic shows from both of these very influential powerful billionaires of how bad it was. and then of course just because of who they are and the weight that they carry in the public forum. If it was going to be bad, this made it even worse. It's really up to you.

It's more of a philosophical question of did they make it worse or were they using their platform to spread the truth And it's just fair that most likely they will get more scrutiny and before I Get on to the whole taxpayer thing. I Want to talk about some interesting data that we actually saw within the markets? So first of all, Svb is a really strong Bank Yes, it was the 16th largest bank, but most people aren't trading the 16th largest bank. They're also not trading ETFs of not that popular Regional Banks For those of you who don't know when ETF is an exchange traded fund, think of it as a basket of stocks. Well, it's really weird that over the past couple weeks leading up to this explosion, there was a large spike in dark pool activity for not even the most popular.

Regional Bank ETFs something that is inherently already not popular. So right away that might throw off one of your red flags of okay, maybe someone knew something. Was it internal to the company? Did it relate to Auditors or did it relate to the world of hedge funds and billionaires? But something seemed odd. Maybe it was just coincidental, but it doesn't seem so coincidental.

When last week over the past couple weeks, we saw huge spikes in options activity before anything happened on any relative basis. when Regional Banks see a giant spike in options activity when I consider that with the spike in dark pool activity I Mean we don't definitively know, but it seems really odd that all this activity came out of nowhere and then the bank blows up. Now once again, obviously you're an adult I'm not a lawyer I'm not a financial advisor I'm also not Clairvoyant But this coincidence seems too big to just be ignored. And if there's anything I've really learned about the markets is where there's smoke, there's probably fire.

Like the chance of this just happening is so infinitely small that I think it does need to be more looked in. Who is doing the trading and where did they get the information? What was their thesis on it? Because the timing once again was just too good and I want to leave you with one major thought. Whenever anything blows up like this, it usually comes down to the average Joe Like you and me, that's forced into cleaning it up most of the time it's through our taxpayer dollars and I wanted to get your thoughts on this because I'm definitely not an expert in this particular sub domain. but I wanted to share with you and just get all of your thoughts.

Wall Street Not taxpayers will pay for the Svb and signature deposit relief plans. If you don't know what the rate of plans are, they're not going to bill out the bank as in the stocks are going to go to whatever they're going to go to. but they are going to bail out the depositors. the people who just had their money there.

So not investors, just the people who are using the banks to hold their money. The money to fully reimburse the positives of the collapsed Silicon Valley Bank and shuttered Signature Bank will be furnished by other Banks Not taxpayers according to treasury officials. The deposit Insurance Fund also known as the Dif, which will cover the deposits is funded with the quarterly fees assessed on financial institutions and interest on government bonds. Now, yes, this is being reported by CNBC so maybe it's true.

Maybe it's not true if any of you know how to check where the money is truly coming from or not. I would love to know, but let's just even assume it is right just for the sake of this argument. In a weird way, aren't taxpayers already paying for it? By the fact that none of these government officials who are figuring out this mess? they're not doing it for free? And the last time I checked all these government officials who are now tasked with fixing this entire situation last time I checked, they get paid from taxes and we're the one who pay taxes. So I know that's a little bit more of a convoluted way to look at it.

but I'm hearing a lot of like oh no, no, the average person like we're fine, you're not paying anything I mean there's at least one example in a way that we are because I don't think any of these government officials are spending their entire weekend figuring out this issue for free and I don't think that the issue is going to be resolving itself anytime soon. So to summarize everything, Svb yeah and made some questionable loans, but that wasn't its downfall. Its downfall was that it made a bad investment into bonds, didn't properly hedge it, the deposits didn't keep up, and apparently they got caught with their pants down when the tide went out. That is a great story.

It's a great thing to learn about. But what I find so much more interesting is what happened with the Auditors Why did they give them a clean bill of health? What happened with the CEO and the CFO selling a couple weeks before the bank blew up? That seems crazy and also what's going on In the world of trading, it seems like someone was in the know. Their timing was just too impeccable. A spike in dark pool activity, a spike in options.

it just doesn't add up, and then really, it seems in one way or another to fall on taxpayers. even if they don't tell us that. that's the truth. So with all that being said, I hope you learned a thing or two.

If I got anything wrong, please let me know in a comment below. But really, what I want to hear from you in the comments is your thoughts on this situation. Did I miss something? Is there something we should dive more into? Let me know your thoughts in a comment below. If you enjoyed the video, don't forget to hit the like and I'll catch you in the next one.

Hope you subscribe. Peace Out.