In case you wondered what a Black Swan might be, the collapse of Silver Lake and Silicon Valley Bank is a great example - something unforeseen in the financial markets that can have a significant impact.
It appears the federal government assumed that exceptional action was required, with the government stepping in to protect the depositors.
This is a huge step for the government to step in and essentially guarantee the system.
This is about nationalizing the banking system.
We are now at a time to recalibrate our banking system.
Of interest is the fact that SVB simply had a run on its cash reserves due to losses it had to reflect on its investments in Treasuries if measured on that particular date: AKA marketing to the market.
The Treasuries will mature at par in the future but are currently valued lower due to rising interest rates.
It is a perfect example of what full faith and credit means.
Now the Fed will be pressured to hold back on further rate increases this week.
The problem with that scenario is that you are ignoring the fact that inflation is still with us.
It seems that the call for banks that are not operated correctly should be allowed to fail.
My problem with the government guaranteeing anything always creates problems.
You only have to look back at the mortgage crisis and the current student loan crisis.
This all comes in a week where we will get the CPI and Fed decision on rate hikes.
Moreover, the S&P 500 stock-index is again testing the support level of 3900.
It shows how something can come almost out of nowhere to completely shake financial markets.
Now we will have to let this play out this week to see what, if any, other bricks will fall.
I don’t believe you can or should eliminate risk.
It is the fuel for gain.
The fact that there can be a loss is part of the game.
Like in life, there will be those who are far more successful than others.
This is free enterprise, not the government guaranteeing anything and everything.
