Yeah if you’re gonna do this, gotta find that middle ground with a bank that’s big enough to have serious debt, but small enough to not get america’s attention when the bailout wallet opens up
This has been obvious for years, but here's the issue: you don't know when it is gonna crack until someone tries to sell a skyscraper and it goes for 10 million instead of 500 million. This is most likely to happen when the mortgage-holders just walk away, allowing their collateral to be seized and sold by the bank rather than waste money paying their mortgage. Maybe this happens soon, when Trump tries to sell a tower or two to pay his bills. Maybe they kite it down the road for years.
The play is to figure out which banks have the most commercial real estate exposure (CBRE, for example, has tons) and buy puts that stretch out as far as you can. The problem is that you're fucked, they're not gonna collapse until after your puts expire, and also you're fucked because the government can see this coming and will just give them free money and you'll lose and they'll give themselves big bonuses. The real play is to just avoid this field entirely.
NYCB was a good play for me during last earnings. I had actually made 40% on my shares. Started seeing their CRE was high and sold positions. Took puts that were through earnings from Q4 and they printed.
I mean, it didn't work for you; the economy did not collapse. You made money in a different way than betting on the economy collapsing. Also it's sowed. Sowing is the act of planting seeds.
I wasn't betting on an economic collapse. I was betting against a specific regional bank. If it was for an economic collapse i would short the entire banking sector. But I didn't. Did you see that or do i have to spell it out for you? Clearly I'm not good at that but for someone with your intellect surely you can see that.
Yes, I know you weren't betting on an economic collapse, dude. We're talking about a guy who is. You're wading in and talking about your own experience but what you experienced and what this guy is talking about are essentially unrelated. It's like if you were in a restaurant and someone said 'should I order the fish?' and people say no, it's not fresh, and then you're like 'Oh yeah actually you should, it worked great for me when I had the pollo asada.' my man that is chicken
Chicken steak? I think you mean Pollo asado. To add to your reference, dude. It would be like me saying i had the flounder and it was good instead of him having the "fish". What i wanted him to see is that it's possible to bet against banks but you can't bet against the whole sector or even large national banks who get bail outs. My comment is to follow in with what everyone else is saying to him. Don't try and bet against big banks, find smaller with high CRE, do your research and give it a shot. Pretty sure my comment was understood by OP. You're just a subject nazi that has taken this wayyyyyy further than it needed to go.
Man you are desperate for his question about whether he can profit from all buildings everywhere being worth a fraction of what they're valued at to be a question about, uh, shareholder uncertainty about a specific bank, and when no one cares about your very specific financial decision because it's unrelated, you call me a 'subject nazi' lmao. The Chinaman is not the issue here, Dude.
There is that enough jerk material for you. Ill keep betting on reg. Banks with high CRE in areas where rentership is down. I'll keep making money on it too. Damn me for trying to show the OP that there is a way to bet against banks and make money. How dare i share knowledge of mine other than what OP is asking for at 30k ft view. Eat a fucking dick dude.
I know you're so fucking happy someone said you're right because you damn sure know you can't get that shit witg your wife. I bet you get all up in her ass if she strays from the subject of conversation too. You're probably fun to be around
> Trump tries to sell a tower or two to pay his bills.
Somehow, the thought of Trump having to sell a tower to pay legal fees being the match the starts the house of cards on fire brings be the giggles.
its like "Yall fuckers were in on this together, until you weren't."
I think this only poses an issue if somehow liquidity dries up. But the Fed has been known to swoop in and flush the banks with cash under such events.
Long term not sure what any of this means…
This guy speaks the truth. If the commercial real estate loans start going bad, the banks are bigly fucked. And they most likely will at some point in the near future.
They’re going to go bad, vacancies are increasing and rates are already starting to reset at double their current rates. These a holes run a 1.2x debt coverage ratio in good times…they’re fuked. To clarify, the cost of their debt is going to double overnight. The banks eat most of those losses they haven’t reserved enough for
as your graph depicts this is not new news but if you believe they will fail perhaps puts on XLF when it hits around 43. KRE would be the one for regional bank contagion play. i tried puts and failed pretty bad. i believe the sector is mighty manipulated.
I wouldn’t do this with XLF which has large holdings in JPM and Berkshire for the etf, JPM only has 5 years of duration risk and Berkshire is even less exposed to these issues. KRE or BAC puts imo
They already got low interest loans for face value of those bonds through BTFP last year and they'll get some relief by next year through rate cuts and slowing of QT.
It’s not that big of an IF for the big banks. Unless some kind of run happens like a total loss of faith in the entire banking system they almost certainly can weather the storm
Smaller banks who went hard into treasuries and also might have losses from commercial real estate might be in trouble
But the US has an astonishing amount of banks. Like 4000 different banks. It’s not uncommon for countries to have like 2 or three banks.
The stat I always bring up here is there’s more different bank companies in South Dakota than the entire country of Canada
So we could probably afford some of those to be ruined and their assets bought by larger banks.
But regardless I keep watching for this commercial bank burst and it’s yet to materialize. Doesn’t mean it won’t but it doesn’t seem to be in full swing yet.
If you were going to play against the banks you’d probably want to try to find out which big regionals have the highest and worst exposure to both commercial real estate and treasuries in the red.
But that’s a lot of work to maybe be wrong anyways. If you do it let me know I can’t be fucked to bother
People cashing out would not be what would trigger the losses. Loans defaulting above the benchmark risk rates would as the banks would need to generate capital to cover those losses. The losses in that diagram tho are from holding bonds with lower yields, so an interest rate cut would actually begin to help by lowering those losses since the bonds would be closer to ones you could buy today (not much but every bit helps).
The Fed requires banks of varying size to maintain liquid capital to cover losses. This is what caused NYCB to completely meltdown and has been fading since the recapitalization event.
Now instead of everyone cashing out, if everyone decided to stop paying and take all their free cash and put it into SPY puts… that would be a very interesting exercise.
Citi commenting on $OZK (large-ish regional bank 77% in CRE loans):
"**The two projects together account for 3.8% of Bank OZK's non-purchased loans and are more than 8.1 times larger than its allowance for credit losses for construction loans, Citi said.**
A spokesperson for the bank did not immediately respond to a request for comment.
**The bank has sizable exposure to CRE. Real estate loans accounted for nearly 77% of its total loan book, as of March 31.**"
the stock fell -14% in a day, and is well known for its 'quarterly dividend hikes'.
The bank has a low payout ratio but the fact it has loses potentially 8.1x larger than its allowance is scary as hell.
Many of the bank stress testing assumptions use a ~5% withdrawal rate during stress. If each of you withdraw more than that, it would really fuck them over.
I work in stress testing at a large regional, we definitely hold more than 5% for a 30-day stress period, and we are on the lower end of almost all regionals for deposit assumptions, nevermind the fact for a lot of regionals their deposit composition is primarily subject to commercial client withdrawals not really much from consumers
I gotcha. Yeah the outflow for the overall deposit population is higher for wholesale and non-op deposits. But just for the retail consumer small business cohorts, much of it is mid single digits.
What I'm curious about is... are banks ever going to have to go back to cash reserve reqs, or is this stress test stuff going to be the standard indefinitely?
Fed would screw you over and press money and deny you from taking out cash so you will only be able to move from bank to bank and banks will lend each other. But will be curious to see how far and how next crash will be
Bail out/Bail-in
why bank bail-ins are the new bailouts
in a bail-in, banks use the money from depositors and unsecured creditors to help them avoid failure.
how bail-in works: fdic/cdic [cdic.ca/wp-content/uploads/How-bail-in-works.pdf](http://cdic.ca/wp-content/uploads/How-bail-in-works.pdf)
delivery of common shares
thanX op!
Bank of America has one of the largest HTM book that is under water. However, the last I check it isn’t a big issue, as demand deposits used to cover the whole amount and declining. It still is used to finance a significant portion. So not much there, as time goes it matures, and less risk, just dampen the current earning power.
2023’march taught us don’t bet against the FED. They will keep printing if there are any potential system risks. A dip buy with a reasonable stop loss is probably a better alternative.
A good play would be making money on SaaS puts or semiconductors rather than trying to predict when to profit off a hypothetical bank run in a sector that virtually always gets salvaged by the government when something goes wrong.
I have abt 50 contracts on C 50P so I very much want a crash to happen soon especially since citi is at $62~ and if they go to $44 that would pretty much mean they lost their 2008 bailout money again but im not sure, i just think the banks story isnt as good as they say
They probably wont because theyre literally the "market movers" and that fine they got for accidently manipulating the Euro did not affect them in the slightest if anything they went up 23%
Yeah, I definitely think banks could be in a pinch. Liquidity is pretty tight right now, and it's only going to get worse. However, things should be fine through June. After that, the Treasury will ramp up new debt issuance from July-Sept, and that will most likely cause bonds to drop more, cause some liquidity problems, and put some banks in a bad spot.
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Nah. Fed comes in instantly and bailout the bank so no point in betting against fed.
That didn't save SVB or FRCB shareholders.
Saved customers and debt holders though.
Small enough to fail.
Yeah if you’re gonna do this, gotta find that middle ground with a bank that’s big enough to have serious debt, but small enough to not get america’s attention when the bailout wallet opens up
Actually true^
But it did for whoever got the accounts
They saved the rest of the banks though
[удалено]
OP is talking about trading stocks, not depositing money into a risky bank so they can wait for a FDIC bailout.
The Fed can't do this anymore.. because of elections coming up and because they are over exposed themselves.
Stop talking out your ass, the Fed can literally do whatever the fuck they want as long as it keeps the status quo
Don’t bet against entities that get bail outs from your government
But we can do puts on them right
This has been obvious for years, but here's the issue: you don't know when it is gonna crack until someone tries to sell a skyscraper and it goes for 10 million instead of 500 million. This is most likely to happen when the mortgage-holders just walk away, allowing their collateral to be seized and sold by the bank rather than waste money paying their mortgage. Maybe this happens soon, when Trump tries to sell a tower or two to pay his bills. Maybe they kite it down the road for years. The play is to figure out which banks have the most commercial real estate exposure (CBRE, for example, has tons) and buy puts that stretch out as far as you can. The problem is that you're fucked, they're not gonna collapse until after your puts expire, and also you're fucked because the government can see this coming and will just give them free money and you'll lose and they'll give themselves big bonuses. The real play is to just avoid this field entirely.
NYCB was a good play for me during last earnings. I had actually made 40% on my shares. Started seeing their CRE was high and sold positions. Took puts that were through earnings from Q4 and they printed.
I was on NYCB too, all you have to do is look. I just did a google search on banks holding the most commercial real estate debt last summer.
That's not about the oncoming collapse mirage, though
Well it worked for me. The 2 properties that were failing in their portfolio sewed doubt in investors minds and helped me with a big win.
I mean, it didn't work for you; the economy did not collapse. You made money in a different way than betting on the economy collapsing. Also it's sowed. Sowing is the act of planting seeds.
I wasn't betting on an economic collapse. I was betting against a specific regional bank. If it was for an economic collapse i would short the entire banking sector. But I didn't. Did you see that or do i have to spell it out for you? Clearly I'm not good at that but for someone with your intellect surely you can see that.
Yes, I know you weren't betting on an economic collapse, dude. We're talking about a guy who is. You're wading in and talking about your own experience but what you experienced and what this guy is talking about are essentially unrelated. It's like if you were in a restaurant and someone said 'should I order the fish?' and people say no, it's not fresh, and then you're like 'Oh yeah actually you should, it worked great for me when I had the pollo asada.' my man that is chicken
Chicken steak? I think you mean Pollo asado. To add to your reference, dude. It would be like me saying i had the flounder and it was good instead of him having the "fish". What i wanted him to see is that it's possible to bet against banks but you can't bet against the whole sector or even large national banks who get bail outs. My comment is to follow in with what everyone else is saying to him. Don't try and bet against big banks, find smaller with high CRE, do your research and give it a shot. Pretty sure my comment was understood by OP. You're just a subject nazi that has taken this wayyyyyy further than it needed to go.
Man you are desperate for his question about whether he can profit from all buildings everywhere being worth a fraction of what they're valued at to be a question about, uh, shareholder uncertainty about a specific bank, and when no one cares about your very specific financial decision because it's unrelated, you call me a 'subject nazi' lmao. The Chinaman is not the issue here, Dude.
You're right!
There is that enough jerk material for you. Ill keep betting on reg. Banks with high CRE in areas where rentership is down. I'll keep making money on it too. Damn me for trying to show the OP that there is a way to bet against banks and make money. How dare i share knowledge of mine other than what OP is asking for at 30k ft view. Eat a fucking dick dude.
I know you're so fucking happy someone said you're right because you damn sure know you can't get that shit witg your wife. I bet you get all up in her ass if she strays from the subject of conversation too. You're probably fun to be around
> Trump tries to sell a tower or two to pay his bills. Somehow, the thought of Trump having to sell a tower to pay legal fees being the match the starts the house of cards on fire brings be the giggles. its like "Yall fuckers were in on this together, until you weren't."
I think this only poses an issue if somehow liquidity dries up. But the Fed has been known to swoop in and flush the banks with cash under such events. Long term not sure what any of this means…
Not the bonds you should be worried about, it’s going to be CRE losses
This guy speaks the truth. If the commercial real estate loans start going bad, the banks are bigly fucked. And they most likely will at some point in the near future.
They’re going to go bad, vacancies are increasing and rates are already starting to reset at double their current rates. These a holes run a 1.2x debt coverage ratio in good times…they’re fuked. To clarify, the cost of their debt is going to double overnight. The banks eat most of those losses they haven’t reserved enough for
So we are edging another March '23
Was the SVB?
Yes. And First Republic later.
as your graph depicts this is not new news but if you believe they will fail perhaps puts on XLF when it hits around 43. KRE would be the one for regional bank contagion play. i tried puts and failed pretty bad. i believe the sector is mighty manipulated.
I wouldn’t do this with XLF which has large holdings in JPM and Berkshire for the etf, JPM only has 5 years of duration risk and Berkshire is even less exposed to these issues. KRE or BAC puts imo
https://preview.redd.it/nw7mz53m734d1.jpeg?width=1918&format=pjpg&auto=webp&s=e38e456f038ff5ff562e88f33b841f468cacb824 Imhotep says you're wrong.
This is not 2008!
Let’s be real the only entities with cash are businesses, most apes have more debt than cash.
They already got low interest loans for face value of those bonds through BTFP last year and they'll get some relief by next year through rate cuts and slowing of QT.
Rate cuts?
It’s not that big of an IF for the big banks. Unless some kind of run happens like a total loss of faith in the entire banking system they almost certainly can weather the storm Smaller banks who went hard into treasuries and also might have losses from commercial real estate might be in trouble But the US has an astonishing amount of banks. Like 4000 different banks. It’s not uncommon for countries to have like 2 or three banks. The stat I always bring up here is there’s more different bank companies in South Dakota than the entire country of Canada So we could probably afford some of those to be ruined and their assets bought by larger banks. But regardless I keep watching for this commercial bank burst and it’s yet to materialize. Doesn’t mean it won’t but it doesn’t seem to be in full swing yet. If you were going to play against the banks you’d probably want to try to find out which big regionals have the highest and worst exposure to both commercial real estate and treasuries in the red. But that’s a lot of work to maybe be wrong anyways. If you do it let me know I can’t be fucked to bother
Big banks are safe, the smaller more regional banks, however…
People cashing out would not be what would trigger the losses. Loans defaulting above the benchmark risk rates would as the banks would need to generate capital to cover those losses. The losses in that diagram tho are from holding bonds with lower yields, so an interest rate cut would actually begin to help by lowering those losses since the bonds would be closer to ones you could buy today (not much but every bit helps). The Fed requires banks of varying size to maintain liquid capital to cover losses. This is what caused NYCB to completely meltdown and has been fading since the recapitalization event. Now instead of everyone cashing out, if everyone decided to stop paying and take all their free cash and put it into SPY puts… that would be a very interesting exercise.
FAZ
Citi commenting on $OZK (large-ish regional bank 77% in CRE loans): "**The two projects together account for 3.8% of Bank OZK's non-purchased loans and are more than 8.1 times larger than its allowance for credit losses for construction loans, Citi said.** A spokesperson for the bank did not immediately respond to a request for comment. **The bank has sizable exposure to CRE. Real estate loans accounted for nearly 77% of its total loan book, as of March 31.**" the stock fell -14% in a day, and is well known for its 'quarterly dividend hikes'. The bank has a low payout ratio but the fact it has loses potentially 8.1x larger than its allowance is scary as hell.
The money is fake so it doesn’t matter Everything is coordinated
Many of the bank stress testing assumptions use a ~5% withdrawal rate during stress. If each of you withdraw more than that, it would really fuck them over.
I work in stress testing at a large regional, we definitely hold more than 5% for a 30-day stress period, and we are on the lower end of almost all regionals for deposit assumptions, nevermind the fact for a lot of regionals their deposit composition is primarily subject to commercial client withdrawals not really much from consumers
I gotcha. Yeah the outflow for the overall deposit population is higher for wholesale and non-op deposits. But just for the retail consumer small business cohorts, much of it is mid single digits.
retail/op/non-op/wholesale stop giving me work flashbacks hahah. do you do stress testing/risk at a bank
Yeah I'm familiar with it a little bit.
What I'm curious about is... are banks ever going to have to go back to cash reserve reqs, or is this stress test stuff going to be the standard indefinitely?
It works until it doesn't.
Fed would screw you over and press money and deny you from taking out cash so you will only be able to move from bank to bank and banks will lend each other. But will be curious to see how far and how next crash will be
No idea what that means.
high rates benefit the banks as such they’re at all time highs
Except for svb high rates killed them
I'm referring to big banks
Well run banks
I posted that on a different sub 9 hours ago.
Bail out/Bail-in why bank bail-ins are the new bailouts in a bail-in, banks use the money from depositors and unsecured creditors to help them avoid failure. how bail-in works: fdic/cdic [cdic.ca/wp-content/uploads/How-bail-in-works.pdf](http://cdic.ca/wp-content/uploads/How-bail-in-works.pdf) delivery of common shares thanX op!
Welcome to the inverted yield curve
😵💫
Bank of America has one of the largest HTM book that is under water. However, the last I check it isn’t a big issue, as demand deposits used to cover the whole amount and declining. It still is used to finance a significant portion. So not much there, as time goes it matures, and less risk, just dampen the current earning power.
Calls on the crypto market
Silver and gold
2023’march taught us don’t bet against the FED. They will keep printing if there are any potential system risks. A dip buy with a reasonable stop loss is probably a better alternative.
Ok
The hedge to the dollar... btc, gold, silver.
Playing regional bank is so 2023
Every investor can look at the banks balance sheet and cash flow.
Oh my
The banks that failed fell because their rate exposure was unhedged. So you need to figure out what portion of these losses are hedged/unhedged.
Betting against banks = betting against economy Are you sure about that?
You never really lose unless you realize your losses. checkmate? per chance
A good play would be making money on SaaS puts or semiconductors rather than trying to predict when to profit off a hypothetical bank run in a sector that virtually always gets salvaged by the government when something goes wrong.
>making money on SaaS puts [*Cries in Snowflake*]
I have abt 50 contracts on C 50P so I very much want a crash to happen soon especially since citi is at $62~ and if they go to $44 that would pretty much mean they lost their 2008 bailout money again but im not sure, i just think the banks story isnt as good as they say
Why do you think Citi would have terrible earnings?
They probably wont because theyre literally the "market movers" and that fine they got for accidently manipulating the Euro did not affect them in the slightest if anything they went up 23%
Then why get puts
I would always like to inverse a growing trend if i could cause then its cheaper😁👍🏽 plus i get more if i win, a small price to pay really.
Not yet. Friday's action suggests that more Bogleheads are buying the S&P 500 next 3 months.
Yeah, I definitely think banks could be in a pinch. Liquidity is pretty tight right now, and it's only going to get worse. However, things should be fine through June. After that, the Treasury will ramp up new debt issuance from July-Sept, and that will most likely cause bonds to drop more, cause some liquidity problems, and put some banks in a bad spot.
Which means there will be front running in June in anticipation of your last sentence.
Front running of what? The Fed injecting some liquidity into the banking system?