Tremendous

An angel investor's take on life and business

  • Deutsche Bank Under Fire

    Is Deutsche Bank the next Credit Suisse? Traders think so today as they dump the stock and rush to protect bond holdings.

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    From a new report in Bloomberg:

    Deutsche Bank AG became the latest focus of the banking turmoil in Europe as ongoing concern about the industry amid a slowing economy sent its shares slumping the most in three years and the cost of insuring against default rising.

    The bank, which has staged a recovery in recent years after a series of crises, was the biggest loser among large European bank stocks Friday after announcing a plan to repurchase debt, a move normally seen as a sign of strength. Analysts struggled to explain the selloff, which prompted German Chancellor Olaf Scholz to publicly back the lender.

    The cost of insuring against a bank’s default is a key stat. Called a Credit Default Swap (CDS), this protection often soars in price when a bank is close to failing.


    One thing in Deutsche Bank’s favor: a big pile of cash. It’s sitting on $179 billion of cash and deposits at central banks, according to its latest annual report.

    That means it could pay back 28% of its deposits almost immediately. But the thing is, Credit Suisse had a ton of cash too.

    It failed anyway. In the end, no bank can pay back all its depositors right away.

    Even US regulators seem concerned. Treasury Secretary Janet Yellen convened a group of top officials this morning in an unscheduled, closed door meeting.

    In the end, Germany won’t let Deutsche Bank fail. Neither will the ECB.

    Deutsche Bank is the largest bank in Germany by far. It ranks #8 in the entire EU.

    Olaf Scholz is not going to let old Granny Durchdenwald lose her life savings.

    But that doesn’t mean Deutsche Bank shareholders are safe. Once mighty Credit Suisse is now a penny stock.

    I hate bank stocks. Banks often pick up pennies in front of a steamroller, turning in decent profits until they suddenly get crushed.

    Perhaps Deutsche Bank will survive as an independent company. Either way, shareholders won’t be sleeping well tonight.

    What do you think will happen to Deutsche Bank? Leave a comment and let us know!

    Have a great weekend everyone!

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    More on markets:

    Don’t Wanna Pay 216%? How About a Naked Short?

    Interest Rate Time Bomb May Kill Hedge Funds

    Executives Dumped Shares Shortly Before First Republic Rescue

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Don’t Wanna Pay 216%? How About a Naked Short?

    Cost to borrow shares of AMC Entertainment holdings went through the roof today. From a report out just this afternoon on InvestorPlace:

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    The cost to borrow (CTB) fee for AMC Entertainment (NYSE:AMC) has skyrocketed to 215.80% today, up by more than 100% from the reading of 101.76% on March 10. Yesterday’s closing CTB fee reading clocked in at 211.41%. Meanwhile, between March 10 and today, AMC stock has fallen more than 10%. What’s going on?

    The CTB represents the yearly fee that short sellers must pay to borrow shares. A higher fee could represent increased short seller demand while a lower fee could represent lower demand. A higher fee could also signal a scarcity of available short shares. Still, AMC’s exorbitant CTB fee could actually be seen as a positive for AMC stock shareholders.

    Let’s say you want to short AMC. But you don’t want to pay 216% a year interest because…uh…no one does.

    But don’t worry! There’s a dandy alternative.

    How about a naked short?

    With a naked short, you don’t even have to borrow the shares at all! Instead of 216% interest, how about 0%!

    Pretty sweet, right?

    One small problem. It’s against the law.

    There is strong evidence of massive naked shorting in AMC stock. Fails to deliver hit nearly 12 million shares in the latest SEC report.

    That’s absolutely staggering, even for AMC. And keep in mind, most stocks have few if any fails to deliver.

    Why are tons of trades failing?

    To close a short sale, you need to borrow some shares. But it’s kinda hard to do that right now, at 216% interest.

    So why not just cut some corners and naked short? It’ll just wind up a fail to deliver and get swept under the rug.

    There’s likely a crime here in plain sight. But for it to matter, the SEC needs to act.

    But before shorts laugh at the SEC and pop a bottle of Dom, they should think about the risks.

    Half of Wall Street is betting that AMC will crash if APE shares convert. This share conversion dilutes AMC stock holders.

    But conversion isn’t certain. And even if it happens, AMC shares have jumped after prior dilutions.

    In a way, that makes sense.

    Yes, you own a smaller piece of the company after dilution. But this heavily indebted company now has far more capital.

    That makes the risk of bankruptcy increasingly remote.

    I have no idea where AMC or any other stock is going.

    But I do know that people don’t like paying 216% interest. And to avoid it, they just might break the law.

    After all, what could happen?

    Do you think the SEC will act? Leave a comment and let us know!

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    More on markets:

    AMC Shorts Lose $180 Million So Far This Year

    Interest Rate Time Bomb May Kill Hedge Funds

    Executives Dumped Shares Shortly Before First Republic Rescue

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • AMC Shorts Lose $180 Million So Far This Year

    This is not investment advice.

    Like moths to a flame, short sellers love to bet against AMC Entertainment Holdings. Those bets have cost them a cool $180 million so far this year.

    And it’s only March.

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    From a new report in TheStreet:

    This year alone, thanks to quick rallies in the stock, AMC short sellers have already lost about $180 million.

    One of the main reasons why there has been such high demand for short positions in AMC in recent months is the fact that many investors have entered into an arbitrage trade. They’ve shorted AMC and gone long APE due to the share price discrepancy.

    Short sellers need to borrow AMC shares. The borrow fees have soared to 160% currently, a staggering rate.

    AMC and APE are an obvious pairs trade. The two may converge if APE shares convert into AMC shares, as expected.

    So if you short AMC and buy APE, you should make money on both trades. The AMC shares decline due to dilution, while the APE shares rise in value to match the AMC shares.

    Sounds great right? Small problem…

    AMC has a passionate fan base of retail investors. Those investors are attempting to orchestrate a short squeeze.

    And that’s a whole lot easier to do when 25% of the shares are sold short and it costs 160% a year to do it.

    The pain has no end in sight.

    Retail investors are buying stocks like crazy. They bought at a pace of $1.5 billion a day in the first two months of the year, a record.

    Hedge funds shorting AMC, pairs trade or no, are making a big mistake.

    Every day, more cash is coming in to squeeze them. And you can’t hold a position forever at 160% interest.

    Worst of all, their potential for loss is unlimited.

    Any responsible investor would close this trade immediately. But never forget, they’re playing with other people’s money.

    What do you think the future holds for AMC and APE shares?

    Leave a comment and let me know!

    More on markets:

    Interest Rate Time Bomb May Kill Hedge Funds

    Executives Dumped Shares Shortly Before First Republic Rescue

    SVB Fallout

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    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • AI: Capital Bonfire?

    AI is the biggest opportunity in 20 years. It could also kill countless VC funds.

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    I took a sip of some yummy espresso last Thursday and plopped down at the laptop. Time to dig into a deal memo from a VC I really respect.

    He laid out a clear view of AI’s future. And if you’re an investor, it’s scary. 😲

    Tons of startups are all racing to become the next hot thing in AI. They’re all doing the same things with the same tools.

    Most will fight each other to the death. With differentiation nonexistent, margins are headed to zero.

    Now, what if we add VC’s with billions and a bad case of FOMO?

    A bunch of massively overfunded companies will fight to the death. No one will make money.

    And many AI-heavy funds will be destroyed. Or as this investor put it, we are headed for a “capital bonfire.”

    I tried to poke holes in his argument. But I couldn’t.

    It’s not that hard to integrate AI tools into software. A founder I know did it in just 6 hours using OpenAI.

    If you’re not something more than a wrapper for OpenAI, you’re not going to make it.

    Geez Francis, you really hate AI, don’t you?

    Not at all! I think ChatGPT and similar technologies are an incredible revolution.

    But just because a new technology is incredibly useful doesn’t make it profitable. Toasters are very useful, but making them isn’t a great business.

    There are too many other companies making the same thing.

    Aggravating the defensibility problem are massive valuations.

    I’ve seen AI companies with no revenue raise “seed” rounds at $150 million or more. I even saw an AI hardware company recently raising “seed” at over $400 million!

    These valuations don’t make sense for companies that are barely off the ground. As Fred Wilson of Union Square Ventures has proven, investors can’t make money with $100 million seed rounds.

    So who wins in AI?

    Big tech will be huge winners. Microsoft practically owns OpenAI.

    It has also integrated AI into all its Office products. You can even ask your calendar to prepare you for an upcoming meeting!

    Microsoft owns the platform many people already use. Then they serve this captive audience some great AI features.

    That’s a winning model.

    Another winning model is focusing on data. I’m looking for companies focusing on unique data sets, data cleaning, and better data processing.

    Data fuels every AI model. Better data means better outputs.

    Even if many AI companies go bust, selling data services can still be a great business. Airlines have a way of going bankrupt, but Saudi Arabia’s doing pretty well selling them fuel.

    Let other investors drop money onto every AI startup from a helicopter. I’ll be taking careful kill shots at big game.

    After all, we only have so many bullets.

    Where do you think AI is headed?

    Leave a comment and let me know!

    More on tech:

    Where Should Startups Put Their Money Now?

    “How Can I Be Helpful?” Gets Put to the Test

    SVB Fallout

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    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Interest Rate Time Bomb May Kill Hedge Funds

    As March began, hedge funds placed one of their biggest bets of all time. It may be their undoing.

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    Traders placed the largest bet in history on increasing short term interest rates. But as a banking crisis spreads, rates may fall, exposing them to huge losses.

    From a report out this morning in Reuters:

    Hedge funds face huge losses on their record bet that the Fed will go full steam ahead with its aggressive interest rate-raising campaign, after some of the most abrupt and violent swings in U.S. rates and bond market pricing in living memory.

    Commodity Futures Trading Commission (CFTC) data shows that speculators held the largest ever net short position in three-month SOFR rate futures in the week ending March 7, only a few weeks after amassing a record short position in two-year Treasuries futures.

    Now, their trade is deeply underwater:

    Implied rates then plunged as much as 200 basis points in a week as traders drastically redrew their Fed outlook. The two-year Treasury yield posted its biggest fall since the Black Monday crash of 1987, and U.S. bond market volatility surged the most since Lehman’s collapse.

    Many funds have already lost 10% of their assets or more so far this month. And as bank after bank fails, the bleeding may get even worse.

    A month ago, most of us thought the Federal Reserve would keep raising rates. Inflation was the priority.

    Now, with a cascade of bank failures, the Fed may cut rates to stop the crisis. Markets are predicting the Fed will lower rates this summer.

    Already, hedge funds are going bust.

    Adam Levinson’s Graticule Asia lost 25% this year, most of it in a few days after the SVB collapse. The fund has closed its doors.

    As an investor, sometimes I think I know where markets are heading. But I never put too many eggs in one basket.

    I’m playing with my own money. But most hedge funds aren’t.

    And it’s not hard to tell.

    What do you think will happen to these funds?

    Leave a comment and let me know!

    More on markets:

    Executives Dumped Shares Shortly Before First Republic Rescue

    SVB Fallout

    Goldman Sachs Under Federal Investigation

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    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • “How Can I Be Helpful?” Gets Put to the Test

    VC’s ask “How can I be helpful?” so often it’s become a cliche. But as SVB collapsed, some investors did everything to save their companies as others stood pat.

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    From a report out today in Forbes:

    Over that frantic weekend, venture capital firms scrambled to respond to the crisis. Some found creative ways to ensure their founders would have access to cash on Monday, at times offering up their partners’ personal funds. More set up contingencies to make loans if necessary, then hoped it would never come to that. Still others chose not to make such an offer, or failed to reach a consensus at all.

    Conversations with about 20 investors and founders suggested that non-traditional investors like [Sam] Altman, or smaller, individual-driven firms like Jason Lemkin’s SaaStr Fund, appeared to move the fastest, alongside several bigger firms that got creative in their problem-solving, including First Round and Redpoint. Most established firms, however, didn’t impress.

    A few brave investors wired their founders money from their own checking accounts. This could’ve cost them millions, depending on company size.

    Fortunately, deposits remained safe, and those investors have likely already been made whole. But in the moment, they had no way of knowing that.

    But most investors just wanted to know if they were at risk:

    When Alex Lorestani, CEO of startup Geltor, which provides vegan proteins for beauty-product makers, started receiving emails from his investors last Thursday, most of them were one-liners. “They just asked, ‘Hey, are you exposed?’”

    When Lorestani informed employees, then his 100-plus investors, however, help came from unexpected places: a fellow founder with some cash to spare, and newer firm Fifty Years, smaller than many with a $90 million fund.

    As an individual angel investor, I’m not in a position to bridge a whole company. So, like many smaller investors, I tried to help in a different way.

    I did my best to give founders the most reliable info I could find, fast.

    I also made sure not to annoy them in a tough time! If they get an email from every single person on their cap table all at once, they won’t be able to do anything else!

    Turns out, only one company so far had SVB exposure. They got some of their money out on Friday, and the rest this week.

    Like so many startups, they’re headed to Chase.

    I couldn’t save companies all by myself. But if I could even provide just a tiny bit of help in that tough time, I was very happy to do so.

    When it was all over Sunday night, I bought myself flowers to celebrate.

    Founders should make a list of these great investors like Jason Lemkin at SaaStr and Ela Madej at Fifty Years. Give them preference in getting on your cap table.

    You won’t regret it.

    How did you see investors respond to SVB?

    Leave a comment and let me know!

    Have a great and more restful weekend, everyone! 🙂

    More on tech:

    Where Should Startups Put Their Money Now?

    Executives Dumped Shares Shortly Before First Republic Rescue

    SVB Fallout

    Get the blog before anyone else…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Executives Dumped Shares Shortly Before First Republic Rescue

    Top executives dumped shares in First Republic bank this year, shortly before its near collapse and rescue. These sales were not part of pre-announced plans.

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    From The Wall Street Journal:

    Top executives of First Republic Bank sold millions of dollars of company stock in the two months before the bank’s shares plummeted during the panic over the health of regional lenders.

    Executives had been selling for months, the documents show. Executive Chairman James Herbert II has sold $4.5 million worth of shares since the start of the year. In all, insiders have sold $11.8 million worth of stock so far this year at prices averaging just below $130 a share. The bank’s chief credit officer, its president of private wealth management and chief executive together sold $7 million worth of stock.

    None of the filings for the executives’ sales indicate that they were executed under 10b5-1 plans, which are pre-scheduled sales designed to insulate insiders from accusations of trading on nonpublic information.

    Their timing was great! The stock is down 72% this year, with most losses coming in the last week.

    If authorities can find evidence that they knew the bank was teetering and didn’t warn investors, these men belong in prison.

    Today, some of the country’s largest banks are working on a rescue for First Republic. From Bloomberg:

    The nation’s biggest banks are close to agreeing upon a plan to deposit as much as $30 billion with First Republic Bank in an effort supported by the US government to stabilize the battered California lender, according to people with knowledge of the matter.

    Customers have been pulling billions from First Republic since the failure of Silicon Valley Bank. This appears to have put First Republic on the brink of being unable to redeem deposits.

    First Republic does not appear to be insolvent. But no bank can redeem a huge portion of its deposits at once.

    And given these large, well-timed insider sales, the bank seems to have considerable internal dysfunction.

    I’ve said it before, and I’ll say it again: diversify your deposits.

    You can split 50/50 or into even smaller chunks. But be sure to include one or more of the Big 4 banks (JPM, Citi, BoA, Wells).

    They can be a pain in the neck to deal with. But they’re the most Too Big to Fail-y banks out there.

    What do you think an investigation of First Republic will find?

    Leave a comment and let me know!

    More on markets:

    Time to Bail on Credit Suisse

    Where Should Startups Put Their Money Now?

    SVB Fallout

    Get the blog before anyone else…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    Photo: First Republic CEO Michael J. Roffler

  • Time to Bail on Credit Suisse

    tl,dr: Get out of Credit Suisse.

    The Swiss bank is suffering severe stress today, with its stock and bond prices plummeting. Depositors and investors are questioning its ability to survive.

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    The Swiss National Bank has pledged to offer liquidity to CS if necessary, per Bloomberg.

    However, the stock has barely reacted as of Wednesday afternoon in New York. Investors seem unconvinced.

    What has gone so wrong at Credit Suisse?

    Just about everything. Again from Bloomberg:

    Credit Suisse’s failings have included a criminal conviction for allowing drug dealers to launder money in Bulgaria, entanglement in a Mozambique corruption case, a spying scandal involving a former employee and an executive and a massive leak of client data to the media. Its association with disgraced financier Lex Greensill and failed New York-based investment firm Archegos Capital Management compounded the sense of an institution that didn’t have a firm grip on its affairs. Many fed up clients have voted with their feet, leading to unprecedented client outflows in late 2022. 

    Problems came to a head today as CS’s largest investor, the Saudi National Bank, refused to provide more capital to CS.

    Credit Suisse appears to have ample reserves to pay depositors.

    It has enough cash and highly liquid assets to pay back half its liabilities quickly. It even has 62 billion Swiss francs of cold, hard cash on deposit at central banks.

    Yet its stock is in the toilet, and its bonds trade at levels implying a strong possibility of default. The cost to insure its bonds through credit default swaps is also sky high.

    Are all 3 of these markets wrong? Maybe, but I wouldn’t want to make that bet.

    For companies and individuals, there is little downside to pulling your money out.

    Even if the Swiss National Bank, Federal Reserve, or others bail them out, there could be delays in getting your money. That was the case with SVB.

    Can you afford that delay?

    In the end, I doubt central banks will let CS collapse. But things could get very messy in the mean time.

    What do you think of the problems at Credit Suisse?

    Leave a comment and let me know!

    More on markets:

    SVB Fallout

    Where Should Startups Put Their Money Now?

    SVB Fails

    Get the blog before anyone else…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Where Should Startups Put Their Money Now?

    This is not investment advice.

    So, where should we put our money? The collapse of SVB has every startup looking for answers. The key for the future is diversification.

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    Here are some ways to mitigate risk:

    The 50/50 Split

    The natural next move is to put all our money into JP Morgan or another giant bank. That should fix the solvency issue, but it raises others.

    Startups often struggle to work with big, old banks. They can be slow moving and unwilling to offer basic products like business credit cards.

    So we need more flexibility. But we don’t want to go through another SVB.

    How about we split the difference?

    We could keep half our money in a Big 4 bank (JPM, Citi, BoA, Wells). The other half can go to a bank that specializes in startups (Mercury, Brex, etc.).

    The Bullet Approach

    Investor Jason Calacanis proposed an intriguing solution of his own: 1 primary bank and several smaller accounts to hold emergency funds.

    Perhaps you use Mercury as your primary bank. Then, you could also have 1 payroll’s worth of money in each of 3 big banks (JPM, Citi and BoA).

    Should anything happen to Mercury, you can still make payroll 3 times.

    This is a great solution. It keeps most of your money in one place, making it easy to pay vendors and employees.

    But it also preserves safety in a crisis.

    Zombie Apocalypse Approach

    The safest approach is to never exceed the FDIC $250,000 limit at any bank. However, this is not workable.

    $250,000 isn’t even a single payroll for many companies. Payroll systems and vendor payments would have to constantly be switched over.

    We need bank safety. But we also need to run a business.

    Wrap-Up

    We’re still working out the best response to SVB. In the end, no approach is without risk.

    But any setup that gets us multiple accounts is a huge improvement.

    There’s also a big opportunity here. If a startup can make it easy to balance money across banks, they’ll find a lot of customers.

    Where will you be keeping your startup’s cash and why?

    Leave a comment and let me know!

    More on tech:

    SVB Fallout

    SVB Fails

    Venture Funding Down 65%

    Get the blog before anyone else…subscribe!

    If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • SVB Fallout

    All modern economies use money. You have to put your money somewhere. Shouldn’t it be safe?

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    The Federal Reserve thinks it should be, and I couldn’t agree more. Over the weekend, the Fed, Treasury and FDIC acted decisively to stop the banking crisis.

    From Bloomberg:

    The Federal Reserve brought out its bazooka Sunday, guaranteeing funds for any bank whose depositors might have been clicking “withdraw” over the weekend. The central bank saw clear potential for a systemic crisis in the closures of SVB and Signature Bank and acted to kill it before it got started.

    Our government acted decisively and all US bank accounts are now protected.

    So what’s the future for banking in America?

    You have to put your money somewhere, right? And whether you’re an individual or a business, you have to assume that place is safe.

    Let’s make regulation catch up with reality.

    There should be no limit on FDIC insurance. Any person or business putting its money in a bank account should have peace of mind.

    After all, $250,000 is a lot to an individual, but it’s not much for a business. That may not even cover a single payroll.

    What’s at stake here is hard working Americans getting the paychecks they earned. No worker should be unable to pay her bills because a bank made bad decisions.

    What’s more, individuals and businesses aren’t equipped to figure out how safe a bank is. That’s the job of regulators.

    If the regulators fail to prevent disaster, we shouldn’t take it out on the depositors.

    But isn’t this a license for banks to do anything?

    Not with the right regulations. We should expand stress tests and tight regulation from just the biggest banks to all banks.

    This could prevent another SVB.

    We should also increase FDIC insurance premiums. Banks pay these premiums to get FDIC insurance.

    With the insurance expanding, the premiums must also rise.

    And what about the SVB executives and shareholders?

    Screw ‘em. Let them lose their jobs and money.

    They made bad decisions, and they deserve to pay, big time.

    But you know who doesn’t deserve to pay? Hard working people counting on a paycheck.

    Finally, what should founders do post-SVB? Create multiple bank accounts.

    Perhaps 50% of your money goes into a startup-friendly product like Mercury. The other half can go in old economy but rock solid JP Morgan.

    Splitting cash across several accounts, including one or more Big 4 Banks (JPM, BoA, Citi, Wells) is wise. Expect many VC’s to require it.

    We dodged a very big bullet this weekend. Let’s celebrate!

    More on tech:

    SVB Fails

    Venture Funding Down 65%

    Everything You Always Wanted to Know About Venture (But Were Afraid to Ask)

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    Photo: “Governor Jerome Powell speaks at Brookings panel, ‘Are there structural issues in U.S. bond markets?’” by BrookingsInst is licensed under CC BY-NC-ND 2.0