Monday Market Mayhem – B-B-B-Bailout!


Mindful Monday: As scary as it might be...the more we let go, the more we  actually gain control. — Diane Yeo MindfulnessWow, what a ride we are having!  

Thank God this happened over the weekend or we’d be in massive turmoil by now.  Even as it is, there’s just so much uncertainty and things are coming apart at the scenes – even oil is collapsing.  On Friday, there was widespread concern about the collapse of two banks, Silicon Valley Bank and Signature Bank.  U.S. authorities took action to contain the fallout from Silicon Valley Bank’s collapse, which focused on business customers, including startups throughout the tech sector.

Over the weekend, officials announced that depositors with money at the California bank would be paid back in full, and depositors of Signature Bank, which had been shuttered by New York regulators, would also be made whole. The Fed announced an emergency lending program to funnel funding to eligible banks and help ensure that they are able to meet the needs of all their depositors. The turmoil was reflected in choppy trading in markets around the world, with US stocks poised to open down again this morning.

Euro Stoxx 50 Chart HourlyEuropean shares are down across the board, with banks bearing the brunt of the losses. Investors were turning to bonds, dumping stocks and buying European government bonds, which are considered less risky. The Fed’s plan for interest rate increases may be reconsidered due to the turmoil in the banking system. Goldman Sachs analysts now believe that the Fed will keep rates unchanged next week, but expect increases at its meetings in May, June, and July.  This is as opposed to a 0.5% hike expected as of Friday morning so THIS is what the market looks like with an effective 0.5% CUT – keep that in mind.  

The sudden closure of Signature Bank, a New York-based bank with a large real estate lending business and a recent focus on cryptocurrency deposits, has left many of its customers and partners reeling.  Signature’s decision to welcome cryptocurrency deposits came just before the overheated industry blew up last year. 

As word about Silicon Valley Bank’s troubles began to spread last week, business customers of Signature began calling the bank, asking if their deposits were safe.  Many were worried that their deposits could be at risk because, like business customers of Silicon Valley, most had more than $250,000 in their accounts. The FDIC insures deposits only up to $250,000. Despite assurances from regulators that customers of both banks would be made whole regardless of how much they held in their accounts, Signature saw a torrent of deposits leaving its coffers as well, which ultimately led to the bank’s closure.

Gold Chart HourlyThe collapse of Silicon Valley Bank has led to investors seeking safer options such as government bonds and gold. US stock futures have been fluctuating, with losses in premarket trading for individual bank shares and European bank stocks. First Republic shares have plummeted by over 70%, despite an agreement with JPMorgan Chase for additional financing.

YARN | Remain calm. All is well. | Animal House (1978) | Video gifs by  quotes | 3395c298 | 紗Other regional bank shares have also seen significant losses, with Bank of America shares down by 5%. In the UK, HSBC has agreed to buy Silicon Valley Bank’s British arm for £1 (not a typo!) and continue to operate it for customers. First Republic Bank’s customers are businesses and wealthy individuals on the coasts, many of whom have been looking for higher interest alternatives to traditional bank accounts. Despite the collapse of Silicon Valley Bank, First Republic maintains that its “capital and liquidity positions are very strong” and that its “capital remains well above the regulatory threshold for well-capitalized banks.”

Certainly, the situation with the banks and the government’s response does raise concerns about moral hazard and the potential consequences of the actions taken.

Firstly, regarding the government’s decision to insure all of SIVB’s depositors, even above the FDIC cap, it is true that this sets a dangerous precedent for moral hazard. When depositors know that their deposits are fully insured, regardless of the size of the bank or the riskiness of its investments, they have less incentive to be cautious about where they place their money. This can lead to a situation where banks take on riskier and riskier investments, knowing that they will not face the full consequences of their actions.

Additionally, the government’s actions in bailing out the banks can also have negative consequences for the economy as a whole. By stepping in and protecting the banks from the full consequences of their risky investments, the government may be encouraging more risk-taking behavior in the future. This can lead to a situation where the financial system becomes increasingly unstable, as banks take on ever riskier investments in an attempt to make higher profits.

Bank Failures March 13 2023

There is also the issue of the government’s debt and ongoing debt ceiling battle. The government’s response to the banking crisis, particularly in terms of providing additional funding and insurance, will likely add to the already significant national debt. This can have negative consequences for the economy in the long term, as the government may be forced to cut spending or raise taxes in order to pay down the debt. Additionally, the ongoing debt ceiling battle only exacerbates these concerns, as the government may face significant difficulties in raising the funds necessary to pay for these additional expenses.

Finally, the actions of the Fed in providing additional funding to the banks can also raise concerns about their role in the economy. If the Fed is seen as simply printing money to cover up banks’ mistakes, it can erode confidence in the financial system and the government as a whole. This can have negative consequences for the economy, as individuals and businesses may be less willing to invest or spend if they do not believe that the government can effectively manage the financial system.

Overall, the situation with the banks and the government’s response raises significant concerns about moral hazard, the economy, and the role of the government and the Fed in the financial system. While it is important to take steps to protect depositors and prevent further instability in the financial system, it is also crucial to consider the potential long-term consequences of these actions and work to address the underlying issues that led to the crisis in the first place.

As the banking crisis continues to unfold, with the collapse of Signature Bank and Silicon Valley Bank (SVB), many are left wondering how we got here and what lies ahead.  I was going to work on another book this weekend, warning about how this can happen due to massive concentrations of wealth, but I ended up writing this instead:

To fully understand the situation, we need to go back to the 2008 financial crisis, which was caused by a complex web of factors, including deregulation, irresponsible lending practices, and an over-reliance on complex financial instruments. The crisis resulted in the failure of many banks and the near-collapse of the global financial system.

Despite efforts to regulate the banking industry and prevent a repeat of 2008, it seems that we may be facing a similar crisis once again. The collapse of Signature Bank and SVB, both known for their exposure to the cryptocurrency market, highlights the risks of unregulated and volatile markets.

File:American union bank.gif - Wikimedia Commons

While the Biden administration has moved quickly to protect depositors and prevent further bank runs, questions remain about the long-term stability of the banking system. Some experts argue that more regulation and oversight are needed to prevent a repeat of this crisis, while others argue that the government should stay out of the banking industry altogether.

Regardless of the path forward, it is clear that the banking crisis is far from over. As businesses and individuals continue to grapple with the fallout, many are left wondering what the future holds for the banking industry and the economy as a whole. Only time will tell how this crisis will play out, but one thing is certain: the consequences of inaction could, once again, be dire.

Here’s a little primer on where we are and how we got here:  

Part 1: The Road to Collapse

The collapse of Signature Bank and Silicon Valley Bank (SVB) has sent shockwaves through the financial world, but it didn’t happen overnight. The seeds of this crisis were sown years ago, as the two banks pursued vastly different strategies that ultimately led to their downfall.

Signature Bank was a rising star in the banking industry, with a laser focus on the growing world of cryptocurrency. The bank saw an opportunity to cater to the needs of crypto startups and investors, and it quickly became one of the leading banks in this space. Its bespoke payments system for crypto companies helped it double deposits in just two years, and by early 2022, a significant portion of its deposits came from digital-asset clients.

Banks active in digital assets challenged by crypto-related deposit  outflows | S&P Global Market Intelligence

But Signature’s focus on crypto would also be its downfall. As the crypto market experienced a sharp downturn, following the collapse of Sam Bankman-Fried’s FTX exchange in November 2021, Signature’s deposits began to drain away. Its exposure to crypto left it vulnerable to the whims of the market, and when the market turned against it, the bank was left in a precarious position.

SVB, on the other hand, was a victim of its own success. The bank had seen its deposits surge in the wake of the pandemic, as federal policy responses left tech companies flush with cash. But rather than sitting on this cash, SVB invested it in longer-dated securities, which left it vulnerable to losses as interest rates began to rise. At the same time, SVB’s depositors were heavily concentrated in the world of startups and venture-capital firms, which made it uniquely vulnerable to a run.

Bank Failures3 March 13 2023

As the tech industry began to slow down, and deposit costs began to rise, SVB’s venture-capital-backed customers began to pull their funds out of the bank. This sparked a classic bank run, with more and more customers withdrawing their funds to avoid potential losses on deposits in excess of the $250,000 limit insured by the federal government. The resulting collapse of SVB sent shockwaves through the financial world, as one of the industry’s most successful banks fell apart almost overnight.

These two very different paths to collapse demonstrate the diversity of the banking industry, and the unique challenges faced by banks in different sectors. But they also highlight a common thread running through the industry: the pursuit of profits at all costs, even if that means taking on excessive risk and leaving the bank vulnerable to collapse.

Part 2: A History of Banking Crises

The collapse of Signature Bank and SVB is just the latest in a long line of banking crises that have plagued the financial world for centuries. From the tulip mania of the 17th century to the subprime mortgage crisis of 2008, banking crises have been a recurrent theme throughout history.

File:J. P. Morgan beating a photographer with his stick.jpg - Wikimedia  CommonsOne of the most famous banking crises in American history was the Panic of 1907, which was sparked by a failed attempt to corner the market on United Copper Company stock. The ensuing panic led to a run on banks, as depositors rushed to withdraw their funds before the banks could collapse. In response, a group of bankers led by J.P. Morgan stepped in to shore up the banking system, using their own money to prevent the collapse of the banks and stabilize the financial system.

The Great Depression of the 1930s was another major banking crisis, as banks collapsed en masse and depositors lost their life savings. The resulting economic hardship led to widespread unemployment and social unrest, and it took a massive government intervention to stabilize the banking system and restore confidence in the financial world.

In more recent times, the subprime mortgage crisis of 2008 led to a global financial crisis that rocked the world’s economies and left millions of people out of work. The crisis was sparked by a housing bubble,

Part 3: How We Got Here

To understand how we got here, we need to go back to the financial crisis of 2008. That crisis was caused by a combination of factors, including excessive risk-taking by banks, a housing bubble, and lax regulation. The collapse of Lehman Brothers in September 2008 triggered a global financial crisis, with banks across the world struggling to stay afloat.

Causes of the 2008 Financial Crisis

To prevent a complete collapse of the financial system, the US government injected trillions of dollars into the banking system, bailing out banks deemed “Too Big to Fail.” This rescue operation helped to stabilize the financial system, but it also set a dangerous precedent. Banks were essentially told that they could take on as much risk as they wanted, safe in the knowledge that the government would bail them out if things went wrong.

Financial crisis bank fines hit record sum – DW – 08/10/2017

Fast forward to the present day, and we’re seeing the consequences of that policy. Banks have taken on more risk than ever before, and some of them are now facing the consequences. The collapse of Signature Bank and SVB Financial Group is just the tip of the iceberg, and there are likely to be more casualties in the coming weeks and months.

The problem is that the banking system is inherently fragile. Banks operate on a system of trust: we deposit our money with them, and we trust that they’ll keep it safe and return it to us when we need it. But if that trust is broken, then the entire system can collapse.

That’s what we saw in 2008, and that’s what we’re seeing a little of today as well. Banks have taken on too much risk, and now depositors are losing faith in the system. The run on SVB Financial Group last week, was the first salvo in a long war.  If depositors start to withdraw their money from other banks, we could be facing a full-blown banking crisis.  How the Government handles things in the next week, into the next Fed meeting, will be critical.

Part 4: What Comes Next?

So, what comes next? The Biden administration has already taken steps to shore up the banking system, but there’s only so much they can do. The fundamental problem is that banks have taken on too much risk, and that risk needs to be unwound.

IAT: SIVB's Failure Could Lead To Lower Profitability For Regional Banks  (NYSEARCA:IAT) | Seeking Alpha

There are two ways this can happen. The first is a controlled unwind, where banks gradually reduce their risk exposure over time. This is the best-case scenario, but it’s also the least likely. Banks are under pressure to generate profits, and reducing risk is likely to hurt their bottom line.

The second scenario is a sudden unwinding, where banks are forced to liquidate their assets quickly. This is the worst-case scenario, as it could trigger a full-blown banking crisis. If banks are forced to sell off their assets at fire-sale prices, then the entire financial system could collapse.  The Fed can prevent this buy buying those assets (what’s another $600Bn?) so the banks don’t have to sell in a panic.  That’s more likely than letting them collapse.  

The key question is whether the government is prepared to step in again. In 2008, the government injected trillions of dollars into the banking system to prevent a collapse. But the political climate has changed since then, and there’s less appetite for government bailouts.

Treasury Department and Federal Reserve

If we do face a banking crisis, then we could be facing a long period of economic turmoil. Banks are the lifeblood of the economy, and if they’re not functioning properly, then the entire system could grind to a halt.  It’s a sobering thought, but it’s one that we need to consider. The collapse of Signature Bank and SVB Financial Group could just be the start of a much bigger problem.  

Fragile by Design | Princeton University Press thing is clear: the events of the past week have highlighted the need for stronger oversight and regulation of the banking industry. While some may argue that government intervention is anathema to free market principles, the reality is that unchecked greed and a lack of accountability can have disastrous consequences for everyone involved.

As we move forward, we must remember that the health of our economy and the stability of our financial system depend on the responsible actions of those in power. Whether we like it or not, the fate of our country is tied to the decisions made by the wealthy elite who control our financial institutions.

So let us be vigilant in holding these institutions accountable, and let us work towards a future where the needs of all Americans are considered, not just those of the wealthy few. Only then can we truly call ourselves a Democracy that works for everyone.


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Should we be concerned holding money in TDameritrade?

Anybody like cashy and cautious right about now??

very much so

Good morning, everyone. Happy Monday. Phil, I was assigned some of the INTC 35P’s on Friday’s close. Thoughts on what I should do with those shares now?

Yes, they were the 2025’s. Thank you.

The fed fixed the Treasury and agency rate risk via the new BTFP, right? Lets financial firms use them as collateral at par.

JXN back in a 36 handle – theirs is an interest rate risk I think, so the BTFP should help them.

Hi Phil,
Good morning…

FAZ is is shooting up… I’ve entered this trade on Friday. Any comments ?

  • Buy 100 FAZ June $21 calls for $4 ($40,000)
  • Sell 100 FAZ June $30 calls for $2 ($20,000)

Good Morning?

Funds Safety – There is FDIC at Bank Deposits and for Securities it is SIPC. That protects against the loss of cash and securities – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. Most firms and Custodians then purchase ( at not cost to Clients) excess SIPC coverage. At Pershing- One of the largest Custodians ( Part of BNY Mellon) it works like this. In addition to SIPC protection, Pershing provides coverage in excess of SIPC limits from certain underwriters in Lloyd’s insurance market and other commercial insurers. The excess of SIPC coverage is valid through February 10, 2024, for Pershing LLC accounts. It provides the following protection for Pershing LLC’s global client assets:

  • An aggregate loss limit of $1 billion for eligible securities—over all client accounts
  • A per-client loss limit of $1.9 million for cash awaiting reinvestment—within the aggregate loss limit of $1 billion

SIPC and the excess of SIPC coverage do not protect against loss due to market fluctuation.
An excess of SIPC claim would only arise if Pershing failed financially and client assets for covered accounts—as defined by SIPC—cannot be located due to theft, misplacement, destruction, burglary, robbery, embezzlement, abstraction, failure to obtain or maintain possession or control of client securities, or to maintain the special reserve bank account required by applicable rules.

This is my plan on excess cash…. At Etrade you can have two ( separately tilted accounts) for up to 250K insurance each…. So if you don’t have on set one up an move money… I already had one set up so just moved more funds there. 500 K is the max for household…. I imagine this can be done at other institutions.

The other options for holding cash is to buy CD’s from large banks that are FDIC insured… As Phil said each can have put to 250K of insurance…. One issue to be aware of is most of the highest short term rates are at regional banks with 3mo cds at about 4.9 to 5.1 percent, and 6 mo at 5% to 5.8 % – so even thought they are insured there is still risk. I’m going to look for CD in the 3 in 6 month range from the larger banks see what that yields. They other thing is T-Bills which have interest rate risks but no cap loss if held to maturity,

the brokers all buy X amount of coverage, meaning if the firm gets wiped out, the coverage limit is exceeded and you are SOL. if you want peace of mind, you cannot exceed 500,000 in one account.

Same with fidelity. Should keep in mind that FDIC and SIPC only protect against solvency of the institution, not stuff like cyber crime, etc.

I also think FDIC increases for a joint account, but SIPC does not.

you need an IQ of 212 just to wrap your head around all the levels of irony. VCs begging for govt intervention. problems caused by cheap money to be ‘solved’ with cheap money. forcing banks to buy ‘safe’ assets (MBS) with the Volcker Rule in order to make the system more ‘stable.’ Telling us banking system is ‘resilient’ 12 hours before offering system-wide bailout…

great song

The devil is always in the details. Most people will recover a good percentage of the assets they hold eventually, unless the underlying portfolio assets are worth nothing. An illustration of SIPC liquidation: ƒ Assume a firm fails, resulting in $5 billion of client claims on assets. ƒ Assume a recover rate of assets in liquidation of 90% or $4.5 billion. ƒ Assume a client with an account of $5 million. ƒ In a customer proceeding, the client would receive $4.5 million from recovered assets and $500,000 from SIPC. The loss on a $5 million client account would be zero. SIPC reports that, although not every investor or transaction is protected by SIPC, no fewer than 99% of persons who are eligible get their investments back with the help of SIPC. From its creation by Congress in 1970 through December 2014, SIPC advanced $2.3 billion in order to make possible the recovery of $134 billion in assets for an estimated 773,000 investors. 
I am sensitive to the subject. I held Lehman Brothers Common Stock and a LEH note. It drives me crazy when assets like Structured products are described as “Principal Protected” when they rely of the Credit of the issuer.

Question – I have couple of questions

  1. Does FDIC cover my each of bank accounts from various banks to the tune of $250K or only one account person is covered?
  2. Regarding SPIC coverage – What happens if my account is over $500k in an IRA account? Is IRA come under the $500K limit or fully covered? If only $500K, then one should transfer some securities to another broker? How many accounts will SPIC cover in that scenario?


You can also setup “Payable on Death (POD)” accounts. I have 2 of these with Ally Bank.

According to Investopedia:
Benefits of a POD Account A significant benefit of POD accounts is that an account owner can increase their coverage limit under the Federal Deposit Insurance Corp. (FDIC). The standard coverage limit for an individual’s assets at a particular financial institution, including checking and savings accounts, money market accounts, and CDs, is $250,000.
Since a POD is a type of revocable living trust that has someone else with a beneficiary interest on the account, the FDIC provides up to $1,250,000 coverage on up to five accounts at a single bank where each account has a differently named beneficiary. Each beneficiary cannot be covered for more than $250,000. Instead of saving $1,250,000 in one account, which will only be insured for up to $250,000, having multiple POD accounts can increase an account holder’s coverage by up to five times the standard limit.1

Thanks Phil

Good Morning. Little diversion from the financial carnage.

What’s your thoughts on PFE $43 billion purchase of Seagen to bolster their Oncology pipeline. I’m legging my way into your position you posted last week.

Phil, any feedback on PFE?

Checked in with my BotBuddy on the SVB debacle- apparently being “woke” did not help much:

According to the 2020 Corporate Social Responsibility (CSR) report published by Silicon Valley Bank, the bank has an overall ESG and DEI score of 77. This score is based on the bank’s performance in areas such as environmental sustainability, social responsibility, and diversity, equity, and inclusion. Silicon Valley Bank has also set a goal to achieve a score of 90 by 2025.

Well, my BotBud says it should be good for business:

Businesses should strive for high ESG and DEI scores because these scores indicate how well a company is doing in terms of environmental sustainability, social responsibility, and diversity, equity, and inclusion. High ESG and DEI scores can be beneficial for businesses in a number of ways, including improved brand reputation, enhanced customer loyalty, and improved access to capital .
A cynic might point out that a bit more time devoted to risk management might have been wise versus social justice crusading.

But what if striving “…for high ESG and DEI scores…” is how they chose to manage the risk of losing woke customers and investors?  😜 

Last edited 17 days ago by brucethenet

Hi Phil, a question about options behavior. What happens if a SIVB put is sold? How does the trade get resolved since sivb will never trade?


What do you think of the following trade for FRC:
Sell 30 22.50 puts @12.50/$37,500–filled
Sell 50 60.00 calls @14.00 wait for stock rise before filling
Buy 50 25.00 calls .00
Net investment $20,000.

Just asking.
I posted a comment regarding FDIC insurance and how to improve on it and it was tagged “Awaiting approval”. Since it wasn’t posted I guess it got rejected.
If posts are being rejected, maybe you (or whoever is the moderator) could send a private email why it was rejected so the subject and/or content can be avoided in the future.


 March 13, 2023 1:35 pm

Actual FRC trade fills.

Sell 30 22.50 puts @12.50 Fill @$37,500
Sell 30 60.00 calls .00 Fill @ 18.00
Buy 30 25.00 calls .00 Fill @ 18.00
Net Call investment 0.
Net Potential profit $142,500.00


Wow DT-You are a brave man! Kudos to you……

Agree there is risk but it is $30,000. for the stock if delivered not $66K… $22.50 put minus $12.50 premium = $10.00 stock if delivered x 3000 shares. So i close the put at $4.00-$5.00 profit for $12-15,000. and free ride on the calls.
I bought the 25 call at $18… and sold the 60 at $18.00 as the stock rose as I said in my initial comments…”wait for stock rise”…I was hoping for $14.00 but stock went way higher, faster so I moved it up to $18.00 and was filled…therefore zero invested in the call spread!

Well done…:)

Thanks Tully!

If you did this trade…I bought back -30 22.50 put @ $12.50 for $5.03 for $22,410. net profit approximately 2/3 of the available premium at expiration.
Reload on a big pullback?

What expiry do you have?

Well done (although your trade is total gambling with FRC moving around haywire! 🙂 I’m just bitter because my broker won’t allow any option sells or spread with FRC! )

When do you plan to sell your $25-$60 your bull call spread?

Last edited 16 days ago by vidt


Ha, ha…”That’s educated gambling, pal!”
Price volatility can be a friend as well as an enemy.
FRC is not even close to being in the same category as SVB.

The only risk was the puts. $30K. The plan was to close them at a $4-5.00 profit and keep the free call spread. Phil said in one of his typically brilliant informational emails, I’m paraphrasing. “My recommendations are just that; place your orders at what you want to pay or sell them at.” That’s all I did here. got fills on my terms. As I saw the stock run I moved the sell order up to $18.00 on the calls.

The Spread Expires Dec/23

Plan is buy back the 60.00 call sold @ $18.00 for 10.00 or lower ( currently 11) net $24,000. profit.

Will sell the 25.00 calls If stock goes back to $49.00 or better for 12.00 or more; $36K profit. At that point I have an $82,400 gain. Likely I’ll reload on a pullback and attempt a replay.

Good luck!

Caught a good fill early this a.m. bought back 30 60 12/23 Call @ 7.70 $30.900.NP
@$53,300. net on this trade so far.

Again, bravo man! Big smile on my face when I type.

FRC at $31.57.
It looks like an opportunity for rinse repeat of your trade.

As I said, my broker has restrictions…I am tempted to buy $25 Dec ’23 calls.

Did you sell $60 call again today at circa 10:30am? Are you selling the put again now?

No, It didn’t trade high enough. I was tempted to buy 20 more 25 calls at 16.50 tho but will stuck to the discipline. I want to close out the calls at 29.00 or sell the 60 call again for $18.00-19.00.

SOFI/Phil – Hey, Phil, I legged into the $1 mill SOFI spread except for the part about “Sell 7 SOFI 2025 $7 calls for $2.40 ($1,920)”. Should I wait for SOFI to get there again, or shall I sell, hmm, 10 $7 call at current $1.70, or…..?

Got it. Thanks.

CEO of Cullen Frost Bank, CFR, $1M insider buy in light of 10% downward move.

love the talking heads

phil, why is RKT doing so well in the middle of an MBS meltdown? should i buy now if don’t own any yet?