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Re: If SVB is insolvent, so is everyone else - US Treasuries, far from being safe, are the NEW Toxic Security!

By: Fiz in 6TH POPE | Recommend this post (0)
Tue, 14 Mar 23 3:54 AM | 32 view(s)
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Msg. 40968 of 60008
(This msg. is a reply to 40966 by Zimbler0)

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Zim: "Am I right in thinking that that is only if one sells?"

I don't think that is how things work in accounting - nor in rational investing. HIDING losses for any of these PUBLIC institutions is, I'm sure, a felony (albeit in a country which no longer prosecutes felonies if you are politically connected enough...like Biden, Clinton, Bush, etc).

You LOSE the value of your investments when their mark to market price goes down — not when you sell. In ALL cases smart money would have not invested before the crash, but waited until after, if at all. A 50% paper loss requires a 100% paper gain...just to get you back to even, and 100% gains are not that easy to come by in conservative circles.

The banks which lent money long term when interest rates were at historic lows (and WAY below real rates which factored in inflation) SCREWED UP MASSIVELY. They GAMBLED that trees grow to the sky...and that
the Fed would never do what it did.

The really spooky thing to ask is what banks, pensions, insurance companies, etc. did NOT make long term loans when mortgages were at 2-4% and Treasuries were below 0.5%? If you lent fixed-rate, long-term on RE you are screwed. If you lent on 10 year Treasuries or blue-chip corporate bonds, you are also screwed.

I'm trying to think how I would find out the amount of such long-term paper losses held at various banks vs. their liquid assets. Maybe there is something I am not properly considering but, at the moment, I'm wondering if there are ANY commercial institutions which are still solvent on a mark to market basis. How could there be? Only if they didn't loan anything long term or didn't use any leverage (margin). But that doesn't fit ANY public institution I can think of!

If you have much money in any smaller banks (which are less likely to be politically connected enough) you might want to rethink that...quickly...before other people start rethinking it! Even below the FDIC insured level, there is massive risk as the FDIC didn't have even 1% of the money it would need to bail out the deposits it has supposedly insured ... and it is a quasi private institution. All this based on the last time I checked. (I actually took the time to call them once, a long time ago, to find out if this was all true...it was...but they told me not to worry because...well, just because!;!)


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The above is a reply to the following message:
Re: If SVB is insolvent, so is everyone else - US Treasuries, far from being safe, are the NEW Toxic Security!
By: Zimbler0
in 6TH POPE
Tue, 14 Mar 23 1:31 AM
Msg. 40966 of 60008

Fiz > Anyone who has purchased long-term government bonds– banks, brokerages, large corporations, state and local governments, foreign institutions– are all sitting on enormous losses right now.


Am I right in thinking that that is only if one sells?

As in, if one holds the note to maturity one gets the face value back plus whatever interest it paid out.

(Mind you, with todays high rate of inflation and low interest rates most long term bonds are not worth having anyway.)

Zim.


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