Weekend Wall Street #34 - Massive Week Ahead + How to Trade It
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Good evening traders. This is going to be one of the biggest weeks since, well, a long time.
Next week will be an absolutely insane week for the markets with the sheer amount of catalysts we have coming through, so let’s take a look.
Also, paid subscribers, I will be putting out an article every day of this trading week so please keep an eye on your email for more from me.
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As I’ve continuously updated in my weekend newsletters, the Federal Reserve is setting an aggressive stage to bring down inflation via rising interest rates.
Unfortunately, this has caused huge problems for two California banks: Silvergate Capital and SVB Financial.
Although you may have never heard of SVB Financial before this week, they provided capital to 44% of the public venture capital-backed tech and healthcare companies on the stock market last year.
Banks like these invested their cash into bonds during a period of low interest rates when VC backed companies were growing at record rates, but now these higher rates are lowering the value of the bonds they already have.
In 2019, SVB financial had $62B in deposits, but by the end of 2022 they had $173B. This increased the value of their bond portfolio from $13.7B to ~$100B by the end of 2022.
The rate of customer withdrawals along with the rate hikes have forced these banks to sell their bonds at a loss.