The strategy file for the month of February 2024 titled “And the error of analysis was to believe that war was impossible” is available for download in your reading areas here. Those who want to subscribe and can download it instantly, here it is.
Should we worry about a new banking crisis?
Probably not in the short term.
for what
Because the crisis linked to SVB was caused by systemic factors. All banks are required to invest their own funds in government bonds, which were reduced by only 30 to 60% due to the rise in rates! All banks’ capital was affected. Logically, the central banks intervened very quickly by saying that they were taking back all these loss liabilities not at market value but at initial value (hence no loss) and that they were guaranteeing deposits to the United States without an amount limit. End of crisis and banking stress.
Today, we are facing a crisis linked to what is called risk pricing. A fancy expression to talk about unpaid credit repayments that are no longer being repaid by defaulting customers. So the customer should be in default. Then the mortgage held by the bank as security must be used and the loss recorded. In short, despite the real global real estate crisis, there is a lot of latency here. For New York Community Bank, we are not at systemic risk for two reasons.
First, downturns in the real estate market affect banks very differently depending on their exposure and this includes the management of provisions at the level of each bank.
The second is that the New York Community Bank has mismanaged its provisions, and here we have not systemic but individual mismanagement, of a bank that remains modest in size and whose assets, at worst, will be taken over by others.
For the moment there is objectively nothing to worry about at this stage. Actually the real risk at the moment is not in the banks.
It is at the level of the dangers of war.
And I advise you to think about the following question.
In the event of actual war with Russia, or the threat of war with Russia, would the consequences of certain public actions really be different?
I’ll let you think about the scope of this question, which may seem simple and innocuous.
The answer to this question is undoubtedly the most important to your assets, far more than the future of a small regional American bank.
It’s amazing how things and risks can change so quickly.
For those who want the answer, it’s in the strategy file of the month titled “And if the error of analysis deems war impossible”. War or not, we’ve all already lost and I’ll explain why (for those who want to subscribe, here it is)
It is already too late, but all is not lost.
Prepare yourself!
