MY THOUGHTS ON SILICON VALLEY BANK COLLAPSE

MY THOUGHTS ON SILICON VALLEY BANK COLLAPSE

Jason MalabuteBusiness Member
Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 906 votes

The following are my thoughts on the collapse of Silicon Valley Bank and any thoughts of upcoming bailouts. As an advocate for responsible financial practices, I believe that the government should not bail out banks that collapse due to their own risky investments. Such bailouts not only create moral hazard but also set a dangerous precedent that banks can engage in reckless behavior with little or no consequences.

Depositors should not be bailed out for savings over the $250,000 FDIC limit because they should share the risk of banking with a particular institution. When depositors place all their cash in one bank, they are essentially placing all their eggs in one basket, which can be risky. Therefore, it is important for depositors to diversify their savings across multiple institutions to mitigate risk. Additionally, depositors should consider investing their money in assets like real estate, which can provide long-term returns and mitigate the risks that come with being too liquid. Ultimately, depositors should take responsibility for their financial decisions and not rely on the government to bail them out in the event of a bank failure.

When the government bails out a bank, it sends a message that the bank's risky investments were acceptable and that taxpayers should bear the cost of the bank's mistakes. This creates a moral hazard, where banks are encouraged to engage in risky behavior with the knowledge that the government will bail them out if things go wrong. This, in turn, puts taxpayers at risk and undermines the integrity of the financial system.

Moreover, when the government bails out a bank, it effectively rewards poor financial management and risk-taking. This sends the message that there are no consequences for engaging in such behavior, which can ultimately lead to a culture of complacency and a lack of accountability in the banking sector.

In addition to the moral hazard, bailing out banks can also be costly for taxpayers. The funds used to bail out a failing bank are typically drawn from the public coffers, meaning that taxpayers foot the bill.

As a real estate investor, I am aware that financial distress in the market can create great buying opportunities. An economic downturn can create great buying opportunities in commercial real estate for savvy investors. When the market is down, sellers are more flexible on price and terms, and may be more willing to negotiate seller financing or other creative financing options. Additionally, there is likely to be less competition from other buyers as money may be less accessible. This can be particularly beneficial for real estate investors who have preexisting relationships with investors who have cash, creativity, and resourcefulness, allowing them to take advantage of market opportunities that others may miss. Ultimately, an economic downturn can be a great time for investors to acquire high-quality assets at a discount and position themselves for long-term success in the real estate market. With that said, as a real estate investor I would be extra careful with what banking institution I do business with and put my reserve money in moving forward.

In conclusion, I strongly believe that banks and depositors should not be bailed out over the FDIC amount. Bailing out banks creates moral hazard, sets a dangerous precedent, and can be costly for taxpayers. As a society, we should encourage responsible financial practices and hold banks accountable for their actions, rather than rewarding them for their mistakes.

Malabute & Company CPAs525 Reviews
35Reply
1,581 views

Most Popular Reply

Realtor · Longmont, CO · Member since 2021 · 577 posts · 631 votes
3y

If this was a crisis that happened because of risky investments I would agree. That being said, this is a crisis that was created because the bank chose the safest asset on earth (US treasury bonds) to put their depositors money into and the Fed kept rates low too long and then raised rates too fast, and focused on lagging indicators all the while knowing they risked collapsing the banking system. If the Fed does not step in, it is likely that there will be a rush on the banks, and these banks will not be able to liquidate assets fast enough to handle the pressure and collapse. As RE investors we like buying opportunities, but we should not like government created banking system failures. 

See this reply in the discussion

305 Replies

Jump to latestLatest
  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @J Scott:
    Quote from @Carlos Ptriawan:

    It doesn't matter what you call it.

    That's where we disagree.  Words do matter.  Because different words mean different things.

    There's a reason why we have separate terms for open market operations (OMO) and quantitative easing (QE).

    It's impossible to have a nuanced conversation about economics if you refuse to acknowledge that.

    So, with that said, I'm out...  I'll leave it to you guys to debate.  Have a great day, gentlemen!


     the more money available to the public, is QE.

    so we have interest rate going lower, Fed asset increases, M2 also increased in this past week alone, real estate has two months uptick in a row.

    FRB, in other hands, has been saved by Wells Fargo and BAC :-) this is very cool approach to save the bank.

  • Member since 2022 · 485 posts · 216 votes
    3y

    Meanwhile Credit Suisse to be bought 08 style. https://www.reuters.com/busine...

  • Flipper/Rehabber · Kansas City, MO · Member since 2011 · 2k+ posts · 712 votes
    3y

    so I saw a post from a friend of a friend . . who are super smart people in all things, especially this.

    In essence, the Government wanted to sell bonds.  They wanted the banks to park their unused cash in these bonds. They promised the banks that the fed would not mess with the interest rates for several years . . 2024 was the date listed.

    The banks believed the government, they bought the bonds.  And if the banks hold the bonds to maturity, no problem, no losses.

    But the fed started raising rates in 2022 . . . rather quickly.  So now the banks, should they need cash, they could sell the bonds for cash, but they would be selling at a loss because as the interest rate went up, the value of the bonds went down.  If they sell early, they can only sell at what they are currently trading.  Or they can hold on till maturity get their money and their return.

    Then as the interest rates started rising, depositors, like real estate investors and others started pulling money out of the banks who were not raising their rates and offering returns that other products were.  But then we started withdrawing more.  Some of the rich people that have big dollars started with drawing, not to create a bank run but to move their money where they could get a better return.

    But then banks were stuck, they either needed to raise more capital to cover these with draws as a good bank lends out their money 10 times for every dollar, they don't keep it all in liquid cash.  Or they could sell their bonds, but if they sell the bonds, it is at a loss.  And suddenly they are stuck, sell the bonds at a loss, and show their losses to regulators or do not have the money to cover with draws also alerting regulators.

    So now we are where we are - and the Fed, in an effort to curb inflation says they are going to keep increasing rates, which is what caused the whole mess in the first place.

    I hope I didn't paraphrase badly.

  • Real Estate Agent · Chicago, IL · Member since 2017 · 75 posts · 37 votes
    3y
    Quote from @Jason Malabute:

    The following are my thoughts on the collapse of Silicon Valley Bank and any thoughts of upcoming bailouts. As an advocate for responsible financial practices, I believe that the government should not bail out banks that collapse due to their own risky investments. Such bailouts not only create moral hazard but also set a dangerous precedent that banks can engage in reckless behavior with little or no consequences.

    Depositors should not be bailed out for savings over the $250,000 FDIC limit because they should share the risk of banking with a particular institution. When depositors place all their cash in one bank, they are essentially placing all their eggs in one basket, which can be risky. Therefore, it is important for depositors to diversify their savings across multiple institutions to mitigate risk. Additionally, depositors should consider investing their money in assets like real estate, which can provide long-term returns and mitigate the risks that come with being too liquid. Ultimately, depositors should take responsibility for their financial decisions and not rely on the government to bail them out in the event of a bank failure.

    When the government bails out a bank, it sends a message that the bank's risky investments were acceptable and that taxpayers should bear the cost of the bank's mistakes. This creates a moral hazard, where banks are encouraged to engage in risky behavior with the knowledge that the government will bail them out if things go wrong. This, in turn, puts taxpayers at risk and undermines the integrity of the financial system.

    Moreover, when the government bails out a bank, it effectively rewards poor financial management and risk-taking. This sends the message that there are no consequences for engaging in such behavior, which can ultimately lead to a culture of complacency and a lack of accountability in the banking sector.

    In addition to the moral hazard, bailing out banks can also be costly for taxpayers. The funds used to bail out a failing bank are typically drawn from the public coffers, meaning that taxpayers foot the bill.

    As a real estate investor, I am aware that financial distress in the market can create great buying opportunities. An economic downturn can create great buying opportunities in commercial real estate for savvy investors. When the market is down, sellers are more flexible on price and terms, and may be more willing to negotiate seller financing or other creative financing options. Additionally, there is likely to be less competition from other buyers as money may be less accessible. This can be particularly beneficial for real estate investors who have preexisting relationships with investors who have cash, creativity, and resourcefulness, allowing them to take advantage of market opportunities that others may miss. Ultimately, an economic downturn can be a great time for investors to acquire high-quality assets at a discount and position themselves for long-term success in the real estate market. With that said, as a real estate investor I would be extra careful with what banking institution I do business with and put my reserve money in moving forward.

    In conclusion, I strongly believe that banks and depositors should not be bailed out over the FDIC amount. Bailing out banks creates moral hazard, sets a dangerous precedent, and can be costly for taxpayers. As a society, we should encourage responsible financial practices and hold banks accountable for their actions, rather than rewarding them for their mistakes.


     Ever thought of using banks only for operational expenses (two months' worth of costs) and putting the rest of your cash in a life insurance policy that invests in mutual funds that pay dividends or alternative tax avoidance vehicle?

  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y
    Quote from @Michael Wooldridge:

    I take advantage of capitalism all the time but this is one area I absolutely disagree with you on. Uncheck capitalism is just bad especially if there is no penalty for crashing a sector or economy if you walk away with a few hundred million for taking the delayed risks. Also separately at some point capital gains need to be a progressive tax over a certain number. 

    I certainly agree that illegal gains should be punished, but Govt overreach is already severely out of control.

    Oh, and there should be no capital gains tax at all.

  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @Bruce Woodruff:
    Quote from @Michael Wooldridge:

    I take advantage of capitalism all the time but this is one area I absolutely disagree with you on. Uncheck capitalism is just bad especially if there is no penalty for crashing a sector or economy if you walk away with a few hundred million for taking the delayed risks. Also separately at some point capital gains need to be a progressive tax over a certain number. 

    I certainly agree that illegal gains should be punished, but Govt overreach is already severely out of control.

    Oh, and there should be no capital gains tax at all.


     Huge difference between illegal gains and people at a level of power and influence that have, in my opinion, a fiduciary responsibility to the country. Sorry but you don’t get to gamble with the economy that provides the power for those big banks. Anybody who has ever sit in a board room with a large company knows too many only care about the 2-4 years not the long term. Well sorry but in re you go broke if you do that. In big business you can walk away with massive bonuses and no punishment. That is what has to stop. 

    As to cap gains so many reasons I have an issue with that. Not the least of which is it would be so easy to cheat the system. 

  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y
    Quote from @Michael Wooldridge:
    How can you cheat a system if there isn't one?
  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @Bruce Woodruff:
    Quote from @Michael Wooldridge:
    How can you cheat a system if there isn't one?

    Which is hwy I said it’s something we disagree on. The system is this country and what makes it and all of us successful. Simple as that.  

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Carlos Ptriawan:
    Quote from @J Scott:
    Quote from @Carlos Ptriawan:

    It doesn't matter what you call it.

    That's where we disagree.  Words do matter.  Because different words mean different things.

    There's a reason why we have separate terms for open market operations (OMO) and quantitative easing (QE).

    It's impossible to have a nuanced conversation about economics if you refuse to acknowledge that.

    So, with that said, I'm out...  I'll leave it to you guys to debate.  Have a great day, gentlemen!


     the more money available to the public, is QE.

    so we have interest rate going lower, Fed asset increases, M2 also increased in this past week alone, real estate has two months uptick in a row.

    FRB, in other hands, has been saved by Wells Fargo and BAC :-) this is very cool approach to save the bank.


     to clearly describe my point, I have to insert the chart again LOL.

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Blake B.:
    Quote from @Jason Malabute:

    The following are my thoughts on the collapse of Silicon Valley Bank and any thoughts of upcoming bailouts. As an advocate for responsible financial practices, I believe that the government should not bail out banks that collapse due to their own risky investments. Such bailouts not only create moral hazard but also set a dangerous precedent that banks can engage in reckless behavior with little or no consequences.

    Depositors should not be bailed out for savings over the $250,000 FDIC limit because they should share the risk of banking with a particular institution. When depositors place all their cash in one bank, they are essentially placing all their eggs in one basket, which can be risky. Therefore, it is important for depositors to diversify their savings across multiple institutions to mitigate risk. Additionally, depositors should consider investing their money in assets like real estate, which can provide long-term returns and mitigate the risks that come with being too liquid. Ultimately, depositors should take responsibility for their financial decisions and not rely on the government to bail them out in the event of a bank failure.

    When the government bails out a bank, it sends a message that the bank's risky investments were acceptable and that taxpayers should bear the cost of the bank's mistakes. This creates a moral hazard, where banks are encouraged to engage in risky behavior with the knowledge that the government will bail them out if things go wrong. This, in turn, puts taxpayers at risk and undermines the integrity of the financial system.

    Moreover, when the government bails out a bank, it effectively rewards poor financial management and risk-taking. This sends the message that there are no consequences for engaging in such behavior, which can ultimately lead to a culture of complacency and a lack of accountability in the banking sector.

    In addition to the moral hazard, bailing out banks can also be costly for taxpayers. The funds used to bail out a failing bank are typically drawn from the public coffers, meaning that taxpayers foot the bill.

    As a real estate investor, I am aware that financial distress in the market can create great buying opportunities. An economic downturn can create great buying opportunities in commercial real estate for savvy investors. When the market is down, sellers are more flexible on price and terms, and may be more willing to negotiate seller financing or other creative financing options. Additionally, there is likely to be less competition from other buyers as money may be less accessible. This can be particularly beneficial for real estate investors who have preexisting relationships with investors who have cash, creativity, and resourcefulness, allowing them to take advantage of market opportunities that others may miss. Ultimately, an economic downturn can be a great time for investors to acquire high-quality assets at a discount and position themselves for long-term success in the real estate market. With that said, as a real estate investor I would be extra careful with what banking institution I do business with and put my reserve money in moving forward.

    In conclusion, I strongly believe that banks and depositors should not be bailed out over the FDIC amount. Bailing out banks creates moral hazard, sets a dangerous precedent, and can be costly for taxpayers. As a society, we should encourage responsible financial practices and hold banks accountable for their actions, rather than rewarding them for their mistakes.


     Ever thought of using banks only for operational expenses (two months' worth of costs) and putting the rest of your cash in a life insurance policy that invests in mutual funds that pay dividends or alternative tax avoidance vehicle?


    today there's a coalition of 200 banks asking FDIC to please save us. The problem is not SVB-specific.
    This would be fun though.

  • Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    3y

    Is this how we get the to the digital Fed coin?  I’d say we’re close to the introduction.  
    When the choices are between asset prices dropping and a digital currency BP brass and the investor class will line up and push the digital currency line.  

  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Kim Tucker:

    so I saw a post from a friend of a friend . . who are super smart people in all things, especially this.

    In essence, the Government wanted to sell bonds.  They wanted the banks to park their unused cash in these bonds. They promised the banks that the fed would not mess with the interest rates for several years . . 2024 was the date listed.

    The banks believed the government, they bought the bonds.  And if the banks hold the bonds to maturity, no problem, no losses.

    But the fed started raising rates in 2022 . . . rather quickly.  So now the banks, should they need cash, they could sell the bonds for cash, but they would be selling at a loss because as the interest rate went up, the value of the bonds went down.  If they sell early, they can only sell at what they are currently trading.  Or they can hold on till maturity get their money and their return.

    Then as the interest rates started rising, depositors, like real estate investors and others started pulling money out of the banks who were not raising their rates and offering returns that other products were.  But then we started withdrawing more.  Some of the rich people that have big dollars started with drawing, not to create a bank run but to move their money where they could get a better return.

    But then banks were stuck, they either needed to raise more capital to cover these with draws as a good bank lends out their money 10 times for every dollar, they don't keep it all in liquid cash.  Or they could sell their bonds, but if they sell the bonds, it is at a loss.  And suddenly they are stuck, sell the bonds at a loss, and show their losses to regulators or do not have the money to cover with draws also alerting regulators.

    So now we are where we are - and the Fed, in an effort to curb inflation says they are going to keep increasing rates, which is what caused the whole mess in the first place.

    I hope I didn't paraphrase badly.


     No, I strongly disagree, it is NOT the Fed who caused this whole mess. 

    Yes, those are the mechanics of how things went BUT context of it all will show the SPEED, velocity of which it all went, which was super-sloth speed. 

    The Fed VERY CLEARLY said from the start exactly what they were going to do with rates. They said what there target was, that they would keep fighting inflation via rate hikes until they hit that goal AND that it would be a long road. This was NOT 1,2 4 rate hikes and all of a sudden we are where we are. 

    The banks had immense warning. Any bank with half an ounce of intelligence, when getting that direction from the Fed, would have reviewed there positions, seen how EXPOSED they were int eh bonds, and started liquidating, many MANY months ago, when losses would have been minimal and those funds could have been redeployed in ways to mitigate such. 

    But no, we are to believe SVB is just some innocent martyr, it's not there fault they sat on there thumbs doing nothing, laying down in the highway. The result was inevitable, and it was sealed by inaction of SVB, not the Fed. 

    And why? Because, this is just yet another abuse of power, abuse of position, an institution saying f-it because oh-well they will just use political power to get a bail-out. And here we are. 

    This is the EXACT risk of bail-outs, that it creates an empowerment to bad actors and bad actions. 

    It enrages me all the pity being exuded for these, who did not earn any pity, it was 100% self-inflicted. While, how many business's were DESTROYED with moratoriums? Where is the pity for them? Where is there bail-out? Small business was decimated and we have NOTHING for them, yet some mega bank abused there responsibility instead leveraging political power to get a bail-out if/when vs taking action they could have, should have, but simply refused to and I'm supposed to cry for them.... 

    I will give a F about SVB AFTER every small business lost during moratorium get's a bail-out for the exact $ there business was worth the day before moratoriums, ONLY once all those are made whole, from the death and destruction of there business via direct gov. actions, then and only then will I even consider a pity-party for some damn elitist bank. 

  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Carlos Ptriawan:
    Quote from @Carlos Ptriawan:
    Quote from @J Scott:
    Quote from @Carlos Ptriawan:

    It doesn't matter what you call it.

    That's where we disagree.  Words do matter.  Because different words mean different things.

    There's a reason why we have separate terms for open market operations (OMO) and quantitative easing (QE).

    It's impossible to have a nuanced conversation about economics if you refuse to acknowledge that.

    So, with that said, I'm out...  I'll leave it to you guys to debate.  Have a great day, gentlemen!


     the more money available to the public, is QE.

    so we have interest rate going lower, Fed asset increases, M2 also increased in this past week alone, real estate has two months uptick in a row.

    FRB, in other hands, has been saved by Wells Fargo and BAC :-) this is very cool approach to save the bank.


     to clearly describe my point, I have to insert the chart again LOL.


     Carlos, I think you need to take a few steps back and draw things out in Crayola for people to understand, because I don't think they get what all this means. 

    What is inflation? It's when the individual notes in your pocket/account buy less. 

    Why do they buy less? Think of the notes in your pocket as being part of one big money "pie". When you cut a few billion more slices, each slice get's a bit smaller. This is the relationship of M2 (money supply) to the note in your pocket. More m2 = each note buys less. Less M2 = each note is more rare, more valuable and buys more. 

    How does inflation go down and M2 go up at same time? It doesn't. How does the sun rise and set at the same time, it doesn't. 

    Also many people are getting lowered inflation confused for deflation. I see and hear a lot of talk about lowering inflation and prices going down, this highlights peoples confusion. 

    Prices going DOWN is DEFLATION. Lowered inflation is prices going UP, at a slower pace, NOT prices going down. 

    How many times has anyone heard any analyst, any economist, any forecaster anywhere talking about DEFLATION in this time? Correct, you will find more about flat-earth and lizard people than you will DEFLATION, that's how likely that is. 

    So what Carlos is pointing out here is asset prices will definently hold, and data is proving it, even presenting data to say asset prices will go UP. Why, because inflation is being shown to be all but locked in place, no deflation even possible on any radar, because we are seeing more inflation via more M2 growth. 

    When the Fed gives out $, and there is interest attached to it, that IS inflation, because that IS M2 growth. Where does that interest come from? It's being "shizamed" into existence. 

    This is a primary driver why inflation is constant, because lending is constant. Lending creates new $ into the system. At some point the various agencies do something to physicalize that $ into existence, because it all exists only on records. If no new $ were physicalized at some point banks would have ALL the $, and society none, because of INTEREST. This is what QE is for, it takes those "bonds" and issues out $. So there is $ moving around in the system vs banks holding all the $ from a bunch of bonds. 

    Since banks lend a multiplier of what they have in physical $, this is how we get where we are today. In a way, yes banking is a Ponzi scheme in some ways. 

    Our U.S. system and society exists on a bank scheme system that REQUIRES perpetual growth, perpetual inflation. This is how I know, with mathematical certainty NO Real Estate prices are NOT going back "down" to pre-covid levels. Not on a national average. This IS a "new norm" and people better come to grips with it because it's the reality of it. 

    Yes, there is a serious affordability issue, and banking does not give a rip. The system does not give a rip. The elite do not give a rip. There will be talkie-talk-talk and NOTHING WILL CHANGE, just like always happens. 

    The U.S. exists in financial servitude to a Plutocratic system. That is reality. 

  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y

    @James Hamling My man, that was so well said. I especially took note of the following comments:

    "The Fed VERY CLEARLY said from the start exactly what they were going to do with rates. They said what there target was, that they would keep fighting inflation via rate hikes until they hit that goal"

    "I will give a F about SVB AFTER every small business lost during moratorium get's a bail-out for the exact $ there business was worth the day before moratoriums"

  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @James Hamling:

    Yes, there is a serious affordability issue, and banking does not give a rip. The system does not give a rip. The elite do not give a rip. There will be talkie-talk-talk and NOTHING WILL CHANGE, just like always happens. 

    The U.S. exists in financial servitude to a Plutocratic system. That is reality. 

    It’s worth noting that essentially this was the basis of all discussion in that previous housing prices thread. That the markets wouldn’t crash because of inventory and the only way homes would “technically” lose value was due to inflation. 

    But it’s also what could make this month’s rate increase infuriating. If Powell would sit tight for a few months we might get out of this without a major reset. Rates are high enough to create the pressure needed - and housing will hit the new norm come May.
  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @Bruce Woodruff:

    @James Hamling My man, that was so well said. I especially took note of the following comments:

    "The Fed VERY CLEARLY said from the start exactly what they were going to do with rates. They said what there target was, that they would keep fighting inflation via rate hikes until they hit that goal"

    "I will give a F about SVB AFTER every small business lost during moratorium get's a bail-out for the exact $ there business was worth the day before moratoriums"


    Well said but weren’t you calling for housing market values resetting 7-8 month ago? his whole post argues against the idea of housing values dropping. 
     

  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y
    Quote from @Michael Wooldridge:
    Quote from @Bruce Woodruff:

    @James Hamling My man, that was so well said. I especially took note of the following comments:

    "The Fed VERY CLEARLY said from the start exactly what they were going to do with rates. They said what there target was, that they would keep fighting inflation via rate hikes until they hit that goal"

    "I will give a F about SVB AFTER every small business lost during moratorium get's a bail-out for the exact $ there business was worth the day before moratoriums"


    Well said but weren’t you calling for housing market values resetting 7-8 month ago? his whole post argues against the idea of housing values dropping. 
     


    I did guess that prices would drop in this year (of 2023)...that was my opinion. It had nothing to do with either the Fed or SVB... I still think they might, depending on what happens the next few months. They certainly have dropped overall, but not quite as much as I thought they would....

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @James Hamling:
    Quote from @Carlos Ptriawan:
    Quote from @Carlos Ptriawan:
    Quote from @J Scott:
    Quote from @Carlos Ptriawan:

    It doesn't matter what you call it.

    That's where we disagree.  Words do matter.  Because different words mean different things.

    There's a reason why we have separate terms for open market operations (OMO) and quantitative easing (QE).

    It's impossible to have a nuanced conversation about economics if you refuse to acknowledge that.

    So, with that said, I'm out...  I'll leave it to you guys to debate.  Have a great day, gentlemen!


     the more money available to the public, is QE.

    so we have interest rate going lower, Fed asset increases, M2 also increased in this past week alone, real estate has two months uptick in a row.

    FRB, in other hands, has been saved by Wells Fargo and BAC :-) this is very cool approach to save the bank.


     to clearly describe my point, I have to insert the chart again LOL.


     Carlos, I think you need to take a few steps back and draw things out in Crayola for people to understand, because I don't think they get what all this means. 

    What is inflation? It's when the individual notes in your pocket/account buy less. 

    this chart simply means the Fed inflation fighting era is over and we slowly moving to new QE era LOL

    especially after this weekend announcement that all central bank in the world has access to USD via swap liquidity.

    The Fed has failed my friend LOL

    And it's extremely predictable as I've suggested 8 months ago lol that guy powell is too much obsessed with inflation

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Carlos Ptriawan:


    And it's extremely predictable as I've suggested 8 months ago lol that guy powell is too much obsessed with inflation

    and why I said it's extremely predictable, you could see from the history of the world.

     This is the 5th crash that I've experienced in my life time LOL , I guess nothing new in the world, right @James Hamling
    Once that 2nd line is touched,move everything to cash ....

  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @Carlos Ptriawan:
    Quote from @James Hamling:
    Quote from @Carlos Ptriawan:
    Quote from @Carlos Ptriawan:
    Quote from @J Scott:
    Quote from @Carlos Ptriawan:

    It doesn't matter what you call it.

    That's where we disagree.  Words do matter.  Because different words mean different things.

    There's a reason why we have separate terms for open market operations (OMO) and quantitative easing (QE).

    It's impossible to have a nuanced conversation about economics if you refuse to acknowledge that.

    So, with that said, I'm out...  I'll leave it to you guys to debate.  Have a great day, gentlemen!


     the more money available to the public, is QE.

    so we have interest rate going lower, Fed asset increases, M2 also increased in this past week alone, real estate has two months uptick in a row.

    FRB, in other hands, has been saved by Wells Fargo and BAC :-) this is very cool approach to save the bank.


     to clearly describe my point, I have to insert the chart again LOL.


     Carlos, I think you need to take a few steps back and draw things out in Crayola for people to understand, because I don't think they get what all this means. 

    What is inflation? It's when the individual notes in your pocket/account buy less. 

    this chart simply means the Fed inflation fighting era is over and we slowly moving to new QE era LOL

    especially after this weekend announcement that all central bank in the world has access to USD via swap liquidity.

    The Fed has failed my friend LOL

    And it's extremely predictable as I've suggested 8 months ago lol that guy powell is too much obsessed with inflation


    Didn’t mind his obsession with inflation. But I hated the fact that he ignored the laws of supply and demand - in particular around housing and jobs. Not enough houses and not enough people to fill jobs. Unless you crash the economy you weren’t going to use rates to fix this.

    It is good we have higher rates overall though to slow growth. But lets hope he isn’t an idiot this week.

     

  • Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Michael Wooldridge:
    Quote from @Carlos Ptriawan:
    Quote from @James Hamling:
    Quote from @Carlos Ptriawan:
    Quote from @Carlos Ptriawan:
    Quote from @J Scott:
    Quote from @Carlos Ptriawan:

    It doesn't matter what you call it.

    That's where we disagree.  Words do matter.  Because different words mean different things.

    There's a reason why we have separate terms for open market operations (OMO) and quantitative easing (QE).

    It's impossible to have a nuanced conversation about economics if you refuse to acknowledge that.

    So, with that said, I'm out...  I'll leave it to you guys to debate.  Have a great day, gentlemen!


     the more money available to the public, is QE.

    so we have interest rate going lower, Fed asset increases, M2 also increased in this past week alone, real estate has two months uptick in a row.

    FRB, in other hands, has been saved by Wells Fargo and BAC :-) this is very cool approach to save the bank.


     to clearly describe my point, I have to insert the chart again LOL.


     Carlos, I think you need to take a few steps back and draw things out in Crayola for people to understand, because I don't think they get what all this means. 

    What is inflation? It's when the individual notes in your pocket/account buy less. 

    this chart simply means the Fed inflation fighting era is over and we slowly moving to new QE era LOL

    especially after this weekend announcement that all central bank in the world has access to USD via swap liquidity.

    The Fed has failed my friend LOL

    And it's extremely predictable as I've suggested 8 months ago lol that guy powell is too much obsessed with inflation


    Didn’t mind his obsession with inflation. But I hated the fact that he ignored the laws of supply and demand - in particular around housing and jobs. Not enough houses and not enough people to fill jobs. Unless you crash the economy you weren’t going to use rates to fix this.

    It is good we have higher rates overall though to slow growth. But lets hope he isn’t an idiot this week.

     


    There's a serious flaw in the world/US where one person's mindset can create havoc/chaois in the world.
    And change the guy to Bernanke and you would see a different Fed policy. 

  • Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Michael Wooldridge:
    Quote from @Bruce Woodruff:

    @James Hamling My man, that was so well said. I especially took note of the following comments:

    "The Fed VERY CLEARLY said from the start exactly what they were going to do with rates. They said what there target was, that they would keep fighting inflation via rate hikes until they hit that goal"

    "I will give a F about SVB AFTER every small business lost during moratorium get's a bail-out for the exact $ there business was worth the day before moratoriums"


    Well said but weren’t you calling for housing market values resetting 7-8 month ago? his whole post argues against the idea of housing values dropping. 
     


     Me? Housing prices 'resetting", as in back to pre-covid? No, never have said anything of the sort. 

    Fall '22' I forecasted a market Consolidation Event over winter '22'/'23', with median home prices stepping back 7-14% on national average, with localized market specific deviations ranging as high as +/- 30%, market specific dependent.  

    And with that i detailed how winter markets have a normalized "step-back" action so in many markets it would be a "more normal" market cycle. But most on BP called me nutz, argued the sky was falling, no way prices would hold, that everything would collapse and crumble and we were on verge of a huge discount buying spree. Well, here we are, what are the #'s.    Turn's out what people called me nutz for was actually a bit pessimistic because results were even stronger than I forecasted.     I did accurately forecast the volume collapse, which was a primary driver to people arguing with me saying I made no sense forecasting such a big volume drop but prices holding so strong at same time, people said not possible. Well, obviously was because that's exactly how it happened. 

    Bit a "reset", lol, no, 2019 is long gone and never coming back. That's always been the reality. 

    Now going forward, Oh-Man this is "the" most epic of uncertainty. I would coin this chapter "Zeus's Decision" because we will experience massive differences all decided upon what comes down from "Mount Olympus" and the "God's Of $". 

    They could choose to abandon inflation focus, press on economic strength, even actions that act as liquidity injection, feed wage inflation, and let things run "hot" justifying it as facilitating maximum velocity of the market to allow the market find it's equilibrium. I doubt this direction but, there is lot's of political pressure for it. 

    Or, it could be "damn the warning bells, FULL SPEED AHEAD" and as inflation readings come out which by all forecast measure is considerably higher than J-Pow's desire, jest keep drawing the noose tighter and tighter, strangling the life out of the middle-class, until inflation falls into his "happy-zone" at the expense that things could be in cardiac arrest to do so, and than it's a tail-spin, so than they start injecting liquidity rapidly, and "shizam" we have a bi-polar on-off, hot-cold, economic cycle of big swings. 

    I think the later is more probable. 

    But we also have major election cycle, and telegraphing already of major political meddling, so what new x-factors will that bring. 

    This is going to be a very interesting ride for sure. I am not willing to make any forecast as of yet, and I and those around me say "oh wow, you the "Oz" who predicts the un-predictable, will dare a call on the most wild of call, not willing to even say anything, holly-cow that's not good", yeah, exactly. When it's too big a jump for Evil Knievel to even dare, that's saying something. 

    I do know this, I would NOT want to be dollar heavy, NO WAY! And, NOT in margin on a brokerage account, uh-uh. Follow what the big $ is doing, and they are racing into ASSETS.    I have NEVER, in all my decades in Real Estate and investing, ever seen or heard of the kind of capital deployment into assets I am seeing now. TODAY.    

    Investing alone does not justify these kind of levels, especially not at these returns. This is a "life-boat" action, this is about securitization more than returns. 

    All this talk about SVB and $ leaving it for last while, has anyone asked where that $ has gone? Where it was going? Here's a fun fact, look up the Real Estate holdings by some of big names of silicon valley, yeah that may shock some. And that's just what you can find. Anyone curious how many millions meta dumped in R.E.? Anyone interested why Bezos is a R.E. billionaire now? Doesn't it seem odd that tech is moving capital into R.E.? Why oil is moving $ into R.E.? Why every sector/investor of big $ is moving capital into R.E.? 

  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @James Hamling:
    Quote from @Michael Wooldridge:
    Quote from @Bruce Woodruff:

    @James Hamling My man, that was so well said. I especially took note of the following comments:

    "The Fed VERY CLEARLY said from the start exactly what they were going to do with rates. They said what there target was, that they would keep fighting inflation via rate hikes until they hit that goal"

    "I will give a F about SVB AFTER every small business lost during moratorium get's a bail-out for the exact $ there business was worth the day before moratoriums"


    Well said but weren’t you calling for housing market values resetting 7-8 month ago? his whole post argues against the idea of housing values dropping. 
     


     Me? Housing prices 'resetting", as in back to pre-covid? No, never have said anything of the sort. 

    Fall '22' I forecasted a market Consolidation Event over winter '22'/'23', with median home prices stepping back 7-14% on national average, with localized market specific deviations ranging as high as +/- 30%, market specific dependent.  

    And with that i detailed how winter markets have a normalized "step-back" action so in many markets it would be a "more normal" market cycle. But most on BP called me nutz, argued the sky was falling, no way prices would hold, that everything would collapse and crumble and we were on verge of a huge discount buying spree. Well, here we are, what are the #'s.    Turn's out what people called me nutz for was actually a bit pessimistic because results were even stronger than I forecasted.     I did accurately forecast the volume collapse, which was a primary driver to people arguing with me saying I made no sense forecasting such a big volume drop but prices holding so strong at same time, people said not possible. Well, obviously was because that's exactly how it happened. 

    Bit a "reset", lol, no, 2019 is long gone and never coming back. That's always been the reality. 

    Now going forward, Oh-Man this is "the" most epic of uncertainty. I would coin this chapter "Zeus's Decision" because we will experience massive differences all decided upon what comes down from "Mount Olympus" and the "God's Of $". 

    They could choose to abandon inflation focus, press on economic strength, even actions that act as liquidity injection, feed wage inflation, and let things run "hot" justifying it as facilitating maximum velocity of the market to allow the market find it's equilibrium. I doubt this direction but, there is lot's of political pressure for it. 

    Or, it could be "damn the warning bells, FULL SPEED AHEAD" and as inflation readings come out which by all forecast measure is considerably higher than J-Pow's desire, jest keep drawing the noose tighter and tighter, strangling the life out of the middle-class, until inflation falls into his "happy-zone" at the expense that things could be in cardiac arrest to do so, and than it's a tail-spin, so than they start injecting liquidity rapidly, and "shizam" we have a bi-polar on-off, hot-cold, economic cycle of big swings. 

    I think the later is more probable. 

    But we also have major election cycle, and telegraphing already of major political meddling, so what new x-factors will that bring. 

    This is going to be a very interesting ride for sure. I am not willing to make any forecast as of yet, and I and those around me say "oh wow, you the "Oz" who predicts the un-predictable, will dare a call on the most wild of call, not willing to even say anything, holly-cow that's not good", yeah, exactly. When it's too big a jump for Evil Knievel to even dare, that's saying something. 

    I do know this, I would NOT want to be dollar heavy, NO WAY! And, NOT in margin on a brokerage account, uh-uh. Follow what the big $ is doing, and they are racing into ASSETS.    I have NEVER, in all my decades in Real Estate and investing, ever seen or heard of the kind of capital deployment into assets I am seeing now. TODAY.    

    Investing alone does not justify these kind of levels, especially not at these returns. This is a "life-boat" action, this is about securitization more than returns. 

    All this talk about SVB and $ leaving it for last while, has anyone asked where that $ has gone? Where it was going? Here's a fun fact, look up the Real Estate holdings by some of big names of silicon valley, yeah that may shock some. And that's just what you can find. Anyone curious how many millions meta dumped in R.E.? Anyone interested why Bezos is a R.E. billionaire now? Doesn't it seem odd that tech is moving capital into R.E.? Why oil is moving $ into R.E.? Why every sector/investor of big $ is moving capital into R.E.? 


    You are confusing my point Bruce was one of the folks arguing that prices would reset and that you, Carlos and i were nuts for saying they would not.

    Of which he admitted actually today. anyway wasn’t meant as a jab to him but I found it interesting he was so supportive eof your post when he kept claiming RE was bad to invest and housing would reset on prices.
     

  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y
    Quote from @Michael Wooldridge:

    The two are not mutually exclusive, dude. I supported his post because overall it was brilliant. I don't believe I ever said that 'Real Estate was bad to invest', ever....because that has always been my go-to game. I recall saying that I would wait to invest until prices dropped. The two are not even close to being the same, unless someone has a severe reading/comprehension problem....

    And I also never said y'all were 'nuts'. So please show me those quotes from me, because one of us is making s**t up.....


  • Member since 2022 · 485 posts · 216 votes
    3y
    Quote from @Bruce Woodruff:
    Quote from @Michael Wooldridge:

    The two are not mutually exclusive, dude. I supported his post because overall it was brilliant. I don't believe I ever said that 'Real Estate was bad to invest', ever....because that has always been my go-to game. I recall saying that I would wait to invest until prices dropped. The two are not even close to being the same, unless someone has a severe reading/comprehension problem....

    And I also never said y'all were 'nuts'. So please show me those quotes from me, because one of us is making s**t up.....



    Lol ok overreaction much? I was multitasking not nuts just implied that buying last year or in 2023 was bad. I never said RE was bad just that buying at the time was bad. And my specific example was a property I settled on in October which is cash flowing quite nicely. 

    Anyway the point being is you were against the comments that investing now is bad because prices would drop. 

     

Join the conversationCreate a free account to reply, vote on answers and follow this thread.