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  • Writer's pictureJulie Skye

This 3rd Week of March 2023 Thoughts from Julie & Harry

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Attached is a newsletter from my health insurance agent, Janet Phipps: be sure you have several agents to talk to. Check out the update on St. Francis and Hillcrest.


“Incompetence bordering on malfeasance” is the quote now going around about the CEO of SVB, Gary Becker, who sold $3.6 million of his own shares in SVB last Thursday. This is not going to turn out well for Becker as he will become the Poster Boy everyone looks to blame.


Our portfolios are very different from “the market” and the best way to see how your portfolio is performing is to log onto your Client Portal. I should have a therapist on staff to help me deal with my PTSD from stupid…suffering from stupid business managements. After almost 40 years of the same-ol-same-ol, this is the exact same weekend that Bear Stearns went under 15 years ago.


Why does it matter to you? You have to pay attention when one of the most well-respected voices on the economy: know I will always bring you the voices that matter. Below is a great analysis from my Partner, Harry Moran, based in Saratoga Springs. He has written such a great analysis, don’t need to add anything!



Silicon Valley & Signature Bank – Implications for Depositors & Investors One might think that runs on a bank, and banking failures, are a thing of the Great Depression, not something you encounter in modern times. One would be wrong though, thanks to the highly publicized failure of a once-obscure institution called Silicon Valley Bank (SVB), which collapsed last Friday and was taken over by federal regulators in order to protect the assets of its depositors. It was the largest failure of a U.S. bank since the 2008 economic crisis. Is there reason to be alarmed? In our view, probably not. SVB was unique in the banking industry. Unlike most banks that loan money to local residents, small businesses, and corporations, SVB lent to a very exclusive group of companies: tech startups, venture-backed health care companies, etc. Over its 40-year existence, the bank grew with the tech industry, eventually becoming one of America’s 20 largest lending institutions, with $209 billion in total assets at the end of last year. Unfortunately, in addition to its loan portfolio, SVB also decided to invest roughly $21 billion of its assets in long-term bonds, which were only paying, on average, interest rates of 1.79%. When interest rates doubled and then rose again, those bonds became much less valuable at exactly the wrong time: when venture capital firms were experiencing their own shortfalls and were drawing down the funds they held at SVB. The bank announced that it had sold a big part of its bond portfolio at a loss, and also at the same time, proposed to sell $2.25 billion in new stock shares of the bank in order to cover those losses. Once this news broke, some of the venture capital firms decided that it would be safer to move their assets out of SVB, which triggered a disastrous run on the bank. The bank’s share price went into a free fall, losing 80% of its value in a couple of wild trading days, and California regulators decided they’d seen enough. Last Friday, they moved in to shut the bank down and place it into receivership. In the US, the Federal Deposit Insurance Corporation (FDIC) guarantees any deposits up to $250,000, which means that most (if not all) of the ordinary people who banked with SVB were made whole within a few days— in fact. The Treasury Department, Federal Reserve, and the FDIC then jointly announced that all deposits of SVB, including those above $250,000, would be guaranteed by the government’s bank-deposit insurance fund. Any losses incurred by the fund would be covered by a special assessment on banks, and US taxpayers would not incur any losses. The measures taken by regulators do not constitute a bailout, because while depositors will be protected, those who held stocks and/or bonds of the bank itself, will not. The news of an impending takeover sent a wave of anxiety into the markets as investors wondered whether this might be a sign of widespread weakness in the banking industry. The stocks of smaller and regional banks took a brief, and probably short-term, tumble in their share prices. However, the uniqueness of SVB, and its customer base, suggests that this is an isolated event. Nevertheless, we are likely to hear about a small number of other banks that might have overextended themselves with similar, ill-timed investments in long-term bonds paying low interest, who were blindsided by the speed of rising rates. As you read this, analysts are also looking at whether any of the banks they cover might have put depositor money into cryptocurrencies—whose trading markets went into a still-unexplained turmoil with the SVB news. The subsequent collapse of Signature Bank was in fact tied to its exposure to crypto and was also a unique situation. Treasury Secretary Janet Yellen has convened a meeting of regulators in order to carefully probe the soundness of the banking system. The most likely outcome is that the SVB mess will spark a healthy reexamination of risks and exposures, which will give the regulators time to sort out hidden risks before they lead to more collapses. In another reassuring development, the Federal Reserve on Sunday unveiled a new program to ensure banks can meet the needs of all their depositors amid escalating chances of bank runs following the abrupt collapse of two major banks in the space of 72 hours. The Bank Term Funding Program(BTFP) will offer loans with maturities of up to a year to banks, savings associations, credit unions, and other eligible depository institutions. "The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution's need to quickly sell those securities in times of stress," the Fed said in a statement on Sunday. We will continue to monitor our custodial cash accounts and any other potential exposures but don’t see any reason for concern with any of our partner firms. The biggest takeaway for now is to make sure that bank deposits don’t exceed the FDIC coverage limit of $250,000 at any one bank. While in the case of SVB, regulators decided to make all depositors whole (even the many who had over $250,000 with the bank) in order to preserve stability and confidence in the banking system, that may not be the case if there are other bank failures. As always, please reach out to us if you have any questions re: how this might relate to your personal situation. Best Regards, Harry Moran, CFP®, AIF®, CeFT® Owner/Founder of Sustainable Wealth Advisors (SWA) Founding Member of Sustainable Advisors Alliance, LLC (SAA)

Investment advisory services provided by Sustainable Advisors Alliance, LLC (SAA), with Harry Moran, CFP®, AIF® as Investment Advisor Representative (IAR) also doing business under the name Sustainable Wealth Advisors. Our current disclosure brochure, Form ADV Part 2, is available for your review upon request, and on our website, www.SustainableAdvisorsAlliance.com. This disclosure brochure, or a summary of material changes made, is also provided to our clients on an annual basis. Neither Sustainable Wealth Advisors nor Sustainable Advisors Alliance, LLC provide tax or legal advice. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy, or the completeness of, any description of securities, markets or developments mentioned. We may, from time to time, have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions. Past performance may not be indicative of future results. Indexes are not available for direct investment. All investing involves risks, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful or that financial markets will act as they have in the past.



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