Should You Be Worried About a Bank Run?

by Greg Rieben
"If you can keep your head when all about you are losing theirs...If you can trust yourself when all men doubt you..." - Rudyar Kipling
 
This is my first blog post in a while because the price action in the markets has been choppy, sideways, and rangebound.  

Just take a look at the S&P 500. It's trading at the same price that it was in June, September, November, December, and January. If that's not a choppy market environment, I don't know what is.
         

 

Over the years I've learned that sometimes there's just nothing to do except preserve capital while waiting for asymmetric opportunities to present themselves.

The current price action doesn't make for good headlines and the media has been fixated on inflation and interest rate data. But, that gets boring after a while.

They now have your full attention with The Silicon Valley Bank collapse and reports of bank runs.

Lets pretend that you know nothing about banking or how financial institutions work, and you get all your information from mainstream media and your social media feed.

Are you worried? The media sure wants you to be.

Some weekend headlines:

  • SVB Fallout Spreads Around the World - Bloomberg
  • As Banks Topple, Regulators Face Reckoning on Week of Mayhem - Bloomberg
  • Canadian Banks Erase $19.7 Billion in Value on SVB Contagion - BNN
  • Contagion Spreads: Desperate Customers Line Up Outside First Republic Bank... - Daily Mail
I've done a lot of reading and asked a lot of questions over the last few days when it comes to SVB and how it will play out in the days ahead. My research tells me that most people outside of depositors and shareholders have little to worry about.

Unfortunately, there will be negative consequences for many businesses and individuals that have been directly involved with this particular bank. However, they might be spared to some degree if a buyer is found before Monday morning, which I believe is a good possibility.

FDIC Auction for Failed SVB Underway, Final Bids Due Sunday - Bloomberg

A power house like JP Morgan might see value in acquiring a business like SVB for pennies on the dollar and the bidding has begun.

However, no one knows for sure how this will all play out so next week could be a bumpy ride in the markets.

I will be looking to make volatility my friend as a lot of quality stocks have already been unfairly sold because of the negative sentiment and fear from potential contagion. 

You have have many choices to make as an investor. In this particular situation, you can let fear and your emotions get the best of you or you can use the fear mongering by the media to your advantage.

I plan to use it to my advantage.

Have a great week and thanks for reading.


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