Will bank faiure contagion spread in US and elsewhere in the world

Every generation needs a revolution - an entrepreneurial revolution

In March alone there at least 2 bank failures with at least $100 billion in assets:  Silicon Valley  ($300b) and Signature Bank ($100B)

What is interesting to note is that SVB failed despite being liquid.   The trouble was with investment decisions.   Since it could not lend out its huge liquidty on hand, it invested in long term bonds (govt and private)  at 1.5%  The culprit was the high interest rate imposed by Fed whose recent rate was up to 4.75%.  It is possible that the  rates can go up further

Now there is inverse relationship between bond prices and interest rates.   High interest rates depresses long term bond prices   Investopedia - inverse relationship between bond prices and interest rates

Now the prices of bonds held by SVB declined in prices and therefore the bank incurred losses, depressing its stock prices.  This worried the  depositors who went into a bank run  SVB had to sell its bonds at fire sale further worsening its PNL

"Bonds have an inverse relationship to interest rates. When the cost of borrowing money rises (when interest rates rise), bond prices usually fall, and vice-versa.

At first glance, the negative correlation between interest rates and bond prices seems somewhat illogical. However, upon closer examination, it actually begins to make good sense.

KEY TAKEAWAYS

• Most bonds pay a fixed interest rate that becomes more attractive if interest rates fall, driving up demand and the price of the bond.
• Conversely, if interest rates rise, investors will no longer prefer the lower fixed interest rate paid by a bond, resulting in a decline in its price.
• Zero-coupon bonds provide a clear example of how this mechanism works in practice

It is possible in the country financia institutions like banks insurance companies, pre need companies and other banks have this dire situation.   And may have incurred paper losses further exacerbated by low investment rates and inflation

There is no substitute for good decision and wise management 

Computing for bond prices

Bank	City	State	Year	Assets at time of failure (nominal)	Assets at time of failure (inflation-adjusted, 2021)	Ref.
Washington Mutual	Seattle	Washington	2008	$307 billion	$386 billion	[3]
Silicon Valley Bank	Santa Clara	California	2023	$209 billion	$209 billion	[4]
Signature Bank	New York	New York	2023	$118 billion	$118 billion	[5]
Continental Illinois National Bank and Trust	Chicago	Illinois	1984	$40.0 billion	$104 billion	[3][6]
First Republ

Oil spill off MIndoro from Empress Princess poses threat to burgeoning tourism in Palawan and Panay??

Every generation needs a revolution - an entrepreneurial revolution

Oil spill off Mindoro

Containing the oil spill

The oil spill off Mindoro recently bearing 800 metric tons of fuel, is rapidly spreading and is spoiling the pristine beaches and water at our famed great beaches and waters.  While cruise ships are flocking to Boracay and Palawan, each tourist estimated to be spending $100 per day during the visit, the tourist attractiveness at the said sites:   San Vicente, Boracay Taytay can go down to zero

Al ready there are cancellations from tourists to Mindoro

Even Verde Island one of the  famous dive sites is imperiled

Our  hope for economic recovery after pandemic and efforts to attract tourists is going to naught

All ready blame is being pointed to the  regulatory agencies by the investigating bodies and some members of these agencies are recommended to be suspended.  Indeed why so much negligence, lack of effectiveness happen despite a huge bureaucracy with bloated salary expense.  Trouble is there are so many agencies involved in regulating ships in the country:   MARINA, PCG etc.  

One silly oil spill is alll that it takes to spoil the  countrýs competitive advantage in a flash

Problems facing banks

Every generation needs a revolution - an entrepreneurial revolution

Credit Suisse Bank is facing huge losses due to its handling of risky assets.  Is laying off staff, shares prices decline.   Bad banking decision.   And the contagion could spread in Europe   It is hobbled by its involved in bankrupt Greensil and British financier Greensil (also linked to another Indian billionaire)

CSB woes

Banks worldwide are undercapitalized and could wobble   There were posts that some banks could go under with estimates that worldwide the capital is a little only $100B with high estimates of $1.7 trillion. mainly due to the revaluation of asset quality.  These are uncertain times  Even venerable banks are not exempt from the crisis and instability

For banks in US, due to covid and inflation, the  $2 trillion or so savings of Americans could evaporate as citizens cope up with inflation (diminished spending power) and liquidity in banks could evaporate