Trusting the Banks, Trusting Other Institutions, and Generosity of Time


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March 19, 2023

THE BANKING TURMOIL CONTINUES:  In the first quarter of 2022, Silicon Valley Bank’s (SVB) deposits peaked after surging 86% in 2021.  In the last three quarters of 2022, deposits declined by 13% as the Federal reserve kept raising rates, and its tech company clients began seeing slowdowns, and withdrawing cash.  Here is the recent timeline, which is not over:

  • On March 8, SVB announced that it was booking a $1.8 billion loss after selling some of its assets to cover increasing withdrawals.  It also said it planned to raise $2.25 billion by issuing and selling more stock.
  • On March 9, SVB’s stock crashed at the market open, and shares of the largest U.S. banks began to slide.  Firms who had their money at SVB began to panic and withdraw their money from SVB, to the tune of $42 billion.
  • On March 10, shares of SBV were halted and federal regulators took over the bank before it could open, marking the second largest bank failure in U.S. history.
  • Over the weekend on March 11 and 12, companies that had their money at SVB began to scramble to come up with cash to make payroll and other day-to-day operations fearing that their money at SVB would be unavailable on Monday morning.
  • On Sunday, March 12, federal regulators unveiled emergency measures to make sure depositors at SVB and a second bank, Signature Bank, could make withdrawals beyond the FDIC-guaranteed $250,000.
  • On March 13, shares in First Republic Bank begin to slide on rumors that it is shaky.  Other regional bank stocks continue to slide.
  • On Wednesday, March 15, rumors spread that Credit Suisse was in trouble, and its shares sank.  Later that evening, Credit Suisse said it would borrow up to 50 million Swiss Francs (about $54 billion) from the Swiss central bank to shore up its liquidity.
  • On Thursday, March 16, shares in First Republic begin to recover as federal regulators announced that 11 banks had agreed to deposit $30 billion in the bank.  Credit Suisse shares also jumped.
  • On Friday, March 17, shares of Credit Suisse and First Republic fall again as the optimism faded that these emergency measures would work.  SVB officially files for bankruptcy.
  • On March 18, word hit the streets that UBS is in talks to take over some or all of Credit Suisse.  
  • On March 19, the UBS takeover of Credit Suisse accelerates, looking like a deal will occur imminently.

CREDIT SUISSE STOCK HAS NOT BEEN DOING WELL FOR QUITE AWHILE:  There is more going on with Credit Suisse than a sudden loss of confidence.  The recent scare just accelerated things.  Credit Suisse has endured significant executive turnover.  It lost money is some large, public collapses of Greensill Capital and Archegos Capital Management.  They have been losing wealthy customers due to publicity about its poor health.  One huge customer, Saudi National Bank, recently announced that it could not add more to its deposits at Credit Suisse due to regulatory issues.  This has been a bank that has been doing poorly for awhile, and the trajectory of its stock price reflects that.

U.S. STOCK INCREASE:  Stocks were quite volatile last week.  Some sectors and regions did well and others did not.  As you can see below, the S&P 500 had a decent week, but the Dow Jones Industrial Average ended the week negative.  The NASDAQ composite was up 4.41%.  International stocks fell.  Stocks went back and forth on banking news.  Investors were trying to figure out if the recent banking issues will cause the Fed to slow down or stop raising rates.  Goldman Sachs is convinced the Fed is going to stop.  Others (including me) aren’t so sure.  And of course, investors are on pins and needles for news of any more banking sector disruptions and whether it will move us closer to a recession.

LONGER-TERM PERFORMANCE:  Below are the annualized three-year and five-year numbers for these same indices.  

MONEY WILL MOVE:  No matter what happens next in the banking sector, money is going to be moving around for awhile.  You do not have to be a large company to have combined payroll and operating bank accounts that are above $250,000.  Companies are going to be looking at their banking relationships and considering diversifying where they keep their cash.  Some cash might move to larger banks.  Some is moving out of banks altogether.  Banks are likely to get more conservative in how they invest their assets, but that is not something that happens overnight.  Banks are likely to tighten lending standards, which always has the effect of slowing economic activity.  This banking issue is going to have long term effects.

UNINSURED DEPOSITS:  As we have all been reminded, the FDIC insures deposits in U.S. banks for up to $250,000.  Recently, using emergency authority, SVB deposits greater than $250,000 were backed up by the U.S. government, but don’t count on that for your deposit if something happens to your bank.  Because of FDIC insurance limits, banks hold both insured (by the FDIC) deposits and uninsured deposits.  For a long period of time, returns on bank deposits were at or near zero, but there was very little in the way of safe investing that allowed for greater returns, and money stayed in the bank.  One of the consequences of interest rates rising is that bank depositors with large balances have other places for their money, including U,S. Treasury bills.  In 2022, $800 billion of uninsured deposits in U.S banks left the banking system.  So far in 2023, $160 billion has left the banking system, probably about half of which or more was uninsured money.  You are going to see the Federal Reserve and the U.S. Government get more creative in figuring out ways to protect the banks, and their depositors, while continuing to fight inflation.  We’ll have to wait and see what they come up with.  

U.S. CONSUMERS PAUSE IN FEBRUARY:  Last month, retail sales were down by 0.4% from January.  Sales were up 5.4% from one year earlier.

INDUSTRIAL PRODUCTION IN THE U.S. REMAINED UNCHANGED IN FEBRUARY:  Industrial production includes manufacturing, mining and utilities.  In total, U.S. industrial production was up 0.0% for the month.  Manufacturing rose slightly.  Mining decreased 0.6% and utilities rose 0.5%.

COLLEGE ENROLLMENT DECLINING:  While we all watch our college basketball March Madness brackets getting destroyed, these very same colleges are facing some severe challenges.  Nationwide, undergraduate college enrollment dropped 8% from 2019 to 2022, the steepest decline on record.  In 2022, 62% of public high school graduates immediately go to college.  That number was 66% in 2019.  The factors include demographics, fallout from the pandemic, plentiful, high paying jobs, student loans, and less trust in the institutions of higher learning overall.  There are some preliminary signs that there might be some small improvement this coming year, but colleges in general are bracing for a world of less overall college enrollees.

I’M GLAD STONECROP IS A SMALL BUSINESS:  Gallup recently completed a survey in which it asked how much confidence people have in various institutions.  With the exception of Organized Labor, all categories went down from 2021 to 2022.  Organized Labor stayed steady at 28% of people having confidence in those institutions.  Congress went from 12% to 7%, the lowest reading.  Television News did not do much better, going from 16% to 11%.  Big Business came in at 14%, dropping 4 percentage points.  Banks went from 33% to 27%, and have probably come down further in light of recent news.  Small business came in the very highest at 68%, higher than the police, the church and public schools, all of which were under 50%.  (The only other institution coming in above 50% was the military.)  An article commenting on these results offered four reasons why small business continues to be trusted:

  • Focus on Service, not Scale.  Customers often get deprioritized in big businesses that are hyper-focused on growth.  Small businesses know and serve their customers better.
  • They Thrive on Ownership.  Employees of small businesses feel more accountable to the success of that business and to serving customers than an employee of a larger organization that feels less ownership.
  • Build Community.  68% of a small business dollars flow back to the community they serve.  Small businesses rarely make the error of talking down to their customers because they live amongst them.
  • Small Businesses Love People.  As businesses grow, the pull of bureaucracy is often towards process and away from personalization.  “Small business owners often live closer to and are more in touch with the lives of employees, and have greater flexibility to understand their unique needs and goals unbound by the constraints of broader policies. And that personalization at all levels manifests as deeper, more positive and personal relationships—something akin to love.”

Of course, these are all generalizations.  Some small businesses do all this poorly, and some large businesses do it quite well.  But it is obviously true enough that poll results show that we small businesses have a lot of advantages, and we have to be careful to cling to them as we grow.

HAPPY ST. PATRICK’S DAY!:  We were fortunate to visit Ireland last fall with some close friends.  I can’t help but hearken back to that trip and those sights and the people of that place on this St. Patrick’s Day (I’ve included a smattering of pictures from our trip).  Whether you have any Irish blood in you or not, I hope you had a happy day and weekend!.

One thing I love about Ireland is that the people are very generous with their time.  They love to talk, tell stories, ask questions, make sarcastic jokes, and otherwise build relationships with people they have just met.  Generosity in giving of our most precious commodity, time, is a wonderful trait.  We could all benefit from trying to emulate it.

Have a great week!

Our mission is to help you see the objective, find the path, and navigate past the obstacles to a more prosperous future.

Douglas R. MacGray, J.D., C.F.P. ®
Stonecrop Wealth Advisors, LLC

Direct | Cell | Fax
(610) 628 4545

“Hail to the man who went through life always helping others, knowing no fear, and to whom aggressiveness and resentment are alien.”  Albert Einstein

“Do not be wise in your own eyes.”  Proverbs 3:7 (NIV)


(c) 2023 A.D., Stonecrop Wealth Advisors, LLC, All Rights Reserved

*S&P 500: This is a measure of the performance of the 500 largest companies in the United States, and it a common index to track the performance of U.S. equity markets, especially the large cap markets. 
*MSCI All Country World Index X US: This is a broad measure of the performance of worldwide equity markets excluding the United States. 
*Bloomberg U.S. Aggregate: This is a measure of the U.S. bond markets. 

Investment advisory services offered through Stonecrop Wealth Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission. 



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    Doug MacGray

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    March 20, 2023


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