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Blowing Up

Updated: Jul 20, 2023

A variety of blow-ups have occurred over the last couple of weeks that we have found to be noteworthy:

· Silicon Valley Bank

· The January 6 Committee

· Goldman’s top stock trader


In a turn of events eerily reminiscent of the Great Financial Crisis, Silicon Valley Bank was suddenly shuttered by state regulators today.

Shares of SVB Financial tumbled 60% on Thursday after the bank announced a plan to raise more than $2 billion in capital. The stock dropped another 60% in the premarket this morning before being halted, and shares never reopened for trading.

So, what happened? SVB served a lot of venture-backed companies, and as start-up capital has become harder and harder to come by, those clients’ burn rates have certainly increased. But the real cause of Silicon Valley Bank’s demise was that it had a lot of fixed-rate Treasury (and other) exposure that was underwater and carrying an unrealized loss. The bank’s management-- apparently being very late to this here party-- recently experienced a revelation, concluding that rates will keep rising, so they decided to restructure its assets and flip its portfolio from a fixed-rate one (where rate hikes cause even more capital losses) to a short-term one (where hikes lead to modest gains from net interest margin).

The 18th biggest bank in the country blew up its bond portfolio. Kaboom!


Speaker Kevin McCarthy recently made 41,000 hours of Capitol surveillance footage available exclusively to Fox News’ Tucker Carlson, and he aired some of it this week.

The footage is pretty crazy. It shows the “QAnon Shaman” Jacob Chansley being escorted by officers through the Capitol, guiding him to the Senate floor and even unlocking doors for him. At no point in the tapes does Chansley appear violent or threatening. In fact, he appears to thank the officers for their guidance and assistance, and he gave a prayer on the Senate floor to thank the officers for letting them into the building.

So, what happened? While it is understandable that many would object to the frequently childish Tucker Carlson being given an exclusive in the initial release, it is outrageous that Chansley’s defense attorneys were never able to see the video before a plea or sentencing. The public should have been given access to this footage long ago, and it’s now clear that the January 6th Committee withheld important evidence.

The Committee’s credibility has been blown up. Kaboom!


Goldman Sachs Group Inc. lost its stock-trading rainmaker Joe Montesano this week.

Montesano wasn’t just any trader-- he was a key player in Goldman’s ascent to the industry’s top rank in equities for two straight years. He has been one of Goldman’s top producers whose pay has rivaled the more than $75 million awarded to Chief Executive Officer David Solomon over the three-year Wall Street trading frenzy set off by the pandemic. In 2021, Montesano even out-earned Solomon’s $35 million package, nudged ahead by his oversight of the bank’s lucrative program-trading business.

The 46-year-old Montesano recently informed the firm that he is stepping down as head of equities trading for the Americas and leaving to take a break. He has yet to line up another job.

So, what happened? Montesano must have run up some huge losses—for a guy like that, probably approaching a half bil—before somebody looked over his shoulder and said, “Hey, Joe, maybe you should take a break.”

Losing money as a trader is not an actionable offense for an employer, but the firm probably told him to start taking on risk with a spoon instead of a backhoe. Rather than destroying his comps, Joe has decided to take a little break. Probably pop up on a desk at JP Morgan in about 18 months.

The biggest trader at the industry’s top trading firm blew up. Kaboom!


The S&P 500 is now lower over the last 12 months, six months, three months, month and week. While there have been trading rallies within these periods, SVB’s management and Goldman Sachs’ top trader have blown up, and we see little reason for most investors to expect to better navigate these machinations than they.

…At least not over the short term. What we’ve seen (again) this week is that the stock market is just a glorified casino over the short term. Over ten year periods, the numbers work out much better, so we recommend that investors take this time to fortify their financial houses, plant seeds for growth and plan for a bountiful harvest over a reasonable time frame. …And avoid blowing up. We definitely recommend that.

Click here to invest with Chad.

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