@@that_green_neko"Since his wife works in the accounting department there" dude, she is CEO of LMG!!! Yes, she handles entire Financial side of business, but putting it like that is kinda undermining her influence over Linus😂
FYI, the FDIC stepped in and provided the funds so that all of the deposits would be paid in full, with the funds available on Monday. The shareholders and owners of SVB are not included in this though and they will be paid out through the likely liquidation after other debts have been paid.
So it's actually the opposite of the government causing the problem; it, in fact, prevented this from becoming a much bigger problem. Without the government intervening, this would be the 1920 all over again, where millions lost everything. Way too many people have a hard-on for "government = bad" just because it's an easy scapegoat. They never truly and realistically think about what the alternative would look like.
Land banks are frustrating for the middle class who are struggling to get houses these days. Not to mension any ammount of land. Sitting down and learning business with Linus would be so interesting
also frustrating since it's just not viable to use it if u are not rich since land or real estate for that matter just isn't liquid enough. if u need money now u might very well loose money. so u first of all need to spend a significant amount to get enough land that its worth it but also cant just get the money back.
oh dude it's brutal in Michigan right now. I had to relocate my entire family in a very short amount of time, we had to settle on a leaky, drafty, poorly maintained trailer, in the middle of the woods, for almost $300,000 The only reason we can even afford to live here is that we got 5 adults combining full time salaries to pay for it
haha the french just got angry at the powers at play again. and i think canada even just passed a law against mega-corporations buying households for "investment" purposes. look up blackrock, and how they are abusing digits on a screen to cheat you out of your own homelands.
@@fxarts9755 You might as well paint a label on your forehead "I don't know what i'm talking about". when you need the money from a land bank, you don't sell it, you use it as collateral and borrow it. Same with stock banks, you don't sell it, you borrow against it.
Land banking has had negative effects here in New Zealand. In every city there are 'ghost houses' which are perfectly livable but remain vacant because the owners are speculators or land bankers and do not want tenants. Most arable land is used for agriculture, dairy farming or forestry here so the land bankers target the cities. Some small towns entire main streets are vacant because land bankers buy up the CBD and hike the shop rents so that they are unsustainable because they don't want to be landlords. It has its own set of social problems.
Having incredibly high rent all-round can inflate your asset's value, which helps if for example you are borrowing money and using it as collateral. This has been a problem in many places, especially large cities. New york city is a prime example of this, where stores especially have such inflated rent prices that they are all vacant despite the tourism to that location. I for one cannot wait for a housing crash, and that comes from someone who will actually inherit some.
@@leonro It is impossible to afford a house in a lot of places in the US cause the prices are so stupidly outrageously high as to be pricing out everyone. People are ending up homeless cause of investors, we need laws that either permanently ban all investing in houses forever or limit investors to say 2 houses each and cant buy more without selling. Will help out a lot. The only way im going to be in a house by the time I get old and die from health issues that make working impossible is if my family kicks the bucket and i inherit a house.
@@leonro A crash is only a temporary solution, and could cause tremendous collateral damage. Cities need to start raising taxes on properties that remain vacant for longer than a reasonable period of time, and by enough to make it significantly less profitable than finding tenants. No tax breaks either.
This is why, if you have significant ones, you need evenly distribute your cash holdings between multiple banks. Not necessarily to insure it all but so that you can survive a few months.
Not really necessary for the reason you state. The FDIC is required by law to pay out "as soon as possible" and typically returns the money within a few business days, and often the first day after the bank is shut down. Only if you're lucky enough to have bank deposits of over $250,000 do you need to worry about using multiple banks, and odds are if you're keeping that much sitting in a single bank account, you already have plenty of other cash lying around with which to pay your bills.
Did Linus just do the Lex Luthor speech from Superman Returns? "You can print money, manufacture diamonds and people are a dime a dozen, but they'll always need land. It's the one thing they're not making any more of."
That happened to my parents. They had a part of their savings in a bank that went bust in the late 80s. It took them TWENTY-FIVE YEARS to get something back, and it was about 5%. Like I wasn't even been born when their money went poof. Some of the people in the queue had invested their life savings and got enough back to buy a second hand tv
@@brendancross2767 A bankruptcy of a major Bay Street bank or investment firm in Toronto would affect all of Canada, Alberta in particular due to how highly leveraged upstream, midstream, and downstream oil companies tend to be.
My wife's company, which is a billion dollar company not a "startup", had a significant amount of money in this bank. While they were relieved that they were given access to all of their funds, they had the liquidity and the profits to be ok. Not everyone would have been so lucky. Talking about "land banking?" Bill Gates is now the largest private land owner in the US.
In the UK, The gov and the Bank of England, stepped in over the weekend with HSBC. HSBC has bought the UK arm of SVB for a symbolic £1. That means UK users of the bank are fine. But they all had a terrible weekend before that was announced on Monday.
Fun Fact: No one's bank has enough liquidity. That's how Fractional Reserve Banking works. You put your money in, they lend it out. Doesn't matter if you have over or under $250K.
Sure it does. If you have less than $250k on deposit at a particular bank and it collapses, FDIC insurance guarantees you get ALL of your money back. Why is this so difficult to understand?
@@fabienso5889anyone who genuinely took this as Linus admitting they pay their employees less than minimum is just stupid. Because if that is the case A. How has Linus not going to jail yet? B. Why does lmg have not the highest but some of the highest employee retention of any company I have personally read about
The FDIC uses insurance premiums paid by all its member banks and funds from selling the insolvent bank's loans to other banks, to cover the funds. Most banks have much more out in loans than deposits. The FDIC has announced they they will be able to cover all insured deposits for SVB customers without using taxpayer revenues.
a way to think about linus is that he’s rich because he needs to pay people to do projects he wants and not to hoard money, LMG not going public is a big indicator
Linus has a quality that more rich people need: perspective. He doesn't buy things because he can. He needs a justification. They need to be a proper value. They can be wildly expensive but they need to be worth it. He understands the value of money and what it brings him. Basically, wealth to Linus is a means to an end and he already has what he wants and needs and is too sensible to pursue excess. That's rather exceedingly rare. Most people want money for money's sake and pursue meaningless excess just because they can. It's refreshing to see people who don't. I'm only worth seven figures but I'm in the same boat: sure I'd love more but I already have everything I can practically make use of so I'm good, thanks. Will still take more money if I'm offered but won't go out of my way to pursue it.
@@Demmrir that's all good but the richest people do the same but given that they hold so much wealth that means they lock up a lot of wealth that's no longer circulating through the economy
A lot of companies in the SF Bay Area used SVB as their payroll bank because it was the preferred Bank used by several of the payroll processing companies.
So in America we have Bank Protection Agency that take hold of the Bank and Try to put things inline before it goes Bankrupt. So Most likely the Bank was already dealing with the Bank Protection Agency before anyone knows about it.
The thing with SVB isn't even surprising. What's the amount of money that banks are required to hold on reserve in ratio to their total assets/deposits held? I remember it dropped to obscenely small amounts in either 2020 or 2021.
@@JollyOldCanuck so did Germany with the German branch, although they don't have any assets as the only business they did over here was giving out credits.
The SVB thing hits hard. My former company used SVB heavily for all of our US and foreign accounts. Our Director of Treasury finally started moving us off of SVB to Wells Fargo and HSBC mostly, because SVB didn't have enough enterprise features. Then we were acquired for $15+ billion and the money has been mostly moved out of SVB... looks like a great thing these days.
By the time this clip went live, the situation had changed enough that all of the actual information in it was out of date and not relevant :D Current events be crazy.
haha the SVB is a joke in the long run. look up who is buying all the land, and then turning around and leasing it. a bank run is a f**king joke, that shit is 100 years old. find out who is buying up your land with digital numbers, and leasing it back to you at 3x the cost.
In germany (or maybe europe entirely?) the ensured liquid value per Customer per Bank is 100k€ by law. That said, it only applies to the LIQUID value. Which you should not stack so high anyways (relative to your personal/business value) so.. it's absolutely fine imho.
As someone who has a degree in finance and is currently working towards being a financial advisor, you are pretty spot on. The biggest issue with banks, as it comes to savings/checking accounts, is that the banks use your savings or checking accounts to essentially invest into other avenues for free(yeah you make .5% apr, nothing compared to the 12%+, theyre earning off of your capital). So if the bank invests too much of their working captial, they will then lack liquid assests, which becomes an issue when a company demands a ton of money for whatever; then the bank will stuggle or take an extend amount of time to fullfil that large withdraw. This makes other holders weary of their holdings within the bank, so they too, will move their accounts, and now the bank has no liquid capital as everything is tied up in non-liquid investments; which results in the bank meeting the threshold where the government is required to step in; resulting in everyone else getting screwed who didnt catch on soon enough. This is what happenee to silicon valley bank, mainly due to the increased interest rates, as a result of inflation. Interest rates reached a degree were it no longer made sense to take on loans for expenditures/expansion, causing companies to use their free-floating capital for expansion, as opposed to using loans.
I know people dont read books anymore but this is why everyone should read "creature from jekyll island" Its about the pyramid sceme aka fractional reserve banking, the fdic and modern lending. Its a insanely informative book and will also explain where to put you money to keep it safe from insolvency.
Seeing Linus' take on this is actually super interesting. Also I genuinely thought the part of the reasoning for the lab was to use it as a land bank. I'm genuinely shocked he's only recently learned about that.
Good news on the SVB line: the FDIC as stepped up and stated that they will garuntee 100% of the funds from customers of SVB, the investors in SVB are SOL but the companies with money stored in the bank will get that money back out of the FDIC pool even over the $250k limit
that must make everyone who got kicked out of their homes by silicon Valley workers, or the thousands displaced in Ohio cuz our govt is more concerned about their crony donaters
@@sunny-sq6ci these two points seem at best disingenuous and at worst actively harmful to spout for several reasons. The FDIC pool that is being used to cover the money stored at SVB is paid into by large banks. It is not taxpayer money. It is money that is paid into as part of the insurance policy that these banks are required by law to take out. 2. Silicon valley workers don't have the power of eminent domain so they aren't able to kick people out of their homes. Any situation where somebody was forced to move for a silicon valley expansion project can be pointed to the California government for somebody to be angry at and that's not the FDIC or the federal government. 3. Railroad safety is a very deep rabbit hole that you are free to dive down, but the governmental shortcoming that caused East Palestine can be chopped up to the previous administration loosening restrictions on hazardous materials over rail again, nothing to do with the FDIC. And also anything to do with East Palestine and the derailment. There can be pointed pretty squarely to Norfolk Southern and the persistent culture of poor safety in their management and poor maintenance that is prevalent throughout the entire US railroading industry, none of which has anything to do with the FDIC or silicon valley Bank
@@sunny-sq6ci sorry to hit you with a reality check, but thousands displaced in Ohio is nothing compared to millions losing their jobs because of a cascading financial crisis. Imagine if the previous admin hadn't repealed the regulations that prevented the derailment and the current govt had legal recourse to go after them for it, or if it just hadn't happened at all. Same story with SVB.
@@ghomerhust how do you diversify $487m into insured $250k chunks? That’s quite a tall order. This comment doesn’t suggest Roku lost ALL of their money, just that they lost the $487m held at SVB. They may have plenty of cash squirreled away elsewhere, doesn’t make it hurt any less to lose $486.5m
the FDIC took over the bank and has made a new bank ran by FDIC in hopes that they can sell it to another stable bank. BUT the funds in deposit accounts were being made available to the former SVB bank.
Just found the clip. I’ve never known hard r to mean that either, but I’m confused on why it would be more offensive? They’re both slurs, and in both cases I’d understand that it wasn’t frowned upon in the past
(Canada) My understanding about credit union and their protection, it's not that they have no limit on how much is insured so its better for you, it's that there is no ceiling OR floor. If the credit union defaults, you might get back a lot more than what the CDIC insures with banks (100k per person per bank per type of account) OR you might get much less, you'll get what they CAN give you back since there is no federal regulation
From a business standpoint 250k is not a lot. On an individual level that could be your whole retirement. My girlfriends grandpa was a carpenter his whole life and invested in a proper and worked his ass off to build an immaculate house down in Florida so he could sell it for his retirement. He sold it for 500k and the bank just "Lost his money" Literally had no explanation as to where it went. FDIC picked up and covered some of the loss, but I believe back then they only insured up to 100k. So his plan for retirement was 1/5 of what it was suppossed to be because of a shady bank.
I think the safest way would be to spread your funds among multiple banks. 4 banks, you said? That's 3 banks more than he amount of banks you have your money in.
To the guy who said "it's because of the government", it kinda is and it kinda is not. In 2018 they removed a lot of requirements they had to do (some imposed after the financial crisis of 2008), but not in small part because SVB demanded such deregulation. If the regulations were stronger, and they were forced to follow them, a lot of this wouldn't have happened, or at least not as severely. But the GOP and some Democrats did vote to deregulate, and a lot went worse because that regulation didn't work.
SVB bank going down directly effected me. I work for a tech company that acquires failing retail business, and converts them to digital markets. SVB effected all of the brands under our umbrella.
Some dude I know just bought a piece of land to park some money back in the day and like 20 years later Dollar General came to him with an offer to buy it, because it was in a semi rural area right off the highway and paid him 2.3$ million dollars for it. It wasn't a ton of land either. Maybe an acre or two. Land always appreciates in value. They aren't making any more of it and if your area is growing and becoming more prosperous then that can raise the property value a lot. My mother bought her house back in like 2015 for 80k and now in 2023 it's worth 180k. More than doubled in value in just 8 years.
Land prices dropped where I live between the 70's and today so most people here took a bath and lost money. Houses have gone up by land drops every year.
That's why many countries in EU won't sell you land without warranty from buyer that they will build a fully functional house / warehouse / etc. within some period of time, otherwise you will pay a huge fine. So land banks here must go above just buying a land
Every bank is required to have a reserve in the central bank for cases where it runs out of money to fulfill withdrawals. One of the reasons is that a bank will loan out or invest money you deposit with them, that's how they keep their lights on. If those investments are lost then without some kind of reserve the banking system would fall apart. It's not a 1:1 ratio but certainly something. In this case where the money gets stolen I think that's another situation where the bank would compensate the account holders. The fact that the money was not insured means the bank itself won't be getting their money back. On the comment about a company suddenly losing it's operating capital, as long as it wasn't due to mismanagement it is fairly easy to get a loan from a bank, especially if you can prove through your financial statements that your company is growing or otherwise in a good financial standing. I frequently see even sketchy IT startups in downtown Toronto getting approvals for large loans to stay in business, i.e. during the first year of the COVID pandemic. It all depends on your financial statements.
At work, I see some invoices passing by, and some "checks" comming in. One of the invoice was about 350k$, and those invoices come in every about 6-7 weeks! And 150k$ deposit is weekly. 250k$ for a business is really not much at all.
250k total insured is slightly misleading. Individual, joint (by primary ownership), Trusts, each different PoD titled account (Linus with PoD Suzie entities up to 250k and Linus with PoD Luke 250k = 500k).
Also, unless anyone with more than $250k in a single account is exceedingly dumb, they'll also have plenty of other money in other types of investment too. The only case where it might be unfortunate is if someone has just sold their house or received an inheritance, and hasn't decided what to do with the money yet.
the FDIC 250K backing is not a legal maximum, it's actually the amount the federal government backs up. banks can offer higher insured amounts if they so choose
Ownership type is a weird one, because they're not talking about, say, checking, savings, money market, etc. What they're talking about are their own ownership categories, which includes single accounts, joint accounts, revocable trusts, etc. So, what this means is that if you're a married couple with, say, a million dollars in cash (hopefully you have other money invested, otherwise that's really irresponsible at that level). You could have, at one bank, a Linus owned account insured up to $250K (it could be checking, savings, or if you have both, they combine them in total value), you could have an Yvonne owned account insured up to $250K (same), but you can also have a joint account owned by both Linus and Yvonne, insured up to $500K because the insurance stacks between the both of you. So within one bank, you can easily deposit a million dollars as a married couple with combined finances and stay insured. It gets better because if, say, Linus and Yvonne had $250K for each of their four kids, they could setup trusts at the bank for each of their kids, let's say revocable trusts or something, meaning that they could be insured for up to $2 million dollars. They could even just setup savings accounts for their four children, and those could be insured for $250K, meaning at a single bank Linus and Yvonne could have an insured amount up to $3 million with enough finessing. My father recently reorganized his cash in the midst of this because his bank was considered vulnerable, now everything is FDIC insured, and it's more than $250K. Even better, there are banks with services where they spread those $250K or $500K (for joint accounts) amongst several banks, but where the initial bank controls it. This is one of the ways that people with many millions in cash store that liquid asset (while people claim rich people have no cash, this isn't true, they may have anywhere from a million to tens of millions in cash, depending on their lifestyle and liquidity needs, especially in terms of paying for taxes). Granted I used Linus and Yvonne, and they're not banking with US banks (though if they were banking with a US bank for some reason, they would be covered by FDIC; it's an aspect of the bank, not the citizenship of the depositor), but this is really important information. In fact, it's information that if more people understood this, and I mean upper class individuals with more than $250K in cash, not businesses, then the runs on the bank could be mitigated to some degree. Business and investment clients are going to be the primary cause in some cases, but seeing people lining up at ATMs and outside banks to pull out cash will add up and cause liquidity issues in the long run. Generally businesses aren't going to a bank to setup a transfer of funds, they call their agent or an agent.
If you are going to write novels, learn how to format them. Your block of text just makes our eyes bleed and skim by your voice. Learn to be concise, or just don't bother.
As an American I am ashamed that you can lobby to raise the amount of money in your bank to be considered “systematically important”, then sell your company shares a week days ahead of the collapse. Have the GOV pick up your mess, mean while Granny as a retired worker gets cancer & the GOV says “Nah you’re on your own Buddy GL!”
I would argue you are in the best position ever since you just spend a ton of money and essentially minimized the potential loss through this very well.
The dutch have been making land for centuries 🤣 How do you run a business with only using one bank. It's not expensive to create redundancy in that area. Just apply with every bank and spread your money and risk. And divide your company into multiple entities to spread risk even further. Like paying salaries could be a different company with its own multiple bank accounts. That's how you secure your company survival
I work for one of the larger banks in the US, and my brother works in tech for Microsoft. He and I are both worried suicides are going to spike right now due to SVB failing and some businesses losing everything and some people losing everything. A bank failing destroys lives.
Damn, with this burst, it's gonna have a HUGE knock-on effect for tech development. We experienced the leap of VR/AR this last decade. After this, we are gonna have to wait another decade at min before we have enough support for another big leap in tech in the west.
The problem with land is that it's very illiquid, and it's not guaranteed to go up. Past performance is no guarantee of the future. By the way, the FDIC has guaranteed all deposits, even the unisured ones. A further panic would be very bad.
"I invested in a product I thought should exist" I wish this was the primary thought of investors instead of just "activist investors." I think more products would be truly valuable instead of just profitable
The problem with "land banks" is that you've got to deal with upkeep costs and there is a limit to how much things can "just keep going up" before the ability to pay for it at those prices isn't just there. We've already seen that happen with the housing market in the US back in 08 and it's overdue for it to happen again, especially as it becomes harder to ignore the reality that the internet has made the metropolis cities obsolete. Your money's better off being active in generating revenue to stay ahead of inflation instead of in an "investment" that's going to cost upkeep, takes a lot of time to liquidate, and isn't guaranteed to be high value when you do ultimately want the money back.
Sorry to bring this back from the dead, but I don’t fully understand the whole metropolis is obsolete part of your comment. Do you mean working from home, or the ability to order things to houses? Stuff like that?
Take it from someone down the street from SVB, has family and experience in that bank and other tech banks in that specific area. SVB went under because it was investing it’s customers money into the stock market which has been tanking for months. Everyone who had money there knew what they were doing and were okay with it because for years prior they made money. All of a sudden they all lose everything and they’re shocked…
The other thing about SVB was that the bonds they were in were old so they didn't sell for as much and they weren't able to let the bonds accumulate all the interest because they had to pull them early (for obvious reasons) which made them insolvent because the money would've been there if the bonds had fully paid out, but since they didn't they were left with less money than people were pulling out
21:30 That's a sunk cost fallacy, I think. You bought X shares of company Y. Due to an event, company money goes "poof". You don't own the money that went "poof" anymore. Now, if you don't fall into the sunk cost fallacy, the only thing you need to evaluate is "With the current state of the company, is it worth it to invest Z amount of money?". The fact that money went "poof" is irrelevant (apart from computing risks based on history). The value of your shares don't diminish by issuing new shares, either. Before that event, you own P percent of the company. Let's say the total value of the company is C (total number of shares times value of said shares). After that event, you own P*C/(C+Z) % of the company; which is now worth C + Z.
Something Linus forgot to mention, setting up corporate business account that is international is a gigantic pain in the ass. Especially international ones. Which very few banks can even operate. They would also demand records, which SVB is not likely to give you.
THIS is why the US government bailed out AIG years ago. Counterpart risk. To keep this from happening to dozens, of not hundreds of big banks. Wish our banks were not allowed to commingle public deposits with their investment banking/trading desks.
@@mayto420 Agreed. We are sending all the wrongs messages to banks and people in the financial sector who are thinking about doing risky or stupid things.
The real mess is everyone who had less than $250,000 in assets at the bank was fine anyway. It's like these advisors were trying to cause this so *they* could profit from it. It's also why if I were a millionaire or richer, I'd be diversifying my holdings among different banks
Depositors are guaranteed full protection by the treasury and the FDIC in this instance, they announced it I think yesterday. Shareholders, not so much.
The total valuation of their investments and liquid was 108% of deposits, but they didn't have the liquid to cover the run. That's why the FDIC is able to guarantee the full value of all deposits, not just the $250000 insured.
one of the problems with people using "land banks" is something we see here in the Netherlands. Rich people en mass buy up homes. Houses have been very scarce here, and the influx of people buying them up sure isn't helping.
That explains why I've seen so much interest in precious metals. Housing markets collapsing and regulations affecting markets. I've seen some holdings in stuff like PTLM and stuff that make me nervous. When money moves something is going to happen.
Its really crap that we as money users. Are forced to interact with banks for everything from our pay. To our mortgages. To our daily spending. And yet our money is not fully insured in its entirety... and not by the damn. Government... You want to be a bank and force me to use your services you should have to be fully insured independantly.
I assumed what businesses, or the uber rich, did, was split their deposits. So the "Payrolls" account might be two or three or four banks. If any one bank goes under 100% of it will be insured, until you're reaching the cap of every bank. Then even if you do lose a bank it will be a fraction of your total capital. I thought there were even tools to assist with this.
I’ve not seen anywhere else mention this, but the arm of SVB in the UK was sold to HSBC for £1 (1.22$ USD) after all night of talks a day or so after the collapse, to keep the tech startups in the UK safe!
They "protected" deposit capital reserves by using the money for 10 year government bonds at historically low interest rates that paid close to 0% and would have to be discounted to liquidate early. In other words, they loaned the money they took from customers to the government for less than 1% interest payments and a ten year delay for the principal to be repaid. They had to pay the customers more interest than the government was paying the bank. Not only that, the bank's customers are free to take their money anytime and without warning. The more money customers withdrew the more bonds the bank at to sell at fire sale prices so whoever buys them is not going to lose money in the deal. Plus they had to sell a lot of the bonds in a hurry so there became a point that they didn't have enough operating capital to cover the losses and return the deposits to customers. If they had used all the money to load Apple Pay cards the money would have been more secure. Exaggerating only a little. It's not so much what they should have done, but this is pretty obvious to not be a prudent capital reserve investment. Bank CEOs don't need to be told not to send the required capital reserves to the Mexican drug cartels for safekeeping. That would obviously be a bad decision. The capital could have been used for top rated corporate bonds. Places like Apple and Google would have paid a higher rate and are very unlikely to default. There are funds they could have put the money in for someone else to manage within a spectrum of risk. There are hundreds of thousands of investment options. The goal with capital reserves is to protect the money because it is there to save the bank and its depositors if you have already screwed up badly enough to need to tap the reserves.
Hes never gonna stop making bad quotes lmao. Its just like drop tips, he'll never escape it. What he meant to say: "We dont just pay the minimum wage, we pay much more" What he said: "we dont pay our workers monimum wage."
I don't understand how people who have 250 thousand with a bank or more have no time or desire to examine the financials of the bank they are investing in. Especially startups. Those deposits with svb were made out of greed, not to secure their funds. You secure funds with big banks that are regulated, not svb-like banks.
Q: How do we know you do NOT pay minimum wage when you fire people for talking about their salaries? Linus: Trust me bro. 90% of their users had uninsured funds amounting to over 96% of the bank's assets. meaning that for everyone who had an account balance of $10,000, there were hundreds with over $500,000, when only UP TO $250k is "insured." Tech investors and startups got boned due to low-quality mortgage-backed securities, yet again, and the taxpayer bails them out, yet again.
something that isn't obvious to a lot of people is that when a big business makes a wire payment, *the bank fronts the money* no really. you think that when a company sends a 30 billion dollar wire that they have a 30 billion dollar balance in a deposit account? no. imagine the opportunity cost. no way. never. They have 30 billion dollars of bank credit. So the bank fronts the money. And banks are *supposed* to only hold a certain amount of money. it all flows in and out and up and down so it doesn't matter, but the fact is, the bank can't issue itself credit and is limited in what it can send out. That's why large denomination wires that you send out get held up (sometimes) - the banks have to do the risk analysis to see if xyz corp is good for it, because the bank is on the hook and if xyz corp really can't pay it back, the bank sending it is screwed. Never even mind 30 billion dollars btw I've seen some shit. So when SVB *canada* collapsed, all of their payments are immediately super duper sussy baka. They might fail to clear. They might succeed. we don't know. it's a huge problem for creditor banks to then give their customers access to those funds. Everybody is panicking and sending their money elsewhere. Chaos.
The points around the low returns offered by various assets classes are valid. It's a consequence of this prolonged, low interest rate environment which persisted, somewhat nonsensically, after the GFC. There will pain until a new steady state is achieved. And things such as banks with poorly managed balance sheets and a gross lack of proper risk management will fall.
it was so funny watching Linus go through the stages of annoyance with realising that he has to now talk to accounting about it.
I like to imagine it was a wife joke, since his wife works in the accounting department there.
like "Uggghhh, I have to go talk to my wife..."
@@that_green_neko"Since his wife works in the accounting department there" dude, she is CEO of LMG!!! Yes, she handles entire Financial side of business, but putting it like that is kinda undermining her influence over Linus😂
@@rohitsonar103 no, she’s not. Linus is CEO. She’s CFO. She is accounting.
@@leeman4499 Glad you said it so I didn't have to.
@@leeman4499 okay, She is CFO.
FYI, the FDIC stepped in and provided the funds so that all of the deposits would be paid in full, with the funds available on Monday. The shareholders and owners of SVB are not included in this though and they will be paid out through the likely liquidation after other debts have been paid.
im glad that the account holders were the priority here, as it should be.
So it's actually the opposite of the government causing the problem; it, in fact, prevented this from becoming a much bigger problem. Without the government intervening, this would be the 1920 all over again, where millions lost everything. Way too many people have a hard-on for "government = bad" just because it's an easy scapegoat. They never truly and realistically think about what the alternative would look like.
@@ghomerhust FDIC is Just for deposits.
According to some posts, most of the shareholders had already withdrawn prior to the bank going under.
And now less add this example to the ever-growing pile of "why libertarians are wrong"
Land banks are frustrating for the middle class who are struggling to get houses these days. Not to mension any ammount of land. Sitting down and learning business with Linus would be so interesting
also frustrating since it's just not viable to use it if u are not rich since land or real estate for that matter just isn't liquid enough. if u need money now u might very well loose money. so u first of all need to spend a significant amount to get enough land that its worth it but also cant just get the money back.
oh dude it's brutal in Michigan right now. I had to relocate my entire family in a very short amount of time, we had to settle on a leaky, drafty, poorly maintained trailer, in the middle of the woods, for almost $300,000
The only reason we can even afford to live here is that we got 5 adults combining full time salaries to pay for it
haha the french just got angry at the powers at play again. and i think canada even just passed a law against mega-corporations buying households for "investment" purposes.
look up blackrock, and how they are abusing digits on a screen to cheat you out of your own homelands.
@@mitsota101time for a socialist revolution
@@fxarts9755 You might as well paint a label on your forehead "I don't know what i'm talking about". when you need the money from a land bank, you don't sell it, you use it as collateral and borrow it. Same with stock banks, you don't sell it, you borrow against it.
"Assuming we pay minimum wage, which we don't" - Mr. Tech Tips
Yeah, phrasing like "To be clear, we pay everybody more than minimum wage" would be more clear than "we don't pay anybody minimum wage"
I love the implications of this of this quote
they pay below minimum wage!
He’s never beating the terrible boss accusations
Luke was payed less than minimum wage for a bit
Land banking has had negative effects here in New Zealand. In every city there are 'ghost houses' which are perfectly livable but remain vacant because the owners are speculators or land bankers and do not want tenants. Most arable land is used for agriculture, dairy farming or forestry here so the land bankers target the cities. Some small towns entire main streets are vacant because land bankers buy up the CBD and hike the shop rents so that they are unsustainable because they don't want to be landlords. It has its own set of social problems.
housing prices are already insane, now entire neighborhoods are going to become ghosts towns too
Having incredibly high rent all-round can inflate your asset's value, which helps if for example you are borrowing money and using it as collateral. This has been a problem in many places, especially large cities. New york city is a prime example of this, where stores especially have such inflated rent prices that they are all vacant despite the tourism to that location. I for one cannot wait for a housing crash, and that comes from someone who will actually inherit some.
@@leonro It is impossible to afford a house in a lot of places in the US cause the prices are so stupidly outrageously high as to be pricing out everyone. People are ending up homeless cause of investors, we need laws that either permanently ban all investing in houses forever or limit investors to say 2 houses each and cant buy more without selling. Will help out a lot. The only way im going to be in a house by the time I get old and die from health issues that make working impossible is if my family kicks the bucket and i inherit a house.
@@leonro A crash is only a temporary solution, and could cause tremendous collateral damage. Cities need to start raising taxes on properties that remain vacant for longer than a reasonable period of time, and by enough to make it significantly less profitable than finding tenants. No tax breaks either.
@@pilsplease7561 Raise property taxes on long term vacant buildings. That will bring them back into the rental market soon enough.
This is why, if you have significant ones, you need evenly distribute your cash holdings between multiple banks. Not necessarily to insure it all but so that you can survive a few months.
There is a reason so many big companies get into real estate. And there is a reason it's called "real" estate.
@@B20C0 I jumped down a rabit hole and discovered that big companies such as Macdonalds are actually real estate companies
Not really necessary for the reason you state. The FDIC is required by law to pay out "as soon as possible" and typically returns the money within a few business days, and often the first day after the bank is shut down.
Only if you're lucky enough to have bank deposits of over $250,000 do you need to worry about using multiple banks, and odds are if you're keeping that much sitting in a single bank account, you already have plenty of other cash lying around with which to pay your bills.
Did Linus just do the Lex Luthor speech from Superman Returns? "You can print money, manufacture diamonds and people are a dime a dozen, but they'll always need land. It's the one thing they're not making any more of."
But its true 😂
Time to expand... into space!
That happened to my parents. They had a part of their savings in a bank that went bust in the late 80s. It took them TWENTY-FIVE YEARS to get something back, and it was about 5%. Like I wasn't even been born when their money went poof. Some of the people in the queue had invested their life savings and got enough back to buy a second hand tv
Was their bank not part of the FDIC?
@@Phoenix_of_Sun Yeah, FDIC insurance has been 100k since 1980, and was upped to 250k in 2008
Linus is slightly misinformed on how it does not affect Canada. SVB has a branch in Toronto
Yes but we don’t care about Toronto
does that mean im gonna see a day to day change going to work? or
Had*
SVB only has one branch in Toronto and its assets are minuscule compared to the Big Six banks.
@@brendancross2767 A bankruptcy of a major Bay Street bank or investment firm in Toronto would affect all of Canada, Alberta in particular due to how highly leveraged upstream, midstream, and downstream oil companies tend to be.
My wife's company, which is a billion dollar company not a "startup", had a significant amount of money in this bank. While they were relieved that they were given access to all of their funds, they had the liquidity and the profits to be ok. Not everyone would have been so lucky.
Talking about "land banking?" Bill Gates is now the largest private land owner in the US.
In the UK, The gov and the Bank of England, stepped in over the weekend with HSBC. HSBC has bought the UK arm of SVB for a symbolic £1. That means UK users of the bank are fine. But they all had a terrible weekend before that was announced on Monday.
And the craziest thing was, this wasn't the most suprising thing that happened this episode
How can you just do causally say that?
are u referring to when linus says he casually drops the hard R
@@toxicwifi65 yes ... but ... no?
Hard r
@@toxicwifi65 what?
Fun Fact: No one's bank has enough liquidity. That's how Fractional Reserve Banking works. You put your money in, they lend it out. Doesn't matter if you have over or under $250K.
Sure it does. If you have less than $250k on deposit at a particular bank and it collapses, FDIC insurance guarantees you get ALL of your money back. Why is this so difficult to understand?
Yeah, I thought it ws a standard practice cross in many countries. Apparently not, as Linus stated that some banks have limits at lending.
@@supermarioisacat FDIC insurance is not the same thing as bank liquidity lol
@@supermarioisacat If the bank always has the money, then tell me what the insurance is for.
"works" - I assume you're using this term loosely :'D
The lightly whispered "w-we we don't pay minimum wage" at 3:33 was so pure. Honestly love Luke so much
there are situations you can be a partial partner I don't know if they do that buuut...
I am pretty sure it was a we pay way more than minimum wage
@@fabienso5889anyone who genuinely took this as Linus admitting they pay their employees less than minimum is just stupid. Because if that is the case A. How has Linus not going to jail yet? B. Why does lmg have not the highest but some of the highest employee retention of any company I have personally read about
The FDIC uses insurance premiums paid by all its member banks and funds from selling the insolvent bank's loans to other banks, to cover the funds. Most banks have much more out in loans than deposits. The FDIC has announced they they will be able to cover all insured deposits for SVB customers without using taxpayer revenues.
Dang, at around the 19 minute mark Linus showed exactly why he is so much more respected than most rich people.
a way to think about linus is that he’s rich because he needs to pay people to do projects he wants and not to hoard money, LMG not going public is a big indicator
Linus has a quality that more rich people need: perspective. He doesn't buy things because he can. He needs a justification. They need to be a proper value. They can be wildly expensive but they need to be worth it. He understands the value of money and what it brings him. Basically, wealth to Linus is a means to an end and he already has what he wants and needs and is too sensible to pursue excess. That's rather exceedingly rare. Most people want money for money's sake and pursue meaningless excess just because they can. It's refreshing to see people who don't. I'm only worth seven figures but I'm in the same boat: sure I'd love more but I already have everything I can practically make use of so I'm good, thanks. Will still take more money if I'm offered but won't go out of my way to pursue it.
@@Demmrir that's all good but the richest people do the same but given that they hold so much wealth that means they lock up a lot of wealth that's no longer circulating through the economy
and yet when he criticized elon musk, most of the community ganged up on him
@@333dae exectly, productive capital vs rent seeking asset based/shareholder value capital.
You know it’s a bad day when you go “fuck I have to talk to accounting!” 😂😂😂
A lot of companies in the SF Bay Area used SVB as their payroll bank because it was the preferred Bank used by several of the payroll processing companies.
So in America we have Bank Protection Agency that take hold of the Bank and Try to put things inline before it goes Bankrupt. So Most likely the Bank was already dealing with the Bank Protection Agency before anyone knows about it.
The thing with SVB isn't even surprising. What's the amount of money that banks are required to hold on reserve in ratio to their total assets/deposits held? I remember it dropped to obscenely small amounts in either 2020 or 2021.
I read today that HSBC has bought the UK arm of SVB for just £1.
The Government of Canada also seized the assets of SVB’s Canadian branch.
@@robertlee6338 well... HSBC is pretty solid ain't it?
@@PrograError inb4 they also go *poof*
@@JollyOldCanuck so did Germany with the German branch, although they don't have any assets as the only business they did over here was giving out credits.
Luckily this year regulators said Canadian banks need more cash on hand. (That’s why they were offering good GICs)
Fuck no wonder land prices suddenly shot up the last couple weeks in my area.
The SVB thing hits hard. My former company used SVB heavily for all of our US and foreign accounts. Our Director of Treasury finally started moving us off of SVB to Wells Fargo and HSBC mostly, because SVB didn't have enough enterprise features. Then we were acquired for $15+ billion and the money has been mostly moved out of SVB... looks like a great thing these days.
By the time this clip went live, the situation had changed enough that all of the actual information in it was out of date and not relevant :D
Current events be crazy.
Yeah, things got much, much worse.
"not relevant" So SVB suddenly didn't go belly up? If not, then this is still relevant.
haha the SVB is a joke in the long run. look up who is buying all the land, and then turning around and leasing it.
a bank run is a f**king joke, that shit is 100 years old.
find out who is buying up your land with digital numbers, and leasing it back to you at 3x the cost.
In germany (or maybe europe entirely?) the ensured liquid value per Customer per Bank is 100k€ by law. That said, it only applies to the LIQUID value. Which you should not stack so high anyways (relative to your personal/business value) so.. it's absolutely fine imho.
Same in all of EU I think
As someone who has a degree in finance and is currently working towards being a financial advisor, you are pretty spot on. The biggest issue with banks, as it comes to savings/checking accounts, is that the banks use your savings or checking accounts to essentially invest into other avenues for free(yeah you make .5% apr, nothing compared to the 12%+, theyre earning off of your capital). So if the bank invests too much of their working captial, they will then lack liquid assests, which becomes an issue when a company demands a ton of money for whatever; then the bank will stuggle or take an extend amount of time to fullfil that large withdraw. This makes other holders weary of their holdings within the bank, so they too, will move their accounts, and now the bank has no liquid capital as everything is tied up in non-liquid investments; which results in the bank meeting the threshold where the government is required to step in; resulting in everyone else getting screwed who didnt catch on soon enough. This is what happenee to silicon valley bank, mainly due to the increased interest rates, as a result of inflation. Interest rates reached a degree were it no longer made sense to take on loans for expenditures/expansion, causing companies to use their free-floating capital for expansion, as opposed to using loans.
I know people dont read books anymore but this is why everyone should read "creature from jekyll island"
Its about the pyramid sceme aka fractional reserve banking, the fdic and modern lending. Its a insanely informative book and will also explain where to put you money to keep it safe from insolvency.
Seeing Linus' take on this is actually super interesting. Also I genuinely thought the part of the reasoning for the lab was to use it as a land bank. I'm genuinely shocked he's only recently learned about that.
the equipment in there is worth far more than the money on the land. but hes right. land is finite.
This is such an important topic. My guess is everyone will have to deal with this soon...
I love in the Boston area and people buying houses as an investment is causing houses and apartments becoming more and more unaffordable.
21:09 "Imagine I bank at HSBC"and that's when you know he's not imagining it in Europe 🤣
Good news on the SVB line: the FDIC as stepped up and stated that they will garuntee 100% of the funds from customers of SVB, the investors in SVB are SOL but the companies with money stored in the bank will get that money back out of the FDIC pool even over the $250k limit
that must make everyone who got kicked out of their homes by silicon Valley workers, or the thousands displaced in Ohio cuz our govt is more concerned about their crony donaters
@@sunny-sq6ci these two points seem at best disingenuous and at worst actively harmful to spout for several reasons. The FDIC pool that is being used to cover the money stored at SVB is paid into by large banks. It is not taxpayer money. It is money that is paid into as part of the insurance policy that these banks are required by law to take out.
2. Silicon valley workers don't have the power of eminent domain so they aren't able to kick people out of their homes. Any situation where somebody was forced to move for a silicon valley expansion project can be pointed to the California government for somebody to be angry at and that's not the FDIC or the federal government.
3. Railroad safety is a very deep rabbit hole that you are free to dive down, but the governmental shortcoming that caused East Palestine can be chopped up to the previous administration loosening restrictions on hazardous materials over rail again, nothing to do with the FDIC.
And also anything to do with East Palestine and the derailment. There can be pointed pretty squarely to Norfolk Southern and the persistent culture of poor safety in their management and poor maintenance that is prevalent throughout the entire US railroading industry, none of which has anything to do with the FDIC or silicon valley Bank
@@sunny-sq6ci sorry to hit you with a reality check, but thousands displaced in Ohio is nothing compared to millions losing their jobs because of a cascading financial crisis. Imagine if the previous admin hadn't repealed the regulations that prevented the derailment and the current govt had legal recourse to go after them for it, or if it just hadn't happened at all. Same story with SVB.
I saw it reported that Roku had a single checking account at this bank to the value of about $487m dollars lol. That sounds smart.
diversification isnt a real word for them evidently?
Imagine trusting banks
@@ghomerhust how do you diversify $487m into insured $250k chunks? That’s quite a tall order. This comment doesn’t suggest Roku lost ALL of their money, just that they lost the $487m held at SVB. They may have plenty of cash squirreled away elsewhere, doesn’t make it hurt any less to lose $486.5m
@@theglowcloud2215 Kinda hard to stuff $487 million under your mattress
@@squidwardo7074 idk, where there’s a will there’s a way:)
the FDIC took over the bank and has made a new bank ran by FDIC in hopes that they can sell it to another stable bank. BUT the funds in deposit accounts were being made available to the former SVB bank.
When the boss doesn't know what minimum Wage at his place of Business is, you know he is a good boss!
Here we go, let’s see if they’re brave enough to upload the clip we all want to see 😈
Elaborate please?
@@duncan-_- ive dropped my fair share of hard R's, casually
@@sendersnivy6698Did one of them say a slur? 🤨
Just found the clip. I’ve never known hard r to mean that either, but I’m confused on why it would be more offensive? They’re both slurs, and in both cases I’d understand that it wasn’t frowned upon in the past
@@hopperelecth-cam.com/users/liveA6_UOejJ8Zk?feature=share around 1 hour 26 minutes Linus talks about the hard R 🤨
(Canada) My understanding about credit union and their protection, it's not that they have no limit on how much is insured so its better for you, it's that there is no ceiling OR floor. If the credit union defaults, you might get back a lot more than what the CDIC insures with banks (100k per person per bank per type of account) OR you might get much less, you'll get what they CAN give you back since there is no federal regulation
From a business standpoint 250k is not a lot. On an individual level that could be your whole retirement. My girlfriends grandpa was a carpenter his whole life and invested in a proper and worked his ass off to build an immaculate house down in Florida so he could sell it for his retirement. He sold it for 500k and the bank just "Lost his money" Literally had no explanation as to where it went. FDIC picked up and covered some of the loss, but I believe back then they only insured up to 100k. So his plan for retirement was 1/5 of what it was suppossed to be because of a shady bank.
I think the safest way would be to spread your funds among multiple banks. 4 banks, you said? That's 3 banks more than he amount of banks you have your money in.
To the guy who said "it's because of the government", it kinda is and it kinda is not. In 2018 they removed a lot of requirements they had to do (some imposed after the financial crisis of 2008), but not in small part because SVB demanded such deregulation.
If the regulations were stronger, and they were forced to follow them, a lot of this wouldn't have happened, or at least not as severely. But the GOP and some Democrats did vote to deregulate, and a lot went worse because that regulation didn't work.
SVB bank going down directly effected me. I work for a tech company that acquires failing retail business, and converts them to digital markets.
SVB effected all of the brands under our umbrella.
Some dude I know just bought a piece of land to park some money back in the day and like 20 years later Dollar General came to him with an offer to buy it, because it was in a semi rural area right off the highway and paid him 2.3$ million dollars for it. It wasn't a ton of land either. Maybe an acre or two. Land always appreciates in value. They aren't making any more of it and if your area is growing and becoming more prosperous then that can raise the property value a lot. My mother bought her house back in like 2015 for 80k and now in 2023 it's worth 180k. More than doubled in value in just 8 years.
Land prices dropped where I live between the 70's and today so most people here took a bath and lost money. Houses have gone up by land drops every year.
That's why many countries in EU won't sell you land without warranty from buyer that they will build a fully functional house / warehouse / etc. within some period of time, otherwise you will pay a huge fine. So land banks here must go above just buying a land
Every bank is required to have a reserve in the central bank for cases where it runs out of money to fulfill withdrawals. One of the reasons is that a bank will loan out or invest money you deposit with them, that's how they keep their lights on. If those investments are lost then without some kind of reserve the banking system would fall apart. It's not a 1:1 ratio but certainly something. In this case where the money gets stolen I think that's another situation where the bank would compensate the account holders. The fact that the money was not insured means the bank itself won't be getting their money back.
On the comment about a company suddenly losing it's operating capital, as long as it wasn't due to mismanagement it is fairly easy to get a loan from a bank, especially if you can prove through your financial statements that your company is growing or otherwise in a good financial standing. I frequently see even sketchy IT startups in downtown Toronto getting approvals for large loans to stay in business, i.e. during the first year of the COVID pandemic. It all depends on your financial statements.
"We do not pay minimum wage" Sounds like a spicy out of context clip to me lmao
At work, I see some invoices passing by, and some "checks" comming in. One of the invoice was about 350k$, and those invoices come in every about 6-7 weeks! And 150k$ deposit is weekly.
250k$ for a business is really not much at all.
250k total insured is slightly misleading. Individual, joint (by primary ownership), Trusts, each different PoD titled account (Linus with PoD Suzie entities up to 250k and Linus with PoD Luke 250k = 500k).
Also, unless anyone with more than $250k in a single account is exceedingly dumb, they'll also have plenty of other money in other types of investment too. The only case where it might be unfortunate is if someone has just sold their house or received an inheritance, and hasn't decided what to do with the money yet.
20:57 Linus missing the beep 😂
the FDIC 250K backing is not a legal maximum, it's actually the amount the federal government backs up. banks can offer higher insured amounts if they so choose
You should never depend on that, though. SVB account holders were lucky. I hope they learned their lesson.
Try looking at NZ. We weren't even covered by insurance up until recently, and that is only $100k NZ dollars.
Ownership type is a weird one, because they're not talking about, say, checking, savings, money market, etc. What they're talking about are their own ownership categories, which includes single accounts, joint accounts, revocable trusts, etc. So, what this means is that if you're a married couple with, say, a million dollars in cash (hopefully you have other money invested, otherwise that's really irresponsible at that level). You could have, at one bank, a Linus owned account insured up to $250K (it could be checking, savings, or if you have both, they combine them in total value), you could have an Yvonne owned account insured up to $250K (same), but you can also have a joint account owned by both Linus and Yvonne, insured up to $500K because the insurance stacks between the both of you. So within one bank, you can easily deposit a million dollars as a married couple with combined finances and stay insured. It gets better because if, say, Linus and Yvonne had $250K for each of their four kids, they could setup trusts at the bank for each of their kids, let's say revocable trusts or something, meaning that they could be insured for up to $2 million dollars. They could even just setup savings accounts for their four children, and those could be insured for $250K, meaning at a single bank Linus and Yvonne could have an insured amount up to $3 million with enough finessing. My father recently reorganized his cash in the midst of this because his bank was considered vulnerable, now everything is FDIC insured, and it's more than $250K. Even better, there are banks with services where they spread those $250K or $500K (for joint accounts) amongst several banks, but where the initial bank controls it. This is one of the ways that people with many millions in cash store that liquid asset (while people claim rich people have no cash, this isn't true, they may have anywhere from a million to tens of millions in cash, depending on their lifestyle and liquidity needs, especially in terms of paying for taxes).
Granted I used Linus and Yvonne, and they're not banking with US banks (though if they were banking with a US bank for some reason, they would be covered by FDIC; it's an aspect of the bank, not the citizenship of the depositor), but this is really important information. In fact, it's information that if more people understood this, and I mean upper class individuals with more than $250K in cash, not businesses, then the runs on the bank could be mitigated to some degree. Business and investment clients are going to be the primary cause in some cases, but seeing people lining up at ATMs and outside banks to pull out cash will add up and cause liquidity issues in the long run. Generally businesses aren't going to a bank to setup a transfer of funds, they call their agent or an agent.
If you are going to write novels, learn how to format them.
Your block of text just makes our eyes bleed and skim by your voice. Learn to be concise, or just don't bother.
@@Niikkos Nah I'm cool
Well Signature Bank also went bye bye yesterday
As an American I am ashamed that you can lobby to raise the amount of money in your bank to be considered “systematically important”, then sell your company shares a week days ahead of the collapse. Have the GOV pick up your mess, mean while Granny as a retired worker gets cancer & the GOV says “Nah you’re on your own Buddy GL!”
I would argue you are in the best position ever since you just spend a ton of money and essentially minimized the potential loss through this very well.
Whether you're a business or an individual, the old saying still stands. "Don't put all your eggs in one basket."
"I have to talk to accounting." Translation my wife is going to yell at me for an hour for revealing company finances... Again
saw a notice recently from Etsy that payments to creators are going to be delayed due to the SVB closure.
The dutch have been making land for centuries 🤣
How do you run a business with only using one bank. It's not expensive to create redundancy in that area. Just apply with every bank and spread your money and risk. And divide your company into multiple entities to spread risk even further. Like paying salaries could be a different company with its own multiple bank accounts. That's how you secure your company survival
15:49 The face of a man who has to deal with some sh*t.
"land, they are not making more of it" *laughs in Dutch*
It’s crazy though that some big clients actually got ALL their funds out before
I work for one of the larger banks in the US, and my brother works in tech for Microsoft. He and I are both worried suicides are going to spike right now due to SVB failing and some businesses losing everything and some people losing everything. A bank failing destroys lives.
Damn, with this burst, it's gonna have a HUGE knock-on effect for tech development. We experienced the leap of VR/AR this last decade. After this, we are gonna have to wait another decade at min before we have enough support for another big leap in tech in the west.
The problem with land is that it's very illiquid, and it's not guaranteed to go up. Past performance is no guarantee of the future.
By the way, the FDIC has guaranteed all deposits, even the unisured ones. A further panic would be very bad.
"I invested in a product I thought should exist"
I wish this was the primary thought of investors instead of just "activist investors." I think more products would be truly valuable instead of just profitable
The problem with "land banks" is that you've got to deal with upkeep costs and there is a limit to how much things can "just keep going up" before the ability to pay for it at those prices isn't just there. We've already seen that happen with the housing market in the US back in 08 and it's overdue for it to happen again, especially as it becomes harder to ignore the reality that the internet has made the metropolis cities obsolete.
Your money's better off being active in generating revenue to stay ahead of inflation instead of in an "investment" that's going to cost upkeep, takes a lot of time to liquidate, and isn't guaranteed to be high value when you do ultimately want the money back.
Sorry to bring this back from the dead, but I don’t fully understand the whole metropolis is obsolete part of your comment. Do you mean working from home, or the ability to order things to houses? Stuff like that?
Take it from someone down the street from SVB, has family and experience in that bank and other tech banks in that specific area. SVB went under because it was investing it’s customers money into the stock market which has been tanking for months. Everyone who had money there knew what they were doing and were okay with it because for years prior they made money. All of a sudden they all lose everything and they’re shocked…
The other thing about SVB was that the bonds they were in were old so they didn't sell for as much and they weren't able to let the bonds accumulate all the interest because they had to pull them early (for obvious reasons) which made them insolvent because the money would've been there if the bonds had fully paid out, but since they didn't they were left with less money than people were pulling out
21:30 That's a sunk cost fallacy, I think. You bought X shares of company Y. Due to an event, company money goes "poof". You don't own the money that went "poof" anymore. Now, if you don't fall into the sunk cost fallacy, the only thing you need to evaluate is "With the current state of the company, is it worth it to invest Z amount of money?". The fact that money went "poof" is irrelevant (apart from computing risks based on history). The value of your shares don't diminish by issuing new shares, either. Before that event, you own P percent of the company. Let's say the total value of the company is C (total number of shares times value of said shares). After that event, you own P*C/(C+Z) % of the company; which is now worth C + Z.
Something Linus forgot to mention, setting up corporate business account that is international is a gigantic pain in the ass. Especially international ones. Which very few banks can even operate. They would also demand records, which SVB is not likely to give you.
Canadian banking is essentially one company look into the intertwined network of stock ownership behind the main Canadian banks
6:24 I’m dying at dans effortless silly powers
THIS is why the US government bailed out AIG years ago. Counterpart risk. To keep this from happening to dozens, of not hundreds of big banks. Wish our banks were not allowed to commingle public deposits with their investment banking/trading desks.
i don't think they should bail out banks knowingly doing risky stuff
@@mayto420 Agreed. We are sending all the wrongs messages to banks and people in the financial sector who are thinking about doing risky or stupid things.
I met someone today who works in a company that banks with SVB UK so it is quite a big economic situation.
People should be so scared of mandated government digital currencies that are coming. This is what we’re facing
Another important thing to note is companies out of that bank that were paying operating expenses and payroll on lines of credit..
The real mess is everyone who had less than $250,000 in assets at the bank was fine anyway. It's like these advisors were trying to cause this so *they* could profit from it.
It's also why if I were a millionaire or richer, I'd be diversifying my holdings among different banks
Depositors are guaranteed full protection by the treasury and the FDIC in this instance, they announced it I think yesterday. Shareholders, not so much.
Linus' lawyers must've been sweating waterfalls watching this...
The total valuation of their investments and liquid was 108% of deposits, but they didn't have the liquid to cover the run. That's why the FDIC is able to guarantee the full value of all deposits, not just the $250000 insured.
one of the problems with people using "land banks" is something we see here in the Netherlands. Rich people en mass buy up homes. Houses have been very scarce here, and the influx of people buying them up sure isn't helping.
That explains why I've seen so much interest in precious metals. Housing markets collapsing and regulations affecting markets. I've seen some holdings in stuff like PTLM and stuff that make me nervous. When money moves something is going to happen.
Its really crap that we as money users. Are forced to interact with banks for everything from our pay. To our mortgages. To our daily spending. And yet our money is not fully insured in its entirety... and not by the damn. Government...
You want to be a bank and force me to use your services you should have to be fully insured independantly.
I assumed what businesses, or the uber rich, did, was split their deposits. So the "Payrolls" account might be two or three or four banks. If any one bank goes under 100% of it will be insured, until you're reaching the cap of every bank. Then even if you do lose a bank it will be a fraction of your total capital.
I thought there were even tools to assist with this.
What NAS software are you investing in? I don’t like TrueNAS and I hope yours is better.
News stated all depositors will be made whole, so not just the $250k
I’ve not seen anywhere else mention this, but the arm of SVB in the UK was sold to HSBC for £1 (1.22$ USD) after all night of talks a day or so after the collapse, to keep the tech startups in the UK safe!
"You just buy land, because cash" - Linus
WHoever named this video, You made me laugh out loud, Well played... well played.
In the US every banks insurance limit is 250,000
They "protected" deposit capital reserves by using the money for 10 year government bonds at historically low interest rates that paid close to 0% and would have to be discounted to liquidate early. In other words, they loaned the money they took from customers to the government for less than 1% interest payments and a ten year delay for the principal to be repaid.
They had to pay the customers more interest than the government was paying the bank. Not only that, the bank's customers are free to take their money anytime and without warning. The more money customers withdrew the more bonds the bank at to sell at fire sale prices so whoever buys them is not going to lose money in the deal. Plus they had to sell a lot of the bonds in a hurry so there became a point that they didn't have enough operating capital to cover the losses and return the deposits to customers.
If they had used all the money to load Apple Pay cards the money would have been more secure. Exaggerating only a little.
It's not so much what they should have done, but this is pretty obvious to not be a prudent capital reserve investment.
Bank CEOs don't need to be told not to send the required capital reserves to the Mexican drug cartels for safekeeping. That would obviously be a bad decision.
The capital could have been used for top rated corporate bonds. Places like Apple and Google would have paid a higher rate and are very unlikely to default. There are funds they could have put the money in for someone else to manage within a spectrum of risk.
There are hundreds of thousands of investment options. The goal with capital reserves is to protect the money because it is there to save the bank and its depositors if you have already screwed up badly enough to need to tap the reserves.
Feds already promised to cover the uninsured deposits, so SVB customers should be fine. Shareholders, not so much, but hey.
Watched half and thought of how lovely discussion about value of investments. thanks
Linus publicly admitting that he pays under minimum wage.
Hes never gonna stop making bad quotes lmao. Its just like drop tips, he'll never escape it.
What he meant to say: "We dont just pay the minimum wage, we pay much more"
What he said: "we dont pay our workers monimum wage."
@@lastwymsi wasn't this the same stream where he said he was dropping "hard-R's" back in the day himself?
I don't understand how people who have 250 thousand with a bank or more have no time or desire to examine the financials of the bank they are investing in. Especially startups. Those deposits with svb were made out of greed, not to secure their funds. You secure funds with big banks that are regulated, not svb-like banks.
Q: How do we know you do NOT pay minimum wage when you fire people for talking about their salaries?
Linus: Trust me bro.
90% of their users had uninsured funds amounting to over 96% of the bank's assets.
meaning that for everyone who had an account balance of $10,000, there were hundreds with over $500,000, when only UP TO $250k is "insured."
Tech investors and startups got boned due to low-quality mortgage-backed securities, yet again, and the taxpayer bails them out, yet again.
something that isn't obvious to a lot of people is that when a big business makes a wire payment, *the bank fronts the money*
no really. you think that when a company sends a 30 billion dollar wire that they have a 30 billion dollar balance in a deposit account? no. imagine the opportunity cost. no way. never. They have 30 billion dollars of bank credit. So the bank fronts the money.
And banks are *supposed* to only hold a certain amount of money. it all flows in and out and up and down so it doesn't matter, but the fact is, the bank can't issue itself credit and is limited in what it can send out. That's why large denomination wires that you send out get held up (sometimes) - the banks have to do the risk analysis to see if xyz corp is good for it, because the bank is on the hook and if xyz corp really can't pay it back, the bank sending it is screwed.
Never even mind 30 billion dollars btw I've seen some shit.
So when SVB *canada* collapsed, all of their payments are immediately super duper sussy baka. They might fail to clear. They might succeed. we don't know. it's a huge problem for creditor banks to then give their customers access to those funds. Everybody is panicking and sending their money elsewhere. Chaos.
The points around the low returns offered by various assets classes are valid. It's a consequence of this prolonged, low interest rate environment which persisted, somewhat nonsensically, after the GFC. There will pain until a new steady state is achieved. And things such as banks with poorly managed balance sheets and a gross lack of proper risk management will fall.
Money doesn’t just disappear. Where is it?