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Friday File: What’s up with this Bonkers Banking Week?

Some thoughts on banking and other rate-sensitive businesses, as cracks begin to widen... plus one sell and one buy in the Real Money Portfolio

By Travis Johnson, Stock Gumshoe, March 17, 2023


This is the week for the small fry. Those of us who don’t have savings accounts with $250,000 in them, and don’t have to worry about big corporate payroll cash, get to celebrate that we avoided a scare as some regional banks started to collapse like dominos, with investors and CFOs looking around in some panic to try to guess who might be next. Sometimes “too small to worry” is almost as good as “too big to fail.”

In terms of investments, though, it’s probably time for the big guys. When the world is in a panic, we’ve seen that the money leaves the small banks and rushes into the perceived safety of JP Morgan and Bank of America, regardless of how much those giant banks are screwing their depositors (and boosting their own profits) by offering absurdly low savings account yields. And likewise, when the markets are jittery, it’s the stocks that are big and relatively stable, and the companies who don’t depend on anyone else to fund their operations, who tend to attract money. When things are scary, investors tend to want to invest with companies who don’t need their money. Small caps had their moment in January, but it might be over already… at least for a little while.

Lots of readers have written in to ask what on earth is going on with the banks, and what they should do, so I’ll try to answer some of those questions in a general way (I can’t tell you what to do with your money, of course, I’m not your financial advisor and have no idea what your situation might be… and if I gave you personal advice, the SEC would be on me like a ton of bricks). If you can’t stand to read one more thing about the bank crisis, rest assured that my insight and blather is probably not uniquely valuable… you can just skim down to the next **** if you want to skip it.

The first wave of questions came last weekend, and they were essentially answered before the market opened on Monday — lots of readers asked what would become of Roku (ROKU), because that happened to be the tech company that had the most money (and the largest percentage of its cash, about 25%) tied up in an uninsured Silicon Valley Bank (SVB Financial (SIVB)) account. There were ...

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