Ep 181: SVB Failure - More Knowledge, More Wealth

  📍 Good day. This is Gabriel Shane, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance. Our job is to give you the knowledge you need to increase your wealth. Now to the listener, you can always reach out to myself or any one of our colleagues here at Falcon Wealth Planning.

Our phone number is eight five five nine six. 25 26. That's 8 5 5 96. Falcon like the bird, or visit our website@falconwealthplanning.com. That's Falcon WP dot. First short, now I'm the president of Falcon Wealth Planning. We are a fee only non-commissioned, true fiduciary folks, and we help with all aspects of personal finance.

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Our phone number is eight five five nine six three twenty five. 26. That's 8 55 96. Falcon like the bird. Our headquarters is here in sun, shiny state of Southern California. With that being said, it's been raining quite a few times, so you know how Californian people are. They have any reason to complain, folks, that's why traffic is terrible when it rains.

To say, just making some jokes here. Uh, if you have any questions, doesn't matter where you are, we would love to help. So last week on the show, I talked about banking. I talked about run on the banks. I talked about all the craziness that we've been going through since last week on that show. Now the crazy thing about last week is I had a significant busy week.

I actually recorded that show on Monday. and this is what happened Thursday, Friday. You notice on the show I didn't mention anything about Silicon Valley Bank? Yeah, because I recorded on a Monday I was talking about just big picture situation and it's crazy to think folks, what actually transpired Or is it crazy to think, I mean, you had some of these banks over here acted like bozos thinking they're running a bond fund.

Like it's quite frankly, Sickening to think that they would mismanage assets so heavily. Now, here's the thing, there's other regional banks. that are also potentially doing the same things. And our fed, not our fed chair, excuse me, our fed chair is Jerome Powell, our header treasury, Janet Yellen, who used to be the fed chair, uh, she was actually highlighting to the fact of there could be more of these.

So you are seeing in the stock market this week, bunch of ups and downs and financials just going extremely volatile cuz nobody really knows what's going on now. Thing guys with Silicon Valley Bank, they actually bought a registered investment advisory company back in 2019. That managed 15 billion for almost a billion dollars.

So that division is still intact. So much so there is a lot of banks excited to gobble them up, which is why they do these weekly auctions, these bids for failing banks. Folks, it's all deposit dollars there. With the Fed's involvement, it's a value buy for the strong banks that are out. And so especially when they have used to have back in 2019, 15 billion, they could have 25 billion right now.

Now the crazy thing about Silicon Valley Bank is it was only the rich. I just read that Prince Harry and or I don't know if he's a prince anymore, whatever he wants to call himself, the person that's married to Megan Markle. It's funny how we still use. Maiden name, whatever the case is with those two unique individuals is that they claim they have all their money over there, s money you should say.

So it'll be interesting how that goes. But here's the thing. They came out on Sunday and said that money will be accessible. Why? Cuz there was a lot of people very interested in this bank. It was like the 15th, 16th largest bank failure at the time. God, they mismanaged the hell out of that. It's extremely disappointing and quite frankly sad with how bad they did.

They were treating it like almost a hedge fund, uh, a almost like a bond fund, if you will, and I'll explain this. I spoke last week how if a bank has 1 billion in deposits, they can lend up to 10 billion. Well, because there were not as many people lend, borrow, wanting to borrow money because interest rates are high, because opportunity costs for the.

they can in fact move that money into like a one year treasury at 5.2%. You know, why would they be incentivized to lend to other people? This is what's causing money tightening and it's harder for people to get the business loans that they need, remodel loans. Acquisition loans. So you are seeing a lot of this.

Calm down a little bit on that front, but here's the thing. When there's not enough lending, what does the banks do with all their money that they had? They can lend up to 10 times that remember. Well, what this bank did is a, it bought United States treasuries, not the one years at 5.2%, but they had almost two point.

Billion dollars in losses, or they needed 2.3 billion, excuse me, they had 1.8 billion in losses because they were tying it in some crap. One to 2% bonds for long term periods of time over a year. And this is extremely disheartening because when a lot of people wanted their money, There wasn't accessible money they had to sell at a loss, which caused even more red, which caused more people to pull their money out and this is what the cycle happened and how this whole collapse began because they made stupid investments trying to increase their profits.

It's absolutely crazy and I just, it's hard to believe. , like something like this actually can happen. By the way, folks, if you're just joining me, you're listening to Gabriel Shane's certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance.

And it's hard not to talk about the debacle that happen in the banking sector. And now you have companies like. First Republic Bank, you have even Charles Schwab is being dragged into this. I mean, Charles Schwab makes the majority of their money off interest, interest, but they are an investment firm.

Folks, they make lots of money. They have a banking division as well. And it's crazy to think and to believe that now people are freaked out about these regional. Banks and companies, but you know what? It's the reality. Here's the thing. If you have money at Charles Schwab, we're not talking about the FDIC and cash.

Your stocks are not protected by FDIC Why? Cuz stocks couldn't drop in value. Your stocks are protected by SIPC so securities insure, I'm trying to remember this. Securities insurance protection company. . Okay. And so it is protected by SIPC millions of dollars, and they have supplemental insurance for even hundreds of millions per account after that, through London's bank.

and London's insured. So what's my point to all this? It's crazy. The trickle effect that this is now having on just people overreacting. It almost reminds me of like, like the toilet paper, right? People made a rush to go buy a bunch of toilet paper for no good reason at all. For some stupid reason. It's the same thing.

People are rushing to the banks cuz they're thinking what? Their money is not there. It's kind of crazy. If everybody just were to relax, this would never happen. I know people that worked at the old Washington, Washington Mutual that is now chased, that still blames the media for their collapse cuz it caused everybody to freak out and do.

a run on the bank, which is exactly what we're talking about here. And so it's also forcing almost regional banks and you to say like, man, it's hard to compete with them so much. So you're gonna have your money at the Bank of Americas, at the JP Morgan Chases, at the Wells Fargos. And it's just sad to think that we are now forced to feel that is the case.

Why? Because we feel that. government won't let those fail. We, they actually came out with movies saying Too big to fail, but a lot of people have their money scattered and then smaller banks sit in credit unions and these companies, even if they're a non-profit or not, do look to increase these net profits.

and to be so just poorly ran where they put their money in, what all that, to get an extra 1%. I mean, it's, it's disheartening to believe that they made that stupid, much stupid of a decision. But that is exactly what happened, folks, because they weren't lending out, because they were looking to increase.

The revenue because they're paying out, let's just say zero point, nothing on the checking and savings account. They wanted to take that money they had available. It's almost like you, if you had all this money, what are you gonna do? You're probably gonna buy stupid crap. What does that mean? You're probably gonna look to buy.

Some stupid cars or some stupid house you're never gonna go to, or just some stupid items that are for sale. That's what people do when they have a surplus of money. And in this case, this business decided they wanted to increase their profits cause they had all this money that, oh, by the way, they can leverage 10 times.

And they wanted to go see what they can do with it. So they made stupid investments, not thinking that consumers are gonna want access to their money. Well guess. High costs have happened through inflation. High interest rates. What does that mean? If you're looking to buy a property, those millionaires are probably not gonna want to take out a 7% loan anymore.

Why? Cuz the banks aren't paying 7%. Where am I going with this? They pay cash. You know, there's a saying that Warren Buffet says, when the tide comes in, you see who's swimming naked. , I've said this before, with tech companies that were losing billions and billions of dollars and they had no way to sustain their cash flow, so they're laying people off left and right.

And you're seeing that a lot with startups that are down 70, 80, 90 plus percent. I had a list of those companies a while back. I had a list of another, another episode where I talked about the companies are all laying off individual. . You know it's interesting when you see this Silicon Valley Bank, how much high affluent net worth people that they have, and people are worried about F D I C.

Now, granted, everybody's gonna be fired. They already said they're gonna be able to honor everybody's assets. So they did already say that. Okay, good. But less than 3% of all their clients. Actually fell within the F D I C limits. That's 250,000. If they're single, 500,000. If they're married, , 3%. That's crazy.

Which means everybody there is like mega wealthy, right? I mean, that's crazy to think. So my point of this, even with the smaller bank, even though they're not that small, they're 15, 16th largest in the United States, they're still being backed. They're still being protected by the feds. So I know some people are always so excited about F D I C and the security of it, but guess what?

Look could happen. They shut down the bank on Friday, folks, last Friday, last Friday. What is the date of last Friday? I don't know. Let's look here. They did that on the 10th, not Sue Secure. And it's crazy because back then you could kind of remember It's a wonderful life. Jimmy Stewart. He's like, Hey, hey, your money's not with me.

It's tied up in Ed's house and Jimmy's house, right? Cuz they take your money, pay you nothing, and go lend it to somebody else at five, 6%. Well, if everybody all at once, like I said last week, wants to go get their money, they don't have the money to pay off every. and what happened back then is they went into the bank and Jimmy Stewart is over here or forgot his name in the movie.

He was telling everybody, George Bailey, that's what it was. He was telling everybody, Hey, hey, I can't get your money. Well, nowadays you could just process those easily through wire transfers, ACH for anybody who hasn't linked. So it's crazy to think that that happened. It's crazy to think that there were some large corporations that had their money there that they can't even make.

It's kind of sad yet again, it's what happened. Folks, if you want more of a conversation around this, more of how your money could be secured more to see what's safer. F D I C deposits or the United States Treasury folks, give us a call. We can help with this. Now is a time where cash is king. This is a time where you're probably gonna start seeing good deals come up.

You're already seeing it in the stock market. Oh, by the way, the leading indicator in addition. Real estate is now dropping for people that were interested to invest. This could be a good time to start preparing yourself to have money available when things start going in more additional sales folks, give us a call.

Our phone number is (855) 963-2526. That's 8 5 5 96 Falcon. Like the bird, we could help relate the show to your specific situation and make sure you're just not chasing the next exciting thing. You don't want to always be chasing the fad because by the time the fad is there, it's already overpriced. When people are freaked out about real estate, that's the time to buy real estate.

When people are scared of the stock market, that's the time to buy stocks. When people are worried about financial companies, I'm not gonna tell you to go buy financial companies, but my goodness, some of the value on these are. Good value is what I'm saying. Folks, give us a call. We'd be happy to help.

We're gonna go on a quick break. We'll be right back. after a few words. 📍

Welcome back folks. This is Gabriel Sheen, certified financial planner and your host of More Knowledge, more Wealth here and every weekend talking about all important topics of personal finance. And today I was focusing on my reiteration of last week when I was discussing how banks operate and how it's not a shock if everybody went out once to go ask for their money.

That's called a run on the bank, and sure as. I recorded that show on a Monday and Sure. And I never record a show on a Monday, and thank God I did record that show on a Monday so I can brag about people of how I was right on Thursday and Friday. Now, I didn't call out Silicon Valley Bank, valley Bank or anything like that, but what I did do, I tell you that it's not an uncommon situation, and by understanding that your situation is also not uncommon, you have to make sure you're investing in the right things, the right companies.

A lot of people are still investing in tech stocks, especially these mid and small caps, some of these non-profitable ones. You're buying the Caranas of the world. You're buying the Pelotons of the world. I don't know what some people are doing. I mean, some of these companies have serious. Issues losing billions upon billions of dollars.

I don't know. I like Elon Musk maybe cuz Eccentric may. Maybe cuz I just love electric cars and not having to fill up gas. . My point with that is what my point is, he bought Twitter. Twitter was losing a billion do paying, excuse me, a billion dollars a month in interest. That was like the biggest ego trip you could ever do.

It had nothing to do with financials. It was the dumbest thing he has ever done, and quite frankly, he's done and said a lot of dumb things recently. Yet again, the problem I'm seeing. is that most people out there are not making rational decisions with their money. I just got off the phone with somebody saying their alma mater was offering them VC funds.

Like, like, that's scary. Why do you have to take that much more risk if their target rate of return is 15 to 20%, but their potential of losing. is 50 times greater than the stock market and a hundred times greater than the stock market of going to zero, not just losing money. I mean, is it really worth that additional 50% return?

The stock market averages 10% a year. Heck, small caps average 13% a year. Both of those, so it's 1926. Why do you care so much to try to get a 15 to 20% return Because it's higher risk. Small caps lose more than large caps. They are more volatile naturally, they. , but sadly people just don't think that way because tech did so great in 20 19, 20 and 21.

They're thinking it's always gonna be the case. Folks, that was a high interest rate environment. Everything comes together. It's not that you magically got, guessed it right? We were in a low interest environment. It made all the sense of the world to be tech focused and growth focused because you could be losing billions upon billions upon billions of dollars, but because of money was so easily accessible to you, and not just to you, but to the companies.

They were easily allowable to scale. So the vision of the analysts were, look how easy. If they continue this threat, this, this momentum, they're eventually gonna be profitable because the numbers say they will. It's economies of scale. Now, some of these companies are still not profitable. I mean, some of these companies were so overvalued, like Zoom during the recession that they were trading like at an Infinity multiple.

Now it's actually trading at a fair. . What's my point with all this? I'm not telling you to buy Zoom, by the way. I'm not, and by the way, it was trading at it was like a 500 bucks. Now it's probably under a hundred bucks. My point with all this folks is how are you in God's name making these decisions? I mean, are you listening to like the tv, like a Jim Kramer or something?

Like what possibly makes you feel you have the capable. , just know how to be able to execute this on your own. If for professionals, they're dumbfounded with these banks like Silicon Valley Bank and, uh, first Republic Bank, some of these, you know, fairly good banks that have made just one or two stupid decisions.

Who's to say other stupid decisions that other people haven't made and other companies that are being ran? This is why folks, there is no substitute for globally diversified portfolio. Say, sure, some people got lucky on the Apple. On the Amazons, on the Teslas. But at the end of the day, folks, there just is not a substitute for discipline, knowing when to buy, knowing where to sell.

If you are properly allocated, you are able to do that consistently. And I just don't see people do it. It's boring to them. They love the meme stocks, the amc, the Game Stops, which are a dying company, like Holy Smokes. Like I had a, one of my clients was gonna buy a shopping center and he was bragging about game Stop being in there.

It's a dying company. I don't understand how that's even gonna be around in five to 10 years. They were losing so much money. And the same with amc. Are you going to the theaters? Heck, top Gun Maverick almost saved the theaters over this summer, but last summer. Excuse me. But I mean, have you gone since, I mean, I, I used to love going to the movies.

I want to take my daughter to the movies. I remember watching Toy Story there. The last toy story, but just pe. It's just not in our dna. People are busy. People want things instantly. It's sad that you can get DoorDash delivered to your house faster than probably emerg emergency services that come to some of your houses, depending on where you live.

But this is the reality of where we're at. and this is what you need to reanalyze. By the way, folks, if you're just joining your Listen, Gabriel Shaheen, certified financial planner and your host, more knowledge and more wealth here on every weekend, talking about all important topics of personal finance.

And my whole point to you is are you analyzing your portfolio? Even if you are in indexes, which I heavily recommend, globally diversified portfolios, I heavily recommend that. And there's very specifics that you could do cuz there's large cap, there's mid-cap, there's small cap, there's international developed markets emerging.

All of those have large, mid and small cap companies and growth and value subsets. On top of that, how are you allocated? Because what was good last week or last year or last decade is not good. Now that doesn't mean get rid of it, but you gotta allocate and rebalance your portfolio. But people just aren't doing that.

They're just happy of where they're at. I don't get it. This is your money, this is your future. And people are like, no, I'm gonna do it on my own. I tell some, tell uh, sometimes tell people. A, uh, financial planner, they like walk away from me, like, oh my God, oh, whoa. Hey, uh, I manage my own money . Like, I, you like, I, I have some disease.

I'm confused. Like, it's just crazy to me. So, you know what I tell people now when they say what I do, and it's sad what I'm about to say, but I'm gonna say it guys, I help rich people get richer. Because it's sad. It's like the rich people who understand you gotta spend money to make money. Rich people hire the lawyers when they get in trouble.

Rich people, when they have a tax problem, go to an accountant or have had taxes. Uh, accountants in place when they have money questions, they hire financial professional. Isn't it weird how all the financial planners, the small, excuse me, all the rich people in the world have from natural professionals and it's like those with like a couple hundred grand, like, oh no.

Uh, that's a waste of money. . And it's just crazy me. Don't you just ever wonder, I mean, I'm gonna say it again. There's a reason the rich get richer and the poor stay poor. Open your horizons. What you know, it all. Not even the professional you're gonna talk to, knows it all. Have all the ADEs that I've won, we're talking dozens of, uh, ADEs.

Uh, we're, we're talking about top financial advisor, rising Stars RA of the Year, which is Investment Company of the Year. I mean, of all these multiple sources, advisors to watch influential, uh, advisor, I mean probably top hundred advisor in the country. Me Biasly saying, of course, . Hell, I'll say top 20. Hey, why stop at the country, say the world

What's the point of all this? The point of all this is if I don't know everyth. , how the hell are you gonna know everything? And by the way, I got a staff times 50 of what I am, multiple locations, multiple analysts. We have access to things that you don't, but yeah, you gotta figure it out on your own. I, I just, it's, it's nervous and I mean, it's a blessing on one hand because you kind of do need the other side of the spectrum.

But it's sad. I don't want to just help the rich get richer. Sadly, I have to say that to some people so they don't walk next to me like I'm a disease. But it's sad that sometimes some people, those with the smallest of wealths cause the most problems and don't listen. They're looking for advice, not for advice.

They're looking for validation. What they've already done that how it wasn't that bad. How about for once you just take ownership of your life? I mean, this is literally guys why we're offering the free financial assessment. Our job is not to judge. Our job is to help. Our job is to put you in the right direction.

We want all our clients being successful. You notice, I didn't say Rich being successful, spread the good word of what we do, and eventually you'll come back. We'll give you baby steps. Dave Ramsey, what he always talks about baby steps. We don't call 'em baby steps. We'll give you steps. Hey, you need to do this.

You need, and it's different for every person. Dave Ramsey. It's the same for every. , right? Get a thousand dollars, pay off debt. Build three to six months of cash reserves. You know, start saving 15%. Look, works for a majority of people. But what if you run a company? What if you need much stronger cash reserves?

What if you need to reinvest in your company so it grows more, which will make you more, it's gonna be way more than 10 to 12%, he promise. You got what I'm saying? You need somebody that understands you, your situation. Folks, we are offering a free financial assessment where we're given one to two meetings, one to two hours of our time.

Folks, at no cost. There's nothing to hold you back. You got tax season still important. You can still discuss and handle 2022. On top of that, you're in 2023. This is the best time to meet with a professional and folks, we are waving the cost of meeting with. We're doing that to you and we have offices all over.

Give us a call. We would love to help folks. Our phone number (855) 963-2526. That's 8 5 5 96 Falcon. Like the bird, or visit our website@falconwp.com or that's falcon wealth planning.com. We would love to help folks to help relate this show to your specific situation. You should never be embarrassed when you looking to improve yourself.

It's like at the gym, when I first started working out, it was the punt perks in there. I'm still not super muscular, but the point is, is the hardest thing for me was my mind to be the person that's just working out with the. For when I was overweight, just getting on the treadmill so people wouldn't laugh at me.

I mean, that was probably my biggest hurdle to overcome. Finances aren't too different. Don't worry about the past. Focus on the future. Don't worry about the mistakes that you made. Worry about the goals you're looking to achieve. And guess what? The best way for me to achieve my weight goals was to hire a trainer.

Trainer held me accountable. A trainer is a partner. A trainer. I'm the fact that I'm spending money my chief self, I'm like, well, I'm not gonna waste that money. So yeah, I'm gonna go make sure I don't skip the gym. They made sure I got out of bed. You get what I'm saying? Folks, we would be happy to help.

Give us a call. Our phone number is eight five five and 9 6 3 25 26. That's 8 5 5 96. Like the bird folks, this was just a fast, fast show. Yeah, as you can see, I get riled up. I get excited, so I apologize in advance if I ever rub you the wrong way. As you know, that's not my intention. But I want to thank you for tuning in.

Feel free you could get this show on podcast, Spotify. Feel free to download this every week as we talk about all important topics of personal finance. Folks, I want to thank you for tuning in with you, with me. I want to wish you a great weekend. Have a great week, and God,