Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher discusses Silicon Valley Bank’s (SVB) collapse and why he doesn’t think its effects will spread. Ken believes the SVB failure was unique and misunderstood. He says investor commentary centers on the negative effect rising interest rates had on SVB’s debt holdings, which generated losses when the bank had to sell them to cover withdrawal requests. While true, Ken thinks the real problem was the high volume of withdrawal requests caused by a narrow depositor base—mostly concentrated in the venture capital community—which panicked simultaneously. Ken says most banks have a diversified depositor base and aren’t likely to face this problem.
Ken also believes media headlines are misleading by calling SVB and Signature Bank’s collapse “the second- and third-worst bank failures in history”. While accurate when measured in today’s dollars, Ken thinks it’s more important to compare the size of these banks relative to the size of the US economy. According to Ken, the US has seen much bigger bank failures relative to the size of its economy—notably, the Bank of the United States in 1931 and Continental Illinois in 1984.
Ken believes banks are healthier than investors appreciate, pointing to the effects of regulations following the 2008 financial crisis, which bolstered balance sheets. Ken acknowledges big banks are healthier than small banks—and that it’s possible more small banks fail—but says fears of systemic weakness in banking are likely overdone.
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