you put your money into a black box. You get to 'buy stocks' within the black box that go up and down in relation to the real stocks. Then you can pull your money out. Similar to a bank, as long as everyone does not pull their money out at once it all works. If the black box ever breaks, everyone that has money in it will lose it. MFGlobal is an example of this.
No body owns what they think they own. His argument is extending this to everything that uses debt instruments. (mortgages, car loans...)
Armstrong is saying that when this breaks the gov will not be able to confiscate everything. and revalue it. Like they did gold.
I certainly wish I had a stock certificate for the stock I think I bought. But similar to buying real metals vs paper metals. There is a premium to buy actual stock certificates. Stock premium is many multiples of the price.
Even then, if the whole thing goes bust. what is that company going to be worth. As many companies sole earning product is their inflated 'paper' stock price.
They can wipe the stock markets off the face of the earth and most people would not care. But taking houses, cars, and business I don't think will happen on mass scale. as armstrong says, it would cause a revolution. But it will happen in niches and people will rubberneck, say they victim did something wrong and move on.
Silicon valley Bank is an example of this. They had some hedging issues that were questionable. but basically they owned t bills. very conservative. They had a run on the bank and had to mark to market and it crashed them. Any bank today that had a run on it would suffer the same consequences.
great taking: my spider senses went off when he talked about taking a transactional fee for all moved money to replace taxes. Basically; the gov will run on credit card type fees.
Interesting. But total fantasy. Would certainly need to be a much smaller government.
More than a few problems with Silicon Valley Bank. SVB was a major beneficiary (ultimately victim) of the Covid programs. As companies received the funds, they deposited them in the Bank. The system was that SVB would give startups "venture funding" in the form of debt. As I understand it, the companies were required to keep their cash at the Bank to get the funding. Where did that cash come from? From the venture capital firms. VC money and the Covid funds overwhelmed the Bank's balance sheet.
SVB also made large real estate loans back to the entrepreneurs and venture capitalists, secured by lofty valuations.
What really killed them was violating Finance 101. They did not buy Treasury Bills. They bought longer dated issues from the Treasury. Why? They thought they would play the spread between T-bills and the longer maturities. Everyone should know that when interest rates rise, fixed income goes down in value. Apparently, the management team at SVB did not understand the concept. As the Fed drove up rates, their holdings dropped dramatically in value. The stage was set for a run on the Bank. In my view, it was their gross misunderstanding of capital markets and any semblance of risk management that did them in.
It was a real shame. I was there for the founding of the bank. Good people. What a shame to see their legacy thrown away.
mass confiscation: there are going to be pockets of 'slow runners'. people not wearing cloths as the tide goes out. They will get destroyed first and this could run much deeper than normal as 08 did and tech bubble did. but the idea of mass confiscation of stock and debt instruments (what happened with gold) is hard for me to fathom. Though he is correct about stock ownership and what they could do.
One thing that is critical is to disable margin ability on brokerage accounts. I would also try and make sure that one is not invested in mutual funds that use margin or exotic derivatives.
you put your money into a black box. You get to 'buy stocks' within the black box that go up and down in relation to the real stocks. Then you can pull your money out. Similar to a bank, as long as everyone does not pull their money out at once it all works. If the black box ever breaks, everyone that has money in it will lose it. MFGlobal is an example of this.
No body owns what they think they own. His argument is extending this to everything that uses debt instruments. (mortgages, car loans...)
Armstrong is saying that when this breaks the gov will not be able to confiscate everything. and revalue it. Like they did gold.
I certainly wish I had a stock certificate for the stock I think I bought. But similar to buying real metals vs paper metals. There is a premium to buy actual stock certificates. Stock premium is many multiples of the price.
Even then, if the whole thing goes bust. what is that company going to be worth. As many companies sole earning product is their inflated 'paper' stock price.
They can wipe the stock markets off the face of the earth and most people would not care. But taking houses, cars, and business I don't think will happen on mass scale. as armstrong says, it would cause a revolution. But it will happen in niches and people will rubberneck, say they victim did something wrong and move on.
Silicon valley Bank is an example of this. They had some hedging issues that were questionable. but basically they owned t bills. very conservative. They had a run on the bank and had to mark to market and it crashed them. Any bank today that had a run on it would suffer the same consequences.
great taking: my spider senses went off when he talked about taking a transactional fee for all moved money to replace taxes. Basically; the gov will run on credit card type fees.
Interesting. But total fantasy. Would certainly need to be a much smaller government.
More than a few problems with Silicon Valley Bank. SVB was a major beneficiary (ultimately victim) of the Covid programs. As companies received the funds, they deposited them in the Bank. The system was that SVB would give startups "venture funding" in the form of debt. As I understand it, the companies were required to keep their cash at the Bank to get the funding. Where did that cash come from? From the venture capital firms. VC money and the Covid funds overwhelmed the Bank's balance sheet.
SVB also made large real estate loans back to the entrepreneurs and venture capitalists, secured by lofty valuations.
What really killed them was violating Finance 101. They did not buy Treasury Bills. They bought longer dated issues from the Treasury. Why? They thought they would play the spread between T-bills and the longer maturities. Everyone should know that when interest rates rise, fixed income goes down in value. Apparently, the management team at SVB did not understand the concept. As the Fed drove up rates, their holdings dropped dramatically in value. The stage was set for a run on the Bank. In my view, it was their gross misunderstanding of capital markets and any semblance of risk management that did them in.
It was a real shame. I was there for the founding of the bank. Good people. What a shame to see their legacy thrown away.
i knew there was more to svb.
mass confiscation: there are going to be pockets of 'slow runners'. people not wearing cloths as the tide goes out. They will get destroyed first and this could run much deeper than normal as 08 did and tech bubble did. but the idea of mass confiscation of stock and debt instruments (what happened with gold) is hard for me to fathom. Though he is correct about stock ownership and what they could do.
One thing that is critical is to disable margin ability on brokerage accounts. I would also try and make sure that one is not invested in mutual funds that use margin or exotic derivatives.