Credit Suisse - Is it going to go bust, if so what happens?
Discussion
isaldiri said:
JagLover said:
It is only when the tide goes out that you can see who has been swimming naked. The tide first went out out following 2008 and the Euro would have collapsed then, or at least lost a number of members, if it weren't for the interventions then.
Well you are also conflating things. Does the euro have a structural issue that ultimately has to somehow be solved via fiscal unions? Probably yes. However the crowing about the EU/Euro in earlier posts being dysfunctional kind of misses the point about the current ongoing banking issues. CS obviously was never in the EU anyway and has been a bit of a basket case for a while. SVB which was the major trigger for this clearly isn't a EU bank. DB was a not dissimilar basket case but seemingly had turned things around (certainly they have been profitable for a while now and much more so vs say 2017 and not constantly puking out losses like CS had. Unrealised losses in banks leading to a very quick turnaround in confidence in liquidity isn't by any means an EU issue. Having a dig at Von der Leyen and doing the 'I told you so' to have a swipe because one disagrees with the EU seems to be quite missing the point....
turbobloke said:
Having mentioned Italian so-called zombie banks not long ago, asking whether they (possibly like DB, we shall see) have improved sufficiently in recent years to be immune to current turmoil, do you have a view on that?
Immune - no but pretty much no bank right now can claim that anyway. Are they necessarily the next on the hitlist of vulnerable financial institutions - perhaps. isaldiri said:
turbobloke said:
Having mentioned Italian so-called zombie banks not long ago, asking whether they (possibly like DB, we shall see) have improved sufficiently in recent years to be immune to current turmoil, do you have a view on that?
Immune - no but pretty much no bank right now can claim that anyway. Are they necessarily the next on the hitlist of vulnerable financial institutions - perhaps. 
t start 15yrs ago?As I understand it, the reason PacWest has come under pressure is a big increase in the short position. ie hedge funds looking for the next trade. It won't stop at just this one.
In 2008 and after, short selling on banks was banned in some EU countries. Perhaps it's a) time for regulators to consider the same in the US to stop this "slow, rolling crisis" and b) consider whether it's really in the systemic interest to encourage banks to become listed. The regulatory rationale for doing so was to diversify sources of equity capital. It doesn't seem to be doing many favours at moments of crisis however.
In 2008 and after, short selling on banks was banned in some EU countries. Perhaps it's a) time for regulators to consider the same in the US to stop this "slow, rolling crisis" and b) consider whether it's really in the systemic interest to encourage banks to become listed. The regulatory rationale for doing so was to diversify sources of equity capital. It doesn't seem to be doing many favours at moments of crisis however.
Whoozit said:
As I understand it, the reason PacWest has come under pressure is a big increase in the short position. ie hedge funds looking for the next trade. It won't stop at just this one.
In 2008 and after, short selling on banks was banned in some EU countries. Perhaps it's a) time for regulators to consider the same in the US to stop this "slow, rolling crisis" and b) consider whether it's really in the systemic interest to encourage banks to become listed. The regulatory rationale for doing so was to diversify sources of equity capital. It doesn't seem to be doing many favours at moments of crisis however.
It is frankly hard to justify short selling of any stock, if the purpose of a stock market is to provide access to capital to firms and allow investors to share in the success of those firms.In 2008 and after, short selling on banks was banned in some EU countries. Perhaps it's a) time for regulators to consider the same in the US to stop this "slow, rolling crisis" and b) consider whether it's really in the systemic interest to encourage banks to become listed. The regulatory rationale for doing so was to diversify sources of equity capital. It doesn't seem to be doing many favours at moments of crisis however.
A trade designed solely to allow certain participants to profit only from the lack of success of the underlying firms is IMHO wholly contrary to the wider interests of society.
I get, of course, why it is in the interests of the short sellers
And this is a pretty big discussion. But having a huge financial machine in whose interests it is to do everything they can (legally and morally right, or not) to depress a share price, does seem just a touch odd...menousername said:
Not in any way an expert, or defending it, and it is, of course, a complex subject. But banning it also takes away one potential method to hedge a portfolio.
And many portfolios will have as their mandate a long-short strategy and an obligation to their investors to maximise returns.
I agree. But we've moved well past a point where shorting is predominantly a hedging strategy. When shorting becomes your dominant trading strategy, I'd argue you've ruined it for the other children.And many portfolios will have as their mandate a long-short strategy and an obligation to their investors to maximise returns.
There are many examples of things that, done in moderation, were fine, but which become intolerable and are banned when they move into the mainstream. I feel that shorting has become one of those.
These banks we're talking about are being deliberately targeted, as far as I can see, by those who profit from their demise. In a regular firm, the shareholders and staff lose out when it goes to zero; with banks, (a) society as a whole usually has to foot the bill for any losses, and (b) confidence in banking overall is dented.
When every taxpayer is potentially on the hook for the consequences of shorting, I think every taxpayer should have a say as to whether they're happy with that risk. I'm not sure how many taxpayers would be happy to guarantee bank deposits as "a price worth paying" to enable short-sellers to make money
skwdenyer said:
It is frankly hard to justify short selling of any stock, if the purpose of a stock market is to provide access to capital to firms and allow investors to share in the success of those firms.
That's an interesting insight. Sadly, the purpose of stock markets stopped being capital providers with the rise of better DCM, better corporate finance analysis, and private equity capital. Which begs the question what are markets for. There are some excellent papers by New Financial on the topic. But arguably, serving as casinos for whatever strategy, is not a social good. It pits short term profit against long term return.
loafer123 said:
Surely a short strategy on major US banks is a very dangerous trade…one sentence from the Fed and you might as well be burning $100 notes.
Yup, reminding me the oldest-famous short squeeze, Vanderbilt vs Drew for Harlem Railway Company. Vanderbilt crashed all shorter-punters twice, I guess they were begging for a much lower settlement! 
skwdenyer said:
When every taxpayer is potentially on the hook for the consequences of shorting, I think every taxpayer should have a say as to whether they're happy with that risk. I'm not sure how many taxpayers would be happy to guarantee bank deposits as "a price worth paying" to enable short-sellers to make money
I think it was mid 90s, Malaysian finance ministry proposed a compulsory caning as a punishment for short sellers! 
Proper beating that send them to juvenile years Despite all criticism, technically short selling is important, imho. It does facilitates arbitrage strategies that keeps prices mostly aligned like statistical or pairs trade.
skwdenyer said:
It is frankly hard to justify short selling of any stock, if the purpose of a stock market is to provide access to capital to firms and allow investors to share in the success of those firms.
Counter argument is shorting provides a valuable sense check and market brake. If it was only long-only funds SP would keep rising and then crash harderAdam. said:
skwdenyer said:
It is frankly hard to justify short selling of any stock, if the purpose of a stock market is to provide access to capital to firms and allow investors to share in the success of those firms.
Counter argument is shorting provides a valuable sense check and market brake. If it was only long-only funds SP would keep rising and then crash harderEdited by Whoozit on Saturday 6th May 15:37
Adam. said:
skwdenyer said:
It is frankly hard to justify short selling of any stock, if the purpose of a stock market is to provide access to capital to firms and allow investors to share in the success of those firms.
Counter argument is shorting provides a valuable sense check and market brake. If it was only long-only funds SP would keep rising and then crash harderhttps://www.cityam.com/embattled-home-reit-set-to-...
https://viceroyresearch.org/2022/11/23/home-reit-n...
ooid said:
Adam. said:
skwdenyer said:
It is frankly hard to justify short selling of any stock, if the purpose of a stock market is to provide access to capital to firms and allow investors to share in the success of those firms.
Counter argument is shorting provides a valuable sense check and market brake. If it was only long-only funds SP would keep rising and then crash harderhttps://www.cityam.com/embattled-home-reit-set-to-...
https://viceroyresearch.org/2022/11/23/home-reit-n...
Had those actors not existed, would the information have remained hidden? Was there no auditor? No accounts? No scrutiny at annual meetings, or regular investor calls?
I find it hard to accept this case as some sort of justification for the existence of the shorts.
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