Our member Steven Grey of Grey Value Management published a highly insightful article on Pre-emptive bank bailouts. It is a MUST READ for all market participants.
Steven Grey is CEO and chief investment officer of Grey Value Management, an investment firm. Many investors see banks as the investment equivalent of the famous white, windowless van with “Free Candy” spray-painted on the side. Sure, maybe there’s nothing to worry about, but you’re still reflexively wary of what might be lurking inside. Take banks’ unrealised losses on investment securities.
As the chart below shows, during the many years that interest rates hovered near zero, banks’ gains and losses on their investment securities were relatively modest. But when the Fed began raising rates in 2022, bond prices plummeted. That generated huge losses for banks that had accumulated them….
Read the rest here Pre-emptive bank bailouts for fun and profit