Well I can’t blame Powell and stimulus checks for this one
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Saudis are smart to not throw good money after bad. Let us cut the mustard on incompetence and bad business decisions.
Maybebit was the covid shutdowns and working from.home that caused to meltdowns. Stupid is as stupid does.
That particular Saudi bank is already at the legal limit anyway.
Could not legally buy more stock if they wanted to.
LOL
And just what does the value of the company have to do with its deposits, reserves and loan portfolio?
It’s kind of like shark tank.
When the sharks (capitalism free market) say "you are losing money and company is worth $83
only, in this case the socialized centrally planned authorities have decided
“I will lend you 7 times that.”
It makes one wonder if the central planners are doing the right thing.
That is a disconnect from reality. The market cap is not the asset value of the loan portfolio and reserves vs deposits.
I am still wrapping my mind around the idea that bank portfolio managers didn’t understand interest rate risk 101.
I am speculating that investors had access to basically the same information as the government.
Free Market:
We’ve seen what the bank of Zimbabwe and tulip bulbs is worth and we won’t put money into it.
Central planners:
We’ve seen what the bank of Zimbabwe and tulip bulbs is worth and we will put money into it.
The problem here is bank capitalization. That isn’t the same thing as the value of a bank as a company. The bank’s problem is that its managed assets have fallen below its obligations. It doesn’t take a financial wizard to understand that when real interest rates are running greater than 2 standard deviations below historic norms and the economy has entered a high inflation environment, that rate increases and heightened interest rate risk are soon to follow. When I was studying for my Series 7, the 70s-80s time frame was used to demonstrate how bonds trade and how interest rate risk works to its extreme.
So does the government have access to “secret information” that the public does not?
I think the public and the government look at the same information, the government sees more detail and free market won’t touch it.
Six companies make buggy whips.
One of them is in a tail spin.
The government says “our economy has always been based on buggy whips so we must save this company under this management” (as if failing to save the company means the assets an account will vaporize.)
Companies have non-public information, known only to the managing officers. Those managing officers often take that information privately to the government regulators for their industry, usually when they have gotten in over their heads and want the regulator to save them.
So the private sector has valued the entire company at $8.3 billion and decided not to lend it many more money.
The Swiss National Bank has said “We can’t have that!” and given it a $57.3b loan.
