I’ve been reading about SIVB early-stage, venture capital corporate customers and their reaction to the failure of SIVB. I’m stunned. They come across as total financial illiterates. They seem not to have known anything, even about the limits of FDIC insurance of their accounts, to say nothing of the excessive risk-taking of the SIVB management–which even my fast look at the financials revealed. Contrast that with the behavior of hedge funds who were aggressively shorting the stock at the same time startups were happily pouring new money into the bank.

The latest annual doesn’t tell anything like the whole story, though. SIVB apparently wasn’t only buying Treasuries. It was also buying (highly-illiquid) mortgage-related securities, as well–compounding its woes. I also saw two stories–hard to believe they’re correct–asserting that a year or so ago, SIVB was fully hedged against the possibility of rates going up, but that the company subsequently liquidated its hedges (a cynic like me muses that, if correct, this was to show a profit that would avoid a quarterly earnings miss) and didn’t put them back on.

I keep hearing/reading comments that SIVB et al is the worst financial disaster since 2008. True, maybe, but certainly very misleading. The GFC had main three elements, all of which are missing here. Back then,

–major US banks engaged in what I think of as a criminal enterprise in selling vast amounts of mortgage-related securities whose poor credit quality was covered up, to the point where the major institutions holding these securities–US and European–were effectively bankrupt. Worst hit were EU banks, which at least at that time were thought of as the ultimate dumb money

–not knowing which banks might go under, and, more importantly, when that might happen, foreign producers of goods refused to accept letters of credit from US banks, the normal way of making sure they’d be paid on arrival of their cargoes in the US. So they stopped shipping. World trade came to a screeching halt

–US corporations, ruing that they hadn’t laid off workers quickly enough after the internet bubble burst in 2000, and not wanting to make the same mistake twice, began mass firings.

I also find it puzzling that although the banking authorities seem to have been fully aware of what was happening inside SIVB, they were apparently content to accept the company’s refusal to change its behavior. Even that letter from the Bank of England wasn’t enough to get the US authorities to take effective action.

Over the weekend, OPEC+ (includes Russia) announced it was cutting aggregate output by 1.1 million daily barrels, or about 1% of current daily production of around 100 million barrels. Half the reduction will come from Saudi Arabia.

The world price of crude jumped by 5% or so on the news, to around $80 a barrel for the best grades. So too did the stock prices of publicly-traded oil producers in yesterday’s trading on Wall Street.

The move won’t bring in extra revenue for Saudi Arabia, since it is reducing its output by about 5%. Other members of OPEC stand to benefit. And perhaps the higher price will make Russian crude more attractive. I’m assuming here that the Western boycott of Russian crude has mostly reduced price rather than output.

Why raise the price? Why now?

The now is easy. Demand for oil is at a seasonal low point, between the end of winter demand for fuel and before the start of the Northern Hemisphere (mostly North American) driving season. So the price is relatively easy to move.

As to why, my guess is that it’s to prevent the price from falling further. If so, it’s a sign of weakness rather than strength.

It will be interesting to watch the trading in oil stocks over the next few days. The rise in Exxon Mobil (XOM) and Chevron (CVN), the last of the oil majors to remain oil companies rather than energy firms–and therefore the biggest beneficiaries of a price hike–seems excessive to me. This may be short covering or simply news reading trading bots. It will be interesting to see if there’s any followthrough over, say, the coming month. My guess is there won’t, but the oil sector is so small and idiosyncratic that I haven’t really kept up with it for years. So I’m not going to act on my thought.

An aside: to me, the most interesting question in this whole sector is what will happen to gas station chains as the US electrifies.

The link to the Keeping Score page, which I failed to include in the original post last night, is here.

I’ve just updated my Keeping Score page for S&P 500 performance for the month of March, as well as the year to date. Only three of the eleven S&P sectors outperformed during the quarter. They were, in order, IT, Communication services and Consumer discretionary–all sectors that tend to do best during economic expansions. The most highly cyclical, commodity-like sectors underperformed, though, while defensives brought up the rear.

All this the opposite of what the Wall Street strategist consensus had predicted. My sense is that this consensus is now saying that it still believes the near-term direction of the stock market is down–it just got the timing wrong.