One of the great myths you have, when you are young, is that adults are reasonably competent and vaguely skilled at what they are supposed to be doing. As you grow into adulthood yourself you are quickly disavowed of this naive belief as you realised that the majority of adults in the majority of roles they undertake do not have a clue what they are doing. This is particularly true in all aspects of finance. The level of overpaid incompetence displayed on a daily basis is simply breathtaking. Take the collapse of SVB as an example. In simple terms, SVB collapsed because it was incredibly poorly run – at the centre of its problems was that it was long US treasuries and seem to completely miss the memo that the interest rate environment had changed. The US had moved from easing to tightening. This cycle is as regular as night follows day.
The idiots who ran SVB’s treasury department could have saved themselves an awful lot of grief if they had simply looked at a version of the chart below.
This is a free chart from the UD Fed – you don’t have to pay anything for it – you can even download the raw data which is what I did. You can see a sustained period of tightening over the past year. It’s was as obvious as dogs balls that things have changed and a simple stop loss or some form of hedge on their position could have saved them. But apparently, that was too intellectually taxing.
If you still believe that anyone in the corporate world of finance has a clue about what they are doing then you are staggeringly delusional.