Office Hours is an hour long Zoom call we have on Friday’s from 2-3pm ET. The event is exclusive to Epsilon Theory members and is a great way to hear Ben’s thoughts on markets, politics, and current events. Every Monday I post a brief recap of the previous OH. This is not a transcription of the call and doesn’t cover everything. But it does outline the main conversations we had.
Before this was posted on the ET Forum, but we’re moving it to the front page so more people can see the recap and understand the opportunities of Office Hours.
These are the major topics and ideas we discussed during the 03/17/2023 Office Hours as well as some of the biggest takeaways. If you have something you want to add to the conversation, let us know in the comments and join us next time.
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Our conversations were dominated this week by The Banks. It’s a continuation of last week but now with an even bigger cast. Credit Suisse has joined the fray, there’s a “deposit infusion” (Ben refuses to call it a bail out) into First Republic, and the market reaction to all of this. What’s was Ben’s take on all this? He’s hopeful. “I’m very hopeful about what took place yesterday. I think it is absolutely a good thing and we need some good things.” He published a note on it as well, The Dark Forest, that goes into detail on all of this if you want more information.
At the end of the day, Ben feels that “making a deposit for your small business into a bank, a regulated bank, should not be a life or death risk management question. It just shouldn’t.” “It’s an incredible tax on productivity, on our economy and everything….and it’s insane that that would have to be part of your calculus and you could get really dinged if you got it wrong. That’s insane.”
Regarding the ‘deposit infusion’, “when all of those big banks put 30 billion dollars into First Republic, they’re not risking 30 billion dollars. The question is this, are there assets at first republic plus equity at first republic that would cover the deposits if they had to be made good?” The risk isn’t that Frist Republic can’t pay them back at all, the risk is that they might have to, “take a haircut on those deposits, if you had to sell all the assets today. Even if that risk is 2%, why would you even take that risk?”
And that’s the part Ben felt Yellen failed at answering in her most recent statements. There are so many ways to answer that question without “drawing this line in the sand and saying oh you’re a small community bank? Screw you.” Needless to say, he’s not a fan of her latest stance.
We also talked a bit about social media. Because Ben’s also feeling pretty down on Twitter. He’s not feeling the “motivated postings” that he see. And motivated means that, “everyone has to be short one way or another. Or you have to be politically motivated one way or another. You can’t actually think what it is you’re posting. These are people I see posting who I know know better. Or I thought they knew better.” And he just can’t imagine if we were going through 08 or 09 again with Twitter. “I can’t imagine how awful and destructive that would be.” One person commented that Twitter and social media has taken on a ‘one ring’ aspect. Another pointed out that now everyone has to have a take to drive engagement for their business. And the well thought out ideas get mixed up with and lost in the hare-brained ideas until it’s hard to tell which is which.
We’re sure to continue this conversation at the next Office Hours and I encourage you to join us if you have the time. We’ll be meeting from 2-3pm EST on Zoom. Check out the Forum for the link and more information. If there’s a question you have for Ben and the group, post it on the Forum. It’s the best and fastest way to reach a community of intelligent and creative thinkers.
We’d love to hear your thoughts on these ideas and hope that you’ll join us next time. If you haven’t already, sign up to access the Forum and Office Hours.