For more on this amazing
events that have transpired
over the last several days,
I want to bring in
Shark Tank Judge Kevin O'Leary,
who is the chairman of O'Leary Ventures
and is here to join us
What are you hoping to hear from
from President Biden?
Well, I think I know what he's going
to say.
I think I don't think he'll say it
in the way I'm suggesting.
But what effectively happened
over the weekend
is that he national eyes
the American banking system.
It's no longer a risk.
It's no longer private in any sense.
It is now backstopped by the government.
Ultimately the taxpayer.
So it doesn't matter how bad you are
as a bank manager.
And a good example is
what happened in Silicon Valley back.
That was a combination
of a negligent board of directors
and idiot management.
That's very powerful cocktail
and put together.
And it completely wiped out that bank.
And that's what should have happened.
And we knew before the weekend
started that every account
with $250,000 or less was insured.
And anything beyond that,
which is generally business accounts
or sophisticated investors, was not.
But that's all changed.
Now, you have no risk in any bank
any time,
and you as a taxpayer bear
that going forward.
When we spoke on Friday,
you said I said,
how big a deal is this, Kevin?
And we were taxing.
You said next week
the real trouble starts
when they can't make payroll.
Now it looks like
they will be making payroll,
I would imagine. So what do you think?
Do you think that
maybe the you know, the pressure is off
now that things
are going to go back to normal
or is there still more fallout here
No, they'll never go back to normal.
Two things are going to happen.
This this quick memo of this policy
decision
was to try and stop a run on small banks
mid-term midsize banks.
I don't think long term
that's going to work
because why would
you take even 1% of risk
keeping your money,
or at least all of it
in a small regional bank?
You're going to diversify.
And I think that's the first lesson
that wasn't being adhered to
is when you have liquid assets,
you want to make sure it's diversified
and the rule we've put in place
for our portfolio
companies is no more than 20%
in any one financial institution
because you never know
where the Black Swan is swimming.
In other words,
every single institution
has an idiot manager,
big one, small ones.
That's been proven by history.
You just don't know where they are.
And that's the same
for every sector of the economy.
But the banking system is different.
We have 11 sectors in our economy,
the banking system, financial services
is one of them,
but it services all other ten
So what's really happening
when the president
steps out in a few moments
is he's basically saying, Look,
I can't take this risk anymore.
I'm just going to nationalize
the whole thing.
And that's the way
we should look at banking going forward.
Nothing more
than highly regulated utilities.
And that has profound impacts
for you as an investor.
If you thought
putting your money into bank
stocks was a good idea,
you should change your mind
this morning forever.
And should you own bank bonds? Never.
You were taught that lesson
over the weekend.
If you own equity in Silicon Valley Bank,
it's worthless
if you all the bonds is worthless.
Kevin, I.
Go ahead.
Sorry to interrupt, Kevin.
I just
I do want to push back on that
because you've got to differentiate
between the small and medium sized banks
that were given
more lax requirements
in that 2018
legislation and the big guys
because the big guys closed up on Friday
and there's a flight
to safety, to JPMorgan,
to Citigroup, etc.
That doesn't mean they're you know,
you should not assume
that just because they're big
they can't fail managers makes mistakes.
No, but they are. It's your big wait.
But they are held to stress
test requirements,
higher capital and liquidity requirements
because of Dodd-Frank.
That didn't
get diminished for those big ones.
And you should assume
that stage is going to be lifted
even higher on them.
So they're going to be
even more regulated
as they become more concentrated
and far less profitable.
That's my point.
This really does
make you think about owning
bank stocks long term.
I think they'll be underperforming
the index for decades to come.
That's my personal opinion,
but it's the behavior of you
as an investor in the actual accounts.
If you're a business,
you can't put it all in one
financial institutions
Certainly everybody learned that lesson
over the weekend.
So diversification is going to matter.
But this has fundamentally changed
the way you should look at banking
because I'm not really comfortable
that all of a sudden
we've de-risked everybody
all of the time.
It was a good idea to de-risk $250,000
and make more sophisticated investors
think about their behavior
and how they should put their capital
to work. Get diversity.
You don't have to do that anymore.
According to what
the President is going to say,
you have zero risk
and that has consequences.
There's no such thing as a free lunch,
and this is going to be very expensive
for shareholders of banks long term.
All right.
I would never put my money into a bank
stock ever again.
Oh, Kevin O'Leary, Kevin,
I always appreciate your perspective.