Avoid Crisis

March 24, 2023 - Avoid Crisis hosts Reynaldo Arellano and Allen Plyler caution the tentacles of contagion have spread to the world as Credit Suisse is sent to the bank penalty box.  The SEC warning on Crypto and the Wells notice to Coinbase could mean a crisis in crypto is on the way.  Block and Cash App are targeted by a short report.  Inflation may lead to a new wave of layoffs.

Key Points from Rey:
  • Avoid Crisis is going to cover more than just the banking crisis, but right now it is the topic of the day.
  • To avoid crisis you have to look at the signs in front of you.   The tidal wave of information, good and bad, makes it difficult to focus on the macro issues and avoid a crisis.
  • This is a podcast for the real world and in real time.
  • Correlation and coincidence are distinct.  You have to look deeper.
  • People are moving their money around.  Sweeps at Banks are getting larger.  Technology makes moving money easier today.
  • Integrated Consolidated Sweeps are something to look at to avoid uninsured deposit risk.
  • The Fed raising rates this week impacts the economy.  
  • You are a fool if you are not minimizing the risk of an uninsured deposit. 
  • Avoid Crisis by minimizing the risk by spreading cash around in banks so your deposit is insured, but you have to maximize your returns and make sure you don’t incur operational risk as you do that. 
  • Speculation by short sellers seems to focus on the deposits that are uninsured but we could be looking at short squeezes on regional banks as information from the banks come out. 
  • Square, renamed Block has been hit by the Hindenburg report.
  • There is a seesaw here, if inflation continues to go up you might have to fight it with interest rates, but layoffs may be about to snowball into a recession.
  • In the middle of an information storm, you have to find multiple reliable sources to separate the good from the bad information.  To avoid crisis avoid a single source of information in making decisions.
Key Points from Allen:
  • This is a whirlwind.  This interpretation of information from the media has to be understood in light of the bias of the presenter and their agenda.
  • Now we have Signature Bank, the tentacles of contagion go around the world.
  • The CDS went up and now Credit Suisse is at risk.  Assets from SVB might get sold this weekend.
  • FDIC is to make depositors whole, now with Biden saying depositors even beyond the FDIC limit will be taken care of, does it represent a guarantee.
  • Everyone is talking about banks now.  What is the backstop for the uninsured deposits in the system from the government?
  • What other banks will get support like the $30 Billion that went to First Republic Bank.
  • At the beginning of 2023 if you thought Credit Suisse would be around in the same form at the beginning of the year at the end of the year, you would have been wrong.  It won’t even be there anymore at the end of the first quarter.  
  • As more people seek to get more of their total deposits covered under FDIC limits, the total insured liability risk for the FDIC is going up.  Where will that money come from?
  • When rates go up, purchasing power to buy a residence goes down. 
  • Shorting regional banks right now should remember that during the financial crisis there was a freeze on shorting bank stocks, what happens now if there is put in place a ban on shorting regional bank stocks.
  • In a display of sarcasm, the question was posed on “How did interest rates get below zero, could regional banks stock prices trade below zero?”
  • People need to believe in their government, without faith in banks, this crisis continues.
  • The Hindenburg report goes point by point through a large list of items, but has a lot of focus on Cash App, and how it is used in sex trafficking, drugs including fetanyl, and how many fake users are on the account.  The report says Cash App Fake accounts include Elon Musk and Donald Trump. 
  • The charge of Fake accounts was aimed at Twitter as well.  Twitter and Block, both public companies, should be investigated by the SEC based on their disclosures.
  • The SEC is saying stay away from Crypto.  Coinbase got a Wells notice.  More to watch there.
  • Inflation around the world is a major problem, Argentina over 100% but China around 1%.  The US is around 6%.  It can continue to rise.
  • The risks are becoming more elevated, and the pace of the change is rapid.
  • Think through what we are observing as far as information and think deeper.
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Creators & Guests

Allen Plyler, CPA, MPM
Allen Plyler, CPA, MPM is an experienced CFO in Technology, Start-ups and Financial Services with focus on large scale accounting implementations, evaluating emerging accounting Standards and SEC external reporting for publicly held companies. He is experienced in structuring capital markets and equity deals while also providing consulting to CEO and CFOs for business strategy.
Reynaldo E. Arellano, CPA PFS CGMA
Reynaldo E. Arellano, CPA PFS CGMA is a Certified Public Accountant (CPA) with professional designations as a Personal Financial Specialist (PFS) and Certified Global Management Accounant (CGMA). In addition to providing traditional CPA services such as bookkeeping, accounting, and taxes (planning, compliance, and representation) his Firm also offers tactical CFO services and strategic business advisory services. Mr. Arellano started in the financial profession as a Big 8 auditor, then an accounting software consultant, then a Controller eventually becoming a CFO, and held NASD and life insurance licenses (presently inactive). Mr. Arellano has consistently proven to have the highest levels of integrity, intelligence and innovation. He has held numerous managerial (C-suite) and leadership (board of directors) positions within corporations and non-profit organizations.

What is Avoid Crisis?

By seeing what's in front of you and thinking about what can't be seen, one constantly weighs opportunity and risk in alignment with values, beliefs, objectives, and constraints. Crisis occurs when bad things happen to the unprepared. Preparation requires thought, decision, and action. Every moment is a choice and an action. Be deliberate. Avoid crisis. Listen to Avoid Crisis.

Avoid Crisis Inc., Allen Plyler, and / or Reynaldo Arellano are not giving to any listener or listeners any specific tax, legal, financial, medical, or any other advice. Listeners, before taking any action, should seek individualized professional advice from a qualified (and ideally licensed) expert for their own specific facts, circumstances, and purpose.