The Silicon Valley Bank Situation

Managing emotions as an investor can be challenging. When there is a sense of increased uncertainty, it can be easy to let fear override logic. When this happens, it can lead to poor decision making.

Well, one of those times of increased uncertainty is here. The fall of Silicon Valley Bank is the talk of the financial world at the moment. Websites are filled with articles about Silicon Valley Bank, and there certainly isn’t a lack of speculation about the impact that Silicon Valley Bank’s failure will have on the business world.

During this time of increased uncertainty, I want to try to keep a proper perspective and try to make sure that I am using reason and logic to make decisions rather than making rash decisions based on emotion. To achieve this, I am trying to take a balanced view of the situation, maintaining a long term perspective, and staying vigilant.

A Balanced View

I am trying to take a balanced view of the situation. I neither want to minimize the significance of Silicon Valley Bank’s failure nor overestimate its importance. On the one hand, I don’t want to downplay the significance of its collapse. Its failure may have a significant negative impact on the venture capital industry and make it more difficult for startups to receive funding. Banks may become more cautious in lending, and many venture capitalists may likewise tighten their standards before making an investment. If this happens, many startups may lose access to the same levels of funding that previously was available to them. This could result in startups slowing down or even some startups closing if they can’t get the funding they need. Likewise, for those companies that have funds at Silicon Valley Bank, they could be in a difficult financial situation if they either permanently lose their funds that are held at Silicon Valley Bank or lose access to their funds for a significant length of time.

A major slowdown by startups could have a significant impact on the larger economy and on many public companies. Many startups use services offered by public companies, and if those startups reduce spending, public companies may see slower growth. If startups have to cut spending, they may reduce spending on data analytics, cloud computing services, etc. Thus, a major slowdown by startups could have a significant negative impact on public companies and the stock market as a whole.

On the other hand, the impact of Silicon Valley Bank’s failure may be limited. The economy is resilient, and it is possible that startups will be able to still gain access to the capital they need. Companies that have funds at Silicon Valley Bank might be able to recover their assets and gain access to their funds sooner than later. The entire situation may end up being less impactful than some fear.

I don’t want to get either too pessimistic or too optimistic. The entire situation is fluid, and it is impossible to know with certainty how things will develop. Thus, I believe it is best for me to take a balanced view and recognize the wide range of potential outcomes.

Long Term Perspective

I am trying to maintain a long term perspective. My primary investment goal is to make money in the long term. If my portfolio falls 10% this week, I shouldn't overreact because my primary goal isn’t short term outperformance. Of course, seeing my portfolio decline isn’t fun, but I need to remember that stocks don’t just go up in a straight line. It is possible for me to make money in the stock market in the long term even if my portfolio declines in the next few weeks or months.

By having a long term perspective, I can focus on what I believe is most important for achieving long term success in the stock market: trying to invest in very high quality companies that have good future prospects and are trading at a reasonable valuation.

Thus, I plan on continuing to try to find and invest in high quality companies which I believe will appreciate in value in the long term. I don’t need to be as concerned about short term price movements in the market since I am more focused on the long term.

Stay Vigilant

Lastly, I am going to try to stay vigilant. I don’t know what will happen this week, or next week, or next month. I will keep observing the situation with Silicon Valley Bank. I want to try to stay educated on the situation so that I have the information necessary to make informed decisions. Of course, there are a lot of unknowns at this point, but dealing with unknowns is just part of investing. As long as I am staying alert of the situation and learning what I can, I feel I will be in a solid position to make informed decisions.

Conclusion

By taking a balanced view of the situation, having a long term perspective, and staying vigilant, I feel that I am putting myself in a position that I can reduce the impact that the emotion of fear will have on me. As I previously mentioned, I strive to use reason and logic when making decisions about my portfolio, and I don’t want to let the uncertainty surrounding the failure of Silicon Valley Bank cause me to make rash decisions about my portfolio. I can’t predict with certainty the impact that Silicon Valley Bank’s failure will have. I also can’t control the situation. What I can do is control how I respond to the situation, and I hope to respond by using reason and logic to make decisions about my portfolio.

Disclaimer: This newsletter is for illustrative, discussion, education, and entertainment purposes only. Nothing contained in this newsletter is financial advice, investment advice, tax advice, or any other kind of advice. Nothing contained in this newsletter should be considered a recommendation to buy or sell any stock. Nothing contained in this newsletter should be considered a recommendation to undertake any type of financial activity. The author is not a financial advisor. The views expressed are solely the opinion of the author, and the author’s opinion may change at any time. The author has no responsibility to update this newsletter if his views change. The author does not guarantee the accuracy of the information contained in this newsletter. Investing, including investing in stocks, involves risk, including the loss of capital invested. Before making any investment decision, a person should do their own research, consider their individual circumstances, and strongly consider seeking the advice of a properly licensed professional. The author is not responsible for any decisions made by the reader. The author is not responsible for any actions of the reader. The author is not liable for any loss a reader may suffer from buying or selling stocks. The author is not liable for any loss a reader may suffer from any financial decision made by the reader. Once again, this newsletter is NOT financial, investment, tax, or any other kind of advice. As of March 12, 2023, the author is not invested in SVB Financial Group stock (NASDAQ: SIVB). The author’s portfolio of stocks may change at any time, and the author does not have an obligation to inform readers. Likewise, the author does not have an obligation to update this article if the author buys or sells any stock, including but not limited to stock of SVB Financial Group.