Treasury studying extension of FDIC insurance to all bank deposits
Top stories today: 1) FDIC might insure all deposits ($117B cost), 2) JPM could buy out First Republic, 3) Microsoft wants to launch app store in 2024, and 4) Runway announces text-to-video Gen-2.
Hi, and welcome to today's Bay Area Times daily newsletter. Top stories today: 1) FDIC might insure all deposits ($117B cost), 2) JPM could buy out First Republic, 3) Microsoft wants to launch app store in 2024, and 4) Runway announces text-to-video Gen-2.
0. Data and calendar
All values as of 3 AM PT / 6 AM ET, other than S&P500 close (1 PM PT / 4 PM ET).
All times are ET.
1. Treasury studying extension of FDIC insurance to all bank deposits
They don't view it necessary yet: "Treasury Department staff are reviewing whether federal regulators have enough emergency authority to temporarily insure deposits greater than the current $250,000 cap on most accounts without formal consent from a deeply divided Congress, according to people with knowledge of the talks. Authorities don’t yet view such a move as necessary, especially after regulators took steps this month to help banks keep up with any demands for withdrawals." - Bloomberg
Assuming a steady FDIC reserve ratio, this measure would require an additional $117B in FDIC reserves
Which is not a lot, in the grand scheme of things:
The math is: 1.27% reserve ratio x $9,200B in estimated uninsured deposits = $117B.
The Fed or federal government would likely foot the bill initially. Gradually, banks could be mandated to pay higher fees to the FDIC (currently, between 2.5 and 42 basis points of deposits, depending on bank size and risk).
2. JPM leading effort to salvage First Republic Bank, after $30B loan failed to curb worries
Could be in the form of a direct investment: "Jamie Dimon is leading discussions with the chief executives of other big banks about fresh efforts to stabilize troubled First Republic Bank. The discussions, while preliminary, have focused on how the industry could arrange for an investment that would boost the bank’s [capital.] Among the options on the table [is] an investment in First Republic by the banks themselves." - WSJ
The government is likely pushing for the deal. Just like the $30B loan last week, we expect the Treasury and the Fed to be nudging Dimon and the other bank CEOs into this deal. In a world of the USD fiat and of too-big-to-fails, this is just more evidence that the modern banking industry is really a public-private partnership.
After falling 47% on Monday, FRB stock is up 22% pre-market
Markets now expect a 25 bps hike on Wed
In related news...
UBS expected to cut as much as 40K out of combined 120K staff.
CS employees were partially paid in AT1 bonds that are now worth 0.
FDIC to break up SVB, seeking to sell its unit in separate, after initial auctions fail.
Saudi Crown Prince signed off on losing $1.5B deal after advisors expressed doubt.
Behind the scenes: how the Swiss trinity forced UBS to save CS.
3. Microsoft aims to launch iOS and Android app stores in 2024
Would require new EU regulation and approval of Activision acquisition: "Microsoft is preparing to launch a new app store for games on iPhones and Android smartphones as soon as next year if its $75bn acquisition of Activision Blizzard is cleared by regulators, according to the head of its Xbox business. New rules requiring Apple and Google to open up their mobile platforms to app stores owned and operated by other companies are expected to come into force from March 2024 under the EU’s Digital Markets Act." - FT
Microsoft is likely announcing this to entice regulators to approve Activision acquisition. Apple and Google currently have a duopoly on mobile app stores and are able to charge up to 30% from developers. Previously, Microsoft CEO Satya Nadella jabbed at his competitors, saying that the top earners in mobile gaming are not even game companies, but rather intermediaries.
4. Runway announces text-to-video AI, Gen-2, available in "coming weeks"
Generate videos with nothing but words. If you can say it, now you can see it.
Introducing, Text to Video. With Gen-2.
Learn more at https://t.co/PsJh664G0Q https://t.co/6qEgcZ9QV4
— Runway (@runwayml)
Mar 20, 2023
Generates silent 3-second videos from text or text+video. It takes minutes to process, and the resulting video is pretty low-quality, as you can see even in the demo examples. Unlike text-to-image tools like DALL-E 2 and Midjourney v5, text-to-video is not yet ready for business use cases.
Waitlist requires a Discord application. The company says it is accepting more users every week. - Bloomberg, Runway
Meta and Google have better tech, but where are their products? Both tech giants showcased similar products late last year that seemed to produce longer videos, but as usual, they announce products but never release them. Runway has 45 employees and has raised $96M since its founding in 2018.
5. Premium smartphones continue to grow: 55% of revenue contribution in 2022
Apple's market share at 75%; Google doubles but still at 1%
These graphs explain Apple's exceptional financial performance over the past years. The world's middle class continued to grow at a rapid, increasing the demand for premium smartphones, while Apple managed to keep (and expand) its commandeering lead in the profitable segment.
6. Study estimates occupations with the highest and lowest exposure to ChatGPT risk
Unexpectedly, the more the job includes writing, the more it is exposed. We await to see if AIs will be able to replace mathematicians, as this study suggests, as even GPT-4 is still very far away from superintelligence:
And the least risky ones involve manual labor:
We are very skeptical of any claims that AI will lead to unemployment. Ever since the Luddites, people have been incorrectly predicting technology would lead to joblessness. No, technology kills some jobs and creates others -- there's infinite demand for human labor.
7. How Meta Verified compares to other premium offerings
A useful chart from The Information:
8. Susquehanna and Sequoia stand most to lose from TikTok U.S. ban
Another great chart from The Information, useful to have while TikTok CEO Chew testifies to the House on Thursday:
9. Other headlines
Amazon laying off another 9K workers, after 18K layoffs in November.
Netflix plans to release 40 games this year, make them available on all devices.
TikTok confirms 150M U.S. MAUs, up from 100M in 2020 and 11M in 2018.
OpenAI puts ChatGPT offline temporarily to fix bug exposing user chat titles.
GPT-4 fails CFA exam, after scoring highly on SAT, GRE, LSAT, others.
Zero-day exploits hit all platforms in 2022.
$1B Character.AI's characters could face legal challenges: is it fan fiction or not?
Microsoft's Nuance announces AI app to generate patient notes after visits.
Duolingo is working on a music app.
Tesla's cost-cutting puts pressures competitors; bad for everyone's margins.
Anti-ESG bill is vetoed by Biden -- his first.
Beijing giving top chipmakers easier access to subsidies and more state-like powers.
DeSantis proposes bill to ban CBDCs.
Coinbase gets to the Supreme Court... on a procedural, non-crypto case.
Crypto.com gets closer to Dubai license, as U.S. pushes industry abroad.
Microstrategy almost breakeven as BTC approaches $30K.
SEC Commissioner Peirce: Gensler trying to do too much too fast.
Washington and more
Xi meets with Putin in Moscow; each calling the other "dear friend."
Trump Manhattan grand jury heard final witness on Monday.
Biden signs unanimous bipartisan bill to declassify covid origins materials.
Nikki Haley: "China wins if Russia conquers Ukraine."
DeSantis jabs at Trump while criticizing Manhattan DA: "don’t know what goes into paying hush money to a porn star to secure silence over some type of alleged affair."
Howard Stern: Jon Stewart would "win in a slam dunk" if he ran for President.
Saudi Arabia frees 72-year-old American imprisoned for tweets.
World Happiness Report is out: Finland happiest for 6th straight year.
10. Interesting tweets, memes, and images
Computers made analysis cheap, so we do far more analysis
Desktop computers made design cheap, so there is far more design
LLMs make images and text cheap, so...
The Jevons Paradox at work.
— Benedict Evans (@benedictevans)
Mar 20, 2023
Cramer Curse https://t.co/9N4n4UZxOY
— Inverse Cramer (Not Jim Cramer) (@CramerTracker)
Mar 21, 2023
The @federalreserve should pause on Wednesday. We have had a number of major shocks to the system. Three US bank closures in a week wiping out equity and bond holders. The demise of Credit Suisse and the zeroing of its junior bondholders. Notably, bondholders bearing losses is a… https://t.co/rcksilgXYR
— Bill Ackman (@BillAckman)
Mar 20, 2023
I have never heard about a meeting with Jobs which didn’t include Jobs ripping someone https://t.co/u79L6HRyd8
— Austen Allred (@Austen)
Mar 21, 2023
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