Collapse of Silicon Valley Bank 2023

by now you've no doubt seen the news that the United States has just suffered its second biggest bank failure in history threatening to take down not only many of its depositors and their employees and the companies that they do business with but it's having a ripple effect on banks around the world and today I'm going to tell you how to protect yourself [Music] Silicon Valley Bank is now one of the largest bank failures in U.S history following Washington Mutual which crashed the beginning of the global financial crisis the FDIC the U.S government agency which ensures deposits and takes over failing Banks has indeed taken over Silicon Valley Bank and you've seen crazy scenes of Founders and companies going trying to get their cash out you've seen people like Peter Thiel telling uh his Founders get your cash out of this Bank there has basically been a bank run on Silicon Valley Bank and they're saying hey if you have under 250 000 if your deposits are insured by the FDIC we're going to open it up next week and you're able to get your cash out everybody else it is too soon to tell and so this is going to impact a lot of businesses that had all of their cash or certainly much more than that insured limit in Silicon Valley Bank it's going to impact their making payroll Capital expenditures I've heard deals M A deals all kinds of things that companies are planning on spending their money on and you so often hear cash is trash and yet if you're a growing business or if you're a big business that's based in Silicon Valley or that works in that ecosystem or really any kind of business you're keeping cash on hand not only to meet payroll uh you're doing it to build a factory or build a new plant or buy a company there's lots of things that you may want to have cash around for whether it's coming up in a week or a month or whether you're looking out for that opportunity and so my understanding is svb paid relatively High interest rates by U.S standards on call Accounts we'll talk in a moment how you can get better interest rates in other banks in different parts of the world but you had Founders that were optimizing the fact that they just like this bank they felt that it spoke to them and what their business was about they were also parking their cash in Silicon Valley Bank for the higher yield so that that cash they were sitting on would actually make a little bit of return one person in our Network I saw commenting saying we're opening numerous different bank accounts in the United States right now and moving our funds around because even though we didn't really have any money in Silicon Valley Bank we do have much more than the insured limit in our other Banks and we want to make sure that we're covered we're going to optimize for risk not for yield and what I find very interesting about this is you have a generation of Founders and certainly many people who just forgot that 15 years ago the entire world economy went down the tubes many many banks in the United States failed including Washington Mutual including many other you know larger regional and local banks and I think that people have largely forgotten about that and thought hey put your money in in All in One bank now I understand if you're running a very big business you're probably going to be over the insurable limit some banks do have ways to bump that FDIC same up to you know a million dollars you can put your money in Money markets and sweep accounts and all kinds of different things but just in a pure bank account that many businesses use I think pieces businesses got accustomed to hey our money is safe in the bank don't worry about it and here we are a name brand Bank in a very important sector of the economy uh has just failed and it is being taken over and I think people miss this at their Peril if you look at countries like Singapore Austria Andorra maybe these countries have had one bank failure some of them have had none the U.S has had more bank failures than pretty much every other country in the world combined in its history thousands of bank failures in part because they have a lot more small Banks you know if you go to Singapore they have the big three China has the big four Canada has I guess that's the big four so does the United States and I think people have this idea of oh as long as I'm not banking with West Tech or Texas you know Cooperative Farmers Bank you know maybe they're a little small I don't think it's a real bank if it is I have no idea how how good or bad it may be so uh people thought oh if I'm banked with one of the larger ones uh I'm gonna be safe Silicon Valley Bank is not its largest Bank of America not as large as JPMorgan Chase but it does have an outsized influence and I think people got sucked into that thinking hey we can't lose because we can just trust all of our money in One bank and so one thing that I've said from day one uh having banked all around the world never give One Bank all of your money who knows what could happen they could decide they just don't want your kind of business anymore and so we've seen with some of the banks that focus on the crypto and the Bitcoin space recently uh you know they're going out and they're having problems and so what's that going to mean for the crypto industry for example right uh there may be certain banks that just want to de-risk and say we don't want your business we saw a big push that with HSBC years ago especially the folks that had businesses in places like Hong Kong hey we don't want your non-resident company uh and so where are you gonna go uh that even happened to us briefly where they said hey you know come and get your money but we don't want you to make any more payments we're not going to accept any more money good thing we had other bank accounts or else we wouldn't have been able to pay our staff many years ago and so that can happen so even if you don't believe in my premise that diversifying Beyond borders is important at least diversify among Banks I can't comment on your particular bank but I will say I'm not putting all my money in anyone bank and I'm certainly not doing that for my business and so that's the first thing what I want to cover with you is how this affects you and how you can protect yourself first in terms of banks around the world because this isn't just limited to One Bank what this means for folks at Silicon Valley Bank and how you can avoid the same fate befalling you and then what this means for the larger economy and some of the commentary that I'm hearing from folks that make me think that once again doing business in different Western countries is not all it's cracked up to me so you've seen Bank stocks in the United States to a lesser extent in Europe uh and to a lesser extent than that in Asia all tumble there's been a number of different factors including what the Fed was talking about but no doubt this has to have some some role because you're looking at some of the things that happen at svb with bonds and what are the banks that apply to so banks are taking the hit as a result of this if you look at the bank stocks in Asia for example they generally did better than banks in the United States so there was more insulation there I continue to believe that if you are investing in banks for example you can earn higher yields often the lower tax rate or no tax rate at all if you invest in uh you know banks in in Asia for example I'm not here to give you investment advice I'm just telling you uh the facts which is uh you know in these kinds of situations perhaps you want some insulation uh in the case of people who are banking with Silicon Valley Bank or people who are watching this and say well what should we do again the U.S more bank failures than any country in history if you look at the top 50 Banks we've been studying this list that's put out every year on the safest banks in the world the safest 50 banks in the world some years the US has none some years they have won last year they actually had two they are both uh kind of farmer Cooperative banks that generally aren't really retail banks that most people would use if you're in that space much different space than Silicon Valley Bank but if you're in the space that these Banks would serve hey they are at the very bottom of the top 50. they still made it but if you look at some of the largest banks uh you know in the United States they just don't compare with the largest banks in Singapore the largest banks in many European countries even the largest banks in Canada or even Australia and so if you think hey this is the best place in the world to bank statistically speaking in terms of all the uh the qualitative and metrics they just aren't and so if you're looking to diversify Banks within your own country there may be a reason to say well what if we Diversified our business worldwide number one because we're doing business internationally especially if we're a tech company you're probably already hiring people in other countries in a remote first kind of company you have a distributed Workforce maybe your U.S Workforce wants to live overseas why not look at tax and from operational benefits how do I set up a global corporate structure that reflects where I'm doing business where I'm selling where my employees work and skating to where the puck is going to go what's my next Market if I'm especially if I'm in the tech space and I'm only selling to North America I'm probably missing out on a lot of opportunities and so how am I going to get ahead of the curve uh just operationally let on the fact that if I am willing to move as the founder of a company to a lower tax country I can save a lot of taxes yes even as an American and so looking at your corporate structure and looking beyond the Delaware C Corp but looking beyond the LLC you're looking beyond the S Corp and saying well how can we restructure this again for operational advantages for business advantages and potentially for significant tax savings if you as the founder you as the management are willing to move overseas once you do that and once you incorporate non-us structures into your uh business then you have an opportunity to go and open business bank accounts in those jurisdictions now it has no doubt getting gotten harder if you look at Singapore used to accept a lot of offshore companies like BVI at the big three Banks that's long but off the table was just talking to my banker there a couple weeks ago uh they will even accept you know Hong Kong companies kind of sparingly we've opened there so you know we've dealt with no Med capitalist with 11 or 12 of the banks on this top 50 list we deal with banks all around the world and we help entrepreneurs we help investors and we help individuals who are tired of paying high taxes who want diversification who want a backup plan not only move their businesses and their banking over offshore but move themselves overseas and get second passports and this stuff is not just as easy as setting up a company in another jurisdiction especially if you're in the United States and you're watching this happening you need a holistic plan that helps you figure out how is the company strong structured given that you're American where the bank accounts if you set up a company in Hong Kong you may not get a bank account in Hong Kong the average entrepreneur I work with will save millions of dollars over the course of the coming years so you can learn more at nomadcapitalist.com but if you set up the different companies in your structure let's say you want to put your headquarters in the UAE one of the free zones you can take advantage of zero percent tax again if you're an American you may have some tax obligations but you can dramatically increase decrease those if you are willing to move even if you're not willing to move you could potentially just set up a headquarters there have the same tax treatment but have access to for example UAE Banks Banks that while they don't have the same kind of Deposit Insurance as the U.S at times in the past the government has said it will guarantee every single dollar and so you generally see more strength there even in Asia you see Banks where they don't really want more money because they don't have anything conservative enough to do with it and so they just turn away depositors places like Hong Kong it's just much more conservative in many cases than you would find in the United States and so if you can set up a headquarters or set up a an affiliate company or set up some kind of uh you know company in your org chart that is overseas you will have access to Banking and so again these are the things that that you'll work on when you're setting up your Global structure you're going to have access to higher quality Banks if you set up companies overseas you may have access to Swiss banks you may have access to banks that don't make loans at all they just basically take some fees and they park it all right there and they park at all the affiliate Banks and they have proper insurance and so there is in my opinion more safety I'm not saying every Bank in the United States is terrible I'm not saying you should totally abandon the United States but what I am saying is diversification many people are waking up to find out is a good thing and if you're going to diversify within the country consider what happens if there's a larger impact people are already saying oh uh what if more people lose their jobs from these companies that are in some cases doing some very Innovative things what if they can't pay their employees what's going to happen what is going to be the ripple effect of that and keep in mind by the way you have the second largest bank failure in U.S history in a time of record unemployment when the stock market is frustrated that you know interest rates are going to keep going up because they just can't stop from getting jobs you have decades low unemployment everything's supposedly supposed to be so fantastic right and yet you have this huge bank failure imagine what happens when things aren't so Rosy imagine what happens then and so you're seeing that the need for great for much much much more diversification what if you're seeing some of a ripple effect in one country wouldn't you want to diversify across countries and so for a business right most banks around the world are not going to take your us LLC or your Delaware C Corp and open a foreign account for you there are some but the with the U.S it's really very difficult however uh you know you can go and again set up these corporate structures if you're an individual and you say hey I have a business but I take the money out of the business I take dividends I have personal wealth well that's going to be easier you just go and open an account whether it's in Singapore whether it's in Switzerland whether it's in any number of uh places both very storied countries like Switzerland Liechtenstein and Dora the UK or up and coming places like the Georges and things like that we talk about but you want to optimize your banking portfolio I would argue perhaps if you're an investor in things like dividend stocks in the banking sector in other sectors at least take a look and see what other options are hey I invest in Bank stocks okay what are the comparable options in Europe in Asia in other markets that I have some diversification because again you know if you had Singaporean Bank stocks those took a little bit less of drubbing uh than did those in the U.S so very simple diversify outside of your borders and you will have more production and again I think a lot of people probably already have a reason to do that because you have employees customers Etc overseas and you can put that into your mix that's the kind of thing Nomad capitalists will help you figure out uh is hey what's the reason why you might want to develop this international business structure now again this is the news when things are good you're seeing guys like Bill Ackman by the way billionaire hedge fund manager saying hey maybe the government should step in and help out this Bank are we getting going to get into another situation where Banks get a bunch of money taxpayers fund that you already see Joe Biden looking to dramatically increase taxes uh four-fold increase in taxes on stock BuyBacks even Warren Buffett called him out on that he wants to change the way income is defined in terms of taxing people more wants to take the cap off the Social Security tax I mean he's got a lot of new things he wants to tax wouldn't it be just another good reason to say hey we're bailing out the banks you rich fat cats got to pay your fair share and it's not going to be the bank CEOs who are the rich Fat Cats it's going to be you who makes 400 000 or more he's already told you that's his number for who the rich jerks are and so if we get back into the business of government just watch the uh the documentary earlier today about uh how they put all the bank CEOs in the room during the GFC and said sign this you're taking our money we're taking over your bank we're effectively nationalizing your bank what happens if we start to go even some fraction uh down that road again what's that what's that going to do what's that going to do to sentiment remember remember how much people were against capitalism back then right and again if this leads to you know some layoffs if this starts something who knows what the sentiment is going to be but it's not going to be in favor of you keeping your money at the same time Wells Fargo has a technical issue causing customers to report missing deposits listen No Doubt online banking I have numerous Banks every once in a while hey we're down from three to seven in the morning that kind of thing uh Wells Fargo though says a technical issue people were missing their deposits you know online banking in other countries even including Georgia for example it's not quite as good as it used to be but still better than a lot of U.S banks uh Singapore's world-class um I mean you can get a lot better experience in another country and I realized that years ago when I started banking overseas I mean just money movements are faster they're often free uh I mean the quality of let's say a priority Bank where you're putting in six you know High six figures in another country you're going to get so many different Services you're going to get so many different currencies you're gonna get better personal service you're going to get faster transfers cheaper transfers you're just getting a better deal and so at a time when uh you know you're not even seeing your deposits in U.S banks at a time when your bank is failing diversification is the answer hey you know what it may be the stop Gap and I'm not giving you any Financial advice but the stop kit may be all right you're good in the street and you open up two more Banks where you live but in the mid to long term what's your strategy to be International because we have one bank failure and already people are calling get the government involved take more of our money have them ask for it back in taxes have them use it as an excuse to assail capitalism capitalism doesn't work unless we step in and get our grubby pause all over it and so for me the big thing is how everyone just forgot that bad things can happen with your money and worse things generally happen with your money when you put it all in one basket and you just think well the government and the banks and the regulations will surely protect me that's not how it works Nomad capitalist has been saying for a decade you want to be Diversified internationally if you have that you might have avoided this but you certainly would avoid the bigger brunt from it happening in any ripple effect that comes with it

Channel: Nomad Capitalist

Views: 82,565

Keywords: nomad capitalist, go where you're treated best, dual citizenship, second citizenship, andrew henderson, Banking in Singapore vs. Switzerland, switzerland, swiss bank account, swiss banks, banking in singapore, singapore, offshore banking, banking, moving money offshore, finances, safe haven, create wealth, taxes, Bank Failure, US Bank Failures, UAE Company, Banking in Singapore, How to Legally Lower Your Taxes, Peter Thiel, Silicon Valley Bank

Id: czTc5zIlxmY

Length: 18min 4sec (1084 seconds)

Published: Sun Mar 12 2023