We bought 50 shares of First Republic, after the Silicon Valley Bank disaster. That was mistake #1. We doubled down and bought another 50 shares after earnings, and close to $100 billion in deposits were withdrawn last quarter. It seems likely First Republic Bank won’t exist on Monday morning. The FDIC is looking to seize the bank and sell it quick. It was our thinking that First Republic had good assets, and only needed some equity to stay afloat. Why not buy a good asset for cheap was our thinking? That’s probably the case. Whoever buys it will get First Republic for cheap, reduce competition, and go up the next day.
Our cardinal rule of not buying when the monthly MACD gave a sell signal was ignored. And we paid the price, losing about $2200.
Along with having an asset-liability mismatch (holding long term mortgages and bonds while having lot of short term, uninsured deposits), First Republic was slow to raise deposit and CD rates. Wealth advisors have been jumping off the last few weeks. It was no doubt poorly managed.
If you have any puts on First Republic, first congrats, second, make sure to exercise your options manually. Otherwise, your winning trade won’t pay out.
If you own shares in FRC, you can register with the FDIC in hopes of getting some money back. It seems very unlikely.
Have a better investing day.
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