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Opinion: This Is The Best Big Short For When The Silicon Valley Bubble Pops

Opinion: This Is The Best Big Short For When The Silicon Valley Bubble Pops

pacing down about $48 million in 2017 but are likely to get worse, possibly busting through the prior record of minus $58 million.

I don’t really care about the relatively small numbers. The bank can easily absorb that with its balance sheet, but it tells me that things are rapidly going in the wrong direction in private tech and if this is the case, it will impact other parts of their business, such as client deposits.

Unprofitable businesses will bleed more cash as funding dries up.

Things are going in the wrong direction. All the fundamentals are screaming you are heading into a nasty bear market in private tech with close to $1 trillion of paper valuations backing unprofitable startups.

You would think Wall Street analysts would be focused on the facts on the ground but mostly they are bullish on the Silicon Valley Bank stock, just as they are in every bubble. David Long, an analyst at Raymond James, has a $224 target price on the Silicon Valley Bank stock and explains his bubblicious reasoning this way in a Barrons report:

“We believe there’s still more to come,” said Long, whose $224 price target is 25 percent above its $178 price. “Silicon Valley is strategically positioned to grow even more from events now unfolding, such as rate hikes, lower corporate tax rates, and improvements in the initial-public-offering market.”

Although the IPO market is better than last year (up 73 percent year-on-year), it is already underperforming expectations with the weak IPO performance of Snap and Blue Apron (a meal kit delivery business) likely leading to more investor caution.

On the downside, fundamentals are deteriorating in the private tech sector, in Silicon Valley Bank’s warrant portfolio, and in the startup loan portfolio. With so many of the Silicon Valley Bank bulls betting on rate hikes, corporate tax cuts, and a booming IPO market, how long can this speculation support the bubbly stock price? Investors betting against the bank probably need patience for the music to stop completely — likely a six-to-12-month time horizon.

As the great Anthony Scaramucci said, the “fish stinks from the head down.” A very trigger happy SoftBank reportedly backed away from investing in Uber on valuation, The Information recently reported. SoftBank wanted a price of $45 billion while Uber’s last round was $70 billion. If this transaction closed at the $45-billion valuation, this would have put the top unicorn into a 33-percent bear market decline.

Uber investor Benchmark Capital was smartly trying to cash out before all this implodes and couldn’t find foreign money to dump their shares. When more and more American investors can smell the stinky fish (fake valuations), the trend has been to go find some trigger-happy