Hi, and welcome to today's Bay Area Times daily newsletter. Top stories today: 1) SVB is likely insolvent, 2) Meta is working on a decentralized social network, 3) Biden's budget has a 44.6% capital gains tax, 4) but it would still raise debt-to-GDP to 179%, and 5) Trump likely to be criminally charged in NY.

0. Data and calendar

1. SVB faces bank run and is likely insolvency

• SVB already had a $15.1B fair-value gap: in December's financial statements, SVB said that the $91.3B of securities that it "held-to-maturity" actually had a fair value of $76.2B, a $15.1B gap, almost the size of its entire reported equity of $16.3B - WSJ

• Added to the announced the $1.8B loss, SVB could be insolvent:

• CEO said a regrettable statement, accelerating panic: "We have ample liquidity to support our clients, with one exception. If everybody is telling each other that SVB is in trouble, that will be a challenge." - Techcrunch

• VCs like Founders Fund and YC are advising companies to withdraw. As is rational in a bank run: each depositor panics and withdraws, causing mass panic and accelerating the insolvency. Many companies are reporting that their withdrawals are delayed. - Bloomberg, The Information

• Will Buffett or another billionaire save the day? SVB is the Bay Area's leading merchant bank, and many billionaires and investment funds could be interested in owning it.

Stock is down 43% in the pre-market, 89% for the year

2. Meta working on a decentralized text-based social network compatible with Mastodon

• Still in ideation/early development: initially reported by Moneycontrol, Meta confirmed it in a statement: "We’re exploring a standalone decentralized social network for sharing text updates. We believe there’s an opportunity for a separate space where creators and public figures can share timely updates about their interests." - Moneycontrol

• With its 3.7B users, best chance of a decentralized network working: Decentralized social networks have suffered from a lack of consumer interest, since centralized social media bans only affect a small fraction of users. Mastodon's network has 2.6M MAUs, for example. Meta, however, can leverage its 3.7B users and integrate these decentralized features into Facebook and Instagram. Still, we lean bearish on this working over the next 5 years.

3. Biden's budget proposal with more taxes than expected, including 44.6% capital gains tax

• We don't expect the approval of any of Biden's proposed tax hikes, given the Republican House, but here are some of his proposals:

  • 23.8% -> 44.6% capital gains tax rate (including 5% NIIT tax)

  • 37% -> 39.6% top individual income tax rate

  • 21% -> 28% corporate income tax

  • 10.5% -> 21% corporate foreign earnings income tax

  • 1% -> 4% stock buyback tax

  • 25% minimum tax on $100-millionaires' unrealized capital gain tax

  • Limit retirement-account tax benefits to $10M

  • Eliminate crypto wash-sell tax loophole

  • Eliminate carried-interest and like-kind real estate tax breaks

  • Eliminate tax preferences for oil and gas companies

  • $2K -> $3K/$3.6K child tax credit (under/over 6) - Bloomberg

• U.S. taxation is already very high, so none of these proposals make sense. Singapore, for example, provides more and better government services with a lower level of taxation (15% of GDP vs 27%). Biden's proposals would increase convergence between the U.S. and European welfare and regulatory states.

4. We estimate, under Biden's proposal, debt-to-GDP growing to 179% over the next 30 years

A bit better than the CBO's 195% debt-to-GDP projection released in February, but still very worrying for the U.S.:

• As usual, the U.S. government will kick the can down the road, hoping that the debt bomb explodes when the other party is running the government.

5. Trump likely to be prosecuted for criminal charges, signals Manhattan District Attorney

• Prosecutors offered Trump a chance to testify before grand jury: offers like that almost always precede an indictment. Defendants rarely testify before grand juries, as that can be used against them during trial.

• Trump would be charged for paying porn star $130K during campaign. Both the porn star, Stormy Daniels, and former Trump lawyer Michael Cohen, have said that Trump paid her the money (through Cohen) to keep her quiet about her affair with Trump before the 2016 election. - WSJ

• Not a sure win for the prosecutors. The charges are likely two: 1) falsifying business records (in how Trump's companies accounted that payment as a legal expense, and 2) violation of NY State election law, as the payment effectively became an improper donation to Trump's campaign. None are easy wins, and even then, prison time is not guaranteed.

• Trump already called the Black prosecutor "racist" and said he won't stop his campaign, even if charged. Given the proximity to the elections, a Judge could also opt to start the trial after the election, assuming Trump loses. - Raw Story

6. Trump is also publishing a book with 150 letters from politicians, including Kim Jong Un

• He is not ashamed of his foreign policy strategy of building personal relationships with dictators, as the letters below, from and to North Korean dictator Kim Jong Un, show.

• Book price: $99, or $399 for a signed edition.

7. Other headlines

Tech

• Apple Music Classical is available for pre-order, included in Music/One subscriptions.

• Discord testing ChatGPT-powered bot and other AI features.

• GrammarlyGO, ChatGPT-like writer, to be launched in beta in April.

• Whatsapp refuses to remove end-to-end encryption in the UK.

• Elon Musk is planning his own town in Texas.

• Meta pausing Reels Play bonuses in the US.

• ChatGPT now available on Azure OpenAI, pricing at $0.002 for 1,000 tokens.

• NVIDIA CEO interview: GPUs, AI, TSMC, US-China relations.

• Baidu hurrying to launch AI chatbot in beta by March 16.

Business

• Oracle's net income falls 19% to $1.89B as cloud revenue grows 45% to $4.1B.

• Rolex, Patek prices beat S&P over 5 years, worse over 10+ years.

Crypto

• U.S. DOJ appeals NY Judge's decision to approve Voyager's sale to Binance.US.

• NYAG sues KuCoin for unregistered securities dealing, calls ETH a security.

• Messi's Play Time, others invest $21M in soccer Web3 game Matchday.

• Huobi: after dropping 90%+ in a day, Justin Sun creates $100M fund for token support.

• Peter Thiel's Block.One sells its 9.9% Silvergate stake.

Washington and more

• DeSantis expected to announce run after Florida legislative session ends on May 5.

• AI-powered fighter jets is a focus of the U.S. Air Force.

• Santos masterminded 2017 credit card ATM fraud, says former roommate.

• Putin thinks Russia will win as Ukraine matters more to him than West, says CIA chief.

• Saudi Arabia seeks U.S. security guarantees, civilian nuclear program for Israeli peace.

• Belarus passes law to execute those convicted of treason.

• Mexican authorities find 5 surrendered men that allegedly killed Americans.

8. Interesting tweets, memes, and images

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