Mad Money

Jim Cramer’s guide to investing: Lessons from the Silicon Valley Bank crisis

Key Points
  • CNBC's Jim Cramer reflected on his flawed prediction for Silicon Valley Bank in which he recommended the stock shortly before the bank failed.
  • SVB's sudden collapse took many by surprise when the bank's failure followed an inability to raise capital after clients withdrew money en masse.
SVB didn't have a steady source of capital and a stable bond portfolio, says Jim Cramer
VIDEO2:4202:42
SVB didn't have a steady source of capital and a stable bond portfolio, says Jim Cramer

CNBC's Jim Cramer acknowledged that he makes mistakes, including his recommendation to buy Silicon Valley Bank stock at the beginning of 2023 shortly before it collapsed.  

SVB's sudden collapse took many by surprise. The bank failed after capital and startup clients withdrew money en masse and it was forced to sell bonds at a huge loss. When SVB could not raise enough capital, regulators seized and closed it, wiping out the bank's stock.

Cramer noted that SVB wasn't fully transparent about the risks it was taking. Regulators weren't monitoring it as closely as they should have and were too lenient with the bank, he added. It came to light later, Cramer said, that SVB had been reckless with its investment portfolio, making them extremely vulnerable to losses if faced with a mass withdrawal of deposits.

Cramer also conceded that he should have conducted more research.

"So many of us got Silicon Valley Bank wrong because we relied on the regulators, who were also wrong.  The bank examiners were totally asleep at the wheel before the mini financial crisis, although they've gotten a lot more aggressive once the horse had already left the barn. Still, that's no excuse," he said. "We need to be better than the regulators are, and in the case of SVB, we weren't. I wish I'd been more prescient with this one, but when I get it wrong, I always atone for it."

Jim Cramer talks what went wrong with Silicon Valley Bank
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Jim Cramer talks what went wrong with Silicon Valley Bank

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