Bonum Certa Men Certa

Mitchell Baker Running a Bank in Silicon Valley

posted by Roy Schestowitz on Oct 11, 2023

Reprinted with permission from Ryan Farmer. Mitchell Baker na OSCON 2005.

Photo credit: By James Duncan Davidson/O'Reilly Media - https://www.flickr.com/photos/x180/31881581/in/set-660556, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=432850

Bank of Mozilla-can Valley.

So I was looking over Mozilla’s recently-released financial statement for the 2021 fiscal year.

The good news is that letting office leases expired saved them some money. You don’t really need offices anyway between remote work and firing 300 employees.

The bad news is that most of their rainy day fund/cash equivalents is tied up in the bond markets.

Specifically low interest government paper like the kind that brought down Silicon Valley Bank before the recent rout in the bond market which is the worst in American history, and even worse than 1981.

A lot of the rest of it is in corporate debt obligations. Want to take a guess at what kind of corporate debt they have as a chaser to almost-zero interest government bonds that have years and years left until maturity? Might it have been invested in tech crap that is paying junk bond returns because there’s no product? I don’t know. It wouldn’t surprise me.

The problem with snatching up low interest bonds of 10+ year durations is, you’re stuck with them if interest rates rise which means you can hold them and lose money to inflation and the interest income you would have made with a better bond, which they issue now, or you can raise cash by selling it at a “book loss”.

That is, the loss goes on the book immediately, and someone else is only going to buy this thing if they can get a more attractive deal than going to the Treasury and telling them “I would like a bond.”

One would hope that at Mozilla, some of these college-educated professionals could find a Web browser laying around somewhere and take “interest rate risk 101“, also default risk. That one’s even easier. The junk bonds market pays a lot because there’s a higher risk that you might get stiffed by someone who walks away.

The irony is that this woke mob probably voted for this President of ours (and the ones who didn’t will probably say they did, because that’s what is required in order to not face harassment when you’re surrounded by leftists) who has been running around flushing taxpayer money down the toilet, causing the hyperinflation, which led to the high interest rates in the first place. Then the high interest rates laid waste to the bonds market because it had to adjust too much in such a short period of time.

Bonds are typically issued decades at a time. But conditions under which they’re written can change really fast.

It should be interesting to see how Mozilla’s finances look in the coming statements, especially if they need cash real quick and have to put those losses from losses in theory to losses in fact.

Corporations can buy Certificates of Deposit in amounts that individuals can and still get the same Deposit Insurance, with much shorter rates of “exposure” without ability to easily change lanes.

It was all of these “brilliant tech company CEOs” that decided to put hundreds of millions of dollars in places like Bank of Silicon Valley, and all in one account.

I guess they should find a Web browser laying around and go search how the Deposit Insurance Fund works.

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