Happy 3.14159 Day, Roca Nation. In honor of Pi Day, here's a fact that will make you feel much better about your hobbies: In 2006, a Japanese man recited 100,000 digits of pi in 16 hours. The man's entire recitation – including snack and bathroom breaks – was filmed. Meanwhile, we're over here struggling to remember our 4-digit bank PINs...

In today's edition:

• Giant seaweed patch descends on Florida

• Dogs poisoned at a competition in France?

• Explained: The SVB Collapse

🔑 Key Stories

Chick-fil-A Going Global?

Chick-fil-A announced a plan to expand to Europe and Asia

• With 2,898 locations in the US, Chick-fil-A is the country’s third-largest fast-food chain by sales. Since 2013, its total sales have almost quadrupled

• Chick-fil-A has previously expanded into South Africa and the UK, but both of those ventures failed. It currently operates 8 locations in Canada

• On Monday, Chick-fil-A unveiled a new $1B plan to open stores in Europe and Asia – markets KFC currently dominates – by 2026. It didn’t specify the number or exact locations of stores

Dig Deeper

• Chick-fil-A stores still dominate the US market: Despite being closed on Sundays, they average ~$6.3M in annual sales – ~4x rivals KFC and Popeyes

Seaweed Threatening the Gulf

A patch of seaweed twice as wide as the US is descending on Florida and the Gulf of Mexico

• The Sargasso Sea, located in the Atlantic Ocean between the Gulf of Mexico and Africa, is named for a genus of seaweed, “sargassum,” that floats on its surface. Sargasso is the world’s only sea that doesn’t border land. It is instead surrounded by currents

• This year, researchers have observed a sargassum bloom so big it can be seen from space. Hundreds of tons of it are now drifting toward Florida and Mexico

• This year, researchers have observed a sargassum bloom so big it can be seen from space. Hundreds of tons of it are now drifting toward Florida and Mexico

• Washed-up seaweed can hurt tourism, damage coastal areas, and release gases harmful to humans

Dig Deeper

• Doctors claim rotting seaweed releases hydrogen sulfide, a gas that can cause respiratory illnesses. In 2018, thousands of people on 2 small Caribbean islands went into clinics with breathing issues following a surge of washed-up seaweed

SVB Rattling Bank Sector

Several banks sought to prevent bank runs in the wake of the Silicon Valley Bank (SVB) collapse

• On Friday, tech-focused SVB collapsed, sparking fears that depositors would lose billions of dollars. On Sunday, another bank, Signature Bank, collapsed

• The gov’t has since stepped in and guaranteed that depositors would get all of their money back. Still, fears remain about the viability of regional banks

• On Monday, the stock of San Francisco-based First Republic bank fell 62%; Arizona-based bank Western Alliance 47%; and several others by 20%+, sparking fears of more instability ahead. So far today, they have spiked back up

Dig Deeper

• SVB and Signature were the 2nd- and 3rd-largest bank collapses in US history. Both banks had relatively high shares of uninsured deposits (deposits over $250,000), which the FDIC – a government insurance company – does not guarantee

• Get the full story in today's Wrap!

“Political Warfare” in Pacific

The outgoing president of Micronesia, a small Pacific island nation, accused China of waging “political warfare” against it

• In recent years, China has offered many Pacific island nations money and favorable trade deals if they sever ties with Taiwan, a self-governing island China claims. Only 4/14 Pacific islands, including Micronesia, have ties to Taiwan, down from 6 in 2019

• In a just-released letter, Micronesia’s president accused China of threatening him and bribing Micronesian officials to ensure the country doesn’t side with or aid Taiwan in the event of a conflict

Dig Deeper

• The current president will leave the presidency in 2 months. China called his letter “a clear misrepresentation” and “slander” that “doesn’t accord with the facts”

Start speaking a new language in 3 weeks

Together with Babbel

Spring is a time to re-focus, clear out the cobwebs, and make moves to become your best self. If learning a new language has always been a goal, now is the perfect time to make it into reality

• Babbel is a subscription-based language learning platform, available in 14 languages and used by 10M+ people

• There are a variety of ways to learn with Babbel: App-based lessons, podcasts, games, videos, content articles, and live online classes with some of the industry's best teachers

• Babbel has tips sprinkled throughout lessons, as well as courses like "Countries & Traditions," which provide useful tips and cultural knowledge to help you better understand the words you’re learning

Dig Deeper

• Spring is almost here, so step out of your hibernation den and get ready for travel! Start learning with Babbel now, and you can be speaking a new language in time for adventures this summer and beyond

🍿 Popcorn

ICYMI

• Every eyeball, everywhere all at once: Oscars viewership jumped 12% to an average audience of 18.7M, but remained lower than before the pandemic

• Down, set, psych! An NFL insider tweeted that an Aaron Rodgers trade to the New York Jets “is done,” despite others reporting no deal is done

• Friday night memes: Elon Musk is reportedly building a town in Texas where SpaceX, Tesla, and Boring Company employees can live

Wildcard

• Poisoned with a chance of meatballs: At least 4 dogs were poisoned at a cross-country competition in France, and some are claiming it was the meatballs they ate

• California savin’: A helicopter crew rescued a California man stranded on an island after a rushing river swept his car away. He escaped his car to get to the island

• Real-life book thief: An employee at a prominent book publisher who stole more than 1,000 manuscripts — including ones from Margaret Atwood and Ian McEwan — said he wanted to “cherish them before anyone else”

👇 What do you think?

Today's Question:

What is an unspoken rule that more people should follow?

Reply to this email with your answers!

See yesterday's results below the Wrap! 

🌯 Roca Wrap

After the collapse of Silicon Valley Bank (SVB) last Friday, how bad could the crisis get?

In recent years, low interest rates have made borrowing money easy and cheap. That fueled a boom for venture capital firms, who raise money to invest in startups. As startups received record amounts of funding, many parked it in SVB, causing the bank’s size to grow dramatically. As of last week, it was the US’ 16th-largest bank.

But partway through 2022, the Federal Reserve began raising interest rates, ending the startup boom. Instead of depositing cash, startups began withdrawing it. Theoretically, a bank should be able to cover that.

But SVB had a few problems.

Problem 1: Investing Long

Some context: Interest rates measure the annual return an investor gets if they hold a bond. The higher the interest rate, the better the bonds pay. Investors can either hold bonds until they mature or sell them for cash. But when interest rates go up, bonds with lower rates look less attractive and drop in price.

In search of higher returns, SVB invested a high share of its deposits in long-term bonds. It did so when interest rates were low. Over the last year, though, interest rates climbed significantly, which made SVB’s long-term bonds worth less. If they were to sell them to cover withdrawals, they would have lost a large amount of money.

SVB had also invested a relatively large share of its deposits in mortgage-backed securities, a financial asset based on bundles of mortgages. Those are also vulnerable to interest rate shifts.

TLDR: SVB held a disproportionate amount of assets that have performed poorly in the current economic climate. That left them with a shortage of cash to cover withdrawals.

Problem 2: Poor diversification

SVB was unusually reliant on tech startups, which made it vulnerable to sudden shifts in the economy. That industry was also exceptionally vulnerable to interest rate raises. If a bank’s customers were equally divided across the economy, it would be less likely to face a rapid increase in demand for withdrawals. Instead, when the tech industry fell, a large share of SVB’s customers suffered and began taking out their money.

Similarly, those clients – companies with a lot of cash – left SVB with unusually large deposits. The federal government only insures up to $250,000 per depositor. Deposits above that are considered “uninsured.” Because of the nature of SVB’s customer base, 88% of SVB’s deposits were uninsured, compared to 59% for JPMorgan Chase, 46% for PNC, or 33% for Bank of America.

A higher share of uninsured deposits means the bank is less protected in a crisis. That makes a bank run, and bank failure, more likely.

TLDR: SVB had a client base that was vulnerable to current economic conditions.

The combination of those 2 problems – a narrow client base and a large share of interest-rate sensitive investments – left SVB vulnerable. When it announced it was low on cash, its clients tried to pull their cash. SVB wasn’t in a position to give them their money and it collapsed.

On Sunday, the government announced that another bank, Signature Bank, collapsed. Like SVB, Signature catered disproportionately to tech companies, specifically in the crypto sector. It also had an even higher share of uninsured deposits – 90% – that made it susceptible to a bank run.

TLDR: Both SVB and Signature Bank were disproportionately reliant on large deposits from tech companies.

So will the crisis spread?

On Sunday, the government announced that all SVB and Signature Bank depositors would get all of their money back, regardless of whether it was insured. That move was meant to stop depositors from rushing to withdraw money from other banks, particularly ones with similar traits to those – such as having uninsured deposits and being reliant on a specific region or industry.

Stock market reactions initially suggested investors remain worried. On Monday, stock for First Republic bank, another San Francisco-based bank like SVB, fell 70%; Western Alliance, a Phoenix-based regional bank, fell 60%. On Tuesday, they spiked back up. It’s unclear whether that means the economy is in the clear.

For now, the government’s goal is to reassure investors and to keep the banks in business.

“We will not stop at this,” President Biden said Monday. “We’ll do whatever is needed on top of all [this].”

Will investors and depositors believe him? The answer to that question will decide what happens next.

If you have thoughts, let us know at [email protected]!

🌊 Roca Clubhouse

Yesterday's Poll:

Do you always carry cash on you?

Yes: 53%

No: 47%

Yesterday's Question:

What’s your favorite zoo animal? Why?

Harrison from Nebraska: “Hyraxes, this small little rodent-like animal is actually the closest living relative to elephants. You can only barely see a resemblance in its larger front teeth, which are linked to the tusks of elephants.”

Ryan from Boston: “The giraffes are my favorite. The crazy long necks, the beautiful pattern, and they're always the easiest to spot from far away.”

Joan from Maryland: “Hippo is my fav. Although dangerous they are great swimmers and can eat a watermelon or pumpkin whole!”

🧠 Final Thoughts

Today is about as dreary as dreary gets, but that doesn't get us down on our mission to bring you the world's best unbiased news.

We hope you all are warm and/or cozy wherever you are. Spring is around the corner!

–Max and Max