In today’s big story, we’re looking at what the $650 billion in unrealized losses means for financial firms. (Hint: It’s not as bad as it seems.)

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That’s the unrealized losses US financial firms wracked up as of September 30, according to Moody’s estimate. It’s a 15% bump since the end of June, thanks in large part to the rout in the bond market. And with the sell-off continuing well into October, that figure is now likely even worse.

That’s a pretty scary number! To put things in perspective, if those losses were a country’s GDP, it’d be just shy of the top 20.

But the numbers also don’t tell the entire story. Similar to my potential to become a star NFL quarterback, the losses are unrealized. That means there’s a lot of wiggle room for how big banks can portray them on their balance sheet.

Insider’s Matthew Fox has a full breakdown of why banks can easily diffuse these balance-sheet bombs. Whether it’s simply holding them until maturity (meaning they won’t suffer any losses) or cashing them out and reinvesting in higher-yielding bonds, banks have ways to navigate the paper losses.

They said the Titanic was unsinkable, and we all know how that ended.

I don’t mean to be a fearmonger, but perception can quickly become a reality, especially with Wall Street’s herd mentality. A firm could have no plans of selling its bonds for a loss. But if enough people fear they might do it, things can escalate quickly. Lest we forget Silicon Valley Bank.

To be sure, big banks are better capitalized than SVB. Bank of America, which is sitting on some $130 billion in paper losses, has been adamant about its intention to hold its government securities to maturity.

But circumstances change. While the bond sell-off has cooled, there’s always a risk it could spike again, putting even more pressure on banks to eventually pull the trigger.

Even if things don’t get so dire, those unrealized losses still feel pretty real to investors. Big banks’ share prices noticeably dropped as bond prices sunk.

Therein lies the biggest issue. Regulations already limit banks’ balance sheets. Having more capital tied up in these bonds only further hamstrings lenders. And it couldn’t come at a worse time, as new players keep pushing into their territory.

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🔔 Before the opening bell: US stock futures fall early Monday after Moody’s on Friday lowered its US credit rating outlook to negative from stable.

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3. Two recession indicators are flashing, but it’s not as bad as it sounds. The bad news: Indicators tied to the unemployment rate and the yield curve are hinting the market is headed down. The good news: They’re being driven by something different than usual, meaning a recession isn’t as big of a concern.

2. Twitch CEO is somewhat living the van life. Dan Clancy is traveling the US in a van to meet top streamers and hear their concerns. Plus, he’s reportedly even giving some of them his personal phone number.

3. Emails reveal how Amazon and Google tap friends in government to influence policies. Last year, more than 80% of Amazon and Alphabet lobbyists previously held government jobs. Critics say that this relationship lets Big Tech companies limit how they can be regulated.

2. Big firms are now eyeing Airbnb as a moneymaker. A major private-equity firm recently started buying Florida homes to rent on Airbnb. But making a profit can be challenging for individuals and major companies alike.

3. Why strikes are working and which industries could be next. Experts said the economy is ripe for workers to demand more — partially because of the record profits some companies have recorded recently. They also said healthcare and food service are among the next industries to join the wave.

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Dan DeFrancesco, senior editor and anchor, in New York City. Diamond Naga Siu, senior reporter, in San Diego. Hallam Bullock, editor, in London. Lisa Ryan, executive editor, in New York.

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