"just one more thing"

- lt columbo 

I can't help myself: 

I can unreservedly say that many of the "talking heads" speaking on FinTV are almost completely clueless. 

With eyes affixed to the rear view mirror, they are sitting there recommending tech stocks. It's like they can't wait five minutes to see what happens in markets to churn out advice. 

Silence is often golden.

As mentioned earlier this morning I am attending a funeral this afternoon. 

Thanks for reading my Diary today and all week. 

I will see you back on my perch Monday morning. 

Trade and invest well.

Keen observation: 

Chris_Carlucci

Just as an aside, about half of the small community bank stocks I am looking at are green on the day. Of course, they had been hammered over the last four or five days, but just thought it was interesting.

On cue, Amazon and Google green: 

Mar 15, 2023 ' 11:05 AM EDT DOUG KASS

Three Adds

I am aggressively adding to (GOOGL) , (AMZN) and (DIS).

From Peter: Homebuilder sentiment, the new issue of access to credit. The March NAHB homebuilder index rose 2 pts m/o/m to 44 and that was 4 pts above expectations, though still below the breakeven of 50. Present conditions were up 2 pts to just below 50 at 49. The outlook though slipped 1 pt to 47 and prospective buyers traffic remained well under 50 at 31 but that is up 3 pts m/o/m. Putting aside the affordability challenge that buyers have but still tight inventory situation for existing homes, which would imply greater demand for new homes but at lower prices but one builders have difficulty delivering, home builders are now about to face credit challenges in terms of the access to it (of course more so for smaller builders). The NAHB said "a follow-on effect of the pressure on regional banks, as well as continued Fed tightening, will be further constraints for acquisition, development and construction (AD&C) loans for builders across the nation. When AD&C loan conditions are tight, lot inventory constricts and adds an additional hurdle to housing affordability." I'll repeat my belief again that for most banks in the US and Europe, we should be more worried about profitability, the likelihood of a shrinkage in loan growth (aka, credit crunch) and possibly equity raises to deal with bad duration marks rather than viability and one's deposits.NAHB

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Prospective Buyers Traffic

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* They know nothing

"Its (FRC) a good bank... doing the right thing...This is not a bank in trouble, it is meaningfully undervalued."

- Fast Money

This morning First Republic Bank (FRC) was downgraded to junk status (from A- to BB+) by S&P. 

This will serve to increase the bank's funding costs - making profitability next to impossible. 

My guess is that the bank will be forced to sell to a "healthy" banking institution. 

The size of my recent buy of FRC is so small it won't move the needle (it is modestly profitable thus far) - but thoughts of buying more has been eliminated. 

My position is at odds (indeed at the polar opposite) with the uber confident Fast Money panelists last night who gave an unqualified yes to buying this regional bank stock, FRC.

In my view, most investors that are interested in bank stocks should focus on the large money center banks.

I am aggressively adding to (GOOGL) , (AMZN) and (DIS) .

I have covered all of my (SBUX) short at $97.45 for a nice profit.

* If markets stabilize...

On strictly a trading basis, on any slight reason for the market to stabilize and rally a bit - tech names seem poised. 

Some ideas would be Intel (INTC) (hearing PCs stabilzing in Asia), (MSFT) (event day tomorrow),  (META) and my faves (GOOGL) and (AMZN) .

Covered most of my  (KSS) (new 52 week low) - down to tagends.

Covered all of my (HD) and (LOW) shorts for a nice gain.

Plus, I am virtually out of all my Treasuries. 

* Partials...

* Covering some (HON) (-$4, Jim Cramer recommended it last night on Mad Money - I obviously disagree! ), more (WGO) (new low), some (MMM) (new low), more (RILY) (schmeissed) and some (CCL) . 

* Adding to (PARA) , (ELAN) and (FRPT) (down on large convert offering).
__________ 

Long PARA (M), ELAN common (L) and calls (S), FRPT (S). 

Short HON (VS), WGO (S), MMM (VS), RILY (VS), CCL (VS).

Moved from small to medium sized in JP Morgan on today's -$5 decline - average in at $129.40.

I have sold out more Treasuries on today's outsized move.

Covering more (MS) and (GS) , and buying banks across the board.

From Peter: What's going on? It was about 4:45 am ET when the Saudi National Bank said 'no more' to more investment in its already 10% holding in Credit Suisse. While CS Chairman Axel Lehmann today said that help from the Swiss government "isn't a topic", how can it not be at this point notwithstanding the "strong capital ratios, a strong balance sheet" that Lehmann reiterated today? The Qatar Investment Authority owns 7% of Credit Suisse and we'll see what they say next, if anything. With the global bank psychology already fragile, the Euro STOXX bank stock index is down by 6% as of this writing. Credit Suisse has been a slowing moving car crash for years it seems but now today's news of course is happening in the vortex of SVB. I think the problem European banks face, all of which have had to manage NIRP and massive QE for almost 10 yrs and managed to survive, is similar to many US banks in that they own too much duration with I'm sure plenty of negative yielding bonds on their balance sheets which are guaranteed to lose them money if held to maturity. But at least they'll get back most of their principal but the marks look terrible. I don't think depositors have to worry but lending growth will slow, as it will in the US, and now equity holders run the risk of equity raises and dilution. Now with respect to the ECB this week, maybe they split the middle and hike 25 bps tomorrow instead of 50 bps, trying to satisfy both the doves and hawks. And the Fed will hike 25 bps next week again. The message from both will signal a wait and see thereafter while they both still try to flex their inflation muscles but acknowledge that accidents are now happening. Either way, the rate hikes are just about done but I'll repeat again, the persistence of inflation, albeit at a slowing pace, will make it much more difficult for central banks to all of a sudden start slashing rates and reverse on QT but at some point they'll at least try but not go as far as they have in the past. That said, The State Bank of Vietnam is now mostly focused on financial stability and they slashed its overnight lending rate and its discount rate by 100 bps to 3.5% overnight. Their last CPI report was 4.3% in February, which was a slight moderation from January. Back to the Fed for a second, last night Fed Governor Michelle Bowman said "The US banking system remains resilient and on a solid foundation, with strong capital and liquidity throughout the system." Well, if the case and they strongly believe it, it will be why they will hike next week whether it's the right thing to do or not. She did though also acknowledge what's transpired this week, "The board continues to carefully monitor developments in financial markets and across the financial system." In case you didn't see on Monday, the MOVE index, the bond version of the VIX, spiked to its highest level since 2009.MOVE Index

Cass Freight said its February shipments index was down .3% m/o/m seasonally adjusted and down by the same amount y/o/y. They said "Soft real retail sales trends and ongoing destocking remain the primary headwinds to freight volumes, and sharp import declines suggest this type of environment will persist for several more months." With respect to freight costs, the inferred rate fell 5.5% m/o/m and down by 9.4% y/o/y. Cass Freight said "We estimate about 1% was due to lower fuel costs, and the cumulative decline in diesel prices over the 3 months through February has lowered freight bills by about 6%. There was also mix pressure in February as truckload gained a little more share from LTL m/o/m." More on transportation, JB Hunt spoke at the JPM conference yesterday and said "we've talked about being in a freight recession, really in the fourth quarter and even into the first quarter." This was an interesting take on things as an executive highlighted the difference between what their customers are saying and what they believe. "I will say I think our customers haven't really changed their tune much. They still have a more optimistic view on the 2nd half. They feel like they're working through some of their inventory that we really called out. I would say as we progress through the quarter, I'm slightly less optimistic than our customers. It doesn't mean I'm pessimistic, but I'm really trying to discover how much our customers really know." With respect to housing, not surprising, each zig and zag in mortgage rates is tilting activity in one direction or the other. Lennar in their release yesterday said "In December, interest rates and sticker shock continued to constrain sales activity, while in January and early February, lower interest rates energized sales. In late February, a spike in interest rates impacted website and community traffic and had a slight impact on sales." Speaking of which, with the drop in the average 30 yr mortgage rate by 8 bps for the week ended March 10th, refi's rose 7.3% w/o/w but still lower by 38% y/o/y. Refi's were down by 4.8% w/o/w and are still down 74% y/o/y.

* Mine is a simple investment strategy that may fit the bill these days... 

"The rich get richer and the poor go to prison."

- Grandma Koufax 

The chaos in the vc/tech and banking industry means one thing to me - as an investor. 

The largest tech companies and banking institutions stand to benefit in a dramatic fashion from the current mayhem - at the expense of its competition. 

In technology the winners will likely be Microsoft (MSFT) , Alphabet (GOOGL) , Meta (META) and Amazon (AMZN) . The largest tech companies have the resources to expand their product suite of innovation with internally generated funds and the ability to attract intellectual capital. 

In banking the winners will likely be Bank America (BAC) , JP Morgan (JPM) , PNC (PNC) , Citigroup (C) and Wells Fargo (WFC) .

The largest money center banks will gain deposits, continue technological advances, generate capital and improve market share from its less advantaged competition. 

It is simply that simple. 

Over the last three trading sessions I have radically increased my exposure to the largest tech and banking companies. 

I will add on any further weakness.

The proximate cause of this morning's schmeissing in stock futures is the perception of a deepening deterioration in Credit Suisse's (CS) balance sheet and operating income statement. 

The reason I plan to aggressively buy more bank stocks and add to my overall net long exposure is that this is not a new situation - it has been developing for years. 

In fact, as evidence of the market's view of CS -- its equity capitalization is down to only $9 billion. 

Let the Cassandras rejoice, but for me taking advantage of rear view panics is the type of setup I embrace. 

And, without emotion.

* Out of chaos, comes opportunity...

Do you know?
Don't you wonder
What's going on down under you?

We have all been here before
We have all been here before
We have all been here before
We have all been here before

- Crosby, Stills, Nash and Young, Deja Vu

* From trouble ahead, trouble behind to a market that just won't like be much fun (since I quit drinkin') to You Can't Roller Skate With a Buffalo Herd (meaning it's a tough market to navigate these days). And soon thereafter the market was down 4%-6% from the early February highs - and The Law Won! Wednesday I moved to Long Island's Billy Joel so I can finally find what I am looking for. Thursday was no futures column - lyrics silent! Today, the swoon (and SIVB) took the markets by surprise - in this not so magic moment... To yesterday's optimism, I saw the market's party lights. Today, with Credit Suisse concerns (and a hat tip to Yogi Berra), it feels like deja vu all over again.

* Regardless of the banking chaos and the new regime of daily volatility, there is no change in my base expectation that we may have seen the top in the S&P 500 Index for all of 2023. As discussed in my opener on Tuesday, we have breached (to the downside) the middle of the range - bringing stocks back into a buy level.

* Adjusting for the large drop in stock futures (at 6: 42 a.m.), the S&P sits at 3860 - exactly where it was at this time yesterday morning - slightly under my fair market value of 3900. According to my calculus, there is a more attractive distribution of upside (+240 handles) and -160 handles to the downside.

* In this market I am trading more actively these days. I have been emphasizing pairs trades, straddles and strangles. With the higher VIX I am looking to put back on some straddles and strangles.

* While I am a bit more positive over the near term, the intermediate term outlook for stocks remains difficult in light of the competition and a "sea change" and new regime of (still) higher interest rates:

* The S&P Oscillator fell back (less oversold) on Tuesday -- from -7.04% to -5.83%.

"You are never as smart as u think you are when you are making money or as dumb as u think when losing."

-- Unknown

"The stock market will do whatever it has to do to embarrass the greatest people to the greatest extent possible."

-- Wally Deemer

"Workin' on our night moves
Trying to lose the awkward teenage blues
Workin' on our night moves
In the summertime
And oh the wonder
Felt the lightning
And we waited on the thunder
Waited on the thunder."

- Bob Seger, "Night Moves"

This daily Futures feature is like inside baseball. I try to show you and write about what I believe thoughtful hedge fund managers are looking at when they awake -- let's call it our normal routine -- setting the stage for their strategy for the day. The market is a complicated mosaic and the more info you have, the better trader and investor you will be!

The market (and money) never sleeps -- and neither do I, it appears! I have previously described the importance that overnight futures trading holds for me here. It is a guidepost to my strategy in the regular trading session. Moreover, the overnight/early morning futures hold opportunities as they are (1) inefficient, though liquid, and (2) it seems fear and greed are often exaggerated outside the regular trading session. I frequently try to capture those efficiencies by trading actively both in the pre- and after-market sessions.

Here are some brief observations I wanted to highlight and a summary of overnight price movements in various asset classes:

*Wednesday's close (S&P 3920) is basically at fair value and compares to The Chop Bucket of 3700-4100 for the S&P 500. S&P cash adjusted for the sharp drop in futures is 3855 providing a more favorable reward vs. risk.

* Stock futures were slightly lower most of the evening but have collapsed in the last hour (Credit Suisse (CS) "issue") . S&P futures had peaked at +9 and bottomed at -74. Nasdaq futures peaked at +27 and bottomed at -205. At 6:57 a.m. ET, S&P futures were -73 and Nasdaq futures were -202

* The S&P Short-Range Oscillator has been a great trading gauge. When it gets oversold, as it did last Thursday (at over -4%), the market robustly rallied. When it moved to less oversold (over 0), there is typically a market headwind. The Short-Range Oscillator closed Wednesday deeply in oversold -5.83% compared to Tuesday's -7.04%.

* I have also kept a bead on volatility. In recent days, reflecting the bank crisis, the VIX has climbed from the high teens to the mid twenties. This morning, the VIX moved much higher to 27.53 (+3.80). As volatility declined recently, I took off a lot of my straddles and strangles for a profit. I plan to get back into some straddles with the boost in vol today!

* The U.S. dollar is down against the yen but stronger ( a bit) vs. the euro and sterling.

* I have been continually writing that bonds should be at center stage to equity weightings - it's all about the rates. Yesterday yields moved higher after an unprecedented flight to quality on Monday (in which I sold out some of my Treasuries). I added back to six month and one year Treasuries on Tuesday.

* The Two-Year Treasury yield is again falling back in the face of the CS issues. Today the two year is -14 bps at 4.087% and the 10-Year is -9 bps to 3.541%. Over there, the yield on the 10-Year U.K. Gilt bond is -8 bps. See my Barron'sinterview two weekends ago that describes rising rates as the single most important headwind against further stock gains.

* The 10s/2s Treasuries curve has been making dramatic daily moves. The curve steepened to -55 bps this mornng.

* Commodities - where there are no zero days to expiration options! - are broadly much lower again this morning.

Brent oil is -$1.30 to $76.15 - I am still avoiding energy stocks - but getting interested on price.

* Gold is flat. 

Here is a synopsis of some of my columns I believe were important, or in the event you were out for the day and did not read my Diary. The principal intent is to review the logic of my market moves and other factors:

A Remarkable Stat

The Chop Bucket

Investing By the Numbers - Without Emotion

And here are Tuesday's trades (an active day!):

* Added to banks.

* Sold early morning strength in stock futures - (SPY) and (QQQ) (buying back with futures -70 in premarket trading now):

Mar 14, 2023 ' 09:50 AM EDT DOUG KASS

Trading Around Core

Selling some of the (SPY) $391.17 and (QQQ) $295.73 purchased much lower yesterday in premarket.

Will buy back on weakness.

And later:

Mar 14, 2023 ' 01:35 PM EDT DOUG KASS

Two Morning Sales Bought Back

S&P futures have given up about 33 handles from the highs.

I just bought back these morning sales in (SPY) $389.75 and (QQQ) $295.70:

Mar 14, 2023 ' 09:50 AM EDT DOUG KASS

Trading Around Core

Selling some of the (SPY) $391.17 and (QQQ) $295.73 purchased much lower yesterday in premarket.

Will buy back on weakness.

*Mar 14, 2023 ' 10:54 AM EDT DOUG KASS

Today's Individual Stock Buys

(PARA) , (ELAN) , (FRPT) , (BAC) , (PNC) , (TRSSF) .

* Added to (GOOGL) , (DIS) and (AMZN)
__________ 

Long SPY (M), QQQ (M), DIS (L), GOOGL (M), AMZN (M), PARA (M), ELAN common (L) and calls (S), FRPT (S), TRSSF (S), BAC (M), JPM (S), WFC (M), C (M), FITB (M), BK (M), USB (M), PNC (L).

Short SPY calls (S), QQQ calls (S).

Buying banks across the board in premarket trading. 

All of them.

Credit Suisse (CS) credit default swaps:

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This is a good day to be unemotional and stick to one's investment plan/program:

Adding to (SPY) at $385.29 and (QQQ) to $293.13.

A bunch of things. 

I will be out of the office all afternoon to attend a funeral in Delray, Florida. (The child of a good pal passed away unexpectedly.) 

On Thursday and Friday I will be out of the office and not writing in my Diary. But you will be in the very capable hands of Bret Jensen and Stephen "Sarge" Guilfoyle.

This table is a great resource for short term traders:

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From JP Morgan:

EQUITY AND MACRO NARRATIVE: Elevated volatility and low liquidity seem to be a commonality across asset classes. Rates market depth fell to March 2020 levels. Our Equity Trading desk has remarked the difficulty in trying to access liquidity even in the headline-related stocks. As uncertainty creeps back into the market, we may have entered a new trading regime as described below. 

Yesterday, Elan Luger, our Head of Americas Cash Trading, told us, "Quick view into CPI is that it really doesn't matter. What has happened over the last 3 days has done Powell's job for him. Credit creation at banks will collapse and the economy will slow even in a good scenario. Inflation is almost certain to taper off as a result which should take a lot of pressure off of Powell but also means today's backwards looking data point is fairly irrelevant. The market rallying on the view that the Fed does not need to raise anymore is silly IMO. If they don't need to raise it is because of downside risks to growth and systemic risk to the banking system... Not a positive. The last 3 days we saw a massive unwind of consensus positions - short bonds short equities - which is why the market hangs in as well as it does. I recognize we are close to the low end of the range, but I'd argue the range has changed and we are back in sell rallies mode here." 

Keep an eye on stock/bond correlation and stock/Dollar correlation. As we approach the Fed meeting, we could see a re-pricing of yields as we get an update on the DOTS. Terminal rate expectations are under 5%, down from 5.50% last week. 

CORRELATION CHART: SPX & US 10Y YIELD

CORRELATION CHART: SPX & USD

FED'S DECEMBER DOT PLOT

(Source: All 3 charts sourced from Bloomberg; data as of Mar 15, 2023)