I have a lot to catch up with.
Thanks for reading my Diary today.
Enjoy the evening.
Be safe.

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Closing breadth, biggest movers and heat map:

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I sold some (SPY) and (QQQ) calls short at the close -- near the highs of the day.

Wolf Street on CoCo bonds.

I am back to market neutral.

Adding to (FSK) and (ELAN) .

Back from my Dr. appointment.

Getting my sea legs back.

I have a routine Dr. appointment between 2:45-3:30 pm today. 

Radio silence.

Jim Piper

Interesting article in Barron's this weekend regarding banks. In my opinion banks are the classic case of dumb money. I remember the early 80s when the banks loaned out a lot of money low, then as rated rose towards 20% people withdrew money from banks and invested in the somewhat new money market funds at higher rates than they could get from the banks. Finally as rates approached 20%, they stopped loaning money on fixed rate loans....thereby insuring that as rates went down they would not profit from it. Here again, they were caught buying bonds at the low, insuring large losses as rates rose.

What's interesting is that those bonds are held in "hold to maturity account" where the banks aren't required to mark to market. The effect is that BAC for instance show a capital ration of 11.2%, a ratio of above what they are required by regulators of 10.4%. However, according to Barron's, BAC capital ratio plummets to 5.9% when adjusted for losses in the bond market, well below their regulatory requirement. See Barron's for all the bank stocks ratios, but suffice it to say all of them are below their regulatory requirements when the bonds they hold are adjusted for their losses.

The stocks are oversold, but I would say for good reason. Their cost of deposits should be rising. Hurting margins. I think these stocks are dead money. I'm not expert though. Barron's apparently likes the banks, but hard to understand why. BTW, charts look terrible.

dougie kass Jim Piper

i agree that banks face headwinds.
the issue is whether current prices discount the obvious and whether the franchises are undervalued.
dougie

From my pal Mike Lewitt:

The Credit Strategist Blog

As expected, Swiss regulators strong-armed UBS Group AG into buying Credit Suisse Group AG over the weekend for in order to avoid a global banking crisis. The Swiss regulator FINMA announced that while shareholders will be paid ~$3 billion, ~$17 billion of Credit Suisse's Co-Co bonds (Additional Tier 1 or AT1 Contingent Convertible Bonds) will be wiped out, triggering a furious backlash from owners of those toxic securities (actually, any security issued by CS was obviously toxic for years as the bank stumbled from one self-inflicted crisis to another). The deal will end up wiping out tens of thousands of jobs and likely end efforts to spin off CS's investment bank. We won't have CS to kick around anymore (or it may be better said, Credit Suisse won't have us to kick around anymore). It is, as they say, a mercy.

The deal certainty dealt a blow to Europe's $275 billion market in CoCo bonds, which can now be seen as another idea that works better in theory than it does in practice (see below). This transaction imposes the largest loss ever inflicted on AT1 investors since the asset class was initiated after the 2008 financial crisis. But these bonds worked exactly like they were supposed to; they just ran into the practicalities of bailing out a systemically important financial institution.

Holders of Credit Suisse's CoCo bonds may feel like characters in the Cocomelon cartoons I watch with my granddaughter (love has no limits). But they should spare us their faux outrage. They have nothing to complain about and are getting exactly what they bargained for and deserve.

First, they can hardly be surprised at suffering losses after investing in Credit Suisse. Second, Co-Cos are designed to take losses regardless of what happens to the stock that sits under them (which in CS's case lost virtually all of its value over the years). It may seem odd that the deal wipes out the CoCo bonds despite paying out $3 billion to shareholders because this appears to effectively subordinate bondholders to shareholders But that is not really what's happening; CoCos are supposed to work this way. They are a type of debt that is considered part of the issuer's regulatory capital. Holders can convert them to equity or write them down in certain situations, for example, when the bank's capital ratio falls below a certain threshold. CoCos offer higher yields than other bonds and are supposed to be wiped out in this type of situation. That's what happened. There was no call to bail them out.

This deal was unusual in that Swiss regulators voided the requirement for shareholder approval under Swiss law (analogous, perhaps to the Federal Reserve's invocation of emergency powers under Section 13(3) of the Federal Reserve Act). There were good reasons for this, among them the fact that there was no time for a shareholder vote and many shareholders may have opposed the deal. This decision may have removed the necessity of offering CS's shareholders anything for their stock (and perhaps to use that $3 billion to make a partial payment on the CoCos) but for practical (i.e. political) reasons it was decided to pay a nominal amount to shareholders who include the Saudi National Bank and the Qatar Investment Authority, unhappy investors whom the Swiss would probably prefer to offer something.

CoCos may now trade as litigation claims though this occurring in Europe rather than in litigation-happy America makes those claims a long-shot. The rest of Europe's CoCo market is selling off sharply with investors licking their wounds. They'd do better spending their time watching cartoons than reaching for yield in securities cooked up by regulators to bail out banks that can barely help themselves.

At 11:50 am:Breadth

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Biggest Movers

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Heat Map

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What we appear to be experiencing here is a bit of a sigh of relief rally. You will recall that early in the morning, yields were much lower and so were futures. The fact that it appears the banking situation has calmed down slightly as the flight to safety eases and the higher yields are putting some pressure on Nasdaq, which was a previous beneficiary over the past couple of days, but the sigh of relief also helps to push the Dow and S&P higher.

Obviously, this all can be affected by a new name or a new shoe falling, but as I say right now, it is a bit of a sigh of relief rally.

Keep your eye on the yields. They may be the most sensitive to any change in that idea that there is some relief at all.

The technicals help the stock rally to a small degree. The fact that we bounced off 3900 on Friday helps dress up the look of the charts. There is some resistance up around 3950 to 3965 and then much more resistance up around 4000, but that seems like an unlikely target here.

So, for now concentrate on the yields, which should show us the story and try to stay safe.

Arthur

I lost all of my MP Materials (MP) long and most of my St. Joe (JOE) long on Friday's expiration. 

I will be a buyer of both names - but only on weakness.

I have used today's strength to reduce my net long exposure.

Will add on weakness.

I have reduced my (QQQ) position from medium to small on the opening.

FS KKR Capital Corp  (FSK) . 

More soon.

* The moats of the largest banks will grow deeper

Over the course of this week I will discuss the ramifications of the banking industry crisis and why I am buying banks on weakness. 

To summarize, the cause of the problems are several fold: 

* A feckless Federal Reserve who had a misguided view of inflation - holding interest rates to zero for a lengthy period of time - and then proceeded to raise interest rates too high and too fast.

* The 2018 rollback of portions of Dodd Frank - in which both Republicans and Democrats agreed to and are dually to blame for the less supervision that ensued.

* Profoundly weak banking regulatory oversight.

* Poor individual bank management who endorsed a large asset and liability mismatch and who took on credit risks were too concentrated. 

I am buying the banks because the largest institutions will grow more safe, powerful and profitable at the expense of competition that is poorly positioned - from a capital standpoint - and unable to fund the capital expenditures that are needed to make the necessary technological/system advances that are warranted to be put in place in the future.

From Peter: A few things going on.

UBS stock is down about 4% - well off its lows, we see CS stock at almost a zero though some value still there but notably was the complete zero the contingent convertible securities -lowest level of bank debt and CS had $17b worth of them - of CS are being assigned and are supposed to be senior to the equity.

The Euro STOXX bank index is lower by 1.5% in response to the lowest level since December. At least for the European banks I do believe that the ring fence around CS, which has been a melting ice cube for years as we know, will hold and not infect the viability of them. But, with 80% of lending to corporations in Europe done via the banks, you can be sure we're going to see a notable drop in bank loans as we're likely to see in the US where banks provide about 25% of corporate loans.

Also, we're going to see with some banks, both in Europe and the US, equity raises and shareholder dilution, as seen with First Republic here.

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Speaking of US commercial and industrial loans, for the week ended March 8th, so the day before everything hit the fan for SVB, loans as seen in the chart below have been little changed this year as lending standards tighten. While lawmakers in DC have started the conversation on how might the FDIC insured deposits limit will be raised, the sooner the better in making a decision but either way, expect C&I loans to shrink from here I believe. Of the about $17T of bank deposits, about half are insured. It's easy for some to say (including notable hedge fund people on Twitter) 'the government should insure all deposits!' but we're talking big numbers here and easier said than done.

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I'll say this about the Fed this week, what ECB Governing Council member Francois Villeroy said today is why the Fed will most likely hike by 25 bps this week, though telegraph a pause thereafter. Villeroy said with regards to their rate hike, "It showed our confidence both in the solidity of French and European banks, and in our anti-inflation strategy. We will take decisions meeting-by-meeting depending on economic data, but we remain determined to beat inflation." Unlike the Fed though, the ECB is still way behind with its deposit rate relative to inflation.

On whether the Fed should follow the ECB in hiking, imagine for a second the scenario that it was the market that set the fed funds rate, we can at least dream, and not a bunch of people sitting around a large table in DC or on Zoom. Now markets get things wrong a lot but it quickly adjusts when they see the error of its ways. Firstly, the 'market' would have been tightening well before the Fed started to and you can be sure, the 'market' would NOT be raising rates this week.

We saw a nice rally in big cap tech last week as some think they are safe in this environment but I need to remind people that many customers of big cap tech are small and medium sized businesses, including VC funded companies. You can be sure less tech services and software are going to be needed at least for the next few quarters.

Remember when we heard that the Department of Energy would start refilling the SPR at $70 per barrel after 'shorting' oil at around $90? We'll, now they are getting cute with oil now in the mid $60's. Amos Hochstein, an administration energy official is not yet ready to cover their short. "Why don't we take this one day at a time" he said last week on Bloomberg tv. It's a big mistake with reserves at 40 yr lows.

Taiwan said its February exports fell 18.3% y/o/y, a bit more than the expected drop of 17.5%. Exports to Hong Kong and Mainland fell a sharp 36% y/o/y and were down by 12.6% to the US and by 13% to Europe. Exports of electronic products were down by 22% y/o/y.

Germany said its February PPI fell .3% m/o/m, not as much as the estimate of down 1.4% while the y/o/y increase was still 15.8% vs 17.6% in January. Quite the stagflationary situation over there.

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Upside

-BACK +27% (IMAC Holdings and Brain Scientific announce merger-of-equals; no financial terms disclosed)
- (NYCB) +27% (confirms subsidiary Flagstar Bank, N.A. has acquired certain assets and assumed certain liabilities of Signature Bridge Bank)
- (KRTX) +10% (Phase 3 EMERGENT-3 Trial of KarXT in Schizophrenia met primary endpoint; on track to submit NDA to FDA in mid-2023, with potential launch in 2H24, if approved)
- (PFSW) +4.8% (authorizes share repurchase program to purchase up to 1M common shares)
- (NRG) +4.2% (Tier1 firm Raised NRG to Buy from Neutral, price target: $39 from $35)
- (ARWR) +2.9% (receives FDA fast track designation for ARO-APOC3)
- (DOW) +2.1% (Deutsche Bank Raised DOW to Buy from Hold, price target: $60)
- (FL) +1.8% (earnings, guidance; provides mid-term financial targets)
- (UNM) +1.8% (Jefferies Raised UNM to Buy from Hold, price target: $50 from $44)
- (EXEL) +1.5% (announces $550M share buyback until end-2023)
- (FLT) +1.5% (considering strategic alternatives after striking standstill agreement with activist investor D.E. Shaw)

Downside

- (CS) -58% (UBS agreed to acquire Credit Suisse for ~CHF2B in all-stock deal)
- (AZYO) -26% (US FDA Submission delayed for CanGaroo RM Antibacterial Envelope)
- (FRC) -19% (pressured bank sees back-to-back credit rating downgrade from S&P; reportedly in discussions to raise additional funding)
- (RVLP) -16% (earnings)
- (PDD) -14% (earnings)
- (NIU) -7.5% (earnings, guidance)

There was nothing particularly sweet about the stock market trading on Friday, it continued to labor under the cloud of the current banking "crisis" (see below). They started out shaky in the morning as the rumormongers were out and about. We expressed concern about that in this late morning update:

03.17.23 LATE MORNING UPDATE: Nervousness continues among the regional banks, different aspects of the balance sheets, are being talked about. The problem continues to be predominantly duration risk. You should be extra careful because as I said in the comments, today is a kind of rumor-mongers delight, going into a nervous weekend, having followed SVB nervousness of last weekend. The rumormongers will be out and about with scary stories.

The key here is to keep the S&P from dipping below 3900, which would be a bit of a strain. So, stay close to the newsticker, but avoid the rumor-wires at all costs. Have a great Saint Patrick's Day and stay safe.

It was a pretty good guess with the slide rule about trying to keep the S&P above 3900. With all the bouncing around, the intraday low was, in fact, 3901, which has got to be at least a moral victory for the bulls. The churning continued with some expressing anxiety about the massive triple witch that we were seeing on Friday, and we made some observations on that in this mid-afternoon update:

EARLY MID-AFTERNOON UPDATE 03-17.23: Markets come off lows as no new shoes drop. The biggest problem is questions still circulate about whether they are authorized to cover 100% of deposits. but it's not a big issue in the markets yet. Expiration has not added to the volatility, but it has added to the volume. Final half hour may bring some surprises, as we have large re-weightings and shifts of stocks from one class to another. Also, if we come close to a key strike price, traders may try to gun the market one way or another to make the strike price effective. Let's hope it stays quiet, but I did have to lay out the possibilities.

Have Happy Saint Patrick's Day evening and a wonderful weekend and try to stay safe.

Instead, it was not the final 30-minutes that provided some of the swings and surprises, but in fact, they opted to do it through the entire final two-hours, which saw some swings in both trading and psychology as we moved toward the weekend. As I have said time and again, traditionally Fridays have a mild 55 to 60% bias to the upside, but that bias did not hold with anxiety about some surprise negative coming up over the weekend from our astute banking regulators.

This, again, is expected to be a week of some resolve with the Fed right in the middle of it. My best assessment from the local watering holes is that the majority expect the form chart to be right and we get a 25 bp hike with a lot of reassuring commentary about the banking system during the 2:30 press conference that follows the 2:00 p.m. statement.

While we await the Fed, let's begin a review for this morning and as usual the first place to start is overseas. Overnight global equity markets have been on a bit of a roller coaster. In Asia, for example, Japan was down the equivalent of about 450 points in the Dow. Hong Kong was down the equivalent of about 900 points, but Mainland China was off only fractional as are things in India.

The markets in Europe were nervous and rather negative before trading. Now, that they have opened, they seem to be stabilizing a bit and, while as we go to press, there appears to be losses, but they tend to be fractional.

On the official economic calendar, there is virtually nothing here, but there appears to be enough geopolitical and geo-financial news to keep the pot boiling. There remains some confusion about the official government attitude on so-called uninsured deposits. That, unfortunately, is keeping the trading a little shaky in some of the regional banks.

The sooner the government can shore up their guarantees, the closer we will come to things stabilizing. U.S. equity futures were down along with their European cousins much earlier. They seem to have stabilized to some degree as no new shoe appears to be dropping. Yields are down smartly in some cases, but that appears to be a flight to safety.

There is little to say other than refer to the standard drill. Stay close to the newsticker but do avoid the rumor-wires. Keep your seatbelt fastened. Stay very nimble and alert, but most of all, try to stay safe and avoid those rumors.

* Out of chaos, comes opportunity

* I view the drop in rates, the normalization/steepening yield curve and lower prices as such an opportunity being presented - a contrarian view, I know!

* I am buying premarket weakness (at 4:30 am)

* So, let's get Ludacris

Shake your money maker like somebody 'bout to pay ya
Don't worry about them haters, keep your nose up in the air
You know I got it, if you wanna come get it
Stand next to this money like, eh, eh, eh

- Ludacris,Money Maker

* 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 Tuesday's optimism, I saw the market's party lights. Wednesday, with Credit Suisse concerns (and a hat tip to Yogi Berra), it felt like deja vu all over again. This morning, let's get Ludacris... time to make money, money maker?

* Regardless of the continued banking chaos (here and over there) 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. I have been buying weakness and, during this spiraling down of stock prices, adding to my net long exposure

* Adjusting for the small drop in stock futures (at 5:52 a.m.), the S&P sits at 3910 - which is right in the middle of my Chop Bucket range. According to my calculus, there is an equal distribution of upside +200 handles and - 200 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 (the market already has had more moves than a shortstop batting .110 this morning - futures are +35 handles from the 4 am low) 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 grew more oversold on Friday -- expanding from -5.86% to -8.89%. I am a buyer (without emotion).

"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:

*Friday's close (S&P 3915) 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 modest drop in futures is 3910 providing a more favorable reward vs. risk.

* Stock futures started higher (+30 handles) but fell to more than -40 handles around 4 am and are now almost unchanged! S&P futures had peaked at +32 and bottomed at -52. Nasdaq futures peaked at +105 and bottomed at -121. At 5:57 am ET, S&P futures were -5 and Nasdaq futures were +3:

* The S&P Short-Range Oscillator has been a great trading gauge. When it gets oversold, as it did late last week. I buy. When it moved to less oversold (over 0), there is typically a market headwind. The Short-Range Oscillator closed Friday deeper in oversold -8.89% compared to Tuesday's -5.86%.

* 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 26.59 (+1.08). 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 volatility.

* The U.S. dollar is weaker against the yen, euro and sterling this morning.

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* I have been continually writing that bonds should be at center stage to equity weightings - it's all about the rates. I have recently sold a lot of my Treasuries in light of the downward move in rates.

* The Two-Year Treasury yield is again falling back in the face of the (CS) / (UBS) consolidation. Today the two year is -111 bps at 3.732% and the 10-Year is -5 bps to 3.335%. 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 only -37 bps this morning.

* For obvious reasons, the market is ignoring the decline in rates and the normalization of the yield curve. I am not, I am buying.

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

Brent oil is -$2.23 to $70.76 -- I am still avoiding energy stocks -- but getting interested for the first time in a while on price. The notion, expressed in business media, that energy stocks are well positioned even with lower oil prices was fanciful as I have been writing in my Diary:

* Gold has continued its big run. Up +$19 more today:

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: 

I was out of the office all day. 

And here are Friday's trades: 

* I added to banks and indexes on weakness... again this morning in premarket trading.

dougie kass

Something to think about:

Bears, like myself, have cautioned about the widening inversion in the yield curve and the rapid climb in interest rates.

Well, the yield curve has dramatically normalized and rates are dropping like a stone now.

I buy.

Slowly at first...

Dougie

In weakness (S&P futures -40 handles), I am adding to  (BAC) , (C) , (WFC) and (JPM) in premarket trading.

More on banking from Jefferies:

In terms of the latest

1. UBS/CS is of course the news of the weekend - AT1 treatment is getting attention with mixed feedback on how much this could/should matter
2. FRC news lacking - SP downgrade today follows Moodys downgrade Friday night - follows Friday 4:01 headline of a potential private capital raise....
3. Increased threshold for deposit guarantees gaining momentum? --- several mentions from Capitol Hill today.....would this solve the problem? Interesting comment on procedural steps
4. Buffet headlines - any solution here?
5. NYCB/SBNY headlines - the irony in this......but no purchase price provided?
6. Global Central Banks increase swap lines - some cohesion around SNB's UBS backstop among broader concerns, but lacking the oomph to change the discussion
7. H8 data --- worth including Ken's weekly breakdown with the all important caveat that this Fed data is on a 1-week lag and so it does NOT include March 9th and forward (we will of course get that this week) - https://javatar.bluematrix.com/links2/secure/html/cbab7a5a-09e2-4db8-a9c0-1f6e4a91f3e7
8. Other - this point got no attention on Friday, but worth reiterating, as Ken suggested in note, that its possible that part of the increase in discount window access could have been SIVB/SBNY on Thursday/Friday (March 9th/10th) - which would increase TOTAL Fed access attributable to only 4 institutions from above 90%+ (of the $307B) to further above 90% - note here - https://javatar.bluematrix.com/links2/secure/html/af3888ac-1d74-4215-96fa-e7a43df43e5d

UBS/CS

The overall tone here from a market perspective has been relatively positive - European markets looking to open higher as I write

That said - the piece that is getting the most attention is this AT1 vs equity treatment - whereby the AT1 appears to be wiped out vs the equity is garnering some value

The technical side of this - with equity being senior to AT1s based on the distribution that is being reported = could have broader fallout for credit funds further across the cap structure

JEF Fins credit strategist Jon Hatcher has been very active on this topic - with some concern that fixed income investors may have to react beyond just AT1 exposure, with focus more specifically on US preferreds

I've gotten some pushback as to the size of this exposure broadly 

FRC news?

The hope here was that the group could finally diverge from FRC equity value/trading - with Friday night's update being what it was, the method TBD but the conclusion more inevitable

Followed by another gasp at 4:01 Friday

With now nothing to follow by 8pm on Sunday night (beyond 2 more downgrades to boot)

As a reminder - Ken/Casey math got to a run-rate of a loss of ($460M) in PPNR for 1Q vs forecast profitability of $460M - https://javatar.bluematrix.com/links2/secure/html/af3888ac-1d74-4215-96fa-e7a43df43e5d

WSJ article from an hour ago doesn't say a whole lot - For the moment, regulators were inclined to wait and see how First Republic and its peers fare in markets early this week. The calculus was that while First Republic is weak, it is still viable. So action by the Fed or government could be seen as overreacting and hinder private-sector solutions, which would be the preferred outcome.https://www.wsj.com/articles/first-republic-bank-looms-large-for-u-s-regulators-after-credit-suisse-sale-60b0e54e

Increased Deposit Backstop?

Momentum appears to be building - be it for an increased threshold for guarantee and/or an interim guarantee for all - https://www.reuters.com/markets/us/us-lawmakers-examine-hike-fdic-bank-deposit-insurance-cap-2023-03-19/

My 2cents - this seems to be the necessary (interim) solution - to buy confidence and buy time

Because deposit updates are otherwise not helping - the bear case on liquidity, stressed AOCI/HTM/loan marks (capital), and then eps headwinds is just hard to refute

And then beyond politics - in terms of the real-time risk factor, its just too easy for XYZ twitter handle to tweet that XYZ bank is having an issue or seeing lines outside

Interesting tidbit from the article above in terms of procedure (inclusive of the 'systemic risk' trigger) - Treasury Secretary Janet Yellen told Senators last week that further guarantees of uninsured bank deposits beyond those in SVB and Signature Bank would require systemic risk determinations by her, President Joe Biden and "supermajorities" of the Federal Reserve and FDIC boards.

Buffet?

Headlines, articles, tweets all over - but is there any white knight coming to the table?

No reaction when the tweets started going around on Friday......(because there is no one-stop shop capital solution?....because this is more about systemic confidence than winners vs losers?)

Thinking way outside the box - an idea that wont happen, but in the spirit of considering less traditional solutions combined with Buffet's insurance experience - what if Buffett could bridge the gap to LifeCos purchase of Bank bonds...?

Again, I don't know how this could work structurally (in terms of smaller banks and hand-picking winners vs losers) - but just the idea that LifeCo liabilities are longer duration, could buy at par, hold to maturity (in return for warrant coverage), and everyone wins (banks get diluted and we move on)

(ie in a crazy world, could lifeCos recap the bank space?) 

NYCB/SBNY

Details limited - it looks like $38B+ in deposits purchased with no purchase price disclosed (not sure what 'at a $2.7B discount means'?)

But fwiw - the idea that the FDIC is taking equity rights in NYCB = deal is presumably attractive? (combined with the idea that they are letting NYCB purchase in the first place = some show of confidence in NYCB) 

Less to add on 6) through 8) 

But curious on any thoughts as always...

Back with more in the AM in terms of where to from here.....how to move forward....some incremental macro thoughts from JEF eco strategist Tom Simons......Fed Wednesday, etc etc

Its now 8:30 pm......the good news - European markets higher (+1%), rates higher (vs the panic UST bid last week = some sell-off seems healthy)........the bad news - FRC crickets.

This table provides good information for the short term trader:

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* Could the consensus be wrong, again...

Record put volume:

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Jefferies provides solid commentary:

TECHNICALS & MARKETS...

• No one can be blamed for feeling dizzy after such a weekend again. From the government orchestrated rescue of Credit Suisse by UBS and the associated wipe out of 17bln USD in AT1 bonds, to the ensuing Dollar swap lines by the FED to other major central banks, its been a hell of a 48 hour weekend again. With so many of us still having very vivid memories of 2008, it is hard not to ignore the similarities between now and back then. With the aftermath that followed the banks failures in 2008 and 2009, it is understandable, that plenty of analysts and commentators are drawing the comparisons again. We still continue to believe strongly, that this episode is not a repeat of 2008 and that the current woes will blow over quickly again. We will look at a few of the issues and renewed curveballs that were thrown at market participants and see, if our technical lens can shed some light. 

• The most important and also damaging aspect of the weekend developments was the decision by the Swiss regulator to wipe out the AT1 bonds of Credit Suisse. We won't go into details of the mechanics of those bonds and their importance, as there will be plenty of specialist comments out on it today. All we can do is, look where that asset class is trading, and assess, how far the downside could potentially be. A good measure of this asset class is the AT1 LN ETF, which mirrors the main AT1 index. It has already lost more than 20% since February. But that will obviously become a bigger loss today. But the one thing that makes us think, that the downside here will be contained after the initial sell of over the next 1-2 sessions, is the fact, that it almost looks like the same technical setup as it did did in March 2020, at the Covid lows, when the world came to a standstill. 

• Back then all three DeMark indicators were flashing buy signals and pretty much managed to catch the low. Right now, we are 2-3 days away from generating the same setup. As we will inevitably get further downside today, the ETF and index should manage to finalise all three DeMark buy signals over the next couple of sessions. That gives us some confidence, that the initial shock should be absorbed over the next few days, and this asset class will recover. 

AT1 LN...all 3 DeMark counts to complete soon ( red 13, pink 13, green 9)

• Another major risk indicator will be the UBS CDS over the next few days. Again, those are all close to produce DeMark reversal setups over today and tomorrow. That setup fits the picture on European indices. We mentioned on Friday that we were becoming more constructive on EU markets, after shunning them for the last 6 weeks. DAX and EuroStoxx had managed to hold their December highs at 14,700 and 4000 so far, but had not produced any clear buy signals. We thus advised to start purchases but keep powder dry, in case we would break those supports and eventually finalise the buy setups. As it stands, this will happen today and tomorrow.

I haven't written since Wednesday and there will be a lot of subject matter to review on the way towards a market view over the next few days. 

The situation is volatile, rapidly moving and complex. 

Stay tuned - I will do my best.

In premarket trading I purchased (SPY) at $386.39.