Futures Reverse Overnight Plunge As European Banks Stabilize From Historic Rout US equity futures, global markets and European bank stocks have stabilized, rebounding off worst levels which saw Europe's brand new banking megagiant UBS plunge as much as 16% before recouping most of the losses... ... as investors digested UBS’s agreement to buy Credit Suisse as well as central bank moves to boost dollar liquidity in an effort to restore confidence in the global financial system. Futures contracts on the S&P 500 were little changed at 7:30 a.m. ET after tumbling 1% earlier. The Stoxx Europe 600 index was modestly higher, with banks and financial services still the sharpest fallers. UBS shares sank as much as 16%, while Credit Suisse sank 60%. European bank stocks pared losses with the Stoxx Europe 600 Banks Index down less than 1%, after after dropping as much as 6%. A gauge of Asian shares fell by more than 1%. In premarket trading, First Republic Bank was poised to extend last week’s record loss as the US lender’s shares plunged 19% after S&P cut its credit rating again. Wells Fargo and Citigroup trimmed US premarket declines. Gold-mining stocks rallied in premarket trading on Monday, after a $3.2 billion deal between UBS and troubled lender Credit Suisse failed to calm nerves in the banking industry, knocking risk appetite. Newmont, the biggest US-listed gold miner, gains as much as 2.6%; Harmony Gold Mining +5.6%, Gold Fields +2.2%, New Gold +3.4%, Wheaton Precious Metals +1.5%, First Majestic Silver +2%, Pan American Silver +0.7%. The price of gold rose above $2,000 an ounce for the first time in a year amid safe-haven appeal. Here are some other notable premarket movers: Cryptocurrency-exposed stocks rise after Bitcoin extended its gains for a fifth consecutive session, with the digital asset reaching levels not seen in about nine months. Marathon Digital (MARA US) +5.6%, Riot Platforms (RIOT US) +8% and Coinbase (COIN US) +4.2% Energy stocks decline as investors’ concern about the banking system spur broad risk aversion and drag crude prices lower. Exxon Mobil (XOM US) slid 1.3%, Chevron (CVX US) -1.1%, Occidental Petroleum (OXY US) -1.1%. For those who were lucky enough to be away from their computers this weekend, this is what you missed: Credit Suisse shareholders will receive 1 share in UBS (UBSN SW) for 22.48 shares in Credit Suisse which reflects a merger consideration of CHF 3bln and that FINMA determined that Credit Suisse’s additional tier 1 capital in the aggregate nominal amount of around CHF 16bln will be written off. Credit Suisse also told staff in a memo that the details of the transaction are being worked through and no disruption to client services is expected, while it told staff there will be no changes to payroll arrangements and bonuses will still be paid on March 24th. UBS said the company will suspend share buybacks and that they did not initiate the discussions but believe the transaction is financially attractive to UBS shareholders and are planning to de-risk and downsize Credit Suisse’s investment banking operations. UBS also noted its strategy is unchanged in US and APAC and said that Credit Suisse is quite complementary to the wealth business in Southeast Asia. Furthermore, Colm Kelleher will be Chairman and Ralph Hamers will be Group CEO of the combined entity, while the transaction is not subject to shareholder approval and there is a material adverse change clause on the Credit Suisse deal. SNB said it is providing substantial liquidity assistance to support the UBS takeover of Credit Suisse and the takeover was made possible with the support of the Swiss federal government, FINMA and SNB, while it added that both banks have unrestricted access to the SNB’s existing facilities. There were also comments from the Swiss Finance Minister that this is a commercial solution and not a bailout, while she noted the cost of bankruptcy to the Swiss economy would have been huge. ECB said it welcomes the swift actions and decisions taken by Swiss authorities and noted that the Euro area banking sector is resilient with strong capital and liquidity positions. ECB’s Lagarde also stated that the ECB’s policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed. BoE said it welcomes the comprehensive actions by the Swiss authorities to merge UBS and Credit Suisse, while it has been engaging with international counterparts throughout preparations for the announcement. Furthermore, it stated that the UK banking system remains safe and sound and is well-capitalised and funded. Fed Chairman Powell and US Treasury Secretary Yellen said they welcome the announcements by Swiss authorities to support financial stability and noted the capital and liquidity positions of the US banking system are strong and US financial system resilience is strong. Furthermore, they have been in close contact with international counterparts to support their implementation. At least two major banks in Europe are examining scenarios of contagion potentially spreading across Europe’s banking sector and looking to the Fed and ECB to step in with stronger signals of support, according to Reuters citing executives with knowledge of the deliberations. Banking stocks and bonds plummeted after UBS Group sealed a state-backed takeover of troubled peer Credit Suisse, a deal that was shoved down Credit Suisse investors' throats - literally - in an attempt to restore confidence in a battered sector. The Federal Reserve and five other central banks announced coordinated action on Sunday to boost liquidity in US dollar swap arrangements. The Fed’s next policy decision is due later this week, with market attention on whether it may slow or pause interest-rate hikes. UBS emerged as Switzerland’s one and only global bank, a risky bet that makes the Swiss economy more dependent on a single lender. Credit Suisse told staff its wealth assets are operationally separate from UBS for now, but once they merged clients might want to consider moving some assets to another bank if concentration was a concern. The rudest shock in the rushed deal was reserved for the holders of Credit Suisse's riskiest tranche of bonds. UBS is salvaging the most value from the wreckage, says Breakingviews columnist Liam Proud. Hedge fund managers and other large investors believe it is far too soon to call an all-clear on turmoil in the global financial sector. Amid the endless turmoil, the KBW Bank Index plunged 28% over the past two weeks, with financials rattled by concerns over Credit Suisse as well the recent failures of Silicon Valley Bank and two other US lenders. Gains in tech stocks have helped support the overall market, however, as investors look for a safe haven. "The turmoil still has at least a couple of days to play out, and only the Fed can come in and calm that,” Chris Beauchamp, chief market analyst at IG Group Holdings Plc, said on Bloomberg Television. He expects the US central bank to hike rates by 25 basis points as a pause would be interpreted by markets as a sign that the stress in banks is bigger than initially thought. “Assuming these banking stresses do not evolve into something more serious, the European Central Bank and the Fed may perceive that they are at or near their objectives with current policy,” said Brad Tank, chief investment officer for fixed income at Neuberger Berman. “The Fed, in particular, is further along in its tightening cycle and should have more flexibility to pause — and markets are indeed pricing for 2023 fed funds rate cuts once again.” Meanwhile, one day after he revealed his shock that stocks remain resilient and just under 4,000 despite calling for a crah for the past 3 months, Morgan Stanley’s Michael Wilson said the stress in the banking system marks what’s likely to be the beginning of a painful and “vicious” end to the bear market in US stocks, adding that the risk of a credit crunch has increased materially. The S&P 500 will remain unattractive until equity risk premium climbs to as high as 400 basis points from the current 230 level, according to the bearish strategist who two weeks ago flip-flopped briefly to bullish before getting rugpulled by the banking crisis. European stocks are higher after reversing the negative knee-jerk reaction to the terms of the UBS takeover of Credit Suisse. The Stoxx 600 is up 0.6% as gains in utilities, miners and consumer products outweigh declines in bank stocks.  European oil stocks declined as investors’ concern about the potential for a global banking crisis spur broad risk aversion and drag crude prices lower. The Stoxx Europe 600 Energy index slid 1%; among oil majors, Shell declined 1.5%, TotalEnergies -1.3%, and BP -0.6%. Smaller producers also dropped with Harbour Energy falling 5.7% and Tullow Oil -7.7%. Here are the biggest European movers: UBS shares drop as much as 16%, the most in eight years, after a government-brokered deal for it to buy rival Credit Suisse prompted a slew of downgrades Deutsche Bank declines 11%, ING -9.6%, Commerzbank -9.6%, Standard Chartered -8.7%, BNP Paribas -9% following UBS’s agreement to buy Credit Suisse El.En shares slide as much as 9.6% after Berenberg downgrades the laser- equipment maker to hold from buy, saying the company has a “tough year ahead” JM AB falls as much as 7.7% after DNB Markets gave the Swedish construction and building management company its sole sell rating in reinstated coverage Centamin shares rise as much as 6.6%, Endeavour Mining up as much as 7.2% and Fresnillo rises as much as 4.1% as gold gains owing to haven demand amid banking concerns Earlier in the session, Asian stocks declined as the UBS takeunder failed to quell investor concerns about the health of the global financial system.  The MSCI Asia Pacific Index fell as much as 1.4%, reversing most of its gain from Friday, with tech and financial names among the biggest drags. Hong Kong gauges led losses in the region as financial stocks including HSBC and AIA Group fell due to worries over risky bond exposures.  While the takeover of Credit Suisse is seen to reduce the immediate systemic risk for the banking sector, investors are worried over further repercussions from its bonds. Traders are also focused on the Federal Reserve’s rate decision later this week. “Even with the rescue plans over the weekend, it is hard to predict what will happen in the near future,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. “The measures to restore confidence in banks and to tame inflation go in opposite directions, and the dilemma is reducing risk appetite in the stock market.” China’s onshore equity benchmark erased earlier gains even after its central bank unexpectedly cut the reserve requirement ratio late Friday.  The PBOC’s announcement timing “seems to fall in line with recent global banking jitters, which suggests that the PBOC is on high alert to provide any cushion against any knock-on impact from recent turmoil,” said Jun Rong Yeap, market strategist at IG Asia In FX, the Bloomberg Dollar Spot Index steadied, erasing a decline of as much as 0.2% earlier while the Japanese yen is the best performer among the G-10’s. The New Zealand dollar is the weakest. Australia and New Zealand’s currencies flipped to losses amid souring risk sentiment. “Traders are looking for haven assets again with bank stocks falling, and worries about CoCo bonds gaining momentum,” Mingze Wu, a foreign exchange trader at StoneX Group, said of contingent convertible bonds. “The insistence of the Swiss National Bank to make the UBS-Credit Suisse deal happen suggests the rot was deeper and greater than they might have thought, and the dollar is an obvious beneficiary of this rush to safety” In rates, the nervous start to the trading week prompted a flight to safety, with German and UK government bonds rallying. 2-year TSY yield fell as much as 21bps to 3.63%, while its 10- year peer slid to as low as 3.29%, the lowest since September; traders bet on 15bps of Fed hikes this week but eased tightening beyond by as much as 12bps, pricing 105bps of cuts from the peak in May through to year-end. Bund futures are off their best levels but still in the green with 10-year yields down 4bps while two-year yields fall 8bps. In commodities, oil prices fell again with West Texas Intermediate briefly plunging below $65 a barrel, as escalating investor concerns about a global banking crisis eroded appetite for risk assets including commodities. Gold steadied, after rising above $2,000 an ounce for the first time in a year. Bitcoin remains bid and has extended comfortably above the USD 28k handle for the first time since June, though is yet to convincingly breach USD 28.5k to the upside. There is nothing scheduled on the macro calendar today but there will be plenty of bank related newsflow. Market Snapshot S&P 500 futures down 0.1% to 3,943.50 MXAP down 1.1% to 155.86 MXAPJ down 1.4% to 498.89 Nikkei down 1.4% to 26,945.67 Topix down 1.5% to 1,929.30 Hang Seng Index down 2.7% to 19,000.71 Shanghai Composite down 0.5% to 3,234.91 Sensex down 1.3% to 57,214.31 Australia S&P/ASX 200 down 1.4% to 6,898.51 Kospi down 0.7% to 2,379.20 STOXX Europe 600 up 0.6% to 438 German 10Y yield little changed at 1.95% Euro down 0.3% to $1.0641 Brent Futures down 3.8% to $70.18/bbl Gold spot up 0.8% to $2,005.59 U.S. Dollar Index up 0.17% to 103.88 Top Overnight News from Bloomberg The Federal Reserve and five other central banks announced coordinated action Sunday to boost liquidity in US dollar swap arrangements, the latest effort by policymakers to ease growing strains in the global financial system. UBS Group AG shares slumped Monday as investors digested the news of its historic acquisition of rival Credit Suisse Group AG and began to assess the job of integrating the troubled Swiss lender. The riskiest bonds of European lenders are plunging after holders of Credit Suisse Group AG’s contingent convertible securities suffered a historic loss as part of its takeover by UBS Group AG. A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were on the back foot amid ongoing banking sector jitters despite the announcement that UBS will take over Credit Suisse in an emergency rescue valued at CHF 3bln which would wipe out CHF 16bln of additional tier 1 bonds. ASX 200 extended its retreat from a recent break beneath 7,000 with declines led by weakness in the energy, real estate,  consumer and financial sectors, although gold miners were boosted after last week’s climb in the precious metal. Nikkei 225 was pressured amid the banking sector woes and after the BoJ’s Summary of Opinions provided little in the way of new information whereby it reiterated that the BoJ must patiently maintain monetary easing. Hang Seng and Shanghai Comp. were varied with Hong Kong underperforming on broad weakness across sectors, while the mainland was kept afloat for most of the session after Friday’s surprise RRR cut by the PBoC in an effort to boost liquidity and support the economy, but opted to maintain its benchmark lending rates. Top Asian News PBoC 1-Year Loan Prime Rate (Mar) 3.65% vs. Exp. 3.65% (Prev. 3.65%); 5-Year Loan Prime Rate (Mar) 4.30% vs. Exp. 4.30% (Prev. 4.30%) PBoC warned the collapse of Silicon Valley Bank shows rapid monetary policy shifts in developed economies are having a hazardous impact on financial stability, according to Bloomberg citing comments from Deputy Governor Xuan. PBoC adviser Cai said China needs household stimulus to boost the recovery and noted that residents' incomes have not grown well in the past few years, so the recovery in consumption is not enough to support economic growth, according to Caijing. Russian President Putin said he expects total trade volume with China to exceed USD 200bln this year and it is important to increase the share of trade with China conducted in national currencies, according to Reuters. WHO advisers urged China to release all information related to the origin of the COVID-19 pandemic after new findings were briefly shared on an international database to track pathogens, while they recommended researchers in China investigate upstream sources of animals and animal products present in the Huanan Market before January 1st 2020, according to Reuters. BoJ Summary of Opinions from the March meeting stated that the BoJ must patiently maintain monetary easing until the price target is achieved and the BoJ must scrutinise without any preset idea the state of market function but must maintain easy policy at present. Furthermore, it stated the BoJ must focus on the risk of losing the chance to meet the price target with a premature policy shift, rather than the risk of being too late in shifting policy and must be mindful of the risk inflation may overshoot expectations. European bourses are mixed/flat, as marked banking-led pressure has eased throughout the morning following the initial reaction to the UBS-Credit Suisse merger. On this, Credit Suisse and UBS opened lower by over 60% and 8% respectively, but have since eased off lows with the broader SX7P index now ~2% lower vs downside of over 5% at worst. On the merger, attention is on Credit Suisse's AT1 bonds being written off; a detail which pressured such bonds in APAC trade, with HSBC for instance a notable initial laggard on this. Since, we have seen European regulators reiterate  that CET instruments are the first to absorb losses, with AT1 only required after their full use. Stateside, futures are in similar proximity to the unchanged mark given the above as participants await updates around  First Republic and look ahead to the FOMC. Top European News BoE's plans to revamp bank capital rules risk a 25% reduction in lending to small businesses which threatens jobs and economic growth, according to a study by consultants Oxera cited by FT. PoliticsHomes' Payne reminds that DUP MPs meet today to discuss their stance on Wednesday's Windsor Framework vote, expected to announce their stance on Tuesday. Moody’s affirmed Greece at Ba3; Outlook revised to Positive from Stable and affirmed Luxembourg at AAA; Outlook Stable, while S&P affirmed Belgium at AA; Outlook Stable. FX The DXY has struggled to benefit from the subdued start to the session, with the index near the mid-point of 103.68-103.96 parameters for much of the morning. Given the tone, the JPY is the standout outperformer with USD/JPY down to 130.55 vs 132.64 peak; though, given the relative pickup in equity performance USD/JPY is now holding above 131.00. Despite the subdued risk tone, CHF is the underperformer as the market's focus remains on Credit Suisse/UBS; USD/CHF above 0.93 and EUR/CHF above 0.99. Given their high-beta status, the Antipodeans are also faring poorly with RBA minutes and Kiwi trade data scheduled ahead. Elsewhere, peers are comparably more contained with EUR/USD holding above 1.0650 and Cable near 1.22. PBoC set USD/CNY mid-point at 6.8694 vs exp. 6.8701 (prev. 6.9052) Fixed Income EGBs and USTs are benefitting from marked haven demand, with Bunds over 140.00 and USTs nearing 117.00 at best, though the benchmarks have eased from highs as equity sentiment improves. Specifically, Bunds soared to a 140.30 peak vs 137.10 low, but have since pulled back to just below 140.00 as the associated 10yr yield slipped to a 1.92% intraday low. Stateside, USTs are similar in both direction and magnitude with yields lower across the curve and action more pronounced in the short-end currently; as it stands, market pricing via Reuters is leaning towards the Fed leaving rates unchanged on Wednesday, with around a 40% chance of a 25bp hike implied. Commodities WTI and Brent are lower intraday given the broader risk tone and while they are off lows, are yet to stage a 'recovery' akin to that seen in equities; currently, the benchmarks are lower by circa. USD 2/bbl just above USD 64.12/bbl and USD 70.12/bbl respective lows. Spot gold surpassed USD 2000/oz, but failed to hang onto the level as the DXY makes its way back into positive territory and broader sentiment improves slightly while base metals are moving with equity sentiment and as such are turning incrementally firmer on the session. Iraq’s Oil Minister said his country is committed to OPEC’s agreed production rates and obliged some oil companies' operations in the south to cut production to come in line with OPEC’s agreed rates, while it was also reported that Iraq and OPEC stressed the importance to coordinate to stabilise prices, according to Reuters. Iran set April Iranian light crude oil price to Asia at Oman/Dubai plus USD 2.50/bbl, according to Reuters. India plans to extend export restrictions on diesel and gasoline beyond March 31st, according to Reuters sources. TotalEnergies (TTE FP) said 34% of operational staff at its refineries and depots conducted a strike on Sunday morning in protest against the government’s move to raise the retirement age by two years, according to Reuters. Kuwait Oil Company declares a state of emergency re. an oil spill located in west Kuwait; production unaffected. Geopolitics Russian President Putin visited Crimea on the 9th anniversary of its annexation from Ukraine and also visited Mariupol in the occupied Donetsk region of Ukraine, while he also met with the top command of Russia’s military operation in Ukraine at the Rostov-on-Don command post in southern Russia, according to Reuters. Russian President Putin said the visit by Chinese President Xi confirms the special character of the Russian-Chinese partnership and Russia is pinning big hopes on the visit, while he added Russia is expecting a powerful impulse to relations and that relations are at their highest ever point. Putin also said there are no limits or forbidden subjects in relations with China and he is grateful for China’s balanced line on events in Ukraine, as well as welcomes China’s willingness to play a constructive role in solving the Ukrainian crisis. Furthermore, Putin said that they are worried about dangerous actions that could undermine global nuclear security and Russia is open to a diplomatic settlement of the Ukraine crisis but rejects ultimatums, according to Reuters. Chinese President Xi said China has always taken an objective and impartial position on the situation in Ukraine and has made efforts to promote reconciliation and peace negotiations, according to Rossiiskaya Gazeta. ICC judge issued an arrest warrant for Russian President Putin over alleged war crimes related to ‘unlawful deportation’ of Ukrainian children, according to The Guardian. It was also reported that German Chancellor Scholz said ICC is an important institution that has been given a mandate through international treaties and noted that nobody is above the law which is becoming clear now, according to Reuters. Ukrainian President Zelensky’s Chief of Staff and several top security officials including the Defence Minister held a call with US counterparts to discuss military aid for Ukraine, according to Reuters. Ukrainian Infrastructure Minister said the Black Sea grain deal has been extended for 120 days which is longer than the 60-day touted by Russia, while a UN spokesman confirmed the extension of the export deal but didn’t specify the length of the renewal, according to Reuters. EU foreign policy chief Borrell said an agreement was reached on ways to implement an EU-backed deal on normalising ties between Serbia and Kosovo, while he added that the sides agreed to implement their respective obligations in good faith. Saudi Arabia’s King Salman invited Iranian President Raisi to visit Riyadh, while it was also reported that Iran’s Foreign Minister agreed to hold a meeting at the foreign minister level with Saudi Arabia and said that Iran has declared a readiness to reopen embassies. In other news, Iraq and Iran signed a deal to tighten their border security. South Korea said that North Korea fired a short-range ballistic missile off the east coast into the sea on Sunday which flew 800km before hitting a target and is a clear violation of the UN Security Council resolution. In relevant news, G7 foreign ministers said they regret inaction by the UN Security Council regarding North Korea’s missile tests and that the March 16th ICBM launch undermines international peace, according to Reuters. North Korea confirmed it conducted exercises aimed at improving tactical nuclear capability on March 18th-19th and said the US and South Korea are expanding joint military drills aimed at North Korea involving US nuclear assets and its exercises are meant to send strong warnings against US and South Korea. Furthermore, North Korean leader Kim said the country should be ready to conduct nuclear attacks at any time in a deterrence of war, according to KCNA. US Event Calendar Nothing major scheduled DB's Jim Reid concludes the overnight wrap This weekend felt like being transported back into 2007-2008 in many respects with a race-against-time deal between UBS and Credit Suisse being put together in full view of the market. The most remarkable thing about yesterday was the huge swings in Credit Suisse AT1s on a Sunday. Clips of the $17.3bn of outstanding CS AT1 bonds seemed to trade at both ends of a mid-20s to around 70c range as the outline of the UBS deal filtered through. It was eventually a shock that the AT1s were zeroed in the deal even as UBS eventually bought CS for $3.3bn, a firmly positive number. This was however less than half what they were worth at the close on Friday and down 99% from their peak pre-GFC. The decisions to wipe out AT1 bondholders is going to be the biggest issue medium and longer-term for the European banking sector, especially when the company was bought with a positive value yesterday. It's hard to argue with the morals of it but it will likely increase the cost of capital for banks which could lead to an additional tightening of lending conditions. So that c.$17bn of debt destruction could eventually be worth multiples of that to the wider European economy and in other regions too. Selected Asian AT1 securities are trading around 5-10% down as we type and HSBC equity is around -6% in Hong Kong so this serves as a benchmark for the European banking open. The good news at the macro level is that the CS situation has been dealt with and there are no obvious European next shoes to drop at this stage. CS had been decoupled from the rest of the continents' banking sector for months now and therefore was by far and away the weakest link when the US regional banking woes began less than 2 weeks ago. So the market has now got to balance the reduction of systemic risk with the likely higher cost of some forms of bank capital. There will also be nervousness as to how easy it was to change laws and market conventions in order to get this deal done. Some risk premium will surely be factored in to the cost of capital for the sector now. Meanwhile, in a coordinated global response, the Fed in a statement along with five other central banks - including the BOE, the BOJ, the ECB and the SNB - last night announced that they would enhance dollar swap lines i.e., to increase the frequency of swap line agreements from weekly to daily, beginning March 20 and will continue “at least” through the end of next month. In doing so, the central banks indicated that the move would serve as an “important backstop” amid financial market unease, thereby helping to keep credit flowing to households and businesses. Overall, Asian equity markets have started the week on a weaker footing with the Hang Seng (-2.56%) leading losses across the region, with the Nikkei (-1.01%) and the KOSPI (-0.46%) also dipping in early trade. Elsewhere, stocks in mainland China are bucking the regional negative trend with the CSI (+0.12%) and the Shanghai Composite (+0.12%) both trading slightly higher. Note their was a 25bps RRR cut on Friday. Outside of Asia, US stock futures tied to the S&P 500 (+0.12%) and NASDAQ 100 (+0.23%) are relatively flat which helps after the weekend news but then again as you'll see from the weekly review at the end the S&P 500 was higher last week in the face of incredible turmoil elsewhere. Meanwhile, yields on 10yr US Treasuries are stable while 2yr yields (+2.92bps) briefly touched 4% before sliding back to 3.87% as we go to press. Moving forward, it's hard not to have sympathy for the Fed this week. Any criticism of their policy should probably be more directed to the actions of 2020-2021 for keeping policy excessively too loose as government spending, money supply and inflation was surging. Today they are in a catch-22 position where the excesses of those days (and earlier) are now unravelling while inflation is still way above target. Their rate decision on Wednesday will be the undoubted non-banking related highlight of the week but we will also have the BoE meeting (Thursday), UK CPI (Wednesday), Japan CPI (Thursday), flash global PMIs (Friday) which might capture a small amount of the turmoil period, and importantly Chinese President Xi Jinping will be in Moscow from today to Wednesday. After the FOMC, it will be the BoE's turn on Thursday to decide on rates. Our UK economists preview the meeting here and expect a final +25bps hike as well as likely dovish forward guidance amid concerns over overtightening risks. The decision will follow a host of UK inflation data released on Wednesday. Also on Thursday markets may follow the SNB meeting more closely than usual following this week's turmoil around Credit Suisse. Aside from several monetary policy decisions, there will also be a plenty of central bank speakers, especially from the ECB, including President Lagarde (twice), following last week's +50bps hike. In the US, aside from the PMIs investors will also get durable goods orders (DB forecast -0.5% vs -4.5% in January) on Friday and a host of regional Fed indicators throughout the week to gauge economic sentiment. Housing market data including existing home sales (tomorrow) and new home sales (Thursday) are also due. Over in Europe, other key data will include the PPI (today) and the ZEW survey (tomorrow) for Germany, Eurozone consumer confidence on Thursday and UK consumer confidence and retail sales on Friday. Moving on to Japan, the key release will be the CPI report on Thursday. Our Chief Japan Economist (full preview of the week ahead here) expects government subsidies for electricity and gas to weigh on core CPI inflation (3.2% vs +4.2% in January) but core-core CPI ex. energy to pick up 3.4% (3.2%) but reach its peak for the cycle. Looking back on a tumultuous last week now. On Friday, with market volatility already elevated from the growing concerns around the global financial system the preliminary University of Michigan sentiment survey dropped -4.6pts to 63.4. That was just the second monthly drop since last June, and the lowest reading since December. The declines pre-dated the SVB collapse. If one wanted to find a positive in the report inflation expectations were lower with 5-10yr expectations down to 2.8% (2.9% expected), while the 1yr inflation expectation was 3.8% (4.1% expected). That’s the lowest 1yr expectations have been since April 2021. That was just the last link in a chain of market moving events last week that repriced Fed futures across the curve. Expectations for a 25bps hike at the March meeting is now at just 60% with a 15.0bp hike priced in. That is down -18.3bps on the week and -4.2bps on Friday, as well as -27.8bps since Powell’s testimony before the Senate Banking Committee the week before last. At the same time, the expected terminal rate ended the week at 4.794% by the May meeting after starting the week at 5.285% at the June meeting and being as high as 5.691% at the September meeting on the prior Wednesday before the SVB news broke. Futures are also now pricing in nearly -96bps of rate cuts by year-end after starting the week with -40bps of cuts priced. 10yr Treasury yields fell back another -14.8bps on Friday and -27.0bps over the course of the week to their lowest level since early-February at 3.429%. The 2yr yield saw a much bigger move, coming down -74.9bps last week (-32.0bps on Friday) to their lowest level since September 2022. On this side of the pond, 10yr bund yields fell back -40.0bps (-18.2bps on Friday) last week to 2.108%, its lowest point since the first week of February. The 2yr bund yield fell by -71bps last week (-22.0bps Friday) in its most significant weekly down move since September 1992. While sovereign bonds outperformed last week, US equities whipsawed with a large amount of dispersion. Even though the S&P 500 closed the five days higher, US banks continued to selloff with the KBW bank index down -14.55% last week (-5.25% Friday), with major banks like JPM (-5.87%), BofA (-8.09%), Citi (-8.46%), and GS (-7.26%) outperforming while the regional bank ETF KRE was down -14.30% last week. With CS seeing pressure from a lack of depositor and investor confidence, the SNB offered the Swiss bank a 50bn franc credit line. However this was not enough to stop the stock from ending the week -25.48% lower (-8.01% Friday), while European Banks at large were down -13.40% (-2.72% Friday) leaving the index up just +1.2% YTD. The STOXX 600 was down -3.85% week-on-week (-1.21% on Friday), whilst the CAC and DAX fell -4.09% (-1.43% on Friday) and -4.28% (-1.33% on Friday) respectively. With risk markets selling off, credit spreads widened significantly on the week once again. The Euro Crossover HY CDS index was +66.7bps wider (+18.8bps wider Friday) and EUR IG CDS +18.1bps wider on the week (+3.8bps Friday). EUR HY CDS is now +18.9bps wider YTD, with EUR IG +9.9bps wider since the start of the year. US credit also significantly widened again as the US HY CDS index was +31.6bps wider (+26.8bps Friday) with IG +4.8bps wider following a +5.1bps move on Friday. The weekly widening has left USD HY CDS +45.7bps wider YTD, while US IG CDS was +5.8bps wider YTD. Finally in commodities, industrial inputs sold off as recession fears rose. Brent crude fell back -11.85% (-2.32% on Friday) and WTI was down -12.96% (-2.36% on Friday), meanwhile European natural gas futures reversed the prior week’s significant rally with energy prices falling -18.92% week-on-week (-3.35%). Copper was down -3.26% (+0.72% Friday) while the overall Bloomberg Commodity index was down -1.87% (-0.16% Friday). With the risk-off tone throughout markets, Gold was a notable outperformer with the precious metal up +6.48% on the week (+3.63% Friday) in its best weekly performance since Covid to close at its highest level in a year at $1989/oz. Tyler Durden Mon, 03/20/2023 - 08:03.....»»

The mood on Wall Street remains tentative, with the index futures pointing to a modestly higher opening. Some of the positive sentiment is attributable to the coordinated action announced by five of the world’s biggest central banks to ease liquidity strain. Cues From Past Week’s Trading: Stocks closed the week ended March 17 mostly higher despite the volatility seen amid the continuing news flow on the banking crisis. The S&P 500 and the Nasdaq Composite indices recorded weekly gains of 1.43% and 4.41%, respectively, while the Dow Industrials in which financial stocks have over 15% weighting edged down 0.15%. See Also: Best Binary Options Strategies The mood in the past week alternated between hope and despair as traders digested the government’s rescue plan to backstop all Silicon Valley Bank deposits, reports of trouble at First Republic Bank (NYSE: FRC) and, subsequently, the private banks’ rescue package for the bank. Issues at Credit Suisse AG (NYSE: CS) also simmered through the week, which culminated in a Swiss National Bank-brokered deal for the bank to be bought by peer UBS Group Inc. (NYSE: UBS) over the weekend. The major indices opened notably lower and moved roughly sideways till late afternoon trading, weighed down by renewed selling in financial stocks. The averages cut their losses in late afternoon trading after reports suggested Switzerland’s central bank will extend a helping hand to Credit Suisse, calming the nerves of traders. U.S. Indices' Performance ...Full story available on Benzinga.com.....»»

Gold Prices Reflect A Shift In Paradigm, Part 2 Authored by Alasdair Macleod via GoldMoney.com, In the first part of this report, we highlighted that observed gold prices have significantly detached from our model-predicted prices. While this has happened in the past, prices always converged eventually. However, the delta between the observed and the model predicted price has now reached a record high of around $400/ozt. We thus ask ourselves whether it is reasonable to expect that model-predicted and observed prices will converge again in the future, or, whether we witness a shift in paradigm and the model no longer works.  In our view, the only reason for gold prices to sustainably detach from the underlying variables in our gold price model is if central banks (particularly the Fed) lose control over the monetary environment. Thus, it seems that the gold market is now pricing in a significant risk that the Fed can’t get inflation back under control. As we highlighted in Part I of this report (Gold prices reflect a shift in paradigm – Part I, 15 March, 2023), this is happening in the most unlikely of all environments. The Fed has aggressively hiked rates at the fastest pace in over 50 years and it is signaling to the market that it will do whatever it takes to get inflation under control. So why is the gold market still concerned about inflation? The issue is that so far, it has been easy for the Fed to raise rates sharply to combat inflation. Despite the sharp move in the Fed Funds rate, one may get the impression that nothing has happened yet that would jeopardize the Fed’s ability to raise rates even higher. For starters, the unemployment rate remains stubbornly low (see Exhibit 8).  Exhibit 8: The US unemployment rate remains stubbornly low despite the sharp rate hikes Source: FRED, Goldmoney Research Equity and bond prices have sharply corrected in the early phases of the Fed’s rate hike cycle, but since then equity markets have partially recovered their losses. While equity prices are not the real economy, large downward corrections can impact the real economy nevertheless due to the wealth effect. When people become less wealthy, they spend less, which in turn has an effect on the economy. The impact of this reduction in wealth might also not be meaningful so far as the correction came from extremely inflated levels. The S&P 500, for example, has corrected almost 20% from its peak, but it is still 14% higher than the pre-pandemic highs in 2019 (see Exhibit 9). Exhibit 9: Even though US equity prices have corrected sharply, they are still well above the pre-pandemic highs…. Source: S&P, Goldmoney Research The real estate market has slowed down significantly, but so far prices haven’t crashed (see Exhibit 10), and even though there are a lot of early warning signs, the Fed historically had only become concerned when a crumbling housing market started to affect the banks. While we certainly saw turmoil in the banking sector over the last few days, it was not related to the mortgage business so far.  Exhibit 10: …and home prices – despite the clear rollover – have not crashed yet Source: S&P, Goldmoney Research Hence, at first sight, it appears there is little reason for the gold market to price in a scenario where the Fed loses control over inflation. However, there are plenty of warning signs that things are about to change. In our view, the correction in the equity market is far from over. When the last two bubbles deflated, equities corrected a lot lower for longer (see Exhibit 11). Exhibit 11: the last two bubbles saw much larger corrections in equity prices Source: S&P, Goldmoney Research This alone will start to put a strain on the disposable income of not just American consumers, but globally. We are seeing signs of this in all kinds of markets. For example, used car prices had skyrocketed until about a year ago on the back of supply chain issues combined with excess disposable income. But since the Fed started raising rates, used car prices have retreated somewhat (see Exhibit 12). Arguably this is good for people wanting to buy a car with cash, and it will also have a dampening effect on inflation numbers, but the reason for it is not that all the sudden a lot more cars are being produced, but that higher rates make it more expensive to finance cars, and thus demand is weakening.  Exhibit 12: Manheim used car index Source: Bloomberg, Goldmoney Research Certain aspects of the housing market also show more signs of stress than the correction in real estate prices alone suggests. For example, lumber prices have completely crashed from their spectacular all-time highs and are now back to pre-pandemic levels (see Exhibit 13).  Exhibit 13: Lumber prices have come back to earth Source: Goldmoney Research Similar to the development in the used car market, while this may be good for people trying to build a new home, it is indicative of the material slowdown in construction activity. This can be directly observed in housing data. New housing starts are 28% lower than in spring 2022 (See Exhibit 14).  Exhibit 14: New Housing Start data shows a material slowdown in construction activity Source: FRED, Goldmoney Research Moreover, mortgage costs have exploded. A 10-year fixed mortgage went from 2.5% a year ago to 6.3% now (see Exhibit 15). This will undoubtedly dampen the appetite for home purchases and strain disposable income as previously fixed mortgages must be rolled over. Given current mortgage rates, it is surprising that the housing market has not yet corrected a lot more. Exhibit 15: Mortgage rates have exploded over the past 12 months Source: Bankrate.com, Goldmoney Research There is a myriad of other indicators, from crashing freight rates (see Exhibit 16) to layoffs in the trucking and technology sector as well as languishing oil prices despite record outages and inventories, that indicate that the Feds (and increasingly other central banks) ultra-hawkish policy is impacting the real economy, both domestic and globally.  Exhibit 16: Freight rates had skyrocketed in the aftermath of the Covid19 Pandemic but are now back to normal Source: Goldmoney Research The result will be a period of global economic contraction. The Fed may view this decline in inflation as confirmation that their policies are working to fight inflation, even though it will only reflect a crashing economy. Importantly, once the recession kicks in, we will soon see rising unemployment. Once unemployment starts rising, the Fed will have to slow down its rate hikes and eventually stop. However, the underlying cause of inflation – over 8 trillion in asset buying by the Fed – will only have reversed a tiny bit by that point. This means that once the fed will have to make a decision, to either fight unemployment or inflation.  We believe that the most likely explanation for the recent rally in gold prices against the underlying drivers of our model is that the market is increasingly pricing in that the Fed, once it is forced to stop hiking, will lose control over inflation. Faced with the choices of years of high unemployment and a crumbling economy or persistent high inflation, the gold market thinks the Fed will opt for the latter. This would mark a true paradigm shift, and from that point on, gold prices may start to price in prolonged high inflation (and our model may not be able to capture this properly). The crash of Silicon Valley Bank (SVB) a few days ago has created significant turmoil in financial markets. While the Fed jumped in and announced a new lending program that effectively bailed out the bank, it also led to a sharp change in market expectations for the Fed. Before the bailout, Fed fund futures implied that the market expected several more Fed hikes this year, and only a gradual easing thereafter. One week later and the market is now pricing in that the Fed will only hike until May, and then pivot and start cutting rates (see Exhibit 17).  Exhibit 17: The crash and subsequent bailout of SBV led to a sharp reassessment of the Fed’s ability to raise rates Source: Goldmoney Research The gold market is still pricing in a much more dire outlook with higher and persistent long-term inflation Only time will tell whether this view is correct. In our opinion, it is quite forward-looking, and gold seems to be the only market that is that forward-looking at the moment. 10-year implied inflation in TIPS, for example, is at a laughably low 2.2%. For the model-predicted prices to match observed gold prices, 10-year implied inflation would have to be around 1.5% higher, at 3.75%. This doesn’t seem to be completely unfeasible. However, even if the gold market turns out to be ultimately correct, it will take a while until the rest of the market agrees with that view, and most likely there will be a period of sharply declining realized inflation in the meantime. That said, as equities look even more fragile in this scenario, and bonds and cash are unpopular asset classes during periods of high inflation, gold may simply be the only game in town until its time as the ultimate inflation hedge is coming.  Tyler Durden Mon, 03/20/2023 - 05:00.....»»

Investors are still looking to the Federal Reserve's interest rate decision later this week for further cues. Asian share are steady in early Monday trade.Richard A. Brooks/AFP/Getty Images Asian shares ended lower on Monday after UBS struck a deal to acquire Credit Suisse. ING economists said a relief rally is possible after Switzerland moved to contain the banking crisis. Investors are still looking to the Fed's interest-rate decision this week for further cues. Asian shares are down on Monday after Switzerland's UBS struck a deal to take over peer Credit Suisse. The deal values Credit Suisse at around $3.25 billion.The development in Europe came after a wild week for the banking sector — Silicon Valley Bank was shut down by regulators on March 10, spurring jitters of a contagion that could lead to a broader economic crisis.Japan's Nikkei 225 closed 1.4% lower, while Shanghai Composite Index ended the day 0.5% lower. Korea's Kospi closed 0.7% lower, and Australia's ASX200 was down 1.4% for the day.Hong Kong's Hang Seng Index fell much more sharply than other Asia Pacific indices — posting 2.7% in losses — but the index has been under pressure from China's slow economic recovery after the country lifted zero-Covid curbs in January.S&P 500 futures were 0.7% lower at last check.Bitcoin rose 4.3% over the past 24 hours and is now trading above $28,200, according to CoinMarketCap.Hong Kong-listed shares of HSBC Holdings closed 6.2% lower while its British banking peer Standard Chartered dropped by 7.3%.HSBC and Standard Chartered continued to come under pressure on the London Stock Exchange later in the global day, falling 3.2% and 4.3% respectively at last check. Other major European banks shares also slumped early in the trading day with Deutsche Bank down 6.7% and Societe Generale down 5.2%.Additional tier 1, or AT1, bonds of some Asian banks were also down on Monday morning, after the Swiss Financial Market Supervisory Authority said there will be a "complete write-down" on Credit Suisse's AT1 bonds to "boost capital" in the newly merged bank. The write-down will cost 16 billion Swiss francs, or $17 billion, according to the regulator.The 5.825% perpetual dollar note issued by Hong Kong's Bank of East Asia was down by 8.6 cents to just under 80 cents, while the 4% perpetual note issued by Thailand's Kasikornbank dropped 4.3 cents, also to just under 80 cents, per Bloomberg. The losses would be the largest ever for these issuances if they are maintained over the trading day.AT1 bonds were created after the Global Financial Crisis of 2007 to 2009 to pass the risks from crises onto investors rather than onto taxpayers.Analysts are keenly watching the Fed's interest rate decision later this weekThe markets could rise on relief that Switzerland moved to prevent the banking crisis from spreading over the weekend, ING economists Robert Carnell and Iris Pang said in a note on Monday seen by Insider. Investors will also be keenly watching the Federal Reserve's interest rate decision for further cues, per the ING economists. The Fed is set to meet on Tuesday and Wednesday. The central bank's decision is keenly watched, as a year of aggressive interest rate hikes has dampened the stock markets."Initial reaction for the financial banks in the region to the UBS' buyout of Credit Suisse seems to point to more measured gains, suggesting a still-cautious environment as sentiments remain on hold for further developments in the banking space," wrote Yeap Jun Rong, a market strategist at IG, an online trading platform in a Monday note.'Business as usual' for Credit Suisse in Hong Kong, SingaporeHong Kong and Singapore regulators say Credit Suisse is conducting business as usual on Monday.The Hong Kong Monetary Authority, or HKMA, said in a Monday statement the bank's operations in the city will "open for business today as usual" and customers can access their deposits.Credit Suisse's Hong Kong branch holds about HK$100 billion, or $12.7 billion, in assets — less than 0.5% total assets in the city's banking sector, per HKMA.The Monetary Authority of Singapore said Monday Credit Suisse will continue operating in the country "with no interruptions or restrictions."The bank's customers "continue to have full access to their accounts and CS' contracts with counterparties remain in force," the Singapore authority added.March 20, 2022, 12.05 p.m. SGT: This story has been updated to reflect the price movement in the AT1 bonds of some Asian banks.March 20, 2022, 3.06p.m. SGT: This story has been updated to reflect price movements in the various Asia Pacific exchanges.March 20, 2022, 5.02p.m. SGT: This story has been updated to reflect price movements in the various Asia Pacific exchanges, and price movements of bank stocks in various European exchanges.Read the original article on Business Insider.....»»

US stock futures tumbled Monday as worries about a bank crisis persisted, even after UBS was forced to take over Credit Suisse to try to avert more trouble. US stock futures fell Monday after UBS agreed a deal to take over rival bank Credit Suisse.Spencer Platt/Getty Images US stock futures fell in Monday's premarket as worries about a bank crisis continued to build. Dow futures lost as much as 400 points and were down 150 points at last check. The Swiss government has forced UBS to buy Credit Suisse to try to stop it spreading crisis. US stock futures fell in premarket trading Monday as investors fretted about a developing bank crisis after UBS agreed a deal to take over Credit Suisse.Dow Jones Industrial Average futures were down 150 points, or 0.5%, at 5:30 a.m. ET, after dropping as much as 400 points earlier in the morning.  S&P 500 futures fell 0.4%, while Nasdaq 100 futures were down 0.3%, both coming back from deeper losses.The indicated losses come despite Swiss banking giant UBS agreeing to buy its longtime rival Credit Suisse in a deal worth 3 billion Swiss francs ($3.25 billion) on Sunday. The Swiss government forced through the deal, the latest bid by authorities worldwide to try to quell the crisis looming over banks.The takeover came after Credit Suisse's shares plunged nearly 70% last week. The collapse of Silicon Valley Bank has investors worried about contagion elsewhere, and big losses for US regional banks have weighed on stocks in Europe."With the takeover of Credit Suisse by UBS, a solution has been found to secure financial stability and protect the Swiss economy in this exceptional situation," the Swiss National Bank said in a statement published Sunday afternoon.But the early signs Monday suggested that the rescue deal had failed to soothe investors fretting about a broader banking crisis.UBS's Zurich-listed shares plunged 12% in early-morning trading, while Credit Suisse's plummeted 62%. France's BNP Paribas slipped just under 4%, while Spain's Banco Santander fell nearly 3% after the opening bell.There were also signs of further stress in the US regional banking system, with First Republic shares falling another 14% in premarket trading after S&P cut its rating of the bank's bonds further into junk territory."It is not yet known exactly where more pain will emerge in the banking sector, but investors fear the problems are not yet over," Hargreaves Lansdown's head of money and markets Susannah Streeter said.Here's what else is happening in markets:Europe's flagship Stoxx 600 fell 0.7% in early-morning trading, with Paris's CAC 40 down 0.4% and Frankfurt's DAX down 0.6%. London's FTSE 100 slipped 0.9%.In Asia, Tokyo's Nikkei 225 closed 1.4% lower, while the Shanghai Composite index fell 0.5%. Korea's Kospi closed 0.7% lower, and Australia's S&P ASX 200 was down 1.4% for the day.US bond yields edged lower, with yields on 2-year Treasury notes down 13 basis points to just under 3.7% and yields on 10-year Treasury notes falling 10 basis points to 3.3%.Oil benchmarks traded lower, with Brent crude down 1.8% to under $72 a barrel and WTI crude falling 1.9% to just over $65 a barrel.The price of gold jumped 1.3% to just under $2,000 per Troy ounce.Cryptocurrencies were mixed after UBS's rescue deal. Bitcoin climbed 1.1% to over $28,000, but ethereum fell 0.7% to under $1,800.Read the original article on Business Insider.....»»

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Credit Suisse shares CH:CSGN dropped 72% in opening trade, after agreeing to be bought by rival UBS in a deal underwritten by Swiss authorities. The steep share price drop came as Credit Suisse agreed to a discount, as well as the pressure for the drop in the value of UBS CH:UBSG shares. The Euro Stoxx banks index XX:SX7E, which doesn’t include UBS or Credit Suisse, fell 5%.Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news......»»

Investors are still looking to the Federal Reserve's interest rate decision later this week for further cues. Asian share are steady in early Monday trade.Richard A. Brooks/AFP/Getty Images Asian shares are down on Monday after UBS struck a deal to acquire Credit Suisse. ING economists said a relief rally is possible after Switzerland moved to contain the banking crisis. Investors are still looking to the Fed's interest-rate decision this week for further cues. Asian shares are down on Monday after Switzerland's UBS struck a deal to take over peer Credit Suisse. The deal values Credit Suisse at around $3.25 billion.The development in Europe came after a wild week for the banking sector — Silicon Valley Bank was shut down by regulators on March 10, spurring jitters of a contagion that could lead to a broader economic crisis.Japan's Nikkei 225 was 1.4% lower at last check, while Shanghai Composite Index was 0.5% lower. Korea's Kospi closed 0.7% lower, and Australia's ASX200 was down 1.4% for the day.Hong Kong's Hang Seng Index fell much more sharply than other Asia Pacific indices — posting 3.2% in losses — but the index has been under pressure from China's slow economic recovery after the country lifted zero-Covid curbs in January.S&P 500 futures were 1% lower.Bitcoin rose 2.8% over the past 24 hours and is now trading above $27,700, according to CoinMarketCap.Hong Kong-listed shares of HSBC Holdings fell by almost 7% at last check, the biggest drop in nearly six months. Hong Kong-listed shares of British banking peer Standard Chartered dropped by 8.5%. Additional tier 1, or AT1, bonds of some Asian banks were also down on Monday morning, after the Swiss Financial Market Supervisory Authority said there will be a "complete write-down" on Credit Suisse's AT1 bonds to "boost capital" in the newly merged bank. The write-down will cost 16 billion Swiss francs, or $17 billion, according to the regulator.The 5.825% perpetual dollar note issued by Hong Kong's Bank of East Asia was down by 8.6 cents to just under 80 cents, while the 4% perpetual note issued by Thailand's Kasikornbank dropped 4.3 cents, also to just under 80 cents, per Bloomberg. The losses would be the largest ever for these issuances if they are maintained over the trading day.AT1 bonds were created after the Global Financial Crisis of 2007 to 2009 to pass the risks from crises onto investors rather than onto taxpayers.Analysts are keenly watching the Fed's interest rate decision later this weekThe markets could rise on relief that Switzerland moved to prevent the banking crisis from spreading over the weekend, ING economists Robert Carnell and Iris Pang said in a note on Monday seen by Insider. Investors will also be keenly watching the Federal Reserve's interest rate decision for further cues, per the ING economists. The Fed is set to meet on Tuesday and Wednesday. The central bank's decision is keenly watched, as a year of aggressive interest rate hikes has dampened the stock markets."Initial reaction for the financial banks in the region to the UBS' buyout of Credit Suisse seems to point to more measured gains, suggesting a still-cautious environment as sentiments remain on hold for further developments in the banking space," wrote Yeap Jun Rong, a market strategist at IG, an online trading platform in a Monday note.'Business as usual' for Credit Suisse in Hong Kong, SingaporeHong Kong and Singapore regulators say Credit Suisse is conducting business as usual on Monday.The Hong Kong Monetary Authority, or HKMA, said in a Monday statement the bank's operations in the city will "open for business today as usual" and customers can access their deposits.Credit Suisse's Hong Kong branch holds about HK$100 billion, or $12.7 billion, in assets — less than 0.5% total assets in the city's banking sector, per HKMA.The Monetary Authority of Singapore said Monday Credit Suisse will continue operating in the country "with no interruptions or restrictions."The bank's customers "continue to have full access to their accounts and CS' contracts with counterparties remain in force," the Singapore authority added.March 20, 2022, 12.05 p.m. SGT: This story has been updated to reflect the price movement in the AT1 bonds of some Asian banks.March 20, 2022, 3.06p.m. SGT: This story has been updated to reflect price movements in the various Asia Pacific exchanges.Read the original article on Business Insider.....»»

Investors are still looking to the Federal Reserve's interest rate decision later this week for further cues. Asian share are steady in early Monday trade.Richard A. Brooks/AFP/Getty Images Asian shares are down on Monday after UBS struck a deal to acquire Credit Suisse. ING economists said a relief rally is possible after Switzerland moved to contain the banking crisis. Investors are still looking to the Fed's interest-rate decision this week for further cues. Asian shares are down early on Monday after Switzerland's UBS struck a deal to take over peer Credit Suisse. The deal values Credit Suisse at around $3.25 billion.The development in Europe came after a wild week for the banking sector — Silicon Valley Bank was shut down by regulators on March 10, spurring jitters of a contagion that could lead to a broader economic crisis.Japan's Nikkei 225 was 1.1% lower at last check, while Korea's Kospi edged down 0.5%. Australia's ASX200 was 1.2% lower and the Shanghai Composite Index was 0.1% higher.Hong Kong's Hang Seng Index fell much more sharply than other Asia Pacific indices — posting 2.6% in losses — but the index has been under pressure from China's slow economic recovery after the country lifted zero-Covid curbs in January.S&P 500 futures were 0.2% higher.Bitcoin rose 0.2% over the past 24 hours and is now trading above $27,300, according to CoinMarketCap.Hong Kong-listed shares of HSBC Holdings fell by almost 7% at last check, the biggest drop in nearly six months. Hong Kong-listed shares of British banking peer Standard Chartered dropped by almost 6% on Monday. Additional tier 1, or AT1, bonds of some Asian banks were also down on Monday morning, after the Swiss Financial Market Supervisory Authority said there will be a "complete write-down" on Credit Suisse's AT1 bonds to "boost capital" in the newly merged bank. The write-down will cost 16 billion Swiss francs, or $17 billion, according to the regulator.The 5.825% perpetual dollar note issued by Hong Kong's Bank of East Asia was down by 8.6 cents to just under 80 cents, while the 4% perpetual note issued by Thailand's Kasikornbank dropped 4.3 cents, also to just under 80 cents, per Bloomberg. The losses would be the largest ever for these issuances if they are maintained over the trading day.AT1 bonds were created after the Global Financial Crisis of 2007 to 2009 to pass the risks from crises onto investors rather than onto taxpayers.Analysts are keenly watching the Fed's interest rate decision later this weekThe markets could rise on relief that Switzerland moved to prevent the banking crisis from spreading over the weekend, ING economists Robert Carnell and Iris Pang said in a note on Monday seen by Insider. Investors will also be keenly watching the Federal Reserve's interest rate decision for further cues, per the ING economists. The Fed is set to meet on Tuesday and Wednesday. The central bank's decision is keenly watched, as a year of aggressive interest rate hikes has dampened the stock markets."Initial reaction for the financial banks in the region to the UBS' buyout of Credit Suisse seems to point to more measured gains, suggesting a still-cautious environment as sentiments remain on hold for further developments in the banking space," wrote Yeap Jun Rong, a market strategist at IG, an online trading platform in a Monday note.'Business as usual' for Credit Suisse in Hong Kong, SingaporeHong Kong and Singapore regulators say Credit Suisse is conducting business as usual on Monday.The Hong Kong Monetary Authority, or HKMA, said in a Monday statement the bank's operations in the city will "open for business today as usual" and customers can access their deposits.Credit Suisse's Hong Kong branch holds about HK$100 billion, or $12.7 billion, in assets — less than 0.5% total assets in the city's banking sector, per HKMA.The Monetary Authority of Singapore said Monday Credit Suisse will continue operating in the country "with no interruptions or restrictions."The bank's customers "continue to have full access to their accounts and CS' contracts with counterparties remain in force," the Singapore authority added.March 20, 2022, 12.05 p.m. SGT: This story has been updated to reflect the price movement in the AT1 bonds of some Asian banks.Read the original article on Business Insider.....»»

Investors are still looking to the Federal Reserve's interest rate decision later this week for further cues. Asian share are steady in early Monday trade.Richard A. Brooks/AFP/Getty Images Asian shares are down on Monday after UBS struck a deal to acquire Credit Suisse. ING economists said a relief rally is possible after Switzerland moved to contain the banking crisis. Investors are still looking to the Fed's interest-rate decision this week for further cues. Asian shares are slightly lower early on Monday after Switzerland's UBS struck a deal to take over peer Credit Suisse. The deal values Credit Suisse at around $3.25 billion.The development in Europe came after a wild week for the banking sector — Silicon Valley Bank was shut down by regulators on March 10, spurring jitters of a contagion that could lead to a broader economic crisis.Japan's Nikkei 225 was 0.7% lower at last check, while Korea's Kospi edged down 0.2%. Australia's ASX200 was 0.9% lower and the Shanghai Composite Index was 0.2% higher.Hong Kong's Hang Seng Index fell much sharply than other Asia Pacific indices — posting 2% in losses in its first hour of trade on Monday — but the index has been under pressure from China's slow economic recovery after the country lifted zero-Covid curbs in January.S&P 500 futures were 0.4% higher.Bitcoin rose 21.45% over the past 24 hours and is now trading above $27,600, according to CoinMarketCap.The markets could rise on relief that Switzerland moved to prevent the banking crisis from spreading over the weekend, ING economists Robert Carnell and Iris Pang said in a note on Monday seen by Insider. Investors will also be keenly watching the Federal Reserve's interest rate decision for further cues, per the ING economists. The Fed is set to meet on Tuesday and Wednesday. The central bank's decision is keenly watched, as a year of aggressive interest rate hikes has dampened the stock markets."Initial reaction for the financial banks in the region to the UBS' buyout of Credit Suisse seems to point to more measured gains, suggesting a still-cautious environment as sentiments remain on hold for further developments in the banking space," wrote Yeap Jun Rong, a market strategist at IG, an online trading platform in a Monday note.Read the original article on Business Insider.....»»

The index futures cut their losses and traded in the green on Sunday following Swiss investment bank Credit Suisse AG’s (NYSE: CS) sale to its peer UB read more.....»»

The index futures cut their losses and traded in the green on Sunday following Swiss investment bank Credit Suisse AG’s (NYSE: CS) sale to its peer UB read more.....»»

This is a Real-time headline. These are breaking news, delivered the minute it happens, delivered ticker-tape style. Visit www.marketwatch.com or the quote page for more information about this breaking news......»»

U.S. stock-index futures opened with modest gains Sunday evening as investors assessed a historic deal to rescue troubled Swiss lender Credit Suisse as authorities scrambled to head off a deeper loss of confidence in the global banking system. Rival bank UBS Group UBS agreed to buy Credit Suisse CSCH:CSGN for more than $3 billion in a deal shepherded by Swiss regulators. Also Sunday, the Federal Reserve and five other major central banks announced they were taking steps to ensure that U.S. dollars remained readily accessible throughout the global financial system in response. Futures on the Dow Jones Industrial Average YM00 rose 50 points, or 0.2%, while futures on the S&P 500 ES00 and Nasdaq-100 NQ00 were up 0.2%. U.S. stocks ended lower Friday amid persisting banking sector fears, with the Dow DJIA  booking back-to-back weekly losses. The S&P 500 SPX rose 1.4% last week, while the technology-heavy Nasdaq Composite COMP climbed 4.4% in its biggest weekly percentage gain since January, according to Dow Jones Market Data.Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news......»»

How The Fed's 2008 Mortgage Experiment Fueled Today's Housing Crisis Authored by Alex Pollock abd Paul Kupiec via The Mises Institute, How should Congress assess the Federal Reserve’s track record as an investor in residential mortgage-backed securities (MBS)? Regardless of Fed spin, it merits a failing grade. The Fed’s COVID-era intervention in the mortgage markets fueled the second real estate bubble of the 21st century. The bubble ended when the Fed stopped purchasing MBS and raised rates to fight inflation. While time will tell whether recent increases in home prices are reversed, the end of the bubble has already cost the Fed over $400 billion in losses on its MBS investments. From 1913 until 2008, the Fed owned precisely zero mortgage-backed securities. While the Fed’s monetary policy decisions still impacted conditions in the housing and mortgage markets, they did so indirectly through the influence the Fed’s purchases and sales of Treasury securities had on market interest rates. In a radical “temporary” policy response to the 2008 financial crisis, the Fed began intervening directly in the mortgage market. Through a series of MBS purchases, the Fed’s MBS portfolio ballooned from $0 to $1.77 trillion by August 2017. The Fed subsequently altered policy and slowly reduced its MBS holdings. By March 2020, it held about $1.4 trillion in MBS. When the COVID crisis hit in March 2020, the Fed decided to reinstate its 2008 financial crisis rescue plan. It resumed purchasing MBS as well as Treasury notes and bonds. By the time it stopped its purchases in the spring of 2022, it owned $2.7 trillion in MBS. The Fed had become the largest investor in MBS in the world. By spring 2022, it owned nearly 22 percent of all 1-to-4 family residential mortgages in the U.S. By Sept. 30, the date of the last available quarterly Fed consolidated financial statement, the Fed had lost $438 billion on its MBS investments. These losses will increase if the fight to subdue inflation requires still higher interest rates. Because most buyers borrow 80 percent or more of the purchase price of a home, house prices are sensitive to the level of mortgage interest rates. Low mortgage rates increase the pool of potential buyers, stimulating housing demand. If the interest rate stimulus is overdone, excess demand will push up home prices. High mortgage interest rates have the opposite effect. They dampen demand, dissipate upward pressure on home prices, and in some cases, lead to home price declines. As one might predict, the Fed’s massive MBS purchases coincided with large reductions in mortgage interest rates. During the Fed’s COVID MBS purchase campaign, the national average 30-year mortgage interest rate fell to a low of 2.65 percent in January of 2021. Today, with the Fed’s campaign of higher interest rates to battle inflation, 30-year mortgage interest rates are hovering around 7 percent. This change in the mortgage interest rate alone would cause monthly principal and interest payments on a same-sized mortgage loan to increase by 65 percent. Predictably, the decline in mortgage interest rates stimulated housing demand and pushed up home prices. Government statistics report that, from January 2018 to this January, the median new home price in the United States rose from $331,800 to $467,700—an increase of 41 percent. Interestingly, from January 2018 through March 2020, before the Fed renewed its MBS purchases, the median price of a new house actually declined to $322,600. From April onwards, the national median house price rose steadily, reaching a peak of $468,700 by the end of June 2022. In 2018, purchasing a new median-price home with 20 percent down and the then prevailing average 30-year mortgage rate of 3.95 percent required $1,259 in monthly principal and interest payments. In January, purchasing the $467,700 median-priced new home with 20 percent down required monthly payments of $2,360 given the 6.48 percent rate on a 30-year mortgage. In only 5 years, because of house price inflation and higher mortgage interest rates, the monthly principal and interest payment needed to purchase a median-priced new house increased by 87 percent! The Fed’s foray into the MBS market will have a long-lasting impact on real estate markets. Not only has demand for homes been softened by home price inflation and 7 percent mortgage rates, but current homeowners with favorable mortgage interest rates are reluctant to sell, reducing the inventory of homes available for sale in a market that is already starved for listings. This unfavorable balance is clearly reflected in the National Association of Realtors housing affordability index which has fallen from a cyclic high of 180 in July 2021, to recent readings below 100, indicating affordability challenges not seen since the double-digit mortgage interest rates of the 1980s. The end of Fed MBS purchases and the increase in Fed policy rates have put an end to the COVID housing bubble. While home prices are showing declines in some areas, prices in other areas remain elevated due to historically low inventories of homes for sale and strong job markets. Any realistic review of the impact of the Federal Reserve’s experiment investing in MBS would conclude that the Fed should stop buying mortgages. Its decision to invest trillions of dollars in MBS has helped to push the cost of home ownership beyond the reach of many. Others will find themselves locked into homes they cannot afford to sell because of the artificially low rates on their current mortgages. From either perspective, the Fed’s MBS experiment has whipsawed housing markets and cost the Fed over $400 billion in MBS losses. It’s hard to see how this experiment merits anything but a failing grade. Tyler Durden Sun, 03/19/2023 - 10:30.....»»

Grant Sabatier, 38, became a millionaire after the Great Financial Crisis. He says the key to wealth goes well beyond market timing. Grant Sabatier, the author of "Financial Freedom."Courtesy of Grant Sabatier Grant Sabatier, 38, became a self-made millionaire in five years. He hustled, cut expenses, and benefitted from one of the strongest bull markets in history. Sabatier says that economic uncertainty has created an "incredible opportunity to invest," but that there's more to building wealth than timing the market. In 2010, Grant Sabatier had less than $5 to his name. But just five years later, at age 30, he had accumulated a nest egg of $1.25 million which allowed him to retire early — and go on to author the book "Financial Freedom", the blog "Millennial Money", and co-found BankBonus.com.Sabatier, who is now 38 years old, said that he saw his wealth grow in part because he was lucky enough to invest during the stock market's surge over the past decade-plus."I was the beneficiary of one of the greatest bull markets in history," he told Insider.But he says buying the dip at the right time isn't all it takes to build wealth, and that it should be supplemented with lifestyle changes and side hustles that increase your income. Sabatier says that he's seen many people "obsess about cutting back" on spending and make cuts that are "unsustainable and make them unhappy" — that's among the reasons he recommends people focus more of their energies on boosting their earnings."There's a limit to how much you can cut back, but not a limit to how much money you can make," he said. "I wish more people focused on the upside, rather than mitigating the downside."Since fears of a recession spiked last year, some investors have begun preparing to capitalize on the next market downturn and become "recession millionaires." While the economy and the stock market don't always rise and fall in tandem, historically, a struggling economy has provided investors with opportunities to buy stocks on the cheap.When Sabatier began investing in 2010, the US economy had already emerged from the Great Recession, and the stock market had recovered some of its losses. But the S&P 500 was still well below its 2007 peak, and Sabatier was able to ride the market wave over the next decade. From March 2009 to March 2020, the S&P 500 gained over 400% — the longest bull market run in US history.While Sabatier recognizes the major role the stock market's surge played in his personal wealth building, he ultimately attributes his financial success to the steps he took to make additional money and cut expenses over a decade ago. That's because in order to have any chance at capitalizing on a down market and generating big returns down the road, he says one has to have the money to invest in the first place.Sabatier says growing one's skills, negotiating a higher salary, starting a side business, and reading books about investing or entrepreneurship are good ways people can put themselves on a path to earning additional income.In addition to his $50,000 digital-marketing job, Sabatier took on side hustles that included building websites, flipping domain names, pet-sitting, selling concert tickets, and flipping vintage mopeds. This helped him increase his income to well over six figures per year."If you want to reach financial independence as quickly as possible, you're going to need to up your side hustle game," Sabatier told Insider last year.In his mid-20s, Sabatier said that he put roughly 80% of his earnings into index funds — and he recommends that young Americans invest "as much as you can now.""You'll come out ahead over the next 10, 20, and 30-plus years," he said, adding that, "the best time to start investing was yesterday. The second best time is today."Read the original article on Business Insider.....»»

Stockman On Washington's Panicked Bailout Of Bank Deposits... Here's What Comes Next Authored by David Stockman via InternationalMan.com, Why would you throw-in the towel now? We are referring to the Fed’s belated battle against inflation, which evidences few signs of having been successful. Yet that’s what the entitled herd on Wall Street is loudly demanding. As usual, they want the stock indexes to start going back up after an extended drought and are using the purported “financial crisis” among smaller banks as the pretext. Well, no, there isn’t any preventable crisis in the small banking sector. As we have demonstrated with respect to SVB and Signature Bank, and these are only the tip of the iceberg, the reckless cowboys who were running these institutions put their uninsured depositors at risk, and both should now be getting their just deserts. To wit, executive stock options in the sector have plunged or become worthless, and that’s exactly the way capitalism is supposed to work. Likewise, on an honest free market their negligent large depositors should be losing their shirts, too. After all, who ever told the latter that they were guaranteed 100 cents on the dollar by Uncle Sam? So it was their job, not the responsibility of the state, to look out for the safety of their money. If the American people actually wanted the big boys bailed out, the Congress has had decades since at least the savings and loan crisis back in the 1980s to legislate a safety net for all depositors. But it didn’t for the good reason that 100% deposit guarantees would be a sure-fire recipe for reckless speculation by bankers on the asset-side of their balance sheets; and also because there was no consensus to put taxpayers in harms’ way in behalf of the working cash of Fortune 500 companies, smaller businesses, hedge funds, affluent depositors and an assortment of Silicon Valley VCs, founders, start-ups and billionaires, among countless others of the undeserving. And for crying out loud, forget this baloney about the bailouts aren’t costing taxpayers a dime because they are being paid for by the banks via insurance premium payments to the FDIC fund. Well, yes, when the Congress wants to disguise a tax they call it an “insurance premium”, as if its victims had the choice to elect coverage or not. But when $18 trillion of deposits are being assessed in order to bailout careless large depositors who paid no attention to what was happening to their money, then that’s an onerous tax by any other name. Accordingly, Washington’s panicked bailout of $9 trillion of uninsured deposits held by big and small companies, hedge funds and affluent customers over the weekend was therefore nothing less than a gift to the undeserving. And now we find out the two banks that have been explicitly funded 100% by Uncle Sam—SVB and Signature Bank—were deep into woke investing and conduct. That makes the bailout by Janet Yellen & Co. especially galling. For crying out loud, this is how the poison of wokeness and ESG spread like wild-fire among American businesses in the first place. The latter should have ordinarily been a bulwark of conservative values and common sense, but years of ultra-easy money from the Fed and the precedent of bailout-after-bailout since the 1980s allowed top executives to take their noses off the grindstone of safe and sustainable profitability in favor of a purely political agenda. In any event, inflation is still raging and wage workers are still taking it on the chin. During February real wages dropped for the 23rd consecutive month. So the Fed needs to stay on its anti-inflation playbook, come hell or high water. That means it needs to keep raising rates until their after-inflation level is meaningfully positive, which is not yet remotely the case. Indeed, unlike Tall Paul Volcker back in the late 1970s, who inherited 10-year Treasury yields at -2.0% and raised them to +10% over the next several years, real interest rates are still deeply underwater as we show below. The cries to stop the rate increases, therefore, are just damn nonsense. In fact, in any sane world these are not even “increases”. They are long overdue normalization of interest rates that have been absurdly pinned to the zero bound for upwards of a decade. And the Fed most certainly should not throw in the rate increase towel owing to a Wall Street proclaimed “crisis” in the small banking sector. That’s the long-standing wolf cry of the entitled class of speculators decamped in the digital canyons of Wall Street. Yes, regional banks were playing fast and loose with depositor money, but even the biggest of these did not amount to a hill of beans in the great scheme of the nation’s $25 trillion GDP. As we showed a few days ago, both the recently departed SVB and Signature Bank each accounted for barely one-half of one percent of the nation’s $30 trillion of banking system assets. If a few more local and regional banks need to be closed, therefore, so be it. Sooner or later the piper has to be paid. Y/Y Change In Real Hourly Earnings, March 2021 to February 2023 For want of doubt, here is the pattern of the annual rate of change in the two-year stacked CPI. During the 18 months after January 2021 it soared from 1.9% to 7.1%. Yet notwithstanding the Fed’s purported anti-inflation campaign since March 2022, there has been no meaningful retreat from the June 2022 peak. That is, when you take the “base effects” out if the equation, it is clear that the CPI has been stranded at 40-year high levels at 7.0% ever since. Annual Change, Two-Year Stacked CPI: January 2021: 1.9%; June 2021: 2.9%; January 2022: 4.5%; June 2022: 7.1%; July 2022: 6.8%; August 2022: 6.7%; September 2022: 6.8%; October 2022: 7.0%; November 2022:7.0%; December 2022: 6.8%; January 2023: 7.0%; February 2023: 7.0% Nor is that the extent of the inflationary warning signs in the February CPI report. For example, plunging used car prices and the rollover of asking rents were supposed to be saving the day, bringing the headline CPI rate rapidly back toward the Fed’s 2.00% target. But it’s not happening—-at least in the real world. On the matter of used vehicles there is nothing more authoritative than the Manheim used car auction index. But this real world index is going back up again, even as the green eyershades at the BLS insist that used vehicle prices are still going down. Manheim Used Vehicle Index Change Versus CPI Used Vehicle Index One Month (February): +4.3% vs. -2.8%; Three Months: +7.8% vs. -5.3%; Six Months: +2.0% vs. -11.0% Eventually, of course, the BLS will make revisions and adjustments to catch-up with the real world, meaning that the purported anti-inflation impact of used car prices will soon turn into a booster shot. Likewise, the CPI shelter index for February was up at a near record 0.8% on a M/M basis and 8.1% from last February. As is evident from the chart, this component—which accounts for 24% of the weight in the headline CPI and 40% of the core CPI—is still accelerating, not cooling. Change In CPI Shelter Index, Month/Month (Purple) and Year/Year (Black), 2021 to 2023 As we have previously noted, the argument that “asking rents” fell sharply during the back half of 2022 and that the CPI is therefore mis-reporting rent increases doesn’t wash. That because “asking rents” on new contracts account for just 1/12 of the rental market at best, and the reported numbers from private real estate companies are not seasonally adjusted. As is evident in the chart below, rental rates always go down during the fall, and then come roaring back in the spring and early summer. In fact, right on schedule the February report by the Apartment List was back in positive territory. In any event, what the CPI shelter index captures is the rolling increase in the total rent roll, not just the new contracts executed during the current month. And that means for the balance of this year at least—even if the overall housing market continues to weaken– average rents will be significantly higher on a year-over-year basis. Finally, there was one further component in the February report that makes a mockery of the claim that the CPI is fixing to cliff-dive and that the Fed can therefore take its foot off the neck of the Wall Street gamblers. To wit, upwards of 60% of the CPI is accounted for by services less energy services, and this component was up 7.3% on a Y/Y basis, marking the largest such gain in 41 years! So the Fed needs to keep its nose to the anti-inflation grindstone. It is not yet even close to turning the tide. Y/Y Change In CPI For Services Less Energy, 2000 to 2023 As to the matter of imprudently managed banks, isn’t it finally time that all parties concerned - including large depositors - are made to pay the price for their feckless and reckless indifference to financial risk? As a reminder, the unfolding of financial markets during 2022 was a screaming wake-up call that mis-matched bank portfolios were a train wreck waiting to happen. After all, last year the 30–year UST tanked by 39.2%, marking the greatest one-year decline since, well, 1754! Likewise, the 10–year UST fell by 17.8%, another record vaporization of value. That’s why, of course, unrealized bank portfolio losses went from $15 billion in Q4 2021 to a staggering $650 billion in Q4 2022. And no one was hiding the ball—every dime of these potential losses were reported in the quarterly SEC filings. Yet, and yet, bank executives and uninsured depositors sat on their hands because these soaring risks were not running through the income statement and thereby causing bank stock prices to fall even further. The whole theory behind this greatest ever outbreak of benign neglect was that all of the impacted Treasury and Agency securities generating these potential losses would be held to maturity and repaid in full. Alas, that predicate was valid only to the extent that uninsured depositors sat on their hands permanently, and that imprudent folks like Peter Thiel and Ken Griffin would never yell “fire in the theater”. They did, of course, and then the even greater fools in Washington enacted a $9 trillion deposit guarantee during the course of panicked deliberations in the White House Sunday afternoon. So now that $18 trillion worth of US bank deposits have been totally euthanized economically by the geniuses in Washington, how do you stop bank managements from running wild on the asset-side of their balance sheet? After all, they have already been making ungodly sums of money by mismatching their balance sheets, and now its Katie-bar-the-door. Indeed, the Signature Bank fiasco is a poster boy for the art of minting fake profits off dangerous balance sheets. Not far below the surface we find the same old bank failure culprit: Namely, dirt cheap deposits thanks to the Fed, mismatched with substantially higher yielding but problematic assets. Thus, in 2022 Signature Bank earned an average of 3.11% on its $114.3 billion of earning assets, while its cost of funding was just 0.88% on its $103.4 billion of deposits. In dollar terms, the assets generated $3.56 billion of gross income, while the bank paid out just $0.913 billion on its deposits. Alas, if this were the widget business the above figures would amount to a sterling gross margin of 74%. And the resulting $2.54 billion of net interest margin wasn’t eaten up by SG&A, either. Net operating expense/fee income amounted to just $700 million, making Signature Bank an apparent goldmine in 2022 Yet just like that it was gone! The reason is that its income statement was way too good to be true. The bank primarily catered to business operations in law, real estate and other professional services. Accordingly, like the case of SVB, fully 90% of its deposits base was not FDIC insured mom and pop savings accounts, but consisted of the working cash balances of its client firms. At the same time, $70.2 billion of its $114.3 billion of earning assets were in commercial loans, mortgages and leases, which accounted for $2.80 billion of its $3.56 billion in gross income, owing to an average 4.0% yield on this part of the portfolio. So at the heart of the operation was a 4% asset yield matched with a 0.88% deposit cost. And also a highly illiquid, sticky asset book (e.g. taxi medallion loans and low income housing mortgages) matched with deposits which were potentially hot and mobile, should its uninsured depositors ever get nervous and take flight. They did, and in a New York minute the Signature Bank profits machine vaporized. And that’s to say nothing of its fixed income book which was drastically underwater owing to last year’s fixed income market bloodbath. The only thing missing from Signature Bank’s financial picture is that it was not one of the 30 too-big-to-fail SIFIs (systemically important financial institutions), which were given a backdoor guarantee of uninsured depositors by Dodd-Frank. Then, like JP Morgan, its deposit costs would have been even cheaper and its fake profits even more fulsome. As of 6:15 Pm Sunday night, of course, every bank now has the 100% safety net for uninsured deposits. This means that the 5,000 still living banks will have every opportunity to ignore their depositors and play even more artificial and remunerative games by mismatching their assets and liabilities. Stated differently, banks have been way the hell too profitable thanks to the Fed’s insane financial repression and the rampant moral hazard of the bank regulatory and deposit insurance schemes. The top half dozen or so SIFI banks have actually booked more than $1 trillion of net income in the last eight years exactly because the geniuses in Washington have back-stopped and drastically cheapened their deposit carry costs. The stock answer to all this from Washington and Wall Street alike is not to worry because new powers to the bank regulators will keep the cowboys from gestating more SVBs and Signature Banks. Well, here is what Michael Barr, the top bank regulator on the Federal Reserve Board, had to say last Thursday morning when the fire at SVB was already raging:  “The banks we regulate, in contrast, are well protected from bank runs through a robust array of supervisory requirements.” Or, as Elon Musk might have said, funding secured! So at the end of the day there is no preventable financial crisis. What there is amounts to a systematic financial travesty that goes back to the hideously low money market regime that the Fed maintained since the eve of the financial crisis back in 2008, coupled with the evil of deposit insurance, both de jure and de facto. The implicit policy of the Federal Reserve, as measured by the inflation-adjusted level of its target Fed funds rate, has been to blow-up the banking system by flooding it with dirt cheap deposit costs. In fact, during the 180 months since Lehman there have been only seven months when the real rate was positive; and even then it was positive by just a hair as depicted by the blue bars peeking above the zero line in the chart below during early 2019. Inflation-Adjusted Federal Funds Rate, 2008-2023 Likewise, it should be evident by now that deposit insurance has nothing to do with either sound money or a prudent banking industry. It has remained in place for decades because it is a social policy-–protection of the little guy—parading as a financial stabilization measure. But it doesn’t stabilize—it inherently and egregiously de-stabilizes, as has been implicit in every financial crisis during the last half century. So if they want “social policy” for the little guy and the blue-haired ladies, give these folks access to a $250,000 government savings account paying 50 basis points of interest as far as the eye can see. For every one else, let them be the watch-dogs of their own money in the commercial banking system. That’s the very predicate of a stable banking system and sustainable free market prosperity. *  *  * The truth is, we’re on the cusp of an economic crisis that could eclipse anything we’ve seen before. And most people won’t be prepared for what’s coming. That’s exactly why bestselling author Doug Casey and his team just released a free report with all the details on how to survive an economic collapse. Click here to download the PDF now. Tyler Durden Sat, 03/18/2023 - 19:00.....»»

How The "Most Anticipated Recession" Is Still Unanticipated By Dhaval Joshi, chief strategist at BCA Research Exactly one year ago today, the US Federal Reserve embarked on the most aggressive tightening cycle in modern history. It comes as no surprise then that the US has just passed two of the three staging posts to recession. The first staging post is a housing recession. US residential fixed investment (home building) has slumped by a fifth. This is significant because post-1970 housing recessions have predicted economic recessions with a perfect four out of four success rate: 1974; 1980; 1990; and 2007 (Chart 1). The second staging post is bank failures. Banks tend to fail just before recessions begin. Ahead of the recession that began in December 2007, no US bank failed in 2005 or 2006. The first three bank failures happened in February, September, and October of 2007, just before the recession onset. Fast forward, and no US bank failed in 2021 or 2022. The first bank failures of this cycle – Silicon Valley Bank and Signature Bank – have just happened. If history is any guide, the start of bank failures presages an economic recession that is more imminent than many people anticipate (Chart 2). To be clear, it is not the direct impact of the housing recession or the bank failures that causes the economic recession. The housing recession and bank failures are simply the early warning signs – the ‘canaries in the coal mine’ – that tell us that high interest rates are killing the economy. The US Economy Has Passed Two Staging Posts To Recession. Here’s The Third Many economists argue that once a recession is staring you in the face, you can promptly cut interest rates to stop it in its tracks. Good luck with that. This is like arguing that once the iceberg was staring you in the face, you could promptly reverse the engines to save the Titanic. Interest rates work with a lag. The impact of tightening takes time to be felt. To repeat, the first US rate hike happened exactly a year ago today, but we are seeing the first bank failures now. In a downturn, the ‘corrective’ impact of loosening also takes time to be felt. Conversely, the ‘self-reinforcing’ feedback that  accelerates the downturn – like a bank run, or households increasing their precautionary saving in response to higher unemployment – is immediate. This makes a recession a non-linear system. Once you’ve passed the point of no return, it is too late to reverse the engines. You cannot avoid the iceberg. In the case of the US economy, once the unemployment rate has increased by 0.5 percent, it has always gone on to increase by well over 2 percent (Chart 3). So, the third and final staging post to recession is the US unemployment rate increasing by 0.5 percent. So far, it is up by 0.2 percent. How The ‘Most Anticipated Recession Ever’ Is Still Unanticipated Is the coming recession the most anticipated ever? The Philly Fed’s latest so-called ‘anxious index’, showed that the proportion of economists expecting the US economy to contract in the second, third, and fourth quarters of 2023 stood at 42 percent, 45 percent, and 41 percent respectively. These are among the most pessimistic readings for any time that a recession hasn’t already begun (Chart 4). Still, the proportion of economists predicting a recession is a minority. This is confirmed by the survey’s overall forecast for US GDP that shows no decline through the next four quarters – though admittedly, that was in mid-February before the recent bank failures (Chart 5). The absence of a forecasted recession might reflect the bias of economists to sugar-coat their predictions, given their asymmetric incentive structure. For an economist’s standing, the best thing is to be right. But if you are wrong, it is better to miss a recession, than to forecast a recession that does not happen. On this basis, peak pessimism should never increase above the high 40s. Yet it does. Once a recession begins, it is no longer taboo to forecast a contraction in the economy. As the sugar-coating of  economists’ forecasts ends, the anxious index can surge to above 70 percent, and forecasts for the economy can collapse. In this important regard, the most anticipated recession is still very unanticipated. Interest Rates, Profits, And Crude Oil Are Not Fully Anticipating A Recession In the financial markets, the deeply inverted US yield curve means that the bond market is forecasting aggressive rate cuts – around 200 basis points through the next two years. As the Fed only cuts aggressively in a recession, the bond market is anticipating a recession. That said, the forecasted pace of cutting, at 25 basis points per quarter, is too low – given that in previous recessions the pace of cutting has been 80-150 basis points per quarter. Meaning, the bond market is not fully anticipating a recession (Chart 6). Our February 8th recommendation to buy the December 2024 Fed funds future FFZ24 is panning out very well. The position is in huge profit and a big part of the expected gains have been made. Traders may wish to crystallize those gains, but the rally will end only when the rates curve fully anticipates a recession. Meanwhile, long bonds (10-year and longer maturity) have at least 10 percent price upside. What about the stock market? Many people argue that the bear market since early 2022 indicates that the stock market is anticipating a recession. This is wrong. The slump in stocks is mostly due to a slump in valuations, caused by the bear market in bonds.  Profit forecasts have not slumped (Chart 7). Based on previous recessions, these profit forecasts are vulnerable to at least a 20 percent downgrade. Mitigating this somewhat, an uplift to bond valuations will boost stock valuations, and limit further downside in the stock market to around 10 percent. Bonds have outperformed stocks in every recession of the past 75 years, including the recessions of the inflationary 1970s. But with bonds only now starting to outperform stocks, bonds versus stocks is not yet anticipating a recession. Turning to commodities, the oil market is not anticipating a recession either. Crude oil demand tracks world GDP, albeit deflated by 1.6 percent a year due to steady gains in energy efficiency. This means that the 2 percent annual growth forecast for world oil demand through 2023-24 would require world GDP to grow at a 3.6 percent clip through the next two years (Chart 8). Yet even a “soft landing” in the US and Europe would cause growth in developed economies to slow to around 1 percent. Meanwhile, China’s outgoing Premier Li Keqiang recently announced China’s GDP target for 2023 at “about 5 percent." This makes the oil market’s implied forecast for demand growth far too rosy, and in a recession the destruction of oil demand always outweighs any cutbacks to supply. Hence, as I explained in Why Oil Is Headed To $55, the crude oil price has a further 25 percent downside. To summarise for a 6-12 month investment horizon, bonds have a 10 percent upside, stocks have a 10 percent downside, and crude oil has a 25 percent downside. Tyler Durden Sat, 03/18/2023 - 16:00.....»»

VANCOUVER, BC, March 17, 2023 /CNW/ - Filo Mining Corp. (TSX:FIL) (Nasdaq First North Growth Market: FIL) (OTCQX:FLMMF) ("Filo Mining" or the "Company") announces its results for the three and twelve months ended December 31, 2022. PDF Version Jamie Beck, President & CEO, commented, "With a strong balance sheet and continued exploration success in 2022, we are accelerating our exploration efforts. There are nine rigs currently available at the project and we are planning for year-round operations throughout 2023. We look forward to another year of high impact drilling comprised of a mix of both large and small step-outs to the north and south of our current interpretation of the Aurora Zone, as well as resource definition drilling within it. Our exploration results continue to stand out on a global scale and showcase the project as one of the most significant copper-gold-silver discoveries of its generation." 2022 HIGHLIGHTS $82.5 million in exploration and project investigation costs incurred, yielding multiple successful holes highlighted by: Discovering what is interpreted to be a new porphyry centre along the broader Filo trend, now named the "Bonita Zone". The Bonita discovery supports the interpretation that Filo del Sol hosts a multikilometer, northeast-trending alignment of overlapping porphyry-centered hydrothermal systems which is open to expansion both to the south and to the north. The Bonita Zone is evidence of the untapped exploration potential that still exists at Filo del Sol despite the significant mineral discoveries made to date; Drilling the highest grade silver intersection on the project to date in hole FSDH055A which intersected 64m at 1,214 g/t silver; Extending the high-grade Breccia 41 Zone with new intersections in holes FSDH055C (126m @ 5.02% CuEq (2.12% Cu, 1.69 g/t Au, 188.7 g/t Ag)) and FSDH057 (289m @ 2.0% CuEq (1.18% Cu, 0.68 g/t Au, 36.0 g/t Ag)); Continued drilling of a combination of larger step-out holes to try to find the edges of the mineralized system, along with step-out and infill holes to further define the size of the remarkable Aurora Zone; Both the Aurora Zone and Breccia 41 remain open to expansion in several directions and drilling to further define them is ongoing; Pace of exploration accelerated with drilling rig count on site increasing from 6 at the beginning of the year to 9 currently; The first year in which drilling, and field operations continued year-round, through the South American winter; Funding secured via $100 million strategic investment by BHP Western Mining Resources International Pty Ltd ("BHP"), resulting in BHP owning approximately 5% of the Company; Added to the S&P/TSX Composite Index - the headline index for Canada, represented by the largest companies on the TSX, and is the principal benchmark measure for the Canadian equity markets; Added to the VanEck Junior Gold Miners ETF, recognizing the significant precious metals content at Filo del Sol, as well as the continued growth in our market capitalization and trading liquidity; Entered 2023 with strong balance sheet including cash of $74.9 million and working capital of $60.3 million; and On January 17, 2023, announced a proposed name change to "Filo Corp." to better align with the Company's strategic vision and plans to seek shareholder approval for the name change at its upcoming annual shareholder meeting. If approved by shareholders, the name change is also subject to TSX approval. FOURTH QUARTER 2022 DRILLING AND ASSAY RESULTS During and subsequent to the end of the fourth quarter of 2022, the Company announced the following results from the ongoing drill program: FSDH067, an infill hole in the Aurora Zone, intersected 1,131.6m at 1.11% CuEq from a depth of 132m, including 4m at 1.54% Cu, 12.08 g/t Au and 20.5 g/t Ag from 202m and 36m at 0.76% Cu, 0.71 g/t Au and 123.2 g/t Ag from 248m. The hole ended in strong mineralization at a depth of 1,263.6m; FSDH062 intersected 1,313.2m at 0.65% CuEq from a depth of 134m, including 520.4m at 0.82% CuEq from 400m. The hole ended in strong mineralization at a depth of 1,447.2m due to rig capacity. The hole was collared at the eastern edge of the current mineral resource of the Aurora Zone and is entirely outside it; FSDH064 intersected 1,356.0m at 1.09% CuEq from a depth of 44m, including 79.0m at 182.6 g/t Ag from 306.0m and 424.0m at 1.54% CuEq from 536.0m. The hole ended in mineralization at a depth of 1,400.0m. The hole is an Aurora Zone infill hole, filling a 300m gap between previously drilled holes. It tested an area which has particularly high-grade mineralization in the shallow, oxidized part of the deposit. The intersected silver zone correlates well with adjacent holes, although the silver zone here is thicker and higher-grade than expected. The porphyry interval in this hole also correlates well with adjacent holes; FSDH070A an infill hole in the Aurora Zone intersected 1,056.5m at 0.86% CuEq from a depth of 282m, including 670.4m at 0.97% CuEq from 369.7m. The hole ended in strong mineralization at a depth of 1,338.5m due to rig capacity; FSDH071 an infill hole in the Aurora Zone intersected 1,028.0m at 1.16% CuEq from a depth of 292m, including 172.0m at 2.14% CuEq from 408.0m and 237.5m at 1.49% CuEq from 776.0m. The hole ended in mineralization at a depth of 1,320m due to rig capacity. The entire hole is outside of the resource pit shell. FSDH068A intersected 1,776.0m at 0.70% CuEq from a depth of 18.0m, including 1,120.0m at 0.92% CuEq from 394.0m and 724.2m at 1.08% CuEq from 574.0m. The hole was planned to test for the eastern and depth extension of the high-grade Breccia 41 Zone intersected in three holes drilled on this same section. The hole is entirely outside of the resource pit shell; FSDH069A intersected 1,296.5m at 1.00% CuEq from a depth of 138.0m, including 31m at 127.0 g/t Ag from 404.0m in the Silver Zone, 598.0m at 1.51% CuEq from 498.0m and 94.0m at 3.01% CuEq from 792.0m. The hole ended in strong mineralization at a depth of 1,434.5m due to rig capacity. The hole is entirely outside of the resource pit shell; FSDH074 intersected 1,022.0m at 0.66% CuEq from a depth of 278.0m, including 516.0m at 0.79% CuEq from 644.0m and 252.0m at 0.85% CuEq from 840.0m. The hole was collared on Section 9200N, 200m east of FSDH068A and 400m east of FSDH041. The hole was stopped in porphyry mineralization at 1,509.0m. The hole is entirely outside of the resource pit shell; and FSDH077 intersected 2.0m at 10.35 g/t Au from a depth of 192.0m plus 516.2m at 0.20% CuEq from 404.0m. The hole was collared on Section 6000N and is the first hole into the new Flamenco target and there are no holes within 500m of it. The hole was stopped at 920.2m. Assay results received by the Company during and subsequent to 2022 are summarized in Appendix 1 to this news release. PRE-FEASIBILITY STUDY UPDATE The Company has completed an update to the pre-feasibility study ("PFS") on the Filo del Sol Project, with an effective date of February 28, 2023, which continued to demonstrate the project's robust economic potential. The PFS, which was based only on the oxide portion of the current Mineral Resource and used prices of US$3.65/lb copper, US$1,700/oz gold, and US$21/oz silver, yielded an after-tax net present value ("NPV") of US$1.3 billion at a discount rate of 8%, and generated an internal rate of return of 20%.  Positive valuations were also maintained across a wide range of sensitivities on key assumptions. The Company's most recent Mineral Resource and Mineral Reserve statement for the Filo del Sol Project is shown below. This Resource does not include any of the mineralization hosted in the Aurora, Breccia 41 or Bonita Zones and the Reserve only encompasses the oxide portion of the Resource. Category Tonnes (millions) Cu (%) Au (g/t) Ag (g/t) Lbs Cu (billions) Oz Au (millions) Oz Ag (millions) Mineral Resource Indicated 432.6 0.33 0.33 11.5 3.2 4.6 160.4 Inferred 211.6 0.27 0.31 7.4 1.3 2.1 50.3 Mineral Reserve Proven - - - - - - - Probable 259.6 0.39 0.34 16.0 2.2 2.9 133.3 Mineral Resource 1)  The Mineral Resource estimate has an effective date of January 18, 2023. 2)  The qualified person for the resource estimate is James N. Gray, P Geo. of Advantage Geoservices Ltd. 3)  The mineral resources were estimated in accordance with the CIM Definition Standards for Mineral Resources and Reserves. 4)  Sulphide copper equivalent (CuEq) assumes metallurgical recoveries of 84% for copper, 70% for gold and 77% for silver based on similar deposits, as no metallurgical testwork has been done on the sulphide mineralization, and metal prices of $4/lb copper, $1800/oz gold, $23/oz silver. The CuEq formula is: CuEq=Cu+Ag*0.0077+Au*0.5469. 5)  All figures are rounded to reflect the relative accuracy of the estimate. 6)  Mineral resources are not mineral reserves and do not have demonstrated economic viability. 7)  The resource was constrained by a Whittle® pit shell using the following parameters: Cu $4/lb, Ag $23/oz, Au $1800/oz, slope of 29° to 45°, a mining cost of $2.72/t and an average process cost of $9.86/t. 8)  Cut-off grades are 0.2 g/t Au for the AuOx material, 0.15% CuEq for the CuAuOx material and 20 g/t Ag for the Ag material. These three mineralization types have been amalgamated in the oxide total above. CuAuOx copper equivalent (CuEq) assumes metallurgical recoveries of 77% for copper, 72% for gold and 71% for silver based on preliminary metallurgical testwork, and metal prices of $4/lb copper, $1800/oz gold, $23/oz silver. The CuEq formula is: CuEq=Cu+Ag*0.0077+Au*0.6136. 9)  Mineral resources are inclusive of mineral reserves. Mineral Reserve 1)  The Mineral Reserve estimate has an effective date of February 28, 2023. 2)  The qualified person for the estimate is Mr. Gordon Zurowski, P.Eng. of AGP Mining Consultants, Inc. 3)  The mineral reserves were estimated in accordance with the CIM Definition Standards for Mineral Resources and Reserves. 4)  The mineral reserves are supported by a mine plan, based on a pit design, guided by a Lerchs-Grossmann (LG) pit shell. Inputs to that process are metal prices of Cu $3.50/lb, Ag $20/oz, Au $1600/oz; mining cost average of $2.72/t; an average processing cost of $9.65/t; general and administration cost of $1.46/t processed; pit slope angles varying from 29 to 45 degrees, inclusive of geotechnical berms and ramp allowances; process recoveries were based on rock type. The average recoveries applied were 83% for Cu, 73% for Au and 80% for Ag, which exclude the adjustments for operational efficiency and copper recovered as precipitate which were included in the financial evaluation. 5)  Dilution and mining loss adjustments were applied at ore/waste contacts using a mixing zone approach. The volumes of dilution gain and ore loss were equal, resulting reductions in grades of 1.0%, 1.3% and 1.0% for Cu, Au and Ag, respectively. 6)  Ore/waste delineation was based on a net value per tonne (NVPT) cut-off of $4.5/t considering metal prices, recoveries, royalties, process and G&A costs as per LG shell parameters stated above, elevated above break-even cut-off to satisfy processing capacity constraints. 7)  The life-of-mine stripping ratio in tonnes is 1.57:1. 8)  All figures are rounded to reflect the relative accuracy of the estimate. Totals may not sum due to rounding as required by reporting guidelines. The Company's Mineral Resource estimate is inclusive of the Mineral Reserve estimate as set forth above. The technical information relating to the PFS is described in a technical report titled "Filo del Sol Project NI 43-101 Technical Report, Updated Pre-feasibility Study" dated March 17, 2023, with an effective date of February 28, 2023 (the "Technical Report"). The Technical Report was prepared for Filo Mining by Ausenco Engineering Canada Inc. and is available for review under the Company's profile on SEDAR at www.sedar.com and on the Company's website at www.filo-mining.com. OUTLOOK Drilling continues to be the primary focus with nine drill rigs at site. As the summer drilling campaign continues, drilling is underway on new exploration targets outside of the Aurora and Breccia 41 Zones. Drilling will remain a mix of both large and small step-outs to the north and south of the Aurora Zone, as well as resource definition drilling within it. The Company continues to maintain a strong focus on improving drill productivity through a variety of initiatives, and is planning for year-around drilling and field operations. Data collected from the current campaign will be used to develop a comprehensive geological model which will guide further exploration and form the basis of an eventual update to the Mineral Resource estimate. The Company will continue preliminary metallurgical testwork on the sulphide mineralization, as well as environmental and social baseline programs in support of future project permitting. The Company's plans and timelines are subject to equipment and staff availability, along with being able to operate safely and effectively throughout the winter and in accordance with the Company's health and safety protocols. BHP exercises anti-dilutive top-up right to maintain pro rata shareholding Jamie Beck remarked, "Recently, BHP elected to exercise its right to maintain its pro rata interest in Filo Mining, and we are once again pleased to receive BHP's ongoing vote of confidence in our team and the Filo del Sol Project." On February 7, 2023, the Company closed a non-brokered private placement to BHP Western Mining Resources International Pty Ltd, a wholly owned subsidiary of BHP Group Limited (collectively, "BHP"), whereby the Company issued 43,711 common shares to BHP for gross proceeds of C$1,084,907 (the "Anti-dilution Top-Up"). The Anti-dilution Top-Up was undertaken pursuant to the terms of the March 11, 2022 private placement (the "Private Placement"), whereby BHP was granted certain anti-dilutive rights, allowing BHP to top-up and maintain its pro rata ownership interest in the Company from time to time (see news releases dated February 28, 2022 and March 11, 2022). SELECTED FINANCIAL INFORMATION (In thousands of Canadian dollars)  December 31, December 31, 2022 2021 Cash and cash equivalents 74,915 19,417 Working capital 60,296 13,052 Mineral properties 9,737.....»»

Schwab has been unfairly caught up in the SVB collapse. Their financial performance has been stellar in recent quarters. Wall Street and the big players have started backing up the truck already. 5 stocks we like better than Charles Schwab Having rallied as much as 45% since last summer, the last thing investors of brokerage […] Schwab has been unfairly caught up in the SVB collapse. Their financial performance has been stellar in recent quarters. Wall Street and the big players have started backing up the truck already. 5 stocks we like better than Charles Schwab Having rallied as much as 45% since last summer, the last thing investors of brokerage firm Charles Schwab Corporation (NYSE:SCHW) would have expected was a plunge of the same magnitude in just three sessions. However, that’s what’s happened in recent days since the collapse of SVB last Friday has caused investors to flee from any finance related stock. .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Ray Dalio Series in PDF Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more   Last Wednesday, shares closed at just over $76 and were fairly flat. By the end of Thursday, they were at $66, Friday they were at $58, while within a few hours of Monday’s open they were at $45. For context, it’s around this level that they spend much of the time between 2017 and 2020 trading at. So What Happened? The stunning weakness, as seen in the likes of First Republic Bank (NYSE: FRC) and other regional banks that look a lot more like SVB than Schwab does was understandable. But what made investors head for the exit in a company that had been outperforming the S&P 500 index every year since 2018? It seems to have stemmed from comments from the company’s CFO, Peter Crawford, in January. As part of the company’s 2023 Winter Business Update, Crawford had commented: “on his expectations for cash sorting, which occurs when clients move their cash into higher-paying money market funds from lower-yielding bank deposits.” He outlined his expectations for cash sorting to slow down throughout 2023, while warning that interest-earning assets could face a double digit drop as rates rise. Analysts read this as a warning about the impact it would have on Schwab’s balance sheet and there was some minor weakness in the stock at the time. However, the sudden failure of SVB due to poorly performing interest rate assets last week has caused many investors to question just how exposed other firms like Schwab are. Hence the biggest drop in the stock’s history through Monday morning. Since then though, things have started to turn and it’s here that we see a massive opportunity opening up. Having fallen a full 40% from last week’s high into Monday, shares have since staged a remarkable comeback and were up more than 30% by Wednesday’s close. They’re still another 30% rally away from undoing all the damage, and several big voices on Wall Street are calling out the likelihood of this in the near term. Morgan Stanley were one of the first to call the selloff overdone, with analyst Michael Cyprys reiterating his Overweight rating during Friday’s bloodbath. In a note to clients, he wrote that the ongoing slump in shares was "a knee-jerk reaction that compounds on long-simmering concerns about cash sorting”. However, his and his team view Schwab’s drop as “a compelling entry point for a high quality franchise that should be able to better navigate liquidity risks than the market prices in, given significant financial strength/ flexibility, liquidity profile and significant earnings/capital generation".   Getting Involved The folks over at Citi followed suit with a full upgrade from Neutral to Buy on Monday, with analyst Christopher Allen writing that “we do not see a material risk to deposits leaving SCHW given the composition of its deposit base and customer protections." And in a sign of just how big an opening this drop might have given investors, billionaire Ron Baron announced that he’d loaded up on the stock during Monday’s session. All the signs point towards the drop in Schwab specifically being a complete overreaction that will soon be undone. While of course there could be surprise unknowns lurking around the corner just like there were for SVB, Charles Schwab is not a regional bank that’s focused on a niche type of customer. This is a stock whose revenue increased every year since at least 2013 and whose annual net income is at record highs. As far as safe bets go when it comes to chasing 30% return, it doesn’t get much better than this. Should you invest $1,000 in Charles Schwab right now? Before you consider Charles Schwab, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Charles Schwab wasn't on the list. While Charles Schwab currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys. Article by Sam Quirke, MarketBeat.....»»