Our banking system is crumbling… and yet we’re obsessed with banning dances on TikTok. Banking is as simple as: taking a deposit, making a few basis points on the float, and sleeping like a baby.
- In 2008, I thought we eliminated the banking industry’s most inept idiots due to their lack of Credit Default Swap knowledge. Obviously, I was wrong (see SCH’s actions over the weekend).
- Currently, the remaining numb-nuts have reinvented themselves displaying that even Yield Curve Inversions have them stumped. DB, Credit Suisse, First Republic, SVB, etc. – in the future please put capital preservation ahead of investment income.
- Oh well - Batter-Up!
There are 2 steps to creating good work, per SG…
- Step 1: Show-Me an example of someone else’s work that you believe is good. Maybe it’s a book cover that feels professional, a jazz riff that inspires, or a pasta dish that’s unforgettable.
- Step 2: Make YOUR OWN version of it. The first hurdle is not to copy it, but rather make something that rhymes.
The Market:
A growing number of investors are suggesting that many VC-backed startups that have yet to find product-market fit – should just stop. Their argument is that many startups simply raised too much money, at valuations that they can never grow into, and a well-planned shutdown is better for everyone. The remaining monies can be re-invested, but more importantly, the founders’ time could be re-focused on more productive endeavors – improving their mental and emotional well-being.
Quotes from: Trends with Friends
- “There are these creeping contagions that are just beginning to show themselves. The liquidity crisis in this economy is hidden.”… Howard Lindzon
- “We don’t have bull markets in America without the financials.”… JC Parets
- “The headlines are going to suck for the next 2 years. Now is the time to hone your craft, build, network, and make small deals to pay the rent.”… Howard Lindzon
- “It’s so easy right now to get sidetracked in all of the doom-n-gloom. If you are out there and you’re building – then build like crazy. There is a light at the end of this tunnel.”… Phil Pearlman
- “There’s no such thing as Information Overload – only Filter Failure.”… Howard Lindzon.
InfoBits:
- Last weekend UBS and Credit Swiss Bank agreed to a shotgun wedding: UBS agreed to acquire its longstanding rival for peanuts.
- First Republic Bank shares were halted over 70 times last week: That may be the most times a single stock has been halted in history.
- Flagstar Bank (a sub of NYCB) rose 31%... after the FDIC agreed to sell them all of Signature Bank’s deposits and branches, some of the loans, and none of its crypto business.
- Failure to launch… Sir Richard Branson’s Virgin Orbit could be on the brink of bankruptcy. Last week the satellite-launching startup paused operations and furloughed staff.
- Amazon plans to lay off 9K more workers… and Meta just let go of 10k more.
- GameStop shares are up 50% after-hours… as the company reported its first net profit in 2 years.
- The FED raised rates 25 bps… to the highest level since 2007 - 4.75% to 5%.
- TikTok’s CEO-Charm lasted 1 hour… but Thursday’s Congressional hearing lasted 5 hours. It did not end well.
- Our FED’s balance sheet has expanded by $400B in the last two weeks: After less than a year of quantitative tightening, our FED just gave 64% of that progress back in 14 days. Stairs down, elevator up.
- In 2027, the U.S. Debt-to-Productivity ratio was 62%... today it has doubled to 129%. The more debt we have, the weaker we are in moments of crisis.
Crypto-Bytes:
- Coinbase, the largest U.S.-based crypto exchange… is considering opening a non-US trading platform – as the U.S. continues to ramp-up its anti-crypto actions.
- Sen. Cynthia “Crypto Queen” Lummis (R-Wyo.) predicted… that this regulatory backlash would drive out the domestic U.S. blockchain industry.
- BTC is up +65% YTD and ETH is up +40%: What’s fueling the rally depends on who you ask.
o Flight to safety: When banking concerns grow, crypto becomes an attractive alternative.
o FED up: A cooling in FED rate-hikes may’ve boosted appetites for crypto investments.
o Shallow pool: The crypto market has less liquidity which can lead to larger price swings.
- Coinbase said that they received a Wells notice from the SEC… signaling that it may have violated U.S. securities law.
- The IRS is considering taxing NFTs… at the capital gains tax rate like other collectibles.
- GS and MS plan to offer crypto custody services: This signals a maturing market and institutional demand.
TW3 (That Was - The Week - That Was):
Monday: Friday’s FED Fund Futures implied a 75% probability of a 25bps rate hike by the FED and a 25% chance of no hike at all. Any other increase is off the table given we just saw 2 of the 3 largest bank failures occur over the past week, and Credit Suisse was just acquired by rival UBS. The S&Ps are down a little more than 1% since the banking crisis began on March 8th. @charliebilello tweeted: “The ‘Fed Put’ is back with assets on their balance sheet increasing $297B over the last week. Nearly half of all Quantitative Tightening was undone in a single week.” I'm watching AAPL here. If it gets over Friday's high at 156.74 I'm going to take a shot at it. But I'll be quick to bail out if I sense anything silly.
Wednesday: Powell raised rates 25bps, and said: “Additional policy firming will be accomplished when appropriate.” His Q&A was not market friendly:
J. Powell: We changed the language from ‘additional rate hikes’ to ‘appropriate policy firming’ - because we want to see if rate hikes + failed banks, will tighten credit as much as rate hikes alone.
Q: Can we take today's statement to mean an end to rate hikes?
J. Powell: NO. We find them necessary for fighting inflation. And rate cuts are NOT in our base case.
Thursday: What is surprising to me, is that they aren't blaming yesterday's sell off on Powell saying "NO" to rate cuts, but rather on Janet Yellen telling congress that "No, we can't protect every depositor and bank". Honestly, bank deposits have only been insured up to $250k for decades – so once again we have the tail trying to wag the dog. I wouldn’t be surprised to see our NY FED desk behind all the buying today. For some reason, this doesn’t feel like your typical dead cat bounce.
AMA (Ask Me Anything…)
The Digital Catastrophe: SVB was the first digital catastrophe victim; however, this is the new normal. Digital Catastrophes have two main components: information and action. With SVB, millions of people were aware of the bank’s issues instantly, regardless of whether they were a customer. But in this case, customers could simply navigate to a new tab in their browser, log into their account, and move their money. The internet enabled SVB to receive $42B in withdrawal requests within 24 hours. In terms of instantaneous money transfer, be careful what you wish for.
Next Week: Next… Tech Gets Pummeled…
Bonds and Gold… are poised to move higher. The ineptitude of our banks to handle their yield curve inversion issues, has scared buyers into bonds and gold. Both are poised to move higher as more and more buyers ‘park their money’ into defensive positions – at least until the dust clears. With Gold (GLD) in particular, notice the impressive upside follow-through and its breakout to all-time highs all around the world. It’s time to get long precious metals as the next bull market in gold begins to take shape.
S&P Concentrated Equity Risk: With money flowing into Bonds and Gold – it will flow out of stocks, and specifically out of technology. There are only 3 sectors that currently matter in the marketplace: energy (-7.5% YTD), financials (-9.6% YTD), and tech (+17% YTD). Currently, we have the most concentrated equity risk in the history of the markets. If the S&Ps are going to move lower, then tech will need to take a hit – because the top 7 tech companies control over 27% of the S&P Index. In the Nasdaq, the top 10 companies account for 57% of the weighting of that index. These are the highest percentages ever recorded in terms of the smallest number of companies – controlling the largest pieces of markets.
Let’s Short TECH: The divergence between the energy and financial sectors falling and tech moving higher is about to come to an end – with correlation taking over. With funds moving from stocks into bonds and gold, markets will begin to move lower.
TRADES:
- META:
o BOT: Apr 21: +207.5 PUT / -202.5 PUT for $2.33 Debit
- GLD - Gold:
o BOT: Apr 28: +185 CALL / -187 CALL for $0.92 Debit
- HPQ – Hewlett Packard:
o BOT: Apr 14: +28 CALL / -29 CALL / -26 PUT
o BOT: Apr 21: +26 PUT … all for $0.22 Credit
- WMT – Walmart:
o BOT: Apr 14: +138 PUT / -139 PUT / -147 CALL
o BOT: Apr 21: +147 CALL … all for $0.08 Debit
SPX Expected Move:
- Last Week’s EM = $120… We touched the upper edge of the EM and reversed off of it.
- Next Week’s EM = $90… Keep your eye on mega-tech. No one is sounding the all clear on energy or financials, but this marketplace will begin to correlate and move lower.
TIPS:
HODL’s: (Hold On for Dear Life)
- PHYSICAL COMMODITIES = Gold @ $1,981 & Silver @ $23.4/oz.
- 30, 60, & 90-Day Treasuries @ 4.6 to 5.1%
- **Bitcoin (BTC = $27,705 / in at $4,310)
- **Ethereum (ETH = $1,750 / in at $310)
- DNN – Denison Mines ($0.97 / in at $1.32)
- GLD - Gold:
o BOT: Apr 28: +185 CALL / -187 CALL for $0.92 Debit
- GME – DRS’d and HODL
- HPQ – Hewlett Packard:
o BOT: Apr 14: +28 CALL / -29 CALL / -26 PUT
o BOT: Apr 21: +26 PUT … all for $0.22 Credit
- Innerscope (INND = $0.005 / in at $0.0052)
- MESO – Mesoblast Ltd. ($3.09 / in at $3.60)
o SOLD July $5 CALLS for $0.85
- META:
o BOT: Apr 21: +207.5 PUT / -202.5 PUT for $2.33 Debit
- MSFT – Microsoft:
o BOT: Apr 21, Unbal-Fly: +280 / -285 / +290 CALLS for $1.65 CREDIT
- NFGC – Newfound Gold ($4.64 / in at $3.75)
o SOLD the April $5.00 CALLS
- NVDA – Nvidia
o BOT: Apr 21, Unbal-Fly: +265 / -267.5 / +270 CALLS for $0.95 CREDIT
- WMT – Walmart:
o BOT: Apr 14: +138 PUT / -139 PUT / -147 CALL
o BOT: Apr 21: +147 CALL … all for $0.08 Debit
Follow me on StockTwits.com to get my daily thoughts and trades – my handle is: taylorpamm.
Please be safe out there!
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