DrStool Posted March 13, 2023 Report Share Posted March 13, 2023 It's Monday the 13th. Good luck with that. The Fed and Treasury announced a bank bailout on Sunday in the hopes of forestalling bank run contagion. But while it sounds big and new, it's really just a few tweaks to the old tried and true discount window. The difference is that the Fed will now lend without the usual 1%-5% margin it required previously. In addition it will value the collateral at par instead of market value. Finally, it will increase the term of discount window loans from overnight rollovers with a limit of 90 days, to a one year term, prepayable at any time. Not a big difference since much of the outstanding bank collateral is in T-bills where their prices are near par. But it does add marginal borrowing for banks holding mostly long term paper that is under water, which is currently on the order of $625 billion. This chart made the rounds of fintwit and all the fin message boards last week. Big depositors at SVB got spooked because there was an awareness of huge unmarked losses there. Today, bank runs are online and instant. Another bank, Signature Bank in New York, fell over the weekend, and the dominoes are set up to fall all at once. The FDIC and Treasury also announced that all depositors at SVB and Signature, including those with deposits above the insured level, will have full access to their funds. The hope is that these announcements will stop any bank runs. If it works, then none of this new program will be tapped. If it doesn't work, depositors will move their funds out of banks and into government money market funds. These new loans, combined with the inflows into MMFs will flood the system with liquidity. Money rates would start falling. The message to investors and consumers is that the inflation fight was finished. Inflation will explode and we'll all die. Have a good day. Meanwhile, here's the hourly ES, S&P 500 24 hour futures. Big rally on the news. As of 3 AM in New York, prices had begun to pull back. 3915 and 3908 are the critical levels as of the New York open. If the fuggies are above that, the bailout announcement may work in the short run. But if the market falls back below those levels, there would still be crash potential. Meanwhile, Thursday and Friday's flight to safety rally in the bond market, as shown on the hourly chart of the 10 year yield, has stalled on this announcement. Is that good news or bad? Some answers: Systemic Meltdown Under Way As Dead Bodies Finally Start Surfacing March 12, 2023 Looks like gold is a safe haven again. DIsaster averted for the yellow metal. Gold On Cusp of Brutal Outlook if This Happens March 8, 2023 Here's a 2 hour bar chart for perspective. Helluva base breakout, but the move appears extended, short term. Some are seeing the euro as a safe haven. Looks like Europeans may be repatriating their cash. Not that that will do any good. Their banks are even more under water from all that negative rate paper they're holding. The EUR/USD has an initial measured move objective of 108.30. But if it gets there, that would apply a move to 1.10-1.11. Please no. I'm still mostly in USD. Here's a 2 hour bar chart. This move also looks extended. Apparently crypto is a safe haven. Here's the daily chart of BTC. Helluva base. If they clear 25,300, look out above on that. The implied target would be 33,000. For moron the markets, see: Bailout or Not, Stock Traders Are Should Give the Fed, Treasury, and FDIC the Finger March 13, 2023 Systemic Meltdown Under Way As Dead Bodies Finally Start Surfacing March 12, 2023 Gold On Cusp of Brutal Outlook if This Happens March 8, 2023 Swing Trade Screen Picks – 3 Buys, No Shorts March 6, 2023 Mixed Bag of Signals Screaming, “Walk This Way” March 5, 2023 February Withholding Taxes Say – Fade the Jobs Report! March 2, 2023 Here’s Why There Will Never Be Bull Markets Until This One Thing Happens February 26, 2023 You Can Now Follow the Diabolical Usual Suspects February 16, 2023 If you're serious about the underlying forces of supply and demand that drive the markets, join me! If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam folder. Link to comment Share on other sites More sharing options...
DrStool Posted March 13, 2023 Author Report Share Posted March 13, 2023 Thread bump. Link to comment Share on other sites More sharing options...
DrStool Posted March 13, 2023 Author Report Share Posted March 13, 2023 In order for the bond market and crypto and gold to rally, something else must be liquidated. Draw your own conclusions. Link to comment Share on other sites More sharing options...
Jimbo Posted March 13, 2023 Report Share Posted March 13, 2023 THINGS ARE MOVING QUICKLY Plug pulled on Signature. Bank Term Funding Program (BTFP) rolled out. Now Big four on a more equal footing with the regionals. The Fear and Loathing Bank ETF idea now dead. But is could be repurposed Big four have $210 billion in unrealised bond losses. How about the Bank Fear and Loathing ETF shorts the big 4. BOA seems to have most of the losses. Link to comment Share on other sites More sharing options...
Jimbo Posted March 13, 2023 Report Share Posted March 13, 2023 WHO IS AIG?????? Who is AIG this time round???? Providing the role of insurer of first and last resort for all the bags???? Providing all the interest rate swap insurance to the Banks?????? Bet its not Goldmember. I can't but think the best candidates are Credit Swiss and Deutsche. The hint is in their share price charts. Link to comment Share on other sites More sharing options...
DrStool Posted March 13, 2023 Author Report Share Posted March 13, 2023 Great stuff Perfesser Jumbo Jimbo from Down Under! Always love your take from the land of Upside Down. 😁 Link to comment Share on other sites More sharing options...
fxfox Posted March 13, 2023 Report Share Posted March 13, 2023 27 minutes ago, Jimbo said: THINGS ARE MOVING QUICKLY Plug pulled on Signature. Bank Term Funding Program (BTFP) rolled out. Now Big four on a more equal footing with the regionals. The Fear and Loathing Bank ETF idea now dead. But is could be repurposed Big four have $210 billion in unrealised bond losses. How about the Bank Fear and Loathing ETF shorts the big 4. BOA seems to have most of the losses. Not even Deutsche itself knows what‘s in their portfolio. The derivatives portfolio of Deutsche is one frickin mess. A spiderweb of unbelievable propotions. Link to comment Share on other sites More sharing options...
DrStool Posted March 13, 2023 Author Report Share Posted March 13, 2023 Bailout or Not, Stock Traders Are Should Give the Fed, Treasury, and FDIC the Finger LEE ADLER 2 - TECHNICAL TRADER MARCH 13, 2023 The Fed, US Treasury, F-DIC and PPT stepped up to the plate on Sunday to rescue the wildly imprudent big depositors of the Silly Con Valley Bonk. Multiple tech startups had big deposits well in excess of the 250k insurable limit, and we, the great unwashed taxpayers are supposed to bail them out? I guess so. But stock market indicators currently say, No Way! Eff you! Here’s what’s coming. Non subscribers click here to access. Technical Trader subscribers click here to download the complete report. Not a subscriber? Get price and time targets, and weekly swing trade chart picks, risk free for 90 days! Link to comment Share on other sites More sharing options...
TurdButter Posted March 13, 2023 Report Share Posted March 13, 2023 55 minutes ago, Jimbo said: WHO IS AIG?????? Who is AIG this time round???? Providing the role of insurer of first and last resort for all the bags???? Providing all the interest rate swap insurance to the Banks?????? Bet its not Goldmember. I can't but think the best candidates are Credit Swiss and Deutsche. The hint is in their share price charts. Could it be an insurance company? Also with a problematic bond portfolio? Link to comment Share on other sites More sharing options...
fxfox Posted March 13, 2023 Report Share Posted March 13, 2023 3 minutes ago, TurdButter said: Could it be an insurance company? Also with a problematic bond portfolio? Of course. After banks they are the biggest bond holders. Link to comment Share on other sites More sharing options...
fxfox Posted March 13, 2023 Report Share Posted March 13, 2023 Isn't Berkshire invested in insurers like there's no tomorrow? Uncle Buffetto made so many mistakes and weird investment decisions in the last few years, wouldn't be surprised if Berkshire gets hit too. Link to comment Share on other sites More sharing options...
SiP Posted March 13, 2023 Report Share Posted March 13, 2023 Guys big banks will not fail because this famous chart is fake - its missing the other side of the equation which are swaps. I talk with couple bond dealers and all of them told me that big banks are fine. because they are hedged. I dont think there is new "AIG" in the system. Thats a question for which we dont know the answer. I agree with Doc - there should be flow of money to MMF and bonds, so the yields will go down and....this means.....loosening of financial conditions .....which means.....market and Fed (due to their behaviour) are lowering the rates. We can see this already. No more 2x50 this year. Maybe 2x25. Maybe its the pivot. What does that mean? that inflation will stay, if Fed and market will stop fighting with it by increasing the rates on the market (Cost of capital). This means ..... higher for longer actually and more pain for consumer and economy. So it will be long process of healing if I must conclude my take on what is happening. * of course there is Credit Suisse and couple other banks that had problems before SVB. Their share price keep going lower which is problematic because those banks are big, probably too big to fail. So I think again - Fed, ECB will help again by offering for free 1-3 years programs buying all their stuff on par (face value, before bonds selloffs). This means actually pivot? Link to comment Share on other sites More sharing options...
SiP Posted March 13, 2023 Report Share Posted March 13, 2023 I dont see panic (flight to USD, selling even gold), because I see USD selloff and gold is bought. In times of stress like during GFC, gold was sold, and USD was bought. So 1. People are buying bonds - because rates will not go higher 2. People are selling dollars because rates are going lower 3. people are buying gold because rates are going lower 4. People are selling oil/commodities because recession is coming. Link to comment Share on other sites More sharing options...
SiP Posted March 13, 2023 Report Share Posted March 13, 2023 2Y 72bps below Fed Funds. Link to comment Share on other sites More sharing options...
SiP Posted March 13, 2023 Report Share Posted March 13, 2023 Good thread link Link to comment Share on other sites More sharing options...
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