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Banking Crisis Contagion Erupts in Europe Where Fed Can Do Little 3/15/23

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The bloated body of Credit Suisse floated back to the surface this morning, throwing Europe into chaos. CS, by the way is a Primary Dealer, so this is a Fed problem too. I have pointed out through the years that only a minority, now 9 of the now 25 Fed Primary Dealers are US based. The rest are furriners, including 9 in Europe including the UK. 4 are Canadian. 3 are Japanese. 

So whatever impacts Fed policy here, impacts the world. And it doesn't take long, especially in the age of instantly public web based communication. 

This is the result this morning on the hourly chart of the ES, 24 hour S&P futures. The threat that we saw yesterday that this pattern would turn bullish for both the short term and intermediate term has, for the time being, been eradicated.  A tentative 5 day cycle projection points to 3775-80. A 2- day cycle projection points to 3795. Either would break the lows and would re-establish a pattern of lower highs and lower lows on the hourly cycles. Bailout or Not, Stock Traders Are Should Give the Fed, Treasury, and FDIC the Finger March 13, 2023


The hourly chart of the 10 year Treasury yield shows a resumption of the buying panic. But yield must trend lower, and thus prices higher, for the bank run crisis to be self mitigating. It remains to be seen if that will unfold as such. Systemic Meltdown Under Way As Dead Bodies Finally Start Surfacing March 12, 2023


BTC is apparently now seen as a safe haven by some. There's an LOL. A breakout above 26,500 would have a conventional measured move target of 37,500. There's a current 9 month cycle projection around 26,000- 26,500. That's done. Pivotal point here. 

Here's the daily chart. 


Gold is also getting a strong safe haven bid. The hourly chart base breakout has a target of 1980-90. But the implications of a long term potentially bullish setup are much greater.  Gold Works On High Base March 14, 2023



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  • DrStool changed the title to Banking Crisis Contagion Erupts in Europe Where Fed Can Do Little 3/15/23
11 hours ago, Jorma said:

I've been trying to figure out all day if if "sticks to the barn door" was a botched mixed metaphor or some old saying I've forgotten.  Well no matter as the Fed just closed the barn door, after the cows got out. A thing of beauty.

Well, yes. The old saying was "If you throw enough shit against the wall some of it is bound to stick." My dad was a farmer in his younger days, so he modified it from wall to barn door. For me that was fitting given your observation of the well known barn door being closed after the cows got out. 

I am often guilty of writing shit that no one else gets. 

In fact, that's apparently the rule, and not the exception. 😢

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1 minute ago, BreakOut said:

We usually get it.

Question: if selling bonds at high values/low rates is self-mitigating for the current bank crisis, isn’t that just kicking the can down the road for the bond buyers when rates go back up?

Answer, I think:  Maybe, but we deal with the crisis in front of us.

Nobody is going to buy these bonds at par. So this policy gives the banks one year to raise fresh equity via new share offers (diluting current shareholders), establish lending facilities, stop paying dividends, stop share buybacks, sell new debt and / or complete a bail-in where current bond holders exchange the banks debt for equity. They certainly should be able to get this done in a year but the CEO's aren't going to be very happy about it.

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One should also not forget that the very low and (only in Europe) sub-zero interest rate polöicy lasted much longer in Europe compared to the US.

Imagine. YOU had to pay the bank an extra fee that they take your money! The whole system was upside/down in Europe.

 One can only guess what the longer term consequences of that policy will be. Sub-zero rates means money has NO value, it is for free so to say... 

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