If the U.S. was to experience a widespread bank run, that would be the time for the Federal Reserve to expand the money supply, thereby providing liquidity to commercial banks such that they may meet depositor withdrawals. Thus far SVIB and SBNY have been closed by the FDIC. Apparently that was too much for Fed … Continue reading Bail Out
Tag: Federal Reserve
Venture Debt & SVBPremium
Venture Debt is a risky way to earn a return (just as SVIB) - especially when the source of capital is customer deposits as opposed to long-term limited partner capital for example. Extending loans to Technology firms that aren't generating cash, or in many cases that are not generating revenue is a risky bet. The … Continue reading Venture Debt & SVBPremium
Tough Month For Banks
Tough month for bank stocks. Not a surprise when 3 month T-Bills yield 5%. How many depository institutions can compete at that rate level? Will the Fed blink? If JPM and GS shares crater - Yes. Otherwise, probably not. Also, as we wrote last night, SIVB may have a new owner come Monday. Source: https://g.co/finance/BANK:INDEXNASDAQ?window=1M … Continue reading Tough Month For Banks
Labor Force Participation – Weak
Blame the various COVID relief packages for the weak labor force participation rate - 62.5% in February, up from 62.4% in January but down from 63.3% in February 2020 pre-pandemic. This at a time when the Biden Administration is proposing a $7 trillion budget. I'm not sure where demand for U.S. Treasuries to fund this … Continue reading Labor Force Participation – Weak
The Fed’s Balance Sheet Reduction (QT) UpdatePremium
The Fed slightly reduced its T-Bill holdings this week. That was the extent of its QT effort. Meanwhile, crypto lender Silvergate went down for the count earlier this week. In addition, Silicon Valley Bank (ticker: SIVB) lost 60% of its market value on Thursday and is off another 22% in the aftermarket as Tech VC … Continue reading The Fed’s Balance Sheet Reduction (QT) UpdatePremium
The Fed’s Balance Sheet Reduction (QT) Update
The Fed modestly reduced its Treasury and Agency security holdings. The 2-Year Treasury yield sits at 4.89%, its highest level since June 2007. The 10-Year Treasury yield sits at 4.08% (we told you it had upside and there is lots more room to move higher), it's highest level since November 2022. Yields will move higher … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
World War III?
Could World War III be around the corner? It very well could be. Why? Look no further than the U.S. Dollar. Is the U.S. arming Ukraine simply to piss off Putin? No. Is the U.S. arming Ukraine as a result of lobbying efforts by Government contractors such as Lockheed Martin (LMT) and Northrop Grumman (NOC)? … Continue reading World War III?
Short-Term Paper, Quality Names and Gold
Short-term Treasuries look attractive. The 1-month T-Bill offers a 4.67% yield. Beats cash and beats holding an equity index fund or ETF. I'm always a fan of owning Quality companies at an attractive price. However, I don't value equities as most investors do - I don't bucket stocks into "Value" "GARP" and "Growth" buckets. I … Continue reading Short-Term Paper, Quality Names and Gold
A 50 BPS Increase In March
I advocated for a 50 BPS increase by the Fed for its February FOMC meeting (it executed a 25 BPS increase). Perhaps the Fed will execute a 50 BPS increase in the Fed Funds rate when the FOMC meets on March 22nd. The current Fed Funds target range is 4.50-4.75%. With prices having accelerated sequentially … Continue reading A 50 BPS Increase In March
Now We Will See Who Is Quality
The Fed won't be arriving on a white horse to rescue investors anytime soon. The Fed may be finally learning the lesson that inflation is a persistent, long-term problem that lacks a quick remedy. In the absence of easy money, the price of goods, services and assets will eventually find a natural price equilibrium. Fundamentals … Continue reading Now We Will See Who Is Quality
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