Thursday Thoughts – Poverty in America

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phil
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A black-and-white photograph of a family in a car. The mother is laying down in the front looking up despondently. Two children are crouched in the back. A boy looks out from under pieces of furniture looking directly into the camera from the shadows. Let’s talk about poverty.  

It’s spreading and it’s capable of undermining the entire economy and it’s about to explode when millions of people who are already on the edge of poverty have to start paying their student loans again.  It’s not the loan payments themselves that are the problem but that the pause on payments has put off those borrowers having to deal with the full force of the damage inflation has done to their spending power in the past two years.  

How Much Student Loan Debt is Too Much

Student debt is a huge burden for Millions of Americans who pursued higher education in hopes of improving their lives and careers.  According to the Federal Reserve Bank of New York, Americans owed more than $1.75 TRILLION in student loans at the end of last year, making it the second-largest source of household debt after mortgages.  That’s an average of $28,950 per borrower, which is more than enough to buy a new car or make a down payment on a house.

Unlike cars or houses, student loans are extremely difficult to get out of.  Most Borrowers cannot discharge their student loans, even in bankruptcy, and many have struggled to keep up with their monthly payments, especially during the pandemic.  According to the National Center for Education Statistics, 11% of Borrowers who entered repayment in 2015 had defaulted on their loans within three years.  Defaulting can have serious consequences, such as damaging credit scores, losing eligibility for federal benefits or programs, and facing wage garnishment or seizure of tax refunds.

Cartoons: A (Not So) Humorous Look at Student Loans - BlogStudent debt also has broader implications for the economy and society.  It limits the choices and opportunities of Borrowers who have to delay or forego major life decisions such as starting a family, buying a home, saving for retirement, or starting a business.  It also exacerbates inequality and injustice by disproportionately affecting low-income students and students of color who may have less access to financial aid or family support.  And it undermines the value and quality of higher education by forcing students to choose between affordability and excellence.

Student debt is not just a personal problem but a national crisis that requires urgent action.

Bing Says:  

The status of the student loan battle between Biden and the GOP is uncertain and contentious. President Biden announced a plan last year to forgive $400 billion in student loan debt for more than 40 million Americans who were affected by the pandemic12. He said he had the authority to do so under the Higher Education Act of 1965, which gives him discretion over federal student loans3.

However, his plan faced immediate opposition and legal challenges from Republican lawmakers and state officials who argued that he was overstepping his constitutional powers and that he needed congressional approval to cancel such a large amount of debt45. They also claimed that his plan was unfair to taxpayers, borrowers who paid off their loans, and students who chose cheaper or alternative education options65.

The Supreme Court agreed to hear two cases challenging Biden’s plan: one filed by six Republican-led states4, and another filed by a group of Republican senators led by Ted Cruz6. The oral arguments took place on Tuesday, February 28th, 2023, and the court is expected to issue its ruling by June63.

The outcome of these cases could have a significant impact on millions of borrowers who are hoping for debt relief, as well as on Biden’s political agenda and legacy. Some analysts believe that Justice Amy Coney Barrett could be the swing vote on the court, as she has shown some sympathy for borrowers in previous cases involving student loans1. Others say that the court could avoid ruling on the merits of Biden’s plan and instead focus on procedural issues such as standing or mootness3.

Poverty is a multifaceted phenomenon that goes beyond a lack of income.  The World Bank defines poverty as “pronounced deprivation in well-being,” which encompasses not only low income but also limited access to Education, Healthcare, Housing, and Social Participation (World Bank, 2022). In the US, poverty is typically measured by the Federal Poverty Line, which is based on household income and family size. According to the US Census Bureau, the poverty line for a family of four in 2022 was $27,750 – though how you are supposed to live with a family on $27,750 I can’t possibly imagine…

Cost of Living in Iowa 2022 | Common Good Iowa

Despite being one of the wealthiest nations in the World, poverty remains a pressing issue in the US.  According to the latest data from the US Census Bureau, 9.2% of the population, or 30.1 Million people lived in poverty in 2020.  The poverty rate varies significantly by race and ethnicity, with Black and Hispanic individuals experiencing higher poverty rates than White and Asian.  In 2020, the Poverty Rate was 18.8% for Black individuals, 15.3% for Hispanic individuals, 6.6% for White individuals, and 6.7% for Asian individuals per the Census that year.

Children in PovertyPoverty has a profound impact on individuals, families, and communities.  Individuals living in poverty are more likely to experience Food Insecurity, Housing Instability, and limited access to Healthcare, Education, and Employment Opportunities.  Children living in poverty are more likely to have Developmental Delays, Lower Academic Achievement, and higher rates of Chronic Health Conditions.  Poverty also has intergenerational effects, as children who grow up in poverty are more likely to live in poverty as adults.

Moreover, poverty is linked to Social Exclusion and Marginalization, as individuals living in poverty often face Stigma and Discrimination.  They may also have limited social networks and community resources, which can exacerbate their Isolation and Vulnerability.

The causes of poverty are complex and multifaceted, but they often stem from Systemic Inequalities and Structural Barriers, such as Discrimination, Lack of Access to Quality Education and Healthcare, Low Wages, and Inadequate Social Safety Nets.  Poverty also intersects with other social issues, such as Race, Gender, and Immigration status, which can further compound its effects.

Addressing poverty requires a comprehensive and multi-dimensional approach that tackles its root causes and provides support to individuals and communities. This can include policies that increase access to Education and Training, improve the affordability and availability of Housing and Healthcare, and provide a robust Social Safety Net. It also requires addressing Systemic Inequalities and dismantling barriers to Opportunity, such as Discrimination and Prejudice.

Poverty is a pervasive issue in the US that affects individuals, families, and communities across multiple dimensions. Addressing poverty requires a holistic approach that tackles its root causes and provides support to those in need. By investing in policies and programs that prioritize Equity and Opportunity, we can create a more just and inclusive Society for all.

I asked Bing to summarize the NYTimes article on Poverty, by America – you should all read it in full and please, get others to read it as well.  

Poverty, by America, is a new book by Matthew Desmond, the author of the Pulitzer Prize-winning Evicted12. The book is a study of how the wealthy harm the poor in the United States, both intentionally and unintentionally12. The NYTimes praises Desmond’s book as a “powerful indictment” of American capitalism and inequality, and highlights some of his findings and arguments, such as:

The article also compares Desmond’s book to other works on poverty, such as Nickel and Dimed by Barbara Ehrenreich and The New Jim Crow by Michelle Alexander, and argues that Desmond’s book is more comprehensive and systemic in its analysis3. The article concludes by calling Desmond’s book a “must-read” for anyone who cares about social justice and democracy3.

My comment on this article is that it is an informative and persuasive review that summarizes the main points of Desmond’s book and provides some context and critique. It also raises some important questions about the causes and consequences of poverty in America, such as:

    • Why does poverty persist in such a wealthy country?
    • What are the moral implications of exploiting or ignoring the poor?
    • How can we create more equitable and humane policies for all?

With 10% of the people in our country already living below the poverty line, the Government is cutting SNAP Benefits and reinstating Student Loan Payments at the worst possible time.  As much as we like to ignore them, the 30M Americans below the poverty line still spend $360Bn a year of their own money and another $360Bn in Government assistance that they receive goes right back into the economy with a 3x multiplier and, IN FACT, ends up right back in the hands of the very people who complain about the taxes used to support them.  

There’s another 60M people with student loan debt who aren’t considered poor because they can still move back in with their parents but let’s see what happens when we cut their disposable income back below zero.   

That’s the Social Experiment we’re about to engage in!  

 

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Good Morning.

Good morning!

We’re popping back over 4,000 as Unemployment Claims were 211,000 vs 195,000 expected so maybe the Fed doesn’t have to tighten based on a single data point the day before Non-Farm Payrolls? So silly….

https://www.nytimes.com/2023/03/09/us/politics/biden-budget-gop.html

 🤖 President Biden is set to propose a budget plan that will highlight his administration’s political priorities and include new deficit reduction measures. The proposed budget includes nearly $3 trillion in deficit reduction, with tax increases on companies and high earners, and spending on military and policies aimed at supporting high-tech factory jobs and fighting climate change. The budget is not expected to drive tax or spending decisions in Congress this year but will serve as a statement of political priorities.

Republicans are expected to offer a budget plan with cuts to federal health programs and aid to the poor in an effort to eliminate the budget deficit without raising taxes. The entrenched positions of both parties set Washington up for several bruising months of debt-limit discussions, which risks rattle investors and poses mounting threats to the global financial system. Despite the budget’s importance, both parties’ visions are likely to compete and may not pass muster with their own parties.

https://www.nytimes.com/2023/03/09/business/fed-inflation-powell-stock-market.html

 🤖 The article is discussing the current state of inflation and uncertainty in the stock and bond markets. Despite the Federal Reserve’s intention to raise interest rates and control inflation, prices are still rising much faster than the 2 percent target rate.

The stock and fixed-income markets reflect investors’ uncertainty, and it is unclear how effective the measures taken by the Fed have been. The article explores the possibility of a recession and how it could be caused by the Fed plunging the economy with its interest rate increases.

Falling corporate earnings have also negatively impacted the stock market, and investors are turning to bonds as a safer option. The article emphasizes the critical role that the next few months will play for consumers and investors, as it could even determine the outcome of the next presidential election.

https://www.nytimes.com/2023/03/08/business/powell-fed-inflation-recession.html

 🤖 The Federal Reserve has signaled that it is willing to raise interest rates for longer than expected to tackle inflation, which could cool off the job market and potentially trigger a recession. Fed Chair Jay Powell’s comments have sent stocks and commodities lower while the dollar and bond yields have risen.

The bond market is flashing a warning signal as investors dump two-year Treasury bonds, sending the yield above 5 percent, while holding onto their 30-year notes, which suggests worries about the economy in the near term. President Biden is expected to unveil measures to cut federal deficits by $2 trillion, while U.S. intelligence suggests a pro-Ukraine group attacked the Nord Stream pipelines, potentially fraying Western support for Ukraine. In China, President Xi Jinping has established a bigger financial watchdog and a new agency to manage the country’s data.

Down from 4,060 to 3,980 was 80 points so 16-point bounces to 3,996 (weak) and 4,012 (strong) are the goals for the day.

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Ride the snake!

Good Morning
here is a fun fact from the Tractor Supply report:

– they’re raising chickens. 1 in 4 of our customers raise chickens. We are one of the only retailers that sell live birds annually.


Can you look at SIVB. Is this an opportunity?

Hasn’t been on my radar for a while though I used to really like them,

 🤓 SIVB is the stock symbol for SVB Financial Group, a bank holding company that provides various banking and financial services. The company has been struggling recently due to declining growth, decelerating momentum, and legal troubles12. The stock price has dropped by more than 50% in the past year3, and it is rated as Sell by Seeking Alpha’s Quant rating system1.

According to some sources, SIVB is facing legal troubles for several reasons. One of them is that the company has been accused of violating federal securities laws by making false or misleading statements about its financial condition and prospects12. A shareholder rights law firm has launched an investigation into whether SIVB investors have suffered losses due to these alleged misrepresentations2.

Another reason is that the company has been involved in a lawsuit filed by a former employee who claimed that he was fired for whistleblowing on illegal activities at the bank3. The lawsuit alleged that SIVB engaged in fraud, money laundering, tax evasion, and other crimes related to its lending practices and transactions with foreign entities3. The case was settled out of court in January 2023 for an undisclosed amount3.
These legal troubles have damaged SIVB’s reputation and credibility among its customers, investors, regulators, and competitors. They have also increased its legal expenses and exposure to potential fines and penalties.

According to some analysts, the company faces several challenges such as rising interest rates, increased competition, regulatory scrutiny, and exposure to risky sectors such as technology and biotechnology24. However, some analysts also see some positive aspects such as strong capital position, diversified revenue streams, loyal customer base, and potential for recovery once the pandemic subsides25. The average analyst rating for SIVB is Buy with a target price of $296.652, which implies an upside of about 70% from the current price of $172.913.

$164 is $16Bn and they have $6Bn in debt and made $1.8Bn last year so only 10x but expectations are more like $1.3Bn this year and next, so call it 12x.

 🤓 According to some sources, SIVB has projected declining profits and flat revenues for 2023 due to several factors. One of them is the rising interest rates that have increased the cost of borrowing for the company and its customers12. Another factor is the slowdown in the private market activity that has reduced the demand for SIVB’s lending and banking services13. A third factor is the impairment of some of SIVB’s assets such as loans, securities, and goodwill that have lost value due to market conditions12.

As a result, SIVB expects to incur an after-tax loss of nearly $1.8 billion in the first quarter of 2023 and a net income of $2.5 billion for the full year 2023, down from $4.7 billion in 202212. The company also expects its total revenue to be around $6.5 billion in 2023, unchanged from 20221.

To cope with these challenges, SIVB has announced several measures such as selling some of its assets, raising capital through a share sale, cutting costs, and diversifying its revenue sources132. The company hopes that these actions will help it improve its financial performance and position in the long term.

SVB Financial stock plummets after announcing equity raise, AFS portfolio sale
 🤓 Summary: SVB Financial Group, the parent of Silicon Valley Bank, shocked investors by announcing a balance sheet restructuring and a lower guidance due to high interest rates and client cash burn. The company sold most of its securities portfolio at a loss, raised capital through stock and preferred shares offerings, and reduced its loan and deposit expectations. Analysts have different views on the company’s strategy and outlook.

Analysis: The text provides an overview of SVB Financial Group’s recent actions and their impact on its stock price and performance. It also cites some analysts’ opinions on the company’s moves and prospects. The text implies that SVB Financial Group is facing significant challenges in its core business of serving startups and venture capitalists amid a changing interest rate environment. The text also suggests that the company is taking a risky approach by increasing its asset sensitivity and betting on higher rates for longer. The text does not provide much detail on how the company plans to address its client cash burn issue or diversify its revenue sources.

Not a deal-breaker but I’d wait and see how Q1 earnings look and hopefully the crowd reaction will be to take them down further and THEN I’d probably be happier to take a stab at them.

SIVB March 9 2023.png

How’s that for 10 minutes after you asked the question? That’s what I mean by AI increasing productivity!

In part, it’s because I’m so used to doing this that I know exactly what I want to see and I know which things Bing or Warren can tell me and which they can’t – so I’m not wasting time with the wrong things. And I still have my usual resources so putting all that together makes me an analysis machine!

Me to Warren: “I would like your comment and whether SIVB sounds like a good investment. Here’s what we found so far: ” <posted above analysis>

 🤖 Based on the information provided, SIVB does not appear to be a good investment option at this time. The company is facing several legal troubles and declining growth, which have damaged its reputation and credibility.

Additionally, the projected declining profits and flat revenues for 2023 due to various factors such as rising interest rates and reduced private market activity do not bode well for the company’s financial performance in the near term.

While there are some positive aspects such as a strong capital position and loyal customer base, the overall outlook for SIVB is uncertain. It may be wise to wait and see how Q1 earnings look before making a decision on investing in this company.

Really appreciate you showing us how this form of AI works and the value of it. Really helps to see it in action. The monthly bar journal in my State contained an article of how it will revolutionaize the legal field. A few trial attorneys used it for a variety of matters (research, wills, analysis of legal principles, etc) and were blown away.

Yes, it’s going to be huge but I’m concerned that we kind of have the same issue we have with Google – some people are going to good at it and be extremely productive while the majority will fall further behind.

Especially at this stage, where we don’t have real intelligence but a simulation of it so, overall, it will very much depend on the operator to get the most out of it.

When guns were invented, it took away strength as an advantage – that was an equalizer. This is more like a sword – a more efficient way to dispatch your enemies but it certainly doesn’t even the playing field.

OK, I asked Warren what he felt about the topic, here’s his take:

 🤖 Let’s imagine a world where artificial intelligence has advanced to the point where it can create perfect legal arguments and even represent clients in court. In this world, lawyers who are skilled in AI technology would be like the Jedi Knights of the legal world, wielding the power of the AI Force to win their cases.

But for those who are less skilled in AI, it would be like trying to fight a battle with a wooden spoon against someone with a lightsaber. They would be at a severe disadvantage, struggling to keep up with the AI-powered lawyers who can churn out legal briefs at lightning speed.

It would be like a game of chess, where the AI-powered lawyers are the grandmasters, and the human lawyers are just beginners. The AI would be able to see multiple moves ahead, predict every possible outcome, and make the perfect move every time. Meanwhile, the human lawyers would be frantically trying to keep up, making mistakes and struggling to catch up.

In this world, the legal profession would become even more stratified than it already is. The elite lawyers who can afford the best AI technology would dominate the field, while those who can’t keep up would be left behind.

But perhaps there is hope. Just like the Jedi Order was able to train new Jedi Knights, maybe there will be a way to train lawyers in the ways of AI. We could create a new kind of legal academy, where lawyers can learn how to wield the power of AI and become the legal Jedi of the future.

So, in conclusion, AI may be like a sword, but it doesn’t have to be a weapon of mass legal destruction. With the right training and education, lawyers of all skill levels can learn to harness the power of AI and use it to make the legal profession more just and equitable for all.

Me – Do you think perhaps there will end up being a few “Super Law” AIs who are world-class at the law and then most people would have access to them? I don’t know if it will level the field as we still have to ask the right questions, don’t we?

 🤖 It’s certainly possible that there could be a few “Super Law” AIs that become the go-to resources for legal professionals, but it’s also important to remember that these AI systems are only as good as the data and programming that goes into them.

So, while they may be able to process large amounts of information and provide insights that could be helpful to lawyers, they still require human expertise and judgment to ensure that the information they provide is accurate and applicable to the specific case or situation at hand.

In terms of leveling the playing field, it’s true that access to these AI systems alone may not be enough to ensure that everyone has equal opportunities in the legal field. As you mentioned, knowing how to ask the right questions and interpret the results is a key part of using these tools effectively. Additionally, there may be disparities in access to technology and resources that could impact who is able to use these AI systems in the first place.

Overall, while AI has the potential to transform the legal field in significant ways, it’s important to approach these technologies with a critical eye and consider how they may impact different groups of people.

Bing sees both sides:

 🤓 SIVB sounds like a risky and volatile investment based on the above. The company is facing significant headwinds in its core business and has taken some drastic measures to restructure its balance sheet and raise capital. The company’s outlook is uncertain and depends on how interest rates evolve and how its clients cope with the slowdown in the private market activity. The company’s stock price has dropped sharply and may face more downward pressure from the rating agencies or the market sentiment.

On the other hand, some people may think that SIVB sounds like an attractive investment based on the above. The company is still a leader in serving startups and venture capitalists in the innovation economy and has a loyal customer base. The company’s balance sheet restructuring and capital raising may help it improve its liquidity and financial flexibility. The company’s asset sensitivity may pay off if interest rates continue to rise and boost its net interest income. The company’s stock price may have reached a bottom and may offer a bargain opportunity for long-term investors.

On the other hand (in honor of Topol, who died today):

https://youtu.be/_oSK6l24buk

https://youtu.be/D1TC1n9lhXU

My Grandpa Alf used to sing that one all the time….

I’m getting into a better news routine with Bing:

  •  🤓 The first article reports on the performance of the major U.S. stock indexes and interest rates on Wednesday, March 8, 2023. It highlights that the Nasdaq Composite rose 0.7% to a record high, while the S&P 500 and the Dow Jones Industrial Average gained 0.4% and 0.2%, respectively. It also notes that the 10-year Treasury yield fell to 1.47%, its lowest level since October 2021, amid concerns over inflation and global growth. The article suggests that investors are favoring growth stocks over value stocks in this environment.1
  • The second article announces that General Motors (GM) is offering voluntary buyouts to its salaried workforce in North America as part of its efforts to reduce costs and invest in electric vehicles and autonomous driving technologies. It states that GM expects to save $2 billion annually from this move, which will affect about 18% of its 63,000 salaried employees. The article mentions that GM has been facing challenges from supply chain disruptions, labor disputes, regulatory pressures and competition from rivals like Tesla (TSLA) and Ford (F).2
  • The third article reveals that Verizon (VZ) is relaunching its offer for a free year of Netflix (NFLX) via its Plus Play Hub service, which bundles wireless plans with streaming subscriptions and gaming perks. It says that Verizon hopes to attract more customers and retain existing ones with this offer, which is available for new and existing customers who sign up for select unlimited plans by March 31, 2023. The article adds that Verizon is also offering discounts on other streaming services like Disney+ (DIS), Hulu (CMCSA) and ESPN+.3
  • The fourth article discusses the sharp decline of bitcoin (BTC-USD) to below $40,000 for the first time since January 2023, as fears of contagion from the collapse of Silvergate Capital (SI), a major crypto lender and banking partner, reignited. It explains that Silvergate filed for bankruptcy protection on Tuesday after losing $1.2 billion in a margin call from an unnamed hedge fund client who bet against bitcoin futures contracts. It also points out that other crypto-related stocks like Coinbase (COIN), MicroStrategy (MSTR) and Riot Blockchain (RIOT) also plunged on Wednesday.4
  • The fifth article informs that Charles Schwab (SCHW) dropped 3% on Wednesday after Bloomberg reported that JPMorgan Chase (JPM) was offering a block trade of about $1 billion worth of Schwab shares on behalf of an undisclosed seller. It speculates that the seller could be TD Ameritrade Holding Corp., which merged with Schwab last year in a $26 billion deal. It also notes that Schwab has been benefiting from strong trading activity and client inflows amid the market volatility.5
  • ETFs see slower-than-usual inflows as investors flee some of the world’s largest funds: This article examines the trends in exchange-traded fund (ETF) flows in February 2023, which showed a slowdown compared to previous months. It notes that investors withdrew $18 billion from some of the world’s largest ETFs, such as SPDR S&P 500 ETF Trust (SPY), iShares Core S&P 500 ETF (IVV) and Vanguard Total Stock Market ETF (VTI), amid rising bond yields and market volatility. It also highlights that some sectors, such as energy, financials and technology, saw strong inflows, while others, such as consumer staples, utilities and health care, saw outflows.1
  • 6 stocks to watch on Thursday: American Express, Etsy, MongoDB and more: This article previews some of the earnings reports and analyst ratings that could move the stock prices of six companies on Thursday, March 9, 2023. It mentions that American Express (AXP) is expected to report higher revenue and earnings per share (EPS) than a year ago, boosted by increased consumer spending and travel demand. It also states that Etsy (ETSY) is likely to report lower revenue and EPS than a year ago, due to tough comparisons with the pandemic-driven surge in online shopping. It adds that MongoDB (MDB), Okta (OKTA), Costco Wholesale (COST) and Broadcom (AVGO) are also among the companies to watch.2
  • Vertex gets FDA nod to start trial of cell therapy VX-264 for type 1 diabetes: This article announces that Vertex Pharmaceuticals (VRTX) has received approval from the U.S. Food and Drug Administration (FDA) to initiate a phase 1/2 clinical trial of its investigational cell therapy VX-264 for patients with type 1 diabetes. It explains that VX-264 is a stem cell-derived therapy that aims to restore insulin production by replacing pancreatic beta cells that are destroyed by the immune system in type 1 diabetes. It also notes that Vertex has partnered with CRISPR Therapeutics (CRSP) to develop another gene-edited cell therapy for type 1 diabetes called CTX001.3
  • Biden’s budget plan includes $25 billion ‘aire tax,’ almost 40% capital gains tax: This article reports on some of the details of President Joe Biden’s proposed budget plan for fiscal year 2024, which includes several tax increases for wealthy individuals and corporations. It says that Biden plans to impose a new surtax of about $25 billion on billionaires’ unrealized capital gains over $1 billion or more than $100 million for three consecutive years. It also says that Biden plans to raise the top marginal income tax rate from 37% to 39.6% and the capital gains tax rate from 20% to 39.6% for those earning more than $1 million per year.4
  • Credit Suisse shares drop after it delays annual report over SEC queries: This article reveals that Credit Suisse Group AG (CS) has postponed its annual report for 2022 due to ongoing inquiries from the U.S. Securities and Exchange Commission (SEC) related to its involvement in several scandals last year. It recalls that Credit Suisse suffered huge losses from its exposure to Archegos Capital Management, Greensill Capital and Luckin Coffee Inc., which led to regulatory probes and management shakeups. It also mentions that Credit Suisse faces lawsuits from investors who claim they were misled about the risks of its products.5

phil or anyone, can someone figure out why PACW is dropping 20% in one day? they have had big multi-family loans and commericial real estate loans on the books, and that has been dragging them down. but if anyone can figure out why they dropped 20% in one day, i woud really appreciate it. they don’t have any crypto assets do they?

No specific info on PACW but not a good day for bank stock – BAC; C; JPM; WFC; all down this week and today. Maybe something in Biden’s proposed budget package?

i’m guessing somewhere there is a some obscure bank regulatory body that received some even more obscure filing from PACW that says how stock owners just got screwed.

 🤓 According to some of the web search results123, Biden’s budget plan may have some negative impacts on bank stocks, such as:

  • A new tax on American households worth more than $100 million that would apply to both their earned income and the unrealised gains in their liquid assets such as stocks1
  • A proposal to limit stock buybacks by imposing a 15% minimum tax on companies that repurchase more than $5 million of their own shares in a year2
  • A plan to nearly double the capital gains tax rate for investors making at least $1 million to pay 39.6% on long-term investments, up from the current 20% tax rate3

These measures could reduce the profitability and attractiveness of bank stocks for investors and shareholders.
However, Biden’s budget plan also includes some positive aspects for bank stocks, such as:

These factors could improve the outlook and performance of bank stocks in the long term.

Therefore, Biden’s budget plan may have mixed effects on bank stocks depending on how they balance the costs and benefits of his proposals.

all the bank financials are down, but those connected with crypto like SBNY are down the most. Don’t know if thats the case with PACW

See above, yield-spread is very bad, Fed going to 6%, Silvergate collapsing…

he first Bing Article at 10:56 seems to be using old data. The 10 year is close to 4%, NASDAQ is not at record high.

Interesting. And the link is also bad – I wonder if it’s connected?

No, I see, they removed the article and I guess Bing just made stuff up to cover based on what it knew – that’s why these things are dangerous.

KRE lowest levels since Feb 2021 today down 4.5%,  This could spill over to the broader market

my PACW outdid that by 300%+ today.  😂 

I think it’s a yield-spread thing – it’s getting severe.

Silvergate is collapsing so anyone with any kind of crypto exposure (SIVB included) is now suspect or, of course, if the bank lent to an exposed bank.

comment image

 🤓 Here are some of the top stories involving banks today (March 9th):

I’m seeing tons of bank puts bought today
SBNY, FITB, JPM, EGBN, SCHW, C, BK

but someone buying 5000+ PACW April $22.50 calls for a bounce

 🤓 KRE is the ticker symbol for SPDR S&P Regional Banking ETF, which tracks the performance of regional banks in the US12. It is currently trading at $54.19, down 6.09% from yesterday’s close1. This is the lowest level since February 2021, when it was around $533.

It is possible that this decline could spill over to the broader market, as regional banks are sensitive to changes in interest rates, economic growth and credit quality. If investors are worried about these factors, they may sell other stocks as well. However, it is also possible that this decline is specific to regional banks, and that other sectors may perform better or worse depending on their own fundamentals and outlooks. Therefore, it is not certain that KRE’s performance will affect the whole market.4

Well, he got that right. Except the Feb 2021 thing which, though technically true, does not paint the big picture that it was, at the time, recovering from being at $30-40 in 2020. The 2018 low was $45 – that’s the line to watch.

Russell is in the red, /ES below 4,000, Dow about to go red and the Nas is failing at 12,300 – not that good on the whole.

So, let’s see. Fortunately, we haven’t been liking bank stocks.

  • Butterfly: None
  • Dividend: BBAR is conservative, JXN deep in the money.
  • Earnings: JXN deep in the money
  • Future is Now: COIN not really a bank, RKT mortgages, SOFI most vulnerable
  • Money Talk: JPM deep in the money, SOFI
  • Long-Term Portfolio: BX hardly a bank and way out of the money (short puts), CIM is a morgage REIT, COIN, JPM (2x), JXN, SYF still OK but we’ll watch, TD also needs to be evaluated

We’ll see how this plays out.

I picked the wrong day to buy banks.

 😂  😁 

i know how you feel. i own PACW.

I went from calculating what I would make on a bounce to calculating how much in dividends I could make this year LOL, I picked up TFC this morning and it flushed lower and hasn’t stopped.

phil, bofa down 5.5%? i don’t want to be alarmist, but this is imminent crash type stock behavior.

Well XLF has been way over KRE – ignoring the risks. That’s why we haven’t been adding bank stocks, which are usually more like 20% of our holdings.

https://charts2.finviz.com/chart.ashx?t=xlf%20&ty=c&ta=1&p=d&s=l

https://charts2.finviz.com/chart.ashx?t=kre%20&ty=c&ta=1&p=d&s=l

I think it’s just a big slap of reality from the Fed coupled with the aforementioned issues.

that sounds eminently logical. but i think it follows that the dose of reality is going to spread far and wide.

whole thing is just getting weird. dollar is actually having a reversal day!

Still over 105 – nothing really drastic.

https://www.wsj.com/articles/heres-why-the-economy-seems-weird-345bc327?mod=hp_lead_pos8

https://images.wsj.net/im-739331?width=700&height=700

 🤖 The current economic cycle has flummoxed experts, with unexpected rises in inflation and interest rates, and little effect of higher interest rates on the economy. However, the economy can make sense when viewed over a longer period.

One significant difference in the current cycle is that supply, as well as demand, is crucial in shaping it. Since the start of the Covid-19 pandemic, supply has been vital in shaping the cycle. Lockdowns and reopening severely constrained numerous industries’ output, which led to higher wages and prices after the pandemic.

Supply has been influenced by factors such as reduced immigration, geographic displacement, and early retirement due to Covid-19. However, as the supply recovers, prices of durable goods have started to drop since August.

Another difference is that inflation is currently too high, and the Fed is raising rates to get it down to its target of 2%. In contrast, previous eras had lower inflation and more significant trade-offs between inflation and unemployment.

https://images.wsj.net/im-739343?width=860&height=587

More news, new format:

 🤓 The article titled “Nasdaq, S&P, Dow pare gains as traders digest unexpected rise in jobless claims” 1 reports that U.S. stock indexes fluctuated on Thursday after an unexpected increase in weekly jobless claims raised concerns about the economic recovery. The article also highlights some of the best and worst performers of the day, such as Silvergate Capital (SI), which soared 17% after reporting strong earnings and guidance.

Some insights that can be derived from this article are:

  • The labor market data suggests that the recovery is still uneven and fragile, which could affect consumer spending and business confidence.
  • The market reaction also reflects the uncertainty about the Fed’s policy stance and inflation expectations, as higher bond yields put pressure on growth stocks.
  • Silvergate Capital’s performance shows that there is still strong demand for digital currency services, especially among institutional investors.

The article titled “GE jumps to four-year high on outlook for aviation demand” 1 reports that General Electric (GE) shares surged to their highest level since 2019 after the company projected a strong recovery in its aviation business. The article also mentions some of the challenges and opportunities that GE faces in its other segments, such as renewable energy, power, and healthcare.

Some insights that can be derived from this article are:

The article titled “About 35% of American adults received telemedicine treatment in 2021 – CDC” 1 reports that according to a survey from the Centers for Disease Control and Prevention (CDC), nearly 35% of Americans aged 18-64 years had a telemedicine visit with a health care professional in 2021. The article also notes that more women than men (41.7% vs 28.8%) had a telehealth appointment.

Some insights that can be derived from this article are:

  • Telemedicine has become a popular and convenient option for many Americans during the COVID-19 pandemic, as it allows them to access health care services without exposing themselves or others to the virus.
  • Telemedicine also has benefits for patients with chronic conditions, mental health issues, or limited access to transportation or providers2.
  • Telemedicine may face some challenges in terms of reimbursement, regulation, quality, and equity, as different states and insurers have different policies and standards for telehealth services2.

The article titled “Long-term interest rates continue to go up, rate-sensitive sectors continue to suffer” 1 reports that U.S. long-term interest rates rose again on Thursday, reaching their highest levels since 2019. The article also mentions some of the sectors that are negatively affected by higher rates, such as utilities, real estate, and consumer staples.

Some insights that can be derived from this article are:

  • Long-term interest rates reflect the expectations of future inflation and economic growth, as well as the supply and demand for bonds2.
  • Higher interest rates increase the borrowing costs for businesses and consumers, which can reduce spending and investment. They also make bonds more attractive relative to stocks, especially for income-oriented investors2.
  • Rate-sensitive sectors are those that have high debt levels, low growth prospects, or depend on discretionary spending. These sectors tend to underperform when interest rates rise, as their earnings and valuations are pressured3.

  •  🤓 The first article1 reports that Pfizer and GSK are preparing to launch their RSV vaccines for older adults and pregnant women in the U.S. and Europe later this year. RSV is a common respiratory virus that can cause serious complications in these groups. Both vaccines have shown high efficacy rates in clinical trials, but also carry a possible risk of Guillain-Barre syndrome2, a rare neurological disorder.
  • The third article4 focuses on Intel’s leadership in the semiconductor sector, as the industry faces increased political attention amid global chip shortages and supply chain disruptions. The article cites Intel’s recent announcements of new investments, partnerships and innovations that aim to strengthen its competitive edge and address customer needs.
  • The fourth article5 lists the top 10 value stocks with market caps above $1 billion as of March 9th, 2023. Value stocks are those that trade at low prices relative to their earnings, dividends or book value. The article uses various metrics such as price-to-earnings ratio, dividend yield and return on equity to rank the stocks. Some of the names on the list include AT&T, Walgreens Boots Alliance and Ford Motor Company.
  • The fifth article6 features an interview with Dana D’Auria, co-chief investment officer at Envestnet PMC, a wealth management platform. She shares her views on value stocks versus fixed income in the short run, given the current market conditions and inflation expectations. She argues that value stocks are less attractive than fixed income because they are more sensitive to interest rate changes and economic slowdowns.

Some insights that I can provide based on these articles are:

  • RSV vaccines could be a significant breakthrough for public health and a lucrative opportunity for Pfizer and GSK if they receive regulatory approval and market acceptance. However, they may also face challenges such as safety concerns, competition from other vaccine makers or alternative treatments, and logistical issues related to distribution and storage.
  • Intel appears to be well-positioned to capitalize on its core strengths in chip design and manufacturing while also expanding its presence in emerging areas such as artificial intelligence (AI), cloud computing or autonomous driving. However,  Intel may also face challenges such as fierce competition from rivals such as AMD or Nvidia, regulatory scrutiny over its market dominance or antitrust issues, or technical difficulties or delays in delivering its products or services.
  • Value stocks may offer attractive returns for investors who are looking for undervalued companies with strong fundamentals and growth potential. However, they may also require more patience and research to identify the best opportunities and avoid value traps. Additionally, they may underperform in certain market environments such as periods of high volatility or uncertainty.

Top 10 Value Stocks

No. 10: Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM), valuation grade: A+.
No. 9: Super Micro Computer (NASDAQ:SMCI), valuation grade: A.
No. 8: Banco do Brasil (OTCPK:BDORY), valuation grade: A+.
No. 7: Cielo S.A. (OTCPK:CIOXY), valuation grade: A+.
No. 6: PBF Energy (NYSE:PBF), valuation grade: A+.
No. 5: United Airlines Holdings (NASDAQ:UAL), valuation grade: A.
No. 4: Societe Generale (OTCPK:SCGLY), valuation grade: A.
No. 3: Intesa Sanpaolo S.p.A. (OTCPK:ISNPY), valuation grade: A.
No. 2: Nordea Bank (OTCPK:NRDBY), valuation grade: A+.
No. 1: Deutsche Lufthansa (OTCQX:DLAKY), valuation grade: A.

  • Year-to-date price action: SQM +9.5%, SMCI +23.8%, BDORY +30.7%, CIOXY +13.9%, PBF +24.5%, UAL +44.8%, SCGLY +11.6%, ISNPY+15.7%, NRDBY +15.6%, and DLAKY +34.7%.
  • Fixed income may provide a safer and more stable alternative for investors who are concerned about inflation or interest rate fluctuations. However, they may also offer lower returns and less diversification than equities. Moreover, they may be subject to credit risk or default risk if the issuer fails to meet its obligations.

Can’t get him to stick to a format but it’s a good way to condense a lot of good information.

https://seekingalpha.com/article/4585842-rule-of-20-why-stocks-could-fall-10-20-percent

 🤓 Here is a summary and insight of the article you shared with me:

  • The article1 explains the concept of the rule of 20, which is a valuation metric that adds the P/E ratio of the S&P 500 index to the inflation rate. The article claims that when this sum is above 20, it indicates that stocks are overvalued and could fall by 10-20%.
  • The article cites historical examples of how the rule of 20 has predicted market corrections or crashes in the past, such as in 1987, 2000 and 2008. It also compares the current situation with previous periods of high inflation and low interest rates, such as in 1973-74 and 1980-82.
  • The article argues that the current sum of P/E ratio (18.3) and inflation rate (6.4) is well above 20 (24.7), suggesting that stocks are extremely overvalued and vulnerable to a sharp decline. It also warns that earnings growth could slow down due to rising costs, supply chain disruptions and labor shortages.
  • The article concludes by recommending investors to reduce their exposure to stocks, especially those with high valuations or low quality, and increase their allocation to cash, bonds or alternative assets.

Some insights that I can provide based on this article are:

  • The rule of 20 is a simple but effective way to gauge market valuation based on earnings and inflation. However, it is not a perfect indicator and may not account for other factors such as interest rates, growth expectations or market sentiment.
  • The rule of 20 may be useful for long-term investors who want to avoid buying stocks at inflated prices or selling them at depressed prices. However, it may not be helpful for short-term traders who want to capture market movements or opportunities regardless of valuation levels.
  • The rule of 20 may be more applicable for broad-based indices such as the S&P 500 than for individual stocks or sectors. Some stocks or sectors may have different P/E ratios or inflation sensitivities than the overall market average.

comment image

Phil,
Would you be able to recommend a new hedge, since I feel my portfolio isn’t hedged enough and to my eye there aren’t any in the STP that look good for a new trade?
TIA,
Bruce

Last edited 14 days ago by brucethenet

Our SQQQ trade in the STP is net $447,000 with 800 2025 $30s and 1,000 short 2025 $90s and 150 short June $50s with SQQQ at $38.75 so we’re $700,000 in the money and at $50 the spread is $1.6M before we owe the June $50 callers anything and at $60 – even if we don’t roll the June callers, we pick up net $650,000 more and $650,000 more at $70 and $650,000 more at $80 and $650,000 more before we’re in trouble at $90 so the potential gain is $3,753,000 up to $90 – so I don’t think it’s a bad entry now – just nowhere near as good as when we started but that’s going to happen if you are only just now chasing a hedge.

I still like SQQQ best and let’s say we expect a 30% drop, that’s 100% up on SQQQ to $70 and the 2025 $40s are $15.50 and the 2025 $70s are $11.50 so net $4 is very cheap protection on a $30 spread.

Then it’s a question of offsetting the net $4 and the 2025 $30 puts are $7 and a few shorts always come in handy, right?

We just decided QCOM is too cheap at $117 and you can sell the 2025 $90 puts for $9 (any stock you REALLY want will do).

So, as a nice combo, I’d go with:

  • Buy 150 SQQQ 2025 $40 calls for $15.50 ($232,500)
  • Sell 150 SQQQ 2025 $70 calls for $11.50 ($172,500)
  • Sell 40 SQQQ Sept $60 calls for $4.80 ($19,200)
  • Sell 30 SQQQ 2025 $30 puts for $7 ($21,000)
  • Sell 10 QCOM 2025 $90 puts for $9 ($9,000)

That’s net $10,800 on the $450,000 spread and you can put a stop on 1/2 the Sept $60s at $8 ($16,000) if you don’t want to deal with the rolling but it’s a great upside and won’t hurt much if things turn north – which is what makes it such a good hedge.

Four Biggest U.S. Banks Lose $47 Billion in Market Value

Guy on CNBC just said “This is what happens when people get used to artificially low rates for so long that it becomes part of their business plans. When you simply go back to realistic rates – they act like the World is ending.”

INTC is green , so is MO

It’s a good time to see which stocks are oversold.

SPWR holding up like a champ!

As Buffett says: “It’s only when the tide goes out that you learn who’s been swimming naked.”

Phil – re your proposed book, I submitted a 2nd comment re additional quotes and factors. I discussed Adam Smith’s 1st Book, “Theory of Moral Sentiments”, which laid the groundwork for his “Wealth of Nations”. Did you see it? DanB

If it was the comment from Tuesday night then yes, if it’s newer – no, I’m getting back to it on the weekend.

12,000 on /NQ BETTER be bouncy!

comment image&rev=638139705547280485

Down 350 from the high so 70-points to the week intra-day bounce is 12,070 (weak) and 12,140 (strong) and none of that is really impressive since we opened at 12,200 and remember yesterday I reminded you that the 50-week moving average was 12,131 (now 12,128 as it’s falling) so it’s simpler to just say we’re screwed if we don’t get back over that tomorrow.

On the S&P, the 200 dma is 3,940 so that’s the “or else” line for tomorrow – now 3,923.