Woeful Wednesday – Credit Suisse Sets off Another Panic


Wednesday's Child is Full of Woe Svg Png Dxf Jpg Addams - Etsy Hong KongHere we go again.

Credit Suisse shares fell 21% this morning after its Saudi backers ruled out more investment. The embattled Swiss bank revealed ‘material weaknesses’ in its reporting on Tuesday.  The Saudi lender became the largest shareholder in Credit Suisse after it replaced Harris Associates earlier in March. But acquiring any additional stake in the company is not an option for them, Chairman Al Khudairy said. 

In a further sign of turmoil, the cost of insuring bonds of Credit Suisse against a default in the near term has surged. The five-year Credit Default Swaps (CDS) on Credit Suisse debt extended to 533 basis points from 549 basis points at last close, per Reuters.  CDS are financial contracts that allow investors to protect themselves against the risk of a borrower defaulting on its debt.

The cost of insuring bonds of Credit Suisse against a default in the near term has surged, meaning that investors see an increased risk of Credit Suisse defaulting on its debt, which means it’s expensive to keep your money there – which means withdrawals surge and default becomes even more likely.  This is what happened in 2008!  

The recent collapse of SVB and other financial institutions has shifted the focus of investors and the Fed from fighting Inflation to Financial Instability. The Fed will weigh the risks to Financial Stability along with Inflation in its policy meeting next week.

The upheaval in the market has investors reassessing their portfolios and awaiting signals on how it will affect the Fed’s long-term plans.  The KBW Bank Index (KBWR for Regional) has fallen 19% in the past week, even after yesterday’s BS rally.  The VIX also reached its highest levels since October on Monday.  Investors pointed to worries that the credit scare could discourage regional banks from lending to individuals and businesses, which could itself cause an economic contraction.

Most of us who are more than 30 years old remember how things fell apart in 2008. It didn’t happen all at once or overnight and we were reassured, on multiple occasions, that “all would be well“, when it most assuredly was not.

It’s been over a decade since the banking system crashed and burned in 2008, but the scars of that financial crisis still linger in the memories of those who lived through it. We were reassured time and time again that the economy was strong and the banks were sound, but as we soon discovered, those assurances were about as trustworthy as a subprime mortgage.

CNBC Financial Advice - The Daily Show with Jon Stewart (Video Clip) |  Comedy Central UShttps://www.cc.com/video/u9y5b/the-daily-show-with-jon-stewart-cnbc-financial-advice

It all started with the housing bubble, as banks and mortgage lenders bet big on the idea that housing prices would keep rising indefinitely. When that bubble finally burst, it set off a chain reaction that would bring the entire financial system to its knees. Lehman Brothers, once considered a pillar of the banking world, collapsed in September 2008, and the shockwaves were felt around the globe.

BUT THAT WAS JUST THE BEGINNING… As the crisis deepened, we learned of shady deals and risky investments that had been hidden from public view, all in the pursuit of short-term profits. The so-called “too big to fail” banks had made bets that were so massive and so interconnected that the failure of one could bring down the entire system. And yet, when the time came for them to pay the piper, they were bailed out by the taxpayers, with no real consequences for their reckless behavior.

The Needs Of the Many Outweigh the Needs Of the Few: NYC Schools Edition -  New York School TalkIt’s easy to blame the Banks, but they were only doing what the system incentivized them to do: Pursue profit at all costs – no matter how much risk it entailed. As long as we continue to prioritize the interests of the wealthy few over the needs of the many, we’ll keep seeing these boom-and-bust cycles play out again and again. The question is, will we ever learn from our mistakes or will we keep blindly putting our trust in the same institutions that have betrayed us time and time again?

I don’t think conditions are as bad as they were in 2008 but there is a HUGE issue (as we discussed last week) of banks that have not taken mark-to-market writedowns which, in layman’s terms, means the earnings they just reported were fake, Fake, FAKE!!! and THAT is EXACTLY what went wrong the last time.  

Until we resolve these issues, any recovery we seem to have is going to be built on a very shaky foundation.  

“No visible means of support
And you have not seen nothin’ yet
Everything’s stuck together
And I don’t know what you expect

Hold tight
We’re in for nasty weather
There has got to be a way
Burning down the House” – Talking Heads 


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Good morning. Here is the link to today’s webinar



DIS already just $92

Phil, I have been and still am of the opinion that the markets are woefully over-valued. Don’t worry, I am imagining Disney at $65

i do think we should agree on some price at which Citigroup would be irresistable. what do you think?

that’s WHAT I am so excited about. the prospect of ARMAGEDDON prices.

somebody is having a good day:

TMUS T-Mobile Buys Ryan Reynolds’s Mint Mobile For $1.35 Billion

oh my god, havent’ thought about Ford Prefect in so long. the answer is 42.

Zaphod, in the push pull between slow burning inflation and gobal slowing, lightly seasoned with mild bank collapse, where will the 2 year yield eventually even out?
answer: 4.2
ZaphodGPT, how much of my portfolio will I recover if the above situation is sharpely seasoned with horrific bank collapse?
answer: 42 %.

somebody should make a ZaphodGPT, or a DouglasGPT. and it should have a sense of humor.

in fact, there’s probably a great market in developing personal GPTs of the future with personalities tuned to peoples preferences.

but there are already so many great characters inside my head that talk to me all the time…:)

for sure it is, but I can’t really decide if i think its deep thinking or just has a lot of excellent serially sensical material to draw from in the form of the hitchhiker books.

either way, it is still amazing.

maybe the chatGPT is so insanely deep thinking that it thought outputting the Hitchhiker’s Guide conversation backward was hilariously, brilliantly appropriate to the material.

bought 3 /cl at 68.61, got off at 69.08. thanks Phil.

Q: What’s the Credit Suisse defintion of Woebegone?

A: “Whoa, all the money, BE GONE.

phil, do you think it is possible or likely that Powell will guarantee all deposits?

well, that’s what i think. it’s ridiculous, but i’m reading this from a supposedly serious thinker on twitter, https://twitter.com/fkronawitter1/status/1635984684051054593

Florian Kronawitter

My view on what’s next: – ECB won’t hike 50bps anymore tomorrow – US will give blanket guarantee for all deposits – Fed will pause next week All good for bonds. Equities may squeeze on this before falling apart, but uncertain on sequence
1:41 PM · Mar 15, 2023

maybe i don’t understand what he means by ‘blanket guarantee’?

Powell’s BTFP plan, which now lets banks use treasuries, agencies, and MBS for collateral and get funding from the Fed at par, pretty much fixes a ton of issues (so banks which bought treasuries at 1% and are now struggling at 5% no longer needed to deal with that). So it isn’t just FDIC, more that the interest rate risk on treasuries, agencies, and MBS has been eliminated. The problem, of course, is that none of these plans are going to prevent people from moving their money into JPM/BAC/C – just that the speed of the bank run has decreased.

I am accumulating HBI and SOFI, INTC and LUV. Those are my 4 long term plays. If they get cheaper I will be adding more. Not made for the options game just yet. Thanks Phil for the guidance.

Somebody once said if you aren’t going to buy when the stock is cheap, WHEN ARE YOU GOING TO BUY?

re GS story above,

Troubled lender SVB Financial Group said on Tuesday Goldman Sachs Group Inc had bought its bond portfolio before federal regulators took the bank into receivership. The portfolio, consisting mostly of U.S. Treasuries, had a book value of $23.97 billion and its sale fetched proceeds of $21.45 billion for SVB

Hi Phil
I do understand and agree with your wait and see for the moment.
But would like to have your opinion on what could be a good entry level on BAC and CVS

ok thanks

roughly $22 is Tangible Book Value. that would be a hell of an entry price. of course, that assumes no reduction in the asset values behind the TBV at this time.

For BAC?

Hello Phil,
Is it still good time to enter GLD trade?

Am at -20% of LB.TO in registered account, how can I play in Downside, any ideas ?

WBA– 9.7 x earnings or is it too early?
sell 30 01/25 30 put@3.80
sell 30 01/25 40 call@2.50
buy 30 01/25 30 call@6.30