Friday Failure at S&P 4,000 – It Ain’t Over ’till it’s Over


S&P 500 Chart HourlyI hope we didn’t come all this way just to fail?

We finally had two positive days in a row (and it only cost us $2Tn in bailouts and counting) but, unfortunately, Credit Suisse is back on the chopping  block – shares slid 10%, reversing some of the surge the bank enjoyed the day after it said it would borrow $50Bn from the Swiss National Bank.

Prices on Credit Suisse’s Credit-Default Swaps, which protect investors in case the bank doesn’t meet its obligations, remain at extremely high levels. Credit Suisse’s so-called bail-in bonds traded at around 44 cents on the dollar Friday, indicating that investors believe the bank’s fortunes are still very much in peril.

CS March 17 2023Despite reassurances from bank executives and Swiss authorities, large investors and major banks have either pulled back or declined to increase their exposures to Credit Suisse, trading stocks, or writing up contracts tied to interest rates. Although the bank has high capital levels and ample liquidity, its troubles stem from its customers cutting exposure to the bank, a continuing “run” that is leading to lost revenue at its investment bank and exacerbating last year’s significant losses.

Credit Suisse had $169 billion of long-term debt outstanding as of the end of 2022 and a further $25 billion in short-term borrowing. Around $16 billion of its debt are from the bail-in bonds, which get written off in the event the bank is taken over by regulators or its capital drops below a certain level. It also had $23 billion of securities financing transactions, which includes repurchase agreements, or repos, a common type of borrowing in which one side lends another money backed by shares or bonds. 

The bank’s more senior bonds could face haircuts in an insolvency situation, since regulators often give priority to depositors. It will be up to Credit Suisse’s lead regulators, the Swiss National Bank and the financial regulator Finma, along with politicians in Switzerland, to decide exactly how to structure a rescue plan and who would come out whole. In a typical bank failure, equity holders get wiped out. 

This interesting table was shared by Paul Noring – Berkeley Research Group.  It shows the unrealized depreciation on Hold to Maturity Securities (HTM) for top 100 banks versus equity. These unrealized losses are NOT reflected in profits or a deduct to equity via Other Comprehensive Income (OCI) – only in the footnotes! The losses are also NOT reflected in stress tests or measures of capital adequacy.

Unrealized Depreciation.jpg

Until these unrealized losses are realized or transferred to the Fed (so we can pretend they never happened), the uncertainty is bound to continue and, while our Fed may have pledged Trillions of Dollars that they don’t have to support our banks – that doesn’t solve ANYTHING for banks in the rest of the World – who are assuredly in the same situation!  

First Republic shares plummeted over 20% in pre-market trading after the bank’s board suspended its dividend and major US lenders deposited $30 billion in the bank to prevent a financial panic following two bank failures. This news has not helped regional banks, with PacWest Bancorp declining around 10% and Zions Bancorp shares edging down 3.5%.

Given all of this news, it’s clear that there are significant risks in the banking sector that could have far-reaching effects. We still recommend continued caution into the weekend.

SPX March 17 2023

Tiger Global is feeling the heat from the recent tech sector downturn.  According to sources familiar with the firm, Tiger has marked down the value of its investments in private companies by a whopping 33% across its venture-capital funds in 2022, erasing a cool $23 BILLION from their portfolio of startups around the World, including big names like TikTok parent ByteDance and payments company Stripe. 

In the fourth quarter alone, Tiger’s newest Venture Funds lost between 9% and 25%.  While these markdowns are substantial, they highlight a lag in private markets compared to fast-growing public companies.  Tech stocks took a beating last year, but large venture-capital investors have only reported more modest declines so far.  It’s a tricky process to value private companies, and managers have wide discretion to do so, relying on recent transactions, revenue, and comparable company performance.  The lag in private-market valuations during a rout in technology stocks should be a huge red flag to Investors.

Pin on Accounting Humour

Of course, this disconnect hasn’t gone unnoticed by more sophisticated Investors, including Harvard University’s Endowment, whose chief suggested in his annual letter last fall that Venture Managers had not written down their private investments sufficiently.  That could create a blind spot for investors deciding whether to invest in new funds managers are raising.  For Tiger, these recent write-downs have changed some of its performance stats significantly, with its internal rate of return dropping from 22% to 9% in its “2020 PIP 12 Fund.”

Tiger has already reported far larger losses for the year in its flagship Hedge Fund and in its Long-Only Fund, which invest heavily in public markets and focus on high-growth, largely unprofitable tech companies.  Tiger lost 56% in its Hedge Fund and 67% in its Long-Only Fund, although the losses could have been even worse, since the funds include some private investments.

Have a great weekend, 

    • Phil


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As I see it,looking at your list, Phil, Charles Schwab stands on the top of the chopping board. Does not look so good for TDA greatly joing Schab. How sure are our cash holdings in our accounts with TDA?

In this case one should reduce cash holdings in all combined accounts to 500000 do I see this right?

I experienced this once with a broker where the SEC closed the broker and all accounts were frozen. Lucky I did have mostly stocks so after 6 month all stocks and options were relised. Bad luck for those who had short put options.

I purchased tbills to get money out of my accounts.

Pretty sure the T-Bills are counted as securities in the total $500K, unless you hold them direct with US Gov.

cash SIPC limit is 250K, 500K is for total assests.

Here again are we talking about per account or total accounts. Stock is in your name, it can not be taken away. so what is what

Per brokerage firm (so 5 accounts at fidelity, individual or joint, 250K cash totaled and 500K assets totaled including the cash).

Still is not clear to me in respect of the stock. The value of the stock reflects a company it is in the holders name. Your insurance is the stability of the company, to me cash is the question here.

say if you convert all cash in to stock, what has it to do with the 500K, the only way you could insure your stock is by buying puts.

The stocks can be rehypothecated in a margin account which we all have, so no the stock is not in your name. Insurance will cover $500K total.

I am not sure of this. The stock should be registered in your name!!!!

Nope-when you sign up for margin, you sign your life away. Read the small print

no thats the value of the stock, a different thing. You have 300K cash, and 100K in AAPL stock (so total value of account is 400K). Brokerage goes bust – so now SIPC comes in and takes over. You get 250K cash back, and they give you the same number of AAPL stock you held. The value of the AAPL stock could have changed, that change is not accounted for.

Cash is inclusive of SIPC, in the total $500K, if you have no securities and just cash its up to $250K, a money fund is considered a mutual fund and therefore securities. You can buy a bank CD up to 250K or 500K for joint, that is FDIC insured… So there are ways to get around the minimums and really maximize insurance. But at the end of the day do you want to wait in line for your money, it’s like being on an island for a hurricane…. You will survive, but now you have to wait for food, water, and sleep in the local schools gymnasium…..

it also kind of depends is Schwab bought interest swaps to hedge out the risk or not. does anyone know if they have or have not?

Schwab knows we (i have Ameritrade accounts too) are in this position and yet they do not clarify what our risks are for us. They have not as far as I know posted any supplementary information to reassure us. That scares the bejeezus out of me.

I thought TD Ameritrade belongs to TD (the Canadian bank, which these days goes down more than the other Canadian banks), not to SCHW.

Any thoughts on Interactive Brokers??

SCHW bought TDA and is starting to migrate accounts…

Good Morning.

Phil, /GC gold futures breaking 1955, would this be a good entry point on gold with tight stops?

Phil, I have the GOLD spread, the futures play was just a short term play that I plan to close before end of day.

  • Sell 10 GOLD 2025 $17 puts for $2.60 ($2,600) 
  • Buy 20 GOLD 2025 $13 calls for $6 ($12,000) 
  • Sell 20 GOLD 2025 $17 calls for $3.85 ($7,900)

Hello Phil,
I do not have any GOLD position, what is your recommendation… can I add this position ?

/GC in @ 1955 and got stopped out at 1985, for a 3k profit!! Gold on a tear hitting 1993. I think we will cross 2000 next week given the current panic in the market!!

Is SPWR somehow caught up in all this?

SPWR and other green technologies are sometimes correlated to the price of the not so green oil, nat gas and other commodities. if market assessment of current situation is that the onset of recession is brought forward, and that is why price of oil, nat gas and commodities are dropping, then SPWR is tangentially, or directly (if you prefer) caught up in it.

hey everyone, yesterday when i posted that the banking situation is a net negative for bank lending and asset disposition behavior, i was not trying to say the situation has to be net negative for the stock market. if the banking situation causes Powell to pause or pivot earlier, then I accept that that could be a net positive for the markets as a whole, even if the banks are in a bind.


I have

short 400 Jan 24 80 sold at 17.04 (4.97 now)
short 400 Jan 25 90 sold at 28.78 (8.67 now)

Which one should I buy back? 2024 or 2025?


Hello Phil,
Here is my position on hedging trade…
Buy 5 FAZ June $21 calls for $4.17 ($2085)
Sell 5 FAZ June $30 calls for $1.77 ($885)
Sell 1 JPM 2025 $80 puts for $4.20 ($420) 
Sell 1 GS 2025 $185 puts for $10.60 ($1060)

I did not understand your comments
“FAZ – The short June $30 calls are $32,000 – let’s buy 50 (1/2) back at $3.20 and that gives the longs room to run”

Phil – Does it make sense to buy insurers now? Add to PRU, MET, etc.? They too will have interest-rate related losses, but unlike banks, people are not going to be taking their money out.

Yes – I know how bonds lose value – so we are in agreement that we should add to insurers?

I have another billing issue that is getting annoying. I cannot find anywhere on this site where I can see my history of payments- that used to available on the old site. Where can I access this info and who do I contact to get this issue resolved. I tried to email but it got bounced back?

This is from the TD Ameritrade site under FAQ’s:
Specific to the TD Ameritrade broker dealer:
TD Ameritrade is a member of the Securities Investor Protection Corporation (“SIPC”), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). An explanatory brochure is available upon request at Additionally, TD Ameritrade provides each client $149.5 million worth of protection for securities and $2 million of protection for cash through supplemental coverage provided by London insurers.

If TD Ameritrade goes under, then a bunch of other people also go under, and the London insurers will also go under.

Have faith in the treasury to bail us out

Yes, the same thought crossed my mind as I was typing that.

SPIC has recovered 100% of the funds for Lehmann, MF Global etc in weeks. Brokerage firms and clearing firms don’t commingle client funds and firm funds. I assume Charles Schwab Bank & Broker Dealer as two different entities. The challenge could be for the bank entity if Schwab bank is forced to sell their treasuries converting their unrealized loses to realized loses as clients transfer from their bank which pays next to nothing to brokerage money market funds which was paying over 4% recently. I found out Schwab sweeps any excess cash in brokerage to Schwab Account by default transferring excess cash from Brokerage accounts to their bank account. I now have to manually manage this. Brokerage customers would be okay though Schwab investors could potentially face challenges in the short term.

It’s interesting ETrade went through the similar issue with the bank they bought. ETrade brokerage customers never had a problem though ETrade investors didn’t do well.

When you say you manually manage this do you mean you transfer cash to one of their MMF’s?
I started moving cash to the Schwab Funds Value Advantage MMF which can be traded on the TOS platform under the symbol SWVXX.
Then the question is the MMF considered cash or a security and how secure is that?

Yes. Other firms like Fidelity automatically sweep in to their high yielding money market funds. Some firms like TastyTrade don’t sweep anything automatically. And, they don’t support mutual funds. So, I move cash to ETFs like JPST.

MMF is considered security. During the financial crisis, they did broke the buck and was made whole. Risk is very very low.

In my TDA accounts SWVXX is not considered cash, it’s a mutual fund (security).

jesus, you guys, be careful. i searched on pstas quote and read the whole paragraph from which pstas copied. it ends with “TheTD Ameritrade supplemental coverage has an aggregate limit of $500 million over all customers.”
Meaning, after TD Ameritrade goes under and blows through 500 million of coverage in the blink of an eye, we all take a MONSTER haircut on anything over 500,000 in our accounts.

Not really – we take a haircut on whatever cannot be recovered. Most of the stuff will be recovered. If Schwab goes under due to their banking, then SIPC takes over the brokerage. The stocks and assets are still recoverable, and SIPC will try and get us those assets; might just take some processing time. If under a weird scenario they cannot get back everything, the 500K limit kicks in, but that is very unlikely

Schwab has billions and billions of liabilities and only 500 million of coverage. Do you remember Jon Corzine? I don’t think Schwab would screw us like Corzine, but since none of us can really figure out the mechanics and liabilities of a broker whose business is only 1 part broker but also 1 part big bank, i still get nervous. Schwab was under immense competitive pressure in the years before it bought out Ameritrade. All the brokers were moving to free commissionless trading and so Schwab built up this banking business in addition to its brokerage business. who knows what happens if the bank side fails? i haven’t moved my money; i agree that a disaster is unlikely, but here we are at tail event time….

ok, i see farther below that the SIPC recovered all funds in the MF Global meltdown. that is actually very comforting.

MM Funds Schwab Etc. Another consideration

I think Janet Yellen was trying to make a point with Lizzie Warren in her testimony this week that the Stress test is for Capital, it’s hard to measure liquidity/panic when everyone heads for the exits.


I have

short 400 Jan 24 80 sold at 17.04 (4.97 now)
short 400 Jan 25 90 sold at 28.78 (8.67 now)

Which one should I buy back? 2024 or 2025?


ok, but I am reposting. Warren is being horribly misleading, even incorrect, because TD Ameritrade only has $500 million in TOTAL COVERAGE FOR ALL CUSTOMERS. After a piddling $500 mill, Zero coverage.

h. Account Protection. You are a member of the Securities Investor Protection
Corporation (“SIPC”), which protects securities customers of its members up
to $500,000 (including $250,000 for claims for cash). An explanatory brochure
is available on request at Additionally, you provide each client $149.5
million worth of protection for securities and $2 million of protection for cash
through supplemental coverage provided by London insurers. In the event of
a brokerage insolvency, a client may receive amounts due from the trustee
in bankruptcy and then SIPC. Supplemental coverage is paid out after the
trustee and SIPC payouts and under such coverage each client is limited to a
combined return of $152 million from a trustee, SIPC, and London insurers. The
TD Ameritrade supplemental coverage has an aggregate limit of $500 million
over all customers.

If Schwab is vulnerable what brokerage firms are to be considered as alternatives?

I was reading the same but then went back looking for the article and couldnt find it. I think it was saying the money was pulled from SWVXX money market fund and most of it moved to SNSXX their US treasury fund. I’d like to re-read if you can find the article.

That’s exactly what the BBerg article said was that they moved into SNSXX, SCOXX, or SNOXX-All full faith and credit. Still exposed to a franchise failure, but safer I think…

ah yes, it was Bloomberg. thanks

Schwab Customers Added $16.5 Billion in Tumultuous Week for BanksBloomberg

Your interpretation is correct. Clients are not pulling their funds from Schwab, mostly changing money market funds from Prime to Treasury funds. SWVXX has about 50% of portfolio in Treasury Repo Agreements, 28% in CD’s and 20% in Commercial paper. The Government money market funds- SNSXX for example, have 100% allocated to US Treasury debt.

here is someone playing it safe:
a trader sold 3200 STX Sept 42.50 puts for $1.40

oy vey, and I’m assuming he’s referring to Monty Python?