More EVs to qualify for tax credit following Treasury changes

BMO's 2022 audited annual consolidated financial statements and accompanying Management Discussion and Analysis (MD&A) are available online at www.bmo.com/investorrelations and at www.sedar.com. Financial Results Highlights Fourth Quarter 2022 Compared with Fourth Quarter 2021: Net income of $4,483 million, compared with $2,159 million; adjusted net income1,3,4 of $2,136 million, compared with $2,226 million Reported earnings per share (EPS)2 of $6.51, compared with $3.23; adjusted EPS1,2,3,4 of $3.04, compared with $3.33 Provision for credit losses (PCL) of $226 million, compared with a recovery of the provision for credit losses of $126 million Return on equity (ROE) of 27.6%, compared with 16.0%; adjusted ROE1,3,4 of 12.9%, compared with 16.5% Common Equity Tier 1 Ratio5 of 16.7%, compared with 13.7% Fiscal 2022 Compared with Fiscal 2021: Net income of $13,537 million, compared with $7,754 million; adjusted net income1,3,4 of $9,039 million, compared with $8,651 million Reported EPS2 of $19.99, compared with $11.58; adjusted EPS1,2,3,4 of $13.23, compared with $12.96 Provision for credit losses of $313 million, compared with a provision of $20 million ROE of 22.9%, compared with 14.9%; adjusted ROE1,3,4 of 15.2%, compared with 16.7% TORONTO, Dec. 1, 2022 /CNW/ - For the fourth quarter ended October 31, 2022, BMO Financial Group (TSX:BMO) (NYSE:BMO) recorded net income of $4,483 million or $6.51 per share on a reported basis, and net income of $2,136 million or $3.04 per share on an adjusted basis. "This year, we continued to execute on our strategy to strengthen and grow each of our diversified businesses. Against the backdrop of a rapidly changing macroeconomic environment, we delivered on our commitments to positive operating leverage, improved efficiency and achieved above-target return on equity. Our strong performance was supported by targeted investments in technology and talent which delivered award winning customer and employee experiences. Very good revenue performance was driven by robust, high-quality growth in loans and deposits and expanding net interest margins, all underpinned by our leading risk management approach," said Darryl White, Chief Executive Officer, BMO Financial Group. "Looking ahead to 2023, the economic environment remains uncertain, with inflation and higher interest rates expected to slow the economy in the near term. We have a proven track record of sustained performance and remain well positioned to deliver in any environment. We will continue to dynamically manage capital and resources to grow our businesses and support our customers while finalizing preparations for the natural next step in our North American growth strategy, the approval, closing and integration of Bank of the West. "BMO has a long-standing, deep sense of purpose, and we are leveraging our position as a leading financial services provider to make progress for a thriving economy, sustainable future and an inclusive society, while targeting continued top-tier returns for our shareholders," concluded Mr. White. Concurrent with the release of results, BMO announced a first quarter 2023 dividend of $1.43 per common share, an increase of $0.04 from the prior quarter, and an increase of $0.10 or 8% from the prior year. The quarterly dividend of $1.43 per common share is equivalent to an annual dividend of $5.72 per common share. Caution The foregoing sections contain forward-looking statements. Please refer to the Caution Regarding Forward-Looking Statements. (1) Results and measures in this document are presented on a generally accepted accounting principles (GAAP) basis. They are also presented on an adjusted basis that excluded the impact of certain specified items from reported results. Adjusted results and ratios are non-GAAP and are detailed for all reported periods in the Non-GAAP and Other Financial Measures section. For details on the composition of non-GAAP amounts, measures and ratios, as well as supplementary financial measures, refer to the Glossary of Financial Terms. (2) All EPS measures in this document refer to diluted EPS, unless specified otherwise. EPS is calculated using net income after deducting total dividends on preferred shares and distributions payable on other equity instruments. (3) Reported net income included revenue related to the announced acquisition of Bank of the West, with revenue in Q4-2022 of $3,336 million ($4,541 million pre-tax) resulting from the management of the impact of interest rate changes between the announcement and closing on its fair value and goodwill, as well as acquisition and integration costs of $143 million ($191 million pre-tax). Fiscal 2022 net income included revenue of $5,667 million ($7,713 million pre-tax) and expenses of $237 million ($316 million pre-tax). Refer to the Non-GAAP and Other Financial Measures section for further information on adjusting items. (4) Q4-2022 reported net income included a legal provision of $846 million ($1,142 million pre-tax) related to a lawsuit associated with a predecessor bank, M&I Marshall and Ilsley Bank, comprising interest expense of $515 million pre-tax and non-interest expense of $627 million pre-tax, including legal fees of $22 million. These amounts were recorded in Corporate Services. For further information, refer to the Provisions and Contingent Liabilities section in Note 24 of the audited annual consolidated financial statements in BMO's 2022 Annual Report. (5) The Common Equity Tier 1 (CET1) Ratio is disclosed in accordance with the Office of the Superintendent of Financial Institutions' (OSFI's) Capital Adequacy Requirements (CAR) Guideline. Note: All ratios and percentage changes in this document are based on unrounded numbers.   Significant Events During the first quarter of 2022, we completed the sale of our EMEA Asset Management business to Ameriprise Financial, Inc., including the transfer of certain U.S. asset management clients, and on April 30, 2021, we completed the sale of our Private Banking business in Hong Kong and Singapore to J. Safra Sarasin Group. Collectively, we refer to these transactions as "divestitures". The divestitures reduced net revenue and expenses by approximately 3% and 4%, respectively, on both a reported and an adjusted basis, compared with the prior year. On December 20, 2021, we announced the signing of a definitive agreement with BNP Paribas to acquire Bank of the West and its subsidiaries. Under the terms of the agreement, we will pay a cash purchase price of US$16.3 billion, or US$13.4 billion net of an estimated US$2.9 billion of excess capital (at closing) at Bank of the West. The transaction, which is expected to close by the end of the first calendar quarter of 2023, is subject to customary closing conditions, including regulatory approvals. We expect to fund the transaction primarily with excess capital, reflecting our strong capital position, including the added impact of the 20,843,750 common shares issued for $3,106 million on March 29, 2022, and anticipated capital generation. On closing, the acquisition is expected to add approximately US$92 billion of assets, US$59 billion of loans and US$76 billion of deposits to our consolidated balance sheet. These amounts are based on the financial position and results of Bank of the West as at the period ended September 30, 2022. This acquisition aligns with our strategic, financial and cultural objectives, and meaningfully accelerates our U.S. growth. Building on the strength of our performance and our integrated North American foundation, the acquisition will bring nearly 1.8 million customers to BMO and will further extend our banking presence through an additional 503 branches and commercial and wealth offices in key U.S. markets. After closing, our footprint will expand to 32 states, including an immediate scaled entry into the attractive California market, where we expect to deliver a highly competitive offering to new growth markets, combining the strength of our digital banking platform and our strong banking team to generate good customer growth. A signature strength of Bank of the West is the deep relationships formed between its customers, its employees, and the communities they have served for over 100 years. As part of this transaction, we do not plan to close Bank of the West branches, and we are committed to retaining front-line Bank of the West branch employees. Leveraging our deep integration experience and proven track record in U.S. expansion, we remain confident that we can achieve annual pre-tax cost synergies of approximately US$670 million (C$860 million) through operational efficiencies across our combined businesses. Integration planning is underway and is being overseen by a dedicated joint integration management office. Under IFRS, the purchase price will be allocated to the identifiable assets and liabilities of Bank of the West at closing, on the basis of their relative fair values, with the difference recorded as goodwill. The fair value/par value differences, referred to as the fair value mark, will be amortized to income over the estimated life of an underlying asset (liability). Intangible assets identified, including the core deposit intangible related to non-maturity deposits, will be amortized over their estimated life. The fair value of fixed rate loans, securities and deposits is largely dependent on interest rates. If interest rates increase, the fair value of the acquired fixed rate assets (in particular, loans and securities) will decrease, resulting in higher goodwill. If interest rates decrease, the opposite would be true. Conversely, the fair value of floating rate assets (liabilities) and non-maturity deposits approximate par, providing no natural fair value change offset. Changes in goodwill relative to our original assumptions announced on December 20, 2021 will impact capital ratios at closing, because goodwill is treated as a deduction from capital under the Office of the Superintendent of Financial Institutions (OSFI) Basel III rules. In addition, given that the purchase price of the acquisition is in U.S. dollars, any change in foreign exchange translation between the Canadian dollar relative to the U.S. dollar between the announcement and the closing of the acquisition will result in a change to the Canadian dollar equivalent goodwill. We are proactively managing exposure to capital from changes in fair value of the assets and liabilities of Bank of the West at closing. As part of our fair value management actions, we entered into interest rate swaps that increase in value as interest rates rise, resulting in mark-to-market gains recorded in trading revenue. These swaps were largely offset from an interest rate risk perspective through the purchase of a portfolio of matched-duration U.S. treasuries and other balance sheet instruments that generate net interest income. Together, these transactions aim to mitigate the effects of any changes in goodwill arising from changes in interest rates between the announcement and closing of the acquisition, with the associated revenue (loss) treated as an adjusting item. In addition, BMO entered into forward contracts, which qualify as accounting hedges, to mitigate the effects of changes in the Canadian dollar equivalent of the purchase price on closing. Changes in the fair value of these forward contracts are recorded in other comprehensive income (OCI) until closing of the transaction. The impact of the fair value management actions on our results was treated as an adjusting item. The current quarter included $4,541 million pre-tax ($3,336 million after-tax) revenue related to the management of interest rate changes, comprising $4,698 million of mark-to-market gains on certain interest rate swaps as at October 31, 2022, recorded in non-interest revenue, as well as a loss of $157 million on a portfolio of primarily U.S. treasuries and other balance sheet instruments recorded in net interest income. Fiscal 2022 results included $7,713 million pre-tax ($5,667 million after-tax) revenue, comprising $7,665 million recorded in non-interest revenue and $48 million recorded in net interest income. The impact on our Common Equity Tier 1 Ratio related to these fair value management actions was approximately 95 basis points in the fourth quarter of 2022, and the cumulative impact was approximately 150 basis points in fiscal 2022. In addition, the changes in the fair value of the forward contracts increased OCI by $706 million in the current quarter and increased OCI by $638 million in the current year. This Significant Events section contains forward-looking statements. Please refer to the Caution Regarding Forward-Looking Statements. Fourth Quarter 2022 Performance Review The order in which the impact on net income is discussed in this section follows the order of revenue, expenses and provision for credit losses, regardless of their relative impact. Adjusted results and ratios in this Fourth Quarter 2022 Performance Review section are on a non-GAAP basis and discussed in the Non-GAAP and Other Financial Measures section. Adjusted results in the current quarter excluded the impact of the announced acquisition of Bank of the West, comprising revenue of $3,336 million ($4,541 million pre-tax) related to the management of the impact of interest rate changes between the announcement and closing of the acquisition on its fair value and goodwill, as well as acquisition and integration costs of $143 million ($191 million pre-tax). In addition, current quarter adjusted results excluded the impact of a legal provision of $846 million ($1,142 million pre-tax) related to a lawsuit associated with a predecessor bank, M&I Marshall and Ilsley Bank, comprising interest expense of $515 million pre-tax and non-interest expense of $627 million pre-tax, including legal fees of $22 million. For further information, refer to Note 24 of the audited annual consolidated financial statements in BMO's 2022 Annual Report. Adjusted net income also excluded the amortization of acquisition-related intangible assets and other acquisition and integration costs in both the current and the prior years. Reported net income increased from the prior year, primarily due to the impact of the above noted fair value management actions, and adjusted net income decreased 4%, with higher net revenue offset by higher expenses and a higher provision for credit losses. Net income increased in U.S. P&C and decreased in BMO Capital Markets, BMO Wealth Management, and Canadian P&C. On a reported basis, Corporate Services recorded net income compared with a net loss in the prior year, and on an adjusted basis, Corporate Services results were relatively unchanged. Canadian P&C Reported and adjusted net income was $917 million, a decrease of $16 million or 2% from the prior year. Results were driven by an 11% increase in revenue, primarily due to higher net interest income reflecting strong balance growth and higher net interest margins, more than offset by higher expenses and a higher provision for credit losses compared with a recovery in the prior year. U.S. P&C Reported net income was $660 million, an increase of $151 million or 30% from the prior year, and adjusted net income was $662 million, an increase of $147 million or 29%. The impact of the stronger U.S. dollar increased revenue and net income growth by 9%, and expense growth by 8% on a reported basis. On a U.S. dollar basis, reported net income was $488 million, an increase of $82 million or 21% from prior year, and adjusted net income was $489 million, an increase of $79 million or 19%. Reported and adjusted results were driven by an 18% increase in revenue, primarily due to higher net interest income reflecting higher net interest margins and loan balances, partially offset by higher expenses and a higher provision for credit losses compared with a recovery in the prior year. BMO Wealth Management Reported net income was $298 million, compared with $345 million in the prior year, and adjusted net income was $298 million, a decrease of $51 million or 14% from the prior year. Wealth and Asset Management (1) reported net income was $221 million, a decrease of $66 million or 24% from the prior year, primarily due to higher underlying expenses from continued investments in the business and divestitures. Insurance net income was $77 million, an increase of $19 million from the prior year, primarily due to benefits from changes in investments to improve asset liability management. BMO Capital Markets Reported net income was $357 million, a decrease of $174 million or 33% from the prior year, and adjusted net income was $363 million, a decrease of $173 million or 33% . Reported and adjusted results were impacted by current market conditions, resulting in lower Investment and Corporate Banking revenue, partially offset by higher Global Markets revenue, higher expenses, and a lower recovery of the provision for credit losses compared with the prior year. Corporate Services Reported net income was $2,251 million, compared with a reported net loss of $159 million in the prior year, and adjusted net loss was $104 million, compared with an adjusted net loss of $107 million. Reported results increased, primarily due to higher revenue reflecting the fair value management actions, partially offset by the legal provision noted above. Adjusted results were relatively unchanged from the prior year. Capital BMO's Common Equity Tier 1 Ratio was 16.7% as at October 31, 2022, an increase from 15.8% at the end of the third quarter of 2022, primarily driven by the benefit from fair value management actions related to the announced acquisition of Bank of the West, internal capital generation and common shares issued from treasury under the shareholder dividend reinvestment and share purchase plan, which were partially offset by the legal provision noted above and higher risk-weighted assets. (1)   Wealth and Asset Management was previously known as Traditional Wealth. Credit Quality Total provision for credit losses was $226 million, compared with a recovery of the provision for credit losses of $126 million in the prior year. The provision for credit losses on impaired loans was $192 million, an increase of $108 million from the prior year. The provision for credit losses on impaired loans as a percentage of average net loans and acceptances ratio was 14 basis points, compared with 7 basis points in the prior year. There was a $34 million provision for credit losses on performing loans in the current quarter, compared with a $210 million recovery in the prior year. The $34 million provision for credit losses on performing loans in the current quarter reflected a deteriorating economic outlook and balance growth, largely offset by continued reduction in uncertainty as a result of the improving pandemic environment and portfolio credit improvement. The $210 million recovery of credit losses in the prior year largely reflected an improving economic outlook and portfolio credit improvement, partially offset by growth in loan balances. Refer to the Critical Accounting Estimates and Judgments section of BMO's 2022 Annual Report and Note 4 of our audited annual consolidated financial statements for further information on the allowance for credit losses as at October 31, 2022. Caution The foregoing sections contain forward-looking statements. Please refer to the Caution Regarding Forward-Looking Statements. Regulatory Filings BMO's continuous disclosure materials, including interim filings, annual Management's Discussion and Analysis and audited annual consolidated financial statements, Annual Information Form and Notice of Annual Meeting of Shareholders and Proxy Circular, are available on our website at www.bmo.com/investorrelations, on the Canadian Securities Administrators' website at www.sedar.com, and on the EDGAR section of the U.S. Securities and Exchange Commission's website at www.sec.gov. Information contained in or otherwise accessible through our website (www.bmo.com), or any third party websites mentioned herein, does not form part of this document. Bank of Montreal uses a unified branding approach that links all of the organization's member companies. Bank of Montreal, together with its subsidiaries, is known as BMO Financial Group. In this document, the names BMO and BMO Financial Group, as well as the words "bank", "we" and "our", mean Bank of Montreal, together with its subsidiaries.   Financial Review Management's Discussion and Analysis (MD&A) commentary is as at December 1, 2022. The material that precedes this section comprises part of this MD&A. The MD&A should be read in conjunction with the unaudited interim consolidated financial statements for the period ended October 31, 2022, included in this document, as well as the audited annual consolidated financial statements for the year ended October 31, 2022, and the MD&A for fiscal 2022, contained in BMO's 2022 Annual Report. BMO's 2022 Annual Report includes a comprehensive discussion of its businesses, strategies and objectives, and can be accessed on our website at www.bmo.com/investorrelations. Readers are also encouraged to visit the site to view other quarterly financial information. Bank of Montreal's management, under the supervision of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness, as at October 31, 2022, of Bank of Montreal's disclosure controls and procedures (as defined in the rules of the U.S. Securities and Exchange Commission and the Canadian Securities Administrators) and has concluded that such disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting during the quarter ended October 31, 2022, which materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Because of inherent limitations, disclosure controls and procedures and internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. As in prior quarters, Bank of Montreal's Audit and Conduct Review Committee reviewed this document and Bank of Montreal's Board of Directors approved the document prior to its release. Caution Regarding Forward-Looking Statements Bank of Montreal's public communications often include written or oral forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the "safe harbor" provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements in this document may include, but are not limited to, statements with respect to our objectives and priorities for fiscal 2023 and beyond, our strategies or future actions, our targets and commitments (including with respect to net zero emissions), expectations for our financial condition, capital position or share price, the regulatory environment in which we operate, the results of, or outlook for, our operations or for the Canadian, U.S. and international economies, the closing of our proposed acquisition of Bank of the West, including plans for the combined operations of BMO and Bank of the West and the financial, operational and capital impacts of the transaction, and include statements made by our management. Forward-looking statements are typically identified by words such as "will", "would", "should", "believe", "expect", "anticipate", "project", "intend", "estimate", "plan", "goal", "commit", "target", "may", "might", "schedule", "forecast", "outlook", "timeline", "suggest", "seek" and "could" or negative or grammatical variations thereof. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, both general and specific in nature. There is significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that our assumptions may not be correct, and that actual results may differ materially from such predictions, forecasts, conclusions or projections. We caution readers of this document not to place undue reliance on our forward-looking statements, as a number of factors – many of which are beyond our control and the effects of which can be difficult to predict – could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements. The future outcomes that relate to forward-looking statements may be influenced by many factors, including, but not limited to: general economic and market conditions in the countries in which we operate, including labour challenges; the severity, duration and spread of the COVID-19 pandemic, and possibly other outbreaks of disease or illness, and their impact on local, national or international economies, as well as their heightening of certain risks that may affect our future results; information, privacy and cybersecurity, including the threat of data breaches, hacking, identity theft and corporate espionage, as well as the possibility of denial of service resulting from efforts targeted at causing system failure and service disruption; benchmark interest rate reforms; technological changes and technology resiliency; political conditions, including changes relating to, or affecting, economic or trade matters; climate change and other environmental and social risk; the Canadian housing market and consumer leverage; inflationary pressures; global supply-chain disruptions; changes in monetary, fiscal, or economic policy; changes in laws, including tax legislation and interpretation, or in supervisory expectations or requirements, including capital, interest rate and liquidity requirements and guidance, and the effect of such changes on funding costs; weak, volatile or illiquid capital or credit markets; the level of competition in the geographic and business areas in which we operate; exposure to, and the resolution of, significant litigation or regulatory matters, our ability to successfully appeal adverse outcomes of such matters and the timing, determination and recovery of amounts related to such matters; the accuracy and completeness of the information we obtain with respect to our customers and counterparties; failure of third parties to comply with their obligations to us; our ability to execute our strategic plans, complete proposed acquisitions or dispositions and integrate acquisitions, including obtaining regulatory approvals; critical accounting estimates and judgments, and the effects of changes to accounting standards, rules and interpretations on these estimates; operational and infrastructure risks, including with respect to reliance on third parties; the possibility that our proposed acquisitions, including our acquisition of Bank of the West, do not close when expected, or at all, because required regulatory approvals and other conditions to closing are not received or satisfied on a timely basis, or at all, or are received subject to adverse conditions or requirements; the anticipated benefits from proposed acquisitions, including Bank of the West, such as potential synergies and operational efficiencies, are not realized; our ability to manage exposure to capital arising from changes in fair value of assets and liabilities between signing and closing; our ability to perform effective fair value management actions and unforeseen consequences arising from such actions; changes to our credit ratings; global capital markets activities; the possible effects on our business of war or terrorist activities; natural disasters and disruptions to public infrastructure, such as transportation, communications, power or water supply; and our ability to anticipate and effectively manage risks arising from all of the foregoing factors. We caution that the foregoing list is not exhaustive of all possible factors. Other factors and risks could adversely affect our results. For more information, please refer to the discussion in the Risks That May Affect Future Results section, and the sections related to credit and counterparty, market, insurance, liquidity and funding, operational non-financial, legal and regulatory, strategic, environmental and social, and reputation risk, in the Enterprise-Wide Risk Management section of BMO's 2022 Annual Report, all of which outline certain key factors and risks that may affect our future results. Investors and others should carefully consider these factors and risks, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. We do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by the organization or on its behalf, except as required by law. The forward-looking information contained in this document is presented for the purpose of assisting shareholders and analysts in understanding our financial position as at and for the periods ended on the dates presented, as well as our strategic priorities and objectives, and may not be appropriate for other purposes. Material economic assumptions underlying the forward-looking statements contained in this document include those set out in the Economic Developments and Outlook section of BMO's 2022 Annual Report, as well as in the Allowance for Credit Losses section of BMO's 2022 Annual Report. Assumptions about the performance of the Canadian and U.S. economies, as well as overall market conditions and their combined effect on our business, are material factors we consider when determining our strategic priorities, objectives and expectations for our business. Assumptions about Bank of the West's balance sheet, product mix and margins, and interest rate sensitivity were material factors we considered in estimating the fair value and goodwill and intangibles amounts at closing, and assumptions about our integration plan, the efficiency and duration of integration and the alignment of organizational responsibilities were material factors we considered in estimating pre-tax cost synergies. In determining our expectations for economic growth, we primarily consider historical economic data, past relationships between economic and financial variables, changes in government policies, and the risks to the domestic and global economy. Financial Highlights (Canadian $ in millions, except as noted) Q4-2022 Q3-2022 Q4-2021 Fiscal 2022 Fiscal 2021 Summary Income Statement (1) Net interest income 3,767 4,197 3,756 15,885 14,310 Non-interest revenue 6,803 1,902 2,817 17,825 12,876 Revenue 10,570 6,099 6,573 33,710 27,186 Insurance claims, commissions and changes in policy benefit liabilities (CCPB) (369) 413 97 (683) 1,399 Revenue, net of CCPB (2) 10,939 5,686 6,476 34,393 25,787 Provision for credit losses on impaired loans 192 104 84 502 525 Provision for (recovery of) credit losses on performing loans 34 32 (210) (189) (505) Total provision for (recovery of) credit losses 226 136 (126) 313 20 Non-interest expense 4,776 3,859 3,803 16,194 15,509 Provision for income taxes 1,454 326 640 4,349 2,504 Net income 4,483 1,365 2,159 13,537 7,754 Adjusted net income 2,136 2,132 2,226 9,039 8,651 Common Share Data ($, except as noted) (1) Basic earnings per share 6.52 1.96 3.24 20.04 11.60 Diluted earnings per share 6.51 1.95 3.23 19.99 11.58 Adjusted diluted earnings per share 3.04 3.09 3.33 13.23 12.96 Dividends declared per share 1.39 1.39 1.06 5.44 4.24 Book value per share 95.60 90.88 80.18 95.60 80.18 Closing share price 125.49 127.66 134.37 125.49 134.37 Number of common shares outstanding (in millions) End of period 677.1 674.4 648.1 677.1 648.1 Average basic 676.1 673.3 648.2 664.0 647.2 Average diluted 677.5 674.8 650.1 665.7 648.7 Market capitalization ($ billions) 85.0 86.1 87.1 85.0 87.1 Dividend yield (%) 4.4 4.4 3.2 4.3 3.2 Dividend payout ratio (%) 21.3 71.1 32.7 27.1 36.5 Adjusted dividend payout ratio (%) 45.6 44.9 31.7 41.0 32.6 Financial Measures and Ratios (%) (1) Return on equity 27.6 8.8 16.0 22.9 14.9 Adjusted return on equity 12.9 13.8 16.5 15.2 16.7 Return on tangible common equity 30.1 9.6 18.0 25.1 17.0 Adjusted return on tangible common equity 14.0 15.1 18.5 16.6 18.9 Efficiency ratio 45.2 63.3 57.9 48.0 57.0 Efficiency ratio, net of CCPB (2) 43.7 67.9 58.7 47.1 60.1 Adjusted efficiency ratio, net of CCPB (2) 57.2 56.7 57.4 55.8 56.5 Operating leverage 35.3 (24.2) 2.6 19.6 (1.5) Operating leverage, net of CCPB (2) 43.3 (18.4) 1.0 29.0 0.4 Adjusted operating leverage, net of CCPB (2) 0.4 (1.9) 2.4 1.3 6.1 Net interest margin on average earning assets 1.46 1.71 1.62 1.62 1.59 Effective tax rate 24.5 19.3 22.9 24.3 24.4 Adjusted effective tax rate 21.8 22.0 22.7 22.8 22.7 Total PCL-to-average net loans and acceptances 0.16 0.10 (0.11) 0.06 - PCL on impaired loans-to-average net loans and acceptances 0.14 0.08 0.07 0.10 0.11 Liquidity coverage ratio (LCR) (3) 135 129 125 135 125 Net stable funding ratio (NSFR) (3) 114 114 118 114 118 Balance Sheet and other information  (as at, $ millions, except as noted) Assets 1,139,199 1,068,338 988,175 1,139,199 988,175 Average earning assets 1,021,540 972,879 918,255 979,341 897,302 Gross loans and acceptances 567,191 537,829 474,847 567,191 474,847 Net loans and acceptances 564,574 535,417 472,283 564,574 472,283 Deposits 769,478 729,385 685,631 769,478 685,631 Common shareholders' equity 64,730 61,286 51,965 64,730 51,965 Total risk weighted assets (4) 363,997 351,711 325,433 363,997 325,433 Assets under administration 744,442 711,508 634,713 744,442 634,713 Assets under management 305,462 310,469 523,270 305,462 523,270 Capital ratios (%) (4) Common Equity Tier 1  Ratio 16.7 15.8 13.7 16.7 13.7 Tier 1 Capital Ratio 18.4 17.3 15.4 18.4 15.4 Total Capital Ratio 20.7 19.4 17.6 20.7 17.6 Leverage Ratio 5.6 5.3 5.1 5.6 5.1 Foreign Exchange Rates ($) As at Canadian/U.S. dollar 1.3625 1.2813 1.2376 1.3625 1.2376 Average Canadian/U.S. dollar 1.3516 1.2774 1.2546 1.2918 1.2554 (1) Adjusted results remove certain items from reported results and are used to calculate our adjusted measures as presented in the above table. Management assesses performance on a reported basis and an adjusted basis, and considers both to be useful. Revenue, net of CCPB, as well as reported ratios calculated net of CCPB and adjusted results, measures and ratios in this table are non-GAAP. For further information, refer to the Non-GAAP and Other Financial Measures section, and for details on the composition of non-GAAP amounts, measures and ratios, as well as supplementary financial measures, refer to the Glossary of Financial Terms. (2) We present revenue, efficiency ratio and operating leverage on a basis that is net of CCPB, which reduces the variability in insurance revenue from changes in fair value that are largely offset by changes in the fair value of policy benefit liabilities, the impact of which is reflected in CCPB. For further information, refer to the Insurance Claims, Commissions and Changes in Policy Benefits section. (3) LCR and NSFR are disclosed in accordance with the Office of the Superintendent of Financial Institutions' (OSFI's) Liquidity Adequacy Requirements (LAR) Guideline, as applicable. (4) Capital ratios and risk-weighted assets are disclosed in accordance with OSFI's Capital Adequacy Requirements (CAR) Guideline, as applicable.   Non-GAAP and Other Financial Measures Results and measures in this document are presented on a GAAP basis. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from our audited annual consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS). References to GAAP mean IFRS. We use a number of financial measures to assess our performance, as well as the performance of our operating segments, including amounts, measures and ratios that are presented on a non‑GAAP basis, as described below. We believe that these non‑GAAP amounts, measures and ratios, read together with our GAAP results, provide readers with a better understanding of how management assesses results. Non-GAAP amounts, measures and ratios do not have standardized meanings under GAAP. They are unlikely to be comparable to similar measures presented by other companies and should not be viewed in isolation from, or as a substitute for, GAAP results. For further information regarding the composition of non-GAAP and other financial measures, including supplementary financial measures, refer to the Glossary of Financial Terms. Our non-GAAP measures broadly fall into the following categories: Adjusted measures and ratios Management considers both reported and adjusted results and measures to be useful in assessing underlying ongoing business performance. Adjusted results and measures remove certain specified items from revenue, non-interest expense and income taxes, as detailed in the following table. Adjusted results and measures presented in this document are non-GAAP. Presenting results on both a reported basis and an adjusted basis permits readers to assess the impact of certain items on results for the periods presented, and to better assess results excluding those items that may not be reflective of ongoing business performance. As such, the presentation may facilitate readers' analysis of trends. Except as otherwise noted, management's discussion of changes in reported results in this document applies equally to changes in the corresponding adjusted results. Measures net of insurance claims, commissions and changes in policy benefit liabilities (CCPB) We also present reported and adjusted revenue on a basis that is net of insurance claims, commissions and changes in policy benefit liabilities (CCPB), and our efficiency ratio and operating leverage are calculated on a similar basis, as reconciled in the Revenue section. Measures and ratios presented on a basis net of CCPB are non-GAAP. Insurance revenue can experience variability arising from fluctuations in the fair value of insurance assets, caused by movements in interest rates and equity markets. The investments that support policy benefit liabilities are predominantly fixed income assets recorded at fair value, with changes in fair value recorded in insurance revenue in the Consolidated Statement of Income. These fair value changes are largely offset by changes in the fair value of policy benefit liabilities, the impact of which is reflected in CCPB. The presentation and discussion of revenue, efficiency ratios and operating leverage on a net basis reduces this variability, which allows for a better assessment of operating results. For more information refer to the Insurance Claims, Commissions and Changes in Policy Benefit Liabilities section. Presenting results on a taxable equivalent basis (teb) We analyze consolidated revenue on a reported basis. In addition, we analyze revenue on a taxable equivalent basis (teb) at the operating group level, consistent with our Canadian peer group. Revenue and the provision for income taxes in BMO Capital Markets and U.S. P&C are increased on tax-exempt securities to an equivalent pre-tax basis. These adjustments are offset in Corporate Services. Presenting results on a teb basis reflects how our operating groups manage their business and is useful facilitating comparisons of income between taxable and tax-exempt sources. The effective tax rate is also analyzed on a teb basis for consistency of approach, with the offset to operating segment adjustments recorded in Corporate Services. Tangible common equity and return on tangible common equity Tangible common equity is calculated as common shareholders' equity less goodwill and acquisition-related intangible assets, net of related deferred tax liabilities. Return on tangible common equity is commonly used in the North American banking industry and is meaningful because it measures the performance of businesses consistently, whether they were acquired or developed organically. Non-GAAP and Other Financial Measures (Canadian $ in millions, except as noted) Q4-2022 Q3-2022 Q4-2021 Fiscal 2022 Fiscal 2021 Reported Results Net interest income 3,767 4,197 3,756 15,885 14,310 Non-interest revenue 6,803 1,902 2,817 17,825 12,876 Revenue 10,570 6,099 6,573 33,710 27,186 Insurance claims, commissions and changes in policy benefit liabilities (CCPB) 369 (413) (97) 683 (1,399) Revenue, net of CCPB 10,939 5,686 6,476 34,393 25,787 Provision for credit losses (226) (136) 126 (313) (20) Non-interest expense (4,776) (3,859) (3,803) (16,194) (15,509) Income before income taxes 5,937 1,691 2,799 17,886 10,258 Provision for income taxes (1,454) (326) (640) (4,349) (2,504) Net income 4,483 1,365 2,159 13,537 7,754 Diluted EPS ($) 6.51 1.95 3.23 19.99 11.58 Adjusting Items Impacting Revenue (Pre-tax) Impact of divestitures (1) - - - (21) 29 Management of fair value changes on the purchase of Bank of the West (2) 4,541 (945) - 7,713 - Legal provision (3) (515) - - (515) - Impact of adjusting items on revenue (pre-tax) 4,026 (945) - 7,177 29 Adjusting Items Impacting Non-Interest Expense (Pre-tax) Acquisition and integration costs (4) (193) (84) (1) (326) (9) Amortization of acquisition-related intangible assets (5) (8) (7) (20) (31) (88) Impact of divestitures (1) 6 (7) (62) (16) (886) Restructuring (costs) reversals (6) - - - - 24 Legal provision (3) (627) - - (627) - Impact of adjusting items on non-interest expense (pre-tax) (822) (98) (83) (1,000) (959) Impact of adjusting items on reported pre-tax income 3,204 (1,043) (83) 6,177 (930) Adjusting Items Impacting Revenue (After tax) Impact of divestitures (1) - - - (23) 22 Management of fair value changes on the purchase of Bank of the West (2) 3,336 (694) - 5,667 - Legal provision (3) (382) - - (382) - Impact of adjusting items on revenue (after-tax) 2,954 (694) - 5,262 22 Adjusting Items Impacting Non-Interest Expense (After-tax) Acquisition and integration costs (4) (145) (62) (1) (245) (7) Amortization of acquisition-related intangible assets (5) (6) (5) (14) (23) (66) Impact of divestitures (1) 8 (6) (52) (32) (864) Restructuring (costs) reversals (6) - - - - 18 Legal provision (3) (464) - - (464) - Impact of adjusting items on non-interest expense (after-tax) (607) (73) (67) (764) (919) Impact of adjusting items on reported net income (after-tax) 2,347 (767) (67) 4,498 (897) Impact on diluted EPS ($) 3.47 (1.14) (0.10) 6.76 (1.38) Adjusted Results Net interest income 4,439 4,159 3,756 16,352 14,310 Non-interest revenue 2,105 2,885 2,817 10,181 12,847 Revenue 6,544 7,044 6,573 26,533 27,157 Insurance claims, commissions and changes in policy benefit liabilities (CCPB) 369 (413) (97) 683 (1,399) Revenue, net of CCPB 6,913 6,631 6,476 27,216 25,758 Provision for credit losses (226) (136) 126 (313) (20) Non-interest expense (3,954) (3,761) (3,720) (15,194) (14,550) Income before income taxes 2,733 2,734 2,882 11,709 11,188 Provision for income taxes (597) (602) (656) (2,670) (2,537) Net income 2,136 2,132 2,226 9,039 8,651 Diluted EPS ($) 3.04 3.09 3.33 13.23 12.96 (1) Reported net income included the impact of divestitures related to the sale of our EMEA Asset Management business and our Private Banking business in Hong Kong and Singapore. Q4-2022 net income included an expense recovery of $8 million ($6 million pre-tax). Q3-2022 included expenses of $6 million ($7 million pre-tax). Q2-2022 included a gain of $6 million ($8 million pre-tax) related to the transfer of certain U.S. asset management clients recorded in revenue, and expenses of $15 million ($18 million pre-tax), both related to the sale of our EMEA Asset Management business. Q1-2022 included a $29 million (pre-tax and after-tax) loss related to foreign currency translation reclassified from accumulated other comprehensive income to non-interest revenue, a $3 million pre-tax net recovery of non-interest expense, including taxes of $22 million on closing of the sale of our EMEA Asset Management business. Q4-2021 included expenses of $52 million ($62 million pre-tax) related to both transactions. Q3-2021 included expenses of $18 million ($24 million pre-tax). Q2-2021 included a $747 million (pre-tax and after-tax) write-down of goodwill related to the sale of our EMEA Asset Management business, a $22 million ($29 million pre-tax) gain on the sale of our Private Banking business, and $47 million ($53 million pre-tax) of divestiture-related costs for both transactions. The gain on the sale was recorded in revenue with the goodwill write-down and divestiture costs recorded in non-interest expense. These amounts were recorded in Corporate Services. (2) Reported net income included revenue (losses) related to the announced acquisition of Bank of the West resulting from the management of the impact of interest rate changes between the announcement and closing on its fair value and goodwill: Q4-2022 included revenue of $3,336 million ($4,541 million pre-tax), comprising $4,698 million of pre-tax mark-to-market gains on certain interest rate swaps recorded in non-interest trading revenue, as well as a loss of $157 million pre-tax on a portfolio of primarily U.S. treasury securities and balance sheet instruments recorded in net interest income. Q3-2022 included a loss of $694 million ($945 million pre-tax), comprising $983 million of pre-tax mark-to-market losses and $38 million of pre-tax interest income. Q2-2022 included revenue of $2,612 million ($3,555 million pre-tax), comprising $3,433 million of pre-tax mark-to-market gains and $122 million of pre-tax interest income. Q1-2022 included revenue of $413 million ($562 million pre-tax), comprising $517 million of pre-tax mark-to-market gains and $45 million of pre-tax interest income. These amounts were recorded in Corporate Services. For further information on this acquisition, refer to the Significant Events section. (3) Q4-2022 reported net income included a legal provision of $846 million ($1,142 million pre-tax) related to a lawsuit associated with a predecessor bank, M&I Marshall and Ilsley Bank, comprising interest expense of $515 million pre-tax and non-interest expense of $627 million pre-tax, including legal fees of $22 million. These amounts were recorded in Corporate Services. For further information, refer to the Provisions and Contingent Liabilities section in Note 24 of the audited annual consolidated financial statements in BMO's 2022 Annual Report. (4) Reported net income included acquisition and integration costs related to the announced acquisition of Bank of the West recorded in non-interest expenses in Corporate Services. Q4-2022 included $143 million ($191 million pre-tax), Q3-2022 included $61 million ($82 million pre-tax), Q2-2022 included $26 million ($35 million pre-tax) and Q1-2022 included $7 million ($8 million pre-tax). Reported net income included acquisition and integration costs related to Clearpool in Q4-2022, Q3-2022, Q2-2022 and Q1-2022; and acquisition and integration costs related to both KGS-Alpha and Clearpool in Q4-2021, Q3-2021, Q2-2021 and Q1-2021, recorded in non-interest expense in BMO Capital Markets. Acquisition and integration costs were $2 million ($2 million pre-tax) in Q4-2022, $1 million ($2 million pre-tax) in Q3-2022, $2 million ($2 million pre-tax) in Q2-2022, and $3 million ($4 million pre-tax) in Q1-2022. Q4-2021 was $1 million ($1 million pre-tax), Q3-2021 was $2 million ($3 million pre-tax), Q2-2021 was $2 million ($2 million pre-tax) and Q1-2021 was $2 million ($3 million pre-tax). (5) Reported income included amortization of acquisition-related intangible assets recorded in non-interest expense in the related operating group and was $6 million ($8 million pre-tax) in Q4-2022, $5 million ($7 million pre-tax) in Q3-2022, and was $6 million ($8 million pre-tax) in both Q2-2022 and Q1-2022. Q4-2021 was $14 million ($20 million pre-tax), Q3-2021 was $15 million ($19 million pre-tax), Q2-2021 was $18 million ($24 million pre-tax) and Q1-2021 was $19 million ($25 million pre-tax). (6) Q3-2021 reported net income included a partial reversal of $18 million ($24 million pre-tax) of restructuring charges related to severance recorded in 2019, in non-interest expense in Corporate Services.   Summary of Reported and Adjusted Results by Operating Group BMO Wealth BMO Capital Corporate U.S. Segment (1) (Canadian $ in millions, except as noted) Canadian P&C U.S. P&C Total P&C Management Markets Services Total Bank (US $ in millions) Q4-2022 Reported net income (loss) 917 660 1,577 298 357 2,251 4,483 2,306 Acquisition and integration costs - - - - 2 143 145 106 Amortization of acquisition-related intangible assets - 2 2 - 4 - 6 4 Impact of divestitures - - - - - (8) (8) (3) Management of fair value changes on the purchase of      Bank of the West - - - - - (3,336) (3,336) (2,470) Legal provision - - - - - 846 846 621 Adjusted net income (loss) 917 662 1,579 298 363 (104) 2,136 564 Q3-2022 Reported net income (loss) 965 568 1,533 324 262 (754) 1,365 (28) Acquisition and integration costs - - - - 1 61 62 49 Amortization of acquisition-related intangible assets - 1 1 1 3 - 5 5 Impact of divestitures - - - - - 6 6 - Management of fair value changes on the purchase of      Bank of the West - - - - - 694 694 545 Adjusted net income (loss) 965 569 1,534 325 266 7 2,132 571 Q4-2021 Reported net income (loss) 933 509 1,442 345 531 (159) 2,159 618 Acquisition and integration costs - - - - 1 - 1 2 Amortization of acquisition-related intangible assets - 6 6 4 4 - 14 9 Impact of divestitures - - - - - 52 52 4 Adjusted net income (loss) 933 515 1,448 349 536 (107) 2,226 633 Fiscal 2022 Reported net income (loss) 3,826 2,497 6,323 1,251 1,772 4,191 13,537 6,079 Acquisition and integration costs - - - - 8 237 245 185 Amortization of acquisition-related intangible assets 1 5 6 3 14 - 23 17 Impact of divestitures - - - - - 55 55 (45) Management of fair value changes on the purchase of      Bank of the West - - - - - (5,667) (5,667) (4,312) Legal provision - - - - - 846 846 621 Adjusted net income (loss) 3,827 2,502 6,329 1,254 1,794 (338) 9,039 2,545 Fiscal 2021 Reported net income (loss) 3,288 2,176 5,464 1,382 2,120 (1,212) 7,754 2,593 Acquisition and integration costs - - - - 7 - 7 6 Amortization of acquisition-related intangible assets 1 24 25 24 17 - 66 37 Impact of divestitures - - - - - 842 842 27 Restructuring costs (reversals) - - - - - (18) (18) (13) Adjusted net income (loss) 3,289 2,200 5,489 1,406 2,144 (388) 8,651 2,650 (1)   U.S. segment reported and adjusted results comprise net income recorded in U.S. P&C and our U.S. operations in BMO Wealth Management, BMO Capital Markets and Corporate Services. Refer to footnotes (1) to (6) in the Non-GAAP and Other Financial Measures table for details on adjusting items. Certain comparative figures have been reclassified to conform with the current year's presentation.   Net Revenue, Efficiency and Operating Leverage (Canadian $ in millions, except as noted) Q4-2022 Q3-2022 Q4-2021 Fiscal 2022 Fiscal 2021 Reported Revenue 10,570 6,099 6,573 33,710 27,186 CCPB (369) 413 97 (683) 1,399 Revenue, net of CCPB 10,939 5,686 6,476 34,393 25,787 Non-interest expense 4,776 3,859 3,803 16,194 15,509 Efficiency ratio (%) 45.2 63.3 57.9 48.0 57.0 Efficiency ratio, net of CCPB (%) 43.7 67.9 58.7 47.1 60.1 Revenue growth (%) 60.9 (19.4) 9.8 24.0 7.9 Revenue growth, net of CCPB (%) 68.9 (13.6) 8.2 33.4 9.8 Non-interest expense growth (%) 25.6 4.8 7.2 4.4 9.4 Operating Leverage (%) 35.3 (24.2) 2.6 19.6 (1.5) Operating Leverage, net of CCPB (%) 43.3 (18.4) 1.0 29.0 0.4 Adjusted (1) Revenue 6,544 7,044 6,573 26,533 27,157 Impact of adjusting items on revenue (4,026) 945 - (7,177) (29) CCPB (369) 413 97 (683) 1,399 Revenue, net of CCPB 6,913 6,631 6,476 27,216 25,758 Impact of adjusting items on non-interest expense (822) (98) (83) (1,000) (959) Non-interest expense 3,954 3,761 3,720 15,194 14,550 Efficiency ratio (%) 60.4 53.4 56.6 57.3 53.6 Efficiency ratio, net of CCPB (%) 57.2 56.7 57.4 55.8 56.5 Revenue growth, net of CCPB (%) 6.7 0.8 8.2 5.7 9.7 Non-interest expense growth (%) 6.3 2.7 5.8 4.4 3.6 Operating Leverage, net of CCPB (%) 0.4 (1.9) 2.4 1.3 6.1 (1) Refer to footnotes (1) to (6) in the Non-GAAP and Other Financial Measures table for details on adjusting items.   Return on Equity and Return on Tangible Common Equity (Canadian $ in millions, except as noted) Q4-2022 Q3-2022 Q4-2021 Fiscal 2022 Fiscal 2021 Reported net income 4,483 1,365 2,159 13,537 7,754 Dividends on preferred shares and distributions on other equity instruments (77) (47) (59) (231) (244) Net income available to common shareholders (A) 4,406 1,318 2,100 13,306 7,510 After-tax amortization of acquisition-related intangible assets 6 5 14 23 66 Net income available to common shareholders after adjusting for amortization of  acquisition-related intangible assets (B) 4,412 1,323 2,114 13,329 7,576 After-tax impact of other adjusting items (1) (2,353) 762 53 (4,521) 831 Adjusted net income available to common shareholders (C) 2,059 2,085 2,167 8,808 8,407 Average common shareholders' equity (D) 63,343 59,707 52,113 58,078 50,451 Return on equity (%) (= A/D) (3) 27.6 8.8 16.0 22.9 14.9 Adjusted return on equity (%) (= C/D) (3) 12.9 13.8 16.5 15.2 16.7 Average tangible common equity (E) (2) 58,224 54,846 46,580 53,148 44,505 Return on tangible common equity (%) (= B/E) (3) 30.1 9.6 18.0 25.1 17.0 Adjusted return on tangible common equity (%) (= C/E) (3) 14.0 15.1 18.5 16.6 18.9 (1) Refer to footnotes (1) to (6) in the Non-GAAP and Other Financial Measures table for details on adjusting items. (2) Average tangible common equity is average common shareholders' equity (D above) adjusted for goodwill of $5,247 million in Q4-2022, $4,981 million in Q3-2022, and $5,455 million in Q4-2021; $5,051 million in fiscal 2022 and $5,836 million in fiscal 2021. Acquisition-related intangible assets of $124 million in Q4-2022, $126 million in Q3-2022, and $349 million in Q4-2021; $130 million in fiscal 2022 and $381 million in fiscal 2021. Net of related deferred tax liabilities of $252 million in Q4-2022, $246 million in Q3-2022, and $271 million in Q4-2021; $251 million in fiscal 2022 and $271 million in fiscal 2021. (3) Quarterly calculations are on an annualized basis.   Capital is allocated to the operating segments based on the amount of regulatory capital required to support business activities. Unallocated capital is reported in Corporate Services. Capital allocation methodologies are reviewed annually. Return on Equity by Operating Segment Q4-2022 BMO Wealth BMO Capital Corporate (Canadian $ in millions, except as noted) Canadian P&C U.S. P&C Total P&C Management Markets  Services Total Bank Reported Net income available to common shareholders 906 650 1,556 296 346 2,208 4,406 Total average common equity 12,231 14,381 26,612 5,400 12,190 19,141 63,343 Return on equity (%) 29.4 17.9 23.2 21.7 11.3 na 27.6 Adjusted (1) Net income available to common shareholders 906 652 1,558 296 352 (147) 2,059 Total average common equity 12,231 14,381 26,612 5,400 12,190 19,141 63,343 Return on equity (%) 29.4 18.0 23.2 21.8 11.4 na 12.9   Q3-2022 BMO Wealth BMO Capital Corporate (Canadian $ in millions, except as noted) Canadian P&C U.S. P&C Total P&C Management Markets  Services Total Bank Reported Net income available to common shareholders 955 561 1,516 322 252 (772) 1,318 Total average common equity 11,842 13,460 25,302 5,257 11,786 17,362 59,707 Return on equity (%) 32.0 16.5 23.8 24.3 8.5 na 8.8 Adjusted (1) Net income available to common shareholders 955 562 1,517 323 256 (11) 2,085 Total average common equity 11,842 13,460 25,302 5,257 11,786 17,362 59,707 Return on equity (%) 32.0 16.6 23.8 24.4 8.7 na 13.8   Q4-2021 BMO Wealth BMO Capital Corporate (Canadian $ in millions, except as noted) Canadian P&C U.S. P&C Total P&C Management Markets  Services Total Bank Reported Net income available to common shareholders 922 499 1,421 343 522 (186) 2,100 Total average common equity 11,162 13,391 24,553 5,640 10,782 11,138 52,113 Return on equity (%) 32.8 14.8.....»»

U.S. lawmakers are on the cusp of adopting the most far-reaching affordable housing legislation the nation has seen in decades. Expanded tax credits under a pending budget agreement could pave the way to creating thousands of additional rental units for households with low and median incomes, helping to address a housing supply gap that has […] U.S. lawmakers are on the cusp of adopting the most far-reaching affordable housing legislation the nation has seen in decades. Expanded tax credits under a pending budget agreement could pave the way to creating thousands of additional rental units for households with low and median incomes, helping to address a housing supply gap that has dashed hopes and opportunities for a large and growing segment of the population. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Affordable housing initiatives expected to soon become law along with the 2022 federal budget range from an expansion of low-income housing tax credit (LIHTC) allocations to states to the creation of several new tax credits to incentivize development and rehabilitation of affordable housing in a wider range of product types and income levels. Those could include a middle-income housing tax credit to promote affordable rentals for families with incomes closer to their local median but who struggle to afford median rents. A neighborhood homes tax credit would target development and rehabilitation of affordable single-family homes. Existing tax credits for preserving historic structures, investments in new markets and for renewable and clean energy may also expand. Discussion of these much-needed improvements to community development and housing programs has been overshadowed in the news by recent coverage of delayed votes and ongoing intraparty negotiations on a $1.2 trillion infrastructure bill and a social spending measure that has yet to be finalized. On Oct. 1, President Biden urged Democrats to scale back the reconciliation plan, which would include boost to affordable housing, from $3.5 trillion to about $2 trillion to gain support for its passage from the party's moderate members. On its surface, the ongoing drama on Capitol Hill could appear discouraging for proponents of housing reform, who in recent years have seen promising efforts to expand the LIHTC and other programs fail to reach decisive votes. The good news is that many of those earlier provisions influenced the budget reconciliation legislation still under discussion, and both the White House and the majority Democratic Party have made passage of the social spending package a priority. What is more, the current debate is focused on spending, while the federal approach to promoting affordable housing is chiefly through tax credits rather than an allocation from the treasury. Factor in strong bipartisan support for addressing housing affordability, and the housing and community development initiatives currently on the table have excellent prospects to take effect with a 2022 budget accord. These improvements could collectively channel billions of dollars to the creation of affordable housing. It could not come at a time of greater need. Affordability Grows More Elusive For decades, the United States has struggled to bring safe residential rental units within the financial reach of low-income households. Despite limited success since the LIHTC's introduction in 1986, affordability remains elusive for a growing segment of the population. Ideally, a household should spend no more than 30 percent of its income on housing. The White House estimates that before the pandemic, 11 million families or nearly a quarter of U.S. renters paid more than half their income on rent. The ability to lease a home is down 29 percent from a peak in 2001, according to the HUD Rental Affordability Index. In the first quarter of this year the index reached a new low of 99.7. That is a heartbreaking milestone, because any value below 100 on the index means a renter household with median income will not qualify for median-priced rent. The lack of available housing affects not only the jobless but also the working class. In many cities, median apartment rents strain the resources of full-time wage earners including service industry workers, skilled laborers and even civil servants.  Rising costs for land, materials and construction have simply made it financially infeasible to develop multifamily product that is affordable to working-class families without some form of incentives to mitigate development costs. Turning The Tide While authors of the reconciliation legislation have not yet published a draft, the plan is expected to draw housing priorities from recent proposals including the Biden administration's Build Back Better Agenda, the Affordable Housing Credit Improvement Act of 2021, and three bills submitted in July by Rep. Maxine Waters, a California Democrat who chairs the House Financial Services Committee. Another bill, the Decent, Affordable, Safe Housing for All Act (DASH), was introduced in September by Sen. Ron Wyden, D-Oregon, who chairs the Senate Finance Committee. These measures vary in their approaches, but all reflect a sense of urgency and the conviction that the nation must do more to address increasing homelessness and an intensifying crisis in the availability and affordability of housing. And they provide concrete steps to make a greater impact on these pressing issues. Authors of the Affordable Housing Credit Improvement Act, for example, estimate their plan would generate 2 million new affordable housing units over the next decade. By way of comparison, the LIHTC program currently produces a little more than 100,000 low-income units per year. Currently the LIHTC program produces a little more than 100,000 low-income housing units per year, and those units serve households making at or below 50 percent or 60 percent of local median income. Sweeping changes are likely under reconciliation legislation for the Fiscal 2022 budget, however. Because both congressional houses have approved a budget resolution, lawmakers will be able to include these or other housing objectives along with other provisions as they reconcile the House and Senate versions. The LIHTC program has historically enjoyed strong bipartisan support as a way to stimulate community investment without direct federal funding, so its proposed expansion is unlikely to draw opposition. Whatever the housing initiatives ultimately adopted along with reconciliation legislation, new and expanding programs will translate into additional private and institutional capital flowing into communities. As they meet urgent needs for housing, projects made possible through tax credits will also create jobs and opportunities associated with the development, design, finance, construction, and management of affordable residential properties. Developers may find that obtaining development approvals for affordable housing becomes easier when they can target a wider variety of income levels. Real estate developers and investment funds will have more freedom to build tax-credit housing portfolios that appeal to a variety of investors, increasing the geographic diversity of properties within markets. The new investment vehicles that emerge to propel affordable housing initiatives will likely find an attentive and growing investor base. Given the Biden administration's efforts to increase taxation of capital gains and limit tax-deferred exchanges under Section 1031 of the IRS code, many individuals and institutions looking for ways to reduce their tax exposure may gravitate to tax-credit bonds. What is certain is that housing affordability is a formidable national challenge that supersedes partisanship, and the expected changes to the LIHTC program have the potential to bring tangible improvements for American households. The finance and real estate industries should prepare now for the crucial roles they will play in supporting and carrying out this noble effort. Article By Robert Walton, Managing Director of Credit and Asset Management, Trimont About the Author Robert Walton is Managing Director of Credit and Asset Managing at Trimont Real Estate Advisors, a globally integrated loan servicer and credit manager to the commercial real estate finance industry. Updated on Dec 27, 2021, 2:43 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

The Upshots Of The New Housing Bubble Fiasco Authored by MN Gordon via EconomicPrism.com, “The free market for all intents and purposes is dead in America.” - Senator Jim Bunning, September 19, 2008 House Prices Go Vertical The epic housing bubble and bust in the mid-to-late-2000s was dreadfully disruptive for many Americans.  Some never recovered.  Now the central planners have done it again… On Tuesday, the Federal Housing Finance Agency (FHFA) released its U.S. House Price Index (HPI) for September.  According to the FHFA HPI, U.S. house prices rose 18.5 percent from the third quarter of 2020 to the third quarter of 2021. By comparison, consumer prices have increased 6.2 from a year ago.  That’s running hot!  But 6.2 percent consumer price inflation is nothing.  House prices have inflated nearly 3 times as much over this same period. Here in the Los Angeles Basin, for example, things are so out of whack you have to be rich to afford a 1,200 square foot fixer upper in a modest area.  Yet the clever fellows in Washington have just the solution. Massive house price inflation has prompted the FHFA, and the government sponsored enterprises (GSEs) it regulates, Fannie Mae and Freddie Mac, to jack up the limits of government backed loans to nearly a million bucks in some areas. Specifically, the baseline conforming loan limit for 2022 will be $647,000, up nearly $100,000 from last year.  In higher cost areas, conforming loans are 150 percent of baseline – or $970,800.  What gives? If you recall, ultra-low interest rates courtesy of the Federal Reserve following the dot com bubble and bust provided the initial gas for the 2000s housing bubble.  However, the housing bubble was really inflated by Fannie Mae and Freddie Mac.  The GSEs relaxed lending standards and, thus, funneled a seemingly endless supply of credit to the mortgage market. The stated objective of these GSEs was to make housing affordable for Americans.  But their efforts did the exact opposite. The GSEs puffed up the housing bubble to a place where average Americans had no hope of ever being able to afford a place of their own.  Then, when the pool of suckers dried up, about the time rampant fraud and abuse cracked the credit market, people got destroyed. If you also recall, it wasn’t until credit markets froze over like the Alaskan tundra in late 2008 that the Fed first executed the radical monetary policies of quantitative easing (QE).  To be clear, QE had nothing to do with the last housing bubble; ultra-low interest rates and GSE intervention did the trick on their own.  QE came after. But now, in the current housing bubble incarnation, the Fed’s been buying $40 billion in mortgage backed securities per month since June 2020.  Is there any question why house prices have gone vertical over this time? The Fed is now tapering back its mortgage and treasury purchases.  This comes too little too late.  And with Fannie Mae and Freddie Mac now jacking up their conforming loan limits, house prices could really jump off the charts. We’ll have more on the current intervention efforts of these GSEs in just a moment.  But first, to fully appreciate what they are up to, we must revisit the not too distant past… Socialized Losses A moral hazard is the idea that a person or party shielded from risk will behave differently than if they were fully exposed to the risk.  A person who has automobile theft insurance, for instance, may be less careful about securing their car because the financial consequence of a stolen car would be endured by the insurance company. Financial bail-outs, of both lenders and borrowers, by governments, central bankers, or other institutions, produce moral hazards; they encourage risky lending and risky speculation in the future because borrowers and lenders believe they will not carry the full burden of losses. Do you remember the Savings and Loan crisis of the 1980s? The U.S. Government picked up the tab –  about $125 billion (a hefty amount at the time) – when over 1,000 savings and loan institutions failed.  What you may not know is the seeds of crisis were propagated by Franklin Delano Roosevelt during the Great Depression when he established the Federal Deposit Insurance Company (FDIC) and the Federal Saving and Loan Insurance Company (FSLIC). From then on, borrowers and bank lenders no longer had concern for losses – for they would be covered by the government.  The Savings and Loan crisis confirmed this, and further propagated the moral hazard culminating in the subprime lending meltdown. Obama’s big bank bailout of 2008-09 socialized the losses.  Then the Fed’s QE and ultra-low interest rates furthered the moral hazard.  These are now the origins of the current housing and mortgage market bubble…and future bust. By guaranteeing mortgage securities up to nearly $1 million in some areas the government encourages risky lending by banks and speculation by investors.  Banks are less prudent about who they loan money to because the loans will be securitized and sold to investors.  Similarly, investors speculate on these securities because they are guaranteed by the government. Once again, the government is promoting a “heads, I win…tails, you lose” milieu where banks and investors reap big profits taking on big risks and where the losses are socialized by tax payers.  It also sets the stage for massive grift… The Anatomy of a Swindler FDR – the thirty-second U.S. President – was responsible for setting up Fannie Mae.  But another FDR – Franklin Delano Raines – was responsible for running it into the ground. The son of a Seattle janitor, FDR grew up knowing what it was like to have not.  He concluded at a young age it was better to have. Yet it was while mixing with Ivy Leaguers at Harvard University and Harvard Law School where he really refined his thinking.  He came to believe the government should be responsible for supplying the have nots with tax payer sponsored philanthropy. FDR came out of school with the wide eyed ambition of a lab rat.  He was determined to sniff out his way to wealth…and once and for all, find that ever illusive cheese at the end of the maze. The first corner he peered around smelled remarkably prospective.  But he came up empty.  Three years in the Carter Administration didn’t offer the compensation he’d dreamed of. To have was better, remember.  The next corner FDR peered around was much more lucrative.  He did an 11 year stint at an investment bank. But it was in 1991 when FDR got his big break.  For it was then that he became Fannie Mae’s Vice Chairman.  And it was then that he garnered hands on access to muck with the lives of millions.  Still, he wasn’t quite sure how to go about it. To learn such tips and tricks, FDR studied one of the true masters of our time…Bill Clinton.  From 1996 to 1998, he was the Clinton Administration’s Director of the U.S. Office of Management and Budget.  There he discovered you must have a vision…a mission…a delusion that is so grand and so absurd, the world will love you for it. One evening, in the autumn of 1997, it came to him in a flash.  Staring deep into the pot of his chicken soup, just as it approached boil, he hallucinated an image of a house.  Suddenly a small part of the grey matter of his brain opened up… For where Hoover had foreseen a chicken in every pot and a car in every garage, FDR now foresaw much, much more.  A chicken and a car were not good enough.  In FDR’s world, everyone should also get a house with a pot to cook the chicken in and a garage to park the car in.  And he knew just how to give it to them. Yet best of all, FDR also knew he could become remarkably rich pawning houses to the downtrodden.  So in 1999, he returned to Fannie Mae as CEO and got to work on his master plan… Fraudulent Earnings Statements It was a pretty simple four point plan… If low interest rates make housing more affordable, then even lower interest rates make housing even more affordable. So, too, if 20 percent down put housing out of reach for some, then 10 percent down was better. And zero percent down was optimal. Similarly, if a borrower’s credit score doesn’t meet the requisite credit standard, just relax the standard. And lastly, if a borrower’s income is too low to qualify for a loan, just let them state what ever income it is that they must have to get the loan. With the ground rules in place by 1999, FDR began the pilot program that would ultimately ruin the finances of the western world.  It involved issuing bank loans to low to moderate income earners, and to ease credit requirements on loans that Fannie Mae purchased from banks. FDR promoted the program stating that it would allow consumers who were, “A notch below what our current underwriting has required,” get a home. Here’s how it worked… Banks made loans to people to buy houses they really couldn’t afford.  Fannie Mae bought the bad loans and bundled them together with good ones as mortgage backed securities.  Wall Street then bought these mortgage backed securities, rated them AAA, and then sold them the world over…taking a nice cut for their services. FDR had a heavy hand in the action too.  By overstating earnings, and shifting losses, he pocketed the large bonuses a janitor’s son could only dream of.  According to a September 19, 2008 article by Jonah Goldberg, titled, Washington Brewed the Poison, FDR “…made $52 million of his $90 million compensation package thanks in part to fraudulent earnings statements.” Efforts to reform the scheme were stopped by the Democrats in Congress, who weren’t ready to give up the gravy train of money that flowed from Fannie Mae to their campaigns.   “Barack Obama, the Senate’s second-greatest recipient of donations from Fannie and Freddie after [Christopher] Dodd, did nothing.” Now, just 13 years later, Fannie Mae and Freddie Mac are at it again… Here We Go Again On June 23, 2021, in Collins v. Yellen, the Supreme Court decided the President could remove the FHFA director without cause.  The next day, President Biden replaced Trump’s director of the FHFA, Mark Calabria, with a temporary appointment. FHFA, as noted above, regulates government-backed housing lenders Fannie Mae and Freddie Mac.  Prior to getting his pink slip, Calabria had been working to reduce the harm these GSEs could do to the economy. Biden’s replacement immediately reversed course, reinstituting the social engineering policies that brought down the housing market in 2008.  Acting Director Sandra Thomas: “There is a widespread lack of affordable housing and access to credit, especially in communities of color.  It is FHFA’s duty through our regulated entities to ensure that all Americans have equal access to safe, decent, and affordable housing.”  One could mistake these words for those of Franklin Delano Raines.  Certainly, the madness it fosters will be Raines like.  The Wall Street Journal reports: “The problem the [Biden] administration sees is that housing and rental prices are too high.  The fact that the administration’s own policies have caused an inflationary trend in housing along with food, energy and gasoline, among others, is no deterrent. “[…] the administration wants people who would otherwise rent to become homeowners.  These young families would take on the risk and the burden of a mortgage, which the government—through Fannie Mae and Freddie Mac—will make much cheaper.  Investors, of course, will buy these risky mortgages from Fannie and Freddie because they are backed by the government.  “Here we go again.  The only difference between what the administration is proposing, and what brought about the 2008 financial crisis is that the economy is already in an inflationary period, induced by the administration’s other policies.  This will make homeownership even riskier.  In addition, Fannie and Freddie will be buying mortgages of up to $1 million, instead of $450,000. “But the government’s lower underwriting standards drive down standards for private lenders, too.  Banks and other mortgage lenders—if they want to stay in the business—have to offer their mortgages on similar terms.  People who own homes then dive into the market to take advantage of the low down payments, and housing prices rise even faster. This encourages cash-out mortgages, in which homeowners reduce the equity in their homes, sometimes to buy a boat.  “The process goes on for years until prices are so high that sales growth falls and homeowners can’t sell their homes to pay off their mortgages.  Housing prices then collapse, mortgages go unpaid.  Banks, other lenders, and even Fannie and Freddie incur losses and another financial crisis begins.” But wait, there’s more… The Upshots of the New Housing Bubble Fiasco House prices are already in bubble territory in many places across the county.  At these prices, who’s buying? Wall Street.  Pension funds.  BlackRock Inc.  And many, many others… Institutional investors have securitized the residential real estate market.  Hundreds of firms are competing with regular house buyers.  They’re also bidding up house prices. Invitation Homes, for example, is a publicly traded company that was spun off from BlackRock in 2017.  Invitation Homes gets billion dollar loans at interest rates around 1.4 percent – about half the rate of what regular house buyers get.  Often times they just pay in cash. According to a recent SEC disclosure, Invitation Homes’ portfolio of houses is worth $16 billion.  The company collects about $1.9 billion in rent per year.  Thus it takes only about eight years of rental payments to pay back a typical house that Invitation Homes has bought. Invitation Homes now owns over 80,000 rental houses and has a market capitalization of $24.6 billion.  The company has deep pockets.  Regular house buyers cannot compete. No doubt, this is an ugly situation.  The ugliness hasn’t been created by institutional investors.  They’re merely scratching for yield in a world where capital markets have been destroyed by the Fed.  Of course, there’s no situation that’s too ugly for Washington to not make even uglier. According to a recent White House fact sheet: “As supply constraints have intensified, large investors have stepped up their real-estate purchases, including of single-family homes in urban and suburban areas. […].  Large investor purchases of single-family homes and conversion into rental properties speeds the transition of neighborhoods from homeownership to rental and drives up home prices for lower cost homes, making it harder for aspiring first-time and first-generation home buyers, among others, to buy a home. […] “President Biden is committed to using every tool available in government to produce more affordable housing supply as quickly as possible, and to make supply available to families in need of affordable, quality housing – rather than to large investors.” This logic validates FHFA jacking up the limits for conforming loans.  Indeed, the clever fellows in Washington want to make housing more affordable by allowing more and more people to take on massive subsidized mortgages.  The logic makes perfect sense…so long as you have the intelligence of a box of rocks. We all know where this goes.  We all know where this leads. First time house buyers, competing with institutional investors, will use the government’s relaxed lending standards to chase prices higher and higher.  Then, once the mortgage market is sufficiently riddled with fraud and corruption and tens of millions of Americans are tied into loans they cannot repay, the impossible will happen… House prices will go down! …along with the hopes and dreams of those that got sucked into this wickedness. Sandra Thomas will be flummoxed.  Congress will socialize the losses once again.  And populace rage will be channeled into some new Occupy Wall Street movement.  Then things will really get ugly. These – and many more – are the upshots of the new housing bubble fiasco. Tyler Durden Sat, 12/04/2021 - 09:20.....»»

The Great Credit Unwind & Powell's Hidden Pivot Authored by Alasdair Macleod via GoldMoney.com, We are all now aware that the global banking system is extremely fragile. Driving bank failures is contracting credit, which in turn drives interest rates higher. Though it is not generally appreciated, central banks have failed to suppress them. Some regional banks have failed in the US and the run on Credit Suisse’s deposits has forced the Swiss authorities into forcing a reluctant rescue by UBS. Undoubtedly, as the great credit unwind plays out, there will be more rescues to come. In this, the earliest stages of a banking crisis, some questions are being answered. We can probably rule out bail-ins in favour of bail outs, and we can assume that nearly all banks will be rescued — they must be in order to prevent systemic contagion.  In this article I quantify the position of the global systemically important banks (the G-SIBs) and point out that the central banks which are meant to backstop them are themselves bankrupt — or rather they would be properly accounted for.  Because even a minor failure in the banking system could undermine the entire global banking system, the much heralded pivot is now here, but not in plain sight. Because central banks have lost control over interest rates, the focus on preserving the financial markets underpinning the banking system has shifted to supressing bond yields. This is why the Fed has introduced its Bank Term Funding Programme, likely to be copied in other jurisdictions.  It is Powell’s hidden pivot — his line in the sand. But it is the last desperate throw of the dice and depends entirely on inflation being transient and interest rates not rising much more.  The price of even a successful preservation of the banking system is the destruction of fiat currencies, because the bigger picture is still of the greatest credit bubble in history unwinding. And that process has only recently started... The great unwind accelerates  Now that everyone in finance knows that there is a banking crisis, cynicism prevails. When a central banker or treasury minister tries to reassure the public, it is disbelieved. The risk to an extremely fragile global banking system is that if disbelief in public statements spreads from financial sceptics to the wider public, the system is doomed. All credit is based on confidence and confidence alone. It is still too early to say that confidence has been irretrievably shaken. But last weekend, UBS was unwillingly forced by the Swiss authorities into taking over Credit Suisse on a share swap, which valued the latter’s shares at about 70 centimes. That put Credit Suisse’s shares on a discount to book value of 94%. Admittedly, this figure is unreliable when deposits are running out of the door and the full value of foreign exchange derivatives are not accounted for. But it does raise a question over the valuations of all the other global systemically important European banks. And why stop there — the G-SIBs have all taken in each other’s laundry, so if one fails so might all the rest. Perhaps they should all be similarly valued. Presumably, in their groupthink the central bankers represented by the three wise monkeys in the illustration above never thought it would come to this. After all, their regulators have frequently conducted stress tests and all major banks routinely pass them with flying colours. But as Kevin Dowd, Professor of Finance and Economics at Durham University put it in 2016 in one of his several critical reviews of bank regulation,  “The purpose of the stress testing programme should be to highlight the vulnerability of our banking system and the need to rebuild it. Instead, it has achieved the exact opposite, portraying a weak banking system as strong. This is like having a ship radar system that cannot detect an iceberg in plain view. “As the EU banking system goes into a renewed crisis, the UK banking system is in no fit state to withstand the storm. Once contagion spreads from Italy to Germany and then to the UK, we will have a new banking crisis but on a much grander scale than 2007-08. “The Bank of England is asleep at the wheel again, and we will be back to beleaguered banksters begging for bailouts – and the taxpayer will be ripped off yet again, but bigger this time." Unfortunately, it is Professor Dowd’s analysis and conclusion that have stood the test of time. And nothing, repeat nothing, has been done to alter this situation. Only last Monday, the President of the ECB proved this point by releasing the following official statement: “I welcome the swift action and the decisions taken by the Swiss authorities. They are instrumental for restoring orderly market conditions and ensuring financial stability. The euro area banking sector is resilient, with strong capital and liquidity positions. In any case, our policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy.” (italics are my emphasis)[ii]  The group-thinking on stress testing is based on commonly agreed parameters between central banks and regulators for constructing stress models, and their desire to be seen discharging their duties rather than the actuality. That being the case, what we have seen in Switzerland which led to Credit Suisse being valued at only 6% of its book value is an important message not just for European bank regulation, but elsewhere as well. Whatever their mollifying statements, the central bank groupthinkers must now be very worried. But they appear to lack coordination. The Swiss National Bank decided that as part of bailing out Credit Suisse, it would bail in higher ranking bond holders, writing off Sf17bn. That shareholders should get something while senior creditors get nothing is a travesty of company law. Following the market’s reaction, it has been swiftly denounced by regulators in Europe and London, only days after the ECB President issued the formal statement above, extoling the Swiss authorities for their actions. The consequences of the Swiss National Bank writing off senior creditors are likely not just to impose losses on other banks which are in a fragile state themselves and can ill afford their senior debt to be traduced in this way, but to make future bond financing of banks more difficult. Furthermore, banks, insurance companies, and pension funds will be reassessing their risk exposure to all Swiss franc denominated bonds, even to the extent of impacting UBS, Credit Suisse’s rescuer.  The legal wrangling and rating downgrades probably start here, and no one comes out of it without damage to their reputations. And as already noted above, credit depends entirely on confidence. One can only assume that this will get central banks and their regulators to drop the whole bail-in concept in their attempts to ensure the survival of their commercial banking systems. Perhaps the Swiss should backtrack on their decision to save a paltry Sf17bn. We can understand and accept that Swiss banks get into trouble. But the Swiss authorities’ clumsy handling of the Credit Suisse crisis is risking its national reputation for financial probity and stability. The broader problem is that confidence in banking is beginning to be publicly undermined. It is not just a matter of identifying the weakest links, but it is becoming a systemic problem of the widest proportions. The illusion of control by central banks is being shattered by the great credit unwind. Consequently, the policy priority is pivoting from the inflation mandate to pure survival. And as we have seen illustrated by the Swiss authorities, the scope for error is chasmic.  The G-SIB mess Bail-in legislation was not the only G-20 response to the Lehman crisis. The Basel Committee’s third iteration of its regulations, still not fully implemented, was the Bank for International Settlement’s contribution to post-Lehman banking reform. The designation of a new category of bank, the global systemically important bank, or G-SIB, was created. G-SIBs are required to have additional capital buffers to address the systemic risks they are exposed to from international counterparties, relative to domestic regional banks. Here are some relevant facts. At current exchange rates, total G-SIB balance sheet assets are recorded at $63,978 billion. But this is supported by only $4,444 billions of balance sheet equity, giving a ratio of assets to equity of 14.4 times. But this is not evenly spread, with the Eurozone’s seven G-SIBs averaging 19.7 times, and Japan’s three G-SIBs at 23 times. At the lower end of the scale, the US’s eight G-SIBs average 11.4 times and China’s four banks 12.0 times. All these ratios translate into unacceptable leverage when credit unwinds and interest rates increase, threatening to trigger rapidly rising levels of non-performing loans. This is at least partially recognised in stock markets, where G-SIB shares commonly stand at significant discounts to book value. Only four out of the twenty-nine listed G-SIBs have price to book ratios greater than one. Based on last Monday’s share prices, the average price to book for Eurozone G-SIBs is a discount of 56%, for Japan 47%, for China 54%, and for the US it is only 7% bolstered by JPMorgan Chase and Morgan Stanley being the only two US banks trading at a reasonable premium to book value. There is considerable variance within these figures, but the message from the markets is clear: whatever the regulators and central banks say and despite their extra capital buffers, G-SIBs are still a risky investment. These statistics do not tell the whole story. As we saw with the failure of Silicon Valley Bank, it was using widely adopted accounting methods to conceal losses on its bond investments. As of Dec. 31, 2022, SVB had about $120 billion in investments, primarily high quality bonds, such as US Treasuries and agency debt. According to its 10-K filed in February. the bank only had $74 billion of loans to borrowers. Therefore, its investments were significantly larger than its loans. Of the $120 billion in investments, $91 billion were classified as “held to maturity” investments and were not reported at fair value in each reporting period. Instead, they were reported at amortized cost, net of any reserves for credit losses in accordance with accounting convention. SVB originally bought its bonds when the yield curve was positive. That is to say, the cost of short-term funding was less than the yield on the longer maturities which SVB bought. But when the Fed increased its fund rate from the zero bound, the yield curve turned sharply negative with two consequences for SVB. First, its short-term funding costs began to rise, and secondly the capital value of the bonds began to fall. Its shareholders’ capital on the balance sheet was soon wiped out, and belated attempts to rectify the situation simply broadcast SVB’s problems, leading to its demise. It is a problem which is not confined to SVB. There will be other regional banks in the US and elsewhere which have fallen into the same trap. And it won’t be a problem restricted to regional banks. One can speculate that the incentive to buy longer maturity bonds than banks normally hold on their balance sheets was stronger in jurisdictions which imposed negative interest rates. A Eurozone or Japanese bank has had a zero or even slightly negative cost of short-term funding in their respective money markets, encouraging them to buy longer-dated government bonds. And like SVB, they will have been whipsawed by sharply rising short-term rates. This leads us to speculate about how much of similar losses may be hidden in the entire G-SIB system. Like SVB, have they been sufficient to wipe out the notional shareholders’ capital of all the G-SIBs, which we know to be $4.444 trillion? But this problem is not even the mother of all elephants in the room — that award goes to derivatives. The G-SIBs’ participation in regulated futures and over-the-counter derivatives is valued on their balance sheets at net mark-to-market values, which are very small fractions of their nominal values. Nevertheless, regulated futures are credit commitments for the full amounts, and should be valued as such. Options which have been sold are similarly commitments for their exercisable amounts, though bought options are not. The amounts of open interest involved at end-2022 are assessed by the Bank for International Settlements at $36,630bn for all regulated futures, and a further $43,182bn in options. These are just one side of open interest, the majority of which is bank exposure as market makers, traders, and banks acting as principals for their customers. In OTC derivatives, foreign exchange and commodity contracts are liabilities for their full amounts, while credit swaps are not.  At end-June 2022, foreign exchange contracts amounted to $109,587bn with a further $12,951bn in options. Commodity contracts add a further $2,341bn.[iii] We can exclude the large category of credit default swaps, because their gross values are purely notional. These exposures represent only one side of credit commitments, the other being distributed among non-bank financial institutions, hedgers, speculators, and other banks as well. From the G-SIBs’ collective balance sheet perspective, they should all be included at full value.  Last December, Claudio Borio, Head of the BIS’s Monetary and Economic Department even wrote a paper on this topic. Borio stated that “Foreign exchange swap positions point to over $80 trillion of hidden US dollar debt [part of the $109.587 trillion above], reported off-balance sheet”. And “The volume of daily foreign exchange turnover subject to settlement risk remains stubbornly high despite mechanisms to mitigate such risks”. In effect, Borio confirmed that for a true appreciation of global banking risk, gross OTC values for foreign exchange contracts should be recorded on both sides of bank balance sheets, and not just as net mark-to-market contract values. Between regulated and unregulated derivatives, we are therefore staring down the barrel of a further $210 trillion of balance sheet liabilities, to be added to the $64 trillion of officially recorded total G-SIB balance sheets, all supported by only $4.444 trillion of shareholder’s funds. And while the US G-SIBs appear to be less leveraged than their opposite numbers in the Eurozone and Japan, it should be noted that as Borio points out the large majority of OTC exposure is in dollar-denominated contracts, for which the US G-SIBs are the counterparties. If only one G-SIB fails, its counterparty risks could easily undermine all the others. As Borio pointed out, settlement risk remains stubbornly high. It explains why the Fed was ready to come up so swiftly with swap lines for the Swiss National Bank to aid it in its attempt to support Credit Suisse. And it allows us to draw a further conclusion: credit expansion at the central bank level to ensure the global financial system’s survival will place the greatest burden on the dollar, being the currency in which most of these derivative obligations are settled. Can central banks actually handle a credit crisis? Having invested in government and other bonds at the top of the market — a top created by them to be far higher than they would otherwise have been — central banks are now demonstrably bankrupt unless they recapitalise themselves. For all of them, excepting the ECB, it is theoretically easy to do but best done before commercial banks need their support.  The simplest way of recapitalising a central bank is by expanding its balance sheet assets in favour of equity instead of other liabilities. Delaying addressing the same problems faced by Silicon Valley Bank on the basis they need not doesn’t serve central banks well. The losses can be assumed to continue to accumulate as commercial bank credit continues to contract, because it is credit contraction which drives up the true level of interest rates. Already, the Bank of Japan has been accumulating financial assets at negative yields, so that even with a small rise on yields, its losses from last year are over four thousand times its balance sheet capital of only 100 million yen. Sooner or later, its credibility is bound to be questioned if it fails to address this issue. But of all the central banks, the ECB is probably the most difficult to recapitalise. The ECB’s shareholders are not a single state, but the national central banks of the twenty member nations (including Croatia which joined the euro system in January). Unfortunately, with few exceptions the NCBs in the euro system are also all in need of recapitalisation. Imagine the legislative hurdles. The Bundesbank, let’s say, presents a case to the Bundestag to pass enabling legislation to permit it to recapitalise itself and to subscribe to more capital in the ECB on the basis of its share of the ECB’s equity — the capital key — to restore it to solvency as well. One can imagine finance ministers being persuaded that there is no alternative to the proposal, but then it will be noticed by pedestrian politicians that the Bundesbank is owed over €1.1 trillion through the TARGET2 system. Surely, it will almost certainly be argued, if those liabilities were paid to the Bundesbank, there would be no need for it to recapitalise itself. If only it were so simple. But clearly, it is not in the Bundesbank’s interest to involve politicians in monetary affairs. The public debate would risk spiralling out of control, with possibly fatal consequences for the entire euro system. It would be a row at the worst possible time. And with twenty NCB shareholders facing similar hurdles, their contributions to refinancing the ECB requires unanimous consent for proportional subscriptions in accordance with their capital keys. Besides the confusion over bail-ins and bail outs which we can now hope has been settled, there still remains a huge question mark over whether the central banks have the wherewithal to discharge the potentially enormous burden of bail out commitments. In any event, it will need massive quantities of additional central bank credit in all relevant currencies to backstop the system. The destruction to balance sheets at both central and commercial bank levels reinforces the point, that central banks are likely to move their attention away from short-term interest rates over which they have lost control to bond yields which they can still influence. Different versions of the Fed’s Bank Term Funding Programme (more on which follows) are likely to be devised. It is becoming a hidden pivot. The hidden pivot In a classic banking crisis, bank balance sheets become overextended and bankers become cautious in their lending, restricting the expansion of credit. The credit shortage leads to higher interest rates for the few borrowers deemed creditworthy and able to pay them. Both producers and consumers are affected. The shortage of credit and higher borrowing costs result in businesses failing, and a slump in economic activity follows. This leads in turn to the problem identified by Irving Fisher, which he described as his debt-deflation theory.[iv] According to Fisher, when the cycle of bank lending turns down and higher interest rates and falling collateral values follow, it forces banks to call in loans, liquidating collateral and driving colateral values down further. The self-feeding nature of this phenomenon deepens the slump and leads to banking failures.  Fisher’s paper was published in the wake of record numbers of bank failures in America between 1930—1933. And it should also be noted that it has informed every state economist ever since. The fear of a slump exacerbated by collateral liquidation is in the back of every mainstream economist’s mind. But so far, there has been not much evidence of credit shortages undermining the non-financial economy. Presumably, the downturns in credit expansion reflected in broad money supply statistics have reflected banks withdrawing from financial activities, so the hit to non-financial activity is yet to come. But the issue of falling collateral values identified by Fisher has resurfaced in problems created by policy makers themselves, because the sudden rise in interest rates has had the same effect. This is why we are now witnessing central banks pivoting from control of inflation to the preservation of the global commercial banking system. The danger of systemic failure is more hardwired into central bankers’ DNA than that of inflation. And frankly, they have proved pretty clueless on interest rate management anyway. They are set to do “whatever it takes” to preserve both financial market values and the status quo. But things have moved on from Mario Draghi’s famous aphorism. No longer just a finger-wagging threat, whatever it takes is likely to end up undermining the purchasing power of currencies. Whatever it takes is now an open-ended commitment to whatever it costs. There can be no question that pivoting from fear of inflation to fear of a banking crisis undermines currencies. But central bankers appear to find it difficult to concede it publicly. The Fed’s solution is to offer to take in all US Treasuries, agency debt, mortgage-backed securities, and “other qualifying assets as collateral” at par with no haircut against cash liquidity for one year. Furthermore, with foreigners no longer net buyers of Treasuries, there is a funding problem to address. The Fed stated that its new bank term funding programme (BTFP)  “…will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors. This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy. The Federal Reserve is prepared to address any liquidity pressures that may arise.” It is a policy that might have been scripted by Irving Fisher’s ghost. The one-year term of the facility shows that the Fed regards this as a temporary problem to be reversed when the situation improves, and inflation returns towards its two per cent target. Yes, all the forecasts are still for inflation to be transient — only it is taking just a little longer than originally thought. The BTFP is QE by another name, injecting credit into the banks —admitted in the Fed’s statement above. But we have seen that the Fed’s few attempts to reverse QE have always threatened the credit bubble. As soon as bankers realise that because of the history of quantitative tightening, which is what the ending of the facility will amount to, the loan terms can be regarded by them as perpetual. Any bond standing at a discount can be collateralised with the Fed at final redemption value, notwithstanding its current market value at a discount. Already, this has driven the 10-year US Treasury yield below its major moving averages, indicating further falls in yield are to come. Clearly, this is a facility which is likely to lead to a massive and additional expansion of the Fed’s balance sheet. But by putting a one-year loan term on this facility, the Fed will feel justified in disregarding the automatic loss the BTFP facility creates on the basis that the bonds bought will simply returned to the sellers who will repay the money borrowed. It will be treated like a long-term repurchase agreement. While we know that realistically this repo will turn out to be perpetual, purchases in the market by banks to benefit from the BTFP facility allows the Fed to reduce its losses on its existing bond holdings as their yields fall further. And importantly, the government’s deficit will continue to be funded. The banking crisis similarly exists in other jurisdictions, so it is likely that the other major central banks will introduce their own versions of the Fed’s BTFP. All that’s required is an unhealthy dose of group-thinking that the inflation monster will retreat into its cave, and that therefore the outlook for bond yields is for them to fall. Driving this hope is the benefit to central bank balance sheets, which if their assets were properly valued currently puts them all deeply into negative equity.[vi] If it works, the pressure will diminish on banks with bonds shown as held to maturity and the situation might become manageable. But there is still the ongoing problem of credit contraction, which is not going to go away. Can the Fed suppress bond yields by much when the real cost of borrowing, which is driven by credit contraction, continues to rise? The Fed’s BTFP looks like its final gamble. The refuge from this credit crisis is only real money — gold. This article attempts to explain the true state of global credit. Everything appeared to be fine, until the Fed realised it was losing control over interest rates and had to raise them from the zero bound. This was followed by other central banks, with the lone exception of the Bank of Japan. Consequently, the global credit bubble which had been inflating financial asset values over the last forty years, has now burst. Anyone who dispassionately analyses credit conditions must come to this conclusion. Furthermore, far from being an unexpected shock, we are seeing just the start of a great unwind — a great unwind which will continue to impose mounting strains on the global banking system. Even at the first hurdle, it has become clear that the world’s leading central banks in their dollar-based credit system will do whatever they can to preserve it. This is as expected, but the consequences are that the dollar’s credibility as credit will continue to be undermined as rescue after rescue proceeds.  First it was a banking crisis, and that is just the beginning of it. Now the Fed is acting to save financial asset values, likely to be followed by the other members of the central banking cabal. Then it will be the non-financial economy, as malinvestments and over-extended consumers are exposed, leading to further banking write-offs. And finally, it will be governments themselves, faced with soaring welfare costs and collapsing tax revenues, exacerbated by foreigners no longer buying Treasuries. There is only one probable outcome: being only credit, national currencies will eventually lose their credibility. The root of credit valuation woes is that one form of credit, being that in the hands of commercial bank creditors, depends for its value on another form of credit, being manifest in bank notes. But unbeknown to most people, a bank note is not money: it is a credit liability of a central bank. An incorporeal form of wealth is wholly dependent upon another. But as we have seen, the rottenness of the credit system is not confined to a few bad apples in the banking system. The entire contents of the credit basket are rotten, from the top down. For individuals, there is only one escape from the inevitable destruction of the value of credit. And that is to get out of the collapsing credit system altogether. The collapse may appear slow today, but at some indefinable stage in the future, it will become sudden.  It won’t be just the sceptics and cynics finding fault in the system, but the general public will lose faith in their currencies. And when they do, the point of no return has been passed. The corporeal, as opposed to incorporeal form of credit is gold. It is credit without any counterparty. It is credit only in the sense that it is the unspent product of labour and profit. This distinction allows us to define gold as the only stable medium of exchange, or true money. Gold has been money since the end of barter. In today’s monetary system, it has been legal money since Roman coin came into existence, which according to the Roman juror Gaius was at the time of the Duodecim Tabularum, the Twelve Tables ratified by the Centuriate Assembly in 449 BC. Credit comes and goes, but gold is there for ever. Tyler Durden Sat, 03/25/2023 - 08:10.....»»

In his podcast addressing the markets today, Louis Navellier offered the following commentary. There were big declines in Treasury yields yesterday. The Fed has to follow market rates longer term, so these big declines in Treasury yields will basically ensure the Fed will not increase rates going forward. The Fed funds rate is currently at […] In his podcast addressing the markets today, Louis Navellier offered the following commentary. There were big declines in Treasury yields yesterday. The Fed has to follow market rates longer term, so these big declines in Treasury yields will basically ensure the Fed will not increase rates going forward. The Fed funds rate is currently at 4.75% which means they are restrictive and over a hundred basis points above short-term treasuries. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more   Unscripted Yellen The thing that's making the market volatile is our treasury secretary. Treasury Secretary  on Thursday tried to correct her previous comments and testified in front of Congress that “Certainly, we would be prepared to take additional actions if warranted.” Unfortunately, Yellen’s comments apparently re-ignited recent banking fears and caused the stock market to sell off, so she is now 2 for 2 in spooking the stock market this week. As a result, I propose that Treasury Secretary Yellen sticks to her prepared testimony since her unscripted comments during Congressional hearings keep getting her in trouble. Powerful Dimon As I've said before, Jamie Dimon of JP Morgan is more powerful than Janet Yellen or Jerome Powell, and he will make sure that no banks default. I think the banking crisis is grossly overblown, but because it has a foreign component to it now, it creates a little bit more uncertainty. Weak Transportation The Commerce Department announced on Friday that durable goods orders declined 1% in February due to a 2.8% decline in transportation orders for autos and commercial airplanes. Excluding transportation, durable goods orders were unchanged. Shipments of durable goods declined 0.6% in February, while unfilled order backlog declined 0.1%. Overall, durable goods have been dragged down by a weak transportation sector, which has declined in three of the past four months. There is no doubt that higher interest rates are now impeding vehicle sales, so hopefully, lower interest rates will help stimulate vehicle sales in the upcoming months. Ford Expects Losses From Its EV Business Ford Motor Co (NYSE:F) on Thursday disclosed that it expects to lose about $3 billion on its electric vehicle (EV) business in 2023. Finance chief John Lawler described Ford’s EV business as essentially a startup inside the 119-year-old company. Then Lawler said, “Startups lose money as they invest in capability, develop knowledge, build volume, and gain share.” Interestingly, Lawler said the Model e-business will gradually erase its losses and achieve an operating profit margin of 8% by the end of 2026. Ford is #2 in U.S. EV sales, so if Ford is struggling to reach profitability, this bodes very poorly for other EV startups like Rivian and Lucid. I stand by my previous statement that Rivian will run out of money later this year and likely go bankrupt. CATL To Become Ford's Primary Battery Supplier In my opinion, China’s CATL will gradually take over Ford as its primary battery supplier. CATL is not the only foreign company taking over major U.S. companies so they can receive money from the Inflation Protection Act to build U.S. factories. South Korean battery giant LG Energy is the primary battery supplier for GM and is building a new U.S. plant.   Virginia-based AES is waiting to be deemed a “U.S. manufacturer” before it can fulfill a $1 billion solar panel order with its Chinese partners since otherwise, it will not qualify for money from the Inflation Protection Act. So essentially, the Inflation Protection Act is “onshoring” U.S. manufacturing, but it is also allowing Chinese and South Korean companies to effectively take over major U.S. companies behind the scenes. Another example of why CATL wants to onshore in the U.S. is that the cheapest Tesla Model 3 has a lithium iron phosphate battery from CATL made in China. As a result, Tesla reportedly informed its employees that its most affordable EV (standard range and rear wheel drive) may lose eligibility for recently revamped U.S. federal tax credits that became effective in 2023 because it utilizes a battery pack made in China. All the other Tesla models utilize lithium-ion batteries made predominately by Panasonic in the U.S. Coffee Beans Two inmates in a Virginia jail used tools made from a toothbrush and a metal object to create a hole in the wall of their cell and escape, only to be found hours later at an IHOP restaurant nearby when other patrons called the police. The sheriff’s office said it is investigating to help prevent further escapes. Source: AP News. See the full story here......»»

If you want to buy a home but the down payment requirements make this seem out of reach, there are more affordable options. Choosing an FHA-approved condo allows you an easier option to buy with lower credit and down payment requirements. Changes to FHA condo approval rules now mean individual units can qualify even if… The post How to Get on the FHA Condo Approval List appeared first on RISMedia......»»

Your chances of approval depend on the lenders requirements and how well you meet them, so applying with little to no preparation risks denial. Experts at Forbes Advisor offer their guidance and the five steps you need to follow to secure a small business loan. Consider Why You Need A Loan There are various types […] Your chances of approval depend on the lenders requirements and how well you meet them, so applying with little to no preparation risks denial. Experts at Forbes Advisor offer their guidance and the five steps you need to follow to secure a small business loan. Consider Why You Need A Loan There are various types of small business loans, some of which will be more suitable based on your financing needs. .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Ray Dalio Series in PDF Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more   For instance, if you require more equipment for your business, such as computers and printers, you can apply for an equipment loan. However, the lender can seize any equipment you finance through the loan if you fail to repay because the asset serves as collateral. Alternatively, you can apply for a working capital loan, which you can use for business operating expenses such as payroll. You can even apply for a microloan if you only need to borrow a small sum. These are just some of the options that you can choose from, so it’s essential to consider what you need most before you start browsing for loans. Evaluate Your Eligibility Your personal and business credit score is one of the main factors lenders will look take into consideration. A higher credit score increases your odds of approval and receiving a low interest rate. Additionally, lenders may require you to pledge collateral, meaning a valuable item like equipment or real estate that the lender can seize if you default on the loan. Lenders also typically require a personal guarantee, which means you legally agree to repay the loan with your personal assets if the business cannot. Lenders also look at the amount of time you’ve spent in business. A traditional bank will typically require two years of operation, but an online lender may accept businesses that have been in business for as short as six months to one year. Annual revenue is another consideration for lenders, so it’s wise to find out their requirements for annual sales, typically $100,000 to $250,000, and then assess your business to see if you qualify. Compare Lending Options Thoroughly research and compare lenders to ensure you find the best business loan. Term loans, microloans, and lines of credit are just some of the loan products that online business loan lenders offer. Requirements for online lenders tend to be less strict than traditional banks, so approval is typically easier. Plus, online lenders may offer funding as fast as the same day you’re approved. Traditional banks offer a lot of the same loans as online lenders, but you may find it more difficult to qualify due to stricter requirements. In some cases, like with a low credit score, you may need a co-signer who will repay the loan if you fail to do so. However, you may land lower interest rates with this option and secure a loan that meets your needs. This may not be the most suitable option if you need quick funds, as banks tend to be slower in this aspect than online lenders. Another option is microlenders that can offer microloans up to $50,000, which is ideal for those who don’t qualify for traditional business loans as the requirements tend to be more flexible. Some microlenders approve you based on social capital instead of your credit score, which involves financial contributions from outside of the business. Prepare The Required Documentation The usual required documents for a loan consist of a business plan, a minimum of 12 months of personal and business bank statements, personal and business tax returns for at least two years, and any details about current and past business loans. As well as this, you will usually need to provide copies of applicable business licenses and legal documents, articles of incorporation, profit and loss statements, financial statements, and a building lease. It’s wise to check with your preferred lender before applying to ensure you have the required documentation prepared and up to date.   Submit A Formal Loan Application Once you’ve researched multiple suitable lenders, submit a formal loan application online or in person, depending on the lender. You will normally need to provide the lender with your name, business name, and Social Security number, as well as your desired loan amount and purpose, business tax ID, and annual revenue. If you're approved, your funds will be issued once you have signed a loan agreement. You can always contact customer service with any questions if you have any uncertainty. A spokesperson from Forbes Advisor commented: “Diving straight into a small business loan application without taking steps to prepare can be overwhelming and lead to difficulties acquiring the desired loan. “Following these simple steps, such as thoroughly researching lenders and checking your credit profile, could be all that you need to ensure that you don’t pay more for your loan than necessary as well as avoiding a lengthy process.” The tips come from Forbes Advisor, whose editorial team has decades of experience in the personal finance industry. The team helps consumers make smart financial decisions and choose the best financial products......»»

Futures Rebound After Yellen Torches Markets After 76 year old treasury secretary Janet Yellen blew up the market yesterday with her post-FOMC comments that regulators aren’t looking to provide “blanket” deposit insurance to stabilize the US banking system, stock futures have rebounded modestly on Thursday, while paring some earlier gains. S&P 500 futures were up 0.5% at 3990 at 7:45 a.m. ET while Nasdaq 100 futures rose 0.9%. Both underlying indexes fell the most in two weeks yesterday. The tech-heavy Nasdaq index flirted with a bull market yesterday after briefly rising 20% from its December low. US government bond yields have edged up after falling sharply on Wednesday when the Fed raised rates 25bps but also opened the door to a pause, while WTI crude futures are down 0.6% in early US session. The Stoxx Europe 600 Index slid 0.8%, falling for the first time this week before a rates decision from the Bank of England. In premarket trading, banking stocks were again the biggest laggards, following weakness in their US peers and as Citigroup Inc. slashed its outlook for the sector. Coinbase slumped after the largest US crypto exchange said it received a notice from the SEC formally declaring the securities regulator’s plans to bring an enforcement action against it. Analysts say the notice might be a precursor to the agency ultimately suing the company. Here are some other notable premarket movers: First Republic Bank shares rose on Thursday along with banking peers, set for a tentative rebound from yesterday’s losses following disappointment over comments from Treasury Secretary Janet Yellen over bank deposits. Cryptocurrency-exposed stocks rise as Bitcoin rebounds after snapping a six-session gaining streak on Wednesday. US equity futures also climbed, signaling a recovery following a tumultuous day of losses on Wall Street. Marathon Digital (MARA US) +5.1%, Riot Platforms (RIOT US) +4.7%. Chewy falls as much as 6.6% in US premarket trade after the online pet supplies retailer issued softer-than-expected FY23 guidance, with plans for international expansion likely to pressure margins. The company’s 4Q results also showed declining customer numbers, which Barclays says raises questions given that headwinds should have been abating. Phreesia Inc. shares dropped 3.3% in postmarket trading, after the application software company reported fourth-quarter results that beat expectations but gave a revenue outlook that KeyBanc sees as light. Caution reigned in markets on Thursday following the Fed’s decision to proceed with a quarter-point rate hike, combined with Treasury Secretary Janet Yellen’s remarks on the health of the banking sector. While Fed Chair Jerome Powell assured that regulators’ actions demonstrated “all depositors’ savings are safe” as he raised rates by an expected quarter point,  Yellen effectively contradicted him and sent stocks whipsawing, when she said regulators aren’t looking to provide “blanket” deposit insurance. “Yellen’s comments were clearly the more important factor yesterday,” said Manish Kabra, US equity strategist at Société Générale. “Not securing all deposits risks more deposit runs, which means large banks’ outperformance versus regional banks is likely to continue. Overall, the US banks rally will continue to fade, at least until the yield curve is firmly positive.” “It is well possible that the post-FOMC equity selloff quickly reverses, as falling yields are supportive of equity valuations — if financial stress is contained and economic data is not too bad,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.   UBS strategists led by Mark Haefele believe that any rally would be unlikely to endure just yet however, noting that turning points usually rely on investors anticipating interest-rate cuts alongside a trough in economic activity and corporate earnings. “The Fed’s actions and analysis of the economy suggest these conditions are not yet fully in place,” they said in a note. Separately, Goldman Sachs Group Inc. strategists say they expect US households to be net sellers of $750 billion worth of stocks in 2023 amid rising bond yields and declining personal savings. The team led by Cormac Conners says higher 10-year yields and lower savings rates tend to be associated with decreased net equity demand from households. As a result of the ongoing bank crisis, the swap market shows investors are split on the chances that Fed officials will add another 25 basis points to their benchmark in May. Despite Powell’s guidance, expectations for cuts have deepened, with the market suggesting that the effective fed funds rate will drop to around 4.1% in December.  “I would not expect the market to take these rate cuts out in the near term and could very well price in more cuts if the data deteriorates from here,” Matthew Hornbach, global head of macro strategy at Morgan Stanley, told Bloomberg Television. Powell himself, though, said in response to questioning that officials “just don’t” see cuts this year and that they will raise higher than expected if that is needed. “Rate cuts are not in our base case,” he said. He also didn't see the bank crisis as recently as three weeks ago when he swore to Congress he would hike rates 50bps only to trigger the worst banking crisis since Lehman. European stocks are on course to snap a three-day winning streak as banks underperform after US Treasury Secretary Janet Yellen warned they aren’t considering widespread insurance for bank deposits. The Stoxx 600 is down 1.0% while the Stoxx 600 Banks Index falls 2.5%.  Here are some of the biggest European movers: HSBC shares drop as much as 3.3%, ING slides as much as 2.5% and ABN Amro tumbles as much as 3.7% after US peers fell on remarks that US lawmakers aren’t planning on widespread insurance for bank deposits Jeronimo Martins falls as much as 4.1%, curbing the stock’s rally since the start of the month, after 4Q earnings showed a further drop in the Portuguese retailer’s margins Rallye SA slumps as much as 10% after the company said the latest earnings from its French supermarket business make it difficult to finish debt restructuring Gym Group drops as much as 5.1% after Barclays downgrades the fitness operator to equal-weight from overweight, citing a “bleak” profit outlook Sanofi gains as much as 5.3%, the most since December, after releasing positive data from a phase 3 trial for its key drug Dupixent Scout24 climbs as much as 4.4%, reaching highest since mid-November, after the online classified advertising company announced a buyback Inwit rises as much as 4.8% to a record after Reuters reported that private equity firm Ardian is in the early stage of exploring a bid for the Italian tower operator Domino’s Pizza Group jumps as much as 4.3% after Barclays upgrades the pizza delivery chain to overweight from equal-weight, highlighting the increase in app usage Meyer Burger gains as much as 15% after the Swiss solar equipment manufacturer’s Ebitda and profitability beat expectations Nemetschek shares rise as much as 13% to their highest level since September. The German firm’s outlook for 2024 and 2025 was seen as solid The BOE is likely to continue the quickest series of interest-rate increases in three decades, with its focus on combating inflation outweighing calls for a pause given recent turmoil in the banking system. The Swiss and Norwegian central banks both raised rates Thursday, as forecast, and flagged more hikes to come in their campaigns to tame rising consumer prices. For the BOE, February UK CPI data have “removed any flexibility they may have thought they had and now markets are pricing in a higher terminal rate of around 4.5% as a result,” said Craig Erlam, a senior market analyst at Oanda Ltd. “This makes the language that accompanies the decision key,” he said, expecting policymakers to highlight an uncertain outlook and the need to be data-dependent. Earlier in the session, Asian stocks rose as the region’s currencies strengthened against the dollar despite the Federal Reserve’s decision to raise US interest rates on Wednesday.  The MSCI Asia Pacific Index climbed as much as 1.5%, rising for a third day, as most Asian currencies, including South Korea’s won and Thailand’s baht, gained. Hong Kong’s equity benchmarks were among the top performers, boosted by gains in Tencent after the firm reported better-than-expected revenue. Stock gauges in Japan and India underperformed. “Dollar reaction to the Fed hike looks to be muted, which can ease pressure on Asian currencies and fund flows,” said Marvin Chen, an analyst at Bloomberg Intelligence. “Focus should be on the dollar impact as peak Fed rates near.” The dollar slid as market expectations for rate cuts by the Fed deepened despite the central bank hiking its benchmark rate by a quarter-point and signaling that it expects more tightening after that. A weaker greenback tends to be beneficial for Asian shares if it signals higher risk appetite and is seen as a positive for growth in the region’s emerging economies, many of which rely on imports priced in dollars. An index of Asian financial stocks headed for a three-day gain as a key technical indicator suggested the sector’s loss of more than 3% this month may have been excessive. US shares slumped Wednesday after comments from Treasury Secretary Janet Yellen rattled US bank shares and Fed Chairman Jerome Powell dashed hopes on rate cuts this year. Given expected slower US growth and the stresses in its banking system, it makes more sense to lean into the stronger growth recovery in China as well as Hong Kong and Thailand, said Sunil Koul, Asia Pacific equity strategist at Goldman Sachs, in a Bloomberg TV interview Japanese equities fell, following US peers lower, after comments from Treasury Secretary Janet Yellen rattled US bank shares and Federal Reserve chief Jerome Powell said he was prepared to keep raising rates. The Topix Index fell 0.3% to 1,957.32 as of market close Tokyo time, while the Nikkei declined 0.2% to 27,419.61. Sony Group Corp. contributed the most to the Topix Index decline, decreasing 1.3%. Out of 2,159 stocks in the index, 1,256 rose and 781 fell, while 122 were unchanged. Yellen told US lawmakers that the government wasn’t considering “blanket” deposit insurance to stabilize the banking system while Powell said he was ready to keep raising rates until inflation shows signs of cooling. Japanese shares are falling after the comments, said Rina Oshimo, a senior strategist at Okasan Securities. Australian stocks joined the selloff: the S&P/ASX 200 index fell 0.7% to close at 6,968.60, in a broad decline weighed by losses in mining shares and banks. The drop followed a slump on Wall Street as the Federal Reserve pushed back against bets for interest rate cuts this year. In New Zealand, the S&P/NZX 50 index was little changed at 11,594.94 Lastly, stocks in India were among the worst performers in Asia amid a mixed trend seen across global markets as investors remained concerned over the future course of central banks’ policy actions.  The S&P BSE Sensex fell 0.5% to 57,925.28 in Mumbai, while the NSE Nifty 50 Index declined 0.4%. The gauge is now little changed this week after dropping for two out of the last four sessions. The benchmarks have slipped more than 4.5% each for the year.  The underperformance in local equities compared with Asian and emerging market peers is a result of surging interest rates in the US - the Fed raised its main lending rate by another 25 bps on Wednesday to 5% - impacting flows from overseas investors. Index-heavy software exporters and banks came under pressure on increasing worries over global economic growth.  Foreign investors have sold $2.8b of local shares this year through March 20 following inflows of about $11b over the preceding two quarters. Domestic investors have however remained buyers to the tune of $9b in 2023.  Reliance Industries contributed the most to the Sensex’s decline, decreasing 1.3%. Out of 30 shares in the Sensex index, 13 rose, while 17 fell. In FX, weakness in the dollar extended to a sixth day, with a gauge of the greenback falling to the lowest in more than a month as traders boosted bets for US interest-rate cuts, even after the Fed said more tightening may be needed.  It has since rebounded fractionally from session lows. The Norwegian krone gained 1% versus the dollar after a hawkish 25bps hike from the Norges Bank. While there were expectations that Norges Bank would stand pat after hiking today, the central bank explicitly signaled another increase in May The pound and euro advanced, with the former climbing on leveraged demand amid expectations for the Bank of England to deliver a hawkish quarter-point rate increase on Thursday, according to a trader “With the banking sector concerns still fresh, the Fed was more dovish than just a while ago and that is dragging down bond yields and the dollar,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp. “I still think the Fed will raise the rate to tame inflation, which seems to remain stubborn” The Swiss franc struggled to hold gains after the SNB opted for a 50bps increase. The Dollar Index is little changed. In rates, treasuries were cheaper across the curve, although futures remain near top of Wednesday’s range, a bull-steepening rally following Fed’s rate decision. US two-year yields are up ~2bps while UK two-year borrowing costs fall 9bps ahead of the Bank of England rate decision later today.  Thursday’s losses are belly-led, cheapening 2s5s30s fly by ~3bp on the day. Bank of England rate decision at 8am New York time is expected to be a quarter-point rate increase. US yields cheaper by 3bp-5bp across the curve with 10-year around 3.48%, near low end of Wednesday’s 3.427%-3.642% range; on the curve, 2s10s spread is wider by ~1.5bp on the day, near Wednesday’s steepest levels, while 5s30s spread tightens ~1.5bp.  Fed-dated OIS contracts price in around 13bp of rate hike premium for the May policy decision and then ~75bp of cuts by year-end. Crude futures decline with WTI falling 1.2% to trade near $70.05. Spot gold adds 0.5% to around $1,980. Bitcoin rises 1.2%. Looking to the day ahead now, monetary policy decisions will include the Bank of England, the Swiss National Bank and the Norges Bank. Data releases include the US weekly initial jobless claims, February’s new home sales, the Kansas City Fed manufacturing activity for March, and the Q4 current account balance. Finally, EU leaders will gather in Brussels for a summit. Market Snapshot S&P 500 futures up 0.5% to 3,989.00 MXAP up 1.3% to 160.31 MXAPJ up 1.5% to 517.51 Nikkei down 0.2% to 27,419.61 Topix down 0.3% to 1,957.32 Hang Seng Index up 2.3% to 20,049.64 Shanghai Composite up 0.6% to 3,286.65 Sensex little changed at 58,181.18 Australia S&P/ASX 200 down 0.7% to 6,968.61 Kospi up 0.3% to 2,424.48 STOXX Europe 600 down 0.4% to 445.25 German 10Y yield little changed at 2.28% Euro up 0.4% to $1.0897 Brent Futures down 0.2% to $76.52/bbl Gold spot up 0.4% to $1,977.01 U.S. Dollar Index down 0.18% to 102.16 Top Overnight News from Bloomberg Hong Kong’s CPI for Feb falls short of expectations, coming in at +1.7% (down from +2.4% in Jan and below the St’s +2.4% forecast). Singapore’s inflation also comes in a bit below plan at +6.3% headline for Feb (down from +6.6% in Jan and below the St’s +6.4% forecast). BBG Blinken’s planned trip to China may be in the process of getting back on track after being derailed by the Chinese balloon incident. Blinken said China will be capable of invading Taiwan by 2027. SCMP The ECB will probably need to raise borrowing costs more, though the bulk of tightening is already done, according to Governing Council member Madis Muller. BBG Ukrainian troops, on the defensive for four months, will launch a long-awaited counterassault "very soon" now that Russia's huge winter offensive is losing steam without taking Bakhmut, Ukraine's top ground forces commander said on Thursday. RTRS Swiss financial regulator Finma has defended its decision to wipe out a huge swath of risky subordinated bonds as part of the CS rescue deal. In its first statement on the deal since the weekend, Finma said that all the contractual and legal obligations had been met for it to act unilaterally given the urgency of the situation. “On Sunday, a solution was found to protect clients, the financial centr and the markets,” said Finma’s chief executive Urban Angehrn. “In this context, it is important that Credit Suisse’s banking business continues to function smoothly and without interruption.” FT Following the Fed, the BOE will probably continue its quickest series of rate increases in three decades with a 25-bp hike to 4.25%. The SNB raised rates by 50 bps and signaled more to come as it resumed its inflation fight just days after the downfall of Credit Suisse. Norges Bank raised by 25 bps to 3%, as expected, and said it will tighten further in May. BBG Freight companies are dialing back expectations that demand will recover strongly in the second half of the year amid growing economic uncertainty and signs retailers are growing more guarded about placing big orders in 2023. WSJ OPEC+ is unlikely to take action on production despite the recent slump in prices as they attribute most of the volatility to financial speculation, not fundamentals. RTRS The SEC has told Coinbase that it plans to take enforcement action against the company, escalating its crackdown on digital-currency firms by targeting the biggest U.S. crypto exchange, Coinbase said Wednesday. WSJ The Swiss National Bank raised its interest rate by 50 basis points and signaled more to come as it resumed its inflation fight just days after the downfall of the country’s second- biggest bank became the epicenter of global financial turmoil: BBG Norway’s central bank raised its key interest rate to the highest level since 2009 and signaled further tightening after higher price pressure from a weaker-than-forecast krone outweighed concerns about global banking turbulence: BBG Wall Street banks and European rivals are undoing de facto hiring freezes after Credit Suisse’s emergency rescue by UBS, unable to resist the lure of top talent available at a discount: BBG A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks traded mixed with price action choppy as markets digested the FOMC where the Fed delivered a widely expected 25bps rate hike and maintained its terminal rate view but dropped its reference regarding expectations that ‘ongoing’ rate hikes will be appropriate. ASX 200 declined amid the uninspired mood across most industries with underperformance in tech and mining. Nikkei 225 was contained by weakness in financials and after Japan maintained the overall assessment of the economy but cut the assessment on corporate profits and production for the first time since April 2020. Hang Seng and Shanghai Comp. swung between gains and losses with optimism in Hong Kong following earnings releases from Orient Overseas International and Tencent whereby the advances in the latter inspired its tech peers, although participants also digested a rate hike by the HKMA which moved in lockstep with the Fed. Top Asian News HKMA raised its base rate by 25bps to 5.25%, as expected, which is in lockstep with the Fed. RBNZ Chief Economist Conway said inflation is high and widespread because strong demand outstripped supply, while he added that they are incredibly determined to get inflation and inflation expectations back to the target. Furthermore, Conway expects monetary policy tightening to cause the New Zealand economy to enter a mild recession later this year as demand slows, as well as noted that the OCR is now comfortably above neutral and having the desired contractionary effect, according to Reuters. European bourses began the session mixed/flat, but have since dipped more convincingly into negative territory with newsflow focused on hawkish Central Bank action post-Fed thus far. Once again, the FTSE 100 is lagging its peers as focus remains firmly on the upcoming BoE announcement, FTSE 100 -1.0%. Stateside, futures are firmer though remain shy of Wednesday's best levels and have most recently eased off the sessions peak given the above action, ES +0.4%. Citi cuts their Stoxx 600 end-2023 forecast to 445 (prev. 475); FTSE 100 cut to 7600 (prev. 8000); downgrades Banks to Neutral (prev. Overweight). Top European News ECB's Muller says inflation is a bigger problem than the increase in borrowing costs. Lions share of hikes are behind us; ECB is likely to increase rates by a little. ECB's Stournaras says should not commit to any rates in advance. Italy is reportedly preparing a new package of measures worth some EUR 5bln to aid firms and families cope with energy bills, and could be unveiled next week, according to Reuters sources. Central bank decisions SNB hikes by 50bps to 1.50% vs exp. 1.50% (prev. 1.00%); does not rule out further hikes; reiterates language around price stability and FX intervention. Further increased its inflation forecasts, with CPI now not seen dropping back into the 0-2% target band until Q2-2023 (prev. Q4-2023). Click here for full details, reaction & analysis. Norges Bank hikes by 25bps to 3.00% vs exp. 3.00% (prev. 2.75%); the policy rate will be raised further in May; decision unanimous. Rate path now implies an end-2023 rate of 3.60% (prev. 3.08%). Click here for full details, reaction & analysis. Brazilian Central Bank maintained the Selic rate at 13.75%, as expected, while it will remain vigilant and will assess if the strategy of maintaining the Selic rate for a sufficiently long period of time will be enough to ensure the convergence of inflation. BCB added that inflation expectations have shown additional deterioration, especially at longer horizons and they will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected. FX The USD remains on the back-foot after Wednesday's FOMC, though the DXY is back towards a 102.44 high after briefly printing a fresh March low of 101.91. Action which supports peers across the board and features antipodeans outperforming after recent pressure, NZD leading and cognisant of RBNZ's Conway emphasising that inflation remains high and widespread; NZD/USD and AUD/USD testing 0.63 and 0.6750 respectively. GBP is next best ahead of the BoE, Cable at a fresh March peak of 1.2343 with 25bp fully priced and a peak of around 4.45% (current 4.00%) implied. The single currency, EUR, is underpinned by the USD but with EUR/GBP pressure preventing any further appreciation; EUR/USD holding sub-1.09 while EUR/GBP near the 0.8832 low. Finally, CHF benefitted from the SNB's hawkish-hike while the NOK is back to pre-release levels as expectations for a 50bp hike unwind while the hawkish repo path adjustments are factored in. Fixed Income EGBs are underpinned with yields softer across the curve post-Fed while Gilts are closer to the unchanged mark pre-BoE, though the morning's hawkish action has sparked a pullback from best levels. Bunds hold around 136.00 and the 10yr yield now back above 2.25% after dipping to a 2.22% low; modest upside was seen in Bunds following Germany leaving its Q2 issuance calendar unrevised vs the prelim. FY release. Stateside, USTs continue to derive support from Wednesday's announcements; though, the yield curve has lifted marginally from the mid-week trough, but does remain lower overall with action most pronounced in the belly. German Q2 issuance calendar sees no changes vs the prelim. annual release. Commodities Commodities are mixed, with the crude benchmarks attempting to pare back some of their overnight losses while metals glean support from the USD's downside. Specifically, WTI and Brent are towards the lower-end of USD 69.91-70.79/bbl and USD 75.76-76.66/bbl parameters, though the benchmarks are holding above USD 70 and USD 76 respectively. Both precious and base metals are benefitting from the softer dollar; spot gold towards the upper-end of USD 1964-1983/oz parameters, just shy of Wednesday's USD 1985/oz best with base metals supported but off best given the broader risk tone. Iran's Finance Minister said Iran achieved its highest level of oil exports for at least two years last month, according to FT. Goldman Sachs said gold remains the best safe-haven asset for financial risks and raised its gold target to USD 2050/oz from 1950/oz, while it added that Chinese demand continues to surge across the commodity complex with oil demand topping 16mln bpd and it remains very positive on commodity prices with 12-month forecasted returns of 27.9% for S&P GSCI. Geopolitics China's military said it monitored and drove away a US destroyer which entered the South China Sea Paracel Islands, although the US Navy later said that the Chinese military's statement is false regarding a US destroyer being expelled from the South China Sea. Taiwan's Foreign Minister said President Tsai's meeting with the US House Speaker is still being arranged, according to Reuters. Saudi Arabia and Iran's Foreign Ministers agreed to meet soon to pave the way for the reopening of embassies, according to the Saudi state news agency. Russian Foreign Ministry Lavrov is to hold discussions with Iran's top diplomat on March 29th in Moscow, according to Tass. US mulls opening Pacific defense pact with Britain and Australia to more countries, according to Semafor. US reportedly plans to send aging A-10 attack planes to the Middle East while shifting newer jets to Asia and Europe, according to US officials cited by WSJ. US Event Calendar 08:30: March Initial Jobless Claims, est. 197,000, prior 192,000 March Continuing Claims, est. 1.69m, prior 1.68m 08:30: Feb. Chicago Fed Nat Activity Index, est. 0.10, prior 0.23 08:30: 4Q Current Account Balance, est. -$213.7b, prior -$217.1b 10:00: Feb. New Home Sales, est. 650,000, prior 670,000 Feb. New Home Sales MoM, est. -3.1%, prior 7.2% 11:00: March Kansas City Fed Manf. Activity, est. -2, prior 0 DB's Jim Ried concludes the overnight wrap In an FOMC meeting that went to script but perhaps leaned dovish, Mr Powell’s press conference was overshadowed by his predecessor’s (Yellen) simultaneous comments that a blanket guarantee of deposits had not been discussed or considered. It seems highly unlikely the US would let depositors take losses but maybe such a move won't be done pre-emptively and would require future stress first. The reaction to her comments also highlighted the nervousness and fragility underpinning a big 2-day rally. The remarks led to a late slump in equities (S&P 500 -1.65% - all post Yellen) and big rally in bonds (2yr -23bps - more than half after Yellen) and distracted from a relative uneventful FOMC, even if there were nuances worth discussing. Let’s look at the Fed first. They hiked interest rates a further 25bps to put the policy rate in a target range of 4.75-5.00%, while saying in the statement that “additional policy firming may be appropriate”. This replaced "ongoing increases in the target rate will be appropriate". So a softening in language. The pace and asset makeup of QT was unchanged as expected. The median dot plot projection showed fed funds ending 2023 at 5.1%, unchanged from December, and up by roughly one hike to 4.3% at the end of 2024. Despite the median remaining unchanged, there was some upward migration in the dot plot for 2023. In terms of economic projections, the Fed had Core PCE inflation up modestly both this year (3.6% from 3.5% in Jan) and next (2.6% from 2.5% in Jan), but saw risks as “broadly balanced” rather than “weighted to the upside” as we had seen last meeting. On the banking stress, the Fed’s statement noted that it is “likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation.” At the press conference, Chair Powell opened with a statement on the banking sector first by saying that the US banking system is sound and that the Fed programs are “effectively meeting” liquidity needs while policymakers are closely monitoring the situation. He also noted that the events of the past week are likely to weigh on lending standards and slow the economy, which may in fact necessitate fewer rate hikes than thought before. Chair Powell noted that some officials considered a pause in the days leading up to the meeting, however in the end it was a unanimous vote to hike rates. The "pause" word sparked a front-end rally. Our US economists have maintained their terminal rate view of 5.1% following another 25bp rate hike in May. They note there is elevated uncertainty around this modal outcome. Financial and credit conditions along with inflation data will be important to watch in the weeks ahead. See their FOMC review note here for more. The S&P 500 went into the FOMC announcement about flat on the day (-0.04%), having traded in a 0.60% range through much of the US trading session. The initial statement saw a pop in sentiment, before stocks whipsawed through the Chair’s opening statement and peaked up around +0.9% on the day as he noted “disinflation is intact.” However, comments on credit conditions tightening further and rate cuts in 2023 not being the FOMC’s “baseline expectation” saw risk sentiment fall. Roughly an hour prior to the close Chair Powell also acknowledged that the Fed was still open to further rate hikes if the data proves them necessary. At the same time, his predecessor, Treasury Secretary Yellen said to a Senate subcommittee hearing that, “I have not considered or discussed anything having to do with blanket insurance or guarantees of deposits.” She also noted that it was not yet the time to discuss changing the FDIC insurance cap. Risk sold off harder after this with the S&P falling over -1.5% over the last hour of trading to finish at the lows of the day at -1.65%. 493 of the index’s constituents were lower yesterday with Banks leading the late move lower. The KBW index closed down -4.70% on the back of significant regional bank losses once again led by First Republic (-15.5%), while the majors held up relatively better with JPM (-2.6%), C (-3.0%), and BAC (-3.3%) outperforming. Fixed income markets saw more one way traffic with 10yr US Treasury yields -17.53bps lower on the day to 3.43% after being roughly unchanged around the European close and rallying though the FOMC statement and the risk-off move that followed. US 2yr yields were actually higher in the US morning before being unchanged just prior to the meeting and then rallying through the US afternoon to finish the day -23.0bps lower at 3.937% - just off the lows of the day. Following the meeting, fed futures are pricing in a 46% chance of a hike at the next meeting in May, and then roughly 70bps of cut by year-end despite the comments from Chair Powell. This morning in Asia, we are seeing a further steepening in the curve with 2yrs -6bps but 10yrs +1bps. 2s10s is now -44bps after being in the low -60s before the FOMC statement. See our rates strategists' call and rationale for steepeners here for more on the forces around this trade. So the mood completely changed in the last hour or so. Ahead of the Fed, European markets had actually continued to normalise following last week’s volatility. For instance, equities put in another steady performance, with the STOXX 600 (+0.15%) posting a third consecutive advance. Sovereign bond yields also moved higher, with those on 10yr bunds (+3.6bps) at a one-week high of 2.328% as investors priced out the chances of an imminent pause in rate hikes from the ECB. In part, that was supported by a Bloomberg article later in the session, which reported that ECB officials were growing in confidence that they had withstood the current turmoil, whilst concern remained that inflation still needed tackling. When it came to banks however, the rally at the start of the week showed signs of petering out, with the STOXX Banks index coming down -0.69%, and UBS falling -3.71%. Looking forward, central banks will remain in the spotlight today, with the Bank of England’s decision coming up at midday London time. Up until yesterday, market pricing had been more in the balance on whether they’d keep hiking or pause. But just after we went to press yesterday, there was a big upside surprise in the February CPI print. That showed an unexpected increase in the year-on-year measure to +10.4% (vs. +9.9% expected), and core CPI also rose to +6.2% (vs. +5.7% expected). Furthermore, that was faster than the BoE’s own staff projections too, with last month’s Monetary Policy Report predicting a +9.9% reading like the consensus. On the back of that print, investors ratcheted up the probability of a 25bp hike today, with overnight index swaps currently placing a 91% probability on such a move. That echoes the view of our UK economist, who is also expecting a 25bp increase in the Bank Rate that would take it up to a post-2008 high of 4.25%. In his preview (link here), he sees a 6-3 vote split in favour of the 25bp hike, but the big question now will be what they indicate in the forward guidance, and whether they echo the Bank of Canada’s move in making a “conditional pause” more explicit. Asian equity markets are mixed this morning despite an overnight slump on Wall Street. US stock futures being notably higher is helping, with contracts tied to the S&P 500 (+0.43%) and NASDAQ 100 (+0.45%) seeing mild gains. As I type, the Nikkei (-0.30%) as well as the KOSPI (-0.11%) are edging lower but the Hang Seng (+0.78%) is trading in the green after technology heavyweight Tencent yesterday reported better than expected quarterly revenues. Meanwhile, the CSI (+0.36%) is trading higher with the Shanghai Composite (-0.01%) swinging between gains and losses. In FX, the US dollar (as measured by the DXY index) remains under pressure, trading near a seven-week low of 102.105 on the prospect of less Fed tightening ahead. In other news yesterday, UK MPs voted overwhelmingly in favour of the Windsor Framework, which is the recently agreed adjustment to the Brexit deal’s arrangements for Northern Ireland. In the end the vote was 515-29 in favour, although the opponents included former PMs Boris Johnson and Liz Truss. To the day ahead now, and monetary policy decisions will include the Bank of England, the Swiss National Bank and the Norges Bank. Data releases include the US weekly initial jobless claims, February’s new home sales, the Kansas City Fed manufacturing activity for March, and the Q4 current account balance. In the Euro Area, we’ll also get the preliminary consumer confidence reading for March. Finally, EU leaders will gather in Brussels for a summit. Tyler Durden Thu, 03/23/2023 - 07:58.....»»

As a newly established startup, there are some key elements that your business requires to ensure your short and long-term success. A well-detailed business plan, a launch plan, early funding, and the right talent and equity from founders are all among the basic ingredients that can help get a startup off the ground. Aside from […] As a newly established startup, there are some key elements that your business requires to ensure your short and long-term success. A well-detailed business plan, a launch plan, early funding, and the right talent and equity from founders are all among the basic ingredients that can help get a startup off the ground. Aside from the basics, finding the right bank, and pairing it with the right bank account is a consideration many startup entrepreneurs and small business owners often overlook during the initial induction phase of their company. .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Ray Dalio Series in PDF Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more   Following the collapse of California-based bank, Silicon Valley Bank (SVB), in early March 2023, startups and organizations that were caught in the middle of the catastrophe showed many other entrepreneurs and new business owners the importance of partnering with the right financial institution. Although the fall of SVB has sent shockwaves across the economy and banking sector, for many small startups it’s crucial to find the right bank that offers them a range of tailor-made products and services. Banks that equip businesses with the right tools and resources, other than financial support and backing, can help small startups leverage financial capital to build towards a long-term goal. While the broader economy is still battling with stubbornly high inflation and soaring interest rates, startup owners will need to consider some key aspects when choosing a bank for their business going forward. Industry Authority When it comes to finding the right bank for your business, size matters, and in this case, the authority a bank has within the financial system. Many large banks often provide capital resources for specific businesses depending on their industries. In some instances, more established banks will often have a range of products and services that cater to a wide variety of businesses, regardless of whether they are early biotech startups or small-scale eCommerce businesses. Although smaller community banks may be centered around the direct market, focussing on providing businesses in the area with the right capital and resources, it's often riskier to place long-term bets on these institutions, especially if you’re considering expanding in the coming months or years. Look for banks that have a longstanding track record of operations, and have provided customers with the right services to get their business going. Location. Location. Location Another thing to consider is the location of the bank. If you reside in a rural part of the country and have limited access to bank branches and ATMs, you might want to consider partnering with a bank that’s widely available in your area. Although a lot of today’s banking is done online, for small startups and businesses it’s a safer option to choose a bank that they can directly find in their area in case of any disputes or discrepancies. Different Products And Services As already mentioned, not all banks will offer the same type of services to their clients. Some providers will have a range of businesses-related products, with less focus on individual banking solutions. Then some banks may offer attractive business loans at low-interest rates, but product selection may be somewhat limited. The easiest way to approach this is to list a few services you may require for your business and to match this with a bank that can provide you with the right solutions at affordable pricing. Fees And Costs Another thing that comes to mind when choosing a bank is how much you will end up paying in fees and additional bank account charges. There are no standardized or base-level fees for opening bank accounts, and prices will differ across the board. In some cases, banks will have pricing structures that are designed to cater to small businesses and new startups. Typically these services and products have more affordable fees, less additional costs, and come with a limited selection of banking services. Digital Features With so much of the banking and financial ecosystem relying on digital infrastructure, it’s important to think about how these digital features will enhance your business, its performance, and forward-going growth. For startups, it’s always better to side with a bank that provides them with native digital tools such as a banking platform for online transactions, and other digital integrations. These services not only make it a lot easier for startups and small businesses to communicate with institutions, but it also gives them direct and on-demand access to the tools they require in their day-to-day operations. Interest Rates Navigating ongoing interest rate hikes has been a challenge for many new startups and businesses, especially for those that have taken out loans during the early months of the pandemic when interest rates were near zero percent. Now that the so-called free-cash era is over, it’s difficult to find a financial institution that can provide businesses and individuals with interest rates that can help them grow their savings. Online banks often provide more attractive interest rates, but these should be approached with caution, especially for new and young businesses. Shop around, and see which bank can offer you the best possible interest-rate deal. Not only will this help you find the most applicable bank, but it’s also a way to weigh out different options. Customer Support Customer service is another aspect worth considering. Some banks don’t have brick-and-mortar stores and purely rely on digital communication such as instant messaging, chatbots, and artificial intelligence (AI). If you’re comfortable with using these tools to resolve any problems or issues before being put in contact with a human agent, consider your options carefully. You’ll want to make sure that you have access to the best customer service agents to help you resolve any disputes or answer any queries. On top of this, some banks may provide around-the-clock service, while others may limit these operations to designated business hours.   Check Your Credit A low credit score may often mean you have access to a limited range of products and services. On the other hand, the opposite is true for those individuals that have a higher credit score. Larger banks will often want to partner with business owners and their companies that have a stronger line of credit. Other smaller community-orientated banks may be more lenient towards locals that have lower credit scores. Your credit score will impact which loans you can apply for and what interest rate is offered to you. It’s often advised for startup entrepreneurs and small business owners to check the credit requirements of their banks and to see whether or not they qualify for the necessary services they require. Final Thoughts Finding the right bank for your startup at a time when household names are falling apart can leave any business owner and startup entrepreneur feeling uneasy. Having a few options is always better, and making sure that you partner with the right people that will help your business grow while fostering a longstanding relationship is crucial for any young startup. Consider the needs of the business, and how the services and products these banks offer can match them. It’s best to shop around at first, to widen your options and to see what is available. The more information you have, and know what you want for your startup, the easier it will be to find a bank that checks all the boxes and delivers financial services specifically tailored for your new business......»»

Just Imagine Headlines Like: "Banks Brought To Their Knees By Rate Hikes, Face Unrepentant Fed Which Hiked Again" By Peter Tchir, chief strategist at Academy Securities Polar Vortex and Bank “Crisis” We used to have winter storms, sometimes even Nor’easters, but now we get polar vortex or other more ominous sounding things. Maybe this current banking “crisis” is behind us? At least for now. Europe Responding Well European bank stocks are on firm footing. Monday’s price action was mixed and erratic, today, banks across the board are doing well and UBS is trading like a company that got a good deal! UBS’s stock trading in Switzerland closed Friday at just over 17, it traded as low as 14.50 yesterday, and is above 18 right now – encouraging! Even CS stock, on the Swiss exchange is trading at a slight premium to the announced deal price (maybe hoping that as the dust settles the deal terms improve, like they did with Bear Stearns?). US – Implicit vs Explicit and FRC Share Price The FDIC has more power in an “emergency” situation than they do in normal times to protect depositors (Silicon Valley Bank and Signature Bank). I’m told (and it seems reasonable) that to extend deposit insurance to all banks, for unlimited amounts, would require Congress (and that help is not likely to come, certainly not separate from the debt ceiling debate, unless, possibly, things get much worse). So we are in limbo, a high degree of certainty that depositors will be protected, but only if things look bleak. Tough way to keep deposits, but periods of calm do help (though analysts demanding to know (rightfully so, it seems) details on the “cash and cash equivalent” line items, doesn’t help). Then watching FRC stock price break $14, down from $147 on February 2nd is difficult to watch. It seems staggering and unbelievable to me as an outside observer, but there it is. It looks like it is trading higher pre-market today, which would be encouraging for the sector as a whole. As a reminder, and sometimes we all need this, we published about the unique nature of Silicon Valley Bank and Silvergate Capital less than two weeks ago (it seems so much longer than that) in I Like Mid Banks, I Cannot Lie. I reread this morning and can’t help but wonder if I slipped from my own analysis, as I too got caught up in the market turmoil? The Pit of Unrealized Bond Losses I think we are all walking by this deep pit of “unrealized bond losses”. Something we walked by every day for months, but really didn’t notice. SVB made us focus on this. Wow, that is one big pile of unrealized bond losses! Without a doubt there is a massive hole created by unrealized bond losses. But, it is spread across the system. Not sure banks, but insurance companies. But, certainly in the case of insurance companies, the people who agreed to long dated products at low rates (a 2021 annuity for example) are bearing losses to offset that from an insurance perspective (as one simplistic case showing how individuals are also sitting on these “unrealized” losses). The questions are: How bad are the unrealized losses at any one place? Is there any need to sell and realize those losses? (this is a bit circular with the first question as any bank that has eye-catchingly large potential losses, may have to sell or raise capital). Can these losses get much worse? Sure if interest rates move higher or credit conditions deteriorate, bond prices will drop, but they could get better. Is there something that could lead to contagion? Could forced selling by some institutions, lead to lower prices and cause more forced selling? This is what keeps me awake at night as an extremely dangerous situation and I’m watching for any sign of this, but I’m not seeing it at all right now. The bank situation here continues to be rife with risk, but I like the risk reward and think we will avert anything that can morph into systemic risk for now. Yes, we have seen how quickly markets move, so maybe we are playing with fire here, but I like this risk right now. The Fed – Where is the Inflation? I am in the camp that the Fed should pause, as we just saw some upheaval in banks, directly tied to interest rate policy. I see no harm in pausing while we establish what damage may or may not have been done to the “system” of “financial conditions” by the events of the past two weeks. There are many who argue that the Fed must hike 25 bps to show they are serious about inflation. To that, remember when the inflation data was pointing to 50 bps, and then wage pressures dropped? ADP, JOLTS and NFP all pointed to wage inflation coming back under control. Yes, there was inflationary pressure on other things, but also, Oil was at 80 on March 6th and is $68 right now – not sure I want to spark inflation, but we have some breathing room. While the “wonky finance” side of me can grasp the concept that balance sheet expansion (which is happening at a rapid pace) and rate hikes, can go hand in hand, I find it difficult to believe that will play out well in the mainstream media – which should be a concern for all involved. Just imagine the headlines like, Banks Brought to their Knees, By Rate Hikes, Face a Unrepentant Fed who has hiked again! Mainstream media and social media love simple themes. Complex interactions don’t generate the buzz. The above take, wrong for those who understand, may be the message that gets out – which is another reason to pause. Bottom Line I like financials, with two caveats: Get ready for selling pressure if the Fed hikes, because the story will not play out well in the media, and knee-jerk reactions will be to sell. Keep an incredibly vigilant eye on that pile of unrealized bond losses to see if it is growing or getting even more scrutiny. I don’t like rate risk, I do like spread risk. While I don’t think the Fed should hike, I do think they will be incredibility reticent to cut rates and far too many rate cuts are priced in. The last two weeks of trading have destroyed the signal to noise ratio in the treasury market – this is far more about technicals and stop losses and fear, than about rational thoughts on Fed policy. With bond yields stabilizing, the polar vortex extreme of bank issues calming down, credit spreads as a whole should do well. Fade disruption unless the Fed is super dovish. Big rally in disruption and stocks that benefitted the most from ZIRP. This isn’t ZIRP and while there is upside here, I think there is better risk reward elsewhere. Nibble at Commodities. Remember the “China re-opening” overreaction in the commodity market? I think we just got the same in reverse. Bottom line is I’m looking for a “risk on” type of trade, but keeping one eye on that pile of unrealized bond losses, making sure that it’s not growing rapidly, or that a bunch of new people have taken notice and are going to react to it. Tyler Durden Tue, 03/21/2023 - 10:20.....»»

Futures Surge Above 4,000 As Bank Crisis Fades Amid Growing Deposit Insurance Speculation It's only appropriate that the day after the weekly dose of doom and gloom from Marko Kolanovic and Mike Wilson, that stocks soar to the highest level in almost two weeks. S&P futures spiked above 4,000 on Tuesday as fears about turmoil in the global banking sector subsided, following a Bloomberg report that the Biden admin was considering insuring all deposits (unclear exactly how they will credibly insure all $18 trillion in deposits, some 75% of US GDP but whatever) followed by an FT article this morning previewing Janet Yellen's speech at the American Bankers Association on Tuesday in which the Treasury Secretary will signal further US government backing for deposits at smaller American banks if needed, "a shift that seeks to protect parts of the country’s banking system struggling in the recent financial turmoil." Contracts on the S&P 500 were up 0.8% by 7:45 a.m. ET paced by European shares with Estoxx50 +1.8% on the day as  risk appetite has been stoked by report that US officials are studying ways to temporarily guarantee all bank deposits; Nasdaq 100 futures gained 0.7%. Both underlying indexes had risen on Monday. European and Asian markets were solidly in the green. As a result of the jump in risk sentiment, traders are also firming up bets on the Fed raising rates another 25bp on Wednesday with ~20bps currently priced in — versus less than 10bp at one stage on Monday.%. The Bloomberg Dollar Spot Index was down for the second day as treasury yields edged higher, mirroring moves in the UK and Europe. Gold fell and oil rose, while Bitcoin retreated for the first time in nearly a week. Among notable movers in US premarket trading, First Republic Bank advanced more than 20%, rebounding from a slump to a record low as investors weighed a proposal from JPMorgan to help the struggling mid-size lender. Meta Platforms Inc. rose after Morgan Stanley raised its recommendation to overweight from equal-weight. Here are some of the other notable premarket movers: First Republic Bank jumps as much as 27% in premarket trading, set to rebound after closing at a record low Monday, as investors digest a proposal from JPMorgan to help the struggling midsize lender. Shares in fellow regional banks also gain on Tuesday, with Western Alliance (WAL US) +3.9%, PacWest Bancorp (PACW US) +4.9% Meta rises 2.5% after Morgan Stanley raised its recommendation to overweight from equal-weight, citing the social media giant’s pivot to increased efficiency. First Majestic Silver drops 16% in US premarket trading after saying it’s temporarily suspending all mining activities and reducing its workforce at Jerritt Canyon effective immediately. Keep an eye on Emerson Electric as it was upgraded to overweight from equal-weight at Morgan Stanley, which noted the drop in the US electrical-equipment maker’s stock after it announced its bid for National Instruments. Investors are tiptoeing back into riskier assets, reversing the knee-jerk selloff early Monday that followed a government-brokered takeover of Credit Suisse Group AG at the weekend by Swiss rival UBS Group AG. Banks’ Additional Tier 1 bonds rebounded in Europe and Asia after euro-zone and UK regulators gave reassurances on the risky debt category, which seized up after Credit Suisse shareholders took precedence over the holders of over $16 billion of the AT1s. Appetite for risk is also being fueled by expectations that the Federal Reserve may adopt a more cautious policy approach when it decides on interest rates on Wednesday. "The resolution to the Credit Suisse situation has managed to calm markets down, though in the US, all eyes remain on First Republic Bank and whether it needs another show of support from major banks,” said Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital. “If the Fed can calm markets down tomorrow, a longer-lasting rally in equity markets is on the cards.” “About 10 days ago we had a series of risks emerge and now one by one, those tail risks are diminishing,” said Erick Muller, head of investment strategy at asset manager Muzinich & Co. Ltd. “It seems like everything has been put in place to resolve any liquidity issues — which is reassuring.” The latest BofA fund manager survey showed investors now view a systemic credit event as the biggest tail risk to markets, followed by elevated inflation and hawkish central banks. Strategist Michael Hartnett recommended selling the S&P 500 above 4,100 to 4,200 points — between 3.8% and 6.3% higher than current levels. Money markets are wagering on a hike of around a quarter-point as the cracks that emerged in the global banking industry discourage more aggressive tightening. Swap traders now see the Fed’s benchmark rate ending the year around 4%, while two weeks ago investors were betting on rates peaking close to 6%. “It is possible that some central bankers will see recent events as policy finally getting some traction and tightening financial conditions via forcing markets to price in greater credit risk,” Mizuho International Plc strategists including Evelyne Gomez-Liechti wrote in a note. “This would allow central bankers to do a little less with policy rates.” European markets rise for a second day as concerns around the health of the banking sector ease and investors look ahead to this week’s central-bank rate decisions while the demise of Credit Suisse appears to be in the rear-view mirror for investors who have piled back into European bank stocks. The Stoxx Banks Index is up 4.5% as most lenders saw their AT1 notes rebound from Monday’s sharp sell off. The Stoxx 600 is up 1.5%,  with banks and insurance stocks leading gains, while consumer staples trail. Here are some of the biggest European movers: Kingfisher shares rise as much as 3.4% after the UK home- improvement retailer reported FY pretax profit that beat estimates and said it plans to announce a new buyback program Santander gains as much as 4.8%, Deutsche Bank 4.6% and Commerzbank 7.2% as concerns around the banking system ease following UBS’s rescue deal for Credit Suisse RWE climbs as much as 3.2% after the German energy company reported new guidance and a higher dividend ahead of estimates Nordea shares rise as much as 3.6% after Barclays upgraded the bank to overweight, though is cautious given Nordic banks’ vulnerability to deposit outflows and funding costs Axfood gains as much as 5.7%, the most since June 2022, as both DNB and Carnegie upgrade the Swedish food retailer and wholesaler to buy from hold Thyssenkrupp climbs as much as 5.9% after a report that CVC is considering offering €1 for the German industrial firm’s steel unit Rockwool bounces as much as 5.5% as DNB upgrades the Danish insulation supplier to buy from hold, saying it thinks the firm’s margin guidance is “overly cautious” Earlier in the session, Asian stocks gained as concerns of an escalation in the banking crisis eased, with lenders helping drive the day’s advance.  The MSCI Asia Pacific excluding Japan Index climbed as much as 1%, with Tencent, TSMC and AIA Group providing the biggest boosts among individual stocks. Japan was closed for a holiday. Financial stocks lent the most support among sub-indexes to the regional benchmark, which traded close to its 200-day moving average. Sentiment was helped by a rebound in riskier Additional Tier 1 bonds sold by banks in the region, along with news that US officials are studying ways to temporarily guarantee all bank deposits if the turmoil expands.  “Whenever there is bad news on individual banks, governments and big global banks are responding immediately, helping markets find a bottom,” analysts at Shinhan Investment Corp. wrote in a note.  Benchmarks in Hong Kong and China advanced more than 1% to lead a regional rebound. The Hang Seng Tech Index gained 2.5% as Tencent climbed ahead of its earnings release. Korean stock gauges rose after China approved more foreign online game titles, fueling a rally among related stocks.  Investors are waiting for the Fed’s monetary policy decision, due early Thursday in Asian hours, with expectations that the US central bank will refrain from an aggressive interest rate increase. Pershing Square’s Bill Ackman said the Fed shouldn’t raise its benchmark rate. In Australia, the S&P/ASX 200 index rose 0.8% to close at 6,955.40, buoyed by a rebound in banks and mining shares. The rise comes following gains on Wall Street as immediate concerns over the global financial system dissipated. Australia’s central bank will consider pausing its policy tightening cycle next month, given that interest-rate settings are already restrictive and the economic outlook is uncertain, minutes of its March meeting showed. In New Zealand, the S&P/NZX 50 index fell 0.3% to 11,531.30. Stocks in India rose, helped by a recovery in lenders who posted their biggest gains in two weeks as investors chose to look beyond the ongoing banking crisis and chase pockets of value.  Tata Consultancy Services, the country’s biggest software exporter, slumped for a ninth straight session. This was the stock’s longest losing streak since November 2007, triggered by a surprise change in its top leadership. Meanwhile, the turmoil in US and European banks continued to dent the appeal for information technology service providers. The S&P BSE Sensex Index rose 0.8% to 58,074.68 in Mumbai, while the NSE Nifty 50 Index advanced 0.7%. The gauges have now risen for three of the last four sessions but slipped more than 4% over the last one month as global equities remained under pressure on concerns of slowing growth and higher rates. The 50-stock Nifty gauge is now trading at 17.3 times its members’ estimated earnings for the next 12 months - the lowest in one year -  and near its 10-year average, according to data compiled by Bloomberg. In FX, the Dollar Index is flat after a three-day fall. The New Zealand dollar is the weakest among G-10 currencies, followed by the Japanese yen. The euro advanced to the strongest level in five weeks and short-end German bonds extended a drop as concerns about contagion in the European banking sector eased further following the rescue deal of Credit Suisse Group AG over the weekend.  EUR/USD rose as much as 0.5% to 1.0770, the highest since Feb. 14. In rates, the improving market sentiment dented government bonds and treasuries extend declines led by the short-end as US stock futures gain and money markets add to Fed tightening wagers ahead of Wednesday’s policy decision. Losses across the curve are led by an aggressive bear-flattening move in bunds, with 2-year German yields nearly 21bp higher on the day to 2.57% as traders also bet the ECB will raise rates again in May. The US 2-year yield rises 11bps to 4.09% while its 10-year peer climbs 5bps to 3.54%, flattening the 2s10s curve 6bps to -56bps. Traders bet on 20bps of Fed hikes this week and add as much as 17bps to tightening expectations this year. The US session includes 20-year bond auction reopening at 1pm, while a $15b 10-year TIPS sale is slated for Thursday. WI 20-year yield near 3.875% is around 10bp richer than last month’s, which tailed by 0.2bp. Cash trading was closed in Tokyo for a Japanese holiday. In commodities, crude futures rose for a second day with WTI rising 1.3% to trade near $68.50 after swinging in a $3-plus range on Monday. Traders are starting to return to risk markets after authorities stepped in to shore up the financial system. US officials are also studying ways they might temporarily expand protection for all deposits. Spot gold falls 0.6% to around $1,697. Bitcoin gains 0.4%.  To the day ahead now, we get the US existing home sales for February and the latest Philly Fed non-mfg survey. From central banks, we’ll hear from the ECB’s Lagarde and Villeroy, whilst the two-day FOMC meeting will be getting underway ahead of tomorrow’s decision. Lastly, earnings releases include Nike. Market Snapshot Australia’s central bank will consider pausing its policy tightening cycle next month, given interest-rate settings are already restrictive and the economic outlook is uncertain, minutes of its March meeting showed. BBG Vanguard will shut its remaining business in China after a partial retreat two years ago, people familiar said. It will shut the Shanghai unit and exit a robo-advisory joint venture with Ant Group. The reversal comes as rivals including BlackRock and Fidelity strive to build up local operations as China's recovery and a pension reform brighten prospects. BBG UBS relies more on AT1 bonds for its capital than any other major lender in Europe. AT1s are the equivalent of about 28% of its highest quality regulatory capital, Bloomberg calculations show, just slightly more than for Barclays. The average exposure among the 16 biggest banks in Europe is about 16%. BBG Financial market turmoil may do some of the ECB's work for it if it dampens demand and inflation, ECB President Christine Lagarde said on Monday. "Clearly financial stability tensions might have an impact on demand and might actually do part of the work that would otherwise be done by monetary policy and interest rate hikes," Lagarde told European lawmakers. RTRS The Federal Home Loan Bank System issued $304 billion in debt last week, according to a person familiar with the matter, who asked not to be identified discussing non-public data. That’s almost double the $165 billion that liquidity-hungry lenders tapped from the Federal Reserve. BBG US officials are studying ways they might temporarily expand FDIC coverage to all deposits, a move sought by a coalition of banks arguing that it’s needed to head off a potential financial crisis. BBG The jobs market may not be as robust as it seems as many job postings are “fake”, with the prospective employer having no intention of immediately filling the position in question. WSJ US accounting rulemakers are being urged to rethink how banks should value their assets in financial statements, in the wake of the run on Silicon Valley Bank and pressure across the regional banking sector. Advocates of “fair value” accounting are urging the Financial Accounting Standards Board to force banks to recognize unrealized losses on securities such as those held by SVB, even when management insists they will never have to be sold. FT Wall Street bank chief executives are trying to come up with a new plan for First Republic after a $30bn lifeline failed to arrest a sharp sell-off in the lender’s shares. The executives will discuss if anything more can be done for the California-based lender on the sidelines of a pre-planned gathering in Washington on Tuesday, which is being organized by the Financial Services Forum, one of the main industry lobby groups. FT Pacific Investment Management Co. and Invesco Ltd. are among the largest holders of Credit Suisse’s so-called Additional Tier 1 bonds that have been wiped out after the bank’s takeover by UBS Group AG: BBG First Republic Bank shares rallied in US premarket trading after falling to a record low Monday, as investors ponder what’s next for the struggling midsize lender following an offer of help from JPMorgan Chase & Co: BBG Top Overnight News S&P 500 futures up 0.9% to 4,018 MXAP up 0.5% to 156.40 MXAPJ up 1.0% to 504.24 Nikkei down 1.4% to 26,945.67 Topix down 1.5% to 1,929.30 Hang Seng Index up 1.4% to 19,258.76 Shanghai Composite up 0.6% to 3,255.65 Sensex up 0.7% to 58,035.99 Australia S&P/ASX 200 up 0.8% to 6,955.40 Kospi up 0.4% to 2,388.35 STOXX Europe 600 up 1.2% to 446.06 German 10Y yield little changed at 2.18% Euro up 0.1% to $1.0734 Brent Futures up 0.7% to $74.28/bbl Gold spot down 0.6% to $1,967.56 U.S. Dollar Index little changed at 103.35 A more detailed look at global markets Asia-Pac stocks mostly tracked the gains on Wall St where some of the banking sector jitters dissipated following the Credit Suisse rescue and amid hopes FDIC’s deposit insurance amount could be increased. ASX 200 was led by outperformance in energy, financials and the mining-related sectors, while the RBA Minutes from the March meeting noted that the Board agreed to reconsider the case for pausing at the April meeting. Nikkei 225 was closed as Japanese participants observed the Vernal Equinox holiday. Hang Seng and Shanghai Comp. gained as Hong Kong benefitted from strength in consumer stocks and the mainland was buoyed by the PBoC’s liquidity injection albeit with upside capped on higher money market rates. Top Asian News China is giving chipmakers new powers to guide a recovery in the industry with a handful of China's most successful chip companies to get easier access to subsidies and more control over state-backed research, according to FT. RBA March Minutes said the Board agreed to reconsider the case for pausing at the April meeting and that a pause would allow time to reassess the outlook for the economy, while it added that further tightening of monetary policy is likely required to lower inflation. RBA noted monetary policy was in restrictive territory and the economic outlook was uncertain, while these considerations meant that it would be appropriate at some point to hold the cash rate steady to assess more fully the effect of the interest rate increases to date. Furthermore, it said inflation is too high, the labour market is tight, business surveys are solid and sluggish productivity could lead to more persistent inflation. European bourses are firmer on the session, Euro Stoxx 50 +1.7%, as the region continues the positive APAC handover with specific banking-sector updates slim. Sectors are all in the green with Banking names the outperformer, SX7P +3.5%, and back at Friday's best levels; albeit, the index has someway to go to recoup the pressure of recent days/weeks. Stateside, futures are similarly in the green though magnitudes are much more contained as participants await updates to First Republic (FRC) and the FDIC ahead of Wednesday's FOMC, ES +0.6%. Top European News The Times shadow monetary policy committee urges the BoE to continue raising interest rates this week. Two members said the Bank should stick to 50bps, five said 25bps and one said unchanged. ECB's Kazaks said uncertainty in financial markets is high and it is not possible to say that we have stopped hiking, while he added that European banks are well capitalised and financial resources are available, according to Bloomberg. ECB's de Cos says he cannot validate the markets expectation of a 3.25% peak rate, via Expansion. Swiss KOF: Inflation forecast at 2.6% (prev. 2.3%) and 1.5% (prev. 1.1%) in 2023 and 2024. Click here for more detail. Bank headlines US officials are examining ways to permit the FDIC to temporarily insure deposits beyond the current USD 250k cap on most accounts without the need for congressional approval, according to Bloomberg. There were also earlier reports that the House Freedom Caucus is against raising bank deposit guarantees. US banking executives are to discuss at a Financial Services Forum event on Tuesday the next steps for First Republic (FRC), via FT citing sources. Swiss Banking Association says Swiss banking credibility has not been destroyed by the Credit Suisse (CSGN SW) crisis, but the situation is not good. ESMA Chair says reforms to make money market funds more resilient to economic shocks are needed sooner rather than later. Australia's prudential regulator has begun asking banks to declare their exposures to start-ups and crypto-focused ventures following the collapse of Silicon Valley Bank and volatility at global lenders, according to AFR. FX The DXY is underpressure as the risk tone takes a more constructive tilt, with the index at the low-end of 103.24-103.51 parameters. Amidst this, the EUR is the marginal outperformer as the single currency extends above 1.07 though has seemingly paused for breath at 1.0750 with specific catalysts thin. Next best is the CHF, though this is more a recuperation of recent depreciation than any concerted upward move vs the USD while EUR/CHF is essentially flat, given the EUR's relative strength. Antipodeans are at the bottom of the G10 pile following data and RBA minutes which suggested that a pause could occur in April, currently AUD/USD and NZD/USD are below 0.67 and 0.62. Additionally, given the above, the JPY has pared back much of Monday's haven allure with USD/JPY around 25pips shy of Monday's 132.64 high at best. PBoC set USD/CNY mid-point at 6.8763 vs exp. 6.8753 (prev. 6.8694) Fixed Income Bonds extend retreat from Monday's lofty safe haven peaks as risk appetite continues to pick up amidst less financial sector stress. Bunds down to 136.62 vs yesterday's 140.30 Eurex best, Gilts to 104.65 from 107.33 and T-note 114-18+ compared to 116-24. Solid 2053 DMO issuance provides UK debt with little support and 20 year US supply still to come. Commodities WTI and Brent are firmer in-fitting with the risk sentiment seen in European trade and with the complex attentive to commentary from Goldman Sachs, among others. Specifically, the benchmarks are towards the top-end of USD 66.77-68.500/bbl and USD 72.82-7466/bbl parameters respectively. Spot gold is softer given the relatively constructive tone with the yellow metal retreating further from Monday's USD 2009/oz peak to USD 1963/oz at worst while base metals are benefitting from broader action and reports relating to China's steel output. Goldman Sachs' Commodities Head Currie sees upside of USD 5-10/bbl for crude, saying a Fed pause would be bullish for oil. Trafigura says they do not see major impact on industry from Credit Suisse (CSGN SW); current oil prices are not encouraging production. Still moving limited Russian refined products and considering whether to resume more Russian oil trade, CEO does not see much downside for oil at this point. Adds, that the existing LME Nickel contract is not fit for purpose. Gunvor Co-head of trading says with all these new refineries coming on stream, we are not very bullish on refined products down the road; does not think oil price can go over USD 100/bbl by December. Pierre Andurand of Andurand Capital sees oil price at USD 140/bbl at year end. TotalEnergies (TTE GP) Normandy refinery (250k BPD) is to be shutdown amid strike action, according to a statement. Norwegian oil production (Feb) 1.776mln BPD (vs. prev. M/M 1.754mln BPD), gas production 9.9bcm (vs. prev. M/M 11.1mln BPD). China is reportedly considering cutting 2023 crude steel output by circa. 2.5%, via Reuters citing sources. Geopolitics Chinese President Xi said China will continue to play a constructive role in promoting a political settlement of the Ukraine crisis, while President Xi told Russian President Putin that ties with Russia are China's strategic choice. Chinese President Xi has invited Russia President Putin to visit China, via Ria. Subsequently, Russia's Kremlin says Putin and Xi had a throughout exchange on Monday including on Chinese peace proposal for Ukraine, declined to give more details. Iran is interested in developing peaceful nuclear and renewable energy cooperation with Russia, according to RIA. Japanese PM Kishida said he will visit Kyiv and meet with Ukrainian President Zelensky, according to NHK. It was later reported that Japan's Ministry of Foreign Affairs said Japan and Ukraine leaders will hold a summit today. South Korea imposed sanctions on four individuals and six entities linked to North Korea's weapons programmes, while it announced a watch list to ban the export of items related to North Korea's satellite development, according to Reuters. US Event Calendar 08:30: March Philadelphia Fed Non-Manufactu, prior 3.2 10:00: Feb. Existing Home Sales MoM, est. 5.0%, prior -0.7% 10:00: Feb. Home Resales with Condos, est. 4.2m, prior 4m DB's Jim Reid concludes the overnight wrap Morning from what promises to be a very sunny warm day in Lisbon which makes a nice change from the rain in London as I left yesterday as we hit the first official day of spring. Like the seasons, it did feel like a new beginning for markets as they finally saw some positivity in the UBS-Credit Suisse deal after an open that felt like we might be in an ice age rather than starting to see green seasonal shoots. It's worth looking at how bad the open was yesterday and why it turned around. The STOXX 600 fell by almost -2% within 20 minutes of the opening bell, whilst UBS was down almost -16% with European bank AT1s down around 10-15%. It was a similar story on the rates side too, since the 10yr Treasury yield hit its lowest intraday level in over 6 months, at just 3.286% (-14.3bps at that point). It all turned when we got a statement from the European Banking Authority that explicitly set out that the EU’s practice was that “common equity instruments are the first ones to absorb losses”, and that “only after their full use would Additional Tier One be required to be written down”. A similar statement was then issued by the Bank of England, which said that the UK’s bank resolution framework “has a clear statutory order” as used in the case of SVB UK, which prioritised AT1 ahead of CET1. With that reassurance, AT1s recovered somewhat over the session and we saw a broader boost in bank stocks across the board. In more detail, Euro Sub-Financial CDS was as much as +46bps wider on the open yesterday before closing -13bps tighter overall, while the senior index was +18bps wider just after the open before finishing -12bps tighter by the end of trading. The STOXX Banks index advanced +1.97% (from -6.61% at the early lows), as all 19 of the 23 members moved higher on the day. This was an extremely important announcement as most financial investors felt very uncomfortable with the details of the Swiss merger and what it did for AT1 bondholders rights in the resolution pecking order. The EU/UK clarity was a very good move and net net probably helps the European economy longer-term as to permanently increase the cost of bank capital would be counterproductive. As we've shown for the last few days, CS was massively decoupled from the rest of the European banking sector in CDS terms over the last several months, so whilst harder times are to come economically, this announcement and the prior fairly stable European banking system outside of CS, should cut off contagion risks. US banks have a few more issues to deal with still though and although the KBW Banks index was up +0.79% on the day, they were as much as +2.4% higher before selling off steadily after Europe went home. This came as concerns continue to percolate regarding US bank First Republic, even after last week’s move by other US banks to deposit $30bn. S&P cut their credit rating to B+ from BB+ over the weekend and yesterday saw their shares end the day down -47.08%, which builds on a decline of more than -80% already over the previous two weeks. There was a short intraday rally after the Wall Street Journal reported that JPMorgan CEO Jamie Dimon was leading discussions with other CEOs to stabilise First Republic, which could involve some or all of the $30bn in deposits being converted into a capital infusion. Despite these headlines, the stock reverted lower to finish near the lows of the day. Overnight, it was reported that US officials at the Treasury Department and FDIC were studying ways to temporarily expand their deposit coverages in case the current situation expands into a full-blown crisis of confidence. The White House was looking into whether federal regulators would be able to increase the $250k cap without an act of Congress as headlines suggest Republicans would oppose the move. Aside from the First Republic issues, the more positive shift in sentiment saw investors put growing weight on the probability of the Fed hiking rates tomorrow. For instance, shortly after the European open when everything had slumped, just 9bps worth of hikes were being priced in by futures. But that bounced back over the rest of the session, and by the close a 17.8bps hike was priced in, which is equivalent to a 71.2% probability. So for the time being at least (and clearly things are subject to change in these conditions), it would still be a surprise relative to expectations if the Fed didn’t go ahead. Last night, our own US economists published their preview of tomorrow’s Fed meeting (link here), and they agree with the view that the Fed will opt for 25bps. Our economists expect the Fed to follow the ECB’s lead and raise rates in line with expectations, do away with forward guidance, but signal a continued tightening bias. They do not expect much change to the dot plot or the SEP from December, and Powell will also likely emphasise the heightened uncertainty surrounding those forecasts in his press conference. Those expectations of a Fed hike meant that yields posted a small increase yesterday, with the 10yr Treasury yield ending the day up +5.6bps at 3.485%. As with bank stocks though, that only came after a big turnaround earlier in the session, having recovered by nearly +20bps from their intraday low of 3.286%. It was much the same story in Europe too, with the 10yr bund yield up from a low of 1.91% after the open before closing at 2.125%, leaving it up by a net +1.7bps over the day. For equities it was also a positive session, at least once we got past the European morning. By the close, the STOXX 600 had advanced +0.98%, capping off a turnaround of almost +3% on an intraday basis from the initial lows. And over in the US, the S&P 500 was up +0.89%, which now leaves it down by just -1.01% since its close on March 8 before the concerns about SVB really took hold. Tech stocks were the main underperformer yesterday, with Software (-0.8%) the worst-performing industry, but even so the NASDAQ still gained +0.39%. This morning in Asia a cautious rally continues. As I check my screens, the Hang Seng (+0.33%), the KOSPI (+0.30%), the CSI (+0.42%) and the Shanghai Composite (+0.15%) are trading in positive territory. Elsewhere, markets in Japan are closed for a holiday with Treasuries not trading overnight. In central bank news, the minutes from the Reserve Bank of Australia’s recent meeting were less hawkish as the central bank indicated a near-term pause in interest rate increases at its upcoming policy meeting scheduled on April 4th, as uncertainty surrounding the economic outlook persists. In response to the RBA meeting minutes, the Australian dollar rose to a high of 0.6726 versus the US dollar before settling at $0.6687 as we go to press. Meanwhile, 10yr government bonds rallied with yields dropping -4bps to 3.20% as I type. Amidst all the financial news, one more positive story in the background for consumers (albeit for negative return reasons) has been the continued decline in commodity prices. For instance, European natural gas futures (-8.24%) closed at a 19-month low of €39.325 per megawatt-hour yesterday, which brings their decline over March so far to -15.73%. Oil prices were under pressure for most of the day before a late rally in the US left Brent crude up +1.12% to $73.79/bbl and WTI contracts were up +1.35% to $67.64/bbl. Both contracts reached their lowest level since December 2021 intraday. Overall the recent drop in energy prices will benefit consumers, as well as central banks since it’ll offer them a helpful tailwind on the inflation side. On the other hand, it’s worth noting that much of the decline is thanks to growing concerns about a recession, with oil traditionally being a more cyclical commodity in those circumstances. To the day ahead now, and data releases include the German ZEW survey for March, Canada’s CPI for February, and US existing home sales for February. From central banks, we’ll hear from the ECB’s Lagarde and Villeroy, whilst the two-day FOMC meeting will be getting underway ahead of tomorrow’s decision. Lastly, earnings releases include Nike. Tyler Durden Tue, 03/21/2023 - 08:05.....»»

Americans To Bear Burden Of Monetary System's Gradual Deterioration, Economist Says Authored by Petr Svab via The Epoch Times (emphasis ours), Ordinary Americans can expect their wealth to get repeatedly chipped away as the monetary system degrades and requires progressively more intervention by authorities to perpetuate itself, according to an influential author and economist. It may take “a very long time,” however, for the system to actually break, he told The Epoch Times. Traders work on the floor at the New York Stock Exchange as the Federal Reserve chairman Jerome Powell speaks after announcing a rate increase in New York on Nov. 2, 2022. (Seth Wenig/AP Photo) The recent downfall of two sizable American banks, Silicon Valley Bank (SVB) and First Republic Bank, rattled the financial markets. Investors are now looking to the Federal Reserve to provide relief and within months reverse its policy of raising interest rates. That’s after the central bank, together with the Treasury and the Federal Deposit Insurance Corporation (FDIC), already shored up the banking sector, offering special loans and guaranteeing uninsured deposits for the failed banks. The failures, however, represent a symptom of a broader problem—one the central bank can’t fix, according to Daniel Lacalle, fund manager, economist, and prolific author. “The problem here is the concept of ‘what can be done?’” he said, arguing central bank market interventions intended to smooth over market perturbations tend to simply redistribute the risk and losses—and at the added cost of making the system more fragile in the long run. “Every time they try to solve a bubble with more liquidity injections, they create another bubble,” he said. “What you have to do first is not implement crazy monetary policies.” He was referring to the policy of extremely low interest rates that the Fed maintained for most of the past decade. Free Money Lacalle alluded to the Austrian economic theory, which posits that central banks can’t set interest rates correctly. When the economy is not doing well, central banks set the rates artificially low in order to “stimulate” the economy. That allows companies to loosen fiscal discipline and makes credit available to projects that would be otherwise too risky to attract capital. When the economy “overheats”—the availability of credit outstrips the production capacity of the economy, resulting in inflation—the central bank raises rates, tightens credit, and the poorly performing risky projects go under. Because rate hikes take more than a year to fully manifest in the economy, central bankers tend to continue hiking for too long. Excessively high rates then cause the destruction of even viable businesses. Recession ensues. The central bank then tries to cushion the recession blow by dramatically cutting rates, thereby repeating the cycle. “After a decade of excess, of course, there are going to be episodes like SVB and these other regional banks,” Lacalle said. SVB was the banker of choice for many Silicon Valley tech startups and their venture capital funders that have benefited from the protracted period of loose credit. In just a few years, it grew into one of the 20 largest banks in the country, with some $200 billion in assets. When its investments started to underperform and its stock dropped, clients got cold feet and many moved their money elsewhere, triggering a bank run. Regulation Some economists have argued that the SVB crash was the fault of regulators. The Federal Reserve of San Francisco should have stepped in when it saw warning signs of SVB’s instability, argued the Brookings Institution’s Aaron Klein in a recent commentary. Lacalle wasn’t convinced. He pointed out that on paper, SVB was following the regulatory mantras. “You’re hedging your volatile positions in technology and risky ventures, which obviously is your core business—that’s nothing we can do about—and you’re hedging it with long-term treasuries and mortgage-backed securities,” he said. But it was exactly the large treasuries portfolio, which dropped in value due to the Fed’s rate hikes last year, that pushed SVB over the edge. Klein also pointed to SVB’s unhedged $100 billion position in mortgage-backed securities. But Lacalle noted that the Fed itself has designated those as low-risk, sitting on $2.6 trillion of them. If the Fed, as a regulator, was to declare mortgage-backed securities as risky, how could the Fed, as a monetary policy setter, declare them low-risk? Intervention The Fed’s response to the SVB crisis is a typical example, Klein suggested, of the system’s underlying flaw—a short-term solution with long-term negative implications. Shortly after regulators took over SVB, the Fed, the Treasury, and the FDIC announced that no depositors in the failed banks will lose money, despite most of the deposits being above the FDIC insurance limit of $250,000 per account. Furthermore, to ensure no other banks hit a liquidity crunch because of the value drop in their treasury holdings, the Fed will allow them one year to borrow against those holdings at “par value”—the Fed will de facto pretend the treasuries are worth more than they currently are. The Fed’s apparent motivation was to forestall runs on other smaller banks. Yet its actions created “an incentive to take even more risk by the next bank,” Lacalle said. “The example of SVB is telling everyone that what they should do is exactly what SVB did because nothing’s going to happen. If things go well, you will make a lot of money and if things go badly, bad luck, but nothing’s going to happen. So what is the incentive to be prudent and to have a prudent level of risk management? Zero.” Read more here... Tyler Durden Mon, 03/20/2023 - 22:20.....»»

SuRo Capital Corp. (NASDAQ:SSSS) Q4 2022 Earnings Call Transcript March 15, 2023 Operator: Good day ladies and gentlemen and thank you for standing by. Welcome to the SuRo Capital Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will […] SuRo Capital Corp. (NASDAQ:SSSS) Q4 2022 Earnings Call Transcript March 15, 2023 Operator: Good day ladies and gentlemen and thank you for standing by. Welcome to the SuRo Capital Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. This call is being recorded today, Wednesday, March 15, 2023. I will turn the call over to Mr. Sindhu Kotha of SuRo Capital. Please go ahead. Sindhu Kotha: Thank you for joining us on today’s call. I am joined today by the Chairman and Chief Executive Officer of SuRo Capital, Mark Klein; and Chief Financial Officer, Allison Green. Please note that a slide presentation corresponding to today’s prepared remarks by management is available on our website at www.surocap.com under Investor Relations, Events & Presentations. Today’s call is being recorded and broadcast live on our website at www.surocap.com. Replay information is included in our press release issued today. This call is the property of SuRo Capital and the unauthorized reproduction of this call in any form is strictly prohibited. I would also like to call your attention to customary disclosures in today’s earnings press release regarding forward-looking information. Statements made in today’s conference call and webcast may constitute forward-looking statements, which relate to future events or our future performance or financial condition. These statements are not guarantees of our future performance or future financial condition or results and involve a number of risks, estimates, and uncertainties, including the impact of the COVID-19 pandemic and any market volatility that may be detrimental to our business, our portfolio companies, our industry, and the global economy that could cause actual results to differ materially from the plans, intentions, and expectations reflected in or suggested by the forward-looking statements. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including but not limited to those described from time-to-time in the company’s filings with the SEC. Management does not undertake to update such forward-looking statements unless required to do so by law. To obtain copies of SuRo Capital’s latest SEC filings, please visit our website at www.surocap.com or the SEC’s website at sec.gov. Now, I would like to turn the call over to Mark Klein. Mark Klein: Thank you, Sindhu. Good afternoon and thank you for joining us today during these tumultuous times. We would like to share the results of SuRo Capital’s fourth quarter and fiscal 2022. Over the weekend, the second and third bank failures in US history occurred when Silicon Valley Bank and Signature Bank closed. The residual impact of these events is still rippling through the broader markets. In particular, the global financial system is experiencing instability that is being despite the actions taken by the Federal Reserve. While Silicon Valley Bank and Signature Bank may be the only financial institutions to fail, uncertainty may cause significant further dislocation. Additionally, the SVB closure has highlighted the concentration of interdependencies that exist within and between the startup and venture capital ecosystems. As such, we expect the unfortunate collapse of SVB, which was densely integrated within the startup funding ecosystem to potentially have longer tail impacts and possibly shift the way we think about liquidity solution. Amid these events, our team moved quickly to both assess and mitigate where possible exposure to SVB as well as reach out to our portfolio companies, determine what support SuRo Capital might be able to provide. SuRo Capital’s direct exposure to the affected banks was limited to less than a $2,000 business checking account at SVB. SuRo Capital’s cash and securities are held at our custodian US Bank and in its short-term US Treasuries. Additionally, stemming from acts the Fed, all of our portfolio companies that held cash at SVB are expected to regain access to those funds. It is important to also contextualize these recent events which have taken place against the backdrop of 2022. As has been well 2022 , it was one of the worst years for equity markets in decades. The year saw the NASDAQ Composite Index declined by over 30%, while technology stocks as measured by the MorningStar US Technology Index declined 31.5%, their largest single-year loss since 2008. NASDAQ Market Intelligence reports that growth, heavy communications, consumer discretionary, and technology sectors were the largest , with 2022 declines by approximately 40%, 37%, and 28% respectively. Given the overall market conditions, we have seen and continue to see a repricing of private securities and opportunities for us to take advantage of the market’s volatility. While we have been cautious about deploying capital into the turbulent markets, we are seeing increasingly compelling opportunities as the pricing of private — to the movements in the public markets. To that end, we made investments totaling $24 million over the course of the year with $10.3 million of that being deployed in Q4. The Q4 investments comprised of one new portfolio company, Locus Robotics and a follow-on investment made in FanPower via SuRo Capital Sports. Moving further into the new year with over $125 million of investable capital, we remain continuing investing in both primary and secondary opportunities — later stage, high-growth companies at which we will — be we believe will be compelling valuations. We believe current market conditions present an opportunity to explore prospects as businesses opt to remain private for longer to avoid going public in volatile market conditions. Additionally, while there is still a divergence between pricing in the private and public markets, we believe — will continue to converge created advantageous conditions for us to deploy capital. Despite significant slowdowns in SPAC transactions, we are pleased to share the following recent updates of our SPAC positions. On February 27, 2023 — Colombier acquisition announced their intention to merge with PublicSq., an ecommerce marketplace at a valuation of more than $200 million. Assuming — between Colombier and PSQ Holdings is completed, SuRo Capital’s position in the new company will be worth more than $25 million. If the price of the new company holds, SuRo will see an over $20 million increase in its position, given our current stake in Colombier acquisition. Our current cost basis for the investment is approximately $2.7 million. On February 17, 2023, Churchill Capital VI and Churchill Capital VII filed 8-Ks notifying investors they had signed LOIs with target companies. While we are encouraged they have signed an LOIs, this does not ensure that they will reach a definitive agreement or consummate these transactions. Turning to Q4, we ended the year with a net asset value of $210 million or $7.39 dollars per share. That NAV compares to a net asset of $7.83 a share in Q3 2022 and $11.72 dollars a share at the end of 2021. Turning to our top five positions, I’d first want to highlight our cash position. As of year-end, our cash and short-term treasury is available for investment were approximately $120, representing 44% of our gross assets. As we have previously discussed, we believe having cash in this environment advantageous leaves us to continue seeking out new opportunities becoming available due to current market conditions. SuRo Capital’s top five positions as of December 31st were Learneo, formerly known as Course Hero; Blink Health; Orchard Technologies, Locus Robotics, and Architect Capital PayJoy SPV. These positions accounted for approximately 59% of the investment portfolio at fair value. Additionally, as of December 31st, our top 10 positions accounting approximately 78% of the investment portfolio. In the fourth quarter, Course Hero announced the formation of Learneo, a new platform that will house the company six distinct operating businesses; CliffsNotes Course Hero, LitCharts, QuillBot, Squibber , and Symbolab. The parent organization will now be under the Learneo name to reflect the company’s recent growth in business segments that not only support educational use cases, but also support a development of fundamental — foundational skills that unlock productivity beyond education. Our most recent investment to the SuRo Capital investment portfolio is Locus Robotics. Locus is an industry-leading autonomous mobile robotics company that seeks and accuracy in fulfillment and distribution warehouses. We participated with a $10 million investment in Locus’ Series F Preferred Round that was led by Goldman Sachs Asset Management and G2 Venture Partners and as reported by Business Insider was oversubscribed. Locus seeks to deliver productivity increases and improvements in warehouse operations by coordinating human labor with their robotic systems. Locus is currently deployed in over 230 sites globally for more than 90 worldwide customers including DHL, GEODIS, and Ryder. We believe Locus innovative solution is well-positioned for retailers third-party logistic companies, 3PLs and especially warehouses to effectively manage the increasingly complex and demanding requirements placed on today’s fulfillment environments. Since completing the funding round, Locus Robotics has formed partnerships with Berkshire Grey, a leader in AI enabled robotic solutions that automate supply chain processes — Optoro, a leading technology platform for retail and returns of reverse logistics. The company solution picked over 230 million units during the peak holiday shopping period, more than doubling the total number of items in the entire 2021. Transitioning to our public investments, as previously stated, it is our objective to sell our public positions when lockup restrictions expire and there is a relative stability in a given company’s public position trading. In line with this, we continue to monetize several of our public unrestricted positions over the course of the quarter. During the fourth quarter, we fully exited our position in Rover and reduced our positions at NewLake Capital Partners, Rent the Runway, and Kahoot. Subsequent to year end, we sold our remaining positions in Rent the Runway and what was remaining in Kahoot. I would also like to reiterate SuRo Capital’s commitment to initiatives that enhance shareholder value. As such, given our stock is trading at compared to net asset value, we believe our active share repurchase program is an efficient and an accretive deployment of capital. Allison will speak more about our share repurchase program later in the call. As always, it is our intent to be transparent as possible with respect to our dividend distributions. As a BDC that is elected to be treated as a , to distribute our net realized loan capital gains as dividends. Given we recognize net long-term losses in 2022, we will not be distributing any dividends for 2022. As public and private market volatility persists, we remain patient and selective as we continue to evaluate our new opportunities. This will allow us to leverage our considerable cash position and add high growth companies to our field and driving shareholder value. Thank you for your attention, and with that, I will hand it over to Allison Green, our Chief Financial Officer. ImageFlow/Shutterstock.com Allison Green: Thank you, Mark. I would like to follow Mark’s update with a more detailed review of our fourth quarter investment activity and financial results as of December 31st, including the status of our share program and our current liquidity position. First, I will review our investment activity. During the fourth quarter, we invested a total of $10.3 million in new investments. New investments during the fourth quarter include; a $10 million dollars investment in the Series F preferred shares of Locus Robotics Corp. and a $250,000 dollars follow-on investment and Series C2 preferred shares of YouBet Technologies Inc. doing business as FanPower, the SuRo Capital Sports. Over the course of the fourth quarter, we sold our remaining public shares of Rover and continued to monetize our public common shares in Kahoot, NewLake Capital Partners and Rent the Runway. sales of our unrestricted publicly-traded investments, during the fourth quarter, we received approximately $300,000 in proceeds from Second Avenue related to principal repayment and interest on the 15% term loan due December 2023 as well as other investment, dividend, and interest income. Subsequent to year end through today, we completed a $2 million follow-on investment in Orchard Technology Inc. Senior 1 Series preferred shares. Additionally, year end through today, we sold our remaining public common shares of Rent the Runway and continued to monetize our public common shares in Kahoot and NewLake Capital Partners. Finally, subsequent to year end, we received approximately $200,000 in net proceeds from Second Avenue related to principal repayment and interest on the 15% term loan due December 2023 as well as other investment dividends and interest income. Segmented by six general investment of our investment portfolio at year end technology, representing approximately 39% of the investment portfolio at fair value. Financial technology and services, the second largest category, representing approximately 24% of the portfolio. The marketplaces category accounted for approximately 17% of our investment portfolio and approximately 10% of our investment portfolio is invested in cloud and big data companies. Social and mobile accounted for approximately 9% of the fair value of our portfolio and sustainability accounted for less than 1% of fair value of our portfolio as of December 31st. As mentioned earlier by Mark, SuRo Capital is committed to initiatives that enhance shareholder value. As such, over the course of 2022, SuRo Capital repurchased over 3 million shares, representing approximately 10% of previously outstanding shares via the share repurchase program and modified Dutch Auction Tender Offer. The dollar value of shares that may yet be purchased by the company under the share repurchase program is approximately $16.4 million. The share repurchase authorized through October 31st, 2023. Under the repurchase program, we may repurchase SuRo Capital outstanding common stock in the open market provided to comply with the provisions under our insider trading policies and procedures, and the applicable provisions of the Investment Company Act of 1940 as amended and the Securities Exchange Act of 1934 as amended. We are pleased to report we ended the fourth quarter and fiscal year 2022 with an NAV per share of $7.39, which is consistent with our financial reporting. The decrease in NAV per share from $7.83 end of Q3 was primarily driven by a $0.27 per share decrease resulting from unrealized depreciation of our portfolio investments during the quarter, in addition to a $0.10 per share decrease due to a net investment loss and a $0.07 per share decrease due to net realized loss on investment. Additionally, I’d like to follow-up to Mark’s commentary regarding our tax treatment as the BDC RIC and dividends for 2022. As previously mentioned, SuRo Capital has elected to be treated as a RIC under Subchapter M of the Internal Revenue Code beginning 14 and is qualified to be treated as a RIC for subsequent taxable years. To qualify and be subject to taxes of RIC, the company is required to meet certain requirements in addition to the distribution requirements of an amount generally at least equal to 90% of its investment company taxable income and 98.2% of net long-term realized capital gains subject to an excise tax below 100% as defined by the Code. The amount to be paid out as the distribution is determined by the Board of Directors each quarter and is based upon the annual estimated by management of the company. Given our year end net investment loss of approximately $14.7 million and net long-term realized capital loss on investments of $5.9 million, we will not be distributing any dividends for 2022. This net long-term realized capital loss is carried forward into 2023. I would also like to take a moment to review SuRo Capital’s liquidity position as of December 31st. We ended the year with approximately $138.5 million including approximately $40.1 million in cash, $85.1 million dollars in short-term US securities and approximately $13.3 million in unrestricted public securities. This does not include approximately $24,000 in public securities subject to certain customary lockup provisions at year end. As Mark mentioned earlier, SuRo Capital’s direct exposure to recently impacted banks was limited to a less than $2,000 business checking account at Silicon Valley Bank. SuRo Capital’s cash is held at our custodian and in short-term US Treasuries. The approximately $13 million of unrestricted public securities held as of year-end represent our shares in Forge, Kahoot, NewLake Capital Partners, Rent the Runway, and Skillsoft valued at the December 31st, 2002 closing prices. The $24,000 of public security is subject to lockup provisions or other sales restrictions as of year-end is comprised of our position in Kahoot, valued at December 31st, 2022, closing public share price, less the discount for lack of market ability for the lockup provision. At December 31st, 2022, there were 28,429,499 shares of the company’s common stock outstanding. Presently, there are 28,338,580 shares of the company’s common stock outstanding. That concludes my comments. We would like to thank you for your interest and support of SuRo Capital. Now, I will turn the call over to the operator to start the Q&A session. Operator? Operator: Thank you. And we’ll first hear from Kevin Fultz of JP — JMP Securities. See also 22 Largest Hunting Companies in the US and 10 Best Healthcare Stocks for the Long Term. Q&A Session Follow Suro Capital Corp. (NASDAQ:SSSS) Follow Suro Capital Corp. (NASDAQ:SSSS) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Kevin Fultz: Hi, good afternoon and thank you for taking my question. I realize it’s a fluid situation, but just considering the events of the past week, has your view of the investment landscape shifted at all? I’m just looking to get your perspective and possibly maybe outlook on how recent developments could impact venture fundraising and also investment activity moving forward? Mark Klein: Thanks, Kevin, and thanks for your ongoing support. From Thursday up until today, it’s pretty interesting for all. I think if you were walking down the streets last Wednesday and ask people if they ever heard of Silicon Valley Bank, most would not have. So, clearly, the quick — the suddenness of what occurred caught everybody’s attention. I do think that with Silicon Valley Bank not there, you have — certain things that are occur as simple as how does a startup company or a new company open a bank account. As we all know, opening up a bank account large money set or banks takes an extreme period of time and it’s just a different level of complexity than whether it’s Silicon Valley Bank or some others that’s support the venture capital community. I think for a while venture capital funding has started to become more challenging. I think all of this is taken together an insular ecosystem that you see will cause people to take even more pause. I think on the secondary side, I suspect you’ll see more selling as people are trying to find liquidity and there’s a bit more uncertainty, so that might provide opportunity. Yet to be determined whether on the primary side, it will have any difference or not, but the primary markets have been challenged now for several months. So, hopefully that was helpful. Thank you again for your call. Operator: Was there anything further, Kevin? Kevin Fultz: No, that’s it for me. Thank you, Mark. Mark Klein: Thanks, Kevin. Operator: And there are no further questions. I’ll turn the call back over to our presenters for any additional or closing comments. Mark Klein: Well, thank you all again for taking time this afternoon to hear our earnings call. We’re always available to any of you if you want to call your ongoing support. Operator: That does conclude today’s call. Thank you all for your participation. You may now disconnect. Follow Suro Capital Corp. (NASDAQ:SSSS) Follow Suro Capital Corp. (NASDAQ:SSSS) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Readers are referred to the sections Non-IFRS Financial Measures and Forward-Looking Statements at the end of this release. All figures are expressed in Canadian dollars unless otherwise noted. MONTRÉAL, March 16, 2023 /CNW/ - Power Corporation of Canada (Power Corporation or the Corporation) (TSX:POW) today reported earnings results for the three and twelve months ended December 31, 2022. Power CorporationConsolidated results for the period ended December 31, 2022 HIGHLIGHTS Power Corporation Net earnings [1] were $486 million or $0.73 per share [2] for the fourth quarter of 2022, compared with $626 million or $0.93 per share in 2021.Adjusted net earnings [1][3] were $394 million or $0.59 per share, compared with $676 million or $1.00 per share in the fourth quarter of 2021. Adjusted net asset value per share [3] was $41.91 at December 31, 2022, compared with $52.60 at December 31, 2021.The Corporation's book value per participating share [4] was $34.58 at December 31, 2022, compared with $34.56 at December 31, 2021. The Corporation declared a quarterly dividend of $0.5250 per participating share, an increase of 6.1%, payable on May 1, 2023. On January 12, 2023, the Corporation announced the closing of the transaction to combine its interest in China Asset Management Co., Ltd. (ChinaAMC) under IGM Financial Inc. In 2022, the Corporation purchased for cancellation 11.2 million subordinate voting shares for a total of $415 million. On February 27, 2023, the Corporation announced its intention to purchase for cancellation up to 30 million subordinate voting shares during a twelve-month period under a normal course issuer bid. Contribution to net earnings from the publicly traded operating companies was $833 million in the fourth quarter of 2022, compared with $667 million in 2021.Contribution to adjusted net earnings from the publicly traded operating companies was $741 million in the fourth quarter of 2022, compared with $702 million in 2021. Great-West Lifeco Inc. (Lifeco) Fourth quarter net earnings were $1,026 million, compared with $765 million in the fourth quarter of 2021.Adjusted net earnings [5] were $892 million, compared with $825 million in the fourth quarter of 2021. Total assets were $701 billion and assets under administration [3] were $2.5 trillion at December 31, 2022, an increase of 11% and 9%, respectively, from December 31, 2021. Lifeco announced a 6.1% increase in its quarterly dividend, to $0.52 per share, payable March 31, 2023. Lifeco announced, on January 25, 2023, its intention to purchase for cancellation up to 20 million common shares during a twelve-month period under a normal course issuer bid. IGM Financial Inc. (IGM or IGM Financial) Fourth quarter net earnings were $224.7 million, compared with net earnings of $268.5 million and adjusted net earnings of $260.8 million in 2021. Assets under management and advisement [4] were $249.4 billion at December 31, 2022, a decrease of 10.0% from December 31, 2021 and an increase of 4.7% from September 30, 2022. Net outflows [6] were $440 million in the fourth quarter of 2022, compared with net inflows of $1.2 billion in the fourth quarter of 2021. Annual net inflows [6] for 2022 of $1.2 billion remained strong. In December 2022, IGM announced a strategic agreement with nesto Inc. to provide its clients with a best-in-class mortgage experience and enhance its efforts to support growth in its mortgage business. Groupe Bruxelles Lambert (GBL) GBL reported a net asset value [4] of €17.8 billion at December 31, 2022, or €116.18 per share, compared with €22.5 billion or €143.91 per share at December 31, 2021. In the fourth quarter of 2022, GBL completed €136 million of share buybacks. GBL completed €643 million of share buybacks in the twelve months ended December 31, 2022 and cancelled 3.4 million treasury shares. Sagard Holdings Inc. (Sagard) and Power Sustainable Capital Inc. (Power Sustainable) Assets under management [4], including unfunded commitments, of the alternative asset investment platforms were $21.1 billion at December 31, 2022, an increase from $19.1 billion at December 31, 2021. On November 29, 2022, Power Sustainable announced the closing of Vintage II of Power Sustainable Energy Infrastructure Partnership (PSEIP), raising $600 million of additional capital commitments, increasing the committed capital of the investment platform to $1.6 billion. On February 8, 2023, Sagard announced the initial closing of Sagard Senior Lending Fund with commitments totalling US$315 million. On March 9, 2023, Power Sustainable announced the launch of its Global and European infrastructure credit platforms which will target global investments in energy, transportation, social, digital and other sustainable infrastructure. [1] Attributable to participating shareholders. [2] All per share amounts are per participating share of the Corporation. [3]  Adjusted net earnings, adjusted net asset value and assets under administration (reported by Lifeco) are non-IFRS financial measures. Adjusted net earnings per share and adjusted net asset value per share are non-IFRS ratios. See the Non-IFRS Financial Measures section later in this news release. [4]  See the Other Measures section later in this news release. [5]  Defined as "base earnings" by Lifeco, a non-IFRS financial measure; see the Non-IFRS Financial Measures section later in this news release. [6]  Related to assets under management and advisement. FOURTH QUARTER Net earnings attributable to participating shareholders were $486 million or $0.73 per share, compared with $626 million or $0.93 per share in 2021. Adjusted net earnings attributable to participating shareholders [1] were $394 million or $0.59 per share, compared with $676 million or $1.00 per share in 2021. Contributions to Power Corporation's Earnings (in millions of dollars, except per share amounts) Net Earnings   Adjusted Net Earnings 2022 2021 2022 2021 Lifeco [2] 683 511 594 550 IGM [2] 140 166 140 161 GBL [2] (24) (3) (24) (3) Effect of consolidation [3] 34 (7) 31 (6) Publicly traded operating companies 833 667 741 702 Sagard and Power Sustainable [4] (183) 14 (183) 29 ChinaAMC  14 17 14 17 Other investments and standalone businesses [5] (82) 22 (82) 22 582 720 490 770 Corporate operations and Other [6] (96) (94) (96) (94) 486 626 394 676 Per participating share 0.73 0.93 0.59 1.00 Average shares outstanding (in millions) 667.3 676.5 667.3 676.5 Publicly traded operating companies: contribution to net earnings was $833 million and adjusted net earnings was $741 million, representing an increase of 24.9% and 5.6%, respectively, from the fourth quarter of 2021: Lifeco: contribution to net and adjusted net earnings increased by 33.7% and 8.0%, respectively. IGM: contribution to net and adjusted net earnings decreased by 15.7% and 13.0%, respectively. GBL: negative contribution to net earnings of $24 million. Results include the Corporation's share of a charge of $18 million in the fourth quarter of 2022 for losses due to an increase in the put right liability of the non-controlling interests in Webhelp Group (Webhelp) and charges related to Webhelp's employee incentive plan, as well as a decrease in contributions from GBL's associates and consolidated operating companies. Sagard and Power Sustainable: net earnings include a negative contribution of $160 million from Power Sustainable mainly related to a charge for the revaluation of non-controlling interests of $63 million due to fair value increases within the Power Sustainable Energy Infrastructure Partnership and operating losses in its energy infrastructure platform, as well as realized losses in the Power Sustainable China portfolio of $55 million. Sagard had a negative contribution of $23 million. Other investments and standalone businesses: negative contribution to net and adjusted net earnings of $82 million includes a non-cash impairment charge on the Corporation's investment in The Lion Electric Company (Lion) of $109 million after tax. Adjustments in the fourth quarter of 2022, excluded from adjusted net earnings, were a positive net impact to earnings of $92 million or $0.14 per share, mainly related to the Corporation's share of Lifeco's adjustments. Adjustments in the fourth quarter of 2021 were a negative net impact to earnings of $50 million or $0.07 per share, mainly related to the Corporation's share of Lifeco's adjustments and the Corporation's share of an impairment charge of $15 million recognized by Power Sustainable on direct investments in energy assets. [1] A non-IFRS financial measure; see the Non-IFRS Financial Measures section later in this news release. [2] As reported by Lifeco, IGM and GBL. [3]  Refer to the detailed table in the Contribution to Net Earnings and Adjusted Net Earnings section of the Corporation's most recent Management's Discussion and Analysis (MD&A) for additional information. [4] Consists of earnings (losses) from the alternative asset investment platforms including controlled and consolidated subsidiaries. [5] Includes earnings (losses) from the Corporation's other investments and standalone businesses. [6] Includes operating and other expenses, dividends on non-participating shares of the Corporation and Power Financial Corporation (Power Financial) corporate operations; refer to the Earnings Summary below. TWELVE MONTHS Net earnings attributable to participating shareholders were $1,913 million or $2.85 per share, compared with $2,917 million or $4.31 per share in 2021. Adjusted net earnings attributable to participating shareholders [1] were $1,915 million or $2.85 per share, compared with $3,230 million or $4.77 per share in 2021. Contributions to Power Corporation's Earnings (in millions of dollars, except per share amounts) Net Earnings Adjusted Net Earnings 2022 2021 2022 2021 Lifeco [2] 2,143 2,088 2,143 2,175 IGM [2] 538 606 538 601 GBL [2] (133) 60 (133) 60 Effect of consolidation [3] 74 (35) 66 68 Publicly traded operating companies 2,622 2,719 2,614 2,904 Sagard and Power Sustainable [4] (375) 311 (365) 426 ChinaAMC 57 62 57 62 Other investments and standalone businesses [5] (20) 259 (20) 259 2,284 3,351 2,286 3,651 Corporate operations and Other [6] (371) (434) (371) (421) 1,913 2,917 1,915 3,230 Per participating share 2.85 4.31 2.85 4.77 Average shares outstanding (in millions) 670.6 676.8 670.6 676.8 [1] A non-IFRS financial measure; see the Non-IFRS Financial Measures section later in this news release. [2] As reported by Lifeco, IGM and GBL. [3]  Refer to the detailed table in the Contribution to Net Earnings and Adjusted Net Earnings section of the Corporation's most recent MD&A for additional information. [4] Consists of earnings (losses) from the alternative asset investment platforms including controlled and consolidated subsidiaries. [5]  Includes earnings (losses) from the Corporation's other investments and standalone businesses. [6] Includes operating and other expenses, dividends on non-participating shares of the Corporation and Power Financial corporate operations; refer to the Earnings Summary below. Great-West Lifeco, IGM Financial and Groupe Bruxelles LambertResults for the quarter ended December 31, 2022 The information below is derived from Lifeco and IGM's annual MD&As, as prepared and disclosed by the respective companies in accordance with applicable securities legislation, and which are also available either directly from SEDAR (www.sedar.com) or from their websites, www.greatwestlifeco.com and www.igmfinancial.com. The information below related to GBL is derived from publicly disclosed information, as issued by GBL in its fourth quarter press release at December 31, 2022. Further information on GBL's results is available on its website at www.gbl.be. GREAT-WEST LIFECO INC. FOURTH QUARTER Net earnings attributable to common shareholders were $1,026 million or $1.10 per share, compared with $765 million or $0.82 per share in 2021. Adjusted net earnings [1] attributable to common shareholders were $892 million or $0.96 per share, compared with $825 million or $0.89 per share in 2021. Adjustments in the fourth quarter of 2022, excluded from adjusted net earnings, were a positive net impact of $134 million, compared with a negative net impact of $60 million in 2021. Lifeco's adjustments consisted of: Positive earnings impact of $49 million relating to actuarial assumption changes and other management actions; Positive market-related impacts on liabilities of $38 million; and Positive impact from tax legislative changes of $84 million.      Partially offset by: Restructuring and integration costs of $32 million in the United States segment; and Transaction costs of $5 million related to recent acquisitions in the Europe segment. IGM FINANCIAL INC. FOURTH QUARTER Net earnings available to common shareholders were $224.7 million or $0.94 per share, compared with $268.5 million or $1.11 per share in 2021. Adjusted net earnings [2] available to common shareholders were $224.7 million or $0.94 per share, compared with $260.8 million or $1.08 per share in 2021. Adjustments in the fourth quarter of 2021, excluded from adjusted net earnings, were a positive impact of $7.7 million. Assets under management and advisement [3] at December 31, 2022 were $249.4 billion, a decrease of 10.0% from December 31, 2021 and an increase of 4.7% from September 30, 2022. GROUPE BRUXELLES LAMBERT FOURTH QUARTER GBL reported [4] a net loss of €112 million, compared with a net loss of €12 million in 2021. GBL reported a net asset value [3] of €17,775 million at December 31, 2022, or €116.18 per share, compared with €22,501 million or €143.91 per share at December 31, 2021. [1]  Defined as "base earnings" by Lifeco. For additional information, please refer to the Non-IFRS Financial Measures section later in this news release. [2]  Adjusted net earnings is a non-IFRS financial measure. For additional information, please refer to the Non-IFRS Financial Measures section later in this news release. [3] See the Other Measures section later in this news release. [4] GBL adopted IFRS 9 in 2018. Power Corporation continues to apply IAS 39; this resulted in a positive adjustment to the contribution from GBL of $72 million in the fourth quarter of 2022. Sagard and Power SustainableResults for the quarter ended December 31, 2022 Sagard and Power Sustainable comprise the results of the Corporation's alternative asset investment platforms, which includes income earned from asset management and investing activities. Asset management activities includes fee-related earnings (a non-IFRS financial measure, see the Non-IFRS Financial Measures section later in this news release), which is comprised of management fees less investment platform expenses. Asset management activities also includes carried interest and income from other management activities. Investing activities comprises income earned on the capital invested by the Corporation (proprietary capital) in the investment funds managed by each platform and the share of earnings (losses) of controlled and consolidated subsidiaries held within the alternative asset investment platforms. For additional information, refer to the table later in this news release. FOURTH QUARTER Net loss and adjusted net loss [1] of alternative asset investment platforms were $183 million, compared with net earnings of $14 million and adjusted net earnings of $29 million in the corresponding period in 2021. Adjustments in the fourth quarter of 2021, excluded from adjusted net earnings, were $15 million and related to the Corporation's share of an impairment charge recognized by Power Sustainable on direct investments in energy assets. Net loss in the fourth quarter is comprised of: A negative contribution of $7 million from the asset management activities of Sagard and Power Sustainable; A negative contribution of $176 million from investing activities comprised of : $13 million from Sagard; and $163 million from Power Sustainable comprised of: realized losses in the Power Sustainable China portfolio of $55 million; losses before the revaluation of non-controlling interests liabilities of $45 million which mainly includes operating losses in its energy infrastructure platform due to seasonality; and a revaluation of non-controlling interests liabilities [2] of $63 million due to fair value increases within the Power Sustainable Energy Infrastructure Partnership. Summary of assets under management [3] (including unfunded commitments): (in billions of dollars) December 31, 2022 December 31, 2021 Sagard [4] 17.7 16.2 Power Sustainable  3.4 2.9 Total 21.1 19.1 Percentage of third-party and associates 87 % 81 % [1] Adjusted net earnings is a non-IFRS financial measure. For additional information, please refer to the Non-IFRS Financial Measures section later in this news release. [2] The Corporation controls and consolidates the activities of PSEIP on a historical cost basis; however, limited partner equity interests held by third parties have redemption features and are classified as a financial liability which are remeasured at their redemption value. The net asset value [3] of PSEIP was $1,035 million at December 31, 2022, compared with $805 million at September 30, 2022. [3] See the Other Measures section later in this news release. [4] Includes ownership in Wealthsimple Financial Corp. (Wealthsimple) valued at $0.9 billion at December 31, 2022 ($2.1 billion at December 31, 2021) and excludes assets under management of Sagard's wealth management business. Other Investments and Standalone Businesses Results for the quarter ended December 31, 2022 Other investments and standalone businesses includes the Corporation's investments in investment and hedge funds and the share of earnings (losses) of standalone businesses. FOURTH QUARTER STANDALONE BUSINESSES Net loss of the standalone businesses in the fourth quarter of 2022 was $102 million, compared with net earnings of $12 million in 2021. The net loss in the fourth quarter of 2022 includes a non-cash impairment charge of $109 million after tax ($126 million pre-tax) on the Corporation's investment in Lion due to a decline in market value at December 31, 2022. At December 31, 2022, the fair value of standalone businesses was $0.8 billion, compared with $1.5 billion at December 31, 2021. Adjusted Net Asset Value and Participating Shareholders' EquityAt December 31, 2022 ADJUSTED NET ASSET VALUE Adjusted net asset value is presented for Power Corporation and represents management's estimate of the fair value of the participating shareholders' equity of the Corporation. Adjusted net asset value is calculated as the fair value of the assets of the combined Power Corporation and Power Financial holding company (the gross asset value) less their net debt and preferred shares. Refer to the Non-IFRS Financial Measures section later in this news release for a description and reconciliation. The Corporation's adjusted net asset value per share was $41.91 at December 31, 2022, compared with $52.60 at December 31, 2021, representing a decrease of 20.3%. (in millions of dollars, except per share amounts) December 31, 2022 December 31, 2021 Variation % Publicly Traded OperatingCompanies Lifeco 19,414 23,545 (18) IGM 5,592 6,749 (17) GBL  2,388 3,157 (24) 27,394 33,451 (18) Alternative AssetInvestment Platforms Sagard [1] 977 1,515 (36) Power Sustainable [1] 1,478 1,654 (11) 2,455 3,169 (23) Other ChinaAMC  1,150 1,150 − Standalone businesses [2] 829 1,331 (38) Other assets and investments 559 661 (15) Cash and cash equivalents 1,277 1,635 (22) 3,815 4,777 (20) Gross asset value 33,664 41,397 (19) Liabilities and preferred shares (5,701) (5,810) 2 Adjusted net asset value 27,963 35,587 (21) Shares outstanding (millions) 667.1 676.6 Adjusted net asset value per share 41.91 52.60 (20) [1] Includes the management companies of the investment platforms at their carrying value. [2] Includes Lion, LMPG Inc. (LMPG) and Peak Achievement Athletics Inc. (Peak). Power Corporation's Ownership in Publicly Traded Operating Companies Shares held [1](in millions)  Share price Ownership [1](%) December 31, 2022 December 31, 2021 Lifeco [2] 66.6 620.3 $31.30 $37.96 IGM 62.2 147.9 $37.80 $45.62 GBL [3] 14.9 22.8 €74.58 €98.16 [1] At December 31, 2022. [2] On January 12, 2023, subsequent to year-end, the Corporation and IGM completed a transaction in which the interest in ChinaAMC was combined under IGM. In a separate agreement, IGM sold approximately 15.2 million common shares of Lifeco, representing a 1.6% interest in Lifeco, to Power Financial.  [3] Held through Parjointco SA (Parjointco), a jointly controlled corporation (50%). PARTICIPATING SHAREHOLDERS' EQUITY Book value per participating share represents Power Corporation's participating shareholders' equity divided by the number of participating shares outstanding at the end of the reporting period. Participating shareholders' equity is calculated as the total assets of the combined Power Corporation and Power Financial holding company, including investments in subsidiaries presented using the equity method, less their net debt and preferred shares. The Corporation's book value per participating share was $34.58 at December 31, 2022, comparable with $34.56 at December 31, 2021. (in millions of dollars, except per share amounts) December 31, 2022 December 31, 2021 Variation % Publicly Traded Operating Companies.....»»

The real estate market is in an interesting state right now. Home sales are slowing because of higher interest rates, but prices in some areas have yet to drop. Overall, the median existing home sales price in January 2023 was up 1.3% from the same time last year, but home prices in expensive areas have […] The real estate market is in an interesting state right now. Home sales are slowing because of higher interest rates, but prices in some areas have yet to drop. Overall, the median existing home sales price in January 2023 was up 1.3% from the same time last year, but home prices in expensive areas have gone down, while prices in less expensive areas have gone up. Considering that home prices were reaching record highs in 2021, one would expect them to have normalized with the slowing market, but that has yet to happen. However, if interest rates continue to rise, prices should continue to drop. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more But what does that mean to you and your finances? This article will explore how the current real estate market can impact you financially. Real Estate Situations that Can Affect Your Finances There are several situations that you may find yourself in where the real estate market may affect your finances. 1. Buying a Home If you’re in the market to buy a home, you’re going to pay a higher interest rate than you would have in 2021. However, the inventory of homes is high and the number of buyers is down. That means that you may have more negotiating power with sellers. Prices may be higher, but chances are, most sellers are very motivated which could put you in the driver’s seat.  But you’ll end up paying a higher rate, but with a lower price point for the home, so it may even out for you financially. You can also refinance later if interest rates go down and get ahead of the game.  Be sure to do your research into what is happening in your area in terms of prices and the number of sales that are occurring. Every local market is different. Make sure that your real estate agent talks to you about current comparable sales, and use your negotiating power.  2. Selling a Home If you’re planning to sell your home in the near future, you may be under a bit of pressure. Buyers are fewer in many areas due to the higher interest rates, so the people that are buying have the negotiating power. If you can, you may be better off waiting to sell until rates go back down. However, what will happen with interest rates and when is a great unknown. If you need to sell and you want to get a specific profit on what you paid for the home or on what you owe on your mortgage, you can calculate here what price you need to stick to.  Often the best strategy in this kind of market is to price your home higher than what you actually need. That way the buyer can negotiate and feel like they’re getting a deal. It cannot be stressed enough, however, that the best strategy depends on your local market.  Do your homework and talk to your real estate agent about what is happening in your market and what comparable homes are selling for. And if you need to make a certain profit on your home, you can stick to your guns and wait for that buyer that “must have” your home. Work with your agent to make your home as appealing to buyers as possible by making repairs or upgrades and staging the home well. In a tough market, you need to make your home stand out from the competition. Also, work with your tax advisor when considering the price that you need to get. Selling at lower price means less in capital gains tax, so that will have an impact on your finances overall.  Special note: there was $400mm in sales in January 2023. 3. Investing in Real Estate  Investing in real estate right now is an interesting proposition. Warren Buffet said “be greedy when others are fearful”. Real estate investors right now are fearful of economic and market instability; however, having that kind of outlook depends on your goals and your risk tolerance.  If you’re looking to flip houses as an investment, it’s likely that you can find deals, particularly on distressed properties. But with the number of home buyers decreasing, you may find yourself having trouble finding a buyer and thus incur carrying costs. You can still make a profit, though, if you can put minimal money into the property and price it competitively based on local real estate conditions. Your best bet if you want to flip homes now, is to carefully analyze each potential deal, including what is happening in the specific area the property is in, and cherry pick only the deals that make the most sense and have the least risk. With so many “fearful” investors, you’ll have less competition, so you can afford to be choosy.  If you’re considering buying rental properties, it’s still a matter of looking at each deal. The higher interest rates mean that fewer buyers are buying and are renting instead, which can drive rents up. That’s great if you can find a great deal and pay cash for the property. If you need to finance the property, however, you’ll be paying a higher interest rate which will reduce your cash flow.  The bottom line is, if you’re considering investing, you have to really understand your local market. Do considerable research before making a decision.  5. Refinancing Your Mortgage Clearly, if your current interest rate is lower than current mortgage rates, refinancing your mortgage may not be a good idea, and vice versa. You also have to consider your closing costs when deciding if refinancing is financially beneficial.  If you are refinancing to a lower rate and getting cash out from your equity, you may find that when the bank assesses your home’s market value, it may be lower than you think. Again, it depends on what’s happening to prices in your local market. If you want to refinance to a shorter loan term, you may still be able to benefit. Rates on 10 or 15 year mortgages are generally lower than 30 year mortgages, but your payment may still be higher because of the shorter term.  Another thing to consider is that lenders tend to be more conservative in a slow real estate market, so it may be more difficult to qualify for the refinance. Credit score and income requirements will be tighter, so be prepared to go through a more rigorous application process. Your best bet is to shop around for the best rates and terms, analyze your options, and decide which option, if any, is right for you. Here is a nifty refinance mortgage calculator to help you. 6. Home Equity Loans If you’re considering getting a home equity loan, whether the real estate market will impact you depends on your goals. If you want a home equity loan to consolidate other debt, current mortgage rates are still likely lower than the rates on other debt such as credit cards. However, similar to a cash-out refinance, your equity may not be as high as you expect based on market values. If you want a home equity loan to remodel your home, if you’re doing it just because you want your house to be nice and you can afford the payments, go for it. You might want to consider a home equity line of credit with a variable rate so that the rate goes down when rates go down in general. However, rates may also go up. If you want a home equity loan for remodeling, but with the goal of selling your home for a higher price in the near future, you’ll need to give it careful consideration. If rates continue to rise and home prices fall, you may not get your money back from the remodeling you do and the interest you pay on the loan. Be sure not to overdo your improvements. 7. Renting Fewer people buying homes means more people renting, which is creating a rental shortage due to high demand. As a result, in 2023 many predict that rental price growth is likely to remain high, which is bad news for renters.  Other economic factors are also decreasing the amount of income that renters can spend on rent. What this means is that rentals in higher-priced areas will be less in demand, which should start to force prices on those rentals down a bit.  In the longer term, rental prices are likely to start to come back down, so if you’re finding it difficult to afford current rents, you may only be struggling temporarily.  As with all the other effects of the real estate market, how the current conditions will affect renters is location dependent. If you’re in the market for a new rental, do your homework and shop around, and don’t be afraid to negotiate with landlords to try to get a better rate.  In Closing The real estate market is interesting right now, and it’s difficult even for experts to predict exactly what will happen in 2023 and beyond. Many factors will have an impact on the market’s direction, so you should stay informed about what’s happening in the market, particularly in your area.  If you’re in any of the situations discussed, be sure to do your market research and look to professionals, whether it be a real estate agent or a financial advisor, for advice. By doing so, you can find ways to successfully navigate this unpredictable market and protect your finances. Article by Carolyn Young, Due About the Author Carolyn Young is a highly motivated and accomplished marketing professional with over 10 years of experience in the industry. She has a proven track record of driving revenue growth and brand awareness through innovative marketing strategies and tactics. Throughout her career, Carolyn has held various marketing roles at both large corporations and startups. Her expertise includes market research, digital marketing, content creation, social media management, and event planning. Currently, Carolyn is the Marketing Director at a leading software company, where she is responsible for overseeing all aspects of the company's marketing initiatives. She is passionate about helping companies build their brand, connect with their target audience, and achieve their business goals......»»

There are several questions consumers might want to ask before they make one of their biggest purchases. Here are 9 questions you should always ask when buying a car.Kekyalyaynen / Shutterstock.com Car buying isn't always the most fun experience. But shoppers can get through it with certain tips and tricks. You should always ask about inventory dynamics and incentives. Most shoppers don't like car buying — but there are some ways they can make the experience a little less painful. From conversations with dealers and industry analysts from Edmunds, J.D. Power, Kelley Blue Book, TrueCar, Cox, and more over the past several months, we've compiled the questions consumers might want to ask before they make one of their biggest purchases.What type of car should I look for right now? This could be an easy one if a buyer knows exactly what they need and want in a vehicle. But if you're somewhat flexible or needs some pointers on what kind of car to go for next, the brand, type of vehicle, and inventory will likely all influence your final decision. In today's market, there are a lot of nuances to keep track of. Certain brands are more expensive now than in the past, like BMW. Others, like Hyundai and Buick, are less so. Reliability is another important factor to consider, and brands like Kia and Chevrolet top the list. The vehicles that are best for families is another one, too.Certain types of vehicles, like SUVs and pickups, are more costly, while less-in-demand sedans and minivans aren't as expensive. Inventory, meanwhile, is on a rocky ride. (More on that later.)Larger vehicles are generally more in demand and more costly.David Zalubowski/APWhat's going on with new car prices this year? The pandemic sent new (and used) vehicle prices skyrocketing over the past few years. For the most part, new car prices aren't as intimidating as they were during the peak of COVID, but they also aren't falling down at a rapid pace. The average transaction price for a new vehicle was $48,763 last month, according to Kelley Blue Book. Shoppers might want to avoid certain models if they want the best deal. They also might want to look at the best cars for every budget.Waiting several months for a new vehicle is a new normal in the car-buying industry.Maskot/Getty ImagesHow long will I have to wait to get my car? Unless a car buyer doesn't have a lot of specific features in mind and they can drive off a dealer's lot with whatever vehicle they find that day, odds are, they are going to wait several months for a car. But that's the new normal in the world of car buying. Automakers learned throughout the pandemic that customers are willing to wait and pay more to get the cars they actually want. It's not atypical to place an order for a new vehicle and have the estimated delivery window be upwards of six months away — though that means some customers are hedging their bets. The chip shortage has been getting better, but it's still important to ask dealers about.ReutersShould I be worried about the chip shortage? The chip shortage, a consequence of the pandemic and supply-and-demand issues, has been hobbling the auto industry's vehicle output for years now. But this supply chain crisis, which impacted 11 million vehicles worldwide in 2021 and 4.38 million in 2022, is starting to improve. Concerns over the chip shortage remain alive and well, even if automakers are instead blaming other industry disruptions as reasons for delays.  But the impacts of it might be less consequential than other supply chain constraints affecting automakers' ability to deliver. What else is going on with inventory? Generally speaking, car buying is never going back to normal. Many automakers are swapping market share for profits and prioritizing higher-end, luxury vehicles instead of starter cars. Meanwhile, dealers learned from all the demand that they don't have to have the same amount of inventory on their lots as they might have pre-pandemic. Inventory is improving — meaning a dealer might not sell a vehicle the same day it hits its lot — but many brands are still surviving on historically low supply. Domestic brands like Ford and GM have generally had higher days' supply than other automakers in recent months, with Ford at 60 days, GM at 52 days, and Stellantis (the merger of Fiat Chrysler and the French PSA Group) at 68 days in January, according to a Deutsche Bank note. Other brands are nowhere near those levels yet.Shoppers need to beware of the caveats that could come with having inventory. Many of the car brands with more inventory on lots than others might also have higher loan payments. Incentives are historically low, but creeping up.KELENY / Shutterstock.comWhat incentives or other offers are available right now?Automakers loved how much they could get for vehicles during the pandemic. That meant all sorts of incentives and dealership end-of-year blowout sales were no longer.  But incentives and other deals are starting to slowly creep back to the auto-buying market.Incentives are still historically low, but they rose to 3% of the average transaction price last month, a 10-month high, according to Kelley Blue Book. (That's down from 8.3% of the ATP just two years earlier.)Luxury cars had the highest incentives, at 6.5%, last month. Vans, meanwhile, had the lowest incentives, with less than 1% of the average transaction price."Try to take advantage of the incentivized rates that the manufacturers are offering," Whitney Yates-Woods, dealer principal of Yates Buick GMC in Goodyear, Arizona, told Insider. "Make sure that you ask to see if you can qualify for it, because pretty much everyone's offering something and also, you can negotiate a good deal."What about interest rates and financing? The tides have turned for the better for shoppers looking for specific makes and models of vehicles. But skyrocketing interest rates are the new hurdle for many would-be car buyers. This could especially penalize customers with lower credit scores."The role of a dealer isn't just to sell them a car, it's to help them find the lowest interest rate possible, and that's both new car dealers and used car dealers. They have the ability to work with multiple banks," George Chamoun, CEO of digital marketplace ACV, said. "Dealers spend a lot of time understanding the best interest rates and what the various options are," Chamoun said. "Even based on the specific car, one bank may provide a lower interest rate on a specific sort of make and model."Does the used car market have anything I'd be interested in?The used car market might be even more complicated for car shoppers than the new market right now. The effects of COVID really impacted used vehicle supply and demand. As a result, far fewer car shoppers have opted to lease a car in recent years. And many who did lease a car chose to buy it after their contract was up out of fear of not being able to find a replacement in inventory. Those dynamics have directly impacted the types of vehicles on the used car market today. Fewer low-mileage, newer cars are available, and pricing is volatile.  In February, wholesale used vehicle prices were down 7% from a year earlier, but they rose 4.3% from the month before, according to Cox's Manheim Used Vehicle Value Index — the largest increase between the two months since 2009.But you still might be able to find some used vehicles with the biggest price drops. Used car prices have been especially volatile.Justin Sullivan/Getty ImagesShould I do a trade-in? Given the auto industry's supply-and-demand crisis over the past few years, car owners could get sky-high trade-in values.Unfortunately for today's shoppers, those days might be over.The average transaction price for a used vehicle peaked at $31,300 in April 2022, per J.D. Power. That stood at $29,226 last month. Meanwhile, trade-in values hit a high of $25,556 in June 2022, but in January, they stood at $21,984, down 14%.But don't fret: Dealers are still looking for specific trade-ins that fit the needs of their used vehicle customers. You might be sitting on a car with a high resale value.Read the original article on Business Insider.....»»

More than 9,000 residents in Maryland got almost $9 million in tax credits to pay their student loan debt. This tax credit for student loan debt is part of the program that has been running since 2017 and offers a great opportunity to residents struggling to pay off their student loan debt. Tax Credit For […] More than 9,000 residents in Maryland got almost $9 million in tax credits to pay their student loan debt. This tax credit for student loan debt is part of the program that has been running since 2017 and offers a great opportunity to residents struggling to pay off their student loan debt. Tax Credit For Student Loan Debt: What Is It? Last week, Governor Wes Moore announced that the Maryland Higher Education Commission had distributed nearly $9 million in 2022 tax credits to over 9,000 residents with student loan debt. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q4 2022 hedge fund letters, conferences and more   “This program offers Maryland residents a critical advantage when looking for options to pay off student loan debt,” Gov Moore said in a statement. “These tax credits support student success through less debt.” As mentioned above, the program is not a new program. The program has distributed about $50 million in tax credits since it started in 2017. This year, the program awarded an average credit of $966 to over 9,300 residents, totaling $8,996,358. To qualify for the tax credit, taxpayers should have incurred a minimum of $20,000 in undergraduate and/or graduate student loan debt. Also, they should have a minimum of $5,000 in outstanding student loan debt to be eligible for the credit. Taxpayers will be able to claim the credit when they file their Maryland income tax return this year. In case the credit is more than the taxes owed, taxpayers will get a refund for the difference. Further, taxpayers who maintained Maryland residency for the 2022 tax year were qualified to apply for the credit. Recipients of the credit will be required to submit proof to the Maryland Higher Education Commission that they used the tax credit only for paying down the qualifying student loan debt. Who Gets Priority? To apply for the credit, taxpayers need to complete the Student Loan Debt Relief Tax Credit application. It must be noted that the application process is now closed for this tax year (2022).   Priority for the credit is given to taxpayers who didn’t get the tax credit in a prior year, were eligible for in-state tuition, graduated from an educational institution situated in Maryland, or have higher debt burden to income ratios. For more information on the tax credit for student loan debt, visit this link. Tax credits to help residents pay student loan debt is a useful and needed measure, especially at a time when prices are rising. In the fourth quarter of 2022, the total outstanding student loan amount was $1.76 trillion, compared to $1.73 trillion one year ago. As per the latest data from the Federal Reserve, 12% of adults with student loan debt are behind on their payments, while less than 1% of all student loan debt was at least 90 days delinquent or in default in the fourth quarter of 2022......»»

Silicon Valley Bank Crisis: The Liquidity Crunch We Predicted Has Now Begun Authored by Brandon Smith via Alt-Market.us There has been an avalanche of information and numerous theories circulating the past few days about the fate of a bank in California know as SVB (Silicon Valley Bank). SVB was the 16th largest bank in the US until it abruptly failed and went into insolvency on March 10th. The impetus for the collapse of the bank is tied to a $2 billion liquidity loss on bond sales which caused the institution’s stock value to plummet over 60%, triggering a bank run by customers fearful of losing some or most of their deposits. There are many fine articles out there covering the details of the SVB situation, but what I want to talk about more is the root of it all. The bank’s shortfalls are not really the cause of the crisis, they are a symptom of a wider liquidity drought that I predicted here at Alt-Market months ago, including the timing of the event. First, though, let’s discuss the core issue, which is fiscal tightening and the Federal Reserve. In my article ‘The Fed’s Catch-22 Taper Is A Weapon, Not A Policy Error’, published in December of 2021, I noted that the Fed was on a clear path towards tightening into economic weakness, very similar to what they did in the early 1980s during the stagflation era and also somewhat similar to what they did at the onset of the Great Depression. Former Fed Chairman Ben Bernanke even openly admitted that the Fed caused the depression to spiral out of control due to their tightening policies. In that same article I discussed the “yield curve” being a red flag for an incoming crisis: “…The central bank is the largest investor in US bonds. If the Fed raises interest rates into weakness and tapers asset purchases, then we may see a repeat of 2018 when the yield curve started to flatten. This means that short term treasury bonds will end up with the same yield as long term bonds and investment in long term bonds will fall.” As of this past week the yield curve has been inverted, signaling a potential liquidity crunch. Both Jerome Powell (Fed Charman) and Janet Yellen (Treasury Secretary) have indicated that tightening policies will continue and that reducing inflation to 2% is the goal. Given the many trillions of dollars the Fed has pumped into the financial system in the past decade as well as the overall weakness of general economy, it would not take much QT to crush credit markets and by extension stock markets. As I also noted in 2021: “We are now at that stage again where price inflation tied to money printing is clashing with the stock market’s complete reliance on stimulus to stay afloat. There are some that continue to claim the Fed will never sacrifice the markets by tapering. I say the Fed does not actually care, it is only waiting for the right time to pull the plug on the US economy.” But is that time now?  I expanded on this analysis in my article ‘Major Economic Contraction Coming In 2023 – Followed By Even More Inflation’, published in December of 2022. I noted that: “This is the situation we are currently in today as 2022 comes to a close. The Fed is in the midst of a rather aggressive rate hike program in a “fight” against the stagflationary crisis that they created through years of fiat stimulus measures. The problem is that the higher interest rates are not bringing prices down, nor are they really slowing stock market speculation. Easy money has been too entrenched for far too long, which means a hard landing is the most likely scenario.” I continued: “In the early 2000s the Fed had been engaged in artificially low interest rates which inflated the housing and derivatives bubble. In 2004, they shifted into a tightening process. Rates in 2004 were at 1% and by 2006 they rose to over 5%. This is when cracks began to appear in the credit structure, with 4.5% – 5.5% being the magic cutoff point before debt became too expensive for the system to continue the charade. By 2007/2008 the nation witnessed an exponential implosion of credit…” Finally, I made my prediction for March/April of 2023: “Since nothing was actually fixed by the Fed back then, I will continue to use the 5% funds rate as a marker for when we will see another major contraction…The 1% excise tax added on top of a 5% Fed funds rate creates a 6% millstone on any money borrowed to finance future buybacks. This cost is going to be far too high and buybacks will falter. Meaning, stock markets will also stop, and drop. It will likely take two or three months before the tax and the rate hikes create a visible effect on markets. This would put our time frame for contraction around March or April of 2023.” We are now in the middle of March and it appears that the first signs of liquidity crisis are bubbling to the surface with the insolvency of SVB and the shuttering of another institution in New York called Signature Bank. Everything is tied back to liquidity. With higher rates, banks are hard-pressed to borrow from the Fed and companies are hard-pressed to borrow from banks. This means companies that were hiding financial weakness and exposure to bad investments using easy credit no longer have that option. They won’t be able to artificially support operations that are not profitable, they will have to abandon stock buybacks that make their shares appear valuable and they will have to initiate mass layoffs in order to protect their bottom line. SVB is not quite Bear Stearns, but it is likely a canary in the coal mine, telling us what is about to happen on a wider scale. Many of their depositors were founded in venture capital fueled by easy credit, not to mention all the ESG related companies dependent on woke loans. That money is gone – It’s dead. Those businesses are quietly but quickly crumbling which also conjured a black hole for deposits within SVB. It’s a terribly destructive cycle. Surely, there are numerous other banks in the US in the same exact position. I believe this is just the beginning of a liquidity and credit crisis that will combine with overt inflation to produce perhaps the biggest economic crash America has ever seen.  SVB’s failure may not be THE initiator, only one among many. I suspect that in this scenario larger US banks may avoid the kind of credit crash that we saw with Bear Stearns and Lehman Brothers in 2008. But, contagion could still strike multiple mid-sized banks and the effects could be similar in a short period of time. With all the news flooding the wire on SVB it’s easy to forget that all of this boils down to a single vital issue: The Fed’s stimulus measures created an economy utterly addicted to easy and cheap liquidity. Now, they have taken that easy money away. In light of the SVB crash, will the central bank reverse course on tightening, or will they continue forward and risk contagion? For now, Janet Yellen and the Fed have implemented a limited backstop and a guarantee on deposits at SVB and Signature. This will theoretically prevent a “haircut” on depositor accounts and lure retail investors with dreams of endless stimulus.  It is a half-measure, though – Central bankers have to at least look like they are trying.  SVB’s assets sit at around $200 billion and Signature’s assets are around $100 billion, but what about interbank exposure and what about the wider implications?  How many banks are barely scraping by to meet their liquidity obligations, and how many companies have evaporating deposits?  The backstop will do nothing to prevent a major contagion. There are many financial tricks that might slow the pace of a credit crash, but not by much.  And, here’s the kicker – Unlike in 2008, the Fed has created a situation in which there is no escape. If they do pivot and return to systemic bailouts, stagflation will skyrocket even more. If they don’t use QE, then banks crash, companies crash and even bonds become untenable, which puts the world reserve status of the Dollar under threat. What does that lead to? More stagflation. In either case, rapidly rising prices on most necessities will be the consequence. How long will this process take? It all depends on how the Fed responds. They might be able to drag the crash out for a few months with various stop-gaps. If they go back to stimulus then the banks will be saved along with equities (for a while) but rising inflation will suffocate consumers in the span of a year and companies will still falter. My gut tells me that they will rely on contained interventions but will not reverse rate hikes as many analysts seem to expect. The Fed will goose markets up at times using jawboning and false hopes of a return to aggressive QE or near-zero rates, but ultimately the trend of credit markets and stocks will be steady and downward.  Like a brush fire in a wind storm, once the flames are sparked there is no way to put things back the way they were.  If their goal was in fact a liquidity crunch, well, mission accomplished.  They have created that exact scenario.  Read my articles linked above to understand why they might do this deliberately. In the meantime, it appears that my predictions on timing are correct so far. We will have to wait and see what happens in the coming weeks. I will keep readers apprised of events as new details unfold.  The situation is rapidly evolving. Tyler Durden Mon, 03/13/2023 - 23:20.....»»

Electric vehicles could radically change how leasing works as dealers try everything to get used EVs onto lots. Automakers and dealers might make EV lease contracts shorter in order to get those cars into the lucrative used EV market faster.Ram Only used electric cars priced under $25,000 can qualify for a used EV tax credit. That's a limited number of used EVs. Automakers might offer shorter lease terms on new EVs to get those cars into the used market sooner. Car buyers shouldn't be surprised if they run across shorter lease deals in the coming years for electric vehicles — and it could save them a lot of money.It's not very clear exactly how EV tax credits will shake out over the next few years — or how many vehicles will actually qualify for them as automakers race to meet their stringent requirements. So car companies are doing everything they can to tap into what the credits have to offer. That includes ultimately changing the length of leases to get more used EVs onto their lots that may qualify. Used EVs are eligible for a credit when they're priced at $25,000 or less. The credit is for 30% of the used EV's sale price, up to $4,000. The EV also needs to be from a model year at least two years earlier than the year in which it is bought.A lot of today's EVs are priced so high that they might not qualify for the used EV tax credit once they eventually make their way to the used market. The average new EV sold for $58,385 in January, according to Kelley Blue Book. A $74,000 Ford F-150 Lightning Lariat, for instance, is not likely to depreciate enough to drop below $25,000 in just a few years. Even with uncertainty around EV resale values, it would likely take longer. But perhaps a $46,000 base Mustang Mach-E would be more likely to fall to below that mark in three years' time. And automakers and dealers, in anticipation of what the used EV tax credit can do for them in terms of spurring demand with customers who might not consider an EV otherwise, might adjust their EV lease contracts accordingly.How EV leases could shiftCarmakers will have to be fine with giving a customer a multi-year lease for the more expensive EVs that they know they won't be able to resell with the used EV credit anytime soon. But for other, cheaper models, automakers want to profit off those cars as much as possible, so that might mean some unconventional lease terms. A move like this requires buy-in from customers. After all, a 36-month lease is typically the gold standard in the auto business. "Consumers haven't really shown a large appetite for really short-term leases," Tyson Jominy, J.D. Power VP of data and analytics, told Insider. But, "If you can tell someone, I can give you this vehicle for 6 months for $100 a month — sure, why not?" It might make sense for a Chevrolet Bolt, starting at around $27,500, to have as low as six to nine-month lease terms so that it can find its way to the used market sooner rather than later. That gives customers the opportunity to lease an EV for a short period of time and makes the used EV market more accessible. Shorter-term leases aren't far off from the vehicle subscription model, interest for which has fluctuated over the past several years. Do you work for a dealership? Currently in the market for an electric car? Have a story to share? Get in touch with this reporter at astjohn@insider.comRead the original article on Business Insider.....»»

Considerable strength in the U.S. banking system and steps taken by agencies will prevent more bank runs like SVB Financial Group and Signature Bank (SBNY). Over the weekend, two S&P 500 banks — SVB Financial Group and Signature Bank SBNY — failed, signaling the largest U.S. bank failures since Washington Mutual in 2008. Fear rattled  Wall Street, and indexes, including the S&P 500, the S&P Banks Select Industry Index and the KBW Bank Index tumbled 3.2%, 10.6% and 11.3%, respectively, since Wednesday end, indicating a broader sell-off in the banking industry.The weekend’s turbulence came after regulators closed Silicon Valley Bank on Friday and shares of its parent company, SVB Financial (the country’s 16th largest bank), fell more than 60%. On Sunday, regulators seized New York-based Signature Bank.We believe the market run-off in the past two trading days, sparked from the fears regarding the effectiveness of the U.S. banking system and a likely 2008-like crisis re-run, are overblown. The steps taken by U.S. regulatory agencies should be enough to calm the financial markets and offer reassurance that such shocks would be mitigated. Also, lenders’ weakness is not reflective of an industry-wide problem.Silicon Valley Bank Collapse a Unique EventIt appears that Silicon Valley Bank’s collapse was primarily due to poor risk-management decisions. The bank had significant deposits from the tech startup industry and invested these funds in long-term, fixed-rate, government-backed debt securities, exposing the bank to double sensitivity to higher interest rates. With the tech startup industry seeing a severe downturn, depositors started withdrawing significant funds. The bank was forced to dump some of its Treasuries at a loss of $1.8 billion to fund its customers’ withdrawals.Encouragingly, SVB Financial received acquisition interest from JPMorgan Chase & Co JPM and The PNC Financial Service Group, Inc. PNC over the weekend. Per a Reuters article that cited Axios, JPM and PNC, along with Apollo Management and Morgan Stanley, were part of a discussion to acquire SVB Financial in a deal that would exclude its commercial banking division, Silicon Valley Bank.In a move to avert chaos across the tech sector in the U.K., HSBC Holdings has agreed to buy Silicon Valley Bank UK Limited for a nominal £1. Noel Quinn, the CEO, said, “This acquisition makes excellent strategic sense for our business in the UK. It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally.”U.S Agencies Take Steps to Prevent More Bank RunsAlso, on Sunday, the Treasury Department, the Federal Reserve and the FDIC said that all Silicon Valley Bank customers would be protected and able to access their funds deposited in the bank starting Mar 13. It must be noted that approximately 90% of SVB Bank customer deposits were not insured as per the FDIC rule, which covers up to $250,000 per deposit per bank.The agencies also announced a similar “systemic risk exception” for insured and uninsured customers of Signature Bank, giving access to all their deposits on Monday.“This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the agencies said in a joint statement.The Fed on Sunday announced a new expansive emergency lending program - the Bank Term Funding Program (BTFP) - in efforts to limit the contagion risk from small to large banks and shore up confidence in the banking system.The Fed's new U.S. bank funding program will allow banks and other eligible depository institutions (that need to raise cash to pay depositors) to borrow money from the Fed by posting securities as collateral rather than having to sell them significant losses.While the Treasury has set aside $25 billion to offset any losses incurred under the BTFP, the central bank does not expect to have that money, as the collateral securities have low default risk.A Slowdown in Rate Hike to the RescueJanet Yellen, the Secretary of the Treasury, noted that interest rate hikes by the Fed to combat “sticky” inflation were a key issue for the collapse of Silicon Valley Bank. Many of its assets, such as bonds or mortgage-backed securities, lost market value as rates climbed.In light of the recent volatility in the banking sector, markets no longer expect the pace of rate hikes to continue at Fed’s March meeting. According to CME Group, traders do not expect a 50-basis point rate hike in March and a 65% chance of a 25-basis point rate hike.While rising interest rates are a boon for banks, the current situation shows that faster rate hikes have their fall out. Last week, KeyCorp KEY, at an investors’ conference, revised its 2023 outlook for net interest income lower amid rising funding costs and deposit betas. Parting ThoughtsPost the 2008-crisis, the U.S. banking system that has undergone multiple stress tests by regulators, is in notably good shape and holds more capital than ever, indicating the ability to withstand even an economic slowdown. Lastly, even if banks did have to realize the losses like Silicon Valley Bank, it would not affect the solvency of most banks with small treasury books. Free Report Reveals How You Could Profit from the Growing Electric Vehicle Industry Globally, electric car sales continue their remarkable growth even after breaking records in 2021. High gas prices have fueled his demand, but so has evolving EV comfort, features and technology. So, the fervor for EVs will be around long after gas prices normalize. Not only are manufacturers seeing record-high profits, but producers of EV-related technology are raking in the dough as well. Do you know how to cash in?  If not, we have the perfect report for you – and it’s FREE! Today, don't miss your chance to download Zacks' top 5 stocks for the electric vehicle revolution at no cost and with no obligation.>>Send me my free report on the top 5 EV stocksWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report KeyCorp (KEY): Free Stock Analysis Report Signature Bank (SBNY): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»