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The housing market has seen a wave of fraud as conditions remain tight and frustrated buyers and sellers get desperate to close, experts tell Insider. AP Photo/Reed Saxon Real estate professionals say they've seen a surge in housing fraud over the past year. It's a consequence of tight conditions sparking desperation from both buyers and sellers. Some experts say they expect the situation to get worse as market dynamics continue to shift. When fraud victims contact Mark Berman, an attorney at Ganfer Shore that frequently deals with cases of real estate fraud, they're often distraught. Many of them were close to closing on a property when they received a legitimate-looking email or text asking them to wire a chunk of money to wrap up the deal.It becomes clear later that the request was sent by a fraudster, part of a wave of similar scams looking to take advantage of frustrated homebuyers and sellers clamoring to transact in a tough market. Berman and other industry professionals told Insider that real estate fraud has surged, a trend that's being driven by tight market conditions. With high interest rates and anemic transaction volume, homebuyers, sellers, and brokers are often trying to close deals as fast as possible, experts say, and this can make it easy to miss a scammer. Analytics firm CoreLogic found that the risk for property fraud in which a seller misrepresents information about a house on the market, increased 23% in the second quarter of 2022 from the prior year.Wire fraud — when a fraudster siphons money from the buyer at some point in the transaction — and title fraud — in which a scammer transfers a the title of a property to an illicit third party — have also spiked.Transactions where wire and title fraud were a risk factor notched an all-time-high in the fourth quarter of 2022, according to data from FundingShield, with a little over half of all transactions bearing potential signs of wire and title fraud risk. That's nearly double the risk of this kind of fraud seen in 2021, FundingShield told Insider.Though Berman said it was difficult to estimate an exact number, he says that real estate fraud cases have gone up "exponentially" in recent years, with his clients often including home buyers, brokers, and real estate lawyers. Though some of his clients are industry professionals, they also fall into traps set by fraudsters simply because of how clever some of the scams have become."Some scams are so damn good," Berman said. "Scams are getting very sophisticated and real estate agents, brokers, they're not keeping up."Why is this happening?The spike in fraud comes at time of shifting dynamics in the US housing market. Rates on the 30-year fixed mortgage soared from pandemic lows to touch 7% in late 2022 and have hovered near that level since. Meanwhile, home sales, housing starts, and new home listings have all cratered, leading some experts over the last year to warn of a housing market crash that could bring on a steep correction in home prices.But while some prospective buyers have been sidelined, those who are in the market are increasingly desperate to close, experts say, leading to a rise in questionable deal-making. According to CoreLogic's principal of industry solutions, Bridget Berg, it's becoming harder for people to sell homes as the cost of borrowing stays near a record high. That's helped drive higher instances of property fraud.Wire fraud has increased for similar reasons, according to FundingShield CEO Ike Suri. Higher interest rates and sluggish housing activity create more pressure for real estate professionals to close on a deal, which can mean they're not properly verifying if an email or a text is from a legitimate sender."Chaos creates a perfect time for cyber criminals to take advantage of these, especially in the housing industry," he said, adding that each transaction between parties is an opportunity for a fraudster to strike."They end up being exposed to phishing, hacking, spoofing, to name the different schemes out there."Berg told Insider that she expected to see an uptick in mortgage fraud in coming years, with CoreLogic's National Mortgage Application Fraud Index having increased 30% from its low during the pandemic. The index is a predictive tool, currently suggesting 30% higher risk of fraud in mortgage applications. Kip Medrygal, a partner at Locke Lorde who also frequently encounters real estate fraud cases, told Insider he too is expecting an increase in scams, though it's also contingent on housing demand and other market conditions.He speculates that fraud could increase as much as 20%-25% over the next few years if the market remains tight. The shifting market dynamics have experts divided over where US housing goes from here. The Fed is expected to pull back on high interest rates later this year, which could influence a decline in mortgage rates.Nadia Evangelou, chief economist at the National Association of Realtors, previously told Insider that she believed easing interest rate expectations would help the market avoid a crash. She said that housing sales likely bottomed out in early 2023, with the year overall set to be a "turning point" for the market.Read the original article on Business Insider.....»»

GameStop surged on surprise profits, but the bears are already capping gains.  Results are good but driven by an unsustainable inventory reduction.  Caution chasing this stock higher.  5 stocks we like better than GameStop GameStop (NYSE:GME) is an interesting and exciting market to watch, but it is not a market for most investors to dabble […] GameStop surged on surprise profits, but the bears are already capping gains.  Results are good but driven by an unsustainable inventory reduction.  Caution chasing this stock higher.  5 stocks we like better than GameStop GameStop (NYSE:GME) is an interesting and exciting market to watch, but it is not a market for most investors to dabble with. The only thing that can be said is that volatility will reign supreme because the bulls and the bears have strong feelings about where its price should be. 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   Find A Qualified Financial Advisor Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now. The analyst's support shows that average investors should avoid (except with specifically allocated speculation dollars). This stock doesn’t have any. The last to come out with any commentary was Wedbush and the end of last year, and they rate it as Reduce with a price target more than 75% below the newly elevated price action.  Another is the short interest. The short interest is largely why the stock rose 50% at the open following the Q4 report, but they aren’t running scared, far from it. Fintel.io reports short interest was amazingly high at 21%, and the off-exchange short volume is well above 50%, showing a deep commitment level. The bulls may have advanced now, but they may not get much higher when the bears reposition, and it looks like they are doing that very thing right now.   The institutions, you say? Yes, they bought an astounding $1 billion worth of the stock in Q4 but didn’t buy much in Q1. Their new holdings are still down or nearing break-even, with the shares up about 30%, and you have to ask yourself, what will they do now? Start buying again with the economy on the brink of collapse. That may be a stretch. Think about all the daily layoffs and how those will affect spending on games and intangibles like NFTs. GameStop had a good quarter, but how long can it last? GameStop Posts Surprise Profit, Don’t Expect More  GameStop posted a surprise profit in Q4, but the news isn’t great. The company’s revenue of $2.23 billion is down on a YOY basis, and profitability is 100% tied to a reduction in inventory. The inventory reduction is sound, but a 25% decline can’t be sustained long, and the company still have merchandise to sell. The alarming comparison is that the $232 million worth of inventory reduction offset a loss of $147.5 last year for a profit of $48.2 million. That’s a difference of only $195 million which means on an inventory-adjusted basis, this year's operating results worsened despite a 350 basis point improvement in SG&A expense.  The good news is that GameStop still has about $1.4 billion in cash and very little debt. This should sustain operations for the next few years while the bulls and bears fight this thing to the death. Investors can sit back and watch the action between then and now while focusing on better bets.  The Technical Outlook: GameStop Is In A Downtrend  GameStop shares surged more than 50% at the open but are still down trending. The size of the opening surge is a testament to the volatile nature of the stock, as it only moved up to the 150-day EMA. This level has been a critical point of resistance and selling since the meme-stock correction took hold in 2021.   The way it looks now, the short-sellers are out in force and capping gains at this level. Traders should expect downward pressure to build and keep this thing moving sideways, if not down to retest support near $16.  Should you invest $1,000 in GameStop right now? Before you consider GameStop, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and GameStop wasn't on the list. While GameStop currently has a "Reduce" rating among analysts, top-rated analysts believe these five stocks are better buys. Article by Thomas Hughes, MarketBeat.....»»

There are still some chip stocks that are trading at reasonable valuations The semiconductor industry is one of the strongest sectors in the market YTD. In the chart below we can see just how much the Semiconductor ETF SMH has outperformed the S&P 500 ETF SPY.But the rally has forced individual chip stocks to trade up to extreme valuations. Nvidia NVDA for instance, is trading at an unfathomably high 105x earnings. While it is an exceptional company and stock, that is far too rich for most investors.Fortunately, there are still some chip stocks that are trading at reasonable valuations. Using the Zacks Rank I have identified two very compelling semiconductor stocks.Image Source: Zacks Investment ResearchMicrochip TechnologyMicrochip Technology MCHP develops, manufactures, and sells smart, connected, and secure embedded control solutions in the Americas, Europe, and Asia. MCHP has a comprehensive product portfolio serving over 120,000 customers across the industrial, automotive, aerospace and defense, communications, and computing industries.MCHP boasts a Zacks Rank #1 (Strong Buy), indicating upward trending earnings revisions. Current quarter sales are expected to grow 20% to $2.2 billion, and earnings are projected to grow 19% to $1.61 per share over the same period. Full-year sales are expected to be $8.4 billion, a 24% YoY increase, while earnings are expected to climb 30% to $5.99 per share.Image Source: Zacks Investment ResearchAnalysts are in near unanimous agreement in upgrading MCHP’s earnings estimates over the last two months. Earnings expectations have been revised higher by as much as 11%.Image Source: Zacks Investment ResearchAdditionally, the price chart of MCHP has built out a very convincing bullish technical chart pattern. The price action has carved out an 18-month consolidation, and cup and handle pattern. The handle portion of the setup offers a fantastic risk-reward trade. A breakout above $84 should push the stock to new all-time highs. Alternatively, below $79 the pattern is invalidated.Image Source: TradingViewMicrochip Technology is trading at a one-year forward earnings multiple of 14x, below its five-year median of 17x, and below the industry average of 18x. MCHP also offers a dividend yield of 1.8%. Management has raised the dividend payment by 40% over the last year.Image Source: Zacks Investment ResearchASE TechnologyASE Technology ASX is a provider of semiconductor manufacturing services in assembly and testing. ASX develops and offers complete turnkey solutions in the manufacturing and testing of semiconductor components and employs 95,000 people with facilities across the world.ASX has a Zacks Rank #1 (Buy), indicating a positive earnings revision trend. During its last earnings report, ASX EPS surprised to the upside by 10%.ASE Technology stock is showing an interesting technical setup as well. This week the stock broke out of an 8-week bull flag consolidation. The breakout above $7.50 per share triggered the buy signal, now so long as it doesn’t trade back below the breakout level, ASX should move towards $8.50.Image Source: TradingViewASX was able to weather the 2022 technology correction decently, and has made a strong comeback this year. It has now outperformed the broad market over the last two years.Image Source: Zacks Investment ResearchASE Technology is trading at a very reasonable valuation as well. Its one-year forward earnings multiple is 9x, which is below its 10-year median of 13x, and below the industry average of 20x. ASX also has a dividend yield of 4.9%.Image Source: Zacks Investment ResearchConclusionThe semiconductor industry plays a critical role in the broader technological-enabled economy. Without these microchips many of the products we use every day would not exist. Is THIS the Ultimate New Clean Energy Source? (4 Ways to Profit) The world is increasingly focused on eliminating fossil fuels and ramping up use of renewable, clean energy sources. Hydrogen fuel cells, powered by the most abundant substance in the universe, could provide an unlimited amount of ultra-clean energy for multiple industries.  Our urgent special report reveals 4 hydrogen stocks primed for big gains - plus our other top clean energy stocks.  See Stocks NowWant 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 NVIDIA Corporation (NVDA): Free Stock Analysis Report Microchip Technology Incorporated (MCHP): Free Stock Analysis Report SPDR S&P 500 ETF (SPY): ETF Research Reports ASE Technology Holding Co., Ltd. (ASX): Free Stock Analysis Report VanEck Semiconductor ETF (SMH): ETF Research ReportsTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Futures Tumble, Treasuries And Rate Cut Odds Soar Amid Panic That Deutsche Bank Is The Next To Go Yesterday, while attention was still focused on the US banking system and the ongoing botched response by the Fed and especially the Treasury's senile Secretary, who more than two weeks after SIVB collapsed, have still not been able to stabilize confidence in banks - thereby assuring the US is about to slam head first into a brutal recession, just as Biden ordered to contain inflation, as US consumer spending is now in freefall - we pointed out that something bad was taking place in Europe: the credit default swaps of perpetually semi-solvent banking giant Deutsche Bank were quietly blowing out to multi-year highs. oh... pic.twitter.com/vNXc8ZE3Nm — zerohedge (@zerohedge) March 23, 2023 Well, we didn't have long to wait before everyone else also noticed and this morning it's official: the crisis has shifted to Germany's and Europe's largest TBTF bank, with even Bloomberg now writing that Deutsche Bank "has become the latest focus of the banking turmoil in Europe as ongoing concern about the industry sent its shares slumping the most in three years and the cost of insuring against default rising." The bank - which has staged a recovery in recent years after a series of crises that nearly brought it down - said Friday it will redeem a tier 2 subordinated bond early. And while such moves are usually intended to give investors confidence in the strength of the balance sheet, though the share price reaction suggests the message isn’t getting through, and the stock plunged 13% in German trading... ... while DB's CDS has exploded to level surpassing the bank's near-collapse in 2016, and is about to take out the covid wides. “It is a clear case of the market selling first and asking questions later,” said Paul de la Baume, senior market strategist at FlowBank SA. “Traders do not have the risk appetite to hold positions through the weekend, given the banking risk and what happened last week with Credit Suisse and regulators.” It wasn't just Deutsche Bank: UBS Group AG shares also dropped as Bloomberg reported that it’s one of the banks under scrutiny in a US Justice Department probe into whether finncial professionals helped Russian oligarchs evade sanctions, according to people familiar with the matter. In any case, the sudden, violent spike in DB default risk which quickly carried over to all big European banks, and which will not reverse until first the ECB then the Fed both cut rates... ... sent broader risk sentiment reeling with S&P 500 futures at session lows, sliding 1% to 3940. While there was no one big story setting off these moves. It could be a rush to havens heading into the weekend as traders wait for another shoe to drop — which has been a theme during recent weekends. In any case, the latest global equity rout and bank crisis which is now spreading to TBTF banks has sent bond yields crashing with the 2-year US yield plumbing new session lows, breaking down as low as 3.55%, and the resulting shockwave has collapsed odds of another rate hike in May to just 28% while the odds of a rate cut in June have exploded to 83% as the Fed's pivot finally arrives just on time: with the Fed having again broken the global financial system. In premarket trading, First Republic Bank swung between gains and losses as investors digested Treasury Secretary Janet Yellen’s comments about regulators being prepared to take additional steps to guard bank deposits if warranted. Fellow regional banks and bigger lenders decline, and after a volatile session on Thursday took the stock’s March slump to 90%. Block fell another 5%, extending Thursday’s 15% plunge as it announced potential legal action against short seller Hindenburg Research for its report on the payment processor.  Here are some other notable premarket movers: US cryptocurrency-exposed stocks decline, taking a pause from recent gains as the price of Bitcoin falls amid broader risk-off sentiment. Marathon Digital (MARA US) slid 0.9%, Hut 8 Mining Corp (HUT US) -1%, Coinbase (COIN US) -1.9%, Riot Platforms (RIOT US) -1.4%. ReNew Energy Global gains 12% after Bloomberg reported, citing people familiar with the matter, that the Canada Pension Plan Investment Board is exploring buying the shares of the power producer that it doesn’t already own and taking the Nasdaq- listed firm private. Joann slumped 6.2% in extended trading on Thursday after the fabric and crafts retailer reported adjusted earnings per share and Ebitda that missed the average analyst estimates, even as sales topped expectations. Oxford Industries fell 5.5% in postmarket trading after the owner of Tommy Bahama and Lilly Pulitzer issued a forecast for net sales in the current quarter that trailed the average analyst estimate at the midpoint of the guidance range. “Confidence is fragile, market volatility is likely to stay high, and policymakers may have to go further to make sure faith in the global financial system stays solid,” said Mark Haefele, chief investment officer at UBS Wealth Management. “Financial conditions are also likely to tighten, which increases the risk of a hard landing for the economy, even if central banks ease off on interest-rate hikes.” “Credit and stock markets too greedy for rate cuts, not fearful enough of recession,” a team led by Michael Hartnett wrote in a note. The strategist, who was correctly bearish through last year, said investment-grade spreads and stocks will be taking a hit over the next three to six months. Global cash funds had inflows of nearly $143 billion, the largest since March 2020 in the week through Wednesday — adding up to more than $300 billion over the past four weeks, according to the note citing EPFR Global data. European stocks are also plumbing lower, with European bank stocks sliding for a third day, and erasing weekly and yearly gains, as sentiment remains fragile on the sector. Deutsche Bank slumped nearly 15% as credit-default swaps surged amid wider concerns about the stability of the banking sector. The Stoxx 600 Banks Index is 5.3% lower as of 11:20am in London, erasing earlier weekly gains; the index is now -2.8% YTD. Meanwhile, UBS, which is not in the banking sector index, slumped as much as 8.4% as Jefferies cut its rating to hold from buy and it was among the banks under scrutiny in a US Justice Department probe into whether financial professionals helped Russian oligarchs evade sanctions. European oil stocks are also underperforming on Friday, dragging down the regional benchmark, as crude prices slump under pressure from a stronger dollar and concerns about the impact on growth of a fresh bout of stress facing the banking sector. The Energy sub-index slid as much as 4.3%, the most since March 15, while the Stoxx Europe 600 benchmark fell about 2%. Here are some other notable European movers: Casino Guichard-Perrachon SA fell as much as 6% to a fresh record low after Moody’s cut its long-term debt rating on the company further into junk territory Dino Polska drops as much as 5%, after its 4Q report showed that the Polish food supermarket chain is unable to maintain profitability amid inflation pressures Smiths Group gains as much as 2.1%, after the industrial firm beat expectations on Ebita, while also surpassing projections on its full-year sales outlook JD Wetherspoon jumps as much as 9.3% after the British pub operator posted a revenue beat for 1H, with Jefferies analysts noting resilience in like-for-like sales Earlier in the session, Asia equities were set to snap a three-day rally as lingering concerns over the health of the banking sector pushed a gauge of the region’s financial shares lower. The MSCI Asia Pacific Index fell as much as 0.5% before trimming losses, with its 11 sectoral sub-gauges showing mixed moves. Most markets declined, led by Hong Kong’s Hang Seng Index, while Chinese tech shares extended their rally on the back of positive earnings.  An index of Asian financial stocks dropped as much as 0.9%, tracking overnight declines in a measure of US financial heavyweights to the lowest since November 2020. Treasury Secretary Janet Yellen’s comments that authorities can take further steps to protect the banking system if needed failed to fully assuage concerns.  “The unease in the financial space will continue to weigh on the Asian financial sectors,” said Hebe Chen, an analyst at IG Markets Ltd. “The flip-flop in the market this week is seeing overwhelmed investors scratching their heads in the face of the mixed bag from Fed.”  Even with Friday’s lackluster moves, the MSCI Asia benchmark was set to notch its best weekly performance in about two months. The shares rose earlier in the week thanks to assurances from regulators in the US and Europe over protecting the banking sector and the Federal Reserve’s dovish tilt.   Meanwhile, a gauge of tech stocks in Hong Kong advanced for the fourth day close at its highest in a month. Lenovo led the gain, with JPMorgan lifting its recommendation on a bottoming of PC demand. “We like the internet sector, especially within China right now,” Marcella Chow, JPMorgan Asset Management’s global market strategist, said in an interview with Bloomberg TV. “China tech sector is attractive given improving regulatory outlook, leaner and more cost effective cost structure, improving margin.”  Japanese stocks Inched lower as worries linger over the financial sector while investors assess statements made by US Treasury Secretary Janet Yellen. The Topix Index fell 0.1% to 1,955.32 as of market close Tokyo time, while the Nikkei declined 0.1% to 27,385.25. Mitsubishi UFJ Financial Group Inc. contributed the most to the Topix Index decline, decreasing 1.1%. Out of 2,159 stocks in the index, 976 rose and 1,039 fell, while 144 were unchanged. “Assuming that the fallout from the US financial sector woes doesn’t spread significantly, Japanese stocks will likely stop its decline and pick up as the earnings period starts next month,” said Takeru Ogihara, a chief strategist at Asset Management One Australian stocks slumped to post a seventh week of losses; the S&P/ASX 200 index fell 0.2% to close at 6,955.20, with financials the biggest drag, as the malaise hanging over the global banking sector continued to damp sentiment. The benchmark erased 0.6% for the week, the seventh straight decline, maintaining the longest losing streak since 2008.  In New Zealand, the S&P/NZX 50 index fell 0.1% to 11,580.82. Indian stocks declined for a third straight week in the longest losing streak since December spurred by a late selloff in key gauges amid risk-off sentiment in global equities. The Nifty 50 index ended just shy of entering a so-called technical correction given the index’s near 10% drop from its December peak. For the week, the Nifty 50 fell 0.9% while the Sensex declined 0.8%. The S&P BSE Sensex fell 0.7% to 57,527.10 as of 3:30 p.m. in Mumbai, while the NSE Nifty 50 Index declined 0.8% to 16,945.05.  The selloff in small and mid cap counters contributed to the broader losses, with the Nifty Mid cap 100 and Nifty Small Cap 100 indexes ending nearly 2% lower each. Stocks of asset management companies were hammered after the government dropped the benefit of long-term capital gains tax for debt mutual funds in order to ensure parity in tax treatment with other such products. Shares of HDFC AMC dropped 4.1%, Aditya Birla AMC -2%, UTI AMC -4.8% and Nippon Life India AMC -1.2%. Reliance Industries contributed the most to the index decline, decreasing 2%. Out of 30 shares in the Sensex index, six rose and 24 fell In FX, the dollar’s recent weakness, which had supported the outlook for the region’s currencies and other assets, also took a breather on Friday. The Bloomberg dollar index rose 0.3% after a six-day run of declines. The yen rallies to the highest in six weeks amid demand for haven assets due to concerns over the health of the global banking sector. The yen was the biggest gainer versus the greenback among the Group-of-10 currencies. Treasury yields continued to decline reflecting expectations for Federal Reserve rate cuts this year “JPY’s strong performance we believe is driven by the return of its safe haven appeal, especially given that we see that Japanese banks are in a relatively better standing,” said Alan Lau, a strategist at Malayan Banking Bhd in Singapore. “Falling UST yields have also given the JPY support recently. Overall, we are positive on the yen and see the spot being on a downward trend this year with our year-end forecast at 122” In rates, Treasuries front-end adds to Thursday’s gains, with 2-year yields richer by over 20bp on the day, as the yield continues to plumb new session lows, breaking as low as 3.55%, dropping below th 2023 lows, and steepening the curve as traders continue to price out rate-hike premium for the May meeting and start pricing for cuts as early as June. Yields were near lows of the day while rest of the curve is richer by 17bp across belly to 9bp out to long-end; front-end led gains steepens 2s10s, 5s30s by 10bp and 8bp on the day. SOFR white-pack futures surge higher, with gains led by Dec23 contract which rallied 27bp vs. Thursday close; Fed-dated OIS shows just 4bp of rate hike premium for the May policy meeting with almost a full cut then priced into the June policy meeting — around 120bp of rate hikes are then priced into year-end In commodities, oil slipped the most in over a week, with Brent below $75, tracking a slide in equity markets and feeling the effects of a stronger dollar. Aluminum and copper headed toward their biggest weekly gains in more than two months on increasing demand in China and bets on looser Federal Reserve policy. Uranium Energy is among the most active resources stocks in premarket trading, falling about 9%. Gold traded just shy of $2000 and is about to break solidly higher. To the day ahead now, and data releases include the March flash PMIs from Europe and the US, along with UK retail sales for February, and the preliminary US durable goods orders for February. Otherwise from central banks, we’ll hear from the ECB’s De Cos, Nagel and Centeno, the Fed’s Bullard and the BoE’s Mann.   Market Snapshot S&P 500 futures down 1% to 3,940 MXAP down 0.2% to 160.13 MXAPJ down 0.5% to 515.46 Nikkei down 0.1% to 27,385.25 Topix down 0.1% to 1,955.32 Hang Seng Index down 0.7% to 19,915.68 Shanghai Composite down 0.6% to 3,265.65 Sensex down 0.2% to 57,801.12 Australia S&P/ASX 200 down 0.2% to 6,955.24 Kospi down 0.4% to 2,414.96 STOXX Europe 600 down 0.7% to 443.10 German 10Y yield little changed at 2.11% Euro down 0.4% to $1.0791 Brent Futures down 0.6% to $75.46/bbl Gold spot down 0.3% to $1,987.17 U.S. Dollar Index up 0.30% to 102.84 Top Overnight News A Federal Reserve facility that gives foreign central banks access to dollar funding was tapped for a record $60 billion in the week through March 22: BBG Deutsche Bank AG was at the center of another selloff in financial shares heading into the weekend: BBG Credit Suisse Group AG and UBS Group AG are among banks under scrutiny in a US Justice Department probe into whether financial professionals helped Russian oligarchs evade sanctions, according to people familiar with the matter: BBG Japan’s headline national CPI for Feb cools to +3.3% (down from +4.3% in Jan and inline w/the St) while core ticks higher to +3.5% (up from +3.2% in Jan and ahead of the St’s +3.4% forecast). RTRS Copper prices will surge to a record high this year as a rebound in Chinese demand risks depleting already low stockpiles, the world’s largest private metals trader has forecast. Global inventories of the metal used in everything from power cables and electric cars to buildings have dropped rapidly in recent weeks to their lowest seasonal level since 2008, leaving little buffer if demand in China continues to pace ahead. FT Authorities this week raided the Beijing offices of Mintz Group, detaining all five of the New York-based due diligence firm’s staff members in mainland China, the company said—an incident likely to unnerve global businesses operating in the country. WSJ China’s top diplomat Wang Yi urged Europe to play a role in supporting peace talks for Russia’s war in Ukraine, though the US has warned Beijing’s proposals would effectively freeze the Kremlin’s territorial gains. BBG Ukrainian troops, on the defensive for months, will soon counterattack as Russia's offensive looks to be faltering, a commander said, but President Volodymyr Zelenskiy warned that without a faster supply of arms the war could last years. RTRS Europe’s flash PMIs for March were mixed, with upside on services (55.6, up from 52.7 in Feb and ahead of the St’s 52.5 forecast) but downside on manufacturing (47.1, down from 48.5 in Feb and below the St’s 49 forecast). “Inflationary pressures have continued to moderate, with input prices falling sharply in manufacturing… overall input costs rose at the slowest rate since March 2021…the record easing of supply constraints marks a major reversal from the record delays seen during the pandemic” S&P Deutsche Bank was at the center of another selloff in financials. The bank tumbled 11% in Frankfurt and default-swaps on its euro, senior debt surged to the highest since they were introduced in 2019, when Germany revamped its debt framework to introduce senior preferred notes. Other banks with high exposure to corporate lending also declined. Commerzbank slid 9% and Soc Gen 7%.  BBG The Swiss authorities and UBS Group AG are racing to close the takeover of Credit Suisse Group AG within as little as a month, according to two sources with knowledge of the plans, to try to retain the lender's clients and employees. RTRS Citizens Financial is set to submit a bid for SVB's private banking arm, Reuters reported. Customers Bancorp is also said to be exploring a deal for all or part of SVB. Carson Block said depositors at SVB and Signature Bank should have taken haircuts after regulators seized the firms. BBG A more detailed look at global markets courtesy of Newsquawk APAC stocks were mostly subdued after the recent bout of central bank rate hikes and choppy performance stateside where Wall Street just about closed higher amid a dovish market repricing of Fed rate expectations.     ASX 200 was lower with risk appetite sapped by weak PMI data which returned to contraction territory. Nikkei 225 lacked conviction after the latest inflation data printed mostly in line with estimates. Hang Seng and Shanghai Comp. retreated after the central bank drained liquidity and as participants digest earnings releases, while it was also reported that the US added 14 Chinese entities to the red flag list. Top Asian News HKMA said Hong Kong has very little exposure to the European and US banking situation, while it needs to monitor the situation carefully for any further volatility but is not concerned about risks to the Hong Kong banking sector. China is to extend some tax relief measures, according to local media. Equities are back under marked pressure as banking sector concern re-intensifies within Europe, Euro Stoxx 50 -2.3% & ES -0.8%. Specifically, the European banking index SX7P -5.0% is the standout laggard amid broad-based pressure in banking names as CDS' for the stocks continue to rise alongside focus on the redemption of notes by Deutsche Bank and Lloyds; currently, Deutsche Bank -12% is the Stoxx 600 laggard. Stateside, futures are pressured in tandem with the above price action though with the magnitude less pronounced ahead of the arrival of US players and as we await potential updates to the regions own banking names. Apple (AAPL) supplier Pegatron (4982 TW) is reportedly looking to open a second factory within India, to construct the latest iPhone models, via Reuters citing sources. Top European News ECB is likely to reassure EU leaders regarding bank stability on Friday and is to call for EU deposit insurance, according to Reuters. ECB's Nagel says it is necessary to increase policy rates to sufficiently restrictive levels, whilst the APP wind down should accelerate from Q3. Domestic price pressures are likely to last for longer, whilst underlying inflation is increasingly concerning. There are signs of second-round effects from inflation-induced higher wage increases. ECB's Nagel says there is often a bumpy road after similar instances in the banking sector, not surprising there have been market moves. On Deutsche Bank's share slide, ECB's Nagel will not comment. BoE's Bailey says rates will rise again if firms hike prices, via BBC; "If all prices try to beat inflation we will get higher inflation," Bank headlines Deutsche Bank (DBK GY) announces a decision to redeem its USD 1.5bln fixed to fixed reset rate subordinated Tier 2 notes, due 2028. Lloyds (LLOY LN) has issued a notice of redemption for the entire outstanding principal amount of the USD 1bln 0.695% senior callable fixed-to-fixed rate notes due 2024. In terms of the accompanying risk-off price action, the desk notes the early redemption(s) can perhaps be taken as a negative if we assume the justification is that the bank(s) expect to see more dovishness/risk-off before the next fixed-to-fixed rate adjustment. UBS Wealth Management head Khan offered a retention package to Credit Suisse's Asia staff in Hong Kong town hall which focuses on stabilising the Credit Suisse Asia team and boosting banker confidence, according to sources. Credit Suisse (CSGN SW) and UBS (UBSG SW) are among the banks facing a US Russia-sanctions probe. Fed Balance Sheet: 8.784tln (prev. 8.689tln); Total factors supplying reserve funds 8.784tln (prev. 8.689tln); Loans 354.191bln (prev. 318.148bln); Bank Term Funding Program 53.669bln (prev. 11.943bln); Other credit extensions 179.8bln (prev. 142.8bln). FX The USD is benefitting from the marked risk-off move with the index surpassing 103.00 from a 102.50 base in short-order and extending further to a 132.25+ peak since. Action which comes to the detriment of peers ex-JPY, as USD/JPY has been lower by roughly a full point at worse (best) given its haven allure and with JPY repatriation factoring. Notably, CHF is outperforming its peers, ex-JPY, but is still softer overall as its proximity/exposure to the European banking situation continues to overshadow traditional haven status vs USD though it is markedly outperforming the EUR as the focus is on EZ banks this morning. As such, EUR is the standout laggard with EUR/USD down to a 1.0722 trough vs initial 1.0830 best, antipodeans are similarly hampered given their high-beta status and after Thursdays firmer action. Cable failed to see a lasting benefit from the morning's retail data while the subsequent PMIs were slightly softer than expected; but, again, the action is very much USD-driven. PBoC set USD/CNY mid-point at 6.8374 vs exp. 6.8367 (prev. 6.8709) Fixed Income Core benchmarks are experiencing a marked bid given the risk-off price action that we are seeing with an accompanying dovish re-pricing being seen for Central Banks. Specifically, Bunds have surpassed 139.50 and USTs above 1.17 with the respective 10yr yields down to 2.02% and 3.29% with market pricing in favour of an unchanged outcome at the next ECB and Fed meetings as such. Gilts are moving in tandem with EGB/UST peers and have eclipsed 107.00; BoE pricing is now heavily in favour of an unchanged outcome at the May meeting. Commodities Commodities diverge given the marked risk-off action with crude and base metals pressured while precious metals glean incremental support as the USD offsets the benefit of haven demand. Specifically, WTI and Brent are under USD 68.00/bbl and USD 74.00/bbl respectively which places them at the mid/lower-end of the current WTD USD 64.12-71.67/bbl and USD 70.12-77.44/bbl parameters. Spot gold is incrementally firmer though is yet to convincingly surpass USD 2k/oz while base metals are dented by the aforementioned tone with 3-month LME Copper slipping further below 9k to a USD 8940 low. Russia could recommend a temporary halt to wheat and sunflower exports, via Vedomosti; due to the sharp decline in prices. US base at North-east Syria's Al-Omar oil field has been targeted in an attack, according to security sources cited by Reuters. UBS maintains a positive outlook on Gold and targets USD 2050/oz by the end of the year. Geopolitics Ukraine's top ground forces commander said Ukrainian troops are to launch a counterassault soon as Russia's large winter offensive weakens without capturing the eastern city of Bakhmut, according to Reuters. Russian Security Council Deputy Chairman Medvedev says cannot rule out that Russian forces will need to reach Kyiv or Lviv to 'destroy the infection', according to RIA. US Pentagon said the US conducted air strikes in Syria which targeted an Iranian-backed group in response to a deadly UAV attack, according to Reuters and Wall Street Journal. US Treasury Secretary Yellen said sanctions on Iran have created a real economic crisis in that country and the US is constantly looking at ways to strengthen Iran sanctions but added that sanctions may not be sufficient to change a country's behaviour, according to Reuters. China's Defence Ministry said it monitored and drove away a US destroyer which entered the South China Sea Paracel Islands on Friday again and sternly demands the US to immediately stop such provocations, according to Reuters. North Korea said it conducted an important weapon test and firing drill from March 21st-23rd, while it added that it conducted a new underwater attack system in which it tested a new nuclear underwater attack drone and launched strategic cruise missiles. Furthermore, North Korea said its leader Kim guided the military activities and that Kim seriously warned enemies to stop reckless anti-North Korea war drills, according to KCNA. South Korean President Yoon said they will step up security cooperation with the US and Japan against North Korea's nuclear and missile provocations, while he said they will make sure North Korea pays the price for its reckless provocations, according to Reuters. US Event Calendar 08:30: Feb. Durable Goods Orders, est. 0.2%, prior -4.5% 08:30: Feb. -Less Transportation, est. 0.2%, prior 0.8% 08:30: Feb. Cap Goods Orders Nondef Ex Air, est. -0.2%, prior 0.8% 08:30: Feb. Cap Goods Ship Nondef Ex Air, est. 0.2%, prior 1.1% 09:45: March S&P Global US Manufacturing PM, est. 47.0, prior 47.3 09:45: March S&P Global US Services PMI, est. 50.2, prior 50.6 09:45: March S&P Global US Composite PMI, est. 49.5, prior 50.1 10:00: Revisions: Wholesale Inventories 11:00: March Kansas City Fed Services Activ, prior 1 DB's Jim Reid concludes the overnight wrap There's a bad bout of conjunctivitis going round the school at the moment and every member of the family has now had it with the last hold out being me until yesterday. So my eyes are a bit blurry this morning looking at screens. One of the twins believes he has conjunctiv"eye-test" as he thinks it's called. If he hadn't given it to me I'd think he was quite sweet. As I was looking at screens last night through weepy eyes, markets looked like they were trying to normalise. However late weakness in financials again was a big drag on the last couple of hours of US trading. Just after the European close, the S&P 500 was up over +1.2% and looked set to reverse a good portion of the previous day’s losses. However by the end of the session, further weakness in banks and cyclicals more broadly left the index only +0.30%, but having been down nearly half a percent with 30 minutes left in trading. The VIX, which intraday was near its lowest level (20.18) since the SVB issues became prominent, ended the day 0.35pts higher at 22.6. Today we'll see if the flash PMIs around the world are impacted by the early part of the mini banking crisis we've seen in the last two weeks. So watch the European and US numbers carefully. The renewed weakness in banks yesterday actually started in Europe with the STOXX Banks index down -2.27%. The STOXX 600 recovered from an intraday low of almost -1.0% to finish -0.21% lower overall. CDS markets highlighted the stress in European financials as the Subordinated Financial CDS index widened (+20bps) for the first time since last Friday – before the CS-UBS merger news – while the Senior CDS index was +9bps wider. In the US, the Regional bank ETF, KRE, was down -2.78% yesterday whilst the broader KBW Bank index was -1.73% lower as liquidity concerns of the smaller banks continue to permeate. Staying with bank liquidity, after the US close last night, the Fed’s weekly balance sheet data showed that the use of the Fed’s discount window was down from $153bn to $110bn, while the credit deployed to SVB and Signature was up from 143bn to 180bn, and lastly the new emergency bank lending facility (BTFP) was up from $12bn to $54bn. So net of the two failed banks there was little change, indicating that banks were not finding it necessary to access cheap capital. The market should look favourably on that from a contagion standpoint. Overnight S&P and Nasdaq futures are both up around +0.2% and 2 and 10yr UST yields are both around -4.5bps lower as we go to press. Far before that balance sheet data came out the S&P 500 opened much stronger, up +1.8% and stayed buoyant through the first three hours of trading, before the weakness in regional banks weighed on overall sentiment throughout the US afternoon. This was most pronounced with a bout of selling just before Treasury Secretary Yellen spoke in front of a House of Representatives subcommittee an hour or so before the US close. The selling might have been nervousness ahead of her remarks, given the negative market reaction to her comments before the Senate on Wednesday. Regardless, the S&P actually saw a +1.0% whipsaw move when Yellen said that the US government was “prepared for additional deposit action if warranted.” This was quickly faded, with the index continuing to trade between smaller gains and losses until it ended the day +0.30% higher. Despite the weakness in banks and Energy (-1.4%) on the back of lower oil prices, the S&P finished in the green thanks to Tech stocks outperforming on the lower rate outlook. The FANG+ index surged by +2.53%, whilst the NASDAQ 100’s gains (+1.19%) mean it’s now up nearly 20% from its lows at the end of December, almost meeting the traditional definition of a bull market. On the rates side, 10yr Treasury yields held up for the most part, with the 10yr yield -0.08bps to 3.427%. Short-dated rates were another story, with 2yr yields -10.4bps lower to 3.833% fully on the back of lower inflation expectations (-13.3bps), while 5yr rates were -7.2bps lower. This saw the 2s10s yield curve normalise a further +9.4bps yesterday to -41.3bps, which is the least inverted the curve has been in over 5 months. This drop in yields led by inflation expectations was also borne out in fed future pricing, where the market now only sees a 40% chance of a 25bp hike during the May meeting. In Europe there was a sharp decline in longer dated yields that accelerated later in the session, with yields on 10yr bunds (-13.3bps), OATs (-12.3bps) and BTPs (-10.4bps) all moving lower. Furthermore, those moves came in spite of some of the ECB’s hawks calling for further tightening. For example, Austria’s Holzmann said that the ECB would “probably have to add” to its rate hikes at the next meeting in May. And the Netherlands’ Knot said that “I still think that we need to make another step in May, but I don’t know the size of that”. Speaking of central banks, we had the Bank of England’s latest decision yesterday, who hiked rates by 25bps as expected. That takes the Bank Rate up to a post-2008 high of 4.25%, and 7 of the 9 MPC members were in support, with the other 2 preferring to remain on hold. Looking forward, the BoE said that they still expected inflation “to fall significantly” in Q2, aided by falling energy prices and the government’s move to extend the Energy Price Guarantee in last week’s budget. And when it comes to inflationary pressures, they said that if “there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.” In his review (link here), our UK economist writes that while he sees some upside to growth and pay, there are downsides to services CPI and credit conditions, making the next meeting in May a difficult decision to call. On balance, he sees more downside risks than upside, and holds onto his call for the Bank Rate to remain where it is at 4.25%, with the risks tilted to one further hike. Whilst we’re on central banks, yesterday also saw the Swiss National Bank hike rates by 50bps, taking the policy rate up to 1.5%. There were a number of hawkish-leaning details, including an upgrade in their inflation forecast relative to December, and their statement said that inflation was “still clearly above the range the SNB equates with price stability.” In the meantime, SNB President Jordan said that a “Credit Suisse bankruptcy would have had serious consequences for national and international financial stability and for the Swiss economy” and that “taking this risk would have been irresponsible.” This morning in Asia equity markets are lower with the KOSPI (-0.72%) the biggest underperformer with the Nikkei (-0.41%), the Shanghai Composite (-0.54%), the CSI (-0.27%) and the Hang Seng (-0.21%) trading in negative territory. Data from Japan has shown that consumer price inflation (+3.3% y/y) slowed in line with forecasts but for the first time in 13 months in February, compared to a +4.3% increase in January, mainly due to the effect of government’s energy subsidy program. At the same time, core-core CPI (excluding both fresh food and fuel costs) advanced further to +3.5% y/y in February (v/s +3.4% expected), notching the fastest y-o-y gain since January 1982. It followed a +3.2% increase in January highlighting the underlying inflationary pressures. Staying with Japan, the preliminary estimate for manufacturing PMI showed that sector activity remained in contraction for the fifth consecutive month in March after the reading came in at 48.6, albeit up from the previous month’s final reading of 47.7 as output and new orders remained under pressure. On the contrary, activity in the services sector expanded for the seventh straight month in March as the PMI edged up to 54.2, recording the fastest pace since October 2013, against prior month's reading of 54.0. Elsewhere, manufacturing as well as services in Australia slipped into contractionary territory as the manufacturing PMI fell to 48.7 in March from 50.5 in February with the services PMI deteriorating to 48.2 from the prior print of 50.7. When it came to yesterday’s data, the US weekly initial jobless claims came in at a 3-week low of 191k over the week ending March 18 (vs. 197k expected), pointing to continued strength in the labour market. Continuing claims saw a small increase to 1694k (1690k expected) and remains in a slight up-trend but not at a concerning level yet. Meanwhile, the new home sales data for February showed a modest rise to an annualised rate of 640k (vs. 650k expected), taking them up to a 6-month high. Over in the Euro Area, the European Commission’s preliminary consumer confidence data for March showed a decline to -19.2 (vs. -18.2 expected), marking a reduction after 5 consecutive monthly improvements. To the day ahead now, and data releases include the March flash PMIs from Europe and the US, along with UK retail sales for February, and the preliminary US durable goods orders for February. Otherwise from central banks, we’ll hear from the ECB’s De Cos, Nagel and Centeno, the Fed’s Bullard and the BoE’s Mann. Tyler Durden Fri, 03/24/2023 - 08:09.....»»

Tech has always gone through booms and busts. The companies that have always won are the ones that think ahead and stay focused — from the 60s to today. The valuations of most major tech companies were high — and now they’re not.Malte Mueller/Getty Images Tech's pandemic bubble has finally burst, demonstrated by layoffs and falling share prices. Every previous boom and bust in tech over the decades has resulted in winners and losers. The ones that survived were those that stayed agile, kept focused on innovation, and made sure their foundations were solid. There's been a lot of noise in the tech sector lately. Debates over "fake work," sweeping rounds of layoffs, and the rollback of lavish employee perks, have all raised a single unifying question: is the golden age of American tech over? Call it a downturn or call it a market correction. Whichever way you slice it, one thing is certain, the valuations of most major tech companies were high — and now they're not. Investors have spoken and the tech industry has hit a rough patch. After over a decade where the music never seemed to stop in Silicon Valley, the last song of the night is finally playing.The thing is that the tech industry has been here before, and will likely be here again. While companies like Meta and Google have hit rough patches for sure, there's no reason not to believe that they'll bounce back. They may even be wiser for the experience, experts say."The fundamentals are strong, maybe this is a reminder that austerity is important," said Dr. Vijay Govindarajan, a professor at the Tuck School of Business at Dartmouth College.But while the rest of the world gawks at the current state of tech, experts say that there are lessons to be learned from looking at the winners and losers of the previous booms and busts. Every tech boom and bust has a lesson to teachThe origins of modern-day Big Tech dates back to the 1960's, as computers slowly but surely transitioned from something primarily used by the government and academic sectors and into something that would find their way into the workplace, and later, households. Companies like IBM, Intel, and Hewlett-Packard saw their fortunes rise, as Wall Street began to fall in love with tech stocks, American historian and University of Washington professor Margaret O'Mara told Insider.But when the US government started pulling its tech spending amid the economic recession of the 1970s, the floor fell out from under Silicon Valley. It took the personal computer revolution, which peaked in the 1980s to bring the tech sector back into investors' good graces. That boom lasted well through the advent of the Internet in the 1990s — right up until the notorious dot-com crash of 2000 when the market turned on buzzed-about web startups whose investment capital didn't match their earnings potential . The Nasdaq fell 39%, and a number of companies went under. Some of the remaining dot-com survivors that still exist today are Google, Amazon, eBay, Priceline (now Booking.com), and what's left of Yahoo. Tech historian Micheal Malone told Insider that the successful companies took an important lesson from this difficult period: One product wasn't going to keep them relevant nor afloat. Information technology was evolving too fast for any one idea, no matter how good, to carry a comapny through. Apple shook up its PC business with the introduction of the iPhone and the discontinued iPod. And Microsoft acquired internet companies that could help support the creation of its internet software business."You can't just have a hot product, get rich, and walk away. You had to create follow up products," said Malone.Others suggest the real lesson is the dangers of what can happen when investors get involved with technologies that aren't quite mature yet."If you jump into a disruptive technology, you can really lose a lot of money because nobody knows enough about it," said Dr. Vijay Govindarajan, a professor at the Tuck School of Business at Dartmouth College.Staying agile is a relevant lesson, and so is making sure the foundations are soundIt took years for things to turn around, with the great recession of 2008 slowing down the recovery.When investors finally warmed back up to tech, Malone said the new theme became scalability: "You had to understand the markets, changing trends, and if you have those things, can you grow that company by 10 times every year?"Startups turned to users for help instead of taking on the expensive task of scaling by themselves. So-called Web 2.0 companies like Wikipedia, Facebook, Flickr (now part of SmugMug) and Twitter all relied on user-generated content, rather than creating it by themselves. "Facebook could not have created a billion webpages for people. They let people create them themselves. That's scalability," Malone told Insider.That theme carried companies into the earliest part of the 2020's. But something new is emerging now. While the rounds of layoffs and falling stock prices have been painful, Malone believes its bringing new focus to the lessons of being "financially sound" and having strong "structural underpinnings."For Dr. Govindarajan, the theme is austerity, telling Insider that tech "can't afford to be wasteful" anymore.  Wall Street and tech are betting the next boom will come from ChatGPT or the metaverse. But in this environment, it'll be those who thought ahead and made sure to spend their money wisely. "Ten years from today, there will be players who would've made money. Some people would've lost," said Dr. Govindarajan. "And that's the nature of the tech industry."Read the original article on Business Insider.....»»

Retirees who turned 72 in 2022 have just a few more days to make their first mandatory retirement plan withdrawal or required minimum distribution (RMD). The first required minimum distribution deadline for retirees is April 1, and if they miss it, they could face a big tax penalty (known as the excise tax) of as […] Retirees who turned 72 in 2022 have just a few more days to make their first mandatory retirement plan withdrawal or required minimum distribution (RMD). The first required minimum distribution deadline for retirees is April 1, and if they miss it, they could face a big tax penalty (known as the excise tax) of as much as 25%. Required Minimum Distribution Or RMD: What Is It? The required minimum distribution (RMD) is the minimum amount of money that retirees are required to withdraw each year from their retirement accounts. The retirement accounts include traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts. 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   In 2023, the age at which retirees need to take their RMDs is changing to 73 years old. Before 2020, the age for RMDs was 70½. The 2019 Secure Act increased it to 72, and the 2022 Secure 2.0 Act raised the age further to 73, which starts in 2023. Although the yearly required minimum distribution deadline is December 31, there is, however, an exception for the first year. This exception pushes the deadline to April 1. So, if you reach age 72 in 2023, the deadline for your first RMD is April 1, 2025. This means the required minimum distribution deadline for your first RMD for the year 2024 is April 1, 2025. If you reach age 73 in 2023, it means that you were 72 in 2022, and thus, you will be subject to the RMD rule that was in effect in 2022, i.e., the age 72 rule. So, if you were 72 years of age in 2022, then the deadline for your first RMD is April 1, 2023 (RMD will depend on your account balance as of Dec. 31, 2021). The deadline for your second RMD will be Dec. 31, 2023 (RMD will depend on your account balance as of Dec. 31, 2022). Generally, the account custodian or the retirement plan administrator informs you about the RMD for the account. You can calculate the amount yourself as well. To calculate the RMD, you need to divide the prior year's December 31 balance of the IRA or retirement plan account by the life expectancy factor. The IRS regularly publishes the life expectancy factor on its website. How To Avoid A Penalty The Secure 2.0 Act reduced the penalty for skipping the RMD or not withdrawing enough, from 50% to 25% starting in 2023. The applicable penalty rate could be reduced to 10% if retirees take the RMD during the “correction window.” This correction window is normally the end of the second tax year following the year of the missed RMD. Retirees can also request a waiver if they miss the required minimum distribution deadline due to a reasonable cause. In this case, retirees need to include a letter of explanation with their tax return Form 1040, along with Form 5329. The IRS notes that the penalty “may be waived if the account owner establishes that the shortfall in distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall.” If you are requesting a waiver, then you don’t need to pay the excess penalty up front, rather you need to follow the instructions in Form 5329. You will be notified if the IRS doesn’t accept your request. It must be noted that the penalty is levied on the amount retirees should have withdrawn. Separately, account owners in a workplace retirement plan can also avoid the penalty. According to the IRS, account owners in a workplace retirement plan, such as a 401(k) or profit-sharing plan, are allowed to delay their RMDs until the year they retire. This exception, however, isn’t applicable if they are a 5% owner of the business sponsoring the plan.   Why Should You Not Miss The First Required Minimum Distribution Deadline? In addition to a steep penalty, delaying the first RMD until April could also have other implications. If you miss the April required minimum distribution deadline, then your second RMD will be due by December 31. This could double your RMD income for the year. If the RMD is a small amount, then it won’t have much impact on your tax situation. But if it is a big amount, then doubling the RMD income could push you into another tax bracket. This could result in tax issues, such as more Medicare premiums, difficulty adjusting medical expenses, etc. So, it wouldn’t be wrong to say that missing the required minimum distribution deadline can be frustrating as well as costly. Thus, it is always recommended that you never miss the April minimum distribution deadline unless your income and tax situation allows it. To make sure you don’t miss the deadline, you need to ensure that your distribution occurs by the applicable deadline. You can do this by arranging for systematic or automatic withdrawals on a predetermined date. Also, it is vital that you submit your withdrawal requests at least two months before the deadline. Once you get your RMD, don’t forget to check your bank statement to make sure you got the correct amount......»»

U.S. stocks face downside risk after the Fed went ahead with an interest-rate hike to battle high inflation after bank failures earlier this month, according to SoFi’s Liz Young......»»

The "Airbnbust" proves the Wild West days of short-term online rentals are over. That's great news for your next vacation. Short-term rentals like those listed on Airbnb and Vrbo have never been in higher demand — or in greater supply. As the industry grows up, cities can no longer afford to take a hands-off approach.Arif Qazi / InsiderNick Sullivan was facing a sudden squeeze. For the past few years, his two Airbnb properties around Charlotte, North Carolina, had generated as much as $7,000 a month in revenue, which he and his wife stashed away for retirement. But this past fall, that income was slashed in half: Bookings dropped, his homes were empty more often than not, and his monthly revenue sank to $3,000.His cleaner was actually the first to point out the slowdown in bookings — she told Sullivan the same thing was happening with various rentals all over town. "We started panicking and started connecting with other folks who we know have short-term rentals," Sullivan told Insider. "We don't know what's going on." Sullivan is not alone. Whispers of an apocalyptic "Airbnbust" have spread online among short-term-rental hosts facing empty booking calendars, stiff competition for guests, and tumbling earnings. The shift has sparked fears of an irreversible slide in the business and a broader economic slowdown. But the hand-wringing over the idea of a downturn ignores a conflicting, but undeniable, reality: The short-term-rental business is bigger than ever, and some operators are thriving like never before. The number of nights booked at US short-term rentals reached a record high in 2022, as did total revenue, according to AirDNA, which tracks properties listed on the vacation-rental sites Airbnb and Vrbo. Rather than a collapse of the industry, the increasingly bifurcated state of the market — a bust for some, a boom for others — is a clear sign that we have hit a turning point in the long-running battle over short-term rentals. Some cities have allowed vacation-rental listings to multiply virtually unchecked, setting the stage for an oversupply that has come back to bite investors. Other places have cracked down and capped the number of permits, pacifying concerned citizens and preserving the profits of existing Airbnb owners. Regardless of their approach, most cities can't afford to lose the tourism dollars that flow from short-term rentals. That leaves local governments with a decision to make: Accept the boom-and-bust cycle that can come as a result of letting short-term rentals run wild, or craft rules to keep hosts happy and bring peace of mind to residents who fear their neighborhoods could one day be overrun by mini-hotels. Whichever way cities go, it's clear that the Wild West days of Airbnbs are swiftly drawing to a close. The industry is growing up — and that's good news for everyone involved. The makings of an AirbnbustEarly in the pandemic, the future of Airbnb looked grim. Bookings collapsed by more than 50% in New York, Seattle, and San Francisco, and the company's valuation plunged by $5 billion, or nearly 16%, as it prepared to go public. Some wondered aloud if home-sharing would even exist when the world emerged from lockdowns.But not only did Airbnb and competitors like Vrbo survive — they flourished. AirDNA estimated that bookings increased year over year by about 21% in 2021 and by another 21% in 2022. Encouraged by the soaring demand and record-low mortgage rates, investors jumped into the market, buying up homes in attractive locations and marketing them to the rising wave of vacationers and remote workers. The average number of short-term rentals on the market reached nearly 1.3 million in 2022, up by roughly 19% from the previous year and by about 7% from 2019, according to AirDNA. The sudden popularity was a boon for rental platforms — Airbnb recently reported that 2022 was its first profitable year ever. But the deluge of new listings foreshadowed an inevitable correction. As inflation ticked up and the pandemic travel frenzy died down, an oversupply of vacation rentals left hosts fighting over visitors. Jamie Lane, the vice president of research for AirDNA, said the supply shocks during the pandemic were unlike anything he'd seen in more than a decade of covering the lodging industry. Supply and demand were thrown "totally out of whack," Lane told Insider. In February, occupancy rates remained "well above pre-pandemic figures," according to AirDNA, but supply growth continued to outpace demand. As the market normalizes, some short-term-rental hosts are coming to grips with the fact that the banner days of 2021 are long gone. During a high-profile event like the Super Bowl, which draws hundreds of thousands of visitors for a weekend, hosts expect to be booked up. In past years, about 80% of available rooms in host cities like Miami and Los Angeles were taken during Super Bowl weekend. This year, however, some owners in Phoenix came up well short: As of the Thursday before the game, only 52% of rooms in Phoenix were claimed for that weekend, according to AirDNA. While occupancy creeped upwards the day before the game, some hosts had to lower prices to get rooms filled. Ric Kenworthy, who manages close to 100 properties for owners in and around the city, told Insider that in the run up to the game only half of the homes he looks after were rented out. As a result, he reduced the minimum number of nights he required for bookings and charged on average about 40% less than he'd expected. "Everyone's crying the blues right now," he said. Phoenix's problems are part of a larger trend: In the third quarter of 2022, the occupancy rate for short-term rentals fell year over year in 31 of the 50 largest US markets, according to AirDNA. The second-largest drop was in the Phoenix-Scottsdale metropolitan area, where occupancy dipped by more than 10 percentage points. This year, the story remains the same: In February, the month of the Super Bowl, occupancy in the Phoenix-Scottsdale metro was down 13.6% year over year, despite a 60% increase in demand. The number of listings, it turned out, was up 85%. Rather than some catastrophic collapse in demand, all signs point to massive oversupply as the culprit for the "Airbnbust" fears that have gripped many STR owners over the past year.Airbnb owners in cities that host the Super Bowl typically expect to be booked up — but occupancy ahead of this year's game in Phoenix was sorely lacking.Getty ImagesArizona's state government has encouraged the growth of short-term rentals, enacting a law in 2016 that prohibited cities and towns from placing caps on the number of vacation-rental properties. This paved the way for a surge in rentals across the state, particularly in the Phoenix metro area, where the number of listings on Airbnb alone surpassed 20,000 at the start of 2023, a whopping 68% year-over-year increase. Given the sharp rise of short-term rentals there, some local lawmakers have recently called for amending the law. One proponent of lacing new rules around Airbnbs is Solange Whitehead, a city councilwoman in Scottsdale. Whitehead said Scottsdale's local government is not interested in banning Airbnbs but hopes to exert more control over the number of rentals in the town and to weed out bad operators."There is a place for it," Whitehead said. "We just need regulations that protect everybody."A tale of 2 citiesRental hosts who've managed to avoid the bust may have their city government to thank, Nick Del Pego, the CEO of Deckard Technologies, told Insider. Del Pego, whose firm works with local governments around the country to keep tabs on short-term rentals, suggested that hosts in cities that have limited the number of rental properties have seen less of a drop-off in revenue in recent months."In some places, it's still the Wild West," Del Pego said. "In other places, they've put limitations, restrictions, and that in turn means that the legitimate operators tend to have a little less competition. It's certainly a mixed bag, and I've got clients on both ends of the spectrum."Cities must perform a delicate dance when it comes to short-term rentals like Airbnbs. On the one hand, they want to prevent neighborhoods from turning into blocks of hotels masquerading as single-family homes. But short-term rentals are often essential to a healthy tourism economy, particularly in vacation destinations. This push and pull has led towns — even some just a few miles apart — to take very different approaches.The local government in La Quinta, a resort city near Palm Springs in Southern California, stopped issuing new permits for short-term rentals in all but a few designated areas of the city in August 2020. And new rules that took effect in 2021 mandated that when a short-term-rental home trades hands, its permit expires. The total number of STR permits in the city has fallen by about 13% since January 2021, but the tax revenue collected from short-term rentals has steadily increased each year since 2019. In the first half of 2022, the city collected 30% more tax revenue from STRs than it did in the same period in the prior year, suggesting that rental operators there are prospering.Cities must perform a delicate dance when it comes to short-term rentals like AirbnbsAdi Gross, whose company, PD Vacation Rentals, manages 10 short-term rentals in La Quinta, said 2023 is shaping up to be her best year in more than a decade of operations. "We've already booked out our high-season calendar for 2024 and started to book out for 2025 with a waiting list," Gross said.The rules in La Quinta have kept existing rental owners mostly happy. They notched another victory this fall when residents narrowly voted down a ballot measure that would have dramatically reduced the number of short-term-rentals. Big Bear Lake, another popular vacation spot in Southern California, represents the flip side of La Quinta. The city has a permitting process for STRs but doesn't limit the number of rentals allowed to operate there. From 2020 to 2021, the number of nights available at short-term rentals there increased by 17.3%, but demand grew by only 7.2%. "While demand is up relative to any point in their time period before or after COVID, the supply of available short-term rentals is up, and so that's causing the daily rates to go down," Del Pego, whose firm works with the city of Big Bear Lake, told Insider. Evan Engle, the president and general manager of Destination Big Bear, which manages more than 400 rentals on behalf of homeowners in the area, has watched this play out firsthand. Engle said demand for rentals in Big Bear Lake increased sharply when COVID-19 hit, since the city offered a convenient escape for residents of Los Angeles, San Diego, and Las Vegas. Investors jumped in to capitalize on the boom, and the market soon became saturated with short-term rentals. Then the world began opening up, and Big Bear Lake fell down the list of options for travelers. In 2022, Big Bear Lake had the second-lowest occupancy rate of all US cities, at 43%, according to AirDNA. After posting record revenue numbers in 2020 and 2021, Engle's business has returned to its pre-pandemic pace, he said. But the outlook might not be so sunny for an investor who bought a home there when prices were at record highs."People who purchased homes within the last two years paid 30% or 40% more than the previous owner, expecting to have 30% or 40% more revenue, and that's just not happening," Engle said.Engle said that despite the wild fluctuations of the past few years, he's skeptical of the idea that more regulation, like a cap on the number of rentals, would help owners in the long term. Instead, he's betting the market will "self-correct." If an investor isn't making the money they'd hoped for, they may just end up selling or renting out the home to a long-term tenant, Engle said.The short-term-rental business grows upThe rise of short-term rentals during the pandemic, and the struggles of hosts confronting an oversupply, are evidence that local governments can no longer afford to ignore the impact of Airbnbs. They can take a hands-off approach or find a path for growth that ensures both residents and rental hosts end up on stable footing."What I think you're going to see is more caps, or at least more caps in certain neighborhoods," Del Pego said. "In a lot of places, I'm certainly seeing the idea of figuring out the right number for a community becoming more and more prevalent."Lane of AirDNA argued that some level of regulation, like requiring hosts to obtain a permit, is necessary to help bring the industry out of the shadows and reduce risk for investors."If you're investing into a market and there's no regulation, you just don't know the rules of the road," Lane said. "You don't know when regulations are going to be put in place and what those regulations are going to be." But Lane, like Engle, was averse to the idea of cities capping the number of short-term-rentals, saying it creates an "almost unfair advantage" for incumbent hosts and curbs competition.A decrease in the number of short-term rentals would probably mean higher nightly rates in the future as supply falls back in line with demand — AirDNA projects the average rate will rise to $278.19 a night this year, a roughly 2% increase. But the result of more regulation may be a better and more consistent experience for guests and their neighbors. In response to increasing concerns from residents during the pandemic, some cities have more strictly enforced rules meant to minimize noise complaints and other disruptions from short-term rentals and cracked down on hosts who don't have a license. Del Pego suggested that for guests, a more professionalized industry would also mean fewer hassles like exorbitant security deposits, hidden charges, or dirty rentals.  "I think the day has come that short-term rentals are now thought of like a lot of the other businesses: something that needs to be managed and controlled from a planning perspective so that the balance for a city or a county is healthy," Del Pego said. "A lot of cities and counties are leaning in, and I think when Airbnbs were new they were just standing back."Reaching that balance won't be easy. But when short-term rental owners do well — without disrupting neighborhoods — cities get more tax revenue and a thriving tourism economy.There's one thing pretty much everyone can agree on: Short-term rentals are here to stay. AirDNA has forecast that even with a drop in occupancy, the number of available listings is likely to increase to more than 1.4 million this year, which would be a 9% jump from 2022. A business the size of Airbnb "isn't going anywhere," Del Pego said. "The business is just maturing."James Rodriguez is a senior reporter for Insider.Dan Latu is a real estate reporter for Insider.Read the original article on Business Insider.....»»

The "Airbnbust" proves the Wild West days of short-term online rentals are over. That's great news for your next vacation. Short-term rentals like those listed on Airbnb and Vrbo have never been in higher demand — or in greater supply. As the industry grows up, cities can no longer afford to take a hands-off approach.Arif Qazi / InsiderNick Sullivan was facing a sudden squeeze. For the past few years, his two Airbnb properties around Charlotte, North Carolina, had generated as much as $7,000 a month in revenue, which he and his wife stashed away for retirement. But this past fall, that income was slashed in half: Bookings dropped, his homes were empty more often than not, and his monthly revenue sank to $3,000.His cleaner was actually the first to point out the slowdown in bookings — she told Sullivan the same thing was happening with various rentals all over town. "We started panicking and started connecting with other folks who we know have short-term rentals," Sullivan told Insider. "We don't know what's going on." Sullivan is not alone. Whispers of an apocalyptic "Airbnbust" have spread online among short-term-rental hosts facing empty booking calendars, stiff competition for guests, and tumbling earnings. The shift has sparked fears of an irreversible slide in the business and a broader economic slowdown. But the hand-wringing over the idea of a downturn ignores a conflicting, but undeniable, reality: The short-term-rental business is bigger than ever, and some operators are thriving like never before. The number of nights booked at US short-term rentals reached a record high in 2022, as did total revenue, according to AirDNA, which tracks properties listed on the vacation-rental sites Airbnb and Vrbo. Rather than a collapse of the industry, the increasingly bifurcated state of the market — a bust for some, a boom for others — is a clear sign that we have hit a turning point in the long-running battle over short-term rentals. Some cities have allowed vacation-rental listings to multiply virtually unchecked, setting the stage for an oversupply that has come back to bite investors. Other places have cracked down and capped the number of permits, pacifying concerned citizens and preserving the profits of existing Airbnb owners. Regardless of their approach, most cities can't afford to lose the tourism dollars that flow from short-term rentals. That leaves local governments with a decision to make: Accept the boom-and-bust cycle that can come as a result of letting short-term rentals run wild, or craft rules to keep hosts happy and bring peace of mind to residents who fear their neighborhoods could one day be overrun by mini-hotels. Whichever way cities go, it's clear that the Wild West days of Airbnbs are swiftly drawing to a close. The industry is growing up — and that's good news for everyone involved. The makings of an AirbnbustEarly in the pandemic, the future of Airbnb looked grim. Bookings collapsed by more than 50% in New York, Seattle, and San Francisco, and the company's valuation plunged by $5 billion, or nearly 16%, as it prepared to go public. Some wondered aloud if home-sharing would even exist when the world emerged from lockdowns.But not only did Airbnb and competitors like Vrbo survive — they flourished. AirDNA estimated that bookings increased year over year by about 21% in 2021 and by another 21% in 2022. Encouraged by the soaring demand and record-low mortgage rates, investors jumped into the market, buying up homes in attractive locations and marketing them to the rising wave of vacationers and remote workers. The average number of short-term rentals on the market reached nearly 1.3 million in 2022, up by roughly 19% from the previous year and by about 7% from 2019, according to AirDNA. The sudden popularity was a boon for rental platforms — Airbnb recently reported that 2022 was its first profitable year ever. But the deluge of new listings foreshadowed an inevitable correction. As inflation ticked up and the pandemic travel frenzy died down, an oversupply of vacation rentals left hosts fighting over visitors. Jamie Lane, the vice president of research for AirDNA, said the supply shocks during the pandemic were unlike anything he'd seen in more than a decade of covering the lodging industry. Supply and demand were thrown "totally out of whack," Lane told Insider. In February, occupancy rates remained "well above pre-pandemic figures," according to AirDNA, but supply growth continued to outpace demand. As the market normalizes, some short-term-rental hosts are coming to grips with the fact that the banner days of 2021 are long gone. During a high-profile event like the Super Bowl, which draws hundreds of thousands of visitors for a weekend, hosts expect to be booked up. In past years, about 80% of available rooms in host cities like Miami and Los Angeles were taken during Super Bowl weekend. This year, however, some owners in Phoenix came up well short: As of the Thursday before the game, only 52% of rooms in Phoenix were claimed for that weekend, according to AirDNA. While occupancy creeped upwards the day before the game, some hosts had to lower prices to get rooms filled. Ric Kenworthy, who manages close to 100 properties for owners in and around the city, told Insider that in the run up to the game only half of the homes he looks after were rented out. As a result, he reduced the minimum number of nights he required for bookings and charged on average about 40% less than he'd expected. "Everyone's crying the blues right now," he said. Phoenix's problems are part of a larger trend: In the third quarter of 2022, the occupancy rate for short-term rentals fell year over year in 31 of the 50 largest US markets, according to AirDNA. The second-largest drop was in the Phoenix-Scottsdale metropolitan area, where occupancy dipped by more than 10 percentage points. This year, the story remains the same: In February, the month of the Super Bowl, occupancy in the Phoenix-Scottsdale metro was down 13.6% year over year, despite a 60% increase in demand. The number of listings, it turned out, was up 85%. Rather than some catastrophic collapse in demand, all signs point to massive oversupply as the culprit for the "Airbnbust" fears that have gripped many STR owners over the past year.Airbnb owners in cities that host the Super Bowl typically expect to be booked up — but occupancy ahead of this year's game in Phoenix was sorely lacking.Getty ImagesArizona's state government has encouraged the growth of short-term rentals, enacting a law in 2016 that prohibited cities and towns from placing caps on the number of vacation-rental properties. This paved the way for a surge in rentals across the state, particularly in the Phoenix metro area, where the number of listings on Airbnb alone surpassed 20,000 at the start of 2023, a whopping 68% year-over-year increase. Given the sharp rise of short-term rentals there, some local lawmakers have recently called for amending the law. One proponent of lacing new rules around Airbnbs is Solange Whitehead, a city councilwoman in Scottsdale. Whitehead said Scottsdale's local government is not interested in banning Airbnbs but hopes to exert more control over the number of rentals in the town and to weed out bad operators."There is a place for it," Whitehead said. "We just need regulations that protect everybody."A tale of 2 citiesRental hosts who've managed to avoid the bust may have their city government to thank, Nick Del Pego, the CEO of Deckard Technologies, told Insider. Del Pego, whose firm works with local governments around the country to keep tabs on short-term rentals, suggested that hosts in cities that have limited the number of rental properties have seen less of a drop-off in revenue in recent months."In some places, it's still the Wild West," Del Pego said. "In other places, they've put limitations, restrictions, and that in turn means that the legitimate operators tend to have a little less competition. It's certainly a mixed bag, and I've got clients on both ends of the spectrum."Cities must perform a delicate dance when it comes to short-term rentals like Airbnbs. On the one hand, they want to prevent neighborhoods from turning into blocks of hotels masquerading as single-family homes. But short-term rentals are often essential to a healthy tourism economy, particularly in vacation destinations. This push and pull has led towns — even some just a few miles apart — to take very different approaches.The local government in La Quinta, a resort city near Palm Springs in Southern California, stopped issuing new permits for short-term rentals in all but a few designated areas of the city in August 2020. And new rules that took effect in 2021 mandated that when a short-term-rental home trades hands, its permit expires. The total number of STR permits in the city has fallen by about 13% since January 2021, but the tax revenue collected from short-term rentals has steadily increased each year since 2019. In the first half of 2022, the city collected 30% more tax revenue from STRs than it did in the same period in the prior year, suggesting that rental operators there are prospering.Cities must perform a delicate dance when it comes to short-term rentals like AirbnbsAdi Gross, whose company, PD Vacation Rentals, manages 10 short-term rentals in La Quinta, said 2023 is shaping up to be her best year in more than a decade of operations. "We've already booked out our high-season calendar for 2024 and started to book out for 2025 with a waiting list," Gross said.The rules in La Quinta have kept existing rental owners mostly happy. They notched another victory this fall when residents narrowly voted down a ballot measure that would have dramatically reduced the number of short-term-rentals. Big Bear Lake, another popular vacation spot in Southern California, represents the flip side of La Quinta. The city has a permitting process for STRs but doesn't limit the number of rentals allowed to operate there. From 2020 to 2021, the number of nights available at short-term rentals there increased by 17.3%, but demand grew by only 7.2%. "While demand is up relative to any point in their time period before or after COVID, the supply of available short-term rentals is up, and so that's causing the daily rates to go down," Del Pego, whose firm works with the city of Big Bear Lake, told Insider. Evan Engle, the president and general manager of Destination Big Bear, which manages more than 400 rentals on behalf of homeowners in the area, has watched this play out firsthand. Engle said demand for rentals in Big Bear Lake increased sharply when COVID-19 hit, since the city offered a convenient escape for residents of Los Angeles, San Diego, and Las Vegas. Investors jumped in to capitalize on the boom, and the market soon became saturated with short-term rentals. Then the world began opening up, and Big Bear Lake fell down the list of options for travelers. In 2022, Big Bear Lake had the second-lowest occupancy rate of all US cities, at 43%, according to AirDNA. After posting record revenue numbers in 2020 and 2021, Engle's business has returned to its pre-pandemic pace, he said. But the outlook might not be so sunny for an investor who bought a home there when prices were at record highs."People who purchased homes within the last two years paid 30% or 40% more than the previous owner, expecting to have 30% or 40% more revenue, and that's just not happening," Engle said.Engle said that despite the wild fluctuations of the past few years, he's skeptical of the idea that more regulation, like a cap on the number of rentals, would help owners in the long term. Instead, he's betting the market will "self-correct." If an investor isn't making the money they'd hoped for, they may just end up selling or renting out the home to a long-term tenant, Engle said.The short-term-rental business grows upThe rise of short-term rentals during the pandemic, and the struggles of hosts confronting an oversupply, are evidence that local governments can no longer afford to ignore the impact of Airbnbs. They can take a hands-off approach or find a path for growth that ensures both residents and rental hosts end up on stable footing."What I think you're going to see is more caps, or at least more caps in certain neighborhoods," Del Pego said. "In a lot of places, I'm certainly seeing the idea of figuring out the right number for a community becoming more and more prevalent."Lane of AirDNA argued that some level of regulation, like requiring hosts to obtain a permit, is necessary to help bring the industry out of the shadows and reduce risk for investors."If you're investing into a market and there's no regulation, you just don't know the rules of the road," Lane said. "You don't know when regulations are going to be put in place and what those regulations are going to be." But Lane, like Engle, was averse to the idea of cities capping the number of short-term-rentals, saying it creates an "almost unfair advantage" for incumbent hosts and curbs competition.A decrease in the number of short-term rentals would probably mean higher nightly rates in the future as supply falls back in line with demand — AirDNA projects the average rate will rise to $278.19 a night this year, a roughly 2% increase. But the result of more regulation may be a better and more consistent experience for guests and their neighbors. In response to increasing concerns from residents during the pandemic, some cities have more strictly enforced rules meant to minimize noise complaints and other disruptions from short-term rentals and cracked down on hosts who don't have a license. Del Pego suggested that for guests, a more professionalized industry would also mean fewer hassles like exorbitant security deposits, hidden charges, or dirty rentals.  "I think the day has come that short-term rentals are now thought of like a lot of the other businesses: something that needs to be managed and controlled from a planning perspective so that the balance for a city or a county is healthy," Del Pego said. "A lot of cities and counties are leaning in, and I think when Airbnbs were new they were just standing back."Reaching that balance won't be easy. But when short-term rental owners do well — without disrupting neighborhoods — cities get more tax revenue and a thriving tourism economy.There's one thing pretty much everyone can agree on: Short-term rentals are here to stay. AirDNA has forecast that even with a drop in occupancy, the number of available listings is likely to increase to more than 1.4 million this year, which would be a 9% jump from 2022. A business the size of Airbnb "isn't going anywhere," Del Pego said. "The business is just maturing."James Rodriguez is a senior reporter for Insider.Dan Latu is a real estate reporter for Insider.Read the original article on Business Insider.....»»

February data shows home prices broke a 131-month streak of year-over-year gains, according to the National Association of Realtors. (Photo by Joe Raedle/Getty Images) Home prices fell year-over-year for the first time in a decade last month, NAR reported. That drop comes as mortgage rates still hover close to multi-decade highs near 7%.  Easing rate expectations could help the housing market avoid a crash, NAR's senior economist previously said. Home prices fell year-over-year in February for the first annual drop in a decade, according to a report from the National Association of Realtors.The trade association reported that median existing home prices slipped to $363,000 in February, 0.2% lower than what median home prices were in February 2022. That's the first annual decline the market has seen in February 2012, when the market began a 131-month streak of price gains.Meanwhile, existing home sales jumped 14.5% in February to an annual rate of 4.58 million. That's the largest increase in home sales since July 2020, the NAR said on Tuesday."Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines," NAR chief economist Lawrence Yun said in a statement.The interest rate on the 30-year fixed mortgage has hovered around a 20-year-high, thanks in part to the Fed's aggressive interest rate hikes over the last year, which have influenced what consumers pay for a range of loan products. Mortgage rates have eased in recent weeks, however, as investors lower their expectations for interest rate volatility. Fed officials are only expected to hike rates 25 basis points at this week's policy meeting, lower than previous estimates of a 50 basis-point hike. Meanwhile, rates on the 30-year mortgage have eased to 6.6%, according to Freddie Mac's most recent market survey, down from a high of 7% over the last year.Lower rates and lower home prices are increasing affordability in the market, helping rev up demand after a year of slowing activity. Home sales, housing starts, and new home listings cratered in 2022, leading some experts last year to warn of a housing market crash that could bring on a steep correction in home prices.But Nadia Evangelou, a chief economist at NAR, previously told Insider that she believed easing interest rate expectations would help the market avoid a crash. She estimated that housing sales likely bottomed out in early 2023, with the year overall being a "turning point" for the market.Read the original article on Business Insider.....»»

Our round-up shows exchange-traded funds from issuer Direxion currently dominate Fintel’s Fund Sentiment Leaderboard Exchange-traded funds from issuer Direxion currently dominate the Fintel Fund Sentiment Leaderboard as hedge fund managers and institutions see equities markets in unchartered waters amid banking industry uncertainty and central bank efforts to cool inflation. Q4 2022 hedge fund letters, conferences […] Our round-up shows exchange-traded funds from issuer Direxion currently dominate Fintel’s Fund Sentiment Leaderboard Exchange-traded funds from issuer Direxion currently dominate the Fintel Fund Sentiment Leaderboard as hedge fund managers and institutions see equities markets in unchartered waters amid banking industry uncertainty and central bank efforts to cool inflation. 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   Find A Qualified Financial Advisor Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now. The Leaderboard uses an advanced quantitative model to find stocks that are being most accumulated by funds. The proprietary model uses a number of factors, including the increase in the number of disclosed owners and the changes in average allocation across disclosed owners. Institutional investors are using ETFs as they seek to generate returns without taking on excessive concentration risk. Sector ETFs allow for thematic trades without picking individual stocks. The current list tells us that institutions have been buying into the recent banking weakness that has seen small/mid-cap banking stocks sell-off significantly in the last week. The funds have also been buying into retail and tech sectors while shorting the semiconductor sector. At number 10 on the leaderboard is Direxion Daily Mid Cap Bull 3X Shares (NYSEARCA:MIDU) with a fund sentiment score of 98.70. The number of institutional owners of the ETF has increased to 17 from 10 during the quarter. The average portfolio allocation has grown to 0.26%. The leveraged mid cap ETF is down around 45% over the last year with the share price trading around 12-month lows. The ProShares Short Bitcoin Strategy ETF (NYSEARCA:BITI) is ninth on the list, with a sentiment score of 98.89. Five new institutions purchased the ETF during the quarter, bringing the total to 18 with an average portfolio allocation of 1.20%. This ETF aims to trade at a 1x inverse relationship relative to the S&P CME Bitcoin Futures index. The gauge is down around 44.5% since launching in June last year as Bitcoin prices have recovered some losses in 2023. Another Direxion fund, the Direxion Daily Semiconductor Bear 3X Shares ETF (NYSEARCA:SOXS) has the next highest score of 98.89. The number of institutions has grown by 37.5% to 33 from 24 during the quarter. The average portfolio allocation has grown significantly. to 2.98%, which is almost the largest allocation on the leaderboard. The inverse semiconductor sector ETF is down 50.7% over the last 12 months, after being up more than 100% as of October. Many institutions are playing the theme of an unwinding of the tight chip shortage that was felt throughout the pandemic. Putnam Focused Large Cap Value ETF (NYSEARCA:PVAL) has the seventh-highest score, at 98.94. The number of institutions holding the ETF has grown to 19 from 11 during the quarter with an average portfolio allocation of 0.51%. The large cap-focused exchange-traded fund has traded relatively flat over the last year with mega caps usually trading on lower PE ratios with healthier free cash flows from established businesses. Direxion Daily Aerospace & Defense Bull 3X Shares (NYSEARCA:DFEN) is at number six on the list, with a 98.96 sentiment score. The number of owners on the register has grown by 47.37% to 28 during the quarter. The holders have an average portfolio allocation of 0.82%. The DFEN ETF is down 17.7% over the last year but poses strong secular tailwinds amid increased defense spending by countries in the wake of the Ukraine war. Direxion Daily Regional Banks Bull 3X Shares (NYSEARCA:DPST) ETF has the fifth-highest fund sentiment score of 98.99. The number of owners on the register has grown to 27 from 19 during the quarter. with an average portfolio allocation of 1.40%. The DPST ETF is down a whopping 84% over the last year and has fallen 70% in March alone. Funds are crowding into the ETF with the hopes of a recovery from the sharp correction that recently occurred in the banking sector. First Trust Switzerland AlphaDEX Fund (NASDAQ:FSZ) is at number four on the list, with a score of 99.01. The number of institutions on the register has grown by 47.37% to 28. The average portfolio allocation from holders is 1.36%. The Swiss equities focused ETF is down 11.7% over the last year but has recovered 26% from 2022’s lows reached last October. The Direxion Daily Retail Bull 3X Shares (NYSEARCA:RETL) ETF is third on the list with a fund sentiment score of 99.22. The number of institutions on the register has grown to 15 from 10 during the quarter with an average portfolio allocation of 0.87%. The retail sector-focused ETF is down 69.5% over the last year. The ETF has seen several recovery attempts with the most recent 80% climb in January before gains were quickly wiped out with the broader market sell-off.   At the number two spot is Direxion Daily Dow Jones Internet Bull 3X Shares (NYSEARCA:WEBL) with a score of 99.31. The number of owners has grown to 19 from 12, with an average portfolio allocation of 0.97%. The WEBL ETF is down 74.4% over the last 12 months as high price-to-earnings technology stocks were punished for minimal cash flows and frothy valuations. Topping the leaderboard is Fidelity MSCI Financials Index ETF (NYSEARCA:FNCL) with the highest fund sentiment score of 99.40. Institutions are crowding into the ETF with the number of owners more than tripling to 531 from 176. The average portfolio allocation also increased by 330% to 0.82%. The FNCL ETF is down around 21% on a one-year view fuelled by the most recent banks sell-off last week. The ETF lost 15% of its value in March, erasing most of the recovery gains from the previous quarter. This and other regional banking ETFs present significant upside if the banking landscape becomes less volatile. However, with uncertain times ahead, it is hard to pick the bottom. Article by Ben Ward, Fintel.....»»

"The bottom line is that we think this is exactly how bear markets end," Morgan Stanley chief investment officer Mike Wilson said in a note. Morgan Stanley chief investment officer Mike WilsonBloomberg TV The Fed's rush to provide liquidity does not equate to quantitative easing, Mike Wilson wrote. "The bottom line is that we think this is exactly how bear markets end," Morgan Stanley's CIO said. But the last phase of a bear market can be "vicious," Wilson added in a note. The Federal Reserve's rush to provide banks with liquidity amid a contagion crisis should not be a green light for investors to take risky bets, Morgan Stanley chief investment officer Mike Wilson said in a Monday note.Instead — combined with a growing credit crunch and earning estimates that remain overly optimistic  — markets may be in for a dramatic decline.  "The bottom line is that we think this is exactly how bear markets end," the reputed bearish analyst wrote. "In this case, it's the fact that earnings growth expectations are much too high given the headwinds companies are facing, and the fact that the Fed is hiking rates during a period of contracting earnings."In recent weeks, some investors have grown convinced that the Federal Reserve's help in backstopping the deposits of lenders and the addition of liquidity to stabilize other banks is a return to quantitative easing, fueling gains in the stock market.But Wilson said that this liquidity will only have short-lived benefits, and won't alleviate tight lending conditions that are adding to a credit crunch.Of the $308 billion the Fed loaned to banks during the crisis that started with the failure of Silicon Valley Bank, most of it is unlikely to lead to the creation of new credit for their customers, he wrote. "None of these reserves will likely transmit to the economy as bank deposits normally do," he said. "Instead, we believe the overall velocity of money in the banking system is likely to fall sharply and more than offset any increase in reserves, especially given the temporary/emergency nature of these funds."He also noted that the bond yield curve has steepened by 60 basis points within days, historically forecasting a coming recession. Despite this, earnings predictions have remained high, Wilson added, but they will see a downward correction as the next quarterly reporting season approaches."This is how it always plays out in our experience and why the last part of the bear can be vicious and highly correlated — i.e., prices fall sharply via an equity risk premium spike that is very hard to prevent or defend in one's portfolio," he wrote. Read the original article on Business Insider.....»»

"This Is It!" - Von Greyerz Warns "The Financial System Is Terminally Broken" Authored by Egon von Greyerz via GoldSwitzerland.com, The financial system is terminally broken, toast, kaput! Anyone who doesn’t see what it happening will soon lose a major part of their assets either through bank failure, currency debasement or the collapse of all bubble assets like stocks, property and bonds by 75-100%. Many bonds will become worthless. Wealth preservation in physical gold is now absolutely critical. Obviously it must be stored outside a broken financial system. More later in this article. The solidity of the banking system is based on confidence. With the fractal banking system, highly leveraged banks only have a fraction of the money available if all depositors ask for their money back. So when confidence evaporates, so do the balance sheets of the banks and depositors realise that the whole system is just a black hole. And this is exactly what is about to happen.  For anyone who believes that this is just a problem with a few smaller US banks and one big one (Credit Suisse), they must think again. RE CREDIT SUISSE SEE ‘STOP PRESS’ AT THE END OF THE ARTICLE. THE BANKS ARE FALLING LIKE DOMINOS, INCLUDING CREDIT SUISSE TONIGHT Yes, Silicon Valley Bank (16th biggest US bank) is gone after an idiotic and irresponsible  policy to invest short term customer deposits in long term US Treasuries at the bottom of the interest rate cycle. Even worse, they then valued the bonds at maturity rather than market, to avoid taking a loss. Clearly a management that didn’t have a clue about risk. SVB’s demise is the second biggest failure of a US bank.  Yes, Signature Bank (29th biggest) is gone due to a run on deposits.  And yes, First Republic Bank had to be supported by US lenders and the Fed by a $30 billion loan due to a run on deposits. But this won’t stop the rot as depositors attack the next bank and the next one and the next one………. And yes, the Swiss second largest bank Credit Suisse (CS) is terminally ill after a number of poor investments over the years combined with poor management that has come and gone virtually every year.. I wrote an important article about the coming demise of CS 2 years ago here: “ARCHEGOS & CREDIT SUISSE – TIP OF THE ICEBERG.” The situation at CS is so dire that a solution needs to be found before Monday’s (March 20) opening. The bank cannot survive in its present form. [ZH: a 'solution' was found... for now] A failure for Credit Suisse would not just rock the Swiss financial system but have severe global repercussions. A merger with UBS is one solution. But UBS had to be bailed out in 2008 and doesn’t want to be weakened again by Credit Suisse without state guarantees and support from the Swiss National Bank (SNB). The SNB injected CHF50 billion into CS last week but the share price still went to a new low. No one should believe that a state subsidised takeover of Credit Suisse by UBS will solve the problem. No, it will just be rearranging the deck chairs on the titanic and making the problem bigger rather than smaller. So rather than a lifebuoy, UBS will have a massive lead weight to carry which will guarantee its demise as the banking system collapses. And the Swiss government will take on assets which will be unrealisable.  Still, it is likely that by the end of the present weekend a deal will be announced with UBS being offered a deal they can’t refuse by taking over the good assets and the SNB/Government nurturing the bad assets of Credit Suisse in a rescue vehicle. The SNB is of course in a mess itself, having lost $143 billion in 2022. The SNB balance sheet is bigger than Swiss GDP and consists of currency speculation and US tech stocks. This central bank is the world’s biggest hedge fund and the least successful.  Just to put a balanced view on Switzerland. It has the best political system in the world with direct democracy. It also has low Federal debt and normally no budget deficits. It is also the safest country in the world. SWISS BANKING SYSTEM TOO BIG TO SAVE But the Swiss banking system is very unsound, just like the rest of the world’s. A central bank which is bigger than the country’s GDP is extremely unsound. And a banking system which is 5x Swiss GDP makes it too big to save.  Although the Fed and ECB are much smaller in relation to their countries’ GDP than the SNB, these two central banks will soon discover that their assets of around $8 trillion each are grossly overvalued.  With a global banking system on the verge of a systemic failure, Central Bankers and bankers have been working around the clock this weekend to temporarily avoid the inevitable collapse of the bankrupt financial system.  BIGGEST MONEY PRINTING IN HISTORY COMING As I pointed out above, the main Central Banks would also be bankrupt if they valued their assets honestly. But they have a wonderful source of money that they will tap to save the system.  Yes, I am of course talking about money printing.  We will in coming months and years see the most massive avalanche of money printing that has ever hit the world. For anyone who believes that we are just seeing another bank run that will quickly evaporate, they will need to take a shower in ice cold Alpine water.  What we are witnessing is not just a temporary drama that will be sorted out by “the all powerful and resourceful” central banks.  THE DEATH OF MONEY No, instead what we are seeing is the end phase of this financial era which started with the formation of the Fed in 1913 and in the next few years, or much sooner, will end with the death of money. But the Death of Money doesn’t just mean that the dollar (and most currencies) will make their final move to ZERO, having already declined 98% since 1971.  Currency debasement is not the cause but the effect of the banking Cabal taking control of the money for their own benefit. As Mayer Amschel Rothschild said in the late 1700s: “Let me issue and control a nation’s money and I care not who makes the laws”. Sadly, as this Cassandra (me) has written about since the beginning of the century, the Death of Money is not just all currencies going to ZERO as they have throughout history.  No, the Death of Money means a total and final collapse of this financial system.  Cassandra was a priestess in Greek mythology who was given the gift of predicting major events accurately but also given the curse that no one would  believe her predictions.  No depositor must believe that the FDIC (Federal Deposit Insurance Corp) in the US or similar vehicles in other countries will save their deposits. All these organisations are massively undercapitalised and in the end it will be the governments in all countries which step in.  We know of course, that the government has no money. They just print whatever they need. That leaves ordinary people taking the final burden of all this money printing.  But ordinary people will have no money either. Yes a few rich people will be taxed heavily to cover bank deficits and losses. Still, that will be a drop in the ocean. Instead ordinary people will be impoverished with little income, no government handouts, no pension and money which is worthless.  The above is sadly the cycle that all economic eras go through. The issue this time is that the problem is global and of a magnitude never seen before in history.  Regrettably a rotten and bankrupt financial system needs to go through a cleansing period which the world will now experience. There cannot be sound growth and sound values until the current corrupt and debt infested system implodes. Only then can the world grow soundly again.  The transition will sadly be dramatic with a lot of suffering for most people. But there is no other way. We won’t just see poverty, famine but also many human tragedies. The risk of social unrest or civil war is very high plus the risk of a global war. Central banks had of course hoped that their Digital Currencies (CBDC) would be ready to save them (but not the world) from the present debacle by totally controlling people’s spending. But in my view they will be to late. And since CBDCs are just another form of Fiat money, it would just exacerbate the problem with an even more severe outcome at the end. Still, it won’t prevent them from trying. MARKET VALUE OF US BANKING ASSETS $2 TRILLION LOWER THAN BOOK VALUE A paper issued by 4 US academics in finance, illustrates the $2 trillion black hole in the US banking system:  “Monetary Tightening and U.S. Bank Fragility in 2023: Mark-to-Market Losses and Uninsured Depositor Runs?” March 13, 2023  Erica Jiang, Gregor Matvos, Tomasz Piskorski, and Amit Seru  CONCLUSION “We provide a simple analysis of U.S. banks’ asset exposure to a recent rise in the interest rates with implications for financial stability. The U.S. banking system’s market value of assets is $2 trillion lower than suggested by their book value of assets. We show that these losses, combined with a large share of uninsured deposits at some U.S. banks can impair their stability. Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to even insured depositors, with potentially $300 billion of insured deposits at risk. If uninsured deposit withdrawals cause even small fire sales, substantially more banks are at risk. Overall, these calculations suggest that recent declines in bank asset values significantly increased the fragility of the US banking system to uninsured depositors runs.”  What is crucial to understand is that the $2 trillion “loss” is only due to higher interest rates. When the US economy comes under pressure, the loan books of the banks will deteriorate dramatically and bad debts increase exponentially. With total assets of US commercial banks at $23 trillion, I would be surprised if 50% is repaid or recoverable in the coming crisis.  The above risks are just for the US financial system. The global system will be no better with the EU under massive pressure partly due to US led sanctions of Russia. Virtually every major economy in the world is in a dire position.  Lets just look at the debt pyramid which I have discussed in many articles LINK In 1971, when Nixon closed the gold window, global debt was $4 trillion. With gold backing no currency, this became a free for all to print unlimited amounts of money. And thus by 2000 debt had grown 25x to $100t. In 2006, when the Great Financial Crisis started, global debt was $120 trillion. By 2021 it had grown 75x from 1971 to $300 trillion.  The red column shows global debt at $3 quadrillion sometime between 2025 and 2030.  This assumes that the shadow banking system plus outstanding derivatives of currently probably around $2 quadrillion will need to be saved by central banks in a money printing bonanza. This will obviously lead to hyperinflation and thereafter to a depressionary implosion. I know this sounds sensational but still a very likely scenario at the end of the biggest credit bubble in history.  GOLD – CRITICAL WEALTH PRESERVATION  I have been standing on a soapbox for over 20 years, warning the world about the coming financial crisis and the importance of physical gold for wealth preservation purposes. In 2002 we invested important funds into physical gold with the purpose of holding it for the foreseeable future. Between 2002 and 2011 gold went from $300 to $1,900. Since then gold corrected and then went sideways as stocks and the asset markets surged backed by massive credit expansion.  With gold currently around $1990, there is not much gain since 2011. Still since 2002 gold is up 7x. Due to the temporarily stronger dollar, gold’s gains measured in dollars are much smaller than in Euros, Pounds or Yen. But that will soon change.  In the final section of the article “WILL NUCLEAR WAR, DEBT COLLAPSE OR ENERGY DEPLETION FINISH THE WORLD?”, I outlined the importance of owning physical gold to store it in a safe jurisdiction away from kleptocratic governments. “2023 is likely to be the year of gold. Both fundamentally and technically gold looks like it will make major up moves this year.”  And at the end of this article, I explain the importance of how and where gold should be held:“PREPARE FOR 10 YEARS OF GLOBAL DESTRUCTION.” “So my own preference would be to own physical gold and silver that only I have direct control of and can withdraw or sell with very short notice.  It is also important to deal with a company that can move your metals at very short notice if the security or geopolitical situation would necessitate it.” In February 2019 I wrote about what I called the Gold Maginot Line which had held for 6 years below $1,350. This is typical for gold. Having gone from $250 in 1999 to $1,900 in 2011, it then spent 8 years in a correction. At the time I forecast that the Maginot Line would soon break which it did and swiftly moved to $2,000 by August 2020. We have now had another period of consolidation since then and the next move above $2,000 and towards $3,000 is imminent.  Just to remind ourselves what happens to your money and gold during a hyperinflationary period, here is a photo from China’s hyperinflation in 1949 as people try to get their 40 grammes (just over one ounce) that they were allocated by the government. At some point in the next few years, there will be a panic in the West to buy gold at any price.  So as I have been urging investors for over 20 years, please get your gold NOW while it is still available.  STOP PRESS Intense discussions are right now going on here in Switzerland between UBS, Credit Suisse, the regulator FINMA, the Swiss National Bank – SNB – and the Swiss Government. The Fed, the bank of England and the ECB are also involved.  The latest rumour is that UBS will buy Credit Suisse for CHF900 million ($1 billion). The shares of CS closed at a market cap of CHF8 billion on Friday. The deal would clearly involve backing from the SNB and the Swiss government which would have to take on major liabilities.  The December 2022 book value of CS was CHF42 billion, as with all banks massively overstated.  The deal isn’t done at this point, 5.30pm Swiss time, but the whole banking world knows that without a deal, there will be global contagion starting tomorrow Monday the 20th.  Even if a provisional deal will be done by Monday’s open, the financial system has now been permanently injured with an open wound which won’t heal.  The problem will just move on to the next bank, and the next and the next…. Hold on to your seats but buy gold first. Tyler Durden Mon, 03/20/2023 - 07:20.....»»

Gold Prices Reflect A Shift In Paradigm, Part 2 Authored by Alasdair Macleod via GoldMoney.com, In the first part of this report, we highlighted that observed gold prices have significantly detached from our model-predicted prices. While this has happened in the past, prices always converged eventually. However, the delta between the observed and the model predicted price has now reached a record high of around $400/ozt. We thus ask ourselves whether it is reasonable to expect that model-predicted and observed prices will converge again in the future, or, whether we witness a shift in paradigm and the model no longer works.  In our view, the only reason for gold prices to sustainably detach from the underlying variables in our gold price model is if central banks (particularly the Fed) lose control over the monetary environment. Thus, it seems that the gold market is now pricing in a significant risk that the Fed can’t get inflation back under control. As we highlighted in Part I of this report (Gold prices reflect a shift in paradigm – Part I, 15 March, 2023), this is happening in the most unlikely of all environments. The Fed has aggressively hiked rates at the fastest pace in over 50 years and it is signaling to the market that it will do whatever it takes to get inflation under control. So why is the gold market still concerned about inflation? The issue is that so far, it has been easy for the Fed to raise rates sharply to combat inflation. Despite the sharp move in the Fed Funds rate, one may get the impression that nothing has happened yet that would jeopardize the Fed’s ability to raise rates even higher. For starters, the unemployment rate remains stubbornly low (see Exhibit 8).  Exhibit 8: The US unemployment rate remains stubbornly low despite the sharp rate hikes Source: FRED, Goldmoney Research Equity and bond prices have sharply corrected in the early phases of the Fed’s rate hike cycle, but since then equity markets have partially recovered their losses. While equity prices are not the real economy, large downward corrections can impact the real economy nevertheless due to the wealth effect. When people become less wealthy, they spend less, which in turn has an effect on the economy. The impact of this reduction in wealth might also not be meaningful so far as the correction came from extremely inflated levels. The S&P 500, for example, has corrected almost 20% from its peak, but it is still 14% higher than the pre-pandemic highs in 2019 (see Exhibit 9). Exhibit 9: Even though US equity prices have corrected sharply, they are still well above the pre-pandemic highs…. Source: S&P, Goldmoney Research The real estate market has slowed down significantly, but so far prices haven’t crashed (see Exhibit 10), and even though there are a lot of early warning signs, the Fed historically had only become concerned when a crumbling housing market started to affect the banks. While we certainly saw turmoil in the banking sector over the last few days, it was not related to the mortgage business so far.  Exhibit 10: …and home prices – despite the clear rollover – have not crashed yet Source: S&P, Goldmoney Research Hence, at first sight, it appears there is little reason for the gold market to price in a scenario where the Fed loses control over inflation. However, there are plenty of warning signs that things are about to change. In our view, the correction in the equity market is far from over. When the last two bubbles deflated, equities corrected a lot lower for longer (see Exhibit 11). Exhibit 11: the last two bubbles saw much larger corrections in equity prices Source: S&P, Goldmoney Research This alone will start to put a strain on the disposable income of not just American consumers, but globally. We are seeing signs of this in all kinds of markets. For example, used car prices had skyrocketed until about a year ago on the back of supply chain issues combined with excess disposable income. But since the Fed started raising rates, used car prices have retreated somewhat (see Exhibit 12). Arguably this is good for people wanting to buy a car with cash, and it will also have a dampening effect on inflation numbers, but the reason for it is not that all the sudden a lot more cars are being produced, but that higher rates make it more expensive to finance cars, and thus demand is weakening.  Exhibit 12: Manheim used car index Source: Bloomberg, Goldmoney Research Certain aspects of the housing market also show more signs of stress than the correction in real estate prices alone suggests. For example, lumber prices have completely crashed from their spectacular all-time highs and are now back to pre-pandemic levels (see Exhibit 13).  Exhibit 13: Lumber prices have come back to earth Source: Goldmoney Research Similar to the development in the used car market, while this may be good for people trying to build a new home, it is indicative of the material slowdown in construction activity. This can be directly observed in housing data. New housing starts are 28% lower than in spring 2022 (See Exhibit 14).  Exhibit 14: New Housing Start data shows a material slowdown in construction activity Source: FRED, Goldmoney Research Moreover, mortgage costs have exploded. A 10-year fixed mortgage went from 2.5% a year ago to 6.3% now (see Exhibit 15). This will undoubtedly dampen the appetite for home purchases and strain disposable income as previously fixed mortgages must be rolled over. Given current mortgage rates, it is surprising that the housing market has not yet corrected a lot more. Exhibit 15: Mortgage rates have exploded over the past 12 months Source: Bankrate.com, Goldmoney Research There is a myriad of other indicators, from crashing freight rates (see Exhibit 16) to layoffs in the trucking and technology sector as well as languishing oil prices despite record outages and inventories, that indicate that the Feds (and increasingly other central banks) ultra-hawkish policy is impacting the real economy, both domestic and globally.  Exhibit 16: Freight rates had skyrocketed in the aftermath of the Covid19 Pandemic but are now back to normal Source: Goldmoney Research The result will be a period of global economic contraction. The Fed may view this decline in inflation as confirmation that their policies are working to fight inflation, even though it will only reflect a crashing economy. Importantly, once the recession kicks in, we will soon see rising unemployment. Once unemployment starts rising, the Fed will have to slow down its rate hikes and eventually stop. However, the underlying cause of inflation – over 8 trillion in asset buying by the Fed – will only have reversed a tiny bit by that point. This means that once the fed will have to make a decision, to either fight unemployment or inflation.  We believe that the most likely explanation for the recent rally in gold prices against the underlying drivers of our model is that the market is increasingly pricing in that the Fed, once it is forced to stop hiking, will lose control over inflation. Faced with the choices of years of high unemployment and a crumbling economy or persistent high inflation, the gold market thinks the Fed will opt for the latter. This would mark a true paradigm shift, and from that point on, gold prices may start to price in prolonged high inflation (and our model may not be able to capture this properly). The crash of Silicon Valley Bank (SVB) a few days ago has created significant turmoil in financial markets. While the Fed jumped in and announced a new lending program that effectively bailed out the bank, it also led to a sharp change in market expectations for the Fed. Before the bailout, Fed fund futures implied that the market expected several more Fed hikes this year, and only a gradual easing thereafter. One week later and the market is now pricing in that the Fed will only hike until May, and then pivot and start cutting rates (see Exhibit 17).  Exhibit 17: The crash and subsequent bailout of SBV led to a sharp reassessment of the Fed’s ability to raise rates Source: Goldmoney Research The gold market is still pricing in a much more dire outlook with higher and persistent long-term inflation Only time will tell whether this view is correct. In our opinion, it is quite forward-looking, and gold seems to be the only market that is that forward-looking at the moment. 10-year implied inflation in TIPS, for example, is at a laughably low 2.2%. For the model-predicted prices to match observed gold prices, 10-year implied inflation would have to be around 1.5% higher, at 3.75%. This doesn’t seem to be completely unfeasible. However, even if the gold market turns out to be ultimately correct, it will take a while until the rest of the market agrees with that view, and most likely there will be a period of sharply declining realized inflation in the meantime. That said, as equities look even more fragile in this scenario, and bonds and cash are unpopular asset classes during periods of high inflation, gold may simply be the only game in town until its time as the ultimate inflation hedge is coming.  Tyler Durden Mon, 03/20/2023 - 05:00.....»»

Were The Bank Bailouts The Result Of Rising Wealth Concentration? Authored by Yves Smith via NakedCapitalism.com, Typically, financial crises, as in the sort that might or actually do impair the banking system, are the result of leveraged speculation. Is this one of those rare instances when this time might actually be different, via rising wealth inequality creating new levels of hot money that can slosh in and out of banks, making many of them fundamentally less stable? Now admittedly, the continued rise in wealth inequality is an effect of sustained low central bank interest rates, which goosed asset prices generally and particularly favored speculative plays as investors reached for returns. A great deal of commentary has correctly focused on the effects of deflating these asset bubbles and how the rollback of paper wealth can be particularly harmful to financial firms that wrongfooted the correction. But the reduction in wealth also produces a system wide reduction in liquidity (mind you, we’ve always thought liquidity is not the virtue that investment touts make it out to be; the world got by just fine in the stone ages with less that instantaneous trading times and higher transaction costs). The effect in a regime, where for better or worse, there are (or have been) lots of big fish with tons of cash who are accustomed to moving it quickly would wind up looking like an emerging market, where US interest rate moves wind up producing huge and destabilizing waves of hot money moving in and out. It appears not to have occurred to the authorities that we were restructuring our financial system so as to make it possible to generate banana-republic levels of upheaval. The Great Crash blew back to the banking system because stock buyers were making heavy use of margin loans, and on top of that, stock operators were creating leveraged structures (trusts of trusts of trusts). By contrast, the 1987 crash, the result of leveraged buyouts producing a stock market bubble, didn’t do lasting damage, and neither did the later leveraged buyout collapse and large-scale workouts o LBO loans (a big reason is that the loans were syndicated and big foreign banks were big buyers but they didn’t eat enough of this bad US cooking to get really sick). But the Japanese financial crisis was the result of a dual commercial real estate and stock market crash, together on a scale that has stalled Japanese growth for decades. The 2008 crisis looks like a housing crisis, but the severity of the damage resulted from credit default swaps creating synthetic subprime debt that was four to six times real economy exposures. This is a long-winded way of saying that herd behavior in bad lending and/or leveraged speculation produced enough in the way of actual or soon to be realized losses to damage a lot of banks. And banks are interconnected: if one bank gets in trouble, its depositors are the customers or employers of customers of other banks. If those linked customers of other banks have an unexpected hit to income, they could default on their debt payments, propagating damage across the system. The crisis of the past week was not that. Three different banks with very different business strategies and asset mixes got in trouble at the same time. Some like Barney Frank, on the board of Signature Bank, argue that the common element was a regulatory crackdown on banks too cozy with the crypto industry. But that’s not really the case with Silicon Valley Bank, which has been suffering for a while from declines in its deposits due to a falloff in new funding all across tech land, as well as more difficult business conditions leading to not much in the way of new customers and falling deposit balances at most existing customers. What the three banks did have in common was a very high level of uninsured deposits which made them particularly vulnerable to runs and therefore should have led the banks’ managements to be very mindful of asset-liability mismatches and liquidity. And they should have focused on fees rather than the balance sheet to achieve better than ho-hum profits. Silicon Valley Bank has attempted to wrap itself in the mantle of being a stalwart of those rent-extracting innovative tech companies. But Silicon Valley Bank is hiding behind the skirts of venture capital firms. They are the ones who provided and then kept organizing the influx of capital to these companies. The story of the life of a venture capital backed business is multiple rounds of equity funding. Borrowing is very rarely a significant source of capital. So the idea that Silicon Valley Bank was a lender to portfolio companies is greatly exaggerated.2 Both the press and several readers have confirmed that the reason for Silicon Valley Bank’s lock on the banking business of venture-capital-funded companies was that the VCs required that the companies keep their deposits there. And that’s because the VCs could keep much tighter tabs on their investee companies by having the bank monitor fund in and outflows on a more active basis than the VCs could via periodic management and financial reports. Now what flows from that? One of the basic rules of business is that it is vastly cheaper to keep customers than find them. Silicon Valley Bank would be highly motivated to attract and retain both the fund and the personal business of its venture capital kingpins. Accordingly, the press has pointed out that loans to vineyards and venture capital honchos’ mortgages were important businesses. It’s not hard to think that these were done on preferential terms to members of a big VC firm’s “family” as a loyalty bonus of sorts. On top of that, recall that Silicon Valley Bank bought Boston Private with over $10 billion in assets, in July 2021. The wealth management firm also had a very strong registered investment adviser platform and additional assets under management. That suggests Silicon Valley recognized increasingly that the care and feeding of its rich individual clients was core to its strategy. It’s impossible to prove at this juncture, but I strongly suspect that the individual account withdrawals were at least as important to Silicon Valley Bank’s demise as any corporate pullouts. One tell was the demand for a backstop of all unsecured deposits, and not accounts that held payrolls. A search engine gander quickly shows that it’s recommended practice for companies to keep their payroll funds in a bank account separate from that of operating funds. One has to assume that the venture capital overlords would have their portfolio companies adhere to these practices. The press also had anecdata about wealthy customers in Boston getting so rowdy when trying to get their money out that the bank called the police, as well as Peter Thiel (to the tune of $50 million), Oprah, and Harry & Meghan as serious depositors. Similarly, there is evidence that the run at Signature Bank was that of rich people. Lambert presented this tidbit from the Wall Street Journal yesterday in Water Cooler: A rush by New York City real-estate investors to yank money out of Signature Bank last week played a significant role in the bank’s collapse, according to building owners and state regulators. The withdrawals gained momentum as talk circulated about the exposure Signature had to cryptocurrency firms and that its fate might follow the same path as Silicon Valley Bank, which suffered a run on the bank last week before collapsing and forcing the government to step in. Word that landlords were withdrawing cash spread rapidly in the close-knit community of New York’s real-estate families, prompting others to follow suit. Regulators closed Signature Bank on Sunday in one of the biggest bank failures in U.S. history. Real-estate investor Marx Realty was among the many New York firms to cash out, withdrawing several million dollars early last week from Signature accounts tied to an office building, said chief executive Craig Deitelzweig. This selection also illustrates a point that makes it hard to analyze these bank crashes well. The very wealthy regularly use corporate entities for personal investments, so looking at corporate versus purely individual account holdings is often misleading in terms of who is holding the strings. A business owned by a billionaire does not operate like a similar-sized company with a typical corporate governance structure. Ironically, First Republic Bank, which holds itself out as primarily a private bank, had the lowest level of uninsured deposits, 67% versus 86% at Silicon Valley Bank and 89% at Signature. But its balance sheet was heavy on long-term municipal bonds, which are not eligible collateral at the discount window or the Fed’s new Bank Term Funding Program facility. Hence the need for a private bailout. Before you say, “Well, even if there was time to figure out how to backstop payrolls, which there wasn’t, we had to go whole hag because contagion,” that is not a satisfactory answer. Because nearly all banks have sizable Treasury and/or agency holdings (First Republic was unusual), the new Fed interventions come very close to being a full backstop of uninsured deposits. That means vastly more subsidized gambling. There should be a great increase in supervision and regulation to try to prevent more sudden meltdowns, which one would expect to become more frequent otherwise due to even greater government backstopping: As Georgetown law professor Adam Levitin put it: ….. the Bank Term Funding Program bears some consideration. No one in the private market would lend against securities at face, rather than at market. But that’s what the Fed’s doing in order to enable banks that have held-to-maturity securities avoid loss realization. The Bank Term Funding Program is a lifeline for banks that failed at banking 101—managing interest rate risk. The whole nature of banking is that it involves balancing long-term assets and short-term liabilities. Firms that can’t do that well probably shouldn’t be in the banking business. Moreover, European banking regulators, regularly been criticized for last minute, kick-the-can interventions, are finding out how the US rules-based order of “we get to rewrite the rules when we feel like it” works in their arena. From the Financial Times: Europe’s financial regulators are furious at the handling of the Silicon Valley Bank collapse, privately accusing US authorities of tearing up a rule book for failed banks that they had helped to write. While the disapproval has yet to be conveyed in a formal setting, some of the region’s top policymakers are seething over the decision to cover all depositors at SVB, fearing it will undermine a globally agreed regime. One senior eurozone official described their shock at the “total and utter incompetence” of US authorities, particularly after a decade and a half of “long and boring meetings” with Americans advocating an end to bailouts. Europe’s supervisors are particularly irate at the US decision to break with its own standard of guaranteeing only the first $250,000 of deposits by invoking a “systemic risk exception” — despite claiming the California-based lender was too small to face rules aimed at preventing a rerun of the 2008 global financial crisis. Mind you, the Europeans are not being hypocrites. They forced the unsecured depositors at Cyprus bank to take 47.5% haircuts in its banking crisis. Admittedly those were banks in a country seen as a money laundering haven, but it had a lot of British retirees banking there too. The EU also tried to get banks to use bail-in structures like co/cos bonds. The US was skeptical of them and as we predicted, they had perverse effects. But the point is the EU has made a much more serious attempt at renouncing bailouts than we have, even if they have yet to find the secret sauce. And they are not shy about calling out who bears the cost. Again from the Financial Times: The US has claimed SVB’s failure will not hit taxpayers because other banks will cover the cost of bailing out uninsured depositors — over and above what can be recouped from the lender’s assets. However, a European regulator said that claim was a “joke”, as US banks were likely to pass the cost on to their customers. “At the end of the day, this is a bailout paid for by the ordinary people and it’s a bailout of the rich venture capitalists which is really wrong,” he said. So not only are the bailouts an effect of rising wealth concentration, they are going to make it worse. Nicely played. Tyler Durden Sun, 03/19/2023 - 19:35.....»»

Gold Prices Reflect A Shift In Paradigm, Part 1 Authored by Alasdair Macleod via GoldMoney.com, Our proprietary gold price model has done a very good job tracking gold prices since we introduced it to our readers for the first time in 2016. As we have explained before, the intent of our gold price model is not to provide trading signals. Instead, we find the model a very useful tool to thoroughly understand the basic drivers of gold prices. Over the years, we have written extensively about the relationship between the price of gold and the underlying variables we identified. Readers can catch up on these discussions in our three-part framework report here (Gold Price Framework Vol. 2: The energy side of the equation, 28 May 2018), here (Part II, 10 July 2018) and here (Part III, 24 August 2018), as well as some follow up reports that built on the model (Gold Price Framework Update – the New Cycle Accelerates, 28 January 2021) and (Gold prices continue to weather the rate storm, 13 April, 2022. As with all models that aim to explain the price of an asset based on underlying variables over time, there are periods where the observed price and the model-predicted price diverge meaningfully. These instances were always the most interesting to us. When it happens, it raises the question of whether the gold market is pricing something in that the underlying variables don’t, or, whether the gold market does not fully reflect the information the underlying variables provide. In some instances in the past, prices converged as the model-predicted prices moved towards the observed prices. This happens when the gold market preempts some of the moves in the underlying drivers or prices of the underlying variables are distorted for some reason. For example, long-term inflation expectations implied in the TIPS market (one of the drivers) may be too low or high for technical reasons. At some point over the past few years, the Fed owned a much larger share of all outstanding TIPS than it did for nominal treasuries, and both the building up of this position and the winding down distorted implied inflation expectations in our view. In that case, we suggested that the gold market was reflecting “true” inflation expectations better than the TIPS market. And when these distortions disappeared, model-predicted prices converged towards the observed gold price. In other instances, prices converged as observed prices moved towards predicted prices. In those cases, the gold market was mispriced relative to the underlying variables, which, in hindsight, turned out to reflect the state of the market more accurately. The last time that happened was in mid-2020 when the gold price quickly moved to $2200 on the back of the unprecedented expansion of central bank balance sheets. The market suddenly became very concerned about the inflationary impact of that latest round of QE. However, while real-interest rate expectations dropped sharply, they stopped around -1.2%. This arguably marked a new low, but the gold market had priced in even higher long-term inflation expectations and thus lower real-interest rate expectations (see Exhibit 1). And when these long-term inflation expectations didn’t materialize in the TIPS market, gold prices corrected lower. However, inflation DID start to rise sharply in 2021, which also impacted long-term inflation expectations in the TIPS. This meant that our model predicted prices began to rise. The gold market resisted moving with observed inflation for a long time but finally capitulated and gold moved again towards $2000/ozt, where the model had been already for a while (see Exhibit 1). Ironically, when prices finally converged, our gold price model already predicted a sharp correction in the price on the back of the Fed’s aggressive rate hike rhetoric (which pushed TIPS yields up over 2% in a very short amount of time). Again, the observed gold price followed only with a lag. In this entire period, the model predicted price was leading the observed gold price (see Exhibit 1). Exhibit 1: From early 2020 until mid-2022, our model-predicted price was leading observed gold prices by several months both to the up and the downside Source: Goldmoney Research Importantly, when observed gold prices and our model predicted prices diverged in the past, it was for either one of these two reasons. However, there was always a third possibility: Several times in the past, when we saw large discrepancies between the two, we asked ourselves whether what we were observing was a paradigm shift and the model simply didn’t work anymore. Had we come to a point where the relationship between gold and the underlying variables that we identified had broken down?  As we highlighted before, this has never happened so far. Whenever observed gold prices detached from the model-predicted prices, they always converged back eventually. Hence, even though central banks have continuously pushed unprecedented monetary policies, we have not yet seen a shift in paradigm where gold prices sustainably detached from the underlying drivers. However, we eventually expect such a paradigm shift to happen once central banks lose control over the monetary environment.  We ask ourselves again whether this is now the point of a shift in paradigm. Over the past few months, the gold price has once again detached from the model’s predicted price. And it has done so in a remarkable way. First, the delta between the observed gold price and the model-predicted price has reached an all-time high. Current gold prices are more than $400/ozt over model predicted prices (See Exhibit 2). The previous all-time high was $200/ozt and it only lasted for a short period of time.  Exhibit 2: Observed gold prices are substantially higher than the model-predicted price Source: Goldmoney Research Second, this is happening in the most unlikely of all environments. The Fed has been aggressively hiking rates for the past 12 months to fight the highest inflation in over 40 years. The Fed raised the Fed Funds rate from 0% to 4.5% in just 12 months. It is very rare that we see such large rate hikes from cycle bottoms. In fact, this has only happened five times since 1975 that the Fed raised rates more than 4% from the bottom (see Exhibit 3).  Exhibit 3: It happened only 5 times since 1975 that the Fed raised rates by more than 4% from the cycle lows Source: FRED, Goldmoney Research And the speed at which this recent rate hike happened is also remarkable (see table 1). Only the rate hike in 1980 was faster (just 4 months for a 8.5% hike), but arguably that was a policy correction due to a fine-tuning error in a 20% inflation/rate environment (More specifically, the Fed had lowered rates too quickly, from 20% in March 1980 to 9.5% just three months later. It was then forced to raise it quickly back to 18%. We would thus argue that this was just a blip in the easing period that followed the Volker shock). In the other three instances when the Fed raised rates by 4% or more from the bottom, it did so over a period of 28 months on average. This means the recent hike cycle was the sharpest in over 50 years. Moreover, it is the only one that started from the zero bound.  Table 1: The speed of the latest Fed rate hike is unprecedented  Source: FRED, Goldmoney Research In addition, the Fed funds rate has now clearly broken the 45-year downtrend they have been in. The same happened to the entire fixed income market (see Exhibit 4).  Exhibit 4: US rates have clearly broken their 45-year downtrend Source: Goldmoney Research At the same time, while CPI inflation remains high, commodity prices have retraced substantially. This has two effects. It lowers input costs for gold production as long-dated energy prices have declined with the broader commodity markets (see Exhibit 5)… Exhibit 5: Both short and long-term energy prices have declined significantly Source: Goldmoney Research …and it also suggests that CPI inflation will likely slow down over the coming months (see Exhibit 6), which could affect long term inflation expectations and thus real interest rate expectations even further (Exhibit 7).           Exhibit 6: Energy prices vs CPI                           Source: Goldmoney Research Exhibit 7: long-term energy price vs inflation expectations Source: Goldmoney Research Yet despite all this, gold prices have not just held their ground; they have actually risen! Arguably, it could be that the gold market once again has simply got ahead of itself. Or we really do see a paradigm shift this time.  Before we continue exploring this thought, we must add one caveat here. In our models, we use publicly available data for net central bank sales/purchases. The official data from the IMF is notoriously lagging and incomplete, and we are certain that the reported net purchase numbers are much too low. The World Gold Council (WGC), for example, reports net additions of 1136 tonnes in 2022, more than double the 450 tonnes bought by central banks in 2021. It’s no secret that central banks have been on a buying spree in the second half of last year. But exactly how much gold they added remains a bit of a mystery. That said, even assuming that true central bank gold purchases exceeded the WGC estimates by a massive 50% would bring the model-predicted price only about $70/ozt closer to the observed price. We believe this is partially a shortcoming of our model, as it is based on historical data, and we have not seen a lot of volatility in CB gold purchases in the past. However, we have had years with large central bank purchases before, and we had years with higher overall gold demand from all sectors, and yet this didn’t lead to large distortions in our model. Hence, we don’t think central bank purchases can explain the current huge discrepancy between predicted and observed prices. Therefore, in our view, the only reason for gold prices to detach from the underlying variables in our model by such a large amount and for such a long time is that the gold market finally starts pricing in that there is a risk central banks, particularly the Fed, are losing control over inflation, which is remarkable given the prevailing narrative that the Fed is willing and able to do whatever it takes to bring inflation under control. In the second part of this report, we will dive deeper into the current market environment. We will explain why so far it was relatively easy for the Fed to raise rates, why this is about to change and why the gold market may indeed price in a shift in paradigm. Tyler Durden Sat, 03/18/2023 - 11:30.....»»

Kamada Ltd. (NASDAQ:KMDA) Q4 2022 Earnings Call Transcript March 15, 2023 Operator: Greetings. Welcome to the Kamada Ltd. Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. At this time, […] Kamada Ltd. (NASDAQ:KMDA) Q4 2022 Earnings Call Transcript March 15, 2023 Operator: Greetings. Welcome to the Kamada Ltd. Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. At this time, I will turn the conference over to Troy Williams of LifeSci Advisors. Troy, you may now begin. Troy Williams: Thank you, Rob. This is Troy Williams of LifeSci Advisors and thank you all for participating in today’s call. Joining me from Kamada are Amir London, Chief Executive Officer; and Chaime Orlev, Chief Financial Officer. Earlier today Kamada announced its financial results for the three and 12 months ended December 31st, 2022. If you have not received this news release, please go to the Investors page of the company’s website at www.kamada.com. Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of Kamada. I encourage you to review the company’s filings with the Securities and Exchange Commission, including without limitation the company’s Forms 20-F and 6-K, which identifies specific risk factors which may cause actual results or events to differ materially from those described in the forward-looking statements. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, Wednesday, March 15th, 2023. Kamada undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. With that said, it is my pleasure to turn the call over to Amir London, CEO. Amir? Amir London: Thank you, Troy. My thanks also to our investors and analysts for your interest in Kamada and for participating in today’s call. The recently completed 2022 year was a transformational period for Kamada as we embarked on a new and exciting chapter in the company’s evolution. Most importantly, we have now completed our rapid transition from our historical dependence on GLASSIA sales to Takeda, to a diversified fully integrated specialty plasma company with fixed assay approved proprietary product and strong commercial capabilities in the US market, as well as global sales footprint in over 30 countries. The success of this strategic shift is supported by our impressive full year 2022 financial results, which met our annual guidance. Specifically, we achieved total revenue of $129 million and EBITDA of approximately $18 million, representing margins of 14%. Our strong performance in 2022 represented revenue growth of over 25% as compared to 2021 and a 3x increase in EBITDA. Moreover, we generated record operating cash flow of $28.6 million during 2022, supporting the increase in our cash position to $34 million as of December 31st, 2022, which is nearly double what it was at year end 2021. Looking ahead, we expect the momentum from 2022 to extend throughout 2023 with profitability to further meaningfully enhance as compared to last year. As such, we are introducing full year 2023 revenue guidance of $138 million to $146 million and EBITDA of $22 million to $26 million. The midpoint of that range would represent profitability growth of approximately 35% over 2022. Our impressive results in 2022 and positive outlook for this year has been consequence of our ability to leverage multiple growth drivers, including the portfolio of full FDA approved IgGs that we acquired in late 2021, KEDRAB sales observed in the US, GLASSIA royalties received from the Takeda, other proprietary product sales in international markets, and our thriving Israeli distribution business. This significant catalyst, which I will discuss further momentarily, are driving our annual double-digit revenue growth with significant upside potential and limited downside risk. Most importantly, the acquisition completed in November 2021 on the full FDA approved IgG consisting of CYTOGAM, HEPAGAM, VARIZIG and WINRHOSDF following a thorough search for the ideal assets for Kamada was a critical strategic and synergistic advancement for the company. I’m thrilled to report that the full year 2022 revenues of acquired products increased by 24% as compared to full year 2021 and are generating gross margins of over 50% During 2022, as part of the establishment of our direct presence in the US markets, we deployed a team of US-based experienced sales and medical affairs professionals who have rapidly established operation in these key markets. The US sales team is making good progress in promoting our portfolio of specialty plasma products to physicians and other healthcare practitioners through direct engagement and opportunities at medical conventions. The medical affairs team is working to advocate physicians, while addressing the scientific and clinical inquiries, including participating in major medical conferences in the US. As a reminder, our activities promoting these important therapies represent the first time in over decades that these hyperimmune specialty products have been supported by field-based activity in the US market. We are encouraged by the continued positive feedback received from key US physicians who are seeking to publish new clinical data related to our portfolio, while conducting educational symposium that we believe will have a positive impact on the understanding of this product contributing to continued growth in demand. We expect to begin seeing the impact of activity later this year. We are also leveraging our existing strong international distribution network to grow product revenues in new territories, primarily in Latin America and the Middle East. Our achievements with these key products in 2022 including winning a new $11.4 million procurement agreement for VARIZIG for an international organization operating principally in Latin America and securing a $22 million expansion of a Canadian supply tender. Both of these agreements will contribute our result this year. Of course, we are continuing to pursue additional commercial contracts in key strategic territories and are highly encouraged with the significant opportunities ahead of us in 2023 and beyond. This supply agreement and our proactive selling effort to our long standing distribution relationships, underscore Kamada’s assumed commitment to leveraging these new strategic assets. Of the four acquired product, the largest is CYTOGAM, indicated for the prophylaxis of CMV disease associated with solid organ transplantation. This proprietary and unique therapy is the only FDA-approved IgG product for its indication. We recently submit a notification to the FDA to manufacture CYTOGAM at our plant in Israel and expect to receive whether to approval by midyear. The anticipated FDA approval will mark the successful conclusion of the technology transfer process for CYTOGAM from the previous manufacturer, CSL Behring. The ability to manufacture this product at our facility will positively impact our plant utilization and efficiency. Let’s move on to KEDRAB, our rabies immunoglobulin. In the past year, KEDRAB marketed in the US by Kedrion, continued to gain significant market share in the US market which is estimated to be $150 million annually. KEDRAB’s commercial team successfully leveraged the FDA approval obtained in 2021 for the level expansion for the product that helped differentiate it as the first and only human rabies in the globally embedded in the US will be clinically studied in children. We anticipate that some of the products will continue to grow significantly over the next few years. Also to reiterate what we have said previously, I should highlight this product also generates more than 50% gross margin for Kamada. Moving on, during 2022 as planned, we began receiving GLASSIA royalty payments from Takeda. For full year 2022, we generated royalty income of $12.2 million and we expect to receive payments in the range of $10 million to $20 million annually through 2040, which will help us grow our profitability and cash position. In addition, we continue to grow sales of the product in the international market to our local partner. Now, let’s look a little farther ahead at future catalysts. I will begin with Kamada Plasma, our US-based plasma collection company. Our early 2021 acquisition of the Plasma Collection Center in Houston, Texas represented Kamada entry into the US plasma correction market and supported our strategic goal of becoming a fully-integrated specialty plasma product company. Last year, we expanded the Hyperimmune plasma collection capacity to our first panel and are currently advancing our plan to open additional centers in the US to further enhance our supply of specialty and regular plasma. Let’s now turn to our ongoing pivotal Phase 3 InnovAATe clinical trial that is evaluating the safety and efficacy of our InnovAATe Inhaled AAT product for the treatment of AAT deficiency. We remain very excited about the potential of this promising product candidate that’s shown to be highly effective in delivering AAT directly into the patient’s lung. A substantial opportunity exists for Inhaled AAT to be a transformational product in the market that is already over $1 billion in annual sales in the US and the EU. We’re currently conducting the InnovAATe clinical trial, a randomized double-blind placebo-controlled pivotal Phase 3 study. During 2022, we began to accelerate trial recruitment with seven clinical sites now offering and enrolling patients. In addition, the Independent Data Safety Monitoring Board, the DSMB recommended in November 2022, the study continued without modification for the fourth time since the trial was initiated. To-date, 50 patients have been enrolled for treatment, including 19 patients who have already completed the two-year study treatment period for the first trial site in Leiden, The Netherlands. Importantly, no drug-related to adverse events reported to-date and the high level patient adherence to the treatment is encouraging. Moreover, based on accounting safety observed to-date, the study inclusion criteria would result to also include patients with severe air flow limitation. Throughout 2023, we intend to continue expediting trial recruitment and to meet with the FDA and the European Medicines Agency, EMA, to discuss study progress and potential opportunities to shorten the regulatory pathway. In our Israel Distribution segment, we are leveraging our expertise and strong presence in Israeli markets to register market and distribute more than 25 products that are developed and manufactured by our international partners. In recent years, we’ve significantly grown our pipeline of distributed products and in 2023, we anticipate continuing to launch new therapies across multiple medical specialties. An area of strategic focus in this business is the planned distribution of portfolio of 11 biosimilar products expected to be launched upon receipt of Israeli regulatory approval through 2028 with overall annual anticipated peak sales within several years of launch of more than $40 million. Included this portfolio of eight products to a distribution agreement with Alvotech, a global leader in development and manufacturing of biosimilar drugs. To summarize, 2022 was the year of significant progress for Kamada during which we achieved rapid financial improvement, by leveraging multiple robust value-creating catalyst. And we are well-positioned to further substantial revenue and profitability growth in 2023 and beyond. We’ve limited downside risk and substantial upside potential as the global leader in the specialty plasma industry. Importantly, looking past 2023, based on our multiple catalysts, we continue to project annual double-digit growth in revenues and profitability in the foreseeable years ahead of us. With that, I’ll now turn the call over to Chaime. Chaime, please. Copyright: dolgachov / 123RF Stock Photo Chaime Orlev: Thank you, Amir. As previously highlighted, our business performed extremely well in 2022. Total revenues for the full year were approximately $129 million, a 25% increase from the $104 million recorded in fiscal year 2021. For the fourth quarter of 2022, total revenues were approximately $45 million, an increase of 44% year-over-year. These results are indicative of the successful strategic transformation we achieved through the key product acquisition secured during 2021 that resulted in a vertically-integrated global commercial biopharmaceutical company with multiple growth drivers. The year-over-year growth during the fourth quarter and throughout the duration of 2022 was primarily driven by continued strong sales of our previously acquired IgG products, which was fueled by strong sales in the US, resulting from our ongoing marketing efforts as well as the expansion of ex-US sales of these products. Additional catalysts in 2022 included the continued growth of KEDRAB and 10 months of royalty income from GLASSIA. During this 10 months’ period, we recognized $12.2 million of royalty income from Takeda based on their sales, which was in line with our anticipated projections. Total gross profit for the fourth quarter of 2022 was $15.3 million, representing 34% margin compared to $6.6 million or 21% margin in the fourth quarter of 2021. Gross profit for the full year 2022 was $46.7 million, representing 36% margin, up from 30% the prior year. Let’s now turn to explanation of our depreciation expenses. As previously discussed, the company is accounting for depreciation expenses associated with intangible assets, which were generated through the late 2021 acquisition of the four IgG products. In the fourth quarter and 12 months ended December 31st, 2022, cost of goods sold in our Proprietary segment included $1.3 million and $5.4 million respectively of depreciation expenses associated with these intangible assets. Research and development investments during fiscal year 2022 increased to $13.2 million as compared to $11.4 million in the prior year period, primarily due to the expansion of our ongoing pivotal Phase 3 InnovAATe trial for Inhaled AAT. Selling and marketing expenses for the first quarter and full year 2022 increased to $4.8 million and $15.3 million respectively. These increases were attributable to the establishment of our US commercial operation to support the distribution and sale of the acquired portfolio of our four FDA-approved commercial products. In addition, these costs included pre-commercial activities associated with new product launches in Israel — in Israeli Distribution segment. We expect our overall expenses including R&D, sales and marketing, and G&A to increase between 15% to 20% during 2023 compared to 2022 as we continue to advance our commercial activities as well as our Phase 3 InnovAATe trial. As we have since the first quarter of 2022, we continue to account for financing expenses, which we back to revaluation of contingent consideration and long-term assumed liability, all of which are related to the acquisition completed in 2021. For full year 2022, these finance charges totaled $6.3 million. As we did in the third quarter, we again achieved profitability in the fourth quarter, recording net income of approximately $2.9 million or $0.07 per share on a fully diluted basis. For fiscal year 2022, we recorded a net loss of $2.3 million or loss of $0.05 dollars per share on a fully diluted basis. Adjusted EBITDA was $7.2 million 00000. 0 dollars for the fourth quarter of 2022. Adjusted EBITDA for the fiscal year 2022 was $17.8 million, representing 14% margin, which was in line with our annual financial guidance and represents a substantial increase over the $5.4 million of adjusted EBITDA or 5% margins recorded in 2021. To reiterate the guidance provided by Amir earlier, based on our expectations of significant revenue growth and enhanced profitability in fiscal year 2023, we expect revenues to be in the range of $138 million to $146 million and anticipate generating adjusted EBITDA of $220 million to $26 million. The midpoint of such range represents approximately 35% growth as compared to fiscal year 2022. Finally, for the fourth consecutive quarter, or all fiscal year 2022, we generated positive operating cash flow, demonstrating the consistent ability of the company’s commercial operations to generate cash. During the fourth quarter, we generated $6.7 million of operating cash flow and a record $28.6 million in total during fiscal year 2022. Our total cash position as of December 31st, 2022 was $34.3 million, a robust increase from the $18.6 million at December 31st, 2021. That concludes our prepared remarks. We will now open the call for questions. Operator? See also 14 Best Dividend Stocks To Buy and Hold and 10 Best Vanguard ETFs for Diversification. Q&A Session Follow Kamada Ltd (NASDAQ:KMDA) Follow Kamada Ltd (NASDAQ:KMDA) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. At this time, we’ll be conducting a question-and-answer session. Thank you. Thank you. And our first question comes from the line of David Bautz with Zacks Small Cap Research. Please proceed with your question. David Bautz: Hey, good morning guys. Thanks for the update this morning. So, I’ve got a few questions this morning. I want to start with maybe talking about the cash flow that you guys are generating. One, do you foresee the company remaining cash flow positive for the foreseeable future? And if so, what are the company’s plans to do with the cash and would there be the potential to pay out a dividend at some point? Amir London: Hi, David. Thank you for the question and for participating in the call. The answer is absolutely yes. The company will continue to be cash-positive to be profitable. We expect continued significant growth topline and bottom-line and as you can see from our 2022 results, not only the EBITDA was strong, but also we could translate that strong EBITDA into very strong cash flow operation and cash position. So, our EBITDA is well-correlated with generation of cash. In regards to our plan, how to use the cash. So, we will be looking to move forward with some additional BD opportunities looking for the right in licensing or acquisition. We are very happy and ensure that also shareholders is very happy with the success of the acquisition we’ve done in 2021. I think it’s well-represented in our 2022 results and 2023 forecasts. So, with that successful acquisition integration, I think that over time we’ll be ready for next BD move. This, coupled with some additional investments that we would like to make in our pipeline will further enhance our outlook in terms of growth in the mid and long-term. David Bautz: Okay. And now with regards to the four products that you acquired in 2021, the sales you reported today were up 24%, I believe, you said in 2022. What would you say, was the biggest driver behind that growth? And then what do you think is going to be the biggest driver or drivers in the years ahead for those products? Amir London: So we had significant growth basically in the portfolio, and this I can attribute to all four products, both US, Canada and North America. As you know, and we reported it, we won an $11.4 million contract for VARIZIG. We have extended our agreement with Canada for another three to five years. We are growing CYTOGAM in the US in the Canadian market. We have strong markets for HEPAGAM and WINRHOSDF of the US, primarily in the MENA region. So it comes from all four products and in total, having six FDA approved products, KEDRAB, KAMRAB, GLASSIA, and products from the new portfolio, we have a lot of opportunities. This significant network of six products spread over 30 countries basically created a very strong metrics, if I may, of opportunities to grow the business significantly. And we are very happy with the 2022 results. Our 2023 projection, there is another significant growth of those products. And moving forward, we will continue to really take a full potential of those products and grow them significantly over the next few years. David Bautz: Okay. And as a follow-up, I guess, you mentioned that the VARIZIG contract. Is the company working on additional supply contracts like that? Amir London: Absolutely, we have a very proactive further marketing approach as well as registration of our portfolio in new territories through throughout the entire supply chain, some regulatory submissions through supply chain aspects. And for the marketing, we are growing the business and we are proactively participating in additional international tenders......»»

Tandem Diabetes (TNDM) demonstrated positive results from the clinical trial of advancing its Control-IQ technology to younger age group patients. Tandem Diabetes Care, Inc.TNDM recently announced favorable results from the Pediatric Artificial Pancreas (PEDAP) Clinical Trial, published by the New England Journal of Medicine. The participants of the trial comprised children of two-five years of age, with Type 1 Diabetes.The outcome showed an increase of nearly three hours per day time in range, in patients using the t:slim X2 insulin pump with Control-IQ advanced hybrid closed-loop technology, compared to those using a standard insulin pump or multiple daily injections. All the participants were using a Dexcom G6 Continuous Glucose Monitoring System.About Control-IQ TechnologyTandem Diabetes Care’s Control-IQ technology is an advanced hybrid-closed loop feature designed to help increase time in range (70-180 mg/dL). It is the first and only insulin delivery system, cleared to make automatic correction boluses, in addition to adjusting insulin to help prevent high and low blood sugar.The usage of the t:slim X2 insulin pump with Control-IQ technology demonstrated substantial improvements in glucose control without a further increase in hypoglycemia in young children.News on the Trial OutcomeThe results of this randomized, controlled trial for subjects using Control-IQ technology, were immediate and sustained. The outcome also considered a range of characteristics among patients, such as race-ethnicity, parental education, family income, baseline glycated hemoglobin level, virtual versus in-person training format, and pre-study insulin delivery method. Image Source: Zacks Investment ResearchPer a representative of the PEDAP Trial, the safety and efficacy outcomes observed in this study will support the usage of Control-IQ technology for young children with type 1 diabetes. This will evidently minimize the risk of long-term complications and enhance the quality of life.Furthermore, a sequence of randomized controlled trials was also published by the New England Journal of Medicine, which demonstrated more time in range with a low risk of hypoglycemia.For starters, initiating pump therapy with automated insulin delivery can be very daunting. The company takes merit in its t:slim X2 insulin being an attractive therapeutic option, which offers  clinical benefits along with virtual training.Industry ProspectsPer a Research report, the global digital diabetes management market was valued at $14.3 billion in 2022 and is expected to witness a compound annual growth rate of 12.2% by 2027.The rising prevalence of diabetes has increased the focus on the development and adoption of better solutions for diabetes care. Also, advancements in technologies have ensured the introduction of highly flexible solutions in the market.Recent DevelopmentsIn January 2023, Tandem Diabetes Care announced the completion of its previously announced acquisition of AMF Medical SA, the privately held Swiss developer of the Sigi Patch Pump. The Sigi Patch Pump is designed to be an ergonomic, rechargeable patch pump that reduces the burden of managing diabetes through its use of pre-filled insulin cartridges. It is currently under development and not commercially available.Price PerformanceIn the past six months, Tandem Diabetes Care has mostly underperformed its industry. Shares of the company have declined 24.3% against the industry’s rise of 3.1%.Zacks Rank and Key PicksTandem Diabetes Care currently carries a Zacks Rank #4 (Sell).Some better-ranked stocks in the overall healthcare sector are Haemonetics Corporation HAE, TerrAscend Corp. TRSSF and Akerna Corp. KERN. Haemonetics and TerrAscend sport a Zacks Rank #1 (Strong Buy) while Akerna carries a Zack Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Haemonetics’ stock has risen 35.8% in the past year. Earnings estimates for Haemonetics have increased from $2.91 per share to $2.94 for 2023, and from $3.28 per share to $3.29 for 2024 in the past 30 days.HAE’s earnings beat estimates in all the last four quarters, delivering an average surprise of 10.98%. In the last reported quarter, it reported an earnings surprise of 7.59%.Estimates for TerrAscend in 2023 have decreased from a loss of 10 cents per share to a loss of 9 cents per share in the past 30 days. Shares of TerrAscend have declined 73% in the past year.TerrAscend’s earnings beat estimates in one of the last three quarters and missed the mark in the other two, the average negative surprise being 136.11%. In the last reported quarter, TRSSF delivered an earnings surprise of 216.67%.Akerna’s stock has declined 95.9% in the past year. Its estimates for 2023 have remained constant at a loss of $1.91 per share over the past 30 days.Akerna missed earnings estimates in all the last four quarters, delivering a negative earnings surprise of 15.49%, on average. In the last reported quarter, KERN delivered a negative earnings surprise of 13.33%. 7 Best Stocks for the Next 30 Days Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops." Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.8% per year. So be sure to give these hand-picked 7 your immediate attention. See them now >>Want 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 Tandem Diabetes Care, Inc. (TNDM): Free Stock Analysis Report Haemonetics Corporation (HAE): Free Stock Analysis Report Akerna Corp. (KERN): Free Stock Analysis Report TerrAscend Corp. (TRSSF): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Futures Slide As $2.9 Trillion OpEx Chaos Clashes With Broke Bank Bailout Bash Similar to Thursday, futures faded an earlier gain which pushed emini futures briefly above 4000 after the index rallied 1.8% yesterday, as investors were assessing whether a $30BN "deposit injection" rescue package for First Republic Bank is enough to ease the risk of financial contagion, with gains reversing after news that China was cutting its bank reserve ratio and injecting over $70BN in liquidity, which was viewed by the jittery, suspicious market that there may be more unpleasant surprises in the banking sector this time in China which was moving to "ringfence its banking sector." US equity-index futures dropped 0.3%, reversing a similar gain, while the Stoxx Europe 600 index pared an advance and turned negative. A gauge of European banking stocks is heading for a drop of almost 9% this week. Nasdaq 100 futures were flat as the rates-sensitive gauge heads for its best week since November amid expectations the Federal Reserve will temper its tightening path. The 10-year Treasury yield fell eight basis points and a gauge of the dollar declined. As detailed yesterday, as if the bank bailout bonanza, a larger than expected TLTRO repayment in Europe and China's RRR cuts weren't enough, traders are facing fresh turmoil by today’s $2.9 trillion options expiration after a week of bank drama. Such quad-witching days typically involve portfolio adjustments, spikes in volume and price swings, especially on day so near-record low liquidity such as these. Financial stocks were lower in premarket trading Friday, in line with the broader market, as doubt persists around First Republic Bank despite a $30 billion rescue effort from large lenders and federal regulators. First Republic’s slide continues since market close Thursday, as the California bank discloses its borrowing from the Fed ranged from $20 billion to $109 billion in the last week while billionaire investor Bill Ackman warned the effort to rescue FRC was creating a “false sense of confidence" a remarkable U-turn from him begging for a bailout of SVB. First Republic Bank and PacWest Bancorp are among the most active financial stocks in early premarket trading, falling 11.9% and 4.7%, respectively.  FedEx Corp. shares jumped in premarket trading after the parcel company boosted its profit guidance, beating the average analyst estimate. Nvidia Corp. gained slightly as Morgan Stanley upgraded the biggest US chipmaker to overweight from equal-weight. Here are some other notable premarket movers: US Steel shares rise 5.6%, with analysts saying the company’s new first-quarter earnings guidance was much better than anticipated. Baidu shares rise 5% in US premarket trading after the Chinese search-engine operator’s newly debuted AI chatbot gained positive reviews from analysts. Other AI-exposed stocks are also higher in premarket trading, with C3.ai (AI US) +3%, BigBear.ai (BBAI US) +8.5%, SoundHound AI (SOUN US) +7.1%. Cryptocurrency-exposed stocks rose after Bitcoin extended its gains for a second consecutive session, rising back above the $26,000 threshold. Hive Blockchain (HIVE US) climbed 8.7%, Hut 8 Mining (HUT US) +5.8%, Marathon Digital (MARA US) +5.4%, Riot Platforms (RIOT US) +5.7%, Stronghold Digital (SDIG US) +5.1%. Keep an eye at FMC Corp. stock as it was upgraded to buy from neutral at Redburn, which cites “strong” pipeline-driven growth and an expected further increase in the crop chemical producer’s “industry- leading” margins. Investors are recovering from a turbulent week that began with banking-sector concerns driving the VIX index of stock volatility to the highest since October and pushing the S&P 500 to the lowest in more than two months. Friday’s quarterly so-called triple witching — where contracts for index futures, equity index options and stock options all expire — could amp up swings in trading. The failure of Silicon Valley Bank prompted the US government to step in, and banks borrowed a combined $164.8 billion from two Federal Reserve backstop facilities in the most recent week. While that demand for emergency liquidity shows continued caution, the overall rescue efforts have eased the risk of a broader banking-sector contagion, according to Richard Hunter, head of markets at Interactive Investor. “The generally swift and decisive actions which have been taken have removed some of the sting from market volatility,” he said. “We do not expect a full-blown financial crisis, but one must not dismiss the underlying dynamics,” said Karsten Junius, the chief economist at Bank J Safra Sarasin AG. “Financial conditions will most likely tighten further and increase recession risks. We therefore advocate a defensive positioning with regard to risk assets and a tactically cautious stance on the banking sector, even though the constructive case for banks remains intact over the medium to longer term.” Bank of America strategist Michael Hartnett said investors should sell any rally in stocks as fund flows don’t yet reflect deep enough concern about a looming recession. The strategist, who correctly warned of a stock exodus in 2022, recommended selling the S&P 500 above 4,100 points, about 3.5% above its last close. The Stoxx Europe 600 index erased an advance with energy, miners and tech the best-performing sectors. A gauge of European banking stocks is heading for a drop of more than 9% this week as yet another early rally lost steam Friday. Shares in Credit Suisse resumed a decline, falling as much as 10% as the idea of a forced combination with a larger rival UBS Group AG was shot down. The stock had rallied almost 20% Thursday after the Swiss central bank stepped in with support. Bonds across Europe gained, with Germany’s 10-year yield down 10 basis points. Here are the most notable European movers: European mining stocks rebound from two sessions in the red, with copper, aluminum and steel-exposed names leading the bounce, and Glencore gaining 4.2% as of 10:32 a.m. CET European logistics and freight stocks gain, after US peer FedEx’s results beat expectations and it upgraded its forecast, sending its shares surging in postmarket trading Telenor shares rise as much as 3.2%, after a Financial Times report that CK Hutchison is in talks with the Nordic telecom operator about merging their operations in Denmark and Sweden Webuild shares rise as much as 8.1% to add to a 12% post-earnings jump in the prior session, with Akros raising the Italian construction firm to accumulate from neutral Nel shares gain as much as 6%, the most since Feb. 7, as Goldman Sachs raises the Norwegian electrolyzer firm to buy, from neutral, on an increasingly strong growth outlook Enel shares gain as much as 2.4% in early trading. The Italian utility’s FY net income is ahead of expectations, while guidance on its debt and dividend looks robust, analysts say LSE Group shares rise as much as 3% as UBS upgrades the exchange operator to buy from neutral, saying the risk-reward on the stock is “very favorable” Credit Suisse fell as investors examine its prospects after a central bank backstop. The firm and UBS are opposed to a forced combination, Bloomberg News reported Earlier in the session, Asia stocks rebounded, led by Hong Kong-listed shares as risk appetite was helped by a rescue package for First Republic Bank. The MSCI Asia Pacific Index advanced as much as 1.6%, reversing Thursday’s drop. Hong Kong’s Hang Seng China Enterprises Index jumped more than 2%, leading indexes in the region, as Baidu drove China’s artificial intelligence stocks higher after brokers tested its ChatGPT-like service.  China’s central bank announced an unexpected cut to its reserve requirement ratio after domestic markets closed. Gains in Asia were broad-based with most markets in the green, after the biggest US lenders agreed to contribute $30 billion in deposits to First Republic. Bank stocks rose as jitters about the health of the US financial system and economy eased.  The MSCI Asia gauge was still on track for a second straight week of losses, albeit with smaller declines, as rolling headlines on troubled lenders from Silicon Valley Bank and Signature Bank to Credit Suisse Group AG led to choppy trading. The stock measure came close to entering correction territory prior to Friday’s rebound, with markets also digesting a 50-basis-point rate hike by the European Central Bank ahead of the Federal Reserve’s meeting next week. Shares in Taiwan, South Korea and the tech hardware sector “have over-delivered” this year and are looking particularly vulnerable to shockwaves from the US banking stress, according to Goldman Sachs Group Japanese stocks rose, following US peers higher, as sentiment improved after Wall Street banks stepped in to rescue First Republic Bank.  The Topix Index rose 1.2% to 1,959.42 as of market close Tokyo time, while the Nikkei advanced 1.2% to 27,333.79. Sony Group Corp. contributed the most to the Topix Index gain, increasing 3.5%. Out of 2,159 stocks in the index, 1,567 rose and 509 fell, while 83 were unchanged. Japan equities were also buoyed by growth stocks, which “are outperforming value stocks today, especially tech stocks,” said Rina Oshimo, a senior strategist at Okasan Securities. Meanwhile, the European Central Bank went ahead with a planned half-point rate hike. “The reality of overseas banking problems is still unclear,” said Hajime Sakai, chief fund manager at Mito Securities. “While U.S. seems to be calming down, outlook in Europe remains uncertain.” Key stock gauges in India advanced on Friday but registered their third weekly drop in four amid risk-off sentiment triggered by worries over global growth and future course of interest rates. The S&P BSE Sensex rose 0.6% to 57,989.90 in Mumbai, while the NSE Nifty 50 Index advanced 0.7% to 17,100.05. For the week, the Nifty 50 fell 1.8%, while the BSE Sensex declined 1.9%. Indian stocks have sharply underperformed Asian and emerging markets, both today and for the week, as investor concerns persist over the South Asian country’s relatively high valuations and slowing growth momentum. HDFC Bank contributed the most to Sensex’s gain, increasing 1.4%. Tata Consultancy Services was among the worst performing NIFTY IT stocks, and underperformed most of its listed Indian peers, as its CEO’s sudden resignation surprised investors.  Out of 30 shares in the Sensex index, 21 rose and 9 fell. In FX, the Dollar Index is down 0.2% as the greenback falls versus all its G-10 rivals to head for a weekly. The New Zealand dollar and Australian dollar are the best performers. US overnight indexed swaps are now pricing for an 80% probability of a quarter-percentage point Fed rate hike next week, up from a coin toss earlier this week. In rates, treasuries have recouped some of Thursday’s losses, led by bunds and gilts as euro-zone money markets trim rate-hike premium for May after Thursday’s post-ECB selloff. Intermediate sectors lead a limited advance for Treasuries as US stock futures hold most of Thursday’s steep gains. Two-year US yields fell 3bps to 4.11% while the 10-year rate slipped seven basis points to 3.49% vs Thursday’s close and paced by bunds and gilts. Fed-dated OIS contracts price around 20bp of rate-hike premium for next week’s policy decision, in line with Thursday’s close, while around 75bp of rate cuts are priced from May peak into year-end. Oil headed for the biggest weekly decline this year after investor confidence plunged following the worst banking sector turmoil since the financial crisis. WTI futures in New York were down about 10% this week, even though they edged higher by 1.6% to trade near $69.40 to pare some of the decline. The failure of Silicon Valley Bank and troubles at Credit Suisse Group AG, compounded by oil options covering, triggered a three- day rout earlier this week that sent prices to the lowest in 15 months. Gold is headed for its biggest weekly gain since November after attracting haven demand due to banking turmoil in the US and Europe. U.S. Steel is among the most active resources stocks in premarket trading, gaining about 4%.  Looking to the day ahead now, and data releases from the US include the University of Michigan’s consumer sentiment index for March, industrial production for February, and the Conference Board’s leading index for February. Over in Europe, we’ll get the final Euro Area CPI reading for February. Lastly, central bank speakers include the ECB’s Simkus. Market Snapshot S&P 500 futures down 0.3% to 3,981 STOXX Europe 600 up 1.0% to 446.26 MXAP up 1.4% to 157.20 MXAPJ up 1.5% to 506.60 Nikkei up 1.2% to 27,333.79 Topix up 1.2% to 1,959.42 Hang Seng Index up 1.6% to 19,518.59 Shanghai Composite up 0.7% to 3,250.55 Sensex up 0.4% to 57,866.02 Australia S&P/ASX 200 up 0.4% to 6,994.80 Kospi up 0.7% to 2,395.69 Brent Futures up 0.7% to $75.22/bbl Gold spot up 0.5% to $1,929.89 U.S. Dollar Index down 0.33% to 104.07 German 10Y yield little changed at 2.25% Euro up 0.4% to $1.0653 Brent Futures up 0.7% to $75.22/bbl Top Overnight News from Bloomberg China cut the amount of cash banks must keep in reserve at the central bank in an effort to support lending and strengthen the economy’s recovery from pandemic restrictions and a property market slump: BBG Central bank interest-rate hikes really started hitting home this week: BBG Banks borrowed a combined $164.8 billion from two Federal Reserve backstop facilities in the most recent week, a sign of escalated funding strains in the aftermath of Silicon Valley Bank’s failure: BBG If there’s one lesson from the European Central Bank’s latest monetary policy meeting, it’s that bond market volatility is here to stay: BBG China's Xi Jinping will visit Moscow next week for talks with Russian President Vladimir Putin, showcasing the deepening ties between the countries. WSJ TikTok said that the Biden administration was pushing the company’s Chinese owners to sell the app or face a possible ban. But there are probably few companies, in the tech industry or elsewhere, willing or able to buy it, analysts and experts say. NYT ECB officials (including Muller, Simkus, and Kazimir) deliver hawkish comments, warning that rates still have further to go on the upside. BBG Banks borrowed a combined $164.8 billion from two Fed facilities in the week ended March 15, a sign of escalated funding strains. Discount window borrowing shot up to $152.85 billion, eclipsing the prior all-time high of $111 billion in 2008. Another $11.9 billion was borrowed from the new emergency backstop launched Sunday known as the Bank Term Funding Program. BBG The US is committed to replenishing the Strategic Petroleum Reserve but won’t rush to do so immediately despite the recent decline in oil prices, a top Biden administration official said. BBG Poland will send four of its MiG fighter jets to Ukraine in the coming days in what amounts to the first shipment of combat aircraft to the Zelensky gov’t. FT   Fresh turmoil for traders may be sparked by today's options expiration after a week of bank drama. An estimated $2.7 trillion of derivatives contracts tied to stocks and indexes will mature, typically involving portfolio adjustments, spikes in volume and price swings. Demand for bearish options has been on the rise and market makers will be "short gamma," requiring them to ride the prevailing trend. BBG PacWest Corp is in talks about a liquidity boost with Atlas SP Partners and other investment firms. RTRS Charles Schwab saw $8.8 billion in net outflows from its prime money market funds this week as investors rattled by turmoil at US banks plowed even more money into the brokerage’s other portfolios that favor assets with government backing. BBG A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were positive amid the improved global risk appetite after recent bank lifelines including the SNB liquidity backstop for Credit Suisse and with large US banks teaming up to deposit USD 30bln in First Republic Bank. ASX 200 was marginally higher with the index kept afloat amid outperformance in energy and as the top-weighted financial industry benefitted from the recent banking sector relief, although gains were limited by losses in real estate and the defensive sectors. Nikkei 225 made headway above the psychological 27,000 level with railway stocks among the top gainers, while automakers lagged at the opposite end of the spectrum. Hang Seng and Shanghai Comp. were in an upbeat mood as energy and tech spearhead the advances in Hong Kong and with Baidu eyeing double-digit percentage gains, while the mainland also benefitted from the PBoC’s continued liquidity efforts. Top Asian News China Securities Journal noted that the Chinese economy requires more fiscal and monetary support, as well as reiterated that the economic rebound is not yet solid. Japan's government and BoJ will hold a meeting on Friday evening after the SVB collapse, with the MoF, FSA and BoJ poised to exchange information on financial markets, according to Nikkei. Japanese Finance Minister Suzuki said Japanese financial institutions have ample capital base and liquidity, while the financial system is stable as a whole. Suzuki added they are closely coordinating with the BoJ and other central banks regarding responding to financial situations. Japanese Union Rengo says overall wages to rise 3.8% in Spring wage talks. European bourses are firmer across the board, Euro Stoxx 50 +0.4%, as recent liquidity action settles sentiment on Quad Witching Friday. Sectors, are all in the green with the defensively-inclined names lagging and upside in Basic Resources and Banking names, SX7P +0.4%; note, Credit Suisse has dropped into negative territory despite opening in the green. Stateside, futures are essentially unchanged having eased from initial best levels around the European open ahead of Michigan data and as attention turns to the upcoming FOMC. Top European News UK Chancellor Hunt abandoned plans for sovereign wealth funds to pay corporation tax on property and commercial enterprises, according to FT. Negotiations for the UK's re-entry into the EU's Horizon research scheme may begin within weeks following a resolution, in principle, of the post-Brexit Northern Ireland dispute, according to BBC's Parker. German Chancellor Scholz said he does not see the threat of a new financial crisis and the monetary system is no longer as fragile as it was before the financial crisis, according to Handelsblatt. It was also reported that Germany's Economy Ministry said a technical recession can now no longer be ruled out. FX The USD is subdued, though has convincingly reclaimed the 104.00 mark after dropping to a 103.89 low earlier; action which comes to the benefit of G10 peers. Antipodeans are the stand-out outperformers given their high-beta status amid the improvement in risk appetite, though NZD/USD peaked above 0.6250 and AUD/USD failed to surpass the 0.6720 21-DMA convincingly. Other G10s are deriving upside, though magnitudes slightly less pronounced, with USD/JPY holding above 133.00, Cable above 1.21 and EUR around 1.0650. Yuan saw some modest, but ultimately shortlived, pressure on the PBoC's 25bp cut while the Scandis are benefitting from risk, though the SEK less so given unfavourable unemployment data. PBoC set USD/CNY mid-point at 6.9052 vs exp. 6.9017 (prev. 6.9149). Fixed Income EGBs are markedly more contained thus far, though Bunds have still posted a +100tick range and are currently holding near 136.40 with the 10yr yield around 2.25%. EGBs have largely disregarded numerous ECB speakers, who overall have added little, and the final EZ HICP reading for February while Gilts are following suit given a lack of specific drivers ahead of next week's BoE. Stateside, the direction and magnitude of price action is in-fitting with the above though the US yield curve is slightly mixed with the short-end a touch firmer and the long-end end dipping slightly. Commodities Commodities are, generally, deriving support from the firmer risk tone and as the USD remains under pressure; with the crude benchmarks choppy but most recently extending to incremental session highs. Albeit, this upside places WTI Apr'23 just USD 0.30/bbl above USD 69.00/bbl and as such well within the week's USD 65.65-77.47/bbl parameters. Spot gold is similarly bid and at the top-end of USD 1918-1934/oz ranges, with base metals benefitting from the improved tone though the complex is still in the red for the week. OPEC+ delegates are reportedly still encouraged by Asian demand; Delegates largely blame the recent sell-off on speculative money leaving the derivatives oil market rather than weakness in the physical market, according to Bloomberg. US energy envoy Hochstein said US President Biden is committed to replenishing the petroleum reserve. China to lower retail fuel prices from Saturday, according to NDRC. Increasing oil demand from China has lifted shipping costs markedly, via WSJ; highlighting that the daily chartering cost for VLCC has roughly doubled MM. Russia's Kremlin said Russia is extending the Black Sea grain deal for 60 days. China is reportedly mulling efforts to maintain iron ore supply and prices, according to NDRC; warn iron ore trading firms to avoid hoarding and price gouging. Geopolitics North Korea said its missile launch on Thursday was a Hwasong-17 ICBM which sent a warning to enemies and proved the capability to respond overwhelmingly if needed. North Korea added its launch was a response to US-South Korea military drills and its leader Kim called for boosting deterrence of nuclear war, while it noted the launch did not have any negative impact on the safety of neighbouring countries, according to NK News and KCNA. Chinese President Xi is to visit Moscow on March 20-22, according to state media; Both presidents are set to sign "important documents", and discuss strategic partnership, according to Tass. Russia's Kremlin said President Putin and President Xi will meet on March 20th, hold negotiations on March 21st, and there will be a press statement. German Federal Education/Research minister is to visit Taipei, Taiwan on Tuesday, via FT citing sources; Foreign Minister Baerbock intends to visit Beijing, China in April/May. US Event Calendar 09:15: Feb. Industrial Production MoM, est. 0.2%, prior 0% Feb. Manufacturing (SIC) Production, est. -0.3%, prior 1.0% Feb. Capacity Utilization, est. 78.4%, prior 78.3% 10:00: March U. of Mich. Expectations, est. 64.8, prior 64.7; Current Conditions, est. 70.5, Sentiment, est. 67.0, U. of Mich. 1 Yr Inflation, est. 4.1%, prior 4.1% U. of Mich. 5-10 Yr Inflation, est. 2.9%, prior 2.9% 10:00: Feb. Leading Index, est. -0.3%, prior -0.3% DB's Jim Reid concludes the overnight wrap Some optimism has returned to markets over the last 24 hours, with bank stocks stabilising on both sides of the Atlantic and 2yr yields surging back. Even the ECB’s decision to pursue a 50bp hike went without incident, and investors grew in confidence that the Fed would follow up with their own 25bps hike next week, so we’re starting to see a modest change in the mood music. It's also telling this morning that in Asia, US yields and equity futures are fairly stable. Well, they were at the time of typing. As we'll see below, the concerns haven't gone away though, as while Credit Suisse saw its equity price increase, its bonds/CDS were generally flat to weaker. Let's start with the US banks as there was a lot of news surrounding First Republic Bank. The equity opened down a further -12% taking it to its lowest levels since going public, before recovering slowly as reports started filtering out about additional capital injections. Following numerous reports early yesterday that the US government was trying to agree to a rescue package with some of the major US banks, a deal was announced just before the US equity market closed. In a joint statement the consortium of banks including JPMorgan, Citigroup, Bank of America and Wells Fargo tried to reassure the public that their actions, “reflects their confidence in First Republic and in banks of all sizes.” Overall 11 banks are contributing $30bn of uninsured deposits to First Republic, with $5bn coming from JPMorgan, Citigroup, Bank of America and Wells Fargo. The banks' commitment will extend for 120 days initially and could be extended at that point as necessary. In after-hours trading, First Republic's shares fell c.-17% as the bank announced that it was suspending its dividend and plans to trim its debt burden. That leaves the stock nearer to where it was trading prior to the news of the deposit injection but still higher. In terms of bank funding, last night the Fed released the weekly data of how its various lending facilities were used in the week ending March 15. The most anticipated release of the data since Covid did not disappoint in scale. In total, there was $164.8bn of borrowing between the Fed’s discount window ($152.85bn) and the Bank Term Funding Program ($11.9bn) that the Fed announced last week. The discount window figure blows away the previous high of $111bn during the 2008 financial crisis. However, as a function of overall deposits level yesterday’s data was about 1% of deposits, while at the height of the GFC the discount window usage in a week was as much as 1.8% of deposits. This data will be parsed more in coming weeks if stress persists but the 11 bank consortium into First Republic will be hoped to be enough to prevent that. Nevertheless, we shouldn’t get ahead of ourselves, and it’s worth remembering that we’ve already had a temporary period of stability on Tuesday that was then dented by the Credit Suisse worries on Wednesday. Indeed, their bonds stayed fairly stressed yesterday even with the market bounceback. The 5yr credit default swaps stayed around the +1000 level, whilst there were further declines in the value of their debt – notably their ’29 EUR bonds are trading under €70. That was in spite of the announcement we highlighted yesterday that they’d be using a SNB liquidity facility, which initially saw the share price surge +40% at the open, before paring back around half those gains to “only” close up +19.15%. With regard to Credit Suisse, if you’re looking for the positives in European banking see my CoTD here yesterday that shows the rest of the sector is more tightly packed together in 5yr CDS terms and that CS has been an outlier for months. So if the authorities manage to contain it, the immediate contagion risk is limited. However, the CoTD also highlights how we think the financial risk will eventually spread to corporates. If relatively lowly levered financials can get hit then highly levered corporates won’t be immune further down the line with the appropriate lag. Our YE targets for US and EU HY for YE 2023 have been around 860bp for 12 months now, but with most of the pain expected to occur in H2 2023. Our US Lev Loan target is +1000bp for the same time period. If you're not on my CoTD (chart of the day), send an email to jim-reid.thematicresearch@db.com to get added. Banks in aggregate recovered a bit yesterday, though the CS fallout continued to weigh as Europe’s STOXX Banks was up just +1.16% vs the -8.40% the day before. Meanwhile, the news of the further First Republic support saw the KBW Banks index up +2.57% - roughly 1.4% of that came after news hit that First Republic would get $30bn of deposits. We shouldn’t forget that both are still down more than -10% over the week as a whole, but the more positive tone supported a broader equity rally that left the S&P 500 (+1.76%) and Europe’s STOXX 600 (+1.19%) with solid performances on the day. That’s the best day for the S&P 500 in over 2 months and is entering today up +2.56% through the last four days, while the STOXX 600 is down -2.67% on the week so far. Whilst all that was going on, the ECB followed through on their previous commitment to hike by 50bps at yesterday’s meeting, which takes the deposit rate up to a post-2008 high of 3%. President Lagarde said this was supported by a “large majority”, but in other respects the decision was a dovish one, and their statement dropped the previous guidance that they expected to raise rates further. Instead, the message was that they’d take a “data-dependent” approach at subsequent meetings, and there wasn’t much indication about what they were planning to do next. Their inflation forecasts (which were finalised before the current turmoil) were also revised down on the back of lower energy prices, and now see inflation falling from +5.3% in 2023 to +2.9% in 2024 and +2.1% in 2025. On the other hand, the core inflation forecast for 2023 was revised up to +4.6%, which shows that they still see underlying price pressures staying resilient. When it came to the current turmoil, the ECB’s statement said that they were “monitoring current market tensions closely”, and it also affirmed that the “euro area banking sector is resilient, with strong capital and liquidity positions.” President Lagarde went on to deflect comparisons to 2008, saying that “the banking sector is in a much, much stronger position”. Looking forward, our European economists maintain their 3.75% baseline terminal rate call based around a 50bp hike in May and then 25bps in June. That view is predicated on the relatively rapid normalisation of the current global financial shock. Please see their report here for more. With the ECB hike now delivered, there was a growing expectation among investors that the Fed would similarly follow through with a hike at their own meeting on Wednesday. Futures are now pricing in a +19.2bps move, which is a decent increase from the +11.8bps priced by the previous day’s close. In turn, that confidence led to a rebound in shorter-dated yields, with the 2yr yield up +27.0bps to 4.157%, and the 10yr yield also recovered +12.2bps to 3.577% although it is slightly lower (-2.26bps) in Asia as we go to press. In Europe it was much the same story, with yields on 10yr bunds (+16.0bps), OATs (+13.5bps) and gilts (+10.4bps) all rising. Another key factor behind that was growing scepticism that central banks were about to pursue substantial rate cuts this year. For instance, the futures-implied rate for the Fed’s December meeting rose by +40.7bps on the day to 4.097%, which demonstrates how rate cuts are starting to be priced out again. The latest data has been far down the agenda lately, but the weekly initial jobless claims from the US for the week ending March 11 came in at 192k (vs. 205k expected). That’s a -20k decline on last week, which had seen the biggest weekly increase since September. Otherwise, the US housing data was more resilient than anticipated in February, with housing starts up by an annualised rate of 1.450m (vs. 1.310m expected), and building permits up by 1.524m (vs. 1.343m expected). Asian equity markets are higher overnight. As I type, Chinese stocks are advancing with the Hang Seng (+1.85%) emerging as the top performer across the region while the Shanghai Composite (+1.58%) and the CSI (+1.57%) are also sharply higher. Elsewhere, the Nikkei (+1.20%) and the KOSPI (+0.67%) are also trading in the green as risk sentiment improved after the turmoil in the US and European banking sector eased. Outside of Asia, US stock futures are trading flattish with those on the S&P 500 (+0.06%) and NASDAQ 100 (+0.12%) taking a bit of a breather after a hectic week. In the energy markets, oil prices are slightly higher this morning with Brent futures (+1.04%) trading at $75.48/bbl and WTI (+1.05%) at $69.07/bbl amid positive market sentiment as well as strong China demand expectations. To the day ahead now, and data releases from the US include the University of Michigan’s consumer sentiment index for March, industrial production for February, and the Conference Board’s leading index for February. Over in Europe, we’ll get the final Euro Area CPI reading for February. Lastly, central bank speakers include the ECB’s Simkus. Tyler Durden Fri, 03/17/2023 - 08:25.....»»

"The Market Is Being Brutal": Futures Crash As Banks Crisis Slams Europe, Credit Suisse Craters Just when it seemed that futures may finally be stabilizing after a week of rollercoaster moves and one day after US regional banks rebounded amid hopes that the US small bank run was easing, the bank crisis made a triumphant arrival in Europe where (just as we warned yesterday) it was all about Credit Suisse. The Swiss Bank, already trading at all time lows after it said yesterday that its financial reports had a material weakness, cratered more than 20%... ... and its CDS exploded to record highs... ... after the bank's top shareholder, Saudi National Bank Chairman Ammar Al Khudairy, whose stake has lost more than one-third of its value in three months, ruled out investing any more in the troubled Swiss bank as a bigger holding would bring additional regulatory hurdles. “The answer is absolutely not, for many reasons outside the simplest reason, which is regulatory and statutory,” Al Khudairy said in an interview with Bloomberg TV on Wednesday. That was in response to a question on whether the bank was open to further injections if there was another call for additional liquidity. The comment hammered not only CS stock and CDS, but sparked panic amid the entire European banking sector... ... leading to headlines such as these... STOXX 600 BANKS INDEX EXTENDS SLIDE TO 4.1% BNP PARIBAS SLUMPS AS MUCH AS 8% SOCGEN SHARES DROP 7.3% ... as Europe’s Stoxx 600 equity benchmark fell more than 2%, with a gauge of banks plunging as much as 6%, and sparking a fresh rout in S&P futures which after trading mostly unchanged for much of the session, cratered as much as 2%, with Nasdaq futures tagging along. The fresh panic sent investors scrambling for safety, and Treasury yields tumbled both in the US and Europe... ...while Gold soared.   “Credit Suisse’s top holder’s comments are adding to the already negative sentiment towards banks,” said Ricardo Gil, head of asset allocation at Trea Asset Management. “The market is being brutal.” The Credit Suisse contagion then quickly spread back to the US as shares of other large US banks sank in premarket trading. Here are some other notable premarket movers: Vacasa shares decline 11% after the vacation rental management company gave a first-quarter revenue forecast that was weaker than expected. Smartsheet shares gain 12% on low volumes, after the software company gave a positive forecast for full-year adjusted EPS, compared with the loss that analysts had been expecting. It also reported fourth-quarter results that beat expectations, though it gave a full-year revenue forecast that was weaker than expected. Lulu’s Fashion Lounge Holdings jumps 9.5% in extended trading on Tuesday after reporting fourth-quarter net revenue that topped the average analyst estimate and a smaller-than-anticipated adjusted Ebitda loss. “Short-term sentiment across markets remains volatile,” said Mark Dowding, chief investment officer at BlueBay Asset Management. “Steps taken by the Fed and FDIC have helped contain the issues related to US banks and so there should be no lasting impact on financial stability. However, rising volatility, prospect for more regulation and concerns that tighter lending standards could slow growth are all factors that can weigh somewhat on equity and credit markets and lead to somewhat higher risk premiums than we had assigned last week.” “Central banks are likely to be more cautious as they monitor the tightening in credit conditions,” said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management. “However, one major difference with previous banking crisis episodes is a more resilient macro backdrop including persistent inflationary pressures. This will make for a difficult trade-off between inflation and financial stability risks.” “With the regional banks playing a key role in US credit extension, the Fed will not raise interest rates next week, and we have likely seen the peak in both short and long rates during this cycle,” said Torsten Slok, chief economist at Apollo Global Management. US stocks had been hit in the past week following the collapse of Silicon Valley Bank on fears of a possible risk of contagion. Until this morning, all eyes are now on the Fed’s policy meeting next week for clues on whether the central bank will push ahead with previous signals on keeping rates higher for longer or take steps to tone down its hawkish policy; however in light of today's events we can probably forget any rate hikes again. In fact... *FED SWAPS PRICE IN 100BP OF RATE CUTS BY DEC FROM EXPECTED PEAK “The overall assessment of the economy, monetary policy and the financial system has become more difficult and that in itself warrants a more cautious approach to risk,” said Peter Garnry, head of equity strategy at Saxo Bank A/S. Meanwhile, strategists Sarah McCarthy and Mark Diver at Sanford C. Bernstein said that while the recent slump has made investor sentiment more bearish, its not yet pessimistic enough to show a contrarian buy indication. European stocks were obviously in freefall, with all sectors dragged lower by Credit Suisse which slumped 22% to a record low after its top shareholder ruled out providing more assistance. Other European banks followed suit, pushing the Stoxx 600 2.2% lower while the bank index falls 5.6%. The Stoxx 600 Banks Index was 5.9% lower, reaching the lowest since early January, making it the worst performing sector in Europe. Earlier in the session, Asia - blissfully unaware of the drama about to unfold - closed mostly in the green with the MSCI Asia Pacific Index climbning as much as 1.4%, led higher by a rebound in financial stocks from three days of losses in the wake of Silicon Valley Bank’s collapse. Tech stocks including Tencent, Alibaba and Samsung were among the biggest individual contributors to the benchmark’s gain. Investors also evaluated data showing China’s retail sales and industrial output rose in the first two months of the year following the end of Covid restrictions. The stock gains come one day after the key Asian gauge erased its gain for the year amid the global turmoil sparked by SVB’s failure. Asian equities posted losses last month on concerns over China’s economy and higher-for-longer US interest rates. “There has been some derisking that has taken place and I think that sets up people to reload, and if markets then begin to regain the momentum, I think there is buying power on the sidelines not just from hedge funds but also mutual funds, sovereign wealth and a number of other pools of capital,” Timothy Moe, chief Asia-Pacific equity strategist at Goldman Sachs, said in a Bloomberg television interview. Major equity indexes rose more than 1% in Hong Kong, South Korea, Singapore and elsewhere. The Hang Seng Tech Index surged as much as 3.9% as Goldman Sachs said the risk-reward for platform companies “looks good” after substantial derating Japan’s Topix stock index rose as investors bet the worst of the global fallout from the American banking sector has passed.  The Topix advanced 0.6% to 1,960.12 as of the market close in Tokyo, while the Nikkei 225 was virtually unchanged at 27,229.48. Shares also gained after a report showed US inflation data was roughly in-line with expectations, cooling concerns of further Fed interest-rate hikes.  Mitsubishi UFJ Financial Group Inc. contributed the most to the Topix’s gain, increasing 4.7%. Out of 2,159 stocks in the index, 1,740 rose and 354 fell, while 65 were unchanged. Stocks in India were the biggest decliners in Asia as index-heavy banking stocks slid for the fifth consecutive day, the worst such streak since last month.  The S&P BSE Sensex Index fell 0.6% to 57,555.90 in Mumbai, while the NSE Nifty 50 Index declined 0.4% to 16,972.15. The five-day drop in the key gauges has pushed them within 1% of entering a technical correction after they surged to their record peaks in December. A gauge of financial companies, banks and shadow lenders has come under pressure in recent sessions on continuing troubles at sector peers in the US. Analysts are turning cautious on the outlook for banks as rising interest rates and a fears of a slowdown in economic growth start to hurt loan demand. Reliance Industries contributed the most to the Sensex decline, decreasing 1.7%. Out of 30 stocks in the index, nine rose and 21 fell.  In FX, a gauge of the dollar’s strength extended gains after four days of declines, climbing as much as 0.7%; the Japanese yen, a haven currency, outperformed. As they sold everything else, investors flocked to perceived safe-haven assets with Treasuries, bunds and gilts all catching a bid. Treasuries extended gains in early US trading as stock losses deepen. Treasury yields were richer by 20bp to 12bp across the curve in a sharp bull-steepening move with front-end outperforming on the day, steepening 2s10s, 5s30s spreads by ~4bp and ~5bp on the day; 10-year yields around 3.54%, richer by 15bp vs Tuesday close, following similar gains in bunds while 10-year gilts lag by around 7bp. Focal points of US session focus include data releases including February PPI and retail sales at 8:30am New York time. Money markets aggressively pared ECB tightening wagers ahead of Thursday’s policy outcome; traders priced 37.5bps of hikes compared to as much as 47bps earlier. The yield on two-year German notes dropped as much as 33 basis points In commodities, West Texas Intermediate crude fell below $70 a barrel in New York for the first time since late 2021 as investors remain on edge after last week’s bank failures. Spot gold reversed an earlier fall to trade higher by 0.2%. To the day ahead now, and in the UK the government will deliver their Budget announcement. Otherwise, data releases from the US include February’s PPI and retail sales, along with the NAHB housing market index for March and the Empire State manufacturing survey for March. In the Euro Area, we’ll also get January’s industrial production data. Finally, earnings releases include Adobe. Top Overnight News Credit Suisse Group AG Chairman Axel Lehmann said government assistance “isn’t a topic” for the lender as the Swiss bank seeks to shore up confidence among clients, investors and regulators after a series of missteps: BBG China’s economic data for Jan & Feb was largely inline (although pointed to improved momentum amid reopening), with industrial production +2.4% YTD (vs. the St +2.6%), retail sales +3.5% (vs. the St +3.5%), and fixed asset investment +5.5% (vs. the St +4.5%). WSJ  Japanese companies preparing to raise wages by 2.85% during the spring compensation talks that end today, up significantly from +2.2% last year and the fastest rate of change since 1997. RTRS  The cost of insuring Credit Suisse bonds against default in the near term is close to 1,000 bps, about 20 times more than for UBS and 10 times for Deutsche Bank. The CDS curve is also deeply inverted. Chairman Axel Lehmann said government help "isn't a topic." Saudi National Bank "absolutely" won't provide more assistance, its chairman said. The stock tumbled further in Zurich. BBG  The Federal Reserve is rethinking a number of its own rules related to midsize banks following the collapse of two lenders, potentially extending restrictions that currently only apply to the biggest Wall Street firms.  A raft of tougher capital and liquidity requirements are under review, as well as steps to beef up annual “stress tests” that assess banks’ ability to weather a hypothetical recession, according to a person familiar with the latest thinking among U.S. regulators. WSJ  A senior Republican on the House Financial Services Committee called for the gov’t to temporarily provide unlimited deposit insurance to prevent further contagion and Rep. Maxine Waters says expanded deposit insurance is “on the table”. Politico  S&P said it doesn’t expect to place other US banks on negative watch for now as deposit outflows don’t appear unmanageable at the moment. Also, The head of one of the world’s largest asset managers called Moody’s Investors Service’s outlook cut for the US banking system “a terrible overreaction” and said regulators had reassured the market following the collapse of three lenders. “There were a lot of unique circumstances around the banks in question — both on the asset and liabilities side,” State Street Corp. Chief Executive Officer Ron O’Hanley said in an interview with Bloomberg TV on Wednesday. “I don’t think it’s helpful when rating agencies treat entire sectors the same way.” RTRS / BBG  Regional bank leaders are snapping up shares of their companies’ stocks, taking advantage of a selloff fueled by the fallout from Silicon Valley Bank’s collapse. More than 100 executives at lenders across the US, including PacWest Bancorp, Metropolitan Bank Holding Corp. and CVB Financial Corp., spent at least $13.9 million combined boosting their stakes, according to data compiled by Bloomberg. Most of the transactions took place in the past few days. BBG  FRC spoke to at least one PE firm about raising capital before the gov’t took steps Sun night to stabilize the industry and prior to securing a financing pact w/JPMorgan. RTRS   Bank of America Corp. mopped up more than $15 billion in new deposits in a matter of days, emerging as one of the big winners after the collapse of three smaller banks dented confidence in the safety of regional lenders. BBG The Federal Reserve is considering changes to its oversight of midsized banks following the collapse of three lenders in the past week, according to a person familiar with the matter: BBG China’s bond trading was disrupted on Wednesday morning after the regulator reportedly told money brokers to suspend their data feeds due to security concerns: BBG A more detailed look at global markets courtesy of Newsquawk Asia-Pac stocks were mostly positive as they followed suit to the gains in global counterparts after banking contagion fears eased and markets found some relief in the absence of any additional bank failures, although the advances were limited as participants also digested mixed Chinese activity data. ASX 200 was led higher by strength in tech which took impetus from the outperformance of the sector stateside following Meta’s jobs and cost-cutting plans albeit with gains capped as the energy industry lagged after oil prices recently dipped to a fresh YTD low. Nikkei 225 initially climbed as banking stocks atoned for the recent turmoil although price action in Japan was choppy and the index eventually gave back all of its early gains heading into the conclusion of the spring wage negotiations while there are talks of solid wage increases among the large companies. Hang Seng and Shanghai Comp. traded higher with the outperformance in Hong Kong driven by strength in tech and developers, while sentiment in the mainland is underpinned after the PBoC injected funds via its 1-year MLF and 7-day reverse repos but with upside capped following mixed industrial production, retail sales and urban fixed asset investment data releases. Top Asian News PBoC announced to lend CNY 481bln through 1-year MLF vs. CNY 200bln maturing with the rate kept unchanged at 2.75% and injected CNY 104bln via 7-day reverse repos with the rate kept at 2.00%. PBoC said it will step up financing support for private small firms and will support reasonable bond financing needs of private companies, according to Reuters. China's FX regulator said it will prevent external shocks and risks, as well as deepen reforms and the opening up of the forex sector. It will continue pushing forward facilitating cross-border trade and financing, while it will guarantee the safety, liquidity and value of FX reserve assets, according to Reuters. China stats bureau said economic operations showed a stabilising and recovery although the foundation of the economic recovery is not solid yet and that China's economy still faces difficulties this year including global risks. Furthermore, it said China faces pressure and challenges in achieving the 2023 growth target but added that consumption will show a significant recovery this year and that China will continue to take measures to boost consumption. BoJ Governor Kuroda said the BoJ must maintain current monetary easing but there will also likely be scope to consider steps to address the side-effects of easy policy, while he added the BoJ will surely head for an exit from easy policy and has the ability to do so when the inflation target is sustainably and stably met. BoJ Minutes from the January meeting stated that members agreed Japan's economy is expected to recover and inflation is likely to slow towards the latter half of next fiscal year, while it reiterated the importance of current monetary easing policy and many members said more time was needed to gauge the impact of BoJ steps on market function. Japan's Ruling Party proposes a JPY 30k cash handout to low-income households, with an additional JPY 50k per child, via Kyodo citing a senior official; Japan PM Kishida says the government is to mobilise all measures available to prepare the environment for wage hikes, to increase minimum wages beyond JPY 1k nationwide. European bourses are under marked pressure as sentiment sees a marked deterioration as Banking names slip, SX7P -5.3%, amid renewed focus on Credit Suisse, -18.0%; Euro Stoxx 50 -2.4%. Sectors are predominantly in the red with Banking names underperforming and more broadly there is a defensive bias emerging, as Healthcare remains the only sector in the green. Stateside, US futures are directionally in-fitting with the above though magnitudes slightly more contained at present, ES -1.1%. Top European News ECB is still leaning towards a 50bp rate hike on Thursday, given calming markets, stubborn inflation and credibility concerns, via Reuters citing sources. New projections still show inflation significantly above 2% target in 2023, slightly above in 2025. To raise underlying inflation projections. Piece adds that dovish members felt vindicated by recent market turbulence and were likely to push back against committing to further hikes, instead saying any move would be data dependent. IFW, on Germany: sees inflation 5.4% in 2023, 2.1% in 2024. GDP at 0.5% (prev. 0.3%) in 2023 and 1.4% (prev. 1.3%) in 2024. Ifo says German inflation is to fall in to 6.2% in 2023, and 2.2% in 2024; sees GDP at -0.1% in 2023 and 1.7% in 2024. Turkey's Parliament will likely ratify Finland's NATO accession bid before it closes in mid-April, according to two Turkish officials. FX The DXY has experienced a marked turnaround from initial 103.44 lows, with the index now comfortably above 104.00 amid the latest banking concerns. Action which has been exacerbated by a marked safe-haven spike in fixed income which has eroded the earlier EUR/USD upside on RTRS ECB sources around 50bp for Thursday; EUR/USD at 1.0667 trough vs 1.0759 peak. Given the size of the USD move, G10 peers ex-JPY are softer across the board with the CHF leading the downside given the latest focal point for banking sector concern is Credit Suisse; USD/CHF testing 0.92 and EUR/CHF above 0.98. As mentioned, JPY is the outperformer given its traditional haven allure and is below the 134.00 mark within 133.76-135.11 parameters. Elsewhere, GBP succumbs to the USD pre-budget while antipodeans and CAD slip as well though the latter is deriving some relative support from comparably resilient crude prices. PBoC set USD/CNY mid-point at 6.8680 vs exp. 6.8650 (prev. 6.8949) Fixed Income EGBs lead broad and marked debt recovery as banking stocks tank, Bunds fade just shy of 136.00 vs a 133.33 low on ECB sources suggesting a 50bp hike is still favoured on Thursday. Gilts rebound in slipstream alongside US Treasuries within 104.47-103.12 and 114-15+/113-08+ respective ranges. df Commodities WTI and Brent front-month futures are on the backfoot amid the mentioned deterioration in risk sentiment, with the benchmarks trimming initial upside and are now near unchanged on the session. Specifically, WTI and Brent are at the lower end of USD 71.50-72.56/bbl and USD 77.69-78.73/bbl parameters respectively. Elengy confirms strikes on three French LNG terminals has been extended until 21st March. US Energy Inventory Data (bbls): Crude +1.2mln (exp. +1.2mln), Gasoline -4.6mln (exp. -1.8mln), Distillate -2.9mln (exp. -1.2mln), Cushing -0.9mln. Oil output at Kazakhstan's Tengiz refinery was at 645k BPD on March 10th (vs 563k between March 1-6), according to sources. IEA OMR (Feb): 2023 global oil demand upgraded 200k BPD to 101.9mln BPD (prev. 101.7mln BPD); oil supply is outstripping lacklustre demand, but market will balance in the middle of the year China is to lower steel production in order to attain climate goals, according to Bloomberg sources. Spot gold has managed to glean a haven bid from the latest turn in sentiment, with the yellow metal modestly firmer on the session and above USD 1900/oz compared to the earlier USD 1885/oz low; in contrast, given the tone, base metals are slumping. Geopolitics China tells its military to deepen war preparedness planning, Xinhua reports. US military confirmed that a Russian fighter jet struck the propeller of a US military Reaper drone, forcing the US to bring it down over the Black Sea. US summoned the Russian ambassador regarding the downing of the US drone over the Black Sea, while Russia views the drone incident as a provocation, according to RIA citing Russia's ambassador. Ukrainian President Zelensky said the top command's unanimous position is to strengthen Bakhmut's defence and inflict maximum losses on the enemy, according to Reuters. Yahoo News said it obtained Russia's secret document regarding a plan for destabilising Moldova and promoting Russian interests in the country. Honduras announced it is to establish diplomatic ties with China, while Taiwan's Foreign Ministry said it urges Honduras to carefully consider the decision to build ties with China and don't fall into China's trap. Taiwan added that China's only purpose to build ties with Honduras is to squeeze Taiwan's international space and that China has no intention of fostering the well-being of the Honduran people. US Congressional delegation is to visit Taiwan from March 15th-16th and will meet with senior Taiwan leaders to discuss US-Taiwan relations, regional security, trade and investment, and other significant issues of mutual interest, according to the American Institute in Taiwan. "Joint naval manoeuvers between Iran, China and Russia will begin in the northern Indian Ocean, starting today", via Sky News Arabia. US Event Calendar 07:00: March MBA Mortgage Applications +6.5, prior +7.4% 08:30: Feb. PPI Ex Food and Energy MoM, est. 0.4%, prior 0.5% 08:30: Feb. PPI Final Demand YoY, est. 5.4%, prior 6.0% 08:30: Feb. PPI Final Demand MoM, est. 0.3%, prior 0.7% 08:30: Feb. PPI Ex Food and Energy YoY, est. 5.2%, prior 5.4% 08:30: Feb. Retail Sales Advance MoM, est. -0.4%, prior 3.0% 08:30: Feb. Retail Sales Ex Auto MoM, est. -0.1%, prior 2.3% 08:30: Feb. Retail Sales Ex Auto and Gas, est. -0.2%, prior 2.6% 08:30: Feb. Retail Sales Control Group, est. -0.2%, prior 1.7% 08:30: March Empire Manufacturing, est. -7.9, prior -5.8 10:00: Jan. Business Inventories, est. 0%, prior 0.3% 10:00: March NAHB Housing Market Index, est. 40, prior 42 16:00: Jan. Total Net TIC Flows, prior $28.6b 16:00: Jan. Net Foreign Security Purchases, prior $152.8b DB's Jim Reid concludes the overnight wrap (his note alas is stale as it hit before the Credit Suisse news) After three sessions of massive turbulence, the last 24 hours has seen market volatility begin to stabilise for the first time since the SVB crisis began.The bank run story seems to have run out of the requisite oxygen to continue the trends from Monday, however.The evidence from yesterday was that the back stopping of US bank depositors has started to starve the immediate crisis of oxygen. More medium term, we should probably still view this whole episode as evidence that the tightening cycle is having an impact with the usual lag and that events are unlikely to stop here. See our "Waiting for the Lag" chart book from last month here for why we thought the negative impact from the global hiking cycle was likely only just starting for the real economy. However for now crisis conditions are reversing. This is evident across the board, with equities (including bank stocks) seeing a major recovery, and sovereign bond yields paring back a good chunk of their declines over recent days. Furthermore, investors are rowing back on their predictions of an imminent pause in rate hikes, not least after the US CPI print offered a fresh reminder about high inflation. Obviously we’re still a long way from the pre-SVB state of affairs that prevailed last Wednesday, but with worries about bank contagion starting to subside, we’re finally seeing some optimism return to financial markets again. When it comes to the latest on SVB, there weren’t really any new developments yesterday of note. But in many respects that was the best news possible. Through the first half of the US trading session beleaguered regional banks such as First Republic and Western Alliance were up nearly 50% on the day, before a midday slide saw the rallies cut in half. However, the relative calm newsflow did spur a major bounceback overall, with First Republic (+26.98%) and Western Alliance Bancorp (+14.36%) still up significantly on the day while still well beneath their levels at the start of the week when the deposit backstop was known about. The KBW index finished (+3.19%), posting its strongest day in 4 months, whilst Europe’s STOXX Banks (+3.01%) saw its best performance in 5 months. That supported a solid performance for the major indices, with the S&P 500 (+1.68%) recovering thanks to large advances among the more cyclical sectors. The relief rally saw 84% of the S&P 500 constituents climb yesterday, while 87% of the STOXX 600 was higher as the European index gained +1.59%. Whilst some of the most-affected stocks were bouncing back yesterday, we saw a similar reversal in the path of short-dated government bond yields. For instance, both the 2yr Treasury yield (+27.4bps) and the 2yr German yield (+20.2bps) posted their biggest daily advances since June 13 2022 and Dec 15 2022 respectively. Prior to a handful of times over the last year, 2yr rates in either country had not moved that much since March 2011 and before that the Global Financial Crisis. 2yr rates were inline to move as much as those periods intraday before rallying in the second half of the US trading session. Longer-dated yields also saw sizeable gains, with those on 10yr Treasuries (+11.6bps), bunds (+16.1bps), and gilts (+11.8bps) all rising. In Asia this morning, the 2Yr Treasury yield (+5.5bps) is edging higher again but 10yr yields are -2bps lower and this helping the inversion trade again. Those higher yields yesterday were driven by growing doubts that central banks were about to pause their rate hikes, contrary to the speculation on Monday. Of course, that shift was largely driven by the stabilisation in markets, but the latest US CPI print for February added further weight to the arguments to keep hiking. That showed core CPI growing at its fastest pace in 5 months, and in the absence of the SVB crisis it could well have been a report that put the Fed on track to hike by 50bps next week. In terms of the main takeaways, headline CPI was a bit weaker on the month at +0.37%, taking the annual rate down to +6.0% as expected. But core CPI was stronger than expected at +0.45% on the month (vs. +0.4% expected). And this isn’t just a blip either, since if you look at the 3-month annualised rate, core CPI is running at +5.2%, which is far too strong for the Fed to be comfortable. Aside from the robust prints on headline and core, some of the specific details of the CPI report looked even worse. For instance, the trimmed mean that excludes the biggest outliers was still running at +0.63%, which means that inflationary pressures are broad-based and can’t just be blamed on specific factors. There was also bad news from the Atlanta Fed, who break down the numbers into a sticky CPI and a flexible CPI measure. This showed the sticky CPI running at a 5-month high of +0.55%, whereas flexible CPI fell -0.12%, which added to the evidence that this inflation is at risk of becoming persistent. With that in mind, investors priced in a growing chance that the Fed would in fact proceed with a 25bps hike next week, with the amount priced in for the March meeting up from 14.3bps on Monday to 19.2bps yesterday. That implies a 77% chance that they’ll run with a hike, although we’ve still got a full week until their decision, which is clearly contingent on any other financial stability issues arising. When it comes to the terminal rate, investors’ expectations also bounced higher, with the rate priced for May up +19.7bps on the day to 4.955%. And looking further out to year-end, the rate priced in for December was up by a massive +48.5bps on the day to 4.23%, although that’s less than a third of the -181bps decline over the previous three sessions. When it comes to central banks, we’ll soon see attention shift over to the ECB’s decision tomorrow. Up to last week, the widespread expectation had been that the ECB would go for another 50bps hike, in line with their own pre-commitment at the last meeting. But with the SVB collapse and growing financial stability concerns, the prospect of more aggressive hikes has been thrown into doubt, with 25bps now seen as in play. In light of this, our own European economists published an update yesterday (link here), in which they write that a 25bps hike on Thursday seems the more likely move than 50bps, which would take the deposit rate up to 2.75%. Nevertheless, their view is that it would take a significant and persistent financial conditions shock to offset the upside risks to price stability. So with the re-acceleration in core inflation recently, they continue to see 3.5-4% as the main landing zone for the terminal rate. Asian equity markets have rebounded this morning. As I check my screens, risk appetite is being restored across the region with the KOSPI (+1.45%) leading gains followed by the Hang Seng (+1.26%) while the Shanghai Composite (+0.67%) and the CSI (+0.37%) are also gaining ground. Elsewhere, the Nikkei (+0.17%) is trading higher, paring some of its earlier larger gains though, led by banks and financials. In overnight trading, US stock futures are little changed with those on the S&P 500 (+0.09%) and NASDAQ 100 (+0.08%) just above flat. We have early morning data from China with retail sales in the first two months of 2023 rising +3.5% y/y in February (in line with market expectations) as Beijing abandoned its strict zero-Covid policy. The data was much better than the -1.8% contraction in December. Additionally, Fixed-asset investment showed a better than expected improvement, rising +5.5% YTD in February (v/s +4.5% expected) after +5.1% growth in December. Meanwhile, industrial production for the Jan-Feb period increased by +2.4% y/y, faster than a +1.3% gain in December but still a little softer than the +2.6% growth expected. Looking forward, one of today’s main highlights will be the UK government’s Spring Budget, which Chancellor Hunt will be unveiling in the House of Commons around 12:30. All being well, it should be the first fiscal event in a while taking place under normal circumstances. The last one was the Autumn Statement in November, where Hunt announced £55bn of fiscal tightening to regain market credibility. And that statement came in response to September’s mini-budget, which unveiled the biggest package of tax cuts in half a century but triggered market turmoil. In terms of what to expect today, our UK economist writes in his preview (link here) that this should be a “no frills” budget, not least because of the fiscal surprises that took place last year. This means that policy announcements will be kept to a minimum, although there will be a focus on keeping energy costs low, boosting public sector pay, and lifting some public spending. In turn, this could set up a more generous Autumn Statement later in the year, particularly as the government moves closer to the general election required by January 2025. Ahead of that, the latest UK labour market data showed that the unemployment rate remained at 3.7% over the three months ending January (vs. 3.8% expected), and the number of payrolled employees in February was up +98k (vs. +65k expected). In the meantime, there were signs of slowing wage growth, with regular pay growth (excluding bonuses) down to +6.5% across the three months to January relative to the previous year (vs. +6.6% expected). To the day ahead now, and in the UK the government will deliver their Budget announcement. Otherwise, data releases from the US include February’s PPI and retail sales, along with the NAHB housing market index for March and the Empire State manufacturing survey for March. In the Euro Area, we’ll also get January’s industrial production data. Finally, earnings releases include Adobe. Tyler Durden Wed, 03/15/2023 - 08:04.....»»