The Stock Market thread

[henry296]

As someone who worked in consumer banking for a long time, Citi doesn't surprise me. They definitely skew more affluent / private banking that would exceed the $250k mark plus as you mentioned business banking. Bank of America has more of a consumer focus.

Goldman also is surprising to be low.

[RainMaker]

Originally Posted by Edward64

Probably a lot of bad stuff to happen (e.g. layoffs) as a result of market concerns and to address the $600B+ of unrealized losses banks have on their books. This may/will temper inflation some by itself.

There is also a little less publicized lending program that is going to bailout the other banks. The Fed is buying up the banks' losing position on bonds at par valuation. So it'll clean up those unrealized losses and prevent any runs on the banks.

Federal Reserve Board - Federal Reserve Board announces it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors

This is worse than bailing out depositors at SVB who torpedoed their own bank.

It's a really weird time. There was so much political backlash from the 2008 bailouts that the Fed has to do some creative solutions to make bailouts not look like bailouts to the public.

[GrantDawg]

"The new Fed program will enable banks to pledge U.S. Treasuries and other safe government securities as collateral in return for loans of up to one year from the central bank."
Yup, that sounds risky.

Sent from my SM-G996U using Tapatalk

[RainMaker]

It's not risky. It just lets banks get out of bad investments. An advantage none of us would receive.

[Edward64]

The article pdf has more details on BTFP

Program: To provide liquidity to U.S. depository institutions, each Federal Reserve Bank would make
advances to eligible borrowers, taking as collateral certain types of securities.

Borrower Eligibility: Any U.S. federally insured depository institution (including a bank, savings
association, or credit union) or U.S. branch or agency of a foreign bank that is eligible for primary credit
(see 12 CFR 201.4(a)) is eligible to borrow under the Program.

Eligible Collateral: Eligible collateral includes any collateral eligible for purchase by the Federal Reserve
Banks in open market operations (see 12 CFR 201.108(b)), provided that such collateral was owned by
the borrower as of March 12, 2023.

Advance Size: Advances will be limited to the value of eligible collateral pledged by the eligible
borrower.

Rate: The rate for term advances will be the one-year overnight index swap rate plus 10 basis points;
the rate will be fixed for the term of the advance on the day the advance is made.

Collateral Valuation: The collateral valuation will be par value. Margin will be 100% of par value.
Prepayment: Borrowers may prepay advances (including for purposes of refinancing) at any time
without penalty.

Advance Term: Advances will be made available to eligible borrowers for a term of up to one year.

Fees: There are no fees associated with the Program.

Credit Protection by the Department of the Treasury: The Department of the Treasury, using the
Exchange Stabilization Fund, would provide $25 billion as credit protection to the Federal Reserve Banks
in connection with the Program.

Recourse: Advances made under the Program are made with recourse beyond the pledged collateral to
the eligible borrower.

Program Duration: Advances can be requested under the Program until at least March 11, 2024.

[Edward64]

I don't know/understand all the words or implications of the words, but here's CNBC.

https://www.cnbc.com/2023/03/13/wall...ef-plans-.html

In addition to protecting these deposits, the Federal Reserve announced a new Bank Term Funding Program that is aimed at safeguarding institutions vulnerable to the market instability created by the SVB failure.

The new Fed facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral like Treasurys, agency debt and mortgage-backed securities.

The BTFP will value these fixed income assets at par, a boon for the banks that hold long-term assets with yields lower than current market rates. In a BTFP collateral agreement, these bonds would be worth more than they are on the open market, where they would sell at a loss.

(But note in above PDF with more details, it says Rate: The rate for term advances will be the one-year overnight index swap rate plus 10 basis points; the rate will be fixed for the term of the advance on the day the advance is made)

The Wall Street Journal’s editorial board labeled the DIF deposit rescue plan and the BFTP as two separate “bailouts” in an op-ed Sunday.

But Biden administration officials strongly pushed back on the idea that the bank plans constituted a “bailout.”

“The banks’ equity and bond holders are being wiped out,” said the official at Treasury. “They took a risk as owners of the securities, they will take the losses.”

“The firms are not being bailed out ... depositors are being protected.”

I'll wait for more detailed analysis on BFTP but I'm seeing it as Fed adding more liquidity in case the situation escalates more. Which is a good thing.

[RainMaker]

Allowing banks to use their losing positions to borrow at par and not market value is a bailout. Makes the whole bond market pointless.

It does say eligible collateral has to have been owned by March 12th, so banks can't exploit it too much and keep buying shitty bonds to flip into cash. But at some point the government has to let these banks win or lose on their own.

[Edward64]

More inflation metrics coming out Tue & Wed.

I'm sure Jerome is praying it'll be lower than expected so he can ease up on rates. If its worse than expected, he (& committee) will have a key decision to make.

Investors also braced themselves for a series of key inflation data due this week. February’s consumer price inflation report, including the latest reading of the core inflation rate, is expected Tuesday, followed by wholesale inflation data on Wednesday.

[Edward64]

I was wondering if SVB, Signature and Republic went through the ballyhooed Fed "stress" tests.

According to below pdf (see pg 13/66), nope.

https://www.federalreserve.gov/publi...s-20220623.pdf

Unsure why but assume SVB with $200B deposits wasn't deemed important/significant (?) enough.

[RainMaker]

The 2018 banking deregulation bill uppsed the amount to $250 billion before you had to be stress tested.

Here’s a story I wrote 5yes ago about Barney Frank — earning +$1 million on Signature Bank’s board — using his name as author of Dodd-Frank to push a bipartisan bill to deregulate Signature

Signature failed yesterday & the FDIC will cover its depositorshttps://t.co/VJf0KrTrzm

— Jeff Stein (@JStein_WaPo) March 13, 2023

[Edward64]

Originally Posted by Edward64

More inflation metrics coming out Tue & Wed.

I'm sure Jerome is praying it'll be lower than expected so he can ease up on rates. If its worse than expected, he (& committee) will have a key decision to make.

Good news I guess. The back to .5% hike or greater is likely off the table. So looks like .25% or no hikes this month (because of the current crisis).

The consumer price index increased 0.4% for the month, putting the annual inflation rate at 6%, the Labor Department reported Tuesday. Both readings were exactly in line with Dow Jones estimates.

Excluding volatile food and energy prices, core CPI increased 0.5% in February and 5.5% on a 12-month basis. The monthly reading was slightly ahead of the 0.4% estimate, but the annual level was in line.

... the collapse of Silicon Valley Bank and Signature Bank over the past several days paved the way for a more restrained view for monetary policy.

[Edward64]

I've read about CS weakness for a while now, even before this current mess. In wiki, said it had $1.6T in assets. I'm thinking it's too big to fail for Switzerland.

Credit Suisse shares sink 5% as ‘material weaknesses’ found in financial reporting
:
Following the completion of discussions with the U.S. regulator, Credit Suisse confirmed its 2022 results announced on Feb. 9, which showed a full-year net loss of 7.3 billion Swiss francs ($8 billion).

[albionmoonlight]

I can't find the article, but I remember someone writing back when rates started rising (and were clearly going to rise for a while) that portions of the economy had become used to cheap money and that it was papering over fundamental unsoundness and that we'd see some surprising failures over the next few years.

I wish I'd saved that article so I could send the author a "I'd like to subscribe to your newsletter" message.

[Edward64]

Good move Zuckerberg. I think Meta is on or near survival mode to show long term viability, relevance.

https://www.cnbc.com/2023/03/14/meta...ructuring.html

Meta will lay off 10,000 more workers and incur restructuring costs ranging from three to five billion dollars, the company announced Tuesday, with CEO Mark Zuckerberg warning that economic instability could continue for “many years.”

Shares of Meta were up about 3.5%.
:
He added that the company plans to close 5,000 additional open roles that it hasn’t yet filled.

Be sure the let go the folks responsible for spending $10B of your money for your avatar.

[RainMaker]

Imagine celebrating 10,000 people losing their job because a company that is still wildly profitable, didn't make enough profits for their shareholders. Just sociopathic behavior.

[Edward64]

So what would you propose that Meta do?

[RainMaker]

I don't know. I wouldn't be celebrating 10,000 people losing their jobs as some kind of good thing. It's not a fucking video game.

[Edward64]

Okay, I guess you can read my comment that way.

I read it as celebrating Meta acknowledging they have to do something, make hard decisions to ‘right the ship’

[RainMaker]

Maybe the way to "right the ship" is to get rid of the man who set it off course and came up with one of the dumbest ideas in the history of tech.

Meta made $23 billion in net profit last year in case people think they are failing or whatever.

[GrantDawg]

But you see, without these people, they could have made $23.3 billion dollars.

Sent from my SM-G996U using Tapatalk

[Edward64]

I actually don’t disagree about getting rid of Zuckerberg, but what is one to do as he is the major shareholder and that’s prob not realistic.

There’s many smarter people than you and me that do believe Meta is failing.

If you have any other ideas, I’m sure he’ll be willing to listen.

[RainMaker]

Basically, I think it's weird to say "Good move Zuckerberg" at firing 10,000 people because the company only made $23 billion in profits last year. Just a basic human decency thing.

[RainMaker]

The palpable silence from the tech crowd that said we needed to bailout SVB depositors because it would lead to job loss. Wonder why they aren't upset about these layoffs.

[Edward64]

Originally Posted by RainMaker

Basically, I think it's weird to say "Good move Zuckerberg" at firing 10,000 people because the company only made $23 billion in profits last year. Just a basic human decency thing.

I’d say that I said ‘Good move at firing 10,000 people because you know shareholders expect hard decisions to be made to help Meta stop the slide to irrelevance’.

Sure $23B is impressive but that’s a drop of 69% from the prior year. And the downward trend is continuing unless he rights the ship. So yeah, he needs to stop the bleeding because $23B won’t go that far for Meta.

[Edward64]

Originally Posted by RainMaker

The palpable silence from the tech crowd that said we needed to bailout SVB depositors because it would lead to job loss. Wonder why they aren't upset about these layoffs.

I’m just talking about Meta.

But if you want to discuss SVB (and the problems, imperfections of capitalism) that IMO is a separate discussion.

[Radii]

Originally Posted by RainMaker

Basically, I think it's weird to say "Good move Zuckerberg" at firing 10,000 people because the company only made $23 billion in profits last year. Just a basic human decency thing.

The poors are just commodities to people like Edward, to be hired/fired/used/abused at the feet of the important people, the shareholders. So what if a few million can't have homes, or food, as long as the stock price goes up.

[Edward64]

Originally Posted by Radii

The poors are just commodities to people like Edward, to be hired/fired/used/abused at the feet of the important people, the shareholders. So what if a few million can't have homes, or food, as long as the stock price goes up.

Not sure who the 10,000 are but suspect most of them, make more money than you or me (or used to). Let’s not paint them as ‘the poors’. If anything, the are better suited to find jobs than most people.

Ultimately, if Meta can’t right the ship, there’ll be more layoffs. So fire Zuckerberg if you can, no issues from me, but I don’t see how layoffs aren’t part of the solution.

[flere-imsaho]

If those 10,000 people make a lot of money (and be assured, a lot of them aren't developers, and thus don't), that money also supports many support industries like cleaners, food service, etc.... A lot of those people will lose their jobs as well.

[flere-imsaho]

Originally Posted by Edward64

If you have any other ideas, I’m sure he’ll be willing to listen.

The non-sociopathic choice would be to use some of that $23B in net profit to cushion the blow of unemployement for those let go (and the networks of much lower-wage workers they support).

Yes, I'm sure Meta needs to change and restructure. Many companies do and have. Why is it always acceptable, in these situations, for said companies to still be making obscene profit during the transition period that sees so many lives completely upturned.

The only reason the idea of using some of that $23B in net profit to cushion the blow of unemployement* seems so crazy is because this country is so in thrall to the sociopathic principles of capitalism that any call to not maximize profits goes against our national psyche.


*and I'm not talking about 16 weeks severance and health insurance for 6 months, I'm talking half a year severance and a year of health insurance at a minimum. Again, $23B in net profit.

[Edward64]

Originally Posted by flere-imsaho

The non-sociopathic choice would be to use some of that $23B in net profit to cushion the blow of unemployement for those let go (and the networks of much lower-wage workers they support).

Yes, I'm sure Meta needs to change and restructure. Many companies do and have. Why is it always acceptable, in these situations, for said companies to still be making obscene profit during the transition period that sees so many lives completely upturned.
:
and I'm not talking about 16 weeks severance and health insurance for 6 months, I'm talking half a year severance and a year of health insurance at a minimum. Again, $23B in net profit.

What's your logic? Why not 1 year of severance or 2 years of health?

Here's a comp with other Tech giants.

How Tech Giants' Severance Packages Stack up: Google, Microsoft, Amazon

I think Meta is pretty competitive. Plus Meta had given additional 2 weeks of severance pay per year of service. So someone working there for 5 years hits your 26 weeks of severance (base of 16 + (5 x 2).

Basically, their 2022 severance package was pretty good comparatively speaking.

Just for reference, googled on banks (including Goldman Sachs)

https://www.efinancialcareers.com/ne...-severance-pay

Goldman isn't commenting on exactly how much it's offering the people it's letting go, but the indications are good. Business Insider reported that people in NY were getting between two and three months' pay, plus extra for the number of years worked. In London, the Financial Times reported that two months severance is the norm.

This compares well to Deutsche Bank which has been paying the statutory minimum (one week's pay per year served for juniors) in severance pay in London ever since 2018, and which didn't pay for a notice period or extend health insurance in the US when it let go of staff in 2019. Similarly, Credit Suisse has cut severance pay to two weeks per year of service, meaning its unwanted juniors will get very small cushions indeed.

The only reason the idea of using some of that $23B in net profit to cushion the blow of unemployement* seems so crazy is because this country is so in thrall to the sociopathic principles of capitalism that any call to not maximize profits goes against our national psyche.

I don't understand above quote. They are definitely using some of the $23B to cushion the blow, it's expected and it's not so crazy.

[Edward64]

Originally Posted by flere-imsaho

If those 10,000 people make a lot of money (and be assured, a lot of them aren't developers, and thus don't), that money also supports many support industries like cleaners, food service, etc.... A lot of those people will lose their jobs as well.

Sure. There is no info on the breakdown so I said "suspect most of them". I am willing to bet the vast majority of them will be the white collar workers vs the support cleaners, food service. It wouldn't surprise me if many of the cleaners and food service are 3rd party contractors (e.g. not employees).

When I googled, the average & mean varied from site to site so take below FWIW

Just a moment...

How much do people at Meta get paid? See the latest salaries by department and job title. The average estimated annual salary, including base and bonus, at Meta is $140,602, or $67 per hour, while the estimated median salary is $149,718, or $71 per hour.

BTW - I'm okay with moving this discussion to another thread, creating a new one, or stopping. If I don't hear back to the contrary, I'll assume it's a group decision (well at least between RM and me) to continue

[RainMaker]

Simping for Mark Zuckerberg of all people.

[Edward64]

I guess that’s the end of the discussion. Come back anytime

[Edward64]

Originally Posted by Edward64

I've read about CS weakness for a while now, even before this current mess. In wiki, said it had $1.6T in assets. I'm thinking it's too big to fail for Switzerland.

There's going to be some pain today in the financial markets. It will be interesting to see how Swiss citizens react to the CS crisis and if there'll be a big enough of a run where the Swiss Fed equivalent has to step in. Switzerland is not part of the EU so not sure what help will come from there.

Credit Suisse shares slide 24% after Saudi backer rules out further assistance

I tried but was unsuccessful finding an article on which companies or economies have the biggest CS risk. More of a global presence than SVB or Signature so more of global impact. But found how much the Swiss Feds guarantee (Swiss Franc is CHF and roughly 1 to 1.1 with USD).

How much do Swiss banks guarantee?

What is the bank deposit guarantee? Also called depositor protection or investment protection, is here to ensure that customer's deposits are covered up to 100'000 CHF in case of bankruptcy of any Swiss bank or financial institution.

[Edward64]

Interesting to me. In a lot of pics of the NYSE floor, you see the old guy with the glasses and beard. Peter Tuchman



I've started seeing more pics of her in MSM

[Edward64]

Originally Posted by Edward64

I don't know/understand all the words or implications of the words, but here's CNBC.
:
:
I'll wait for more detailed analysis on BFTP but I'm seeing it as Fed adding more liquidity in case the situation escalates more. Which is a good thing.

CNN had a good writeup in layman's terms on BTFP.

Premarket stocks: The forgotten rescue plan that could prevent another SVB-like collapse | CNN Business

There are three essential parts of this new program.

The first are the loans it provides to banks. Financial institutions will be able to borrow cash from their Federal Reserve Bank for up to one year using bonds, mortgage-backed securities and other types of debt as collateral. That means if a bank needs to quickly shore up cash to meet the pace of customer withdrawals, it will be able to.

The second part of the program is valuing bank’s Treasuries and other securities at “par.” The BTLP aims to fix this problem by valuing the bonds used as loan collateral at “par.” If a bank brings in a bond they purchased for $1,000 that’s only worth $600 now, they’ll still get $1,000 in cash.

The third part of the program is meant to instill confidence in the US banking system. These loans will be backed by $25 billion from the US Treasury. If a bank can’t pay back its loan, the government will.

(Article used an example of $1000 bond worth $600. I don't know if that's representative or just purely illustrative. I think, hope it's the latter)


The purpose

They found that if customers know that their bank deposits are insured, a bank run is very unlikely.

That’s what this program intends to do: When banks sell large amounts of super-safe assets like Treasuries at a loss, it signals that they exhausted all other options to raise capital to pay back customers – and failed. The Fed’s program takes that scenario off the table, giving bank customers’ assurances that their money is safe and backed by the US Treasury.

The next 2 quotes are interesting. Let's see on Mon

Has anyone used it?

We don’t know yet! But we will next Monday. That’s when the Fed releases its weekly balance sheet. There won’t be any names attached to the loans but we’ll see how much has gone out to banks.

For those with more patience, the Fed will make the names of banks and how much they borrowed public one year after the program ends. You may be waiting a while though, the program is expected to last a year, but there’s nothing stopping the Fed from extending it indefinitely.

Will anyone use it?

This is where things get tricky. If a bank takes out a loan from the Fed, they’re loudly projecting their liquidity struggles to investors. They’re basically marked with a Scarlet Letter, RSM chief economist Joe Brusuelas told CNN.

And the finale

For about a year now the Fed has been practicing quantitative tightening (QT) to bring down sticky inflation rates. They’re currently selling about $60 billion in Treasuries each month.

This new program does the opposite of that, it injects money into the banking system. But Brusuelas says that $25 billion in loans is at the very most going to slightly offset the effects of tightening. That’s worth preventing an epic bank run which could destabilize the entire economy, he added.

[Edward64]

Without the current bank mess, the lower than expected PPI would have been pretty good for the markets. Oh well. I think this gives Jerome some breathing room to not up rates hike to .5%+ and to keep them at .25% or 0 this month, and buy some time for the markets to settle some.

Key inflation measure shows wholesale prices fell last month | CNN Business

A key measure of inflation fell dramatically in February, according to the latest Producer Price Index, which tracks what America’s producers get paid for their goods and services.

Producer price increases slowed to an annual pace of 4.6% last month, significantly lower than the downwardly revised 5.7% in January, the Labor Department reported Wednesday. February prices fell by 0.1% after rising by a downwardly revised 0.3% in January.

Economists surveyed by Refinitiv had been expecting the 12-month rise in wholesale prices to slow to a 5.4% increase.

PPI is one of several closely watched inflation gauges. Because the producer-centric index captures price shifts upstream of the consumer, it’s sometimes looked to as a potential leading indicator of how prices may eventually land at the store level.

[flere-imsaho]

Originally Posted by Edward64

What's your logic? Why not 1 year of severance or 2 years of health?

Even better.

Originally Posted by Edward64

Sure. There is no info on the breakdown so I said "suspect most of them". I am willing to bet the vast majority of them will be the white collar workers vs the support cleaners, food service. It wouldn't surprise me if many of the cleaners and food service are 3rd party contractors (e.g. not employees).

You misunderstood me.

Some of the 10,000 will be highly-compensated technical workers (developers, architects, etc...).

Some of the 10,000 will be not-as-highly-compensated technical (QA testers) and non-technical (marketing people) workers.

All of the 10,000 spend money in local economies and low-compensated workers in service industries will suffer a knock-on effect, especially if any of the layoffs are geographically concentrated.

[flere-imsaho]

Originally Posted by Edward64

I don't understand above quote. They are definitely using some of the $23B to cushion the blow, it's expected and it's not so crazy.

Ten thousand people making an annual average of, say, 500,000, given 26 weeks severance is ~$3B, or 13% of Meta's net profit in 2022. And we're meant to think that's generous. Maybe you do. I don't.

[GrantDawg]

Come on, guys. Who cares about the people. The stock prices gained 2 dollars.

Sent from my SM-G996U using Tapatalk

[Edward64]

Originally Posted by flere-imsaho

Ten thousand people making an annual average of, say, 500,000, given 26 weeks severance is ~$3B, or 13% of Meta's net profit in 2022. And we're meant to think that's generous. Maybe you do. I don't.

Okay, I see your logic now.

Let's be glad the Feds came in with the bailout of the depositors otherwise there'll be a lot more out of work.

[Edward64]

Yup, I'd consider this a bank bailout. But don't think the Swiss had any other real choice. CS is the 2nd largest bank in Switzerland behind UBS, and with its global reach, it would have taken (or at least severely hurt) a bunch of others globally and spread the contagion.

https://www.cnbc.com/2023/03/16/cred...ouncement.html

Credit Suisse shares rose over 30% at the market open after the bank said that it will borrow up to $54 billion from the Swiss National Bank.

It comes after shares of Credit Suisse plunged to a fresh all-time low on Wednesday when top investor the Saudi National Bank said it would not pump in any more cash due to regulatory restrictions.

The embattled lender announced late Wednesday that it would exercise its option to borrow from the Swiss central bank under a covered loan facility and a short-term liquidity facility.

I wonder what the "material weakness" is. I didn't see any specifics in MSM

The Swiss bank’s losses deepened on Tuesday after it announced in its delayed annual report that “material weakness” had been found in its financial reporting in 2021 and 2022, although it said this did not affect the accuracy of the bank’s financial statements.

[Edward64]

This makes sense to me.

Not sure the tiers to use (# of employees, revenue, payroll size etc.) but the $250K guarantee is not enough for some small businesses.

Warren says $250,000 cap in deposit insurance for banks should be reexamined | The Hill

Sen. Elizabeth Warren (D-Mass.) on Wednesday said the $250,000 cap on deposit insurance should be reexamined to better suit small business and nonprofit organizations.

“I think that we should reexamine, just overall, about why we have limits at $250,000 of protection,” she said on CNBC’s “Squawk Street.”

The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 for each depositor if a bank fails. Warren said this insurance was meant for individuals, and a similar level of protections would help small businesses and nonprofit organizations have more confidence when depositing money into a bank.

“Some small business, some nonprofit, needs a place to manage its money,” she said. “They need to be able to make payroll, they need to be able to pay the utility bills, and they need a safe place to have that money where somebody’s going to keep it safe.”

“They shouldn’t be in the business of having to examine the books of the bank to say ‘I’m worried that this bank is a little too risky’ or ‘I’m worried that another bank has has taken on a certain kind of risk,’ ” she continued.

In addition, the Fed has opened up a can of worms. When they guaranteed (and bailed out) the excess deposits over $250K, I would ask why not the rest of us the next time.

[RainMaker]

Silicon Valley Bank is now marketing themselves as the single safest "place to keep or transfer your deposits (fully insured with no limits or caps)." pic.twitter.com/HLg6D0q5We

— Charlie Bilello (@charliebilello) March 15, 2023

[Edward64]

It's for like min of 120 days so it is to address any liquidity issue but that's what the Fed is for (the Fed can't guarantee SVB and Signature excess deposits and not do the same for Republic)?

The article didn't mention it but I'm thinking there's some Fed guarantees or a wink-wink to those contributing banks. More details to come out next several days.

Stock Chart Icon

A group of financial institutions has agreed to deposit $30 billion in First Republic in what’s meant to be a sign of confidence in the banking system, the banks announced Thursday afternoon.

Bank of America, Wells Fargo, Citigroup and JPMorgan Chase will contribute about $5 billion apiece, while Goldman Sachs and Morgan Stanley will deposit around $2.5 billion, the banks said in a news release. Truist, PNC, U.S. Bancorp, State Street and Bank of New York Mellon will deposit about $1 billion each.

I'm thinking Russia (payback for the sanctions) and China (ours is better than yours) are having a good laugh right now.

[Edward64]

This captures my concern from the post above re: 11 banks bailing out First Republic.

Hedge fund manager Bill Ackman is not happy that the systemically important banks (SIBs) have been chivvied into recycling the deposits they received from First Republic Bank (FRB) back into the struggling lender.

“The result is that FRB default risk is now being spread to our largest banks. Spreading the risk of financial contagion to achieve a false sense of confidence in FRB is bad policy. The SIBs would never have made this low return investment in deposits unless they were pressured to do so and without assurances that FRB deposits would be backstopped if it failed,” Ackman wrote in a tweet late Thursday.

“The press release announcing the $30B of deposits raised more questions than it answers. Lack of transparency causes market participants to assume the worst. I have said before that hours matter. We have allowed days to go by. Half measures don’t work when there is a crisis of confidence.,” he added.

Wish I was brave enough to have bet on First Republic on Wed. CS may be a good long term bet though, price is at $2.16 and has dropped from $8 the past 12 months.

Anyone buying First Republic’s stock FRC, +9.98% at the open on Thursday and selling at the close could have made about 60% for the day. The rebound came after a consortium of big banks pledged $30 billion of deposits for the lender. However, the shares are off 5% running up to the opening bell on Friday after First Republic said it would have to suspend its dividend to conserve cash.

[NobodyHere]

I'm thinking I should thrown in collard greens with my corned beef this weekend instead of cabbage.

[Edward64]

Damn you.

First Republic down -20% today even with the 11 bank bailout. Hopefully the market will steady over the weekend. The Fed (and Joe) will have an anxious weekend. If they let FR fail even with the 11 bank bailout, that could shatter the confidence of the markets. It may be better for them to bailout FR in the truest definition of the word. Dunno.

[bob]

Disclaimer: I max out my 401k every year.

However, sometimes I wonder if the 401k system isn't just a scam that is going to blow up on my generation. For the past 40 years, there has been more and more money coming into 401ks every pay check, so stocks couldn't help but go up. Advisors have to buy something with it, so demand is there. But now that demographics are changing and boomers are taking money out and 20 year olds can't afford to save much, I don't see how these artificially inflated stocks aren't going to stagnate at best. So I'll continue to buy more stock in my account, but is it really going to grow at an average of 8.7% going forward?

There was a reason when company's wanted to get rid of pensions. They saw that it was going to be difficult to get market performance that allowed them to pay those defined benefits, so instead push the responsibility to us.

[sterlingice]

Originally Posted by bob

Disclaimer: I max out my 401k every year.

However, sometimes I wonder if the 401k system isn't just a scam that is going to blow up on my generation. For the past 40 years, there has been more and more money coming into 401ks every pay check, so stocks couldn't help but go up. Advisors have to buy something with it, so demand is there. But now that demographics are changing and boomers are taking money out and 20 year olds can't afford to save much, I don't see how these artificially inflated stocks aren't going to stagnate at best. So I'll continue to buy more stock in my account, but is it really going to grow at an average of 8.7% going forward?

There was a reason when company's wanted to get rid of pensions. They saw that it was going to be difficult to get market performance that allowed them to pay those defined benefits, so instead push the responsibility to us.

This has always been my fear, as well. And it's the "conservative" option. Interest rates have basically only gone down since 1980 so it's not like our generation could drop money into a savings account and watch it grow. There's basically no option to stay ahead of inflation that is truly save. Sure, you can diversify your portfolio - put some money into real estate (which also tanks when the market tanks) or commodities (only those markets are heavily manipulated and bubble when the economy goes up and pop when it goes down) or bonds (which are also so intertwined with stocks now). But they all have similar issues. So, yeah, we're all throwing it into Wall Street roulette and hoping it doesn't come up red a few years before you retire. Meanwhile, we keep taking away the guardrails from any investment, all the while our money is also getting skimmed off the top, both when we put it in and take it out, by fast money.

SI