Comment of the Day
13th March 2023
Eoin Treacy
Mar 14
Video commentary for March 13th 2023
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: US depositors now fully insured, 2-year yield drops sharply, Dollar weak, gold and silver strong, financials mixed. stocks steady but bank heavy indices lead on the downside.
Ackman Says Regional Bank Stocks an 'Incredible Bargain' Now
This article from Bloomberg may be of interest to subscribers. Here is a section:
Pershing Square Capital Management’s Bill Ackman said that regional bank stocks are an “incredible bargain” right now as long as the government does the “right thing.”
The trade is not without real risk but offers “very attractive asymmetry,” he said in a tweet, adding that a decline in rates makes this an even better investment.
The turmoil that has hit bank stocks deepened on Monday with regional banks hit the hardest as the KBW Regional Banking Index sank as much as 12%. That is the sharpest intraday drop since March 2020.
Eoin Treacy's view
The clear conclusion from the announcements over the weekend is that all deposits are now insured. President Biden said in this morning’s press conference that the FDIC will absorb the costs. That implies much higher fees for the mid-sized banking sector in future. However, it also suggests bank runs will be avoided and the majority will survive and possibly thrive.
This section continues in the Subscriber's Area.
Schwab Tumbles Most Ever as Firm Seeks to Calm Investors
This article from Bloomberg may be of interest to subscribers. Here is a section:
Charles Schwab (NYSE:SCHW) Corp. tumbled the most ever on an intraday-basis as the online brokerage sought to reassure investors that it has sufficient liquidity to handle any volatility following the collapse of Silicon Valley Bank.
Shares of Westlake, Texas-based Schwab dropped as much as 23% to $45 after trading was halted for volatility. The stock later pared its decline and was down 17% to $48.93 at 10:09 a.m. in New York.
The firm has a broad base of customers and capital in excess of regulatory requirements, founder and Co-Chairman Charles Schwab and Chief Executive Officer Walt Bettinger said in a statement on its website Monday.
“Schwab’s long-standing reputation as a safe port in a storm remains intact, driven by record-setting business performance, a conservative balance sheet, a strong liquidity position, and a diversified base of 34 million-plus account-holders who invest with Schwab every day,” the executives wrote.
The company, with roughly $7.4 trillion of client assets, said it has access to about $100 billion of cash flow, more than $300 billion of incremental capacity with the Federal Home Loan Bank and other short-term facilities, and that more than 80% of deposits at its bank are insured by the Federal Deposit Insurance Corp.
Eoin Treacy's view
Companies like Schwab offered an attractive service to their customers during the big bull market. Instead of selling highly appreciated assets and absorbing the capital gains tax hit, why not offer the stock portfolio as collateral against a loan to buy a new house, car or boat? Real Estate agents I know report that was a major source of funding during the pandemic housing boom.
This section continues in the Subscriber's Area.
Takes Aim at Illumina Over Grail Deal
This article from Barron’s may be of interest to subscribers. Here is a section:
Illumina was valued at more than $70 billion in the summer of 2021, when it said it had closed the deal for Grail, compared with around $31 billion now. It is still fighting a decision by European regulators to block its acquisition of Grail and potentially force it to divest the company. Illumnina currently holds Grail as a separate unit.
Shares in Illumina were up 20% on Monday but have fallen about 25% over the past 12 months. As well as the uncertainty over the Grail acquisition, the company is facing a projected slowdown in sales of its gene-sequencing products.
Eoin Treacy's view
Illumina has adopted a combative attitude to EU regulators. The basis for their argument is both Illumina and Grail are US companies so the EU does not have jurisdiction. The EU’s argument is they control a large market and are already concerned with monopolistic practices in the gene sequencing sector.
This section continues in the Subscriber's Area.
Eoin's personal portfolio: stock market short profit taken
One of the questions subscribers ask most often is how to find details of my open trades. To make it easier I will simply repost the latest summary on a daily basis until there is a change.
This section continues in the Subscriber's Area.
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