A Recipe for Disaster

1. Banks meltdown and closures (see below)

- Silvergate

- Silicon Valley Bank

- Signature Bank

2. Hotter than expected CPI

3. More rate hikes and high interest for prolonged periods. 

THINGS AIN'T THAT BAD

As the market processed the data from SVB fall out, it soon came to realise that things ain't that bad after all... unless you're a bank. US authorities are confirming that depositors will get their full deposits back. 

That means good news for tech start ups in silicon valley. No one's going down under... Yet. [Evil] 

The only losers last night were the financial institutions. Bank stocks faced sell offs yet again. No one knows if there is contagion risk and regional banks were the hardest hit. Jim Cramer must be laughing at himself now, just from his past predictions of these banks. 

The truth is that it wasn't a solvency problem for SVB, but a liquidity one. That meant the assets were still there, just that it would had taken time to access them. Things would have played out calmly, probably with losses to SVB, but the bank run spiralled everything out of control.

CPI and INTEREST RATE

I suspect CPI will be above 6% still. This will show that inflation remains sticky. 

This would also signal that 25 bp is required from the Fed. 

Would the SVB saga change anything. I don't know. Maybe, but I doubt so. At least, for sure, I not expecting 50 bp.

I expect another 25 bp in May and depending on how this SVB/banking problem plays out, that could be the last of the rate hike s. I'm thinking the banking problem might be reasonable serious for the Fed to stop raising rates, but it won't be catastrophic like Lehman brothers.

LOOKING FORWARD

What do we do? 

We do what investors would do. 

Wait for opportunities and invest.

-DCA into broad based index

-Buy undervalued companies, like big banks that show profitability now.

-Save cash and don't go all in!

$Bank of America(BAC)$ 

$Morgan Stanley(MS)$  

$First Republic Bank(FRC)$  

@TigerStars  @MillionaireTiger  @Tiger_chat  @CaptainTiger