To The Moon

After twists and turns of bargaining, $UBS Group AG(UBS)$ announced that it would acquire $Credit Suisse Group AG(CS)$ , and since then UBS and Credit Suisse are one.

The closing price of $Credit Suisse Group AG(CS)$ on last Friday was 1.86 Swiss francs, and the final purchase price was 0.76 Swiss francs. The total purchase price was 3 billion Swiss francs, or about 3.25 billion US dollars. UBS initially offered as little as 0.25 Swiss francs per share for Credit Suisse early in negotiations this week.

Many people think that this is because $UBS Group AG(UBS)$ is not interested in acquiring $Credit Suisse Group AG(CS)$ , so it gave such a low price. This may be one factor, but the root cause I think is that $Credit Suisse Group AG(CS)$ ’s crisis has dried up its liquidity in the capital market. Confidence also dried up.

The essence of the financial market is liquidity, which is why the FED rescued $SVB Financial Group(SIVB)$ so quickly this time. After experiencing the financial crisis in 2008, the $SVB Financial Group(SIVB)$ knows that if the banks are not rescued in time, the liquidity crisis will spread quickly.

This time UBS acquired Credit Suisse, the Swiss National Bank provided 100 billion Swiss francs in liquidity assistance, and the Swiss government also provided 9 billion Swiss francs in guarantees. I think the Swiss central bank is also very clear that stabilizing bank liquidity is actually saving the liquidity of the entire financial system. Credit Suisse's market value exceeded 100 billion US dollars ten years ago, and it is embarrassing to sell at a low price now. In 2008, JP Morgan initially offered Bear Sterns at $2 per share. More than ten years later, the same drama was staged again.

Last week, the FED announced its latest balance sheet after the closing hours on Thursday, which increased by 300 billion US dollars compared with last week, and its total assets reached 8.69 trillion. Due to the recent banking crisis, the Federal Reserve established BTFP to directly strengthen bank liquidity. I think this is QE in disguise, because private sector liquidity has increased and M2 has also increased. In the past, the treasury bond assets held to maturity by the bank were like non-tradable assets and could not be used directly to pay depositors. If there was a crisis, then these treasury bonds or MBS assets would need to be force sold, but now because of the Federal Reserve’s BTFP, there is no need to worry about force sale of these treasury bonds assets.

Data from bloomberg

The U.S. East will announce the Federal Reserve’s March FOMC interest rate decision on Wednesday. We believe that the extent of interest rate hikes is important. At present, the probability of raising interest rates by 25 bps is relatively high, but what is more important is the dot plot. The current interest rate futures market expects the Fed to If the Fed cuts interest rates by 100 bps before the end of this year, if the terminal rate shown in the dot plot released by the Federal Reserve remains above 5.25%, it will have a relatively large negative effect on the market. Before this week's interest rate meeting, it is recommended to control the position, and safe friends can wait for the meeting to make the next decision.

Gold$Gold - main 2304(GCmain)$ rose sharply after entering March. The underlying logic is related to interest rates. At the same time, the risk aversion caused by the recent banking crisis has been superimposed. We judged in advance the opportunity to pay attention to gold in the band class at the end of February 2/27.

Last week, the U.S. stock market still revolved around the news of the global banking system, the rate of interest rate hikes by the European Central Bank and the monetary policy expectations of the Federal Reserve.

When the market was panicking, we suggested to go long Russell $iShares Russell 2000 ETF(IWM)$ and choose $Direxion Daily Small Cap Bull 3x Shares(TNA)$ as the target.

For big tech, $Microsoft(MSFT)$ /$Alphabet(GOOGL)$ rose sharply this week, and $NASDAQ(.IXIC)$ was strong. We believe that the big technology band can gradually settle down.