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Your Quiver | Monday, March 20, 2023

CIO | Nadine Terman @SolsteinCapital details what she's seeing in global financial markets.

How ‘Bout Them Apples

MS’ Wilson is calling for a painful and vicious end to the US bear market as credit tightening pressures growth. A bear at heart, Wilson is targeting equity risk premium to hit 400 bps from the current 230 bps level and for assets to be correlated during the downturn. His points echo those of JPM’s Matejka who has been focused on the inverted yield curve as the tell tale sign, expecting lows to hit when the Fed starts cutting rates, not hiking them.


Over the weekend, the Swiss government tried to force a UBS takeover of CS instead of nationalizing the bank. UBS put in a bid of $1.1bn, a bid that CS’ biggest shareholder Saudi Natl Bank failed to chew on, but then later raised the bid to $3.2bn, which sealed the deal. Governments were pressuring the Swiss to “take care of business” before Monday, when there could be additional contagion if a solution wasn’t found for CS. So, I would expect 10k+ employees to be looking for a new job soon, and for teams at both banks scrambling to figure out how the combination is going to work. The deal will force a wind down of assets, restructuring, and the transfer of valuable assets (e.g., Swiss Universal Bank) to the rival—and it will change the storyline for a more drama-free, profitable company that was set for $5bn buybacks.


All eyes are on Wed’s Fed meeting, a “gala” of officials who are partially being blamed for the current financial crisis, due to their quick, high rate hikes over the past year. Treasury vol is really elevated, since there are some big banks betting there won’t be a hike (GS, Barclays) and many others who are expecting the Fed to follow their EU peers to continue to fight inflation with another rate hike. At Friday’s close, there was a two-thirds odds placed on the Fed raising rates by 25bps on Wednesday, with the odds suggesting that a pause was imminent due to the banking crisis. We’ll be watching revisions to the Dot Plot because the shape of the futures curve projects to 100 bps of rate reductions by year-end. We’d bank on Powell’s prior messaging that fighting inflation is more important than halting a rising unemployment rate because high inflation affects a lot more people (everyone) than those who lose their jobs.

A Slice

The FDIC now is focused on cutting up SVB because no one stepped up to buy the whole entity. Supposedly, one slice is the “bridge bank” they set up to take receivership of SVB’s assets and liabilities. The other slice is for SVB Private Bank, pretty much Boston Private, which it acquired in 2021. The FDIC extended the bidding process because of interest from multiple buyers.

Red Delicious

A bunch of midsized US banks that don’t have the backing of libertarian vc’s or ultra-wealthy individuals asked federal regulators to extend FDIC insurance to all deposits for the next two years, to stem the withdrawal of deposits. Their long-term assets are in the red, just like those at $FRC, so they’re looking for a positive outcome—while knowing they won’t get the same save-the-day package from larger systemically important peers.

Core Holding

Gold rose, as investors flocked to safe havens. The SPDR Gold Shares increased bullion holdings by >204k ounces in the last session, or roughly $407mm.

Granny Smith

Like a little old lady that no one notices, there are firms operating tankers under the radar to deliver Russian oil. BBG is out with a piece about two firms (Gatik Ship Mgmt in Mumbai and Fractal Shipping in Dubai) that appear to run $2bn in tanker assets between them. The companies assembled fleets in <1yr and deliver millions of barrels of Russian oil globally. Insurance heads say that both companies have provided attestations that oil purchases are in accordance with G7 price caps, but it certainly looks sketchy. They’re doing business that more longstanding companies won’t do, and they’re shielding who owns the companies.


A major departure of senior execs from Apple in the past nine months is just one concern of Tim Cook. The company is looking to cut costs to avoid big layoffs in general, and especially ahead of its upcoming mixed-reality headset and operating release. Apple didn’t hire as many folks like peers in the past few years, so it doesn’t have the same bloat, and with cash of $165bn, it’s hard to look employees in the eye and implement layoffs.

Golden (State) Delicious

About 80% of demands on the Colorado River, according to BBG, come from irrigated farms that are key to California’s economy. With seven states of the Colorado River Basin seeing huge growth, advantageous deals struck by farmers will have to be recut. Not only will farmers have to be paid off, but also customers should expect higher prices for everything from salads to dairy inputs like alfalfa to cheddar cheese.

Pink Ladies

This week we’ve got announcements from systemically important policymakers: ECB President Christine Lagarde testifying at the European Parliament (Mon), US Treasury Secretary Janet Yellen testifying at the US Senate (Wed), and Yellen testifying at the US House of Representatives (Thurs). OK, there’s no apple reference for guys, but we’ve also got: FOMC policy decision and Powell Q&A (Wed), BOE policy decision (Thurs), SNB policy decision (Thurs).