Watch: After the Open | Updated Daily
Sign up for our content

Your Quiver | Monday, March 27, 2023

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


First Citizens is popping today because it is going to purchase around $72.5bn SVB assets at a discount of $16.5bn, plus they entered into a loss share transaction whereby the FDIC absorbs part of the loss on the commercial loans purchased. I don’t even need my Excel open to tell me that’s a good deal. A remaining $90bn in securities and other assets will stay in receivership for disposition by the FDIC. The FDIC received equity appreciation rights in $FNCNA common stock with a potential value of up to $500mm. On March 27, the former 17 branches of SVB will have a new logo on the door.

Over the Weekend

BBG reported that the US is considering expanding federal programs to provide liquidity to banks, in part to help $FRC find a buyer. That doesn’t sound good, even if it is easing investors’ fears.

It's All Downhill From Here

MS’ Wilson is raising the alarm bells that the upcoming earnings season will show that earnings guidance is too high. Not to be outdone with the bearishness, JPM came out and said that this quarter probably marks the high point for stocks for 2023. Relief will only come when the Fed starts cutting rates, according to Nadine Terman of Solstein Capital.


The yield curve is steepening because traders are pricing in big Fed rate cuts. They’re betting that a hard landing will require intervention, which is not what Powell was talking about a week ago. The 10-yr yield was up around 11bps. This week we’ve got various inflation measures coming out (e.g., PCE), as well as remarks from various Fed officials. So, don’t get too settled into this trade.

Lending Drought

That’s what’s happening to EZ businesses and households, with the credit impulse down to 0.1% of GDP in Feb from 0.4%. The 3-mo ave dropped to 0.5% from 1.2%, per NOSO. (The credit impulse measures the change in growth of credit, and it provides a signal on the level of stimulus from lending).

Hidden Leverage

That’s what BBG is talking about this morning. Shadow debt with ties to lenders, p/e shops, institutional investors, p/e employees, banks, portfolio companies, etc. is the concern. Basically, an economic downturn + higher rates + lots of debt incurred when rates were low + interconnected parties = powder keg. Perhaps even more importantly, all the entities in the food chain were benefitting from cheap debt, creating layer after layer of leverage. Regulators are going to have to figure out where the risk ended up after it moved off bank balance sheets post 2009, as well as the credit risk to banks from the loans they made to p/e shops and others during the past decade. Nonbank financial oversight is coming.

Expect Trouble

Some of Twitter’s proprietary source code was posted on GitHub, the code repository owned by $MSFT. The code affects the service’s functions and internal tools, so hackers are probably having a field day. The account was named FreeSpeechEnthusiast, a reference to Musk who said he’d bring free speech to Twitter when he took over the co.

I Don't Blame the Guy

Billionaire Jack Ma, co-founder of $BABA and Ant Group, has been laying low outside of China since he went after Chinese regulators back in 2020. (Remember, the gov cracked down on his company and the overall tech industry after that point…) Well, they want him back, to show the world that everything is hunky dory for co’s trying to do business in China. The surprise disappearance of a leading tech banker Bao Fan last month surely isn’t helping. Neither are the golden shares the government is taking in successful companies like $BABA and Tencent.