Friday was a crazy day in the markets… Futures were bid on the latest jobs and unemployment data, but that followed Thursday’s major sell-off, which was a new wrinkle for us to consider.
That’s because we’re now at a new point of this ongoing, recessionary bear market cycle… the point where we start to see real financial crises pop up.
News broke Friday right before lunchtime on the East Coast that Silicon Valley Bank — which no one gave a crap about before Thursday — has been shut down by regulators.
This bank had the largest securities as collateral of any bank in the U.S., and it was the 18th-largest bank by market capitalization in the U.S. — before Thursday.
It’s a bank that doesn’t have cash, and rather has stocks as collateral… And this is what happens when your overvalued assets — crap stocks — are priced by markets.
A bank like JPMorgan Chase & Co. (NYSE: JPM), which also got taken behind the woodshed in the fallout, has to meet certain capital criteria and scrutiny that SVB Financial Group (Nasdaq: SIVB) didn’t have to.
That likely has something to do with the way it labels itself as being a commercial depositor vs. not a commercial depositor.
To have such a high exposure to equity and still be able to call yourself a bank, it’s incredible.
But the bigger picture here is we have to recalibrate our risk exposure because now we’ve seen a real black swan blowup. This is something you have to price into the trades you’re making.
Because the bodies are just now starting to float to the surface.
We had a bad bear market in 2022, and now we have a real financial crisis with a “bank” blowing up, and it’s likely just the first.
When all this stuff starts to unwind, it could create a bigger spike in volatility, but here’s the kicker…
I warned in late December that banks would be the worst sector in 2023. This is starting to come to fruition. But this very well could be contained to the financial sector, and tech stocks could be fine.
Check out Crush the Open at the top of this post and let’s dive into this black swan event. We also had a major jobs report Friday morning that I expected would move markets on its own, and it did before the bank news broke.
We were looking for 215,000 jobs created in February, and we got 265,000 — strong, which is bad for those who want lower interest rates.
But we also had 3.6% unemployment vs. 3.4% expected — weak, which is good for those who want lower rates. And there’s an even more critical number that came in super soft, so check out Crush the Open up top and let’s discuss a ton of important data, and how we’re trading it!
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*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
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