Author: Martin North

Martin North is the Principal of Digital Finance Analytics

Two Weeks To Save The Banking System!

For the final time in Australia, I caught up with Robbie Barwick from the Citizens Party. We looked at the progress towards the establishment of a Public Bank in the light of recent failures, and the inquiry into Regional Banking.

Importantly, there are just two more weeks to get your submission to the Inquiry. Have your say! and support the transformational policy.

https://www.aph.gov.au/sitecore/content/Home/Parliamentary_Business/Committees/Senate/Rural_and_Regional_Affairs_and_Transport/BankClosures/Submissions

Make a submission to regional bank closures inquiry

Submissions to the inquiry are due by 31 March. All communities, organisations, businesses, and individuals impacted by the banks’ war on cash are strongly urged to make a submission, including to support a government post office bank.

A submission can be a formal representation from an organisation, or as simple as a letter or email, which explains to the Committee your experience and views.

Elderly and vulnerable regional bank customers, who are disproportionately affected, are especially encouraged to hand-write or type physical letters and mail them to the Committee through the post.

Mail your submission to the Committee at this address:

Committee Secretary
Senate Standing Committees on Rural and Regional Affairs and Transport
PO Box 6100
Parliament House
Canberra ACT 2600

Email your submission to the Committee at rrat.sen@aph.gov.au

Upload your submission, and get more information, at the inquiry website

For more information, phone the Committee on 02 6277 3511.

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The Federal Reserve’s War On Inflation Will Continue!

The latest inflation data for the US underscored the ongoing inflation problem the FED has, and while the markets are hoping for a pause, or cut, on the latest numbers this is unlikely. The battle to control inflation is far from won.

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No Free Market Capitalism Here!

So once again the banks get a helping hand from the FED, and depositors in the US are guaranteed to an unlimited extent. But what of moral hazard?

And the markets now do not expect further rate rises, despite the inflation pressures in play. Yet perhaps there is a bifurcation between liquidity and rates, so perhaps the markets are not reading things right.

And once again the FED and Treasury proved Free Market Capitalism is dead!

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Banking Crisis Incoming?

Last Thursday the S&P 500’s bank index finished down 6.6% after hitting its lowest level since mid-October, its biggest one-day drop in over two years as Investors fled the sector after tech-industry lender SVB Financial Group launched a share sale to shore up its balance sheet due to declining deposits from startups struggling for funding and following crypto bank Silvergate’s decision to wind down operations.

Shares of SVB, whose operating segments include Silicon Valley Bank, slumped over 50% in their deepest one-day drop on record after the company announced a $1.75 billion share sale late on Wednesday. SVB is battling cash burn due to declining deposits from startups struggling with a venture capital funding drought.

Unlike most banks, which are helped by rising rates, SVB Financial is “generally hurt by them,” Oppenheimer says, as its deposit base is “generally made up of commercial customers who are rate-sensitive.”

The slump in SVB Financial further soured the sentiment on banking stocks, which have been pressured by a deeper inversion in the Treasury yield curve – a harbinger for a recession.

Morgan Stanley analysts said lower 2023 NII guidance at SVB is driven by cash burn among private companies that bank with SVB. This, according to the analysts, will cause SIVB to bring more higher-cost sweep accounts onto its balance sheet, paying roughly the Fed funds rate to do so.

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Risk On In Tech And Financials

The S&P 500 slumped Friday, amid fears of contagion that swept through banking stocks as regulators closed SVB Financial to protect customer funds after the beleaguered bank’s effort to secure funding failed.

The S&P 500 fell 1.4%, the Dow Jones Industrial Average fell 1%, or 333 points, the Nasdaq Composite was down 1.8%.

SVB Financial Group was closed by regulators and its deposits placed under control of regulators to protect depositors following a run on deposits, after its parent company’s share price crashed a record 60% on Thursday.

In the latest update regarding the rapidly moving SVB Financial Group saga, the Federal Deposit Insurance Corporation (FDIC) said Friday that SVB has been shut down by the California Department of Financial Protection and Innovation.

The regulator, which appointed the Federal Deposit Insurance Corporation as receiver, revealed that the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB) to protect insured depositors. (250k)

“The FDIC as receiver immediately transferred to the DINB all insured deposits of Silicon Valley Bank,” the FDIC said in a statement.
They added that all insured depositors will have access to their insured deposits no later than Monday, March 13.

The FDIC said it will pay uninsured depositors an advance dividend within the next week. For any remaining uninsured funds, depositors will receive a receivership certificate. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to certificate holders.

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All About The Fed, And What Might Break First!

In this week’s market update we look at the contention between the markets and Central Banks. The former is banking on cuts later this year, the latter focusing on inflation control, and the need for higher interest rates. Both cannot be true.

And results this past round suggest weakness ahead.

CONTENTS

0:00 Start
0:15 Introduction
00:30 US Monetary Policy
03:00 US Markets
07:35 US Bond Yields
08:15 US Terminal Rates
10:30 Gold (Who Is Buying?)
12:00 Sound Money??
16:25 Oil
18:20 European Markets
19:25 Euro Terminal Rates
21:00 Asian Markets
23:10 Australian Markets
25:54 Crypto
26:55 Summary And Close

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So Long, And Thanks For All The Fish! – With Tarric Brooker…

Tarric Brooker joins me for my last Friday afternoon chat for a month or so, as I relocate to the UK. For the reasons see here: https://youtu.be/7Nj6N_amn3Y

We discussed a range of viewers questions, for which thanks.

I have genuinely enjoyed my regular chats with Tarric, and rest assured we plan to continue them once I have relocated.

Meantime, you can see the charts on his Substack: https://avidcom.substack.com/p/charts-and-links-from-dfa-q-and-a

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The Mortgage Stress Traffic Accident Is Coming Into View!

More analysts are now talking about mortgage stress. How ever you define the concept (we prefer cash flow metrics) things are getting worse. So ahead of our next batch of updates on Tuesday, we look at what some other analysts are saying.

Perhaps, better late than never they are now understanding things I have been highlighting for some long time!

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More Ups And Downs For The CPI!

The rather shaky monthly indicators are in from the ABS, and headline inflation is down a tad, though only in some categories, so we should not get too excited. The quarterly GDP number to December was also in, and lower than expected – as ther savings ratios fell, and household discretionary spending wilted, though travel, and student arrivals helped to support GDP.

Again, not too much here to suggest other than more weakness ahead as rates rise.

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