A Rant and a RIP For My Old Bank

Say Hi to Lehman for Me! [Morning Reckoning] March 23, 2023 [WEBSITE]( | [UNSUBSCRIBE]( A Rant and a RIP For My Old Bank - Credit Suisse has been dead for a while, but no one told them until this week. - The current CEO didn’t stand a chance. An old CEO already did the damage. - I’ll share some stories from the old days, as well. Asti, Northern Italy March 23, 2023 [Sean Ring] SEAN RING Good Morning Reader, Good Thursday morning to you! I’ve been putting off writing about the demise of my old bank, Credit Suisse. I didn’t write about it in the Rude all week because I didn’t have the energy to do it justice. But since this Morning Reckoning gives me a bit more latitude, I’ll tackle the subject here. If you read the Rude, you know I spent over 11 years of my life over two stints working for Credit Suisse. And if you think that was a waste… I worked for Lehman Brothers for about 15 months before my first CS stint! I’ve worked in CS’s Eleven Madison Avenue office in NYC, its 1-5 Cabot Square office in London, and its swanky 87-88th floor office in the ICC in Hong Kong. In between my western and eastern stints, I got into financial training. It so happens I trained CS staff in Singapore, Hong Kong, Mumbai, Jaipur and Pune. So I know the bank rather well. And other than friends losing their jobs, I’m not sad it’s gone. In this piece, I’ll tell old stories, what CS’s problems really were and why banking regulation is ultimately useless. Now let me share some of the amazing things that happened while I worked for them. [External Advertisement] [This could impact over 100 million families in America. Here's how to protect yourself...]( During and after the Great Financial Crisis of 2008, 485 U.S. banks went under. We warned about 484 — an accuracy rate of 99.8% Now, I have a new warning. But this time, it's not just about a few hundred banks. It's about nearly every single bank in America, whether large or small. [See what it is here.]( [LEARN MORE]( It Wasn’t All Bad I didn’t realize how much I wrote about the good times in the Rude. I’ll link all those articles. In short, my life never would’ve turned out this way without having worked at CS. After all, not many workplaces second you from New York to London… and many years later, from Singapore to Hong Kong. In New York, I never would’ve fallen in love with [our impossibly beautiful 20-year-old intern]( – hold your horses, I was only 23 – and dated her for two years. Our first date is one for the ages, as you may read later. While in London, Hung-Wah never would have driven me to Bruges for [Belgian waffles](. I had forgotten my old boss, Ed, happily paid my tuition (out of CS’s pockets) [for London Business School](. Thanks Ed! If I didn’t go to LBS, I never would’ve met Aussie Trav. That night we spent at the Duke of York pub in St. John’s Wood [listening to a drunken head of risk management]( informs this very piece. And I never would’ve got a bird’s eye view of the mortgage-backed securities debacle if I hadn’t met [my girlfriend, who worked for S&P]( and explained everything to me. Finally, I got to see the [great proprietary trading desk of Alan Howard, Chris Rokos]( et al, at work. They are still at it, at Alan’s Brevan Howard hedge fund and Chris’s family office. If you read those pieces, you’ll know me very well. Interestingly, the first column I ever wrote for the Rude, was titled “[Credit Suisse Hwangs Itself; UBS Loses High Ground, Suffers $774m Loss]( That explains quite a bit. And I’ll reference it here. [Urgent Notice From Paradigm CIO Zach Scheidt!]( [Click here to learn more]( Hi, Zach Scheidt here… I’m the Chief Income Officer at Paradigm Press. With inflation raging (and showing no signs of coming to an end any time soon), almost everyone in America is feeling the pain in a big way. Which is why, several months ago, I set out on a big mission… my goal was to create a [complete, step-by-step plan to surviving and beating inflation]( one that anyone could take advantage of. Today, after hundreds of hours of research, I’m revealing all of my findings. [Simply click here now to see how to survive America’s deadly inflation crisis](. [LEARN MORE]( Senior Leadership The problem was at the top of the house. In Zurich. Yes, Board-level idiocy. Sure, you had some dummies in Asia and the Americas. But the Swiss, themselves, were clueless as to how to run a global bulge bracket bank. (I hasten to remind you – the Swiss government bailed out UBS itself in 2008.) You’ll never see a more incompetent bunch of unjustifiably overconfident midwits in your lives. As a CS employee, I can’t tell you the number of times I asked, “Who’s stupid f*cking idea was this?” Most are already gone, thank the maker. As for the ones that remain, I hope each and every one of them gets fired. If they get to stay at the new UBS, it’s a crime. But really, hiring Tidjane Thiam was the pièce de résistance. Thiam was the CEO of the UK’s Prudential insurance company (not to be confused with The Rock in the US). Despite coming from two rich West African families, speaking fluent French, English and German, clutching an Insead MBA and being a former McKinsey consultant, Thiam is a doofus. [His ass should’ve been thrown out of Prudential]( for a botched takeover of AIG’s Asian life insurer AIA. But thanks to The Bernank’s helicopter money and the Bank of England trotting happily behind, sniffing Helicopter Ben’s ass, Prudential’s shares quadrupled under Thiam’s “leadership.” This fooled the dopey Credit Suisse board, featuring [“King of the Dipshits” Chairman Urs Rohner]( into thinking hiring a black insurance CEO would goose CS’s share price. And hire him they did. At his first press conference, when asked if it would be different running an investment bank rather than an insurance company, the new CEO – and old McKinsey hand – said no, it’s just about numbers. Soon after that presser, a Managing Director and I were walking up to the office. He looked at me and said, “I can’t believe Tidjane said that. Let’s see what the markets think.” Needless to say, the markets weren’t impressed. But the biggest mistake of Thiam’s reign was sidelining the sales and trading teams just as a new bull market began. It couldn’t have been a worse move. Thiam wanted to copy UBS to create a wealth management powerhouse – not a bad idea – but one of CS’s great strengths was its traders and salesmen. The investment bank thrived, mostly. The private bank did, too. But during Thiam’s reign, the S&P 500 climbed over 62%. While Goldman Sachs, Morgan Stanley, Citi, and Bank of America raked it in on their trading floors, Credit Suisse barely participated. This is Bastiat’s “Unseen” of why CS collapsed. UBS Takes Over I used to joke on LinkedIn, begging that UBS takeover CS to improve the look of my profile. I thought it should’ve happened years ago, but the argument was always, “To what end?” “Getting Credit Suisse’s Board away from the moving parts,” was a good enough answer for me. Because ultimately, the Archegos and Greensill disasters happened because the C-Suite overruled the people on the ground. Yes, risk managers told their bosses not to do these deals. But they were overruled because Thiam’s “entrepreneur’s bank” strategy of combining the private and investment banks colored their judgment. That is, Bill Hwang’s private money was in the private bank and his hedge fund money was in the investment bank. If CS pissed him off, they lost twice. So they treaded lightly. Far too lightly. Costing a combined $6.78 billion, those two scandals destroyed Credit Suisse’s already barely existing credibility. How CS lasted another two years is beyond me. A Bailout at What Cost? The Swiss National Bank (the Swiss central bank) backstopped UBS in a way US banks can only dream. From [The Wall Street Journal]( The complete write-down of Credit Suisse’s securities had been pushed for by UBS executives to reduce the burden the firm inherited by taking over its rival. Some investors were caught off-guard because Credit Suisse common shares were spared, with UBS paying $3.2 billion for them via its own stock, even as the AT1s were written down. While that upends the common order in an insolvency, there was a fierce debate over whether Credit Suisse AT1s in fact allowed such a move in their documentation. Finma, the Swiss financial regulator, said Sunday that Credit Suisse was experiencing a crisis of confidence and risked becoming illiquid, even if it remained solvent, and required the state-engineered deal to stay alive. The government provided a more than $9 billion backstop to UBS on potential losses. Sowing consternation among AT1 investors: Swiss authorities hastily passed a law last week that expedited the regulators’ ability to write down the riskier bonds to zero. I’m running out of road here, but luckily I explained the AT1 capital situation in today’s Rude Awakening. Just [click here]( and read it if you want to know more. I’ll leave you with these shocking tweets: [tweet] Credit: [@WallStreetSilv]( [tweet] Credit: [@KobeissiLetter]( As Thomas Sowell once said, “In every disaster throughout American history, there always seems to be a man from Harvard in the middle of it.” In this very Swiss disaster, in the middle of it was a guy from Insead. RIP, Credit Suisse. Say hi to Lehman for me! Let me know your thoughts by emailing me [here](mailto:feedback@dailyreckoning.com), I really enjoy reading them! All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com [“Biden Blackouts” coming this winter?]( [Click here to learn more]( A former advisor to the CIA and Pentagon just made this dark prediction: Calamity Joe’s sabotage of the Nord Stream pipeline [His Evidence Here]( was suicide. In the next 75 days, Americans will face fuel shortages… …widespread blackouts… …empty grocery shelves… …up to $1000 energy bills… …drained retirement accounts, and… …a massive crime wave. This former CIA advisor says most Americans will suffer this winter. But a few will WIN big from the turmoil. [Here’s how to be one of them](. [LEARN MORE]( In Case You Missed It… Greg Guenthner, Editor Banks Fold, Tech Holds [Greg Guenthner] GREG GUENTHNER Good Morning Reader, Investors are obsessed with this bear market. Everyone wants to know when it will officially end and when they can go back to blindly buying stocks. They’re distracted by every possible piece of bearish news. Once-ignored economic numbers are now the focus of tedious news reports, leading to wild intraday price action as traders jockey for position. Throw a fresh bank crisis in the mix, and we’re left with a choppy mess – and more than a few confused market watchers. Banks are failing. The financial news is more bearish than ever. Plus, we have to deal with the Fed this week… again. While the market is currently expecting a 25 basis-point hike, investors will likely hang on Powell’s every word at tomorrow’s presser. They’ll grasp for any potential change in tone now that banks are on shaky ground. Will Jerome release the doves? Or, will he hold the line? Either way, the noise is just getting louder. Yet despite the endless string of issues facing this market, you can still find positive developments bubbling up under the surface of the major averages. You just have to know where to look… In early March, we were fixated on several key do-or-die levels for stocks. Yes, there’s still plenty that needs to go right before we can sound the all clear and ride the averages back to their highs. But several beaten down groups are beginning to perk up while the S&P chops along in no-man’s land. [Crypto Legend Reveals: “The Next Bitcoin”]( He called Bitcoin at $61. Now he says this next crypto will be even bigger. In fact, he’s targeting 25X gains over the next year alone. [>>Click here now for the details]( [LEARN MORE]( Streaking Semiconductors The semis were dowside leaders in 2022. But we’ve discussed in detail how this important tech group snapped back to life in January. The VanEck Vectors Semiconductor ETF (SMH) jumped more than 20% to kick off 2023 in style. Where they go from here, we noted, would be incredibly important to the health of this market. It just so happened that as many tech snapback tech names fizzled in February, SMH remained stubbornly strong. No, most semiconductor stocks did not streak higher in February or early March. But they didn’t give back a huge chunk of those January gains – unlike many other tech names that became a little too hot to kick off the year. In fact, SMH posted the most constructive consolidation of the bunch. It was able to cling to those June and August 2022 pivot highs and set up another test of its year-to-date highs just above $250. That’s where it’s resting as I type. While many tech subsectors – and the Nasdaq Composite, for that matter – endured sharper pullbacks last month, semis are staying constructive and attempting to lead us out of this mess. [chart] We highlighted NVDA’s strong post-earnings performance as one of the key reasons SMH held steady during recent market weakness. Now, we can add another big name to the outperformer list as Advanced Micro Devices (AMD) broke out and streaked to new 7-month highs last week. Strength is spreading through the semis. A clean breakout here could lead to the next leg of this powerful rally. [Response Requested]( 1/1000th of an ounce of gold available As a Morning Reckoning reader, Jim Rickards is offering you 1/1000th of an ounce of gold when you upgrade your account. It will come in the form of a “Gold Back” - a new type of gold currency that’s starting to spread across America ([click here to view](. If you have not responded to Jim’s offer yet, and want to know how to claim yours… Please click the link below for details. [Click here to learn how to claim your new Gold Back Currency<]( Thanks! Amber Anderson Customer Service [LEARN MORE]( The Bitcoin Bulls are Back Remember Bitcoin $25,000? We’ve been sweating a $25K breakout ever since crypto began to consolidate its strong January rally. The idea is simple: If Bitcoin can hold a move above $25K, it would break free from its 2021-22 bear market and embark on a new uptrend. But it’s never that easy – especially when it comes to crypto. Bitcoin looked coiled and ready to break higher in February. Then, it proceeded to tumble toward $20K before sharply reversing and posting its “official” breakout move. After surviving yet another crypto gut-check, Bitcoin has exploded higher, topping $28K for the first time since June 2022. [chart] I’ve long argued that Bitcoin is a tech trade. If it walks like a tech stock and talks like a tech stock, it’s a tech stock! Crypto behaved exactly like the tech growth stocks during last year’s meltdown – and it rallied with them in January. Now, something a little different is happening. Bitcoin is hitting nine-month highs, while tech growth names are still stuck in neutral following their sharp January rallies. The Bitcoin faithful believe crypto is rallying because it’s a safe haven during the current bank turmoil. I’m not so sure. After all, this base breakout has been brewing since before we got the first whiff of Silicon Valley Bank going down in flames. Perhaps the recent turmoil is a good excuse for some buying here – but I don’t believe it’s the full story. Even so, we should continue to watch this relationship develop to see if we truly get a decoupling. So far, Bitcoin has built a formidable lead, with the tech-growth stocks in Cathie Wood’s Ark Innovation ETF (ARKK) falling woefully behind over the past couple weeks. Will Bitcoin drag its former bull market cousins back onto their feet? We’ll know soon enough. In the meantime, the crypto-adjacent stocks are going streaking. Despite the noisy market backdrop, the Bitcoin adjacent names are blasting off along with the red-hot semis. If you’re searching for strong momentum plays that aren’t flinching during the ongoing bank drama, this is where you should begin your search. Let me know what you thought of today’s article… and if you want any more topics covered by emailing me [here](mailto:feedback@dailyreckoning.com). Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Sean Ring] [Sean Ring, CAIA, FRM and CMT]( is a former banker and financial educator and is the editor of the Rude Awakening. Sean has trained interns and graduates from Goldman Sachs, Morgan Stanley, Citi, Bank of America, Standard Chartered Bank, DBS (Singapore), the Abu Dhabi Investment Authority (ADIA), Bank Indonesia (the central bank), HSBC, Barclays, RBS, and BlackRock. He knows the global economy is being corrupted by forces that most people can't understand and has used his unique and worldly experiences to help people navigate the markets. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. 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